SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
[Amendment No..........]
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240-14a-11(c) or ss.240-14a-12
First West Chester Corporation
................................................................................
(Name of Registrant as Specified in Its Charter)
................................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| $125 per Exchange Act Rules 0-11(c)(1)(ii), (4a-6(i)(3), (4a-6(i)(2) or
Item 22(a)(2) of Schedule 14A. |_| $500 per each party to the
controversy pursuant to Exchange Act Rule 14a-6(i)(3). |_| Fee computed
on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
..............................................................
2) Aggregate number of securities to which transaction applies:
..............................................................
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0- 11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
..............................................................
4) Proposed maximum aggregate value of transaction:
..............................................................
5) Total fee paid:
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|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-1(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number or the Form or Scheduled and the date of its filing.
1) Amount Previously Paid:______________________________________
2) Form Schedule or Registration Statement No.:_________________
3) Filing Party:________________________________________________
4) Date Filed:__________________________________________________
<PAGE>
FIRST WEST CHESTER CORPORATION
9 North High Street
West Chester, Pennsylvania 19380
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD 10:00 A.M., MARCH 19, 1996
-------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of First
West Chester Corporation (the "Corporation") will be held on Tuesday, March 19,
1996, at 10:00 a.m., at the West Chester Golf and Country Club, 111 West
Ashbridge Street, West Chester, Pennsylvania 19380, for consideration of and
action by the holders of the Corporation's common stock ("Common Stock") upon
the following matters:
1. The election of four Class III directors, with each director to serve
until the 1999 Annual Meeting of Shareholders and until the election and
qualification of his respective successor;
2. The ratification of the Corporation's 1995 Stock Option Plan;
3. The ratification of the appointment of Grant Thornton, LLP as the
Corporation's independent public accountants for the year ending December 31,
1996; and
4. The transaction of such other business as may properly come before the
Annual Meeting and any adjournment thereof, and matters incident to the conduct
of the Annual Meeting.
The Board of Directors has fixed the close of business on February 5, 1996,
as the record date for the determination of holders of stock of the Corporation
entitled to notice of, and to vote at, the Annual Meeting. The Corporation's
Annual Report to Shareholders for the year ended December 31, 1995, accompanies
this Notice and Proxy Statement.
THE BOARD OF DIRECTORS HOPES THAT YOU WILL FIND IT CONVENIENT TO ATTEND THE
ANNUAL MEETING IN PERSON, BUT WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE SIGN,
DATE AND RETURN THE ENCLOSED PROXY TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT
THE ANNUAL MEETING. RETURNING YOUR PROXY DOES NOT DEPRIVE YOU OF YOUR RIGHT TO
ATTEND THE ANNUAL MEETING AND VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors
EDWARD J. COTTER, Secretary
West Chester, Pennsylvania
February 28, 1996
<PAGE>
FIRST WEST CHESTER CORPORATION
9 North High Street
West Chester, Pennsylvania 19380
--------------------------------
PROXY STATEMENT
This Proxy Statement is furnished and is being mailed with the
accompanying proxy on approximately February 28, 1996, to each shareholder of
record of First West Chester Corporation (the "Corporation") in connection with
the solicitation of proxies by the Board of Directors of the Corporation, to be
voted at the Annual Meeting of Shareholders of the Corporation to be held on
Tuesday, March 19, 1996, at 10:00 a.m., at the West Chester Golf and Country
Club, 111 West Ashbridge Street, West Chester, Pennsylvania 19380, and at any
adjournment thereof, for the purposes stated below.
Any person giving a proxy has the power to revoke it at any time before
its exercise by a later dated proxy, a written revocation sent to the Secretary
of the Corporation or attendance at the Annual Meeting and voting in person. In
the absence of contrary instructions, properly executed proxies, received and
unrevoked, will be voted by the persons named in the proxy: (i) for the election
of each of the Class III directors proposed by the Board of Directors; (ii) for
the ratification of the Corporation's 1995 Stock Option Plan; (iii) for the
ratification of Grant Thornton,LLP as the Corporation's independent public
accountants; and (iv) in their discretion, on such other business as may
properly come before the Annual Meeting and matters incident to the conduct of
the Annual Meeting.
VOTING SECURITIES OF THE CORPORATION
Only shareholders of record at the close of business on February 5,
1996, are entitled to notice of, and to vote at, the Annual Meeting. As of that
date there were 1,712,941 shares of Common Stock outstanding and entitled to one
vote per share, without cumulative voting. This number of shares reflects the
3-for-2 stock split of the Common Stock of the Corporation that occurred in
October 1995. The holders of a majority of the outstanding shares of Common
Stock, present either in person or by proxy, will constitute a quorum for the
transaction of business at the Annual Meeting.
As of February 5, 1996, the Financial Management Services Department of
The First National Bank of West Chester (the "Bank"), a wholly-owned subsidiary
of the Corporation, held 343,371 shares of Common Stock, representing 20.0% of
the total outstanding Common Stock owned. Of these shares, 170,377 shares (9.9%
of the total outstanding Common Stock owned) are held in accounts where the Bank
is sole trustee or executor and may not be voted by the Bank's Financial
Management Services Department in the election of directors; however, the shares
may otherwise be voted by the Bank. The remaining 172,994 shares of Common Stock
are held in accounts where the Bank is co-trustee, agent or custodian, and these
shares may not be voted by the Bank without the authorization of the other
co-trustee, agent or custodian.
The following table sets forth, as of December 31, 1995, the number and
percentage of shares of Common Stock (Common Stock held in the Corporation's
401(k) Deferred Compensation Plan
<PAGE>
(the "401(k) Plan") reflect amounts as of September 30, 1995) which, according
to information supplied to the Corporation, are beneficially owned by: (i) each
person who is the beneficial owner of more than five percent (5%) of the Common
Stock, other than the Financial Management Services Department of the Bank; (ii)
each of the named executive officers of the Corporation; (iii) each of the
directors and the nominees for directorship of the Corporation individually; and
(iv) all current directors and executive officers of the Corporation as a group.
An asterisk (*) appears beside the names of the persons nominated and proposed
for re-election at the Annual Meeting as Class III directors. The executive
officers and directors set forth below were each granted options in 1995 to
purchase additional shares of Common Stock pursuant to the Corporation's 1995
Stock Option Plan. Such option grants are subject to ratification of such Plan
by the shareholders of the Corporation at the Corporation's 1996 Annual Meeting.
See "Ratification of the Corporation's 1995 Stock Option Plan."
Name and Address Number of Shares(1) Percentage(2)
BENEFICIAL OWNER
Jane C. and Lawrence E. MacElree 92,906 (3) 5.42%
7080 Goshen Road
Newtown Square, PA 19073
EXECUTIVE OFFICERS (4)
Charles E. Swope 56,711 (5) 3.31%
James D. Gruver 6,349 (6) --
Richard C. Cloud 5,561 (7) --
William E. Hughes, Sr. 3,377 (8) --
Eric W. Rohrbach 1,290 (9) --
Kevin C. Quinn 1,196 (10) --
Peter J. D'Angelo 771 (11) --
<PAGE>
Name and Address Number of Shares(1) Percentage(2)
Maryann L. Himes 651 (12) --
David W. Glarner 644 (13) --
J. Duncan Smith 244 (14) --
CLASS I DIRECTORS (TERM EXPIRING IN 1997)
John J. Ciccarone 51,547 (15) 3.01%
908 Sheridan Drive
West Chester, PA 19382
Clifford E. DeBaptiste 37,144 2.17%
Worthington and Miner Streets
West Chester, PA 19382
J. Carol Hanson 750 --
1251 Morstein Road
West Chester, PA 19380
John B. Waldron 3,315 (16) --
1423 Manorwood Drive
West Chester, PA 19382
CLASS II DIRECTORS (TERM EXPIRING IN 1998)
M. Robert Clarke 2,250 (17) --
10 Andrews Lane
Glenmoore, PA 19343
Edward J. Cotter 14,504 (18) --
500 North Franklin Street
West Chester, PA 19380
David L. Peirce 7,611 --
P.O. Box 785
West Chester, PA 19381-0785
Charles E. Swope 56,711 (5) 3.31%
9 North High Street
West Chester, PA 19380
<PAGE>
CLASS III DIRECTORS (TERM EXPIRING IN 1996)
Name and Address Number of Shares(1) Percentage(2)
*Richard M. Armstrong 26,760 1.56%
P.O. Box 566
West Chester, PA 19381-0566
*John A. Featherman, III 8,518 (19) --
17 West Miner Street
West Chester, PA 19382
*John S. Halsted 2,451 (20) --
234 North Union Street
Kennett Square, PA 19348
*Devere Kauffman 8,700 (21) --
Riddle Village
311 Arlington
Media, PA 19063
All directors and
executive officers
as a group (21 persons) 240,344 14.03%
- --------------------
(1) Unless otherwise indicated, the shares listed in the table are owned
directly by the individual and the individual has sole voting and
investment power with respect to the shares.
(2) Percentages are omitted for those owning less than one percent of the
shares of Common Stock outstanding.
(3) Of the 92,906 shares shown, Mrs. MacElree has sole voting and
investment power of 78,547 and Mr. MacElree has sole voting and
investment power of 14,359 shares. Mrs. MacElree disclaims that she is
the beneficial owner of any shares owned by Mr. MacElree and Mr.
MacElree disclaims that he is the beneficial owner of any shares owned
by Mrs. MacElree.
(4) The address for each executive officer is 9 North High Street, West
Chester, PA 19380.
(5) Mr. Swope is the Chairman, President and Chief Executive Officer of the
Corporation and the Bank. Of the 56,711 shares shown, 4,116 shares are
held by a trust for the benefit of the Swope Foundation, of which Mr.
Swope is President, 1,207 shares are held by Mr. Swope's minor son,
1,547 shares are held by Mr. Swope's wife and 3,599 shares are held by
the 401(k) Plan, which has sole voting power with respect to such
shares. In addition to the shares of Common Stock described herein, Mr.
Swope, as the President and Chief Executive Officer of the Bank which
is the Trustee of the 401(k) Plan, may be deemed to be the beneficial
owner of an aggregate of a further 43,252 shares of Common Stock held
by the 401(k) Plan; Mr. Swope disclaims that he is the beneficial owner
of such shares.
<PAGE>
(6) Of the 6,349 shares shown, Mr. Gruver shares, with his wife, voting and
investment power of 4,348 shares and 2,001 shares are held by the
401(k) Plan, which has sole voting power with respect to such shares.
(7) Of the 5,561 shares shown, Mr. Cloud shares, with his wife, voting and
investment power of 3,339 shares and 2,222 shares are held by the
401(k) Plan, which has sole voting power with respect to such shares.
(8) Of the 3,377 shares shown, Mr. Hughes shares, with his wife, voting and
investment power of 1,179 shares and 2,198 shares are held by the
401(k) Plan, which has sole voting power with respect to such shares.
(9) Of the 1,290 shares shown, Mr. Rohrbach shares, with his wife, voting
and investment power of 841 shares and 449 shares are held by the
401(k) Plan, which has sole voting power with respect to such shares.
(10) Of the 1,196 shares shown, Mr. Quinn shares voting and investment power
of 447 shares with his wife and 75 shares with his mother, and 674
shares are held by the 401(k) Plan, which has sole voting power with
respect to such shares.
(11) Of the 771 shares shown, Mr. D'Angelo shares, with his wife, voting and
investment power of the 451 shares and 320 shares are held by the
401(k) Plan, which has sole voting power with respect to such shares.
(12) Of the 651 shares shown, Ms. Himes shares, with her son, voting and
investment power of 246 shares and 405 shares are held by the 401(k)
Plan, which has sole voting power with respect to such shares..
(13) Of the 644 shares shown, Mr. Glarner shares, with his wife, voting and
investment power of 393 shares and 251 shares are held by the 401(k)
Plan, which has sole voting power with respect to such shares.
(14) Of the 244 shares shown, Mr. Smith shares voting and investment power
of 67 shares with his wife and 177 shares are held by the 401(k) Plan,
which has sole voting power with respect to such shares.
(15) Mr. Ciccarone shares, with his wife, voting and investment power of the
51,547 shares shown.
(16) Mr. Waldron shares, with his wife, voting and investment power of the
3,315 shares shown.
(17) Mr. Clarke shares, with his wife, voting and investment power of the
2,250 shares shown.
(18) Of the 14,504 shares shown, Mr. Cotter's wife has sole voting and
investment power of 7,673 shares.
(19) Of the 8,518 shares shown, 1,500 shares are owned by FIRSTNATCO FBO
MacElree, Harvey, Gallagher, Featherman & Sebastian, Ltd. Profit
Sharing and 401(k) Plan, of which Mr. Featherman is a co-trustee,
sharing voting and investment powers with one other trustee
<PAGE>
(such 1,500 shares are in Mr. Featherman's account under the said
Plan); Mr. Featherman shares voting and investment power of 2,115
shares with his wife; 710 shares are held by Mr. Featherman's daughter
in a custodial account, of which Mr. Featherman is the Custodian; and
Mr. Featherman's wife has sole voting and investment power of 639
shares. Mr. Featherman disclaims beneficial ownership of the shares
held by his daughter.
(20) Of the 2,451 shares shown, 300 shares are owned by the Gawthrop,
Greenwood & Halsted Profit Sharing Plan, of which Mr. Halsted is a
trustee; 150 shares are owned by Abstracting Company of Chester County,
of which Mr. Halsted is a shareholder and a director and Mr. Halsted's
wife has sole voting and investment power of 150 shares.
(21) Of the 8,700 shares shown, Mr. Kauffman has power of attorney over
3,975 shares owned by his wife.
GENERAL INFORMATION ABOUT THE BOARD OF DIRECTORS
There were nine (9) meetings of the Board of Directors of the
Corporation and twenty-nine (29) meetings of the Board of Directors of the Bank
during 1995. During 1995, each incumbent director attended at least 75% of the
aggregate of (1) the total number of meetings of the Board of Directors of the
Corporation and the Bank held during the period for which such incumbent was a
director, and (2) the total number of meetings held by all committees of the
Board of Directors of the Corporation and the Bank on which such incumbent
served.
Directors, with the exception of Mr. Swope, generally receive a fee of
$400 for each Board meeting and $250 for each committee meeting attended. A
quarterly fee of $100 is paid to Mr. Cotter, the Secretary of the Board. A bonus
for 1995 of $1,000 was paid to each director, including Mr. Swope.
The Board of Directors of the Corporation does not have a standing
compensation, audit or nominating committee, these functions being performed on
an ad hoc basis by the Board of Directors as a whole. However, the Board of
Directors does have an Executive Committee and, upon ratification of the 1995
Stock Option Plan by the shareholders of the Corporation, a Stock Option
Committee.
The Executive Committee of the Board of Directors of the Corporation
consists of Messrs. Swope, Armstrong, Peirce and Cotter. Three (3) meetings were
held during 1995. This Committee has authority to exercise the powers of the
Board of Directors of the Corporation in the management of the business affairs
of the Corporation between scheduled meetings of the Board.
The Finance Committee of the Board of Directors of the Corporation
consists of Messrs. Peirce, Halsted and Swope. Four (4) meetings were held
during 1995. This Committee meets quarterly to review the overall financial
condition of the Bank and make recommendations for a quarterly dividend.
The Stock Option Committee of the Board of Directors of the Corporation
consists of Messrs. Peirce and Featherman and shall administer the key employee
option portion of the 1995 Stock Option Plan, subject to ratification of such
Plan by the shareholders of the Corporation. This Committee shall have
discretion, within the parameters of the 1995 Stock Option Plan, to grant
<PAGE>
options for up to 63,750 shares of Common Stock to employees of the Corporation
and/or the Bank. The Committee held no meetings during 1995. (See "Ratification
of the Corporation's 1995 Stock Option Plan".)
The Executive Committee of the Board of Directors of the Bank consists
of Messrs. Swope, Armstrong, Cotter, Kauffman and Peirce. Four (4) meetings were
held during 1995. This Committee has authority to exercise the powers of the
Board of Directors of the Bank in the management of the business affairs of the
Bank between scheduled meetings of the Board.
The Personnel and Compensation Committee of the Board of Directors of
the Bank consists of Messrs. Peirce and Featherman. Nine (9) meetings were held
during 1995. This Committee reviews and makes recommendations to the Board of
Directors of the Bank regarding compensation and other personnel matters
relating to the officers of the Bank.
The Commercial and Trust Examining Committee of the Board of Directors
of the Bank consists of Messrs. Armstrong, Clarke, DeBaptiste and Kauffman. Four
(4) meetings were held during 1995. This Committee reviews the examinations and
any reports thereon conducted by the Bank's Internal Audit Department.
The Loan Review Committee of the Board of Directors of the Bank
consists of Messrs. Cotter, Featherman and Swope. Four (4) meetings were held
during 1995. This Committee reviews classified, delinquent and charged-off
loans, loan loss reserves, loan to deposit ratios and recommends changes to the
Bank's loan policy.
The Asset-Management Committee of the Board of Directors of the Bank
consists of Messrs. Peirce, Swope, Halsted and Clarke. Ten (10) meetings were
held during 1995. This Committee reviews investments, liquidity, interest rate
sensitivity, capital structure and overall financial performance of the Bank.
The Bank Development Committee of the Board of Directors of the Bank
consists of Messrs. Waldron, Ciccarone, DeBaptiste, Kauffman and Swope. Four (4)
meetings were held during 1995. This Committee reviews all projects which affect
the general administrative operating status of the Bank, including physical
expansion, advertising, marketing, and aesthetic and security-oriented plant
improvements.
The Trust Committee of the Board of Directors of the Bank consists of
Messrs. Swope, Cotter, Halsted and Ms. Hanson. Four (4) meetings were held
during 1995. This Committee reviews compliance of Financial Management Services
Department activities with applicable laws and fiduciary principles.
The Trust Investment Committee of the Board of Directors of the Bank
consists of Messrs, Swope, Waldron and Peirce. Four (4) meetings were held
during 1995. This Committee reviews all accounts where the Bank, acting in a
fiduciary capacity, exercises investment discretion, whether sole or shared.
Directors Deferred Compensation Plan. On December 30, 1994, the
Corporation and the Bank adopted a Directors Deferred Compensation Plan (the
"Directors Plan") as partial incentive to the directors of both entities to
remain directors. The Directors Plan became effective on January
<PAGE>
1, 1995. The Directors Plan permits those directors who elect to participate to
defer their director compensation over a ten-year period (less the number of
years such participant previously chose to defer compensation under the
Directors Plan). A participant may defer his or her compensation in multiples of
$1000. The Directors Plan is administered by the Personnel and Compensation
Committee of the Board of Directors of the Bank. All other terms of the
Directors Plan are substantially equivalent to the Supplemental Benefit
Retirement Plan described under Executive Compensation below.
ELECTION OF DIRECTORS
The Corporation's Articles of Incorporation and Bylaws provide that the
Board of Directors shall be divided into three classes, each as nearly equal in
number as possible, and shall consist of not less than nine or more than 25
members, as fixed from time to time by the Board of Directors. The Board of
Directors has fixed the number of directors at 12, four of whom are to be Class
I Directors, four of whom are to be Class II Directors and four of whom are to
be Class III Directors. The Class I Directors are serving a three-year term
until the 1997 Annual Meeting, the Class II Directors are serving a three-year
term until the 1998 Annual Meeting, and the Class III Directors are serving a
three-year term until the 1996 Annual Meeting. Each director also serves until
his or her earlier resignation or removal or until a successor has been elected
and qualified. On March 3, 1995, the Board appointed J. Carol Hanson to fill the
vacancy created by the death in 1994 of Edward O. Hilbush, Jr., a Class I
Director.
At the Annual Meeting, four Class III directors are to be elected to
serve until the 1999 Annual Meeting and until their respective successors have
been elected and qualified. The intention of the persons named in the proxy,
unless otherwise directed, is to vote all proxies in favor of the election to
the Board of Directors for the nominees listed below. The Board has no reason to
believe that any of the nominees will be unable or unwilling to be a candidate
for election at the time of the Annual Meeting. If any nominee is unable or
unwilling to serve, the persons named in the proxy will use their best judgment
in selecting and voting for a substitute candidate.
The Board of Directors has unanimously recommended a slate of nominees
for election as Class III directors at the Annual Meeting. The Board of
Directors recommends that the shareholders vote FOR the election of such slate
of nominees as Class III directors of the Board of Directors of the Corporation.
The nominees receiving the highest number of votes by the holders of
the Common Stock present at the Annual Meeting and entitled to vote thereon
shall be elected. Abstentions will have no effect on the outcome of the vote for
the election of directors. If a broker that is a record holder of Common Stock
does not return a signed proxy, the shares of Common Stock represented by such
proxy will not be considered present at the Annual Meeting and, therefore, will
not be counted towards a quorum and will not be voted.
<PAGE>
The names of the nominees for Class III directors of the Corporation,
their ages and certain other information as of February 1, 1996, is set forth as
follows:
Name Age Position
Richard M. Armstrong 84 Director
John A. Feather 57 Director
John S. Halsted 62 Director
Devere Kauffman 85 Director
Mr. Armstrong has been a director of the Corporation since 1984 and a
director of the Bank since 1959. Mr. Armstrong is President of Richard M.
Armstrong Co. and Armstrong Engineering Associates, Inc., Managing Director of
Chemtec PTE, Ltd., Singapore, Managing Director of Chemtec BV Berth, Scotland,
and a member of the Board of Directors of Graham Manufacturing Co., Inc.
Mr. Featherman has been a director of the Corporation since 1985 and a
director of the Bank since 1985. Mr. Featherman is a principal of the law firm
of MacElree, Harvey, Gallagher, Featherman & Sebastian, Ltd. and is a Board
member and Secretary of the Chester County Community Foundation.
Mr. Halsted has been a director of the Corporation since 1991 and a
director of the Bank since 1991. Mr. Halsted is a principal of the law firm of
Gawthrop, Greenwood & Halsted, P.C. and currently serves as solicitor of Chester
County.
Mr. Kauffman has been a director of the Corporation since 1984 and a
director of the Bank since 1968. Mr. Kauffman was formerly a General Partner of
Kauffman's.
<PAGE>
MANAGEMENT
Set forth in the following table are the names and ages of the
directors and executive officers of the Corporation and the Bank, their
positions with the Corporation and the Bank, their principal occupations during
the past five years and their directorships with other companies which are
subject to the reporting requirements of Federal securities laws:
<TABLE>
<CAPTION>
Position(s) with Principal
Corporation Occupations
Position(s) with Outside
Name & Age Bank Directorships
- ---------- ------------------- --------------
<S> <C> <C>
Richard M. Armstrong, Director since 1984 President, Richard M.
------------------- Armstrong Co. and Armstrong
84 Director since 1959 Engineering Associates, Inc.
John J. Ciccarone, Director since 1987 President, Omega Industries,
------------------- Inc.
67 Director since 1987
M. Robert Clarke, Director since 1993 Certified Public Accountant,
------------------- President of Clarke, Nicolini
49 Director since 1993 & Associates, Ltd.
Edward J. Cotter, Director and Secretary Former Executive Director,
since 1984 Barclay Friends Hall
75 ---------------------- Corporation.
Director since 1972
Clifford E. DeBaptiste, Director since 1984 Chairman, Supervisor and
------------------- Director, DeBaptiste Funeral
71 Director since 1975 Homes, Inc.; President, Perry
Funeral Homes, Inc.
John A. Featherman, III, Director since 1985 Attorney, MacElree Harvey,
------------------- Gallagher, Featherman &
57 Director since 1985 Sebastian, Ltd.
John S. Halsted Director since 1991 Attorney, Gawthrop,
------------------- Greenwood & Halsted, P.C.;
62 Director since 1991 Solicitor, County of Chester.
J. Carol Hanson, Director since 1995 Executive Director, Barclay
------------------- Friends Hall Corporation
48 Director since 1995 since 1991.
Devere Kauffman, Director since 1984 Former General Partner,
------------------- Kauffman's.
85 Director since 1968
David L. Peirce, Director since 1984 Former President, Denney-
------------------- Reyburn Company.
67 Director since 1973
<PAGE>
Position(s) with Principal
Corporation Occupations
Position(s) with Outside
Name & Age Bank Directorships
- ---------- ------------------- -------------
Charles E. Swope, Director, President and CEO President, CEO and Chairman
since 1984; Chairman of of the Corporation and Bank.
65 the Board since 1987
--------------------------
Director since 1972,
President since 1973, CEO
since 1978, Chairman
since 1987
John B. Waldron, Director since 1984 Associate, Arthur Hall
------------------- Insurance Group;
65 Director since 1981 Owner, John B. Waldron
Insurance Agency until 1994.
Richard C. Cloud, N/A Executive Vice President of the
----------------------------- Bank since 1973, Senior Loan
64 Executive Vice President Officer of the Bank since 1982
since 1973, Senior Loan and Cashier of the Bank since
Officer since 1982 and Cashier 1970.
since 1970
Peter J. D'Angelo, N/A Vice President of Commercial
----------------------------- Loan Department of Bank since
50 Vice President since 1986 1986.
David W. Glarner, N/A Vice President of Mortgage
----------------------------- Lending Department of the
45 Vice President since Bank since 1987 and Vice
1983 President of the Bank since
1983.
James D. Gruver, N/A Senior Vice President of Bank
---------------------------- since 1987.
49 Senior Vice President
since 1987
Maryann L. Himes, Assistant Secretary since 1984 Assistant to President since
------------------------------ 1988.
49 Assistant to President since
1988
William E. Hughes, Sr., N/A Executive Vice President of the
------------------------------ Bank since 1996; Senior Vice
62 Executive Vice President since President and Senior Loan
1996 and Senior Loan Officer Officer of the Bank since 1984.
since 1984
Kevin C. Quinn, Assistant Treasurer since 1986 Senior Vice President of Bank
------------------------------ since 1990.
41 Senior Vice President
since 1990
<PAGE>
Position(s) with Principal
Corpor Occupations
Position(s) with Outside
Name & Age Bank Directorships
- ---------- ---------------- -------------
Eric W. Rohrbach, N/A Senior Vice President of Bank
-------------------- since 1987.
49 Senior Vice President
since 1987
J. Duncan Smith, Treasurer since 1993 Treasurer of Corporation since
-------------------- 1993; Senior Vice-President
37 Senior Vice President since and Comptroller of Bank since
1996 and Comptroller since 1996; Vice President and
1993 1993; Vice President and Chief
Financial Officer of Security
First Bank (1988-1993).
</TABLE>
There are no family relationships between any director, executive
officer or person nominated or chosen by the Corporation to serve as a director
or executive officer.
<PAGE>
EXECUTIVE COMPENSATION
Compensation
The following table sets forth a summary of compensation paid or
accrued by the Corporation for services rendered by the named executive officers
for each of the last three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term
(A) (B) (C) (D) (E) (F) (G)
Name and Other Annual Stock All Other
Principal Salary Bonus Compensation Options Compensation
Position Year ($)(1) ($) ($)(2) (#)(3) ($)(4)
--------- -------- -------- ------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Charles E. Swope, 1995 $243,853 $17,478 $5,625 3,000 $62,264
President, CEO and 1994 212,796 16,204 5,348 _ 89,595
Chairman of Corporation 1993 207,000 12,480 3,504 _ 54,731
and Bank
Richard C. Cloud, 1995 103,083 8,134 3,866 1,500 12,210
Executive Vice President, 1994 98,174 6,548 3,713 _ 12,372
Cashier and Senior Loan 1993 95,500 6,621 2,388 _ 9,991
Officer of Bank
James D. Gruver, 1995 94,771 7,589 3,554 1,500 8,830
Senior Vice President of 1994 90,258 6,017 3,431 _ 2,573
Bank 1993 87,800 5,311 2,195 _ 3,146
William E. Hughes, Sr., 1995 99,845 7,937 3,600 1,500 11,354
Executive Vice President 1994 95,090 6,283 3,276 _ 13,353
and Senior Loan Officer 1993 92,500 5,655 2,112 _ 12,581
of Bank
Eric W. Rohrbach, 1995 94,771 7,589 3,554 1,500 9,068
Senior Vice President 1994 90,258 6,017 3,263 _ 2,763
of Bank 1993 87,800 5,382 2,100 _ 3,275
</TABLE>
(1) Amounts shown include cash compensation earned and received by named
officers as well as amounts earned but deferred at the election of
those officers pursuant to the terms of the Bank's deferred salary
savings (401(k)) plan and Executive Deferred Compensation Plan.
(2) Amounts shown reflect matching contributions by the Bank to the 401(k)
Plan on behalf of the named executive officer.
(3) Amounts shown reflect the number of the underlying shares granted at
the Grant Date under the 1995 Stock Option Plan, which is subject to
approval by the shareholders of the Corporation. See "Ratification of
the Corporation's 1995 Stock Option Plan" below.
<PAGE>
(4) Amounts shown reflect amounts accrued and premiums paid on behalf of
the named officers pursuant to the terms of the Bank's Supplemental
Benefit Retirement Plan and Retirement Life Insurance Plan. See
"Employee Benefit Plans." During 1995, $7,753, $3,092, $2,843, $2,995
and $2,843 was paid by the Bank on account of Messrs. Swope, Cloud,
Gruver, Hughes and Rohrbach, respectively, pursuant to the Bank's
Supplemental Benefit Retirement Plan. During 1995, $7,605, $3,833,
$1,201, $3,268, and $1,439, was paid by the Bank on account of Messrs.
Swope, Cloud, Gruver, Hughes and Rohrbach, respectively, pursuant to
the Bank's Retirement Life Insurance Plan. During 1995, $14,606,
$5,285, $4,786, $5,091 and $4,786 was accrued for the benefit of
Messrs. Swope, Cloud, Gruver, Hughes and Rohrbach, respectively,
pursuant to a qualified defined contribution pension plan. During 1995,
$24,026, was paid by the Bank on account of Mr. Swope for insurance
premiums with respect to term life insurance for the benefit of Mr.
Swope. Also, during 1995, $8,274 was paid by the Bank for the benefit
of Mr. Swope for a trip associated with a 30-year service award.
Employment Agreement
On December 30, 1994, Mr. Swope entered into an employment agreement
(the "Agreement") with the Corporation and the Bank, effective January 1, 1995.
The Agreement is for a period of ten years, terminating on December 31, 2004,
unless terminated earlier in accordance with the Agreement. Under the Agreement,
Mr. Swope is employed as the President and Chief Executive Officer of the
Corporation and the Bank in 1995, and provides for employment thereafter in the
same position or at a rank not less than Senior Vice President. As compensation
under the Agreement, Mr. Swope receives a salary and benefits not less than or
materially different from that which he received as of the date of the
Agreement, as determined by the Board of Directors from time to time. Mr. Swope
is also reimbursed for reasonable business expenses and provided with an
automobile.
If the Corporation breaches the Agreement, Mr. Swope may leave the
Corporation's employ and have no further liability or obligation under the
Agreement and the Corporation will be obligated to continue to pay Mr. Swope the
salary and benefits being paid at the time of the breach for the remaining term
of the Agreement. Mr. Swope may also terminate the Agreement as of December 31
of any year, upon 30 days notice, and the Corporation shall have no further
obligation to pay a salary and benefits to Mr. Swope other than salary and
benefits which have accrued but remain unpaid at the termination. The
Corporation may terminate the Agreement upon a breach of the Agreement by Mr.
Swope which is not cured within 30 days or upon his conviction of a crime.
During the term of the Agreement and for two years thereafter, Mr. Swope may not
be employed by any other bank or financial institution doing business in Chester
County, Pennsylvania.
Compensation Committee Interlocks and Insider Participation
During 1995, the Personnel and Compensation Committee of the Bank
consisted of Messrs. Peirce and Featherman. No member of the Compensation
Committee is a former or current officer or employee of the Corporation or the
Bank. Mr. Featherman is a principal in the law firm of MacElree, Harvey,
Gallagher, Featherman & Sebastian, Ltd., which was retained by the Corporation
as counsel during 1995 and will again be retained during 1996.
Report of the Personnel and Compensation Committee
As members of the Personnel and Compensation Committee and the Stock
Option Committee (both of which Committees are herein referred to as the
"Committee"), it is our duty to administer the Corporation's various employee
benefit plans, including its Stock Bonus Plan and Stock Option Plan. In
addition, we review the compensation levels of members of management,
<PAGE>
evaluate the performance of management and consider management succession and
related matters. The Committee reviews in detail with the Board of Directors all
aspects of compensation for the executive officers of the Corporation and the
Bank.
The compensation policy of the Corporation, which is endorsed by the
Committee, is that a substantial portion of the annual compensation of each
executive officer relates to and must be contingent upon the individual
performance of such executive officer and the contribution of such executive
officer to the Corporation and the Bank.
The Committee is composed of two independent non-employee directors.
The Committee is responsible for setting and administering the salaries and the
annual bonus plans that govern the compensation paid to all executive officers
of the Corporation and the Bank, except that the full Board of Directors is
responsible for ratifying the salaries and bonuses paid to the executive
officers.
Early in 1995, the Committee engaged Grant Thornton, LLP, the
independent public accountants for the Corporation, as a compensation Consultant
to conduct a survey of executive compensation to determine if the executive
officers of the Corporation and the Bank were being compensated in a competitive
manner and to assist in developing an incentive program that would result in
more performance-driven compensation.
Based upon the findings of the Consultant, the Committee concluded that
the 1995 cash compensation of Mr. Swope, the Chief Executive Officer of the
Corporation and the Bank, was not in line with salaries being paid to other
chief executive officers of bank holding companies located within the
Commonwealth of Pennsylvania and did not fully recognize the improvement of the
Corporation's earnings in 1994 under Mr. Swope's leadership. Mr. Swope's base
salary was therefore increased by $35,000 to $258,436, effective June 1, 1995.
The base salary of Mr. Swope for fiscal year 1995 was based principally on his
rights under an Employment Agreement with the Corporation and the Bank (the
"Agreement") which is described elsewhere in this Proxy Statement. On the
effective date of the Agreement, Mr. Swope's base salary was set at $223,436.
The perquisites and other benefits received by Mr. Swope that are reported in
the Summary Compensation Table in this Proxy Statement are provided pursuant to
the Agreement. Also, Mr. Swope has been granted Stock Options for 3,000 shares
of the Corporation's Common Stock under the proposed Stock Option Plan which is
described elsewhere in this Proxy Statement. (See "Ratification of the
Corporation's 1995 Stock Option Plan".)
Upon the advice and with the assistance of the Consultant, the
Committee is developing an Incentive Plan for 1996 which is intended to place
increased emphasis on the Corporation's performance, including, but not limited
to, improvement in return on assets, return on equity, loan growth, average
deposit growth and the efficiency ratio. Superior performance in these five
areas could yield bonuses for executive officers of the Corporation and the Bank
up to, but not exceeding, 50% of their annual base compensation.
The 1996 Incentive Plan will differ from the executive officer bonus
plan used in 1995 where a bonus pool was established based solely on the
Corporation's earnings improvement. The Committee awarded cash bonuses to the
executive officers based on the Corporation's 1995 earnings improvement over
1994. Mr. Swope was granted bonuses for 1995 in the aggregate of $28,875 in
recognition of his ability and dedication to enhance the long-term value of the
Corporation. Mr.
<PAGE>
Swope has continually provided leadership and vision throughout his tenure as
Chief Executive Officer.
Personnel and Compensation Committee
David L Peirce, Chairman
John A. Featherman, III
<PAGE>
Employee Benefit Plans
Termination of Retirement Plan. In October 1994, the Board of Directors
of the Bank approved the termination of the Defined Benefit Retirement Plan
effective December 31, 1994. The participants' vested benefits were distributed
in 1995. Messrs. Swope, Cloud, Gruver, Hughes and Rohrbach received $921,437,
$446,859, $173,790, $152,116 and $144,167, respectively, and the executive
officers, as a group, received $2,152,652 pursuant to such distribution.
401(k) Deferred Compensation Plan. During 1988, the Bank adopted a
deferred salary savings plan intended to comply with the requirements of Section
401(k) of the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code"). The 401(k) Plan established a retirement plan and trust pursuant to
which participating employees may elect to defer receipt of a portion of their
compensation and have such amount contributed to the 401(k) Plan. Subject to
limitations on deductibility of contributions imposed by the Internal Revenue
Code, the Bank matches such contributions with a contribution of $0.75 for each
dollar of deferred salary, until a participant has deferred 5% of his or her
salary. Deferred amounts and matching contributions vest immediately. Any
employee of the Bank who has completed one year of service, and who is regularly
scheduled to work a minimum of 1,000 hours per plan year, is eligible to
participate in the 401(k) Plan. Amounts held in a participant's account under
the 401(k) Plan are generally not distributable until the participant reaches
age 59 1/2, dies, becomes permanently disabled or terminates employment with the
Bank.
Pursuant to the terms of the 401(k) Plan, the accounts of participating
officers received the following amounts of matching funds from the Bank in 1995:
$5,625 for Mr. Swope; $3,866 for Mr. Cloud; $3,554 for Mr. Gruver; $3,600 for
Mr. Hughes; $3,554 for Mr. Rohrbach; and $31,629 for the executive officers as a
group.
A Qualified Defined Contribution Pension Plan was implemented on
January 1, 1995, to replace the terminated Defined Benefit Pension Plan. Under
this plan, the Bank will make annual contributions to the 401(k) Plan for each
eligible participant in an amount equal to three percent (3%) of his or her
salary up to $30,000 in salary, plus an amount equal to six percent (6%) of pay
in excess of $30,000 in salary. The Bank may make additional discretionary
employer contributions subject to approval of the Board of Directors. During
1995, the Bank contributed $8,100, $5,285, $4,786, $5,091, and $4,786, on
account of Messrs. Swope, Cloud, Gruver, Hughes and Rohrbach, respectively, and
$45,547 for the executive officers as a Group, pursuant to the Bank's Qualified
Defined Contribution Pension Plan.
Supplemental Benefit Retirement Plan. The Bank instituted a
Supplemental Benefit Retirement Plan on September 26, 1980, to insure that the
retirement benefits of the executive officers, as a percentage of their income,
are commensurate with that of other employees of the Bank. On December 16, 1988,
the Bank instituted an Executive Deferred Compensation Plan for executive
officers. Effective January 1, 1995, the Executive Deferred Compensation Plan of
the Bank was merged with the Supplemental Benefit Retirement Plan, which was
amended and restated
<PAGE>
in its entirety and is now known as the Supplemental Benefit Retirement Plan
(the "Supplemental Plan"). For all periods prior to January 1, 1995, benefits
were calculated under the prior plans as then in effect and benefits that
accrued up to and through December 31, 1994, were converted to an account
balance for each participant as of such date. At the time of such conversion,
the account balances for Messrs. Swope, Cloud, Gruver, Hughes and Rohrbach were
$273,018, $80,447, $30,691, $67,700 and $31,091, respectively, and $490,609 for
the executive officers as a group.
Participation in the Supplemental Plan is determined by the Board of
Directors of the Bank in its sole discretion and currently includes all
executive officers. The Supplemental Plan is administered by Board of Directors
of the Bank, which periodically determines, in its sole discretion, the amount
to be credited to each participant's Supplemental Benefit Retirement Account. A
participant's interest in his account is fully vested at all times.
At the end of each calendar year, the account of each participant is
increased by the amount of (i) three percent (3%) of such participant's
compensation during such year, (ii) any deferred compensation and (iii) credited
earnings on such account (based on the prime rate published in The Wall Street
Journal on the last working day of December of the prior year). Participants'
accounts are reduced by the amount of all distributions from such account to the
participant during the year. A participant may defer from $5,000 up to $50,000
per year for a period of ten consecutive years, less the number of years such
participant previously chose to defer compensation under the Supplemental Plan.
The benefits under the Supplemental Plan are payable to a participant
upon the earlier of the first day of the month following (a) his reaching age
65, (b) the termination of his employment with the Bank for any reason or (c)
twenty-five years following his first deferral under the Supplemental Plan. A
participant may elect to receive his benefits in the form of a lump sum or in
installments over 5, 10 or 15 years. If a participant dies, the account balance
will be paid to his beneficiary; such payment may be made in installments or in
a lump sum depending upon the circumstances of such participant's death. The
Board of Directors of the Bank may, in its discretion, accelerate the payment of
any benefit due a participant or his beneficiary by directing a lump sum
distribution to such participant or beneficiary.
Benefits under the Supplemental Plan are payable in cash from the
Bank's assets as they become due, irrespective of any actual investments the
Bank may make to meet its obligations under the Supplemental Plan. The rights of
the participants under the Supplemental Plan are no greater than those of any
unsecured creditor of the Bank.
During 1995, $7,753, $3,092, $2,843, $2,995, $2,843 and $30,527 were
accrued pursuant to the Supplemental Plan for Messrs. Swope, Cloud, Gruver,
Hughes, Rohrbach and the executive officers of the Bank as a group,
respectively.
<PAGE>
Retirement Life Insurance Plan. On November 1, 1985, the Bank
instituted the Retirement Life Insurance Plan for the senior staff officers of
the Bank. The Retirement Life Insurance Plan was established to insure that each
officer of the grade of vice-president and above, upon retirement, may receive a
whole life insurance policy with death benefits approximately equal to his or
her annual salary at retirement. The Bank pays all annual insurance premiums and
is the sole owner and beneficiary under the individual policies. The President,
with the approval of the Executive Committee of the Board of Directors,
administers and makes any recommendations or adjustments, or both, to the
Retirement Life Insurance Plan.
All participants are fully vested upon the attainment of the age of 65.
The President, with the approval of the Executive Committee of the Board of
Directors, will determine, the date on which the individual policy may be
delivered to the vested participant. Upon receipt of the indi vidual policy, the
recipient is liable for all taxes due on the cash value of the policy at that
time.
If a participating officer dies prior to age 65 or early retirement, or
prior to delivery of the individual policy to the participating officer, death
benefits under such individual policy shall revert to the Bank as the sole owner
of the policy. If a participating officer retires early, the President may
decide, in his sole discretion, to deliver the individual policy to the retiring
officer. The President, with the approval of the Executive Committee of the
Board of Directors, acts as the administrator of the life insurance proceeds and
disburses such funds to the estate or the beneficiaries named by the deceased
participating officer. If a participant's employment is terminated for any
reason other than retirement, death or disability before he has reached the age
of 65, all rights to the life insurance coverage and any accrued cash value may
be forfeited by the participant upon the determination and decision of the
President and the Executive Committee of the Board of Directors.
Currently, Messrs. Swope, Cloud, Gruver, Hughes and Rohrbach are
participants under the Retirement Life Insurance Plan. The death benefits under
the individual policies of the participating officers at December 31, 1995, were
in the following amounts: $242,262 for Mr. Swope; $139,355 for Mr. Cloud;
$75,281 for Mr. Gruver; $123,583 for Mr. Hughes; $91,361 for Mr. Rohrbach; and
$882,272 for the executive officers as a group.
Stock Bonus Plan. During 1991, the Corporation adopted a Stock Bonus
Plan which was ratified by the shareholders of the Corporation in 1992. Under
the Stock Bonus Plan, the Corporation may grant bonuses to its employees
consisting of (i) shares of its Common Stock, or (ii) shares of Common Stock and
cash, or (iii) cash. The following amounts were determined for 1994, and were
paid in shares of Common Stock in 1995: $8,646 for Mr. Swope; $0 for Mr. Cloud;
$4,159 for Mr. Gruver; $0 for Mr. Hughes; $0 for Mr. Rohrbach, and $16,473 in
the form of 755 shares of Common Stock were paid to all executive officers as a
group. Messrs. Swope, Cloud, Gruver, Hughes and Rohrbach received cash bonuses
of $6,816, $7,118, $2,414, $6,921 and $6,573, respectively, in 1995, in
consideration of services rendered in 1994, and an aggregate of $51,558 was paid
in the form of cash to all executive officers as a group. During 1995, 581
shares of Common Stock were paid under the Stock Bonus Plan for services
rendered during 1994, to employees of the Corporation or the Bank other than the
executive officers, and an aggregate of $117,362 was paid in cash to employees
of the Corporation or the Bank other than executive officers.
<PAGE>
Messrs. Swope, Cloud, Gruver, Hughes and Rohrbach will receive cash
bonuses of $26,859 $11,610, $10,676, $11,249, and $10,676, respectively, in
1996, in consideration of services rendered in 1995 and an aggregate of $112,378
will be paid in cash as bonuses to all executive officers as a group. During
1996, employees of the Corporation or the Bank other than the executive officers
will be paid an aggregate of $293,000 in cash for services rendered during 1995.
No shares of Common Stock will be distributed in 1996 under the Stock Bonus Plan
for services rendered during 1995.
The purpose of the Stock Bonus Plan is to promote the interests of the
Corporation by encouraging and enabling its employees and employees of the Bank
to acquire financial interests in the Corporation through the acquisition of
shares of the Corporation's Common Stock.
All employees of the Corporation and the Bank who have completed one
full calendar year of active employment with the Corporation or the Bank, as the
case may be, are eligible to receive bonuses under the Stock Bonus Plan. Bonuses
granted pursuant to the Stock Bonus Plan are made by the Personnel and
Compensation Committee. The Personnel and Compensation Committee determines the
employees to whom, and the time or times at which, Common Stock bonuses are
granted. The Personnel and Compensation Committee, in its sole discretion,
determines whether stock bonuses will be granted, the number of shares of Common
Stock and the amount of cash, if any, covered by, and the total value of, each
bonus and other terms, conditions or restrictions applicable to awards made
under the Stock Bonus Plan. The terms, conditions or restrictions applicable to
bonuses made under the Stock Bonus Plan need not be the same for all recipients,
nor for all bonuses.
The shares of Common Stock for the stock bonuses are purchased by the
Corporation on the open market through an independent agent specified by the
Corporation's Board of Directors. From time to time, but not more than once in
any three-month period, the Personnel and Compensation Committee determines the
aggregate value of bonuses to be awarded pursuant to the Stock Bonus Plan for a
particular period. The Personnel and Compensation Committee authorizes the
independent agent to purchase a corresponding amount of shares of Common Stock.
All shares of Common Stock received by employees pursuant to the Stock
Bonus Plan (except for shares received by executive officers) are freely
transferable. Nevertheless, the shares of Common Stock granted to recipients may
be subject to such terms and conditions as the Personnel and Compensation
Committee, in its sole discretion, determines appropriate.
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph illustrates a five year comparison of cumulative
shareholder return on the Common Stock for each of the years ended December 31,
1991, 1992, 1993, 1994 and 1995, for (i) the Corporation, (ii) the NASDAQ Market
Value Weighted Index, and (iii) a peer group index. The peer group index
consists of Pennsylvania and New Jersey Banks with total assets of between 100
million and 500 million whose stock is traded on the NASDAQ market. The
comparison assumes $100 was invested on December 31, 1990, in the Corporation's
Common Stock and in each of the foregoing indices and assumes reinvestment of
dividends.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Fiscal Year Ending
COMPANY 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
First West Chester Corp. 100 121.53 144.31 156.31 161.95 219.35
Peer Group 100 72.31 100.80 154.28 162.22 225.43
Broad Market 100 128.38 129.64 155.50 163.26 211.77
</TABLE>
The historical stock price performance of the Corporation's Common
Stock shown on the Stock Price Performance Graph is not necessarily indicative
of future price performance.
The peer group index consists of BCB Financial Services; Broad National
Bancorp; Bryn Mawr Bank Corporation; Carnegie Bancorp.; Community Banks, Inc.;
First Shenango Corp.; Heritage Bancorp Inc.; Progress Financial Corporation;
Raritan Bancorp. Inc.; Royal Bancshares of Pennsylvania; SunBancorp Inc.; TF
Financial Corporation; and WVS Financial Corporation.
Certain entities comprising past peer groups were omitted from the peer
group index for 1995 because each failed the total assets criterion for the peer
group index.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Some of the directors and executive officers of the Corporation, as
well as members of their families and companies with which they are associated,
were customers of, and had banking
<PAGE>
transactions with the Bank in the ordinary course of its business during 1995.
All loans and commitments to lend to such parties were made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons. In the opinion of
management, the loans and commitments do not involve more than a normal risk of
collectability or present other unfavorable features.
The law firm of MacElree, Harvey, Gallagher, Featherman & Sebastian,
Ltd., of which Mr. Featherman, a director of the Corporation and the Bank, is a
principal, was retained by the Corporation and the Bank as counsel during 1995
and will again be retained in 1996.
The law firm of Gawthrop, Greenwood & Halsted, P.C., of which Mr.
Halsted, a director of the Corporation and the Bank, is a principal, was
retained by the Corporation for a legal matter in 1995. The Corporation and the
Bank may retain such law firm in 1996.
RATIFICATION OF THE CORPORATION'S
1995 STOCK OPTION PLAN
On September 18, 1995, the Board of Directors of the Corporation
adopted the 1995 Stock Option Plan (the "Plan"), subject to ratification by the
shareholders of the Corporation at the 1996 Annual Meeting. The purpose of the
Plan is to provide additional incentive to key employees and directors to enter
into or remain in the employ or service of the Corporation or the Bank. The Plan
is divided into two parts: (i) Key Employee Plan and (ii) Director Plan. The
Plan commenced on September 18, 1995, subject to ratification by the
shareholders of the Corporation within twelve months hereafter. Although options
were granted to key employees and directors of the Corporation and the Bank as
described below, such option grants are expressly conditioned upon shareholder
ratification of the Plan. On September 18, 1995, the Board of Directors of the
Corporation declared a 3-for-2 stock split for all outstanding shares of Common
Stock (record date as of October 3, 1995) and all shares reserved for or subject
to an option grant; such dividend was paid on October 16, 1995. The numbers of
shares subject to the Plan discussed herein, reflect the changes resulting from
the stock split.
The Plan provides for up to 187,500 shares of Common Stock to be issued
pursuant to options exercised under the terms of the Plan. The exercise price
for each share of Common Stock purchased pursuant to an option granted under the
Plan shall be at least equal to the "fair market value" of a share of Common
Stock on the Grant Date for such option. If available, the "fair market value"
shall be the mean between the highest bid price and lowest asked priced last
quoted by the then current market makers of the Common Stock on the Grant Date
or the immediately preceding business day if the Grant Date is not a business
day. If no such bid and asked price is available, then the fair market value
shall be determined by the Stock Option Committee (as defined below) in good
faith in the case of an option granted under the Key Employee Plan (see below)
or shall be the mean between the most recent highest bid price and lowest asked
price last quoted by the market makers of the Common Stock in the case of an
option granted under the Director Plan.
<PAGE>
No option may be granted under the Plan after September 17, 2005. No
option may be exercised prior to six months following the Grant Date. Each
option granted expires on the earlier of (a) the tenth anniversary of its Grant
Date, (b) in the case of an incentive stock option, five years after the Grant
Date if the optionee beneficially owns shares possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Corporation or the Bank, (c) the date set by the Board of Directors of the
Corporation as an accelerated expiration date after a finding by such Board that
the options materially adversely affect the Corporation (or may in the future),
or in the case of incentive stock options, where there has been a "change in
control" (as defined in the Plan) in the Corporation, (d) three months following
termination of the optionee's employ or service with the Company or Bank for any
reason other than for cause (for an option granted under the Key Employee Plan),
death or disability, (e) one year following termination of the optionee's employ
or service with the Company or Bank for death or disability, or (f) in the case
of an option granted under the Key Employee Plan, immediately upon the
determination by the Stock Option Committee that an employee as been terminated
for "cause" (as defined in the Plan).
No option granted under the Plan may be transferred except by will or
by the laws of descent and distribution, except that nonqualified options may be
transferred by an optionee pursuant to a qualified domestic relations order as
defined in the Internal Revenue Code or Title I of ERISA. During an optionee's
lifetime, such option may only be exercised by the optionee. Each option granted
under the Plan shall be considered "restricted stock" within the meaning of Rule
144 of the Securities Act of 1933, as amended. The Corporation is not obligated
to register any shares issued pursuant to the exercise of an option granted
under the Plan or to take any action which would make available to the Optionee
any exemption from such registration. The Company is currently contemplating
registration of such shares.
The Key Employee Plan is administered by a Stock Option Committee of
the Board of Directors of the Corporation. The members of such Committee must be
"disinterested" as defined under Rule 16b-3(c) of the Securities Exchange Act of
1934, as amended. Currently, the members of the Stock Option Committee are
Messrs. Peirce and Featherman. Under the Key Employee Plan, options are granted
to key employees of the Corporation and the Bank as follows. First, options to
purchase up to 63,750 shares of Common Stock may be granted to key employees of
the Corporation or the Bank at such times and in such amounts and on such terms
and conditions as determined by the Stock Option Committee pursuant to the terms
of the Plan. Second, options to purchase up to 82,500 shares of Common Stock
shall be granted in accordance with the following schedule:
<PAGE>
NEW STOCK OPTION PLAN BENEFITS
Grant Dates (Number of Shares of Common Stock)
<TABLE>
<CAPTION>
9/18/95 9/30/96 9/30/97 9/30/98 9/30/99
Name and Position
<S> <C> <C> <C> <C> <C>
Charles E. Swope 3,000 3,000 3,000 3,000 3,000
President, CEO
and Chairman
of Corporation and Bank
Richard C. Cloud 1,500 1,500 1,500 1,500 1,500
Executive Vice President,
Cashier and Senior Loan
Officer of Bank
James D. Gruver 1,500 1,500 1,500 1,500 1,500
Senior Vice President
of Bank
William E. Hughes, Sr. 1,500 1,500 1,500 1,500 1,500
Executive Vice President
and Senior Loan Officer
of Bank
Eric W. Rohrbach 1,500 1,500 1,500 1,500 1,500
Senior Vice President
of Bank
Executive Group (10 16,500 16,500 16,500 16,500 16,500
Executive Officers of
Bank and Corporation)
Non-Executive Director 8,250 8,250 8,250 8,250 8,250
Group (11 members of
the Board of Directors
of Corporation and the Bank)
</TABLE>
Should the number of executive officers (other than the President) increase
during the term of the Plan, then on the applicable Grant Date, each executive
officer shall receive an option for that number of shares equal to 13,500
divided by the number of executive officers. Should the number
<PAGE>
of executive officers (other than the President) decrease during the term of the
Plan, the number of shares granted to each executive officer pursuant to an
option shall not change and any ungranted shares resulting from such decrease
shall be added to the number of shares of Common Stock available for
discretionary option grant by the Stock Option Committee as described above.
The options granted under the Key Employee Plan are intended to be
"incentive stock options" in accordance with Section 422 of the Internal Revenue
Code (each, an "ISO"), although the Stock Option Committee may designate any
grant as a "nonqualified stock option" ("NQSO") in its discretion.
Options granted under the Director Plan are NQSOs. Each person serving as a
director of the Corporation or the Bank on the applicable Grant Date (which are
the same as those set forth in the schedule above) and who is not also a key or
other employee of any such entities shall be awarded an option to purchase 750
shares of Common Stock on each Grant Date. If a director is serving on the Board
of both entities, such director shall only be eligible for a grant of options
under the Director Plan as a director of the Corporation. Should the number of
directors eligible for the Director Plan (currently 11) decrease during the term
of the Plan, the number of shares available for grant to each remaining director
shall not change. Any ungranted shares resulting from such decrease shall be
reserved for future grant under the Director Plan should the number of directors
increase. Should the number of directors increase during the term of the Plan,
then each director shall receive on the applicable Grant Date an option for that
number of shares equal to 6,000 divided by the number of eligible directors.
The Corporation has agreed to indemnify each member of the Stock Option
Committee and of the Board of Directors of the Corporation and the Bank with
respect to the administration of the Plan and the granting of options under it
so long as such member has not been found to have been guilty of gross
negligence or willful misconduct in the performance of his or her duties as a
member of the Stock Option Committee or the Board of Directors of the
Corporation or the Bank.
Option Grants for the 1995 Fiscal Year
Below are the options granted to the executive officers and directors of
the Corporation and the Bank for 1995. Such option grants are subject to
ratification of the 1995 Stock Option Plan by the shareholders of the
Corporation at the 1996 Annual Meeting.
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value At Assumed
Individual Grants Annual Rates of Stock
Price Appreciation for
Option Term
- -------------------------------------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E) (F) (G)
Number of % of
Securities Total
Underlying Options Exercise
Options Granted to or Base
Granted Employees Price Expiration
Name (#) in Fiscal Year ($/sh) Date 5% ($) 10% ($)
---- ------- --------------- ------ ---- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Charles E. Swope 3,000 18.2% $23.08 9/17/05$ 43,550 $110,365
President, CEO and
Chairman of Corporation
and Bank
Richard C. Cloud 1,500 9.1% 23.08 9/17/05 21,775 55,182
Executive Vice President
and Senior Loan Officer
of Bank
James D. Gruver 1,500 9.1% 23.08 9/17/05 21,177 55,182
Senior Vice President
of Bank
William E. Hughes, Sr. 1,500 9.1% 23.08 9/17/05 21,177 55,182
Executive Vice President
and Senior Loan Officer
of Bank
Eric W. Rohrbach 1,500 9.1% 23.08 9/17/05 21,177 55,182
Senior Vice President
of Bank
Executive Group (10 16,500 100% 23.08 9/17/05 239,525 607,002
Executive Officers
of Corporation and Bank)
Non-Executive
Director Group (11 8,250 N/A $23.08 9/17/05 $119,763 $303,504
members of Board
of Directors of
Corporation and Bank)
</TABLE>
The bid and ask prices of the Common Stock of the Corporation as of
February 5, 1996 was $28-l/4 bid and $30 asked.
<PAGE>
Federal Income Tax Consequences
The following is a brief description of the federal income tax
consequences, under present tax laws, of options granted under the 1995 Stock
Option Plan.
Generally, there is no federal income tax consequences to either the
optionee or the Corporation upon the grant or exercise of an ISO. Upon the
exercise of an ISO, however, the excess of the current fair market value of the
shares so acquired over the price paid for such shares will generally be treated
as a positive adjustment in determining the optionee's alternative minimum
taxable income for the year of exercise.
If an optionee exercises an ISO and does not dispose of the shares
within two years from the date of grant or within one year from the date the
shares are transferred to the optionee, any gain realized upon disposition will
be taxable to the optionee as long-term capital gain, and the Corporation will
not be entitled to any deduction. If an optionee disposes of shares without
meeting the foregoing holding period requirements, the optionee will realize
ordinary income in the year of disposition, and the Corporation will be entitled
to a corresponding deduction, in an amount equal to the lesser of (a) the excess
of the fair market value of the shares on the date of exercise over the price
paid for such shares, or (b) the excess of the amount realized on such
disposition over the price paid for such shares.
There is no federal income tax consequences to either the optionee or
the Corporation upon the grant of an NQSO. Upon the exercise of an NQSO, the
optionee will recognize ordinary income in an amount equal to the excess of the
fair market value of the shares on the date of exercise over the price paid for
such shares, and the Corporation will generally be entitled to a federal income
tax deduction in that amount.
Recommendation for Ratification
Ratification of the 1995 Stock Option Plan will occur upon the
affirmative votes of the holders of a majority of the shares of Common Stock
present or represented and entitled to vote at the 1996 Annual Meeting.
Abstentions will have no effect on the outcome of such vote. If a broker that is
a record holder of Common Stock does not return a signed proxy, the shares of
Common Stock represented by such proxy will not be considered present at the
Annual Meeting and, therefore, will not be counted towards a quorum and will not
be voted.
The Board of Directors recommends that the shareholders vote FOR the
ratification of the 1995 Stock Option Plan.
<PAGE>
RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed the firm of Grant Thornton, LLP as
independent public accountants for the year ending December 31, 1996. This
appointment will be submitted to the shareholders for ratification at the 1996
Annual Meeting.
The submission of the appointment of Grant Thornton, LLP for
ratification by the shareholders is not required by law or by the Bylaws of the
Corporation. The Board of Directors is nevertheless submitting it to the
shareholders to ascertain their views. If the shareholders do not ratify the
appointment, the selection of other independent public accountants will be
considered by the Board of Directors.
A representative of Grant Thornton, LLP is expected to be present at
the Annual Meeting to respond to appropriate questions and will have the
opportunity to make a statement if he so desires.
The Board of Directors recommends that the shareholders vote FOR the
ratification of Grant Thornton, LLP as the Corporation's independent public
accountants for the year ending December 31, 1996.
OTHER MATTERS
No other matters requiring a vote of the shareholders are expected to
come before the Annual Meeting. However, if other matters should properly come
before the Annual Meeting, it is the intention of the persons named in the
enclosed proxy to vote in accordance with their best judgment on such matters.
REQUIRED FILINGS
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Corporation's officers and directors, and persons who own more than
ten percent of a registered class of the Corporation's equity securities, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission ("SEC"). Officers, directors and greater than ten-percent
shareholders are required by SEC regulation to furnish the Corporation with
copies of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to the
Corporation, or written representations that no Forms 5 were required, the
Corporation believes that, during 1995, all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten-percent beneficial
owners were timely met.
<PAGE>
EXPENSES OF SOLICITATION
The Corporation will bear the entire cost of soliciting proxies for the
Annual Meeting. In addition to the use of the mails, proxies may be solicited by
personal interview, telephone and telegram by the Corporation's directors,
officers and employees. Arrangements may also be made with brokerage houses and
other custodians, nominees and fiduciaries for forwarding proxy materials to
beneficial owners of shares held of record by such persons, and the Corporation
may reimburse such custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred by them in connection therewith.
SHAREHOLDER PROPOSALS
Proposals by Shareholders intended to be presented at the next Annual
Meeting of Sharehold ers of the Corporation must be received by the Corporation
at its executive offices at 9 North High Street, West Chester, Pennsylvania
19380, on or before October 31, 1996, to be included in the Corporation's Proxy
Statement and form of proxy for the 1997 annual meeting.
THE CORPORATION WILL PROVIDE TO EACH PERSON SOLICITED, WITHOUT CHARGE
EXCEPT FOR EXHIBITS, UPON REQUEST IN WRITING, A COPY OF ITS ANNUAL REPORT ON
FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.
SUCH REPORT WILL BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OR
ABOUT MARCH 30, 1996. REQUESTS SHOULD BE DIRECTED TO MR. JOHN STODDART,
SHAREHOLDER RELATIONS REPRESENTATIVE, FIRST WEST CHESTER CORPORATION, 9 NORTH
HIGH STREET, WEST CHESTER, PENNSYLVANIA 19380.
By Order of the Board of Directors
Edward J. Cotter, Secretary
West Chester, Pennsylvania
February 28, 1996
<PAGE>
APPENDIX A
PROXY PROXY
FIRST WEST CHESTER CORPORATION
ANNUAL MEETING OF SHAREHOLDERS, MARCH 19, 1996
THIS PROXY IS SOLICITED ON BEHALF OF
THE CORPORATION'S BOARD OF DIRECTORS
The undersigned hereby appoints Thomas R. Butler and Robert Poole III,
M.D., and each of them, jointly and severally, Proxies, with full power of
substitution, to vote, as designated below, all shares of Common Stock of First
West Chester Corporation held of record by the undersigned on February 5, 1996,
at the 1996 Annual Meeting of Shareholders to be held on March 19, 1996, or any
adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" (1) THE ELECTION OF THE
NOMINEES TO SERVE AS CLASS III DIRECTORS, (2) THE RATIFICATION OF THE
CORPORATION'S 1995 STOCK OPTION PLAN AND (3) THE RATIFICATION OF THE APPOINTMENT
OF GRANT THORNTON, LLP AS THE CORPORATION'S INDEPENDENT PUBLIC ACCOUNTANTS.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED BELOW.
IF NO DIRECTION IS GIVEN IN THE SPACE PROVIDED BELOW, THIS PROXY WILL BE VOTED
"FOR" ITEMS 1, 2 and 3.
1. ELECTION OF FOUR CLASS III DIRECTORS (Term to expire in 1999).
FOR all nominees listed below (except as WITHHOLD AUTHORITY to vote for
all marked to the contrary below) o nominees listed below o
(INSTRUCTION: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name in
the list below.)
RICHARD M. ARMSTRONG, JOHN A. FEATHERMAN, III, JOHN S. HALSTED,
DEVERE KAUFFMAN
2. PROPOSAL TO RATIFY THE CORPORATION'S 1995 STOCK OPTION PLAN.
o FOR o AGAINST o ABSTAIN
3. PROPOSAL TO RATIFY THE APPOINTMENT OF GRANT THORNTON, LLP as the
independent public accountants of the Corporation for the year ending
December 31, 1996.
o FOR o AGAINST o ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment
thereof and matters incident to the conduct of the meeting.
<PAGE>
Please sign exactly as the name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by President or other
authorized officer and affix corporate seal. If a partnership, please
sign in partnership name by general partner.
DATED: _______________, 1996 _______________________________(SEAL)
Signature
_______________________________(SEAL)
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE>
APPENDIX B
FIRST WEST CHESTER CORPORATION
1995 STOCK OPTION PLAN
1. Purpose.
(a) Additional Incentive. The Plan is intended as an
additional incentive to key employees and members of the Board of Directors
(together, the "Optionees") to enter into or remain in the service or employ of
First West Chester Corporation, a Pennsylvania corporation (the "Company") or
its subsidiary, The First National Bank of West Chester (the "Bank"), and to
devote themselves to the Company's success by providing them with an opportunity
to acquire or increase their proprietary interest in the Company through receipt
of rights (the "Options") to acquire the Company's Common Stock, par value $1.00
per share (the "Common Stock").
(b) Two-Part Plan. The Plan shall be divided into two
sub-plans: the "Key Employee Plan" and the "Director Plan". All provisions
hereunder which refer to the "Plan" shall apply to each of the Key Employee Plan
and the Director Plan.
(c) Incentive Stock Option. Each Option granted under the Key
Employee Plan is intended to be an incentive stock option ("ISO") within the
meaning of section 422(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), for federal income tax purposes, except to the extent (i) any such ISO
grant would exceed the limitation of subsection 4(a) below, or (ii) any Option
is specifically designated at the time of grant (the "Grant Date") as not being
an ISO. No Option granted to a person who is not an employee of the Company or
the Bank on the Grant Date shall be an ISO.
2. Option Shares.
(a) Aggregate Maximum Number. The aggregate maximum number of
shares of the Common Stock for which Options may be granted under the Plan is
125,000 shares (the "Option Shares"), which number is subject to adjustment as
provided in Section 7. Option Shares shall be issued from authorized and
unissued Common Stock or Common Stock held in or hereafter acquired for the
treasury of the Company. If any outstanding Option granted under the Plan
expires, lapses or is terminated for any reason, the Option Shares allocable to
the unexercised portion of such Option may again be the subject of an Option
granted pursuant to the Plan.
(b) Allocation of Option Shares. Of the 125,000 Option Shares,
97,500 Option Shares (the "Employee Option Shares") shall be reserved for
issuance to key employees of the Company and the Bank under the Key Employee
Plan and the remaining 27,500 Option Shares shall be reserved for issuance to
non-employee Directors of the Company or the Bank under the Director Plan.
(c) Key Employee Plan Options. Options granted under the Key
Employee Plan may be either ISOs or Options which are not ISOs ("Nonqualified
Options"). Under the Key Employee Plan, Options to purchase up to 42,500
Employee Option Shares (and any Employee
<PAGE>
Option Shares not required for issuance under Options granted in accordance with
the schedule set forth below) shall be granted to key employees at such times in
such amounts and on such terms and conditions as determined by the Committee (as
defined below), in accordance with the terms of the Plan. Options to purchase up
to 55,000 Employee Option Shares shall be granted to key employees in accordance
with the following schedule:
Grant Dates
<TABLE>
<CAPTION>
September September September September September
18, 30, 30, 30, 30,
Key Employee 1995 1996 1997 1998 1999
- ------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
President 2,000 2,000 2,000 2,000 2,000
Option Option Option Option Option
Shares Shares Shares Shares Shares
Each of 9 Other
Executive Officers* 1,000 1,000 1,000 1,000 1,000
Option Option Option Option Option
Shares Shares Shares Shares Shares
</TABLE>
*Should the number of Executive Officers (other than the President)
increase during the Term of the Plan as of any of the foregoing Grant
Dates, the Option granted to each Executive Officer as of such Grant
Date shall cover that number of Employee Option Shares determined by
dividing 9,000 by the number of Executive Officers (not including the
President). Should the number of Executive Officers decrease during the
Term of the Plan as of any of the foregoing Grant Dates, then the
number of Option Shares to be purchased through an Option grant by each
remaining Executive Officer shall not change. Any ungranted Options
resulting from such decrease shall be granted to key employees as
Employee Option Shares at such times in such amounts and on such terms
and conditions as determined by the Committee, in accordance with the
terms of the Key Employee Plan.
(d) Director Plan Options. Options granted under the Director Plan
shall be Nonqualified Options. Under the Director Plan, each person serving as a
Director of the Company or the Bank on the Grant Date and who is not also a key
or other employee of any of such entities shall be awarded an Option to purchase
500 Option Shares at the Option Price (defined below) on September 18, 1995, and
then on September 30 of each of the following four years of the Term of the Plan
(as defined below). If a Director is serving on the Board of the Company and the
Bank at the time of the grant of any Option under the Director Plan, then such
Director shall only be eligible for a grant of Options under the Director Plan
as a Director of the Company. Should the number of Directors eligible for the
Director Plan decrease during the Term of the Plan, the number of Option Shares
granted to each remaining Director shall not change. Any ungranted Option Shares
resulting from such decrease shall be reserved for future grant under the
Director Plan should the number of Directors increase. Should the number of
Directors increase during the Term of the Plan, then the Options covering the
aggregate number of Option Shares to be distributed on an annual basis shall be
divided equally among such increased number of Directors. Options granted under
the Director Plan shall be substantially in the form of the Option attached
hereto as Exhibit "A".
<PAGE>
3. Term of Plan. The Plan shall commence on September 18, 1995, but
shall terminate unless the Plan is approved by the shareholders of the Company
within twelve months of such date as set forth in Section 422(b)(1) of the Code.
Any Options granted pursuant to the Plan prior to Plan approval by the
shareholders of the Company shall be subject to such approval and,
notwithstanding anything to the contrary herein or in any Option Document (as
defined below), shall not be exercisable until such approval is obtained. No
Option may be granted under the Plan after September 17, 2005.
4. Terms and Conditions of Options. Options granted pursuant to the
Plan shall be evidenced by written documents substantially in the forms attached
hereto as Exhibit "A" or, in the case of the Key Employee Plan, as the Committee
shall from time to time approve, subject to (a) the following terms and
conditions and (b) any other terms and conditions (including vesting schedules
for the exercisability of Options) which the Committee shall from time to time
provide which are not inconsistent with the terms of the Plan (collectively, the
"Option Documents").
(a) Number of Option Shares. Each Option Document shall state
the number of Option Shares to which it pertains. In the case of an ISO, in no
event shall the aggregate fair market value of the Option Shares (determined as
of the date the ISO is granted), and any other options granted under the
incentive stock option plans of the Company or the Bank, exceed $100,000.
(b) Option Price. Each Option Document shall state the price
at which an Option Share may be purchased (the "Option Price"), which shall be
at least 100% of the "fair market value" of a share of the Common Stock on the
date the Option is granted. If available, the "fair market value" shall be the
mean between the highest bid price and lowest asked price last quoted by the
then current market maker(s) in the Company's Common Stock (the "Market
Maker(s)"), on the Grant Date or the immediately preceding business day if the
Grant Date is not a business day. If no such bid and asked price is available,
the fair market value shall be determined by the Committee in good faith in the
case of the Key Employee Plan or shall be the mean between the most recent
highest bid price and lowest asked price last quoted by the Market Maker(s) in
the case of the Director Plan. If an ISO is granted to an Optionee who then
owns, directly or by attribution under Section 424(d) of the Code, shares
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or the Bank, then the Option Price shall be at
least One Hundred and Ten Percent (110%) of the fair market value of the Option
Shares on the date the Option is granted.
(c) Medium of Payment. An Optionee shall pay for Options
Shares (i) in cash, (ii) by bank check payable to the order of the Company or
(iii) in the case of the Key Employee Plan, by such other mode of payment as the
Committee may approve, including payment through a broker in accordance with
procedures permitted by Regulation T of the Federal Reserve Board.
<PAGE>
Furthermore, the Committee may provide in an Option Document that payment may be
made in whole or in part in shares of the Common Stock held by the Optionee for
more than one year. If payment is made in whole or in part in shares of the
Common Stock, then the Optionee shall deliver to the Company certificates
registered in the name of such Optionee representing shares of Common Stock
legally and beneficially owned by such Optionee, free of all liens, claims and
encumbrances of every kind and having a fair market value on the date of
delivery of such notice that is not less than the Option Price of the Option
Shares with respect to which such Option is to be exercised, accompanied by
stock powers duly endorsed in blank by the record holder of the shares
represented by such certificates. In the event that certificates for shares of
the Company's Common Stock delivered to the Company represent a number of shares
in excess of the number of shares required to make payment for the Option Price
of the Option Shares (or the relevant portion thereof) with respect to which
such Option is to be exercised by payment in shares of Common Stock, the stock
certificate issued to the Optionee shall represent the Option Shares in respect
of which payment is made and such excess number of shares. Notwithstanding the
foregoing, the Board of Directors, in its sole discretion, may refuse to accept
shares of Common Stock in payment of the Option Price. In that event, any
certificates representing shares of Common Stock which were delivered to the
Company shall be returned to the Optionee with notice of the refusal of the
Board of Directors to accept such shares in payment of the Option Price. The
Board of Directors may impose such limitations or prohibitions on the use of
shares of the Common Stock to exercise an Option as it deems appropriate,
subject to the provisions of the Plan.
(d) Termination of Options. Each Option shall expire on the
tenth anniversary of its Grant Date. Notwithstanding the foregoing, no Option
shall be exercisable after the first to occur of the following:
(i) In the case of an ISO, five years from the date of
grant if, on such date the Optionee owns, directly or by attribution under
Section 424(d) of the Code, shares possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or the Bank);
(ii) The date set by the Board of Directors of the
Company to be an accelerated expiration date after a finding by the Board of
Directors of the Company that a change in the financial accounting treatment for
Options from that in effect on the date the Plan was adopted materially
adversely affects or, in the determination of such Board of Directors, may
materially adversely affect in the foreseeable future, the Company and/or the
Bank, provided such Board of Directors may take whatever other action, including
acceleration of any exercise provisions, it deems necessary should it make the
determination referred to herein above;
(iii) Expiration of three months (or in the case of the
Key Employee Plan, such shorter period as the Committee may select) from the
date the Optionee's employment or service with the Company or the Bank
terminates for any reason other than (A) disability (within the meaning of
Section 22(e)(3) of the Code) or death or (B) circumstances described by
Subsection (d)(vi), below;
(iv) Expiration of one year from the date the Optionee's
employment or service with the Company or the Bank terminates by reason of the
Optionee's disability (within the meaning of Section 22(e)(3) of the Code) or
death;
<PAGE>
(v) In the case of an Option granted under the Key
Employee Plan, the Committee can accelerate the expiration date in the event of
a "Change in Control" (as defined in Subsection 4(e) below), provided an
Optionee who holds an Option is given written notice at least thirty (30) days
before the date so fixed; or
(vi) In the case of an Option granted under the Key
Employee Plan, a finding by the Committee, after full consideration of the facts
presented on behalf of both the Company and the Optionee, that the Optionee has
been discharged from employment with the Company or the Bank for Cause. For
purposes of this Section, "Cause" shall mean: (A) a breach by Optionee of his
employment agreement with the Company or the Bank, (B) a breach of Optionee's
duty of loyalty to the Company or the Bank, including without limitation any act
of dishonesty, embezzlement or fraud with respect to the Company or the Bank,
(C) the commission by Optionee of a felony, a crime involving moral turpitude or
other act causing material harm to the Company's or the Bank's standing and
reputation, (D) Optionee's continued failure to perform his duties to the
Company or the Bank or (E) unauthorized disclosure of trade secrets or other
confidential information belonging to the Company or the Bank. In the event of a
finding that the Optionee has been discharged for Cause, in addition to
immediate termination of the Option, the Optionee shall automatically forfeit
all Option Shares for which the Company has not yet delivered the share
certificates upon refund of the Option Price.
(e) Change of Control. In the event of a Change in Control (as
defined below), the Committee may take whatever action with respect to the
Options outstanding under the Key Employee Plan it deems necessary or desirable,
including, without limitation, accelerating the expiration or termination date
in the respective Option Documents to a date no earlier than thirty (30) days
after notice of such acceleration is given to the Optionee. A "Change of
Control" shall be deemed to have occurred upon the earliest to occur of the
following events:
(i) The date the shareholders of the Company (or the
Board of Directors, if shareholder action is not required) approve a plan or
other arrangement pursuant to which the Company will be dissolved or liquidated;
(ii) the date the shareholders of the Company (or the
Board of Directors, if shareholder action is not required) approve a definitive
agreement to sell or otherwise dispose of all or substantially all of the assets
of the Company;
(iii) the date the shareholders of the Company (or the
Board of Directors, if shareholder action is not required) and the shareholders
of the other constituent corporation (or its board of directors if shareholder
action is not required) have approved a definitive agreement to merge or
consolidate the Company with or into such other corporation, other than, in
either case, a merger or consolidation of the Company in which holders of shares
of the Common Stock immediately prior to the merger or consolidation will hold
at least a majority of the ownership of common stock of the surviving
corporation (and, if one class of common stock is not the only class of voting
securities entitled to vote on the election of directors of the surviving
corporation, a majority of the voting power of the surviving corporation's
voting securities) immediately after the merger or consolidation, which common
stock (and, if applicable, voting securities) is to be held in
<PAGE>
the same proportion as such holders' ownership of Common Stock immediately
before the merger or consolidation;
(iv) the date any entity, person or group, (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act), other than
(A) the Company or any of its subsidiaries or any employee benefit plan (or
related trust) sponsored or maintained by the Company or any of its subsidiaries
or (B) any person who, on the date the Plan is approved by the shareholders,
shall have been the beneficial owner of at least twenty percent (20%) of the
outstanding Common Stock, shall have become the beneficial owner of, or shall
have obtained voting control over, more than fifty percent (50%) of the
outstanding shares of the Common Stock; or
(v) the first day after the date this Plan is approved by
the shareholders when directors are elected so that a majority of the Board of
Directors shall have been members of the Board of Directors for less than
twenty-four (24) months, unless the nomination for election of each new director
who was not a director at the beginning of such twenty-four (24) month period
was approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of such period.
(f) Transfers. No ISO granted under the Plan may be
transferred, except by will or by the laws of descent and distribution. During
the lifetime of the person to whom an ISO is granted, such Option may be
exercised only by him. No Nonqualified Option under the Plan may be transferred,
except by will or by the laws of descent and distribution or pursuant to
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder.
(g) Other Provisions. For Options granted pursuant to the Key
Employee Plan, the Option Documents shall contain such other provisions
including, without limitation, additional restrictions upon the exercise of the
Option or additional limitations upon the term of the Option, as the Committee
shall deem advisable.
(h) Amendment. With respect to Options granted under the Key
Employee Plan, and subject to the provisions of the Plan, the Committee shall
have the right to amend Option Documents issued to such Optionee, subject to the
Optionee's consent if such amendment is not favorable to the Optionee, except
that the consent of the Optionee shall not be required for any amendment made
under Subsection 4(e) above. With respect to Options granted under the Director
Plan, and subject to the provisions of the Plan, the Board of Directors of the
Company shall have the right to amend Option Documents issued to such Optionee,
subject to the Optionee's consent if such amendment is not favorable to the
Optionee, except that the consent of the Optionee shall not be required for any
amendment made under Subsection 4(e) above.
5. Administration.
(a) Director Plan. It is intended that the grant of Options
pursuant to the Director Plan be administered as provided in Rule
16b-3(c)(2)(ii) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Therefore, as set forth in Section 2(d) above, such Options
will be awarded pursuant to the formula as set forth therein.
<PAGE>
(b) Key Employee Plan. With respect to the Key Employee Plan,
the Board of Directors shall appoint a Stock Option Committee composed of two or
more of its disinterested members (as "disinterested" is defined under Rule
16b-3(c) of the Exchange Act) to operate and administer the Key Employee Plan in
its stead. The Stock Option Committee is referred to herein as the "Committee."
(c) Meetings. The Committee shall hold meetings at such times
and places as it may determine. Acts approved at a meeting by a majority of the
members of the Committee or acts approved in writing by the unanimous consent of
the members of the Committee shall be the valid acts of the Committee.
(d) Discretion of Committee. The Committee shall from time to
time at its discretion grant Options pursuant to the terms of the Key Employee
Plan, except as otherwise provided in Section 2(c) herein. Except as otherwise
provided in Section 2(c) herein, the Committee shall have plenary authority to
determine the Optionees to whom and the times at which Options shall be granted,
the number of Option Shares to be covered by such Options and the price and
other terms and conditions thereof, including a specification with respect to
whether an Option is intended to be an ISO, subject, however, to the express
provisions of the Key Employee Plan and compliance with Rule 16b-3(c) of the
Exchange Act. In making such determinations the Committee may take into account
the nature of the Optionee's services and responsibilities, the Optionee's
present and potential contribution to the Company's success and such other
factors as it may deem relevant. The interpretation and construction by the
Committee of any provision of the Key Employee Plan or of any Option granted
under it shall be final, binding and conclusive.
(e) No Liability. No member of the Board of Directors or the
Committee shall be personally liable for any action or determination made in
good faith with respect to the Key Employee Plan, the Director Plan or any
Option thereunder. No member of the Committee shall be liable for any act or
omission of any other member of the Committee or for any act or omission on his
own part, including but not limited to the exercise of any power and discretion
given to him under the Key Employee Plan, except those resulting from (i) any
breach of such member's duty of loyalty to the Company or its shareholders, (ii)
acts or omissions not in good faith or involving intentional misconduct or a
knowing violation of law or (iii) any transaction from which the member derived
an improper personal benefit.
(f) Indemnification. In addition to such other rights of
indemnification as he may have as a member of the Board of Directors or the
Committee, and with respect to the administration of the Plan and the granting
of Options under it, each member of the Board of Directors and of the Committee
shall be entitled without further action on his part to be indemnified by the
Company for all expenses (including but not limited to reasonable attorneys'
fees and expenses, the amount of judgment and the amount of approved settlements
made with a view to the curtailment of costs of litigation, other than amounts
paid to the Company itself) reasonably incurred by him in connection with or
arising out of any action, suit or proceeding with respect to the administration
of the Plan or the granting of Options under it in which he may be involved by
reason of his being or having been a member of the Board of Directors or the
Committee, whether or not he continues to be such member of the Board of
Directors or the Committee at the time of the incurring of such expenses;
provided, however, that such indemnity shall not include any expenses
<PAGE>
incurred by such member of the Board of Directors or Committee: (i) in respect
of matters as to which he shall be finally adjudged in such action, suit or
proceeding to have been guilty of gross negligence or willful misconduct in the
performance of his duties as a member of the Board of Directors or the
Committee; or (ii) in respect of any matter in which any settlement is effected
in an amount in excess of the amount approved by the Company on the advice of
its legal counsel; and provided further that no right of indemnification under
the provisions set forth herein shall be available to or accessible by any such
member of the Committee or the Board of Directors unless within five (5) days
after institution of any such action, suit or proceeding he shall have offered
the Company in writing the opportunity to handle and defend such action, suit or
proceeding at its own expense. The foregoing right of indemnification shall
inure to the benefit of the heirs, executors or administrators of each such
member of the Board of Directors or the Committee and shall be in addition to
all other rights to which such member of the Board of Directors or the Committee
would be entitled to as a matter of law, contract or otherwise.
6. Exercise.
(a) No Exercise Within Six Months. No Option shall be
exercisable prior to the date which is at least six months after the Grant Date.
(b) Notice. No Option shall be deemed to have been exercised
prior to the receipt by the Company of written notice of such exercise and of
payment in full of the Option Price for the Option Shares to be purchased. Each
such notice shall specify the number of Option Shares to be purchased and shall
satisfy the securities law requirements set forth in this Section 6.
(c) Restricted Stock. Each exercise notice shall (unless the
Option Shares are covered by a then current registration statement or a
Notification under Regulation A under the Securities Act of 1933, as amended
(the "Securities Act")), contain the Optionee's acknowledgment in form and
substance satisfactory to the Company that (i) such Option Shares are being
purchased for investment and not for distribution or resale (other than a
distribution or resale which, in the opinion of counsel satisfactory to the
Company, may be made without violating the registration provisions of the
Securities Act) and, in the case of an ISO, the Option Shares may not be sold
within one year of exercise or two years from the Grant Date in order to
maintain the ISO status of the Option; (ii) the Optionee has been advised and
understands that (A) the Option Shares have not been registered under the
Securities Act and are "restricted securities" within the meaning of Rule 144
under the Securities Act and are subject to restrictions on transfer and (B) the
Company is under no obligation to register the Option Shares under the
Securities Act or to take any action which would make available to the Optionee
any exemption from such registration, (iii) such Option Shares may not be
transferred without compliance with all applicable federal and state securities
laws, and (iv) an appropriate legend referring to the foregoing restrictions on
transfer and any other restrictions imposed under the Option Documents may be
endorsed on the certificates. Notwithstanding the above, should the Company be
advised by counsel that the issuance of Option Shares upon the exercise of an
Option should be delayed pending (A) registration under federal or state
securities laws, (B) the receipt of an opinion that an appropriate exemption
therefrom is available, (C) the listing or inclusion of the shares on any
securities exchange or in an automated quotation system or (D) the consent or
approval of any governmental regulatory body whose consent or approval is
<PAGE>
necessary in connection with the issuance of such Option Shares, the Company may
defer the exercise of any Option granted hereunder until either such event in A,
B, C or D has occurred.
7. Adjustments on Changes in Common Stock. The aggregate number of
shares of Common Stock as to which Options may be granted under the Director
Plan and the Key Employee Plan, the number of Option Shares covered by each
outstanding Option and the Option Price per Option Share specified in each
outstanding Option shall be appropriately adjusted in the event of a stock
dividend, stock split or other increase or decrease in the number of issued and
outstanding shares of Common Stock resulting from a subdivision or consolidation
of the Common Stock or other capital adjustment (not including the issuance of
Common Stock on the conversion of other securities of the Company which are
convertible into Common Stock) effected without receipt of consideration by the
Company. The Board of Directors shall have the authority to determine the
adjustments to be made under this Section and any such determination by the
Board of Directors shall be final, binding and conclusive, provided that no
adjustment shall be made which will cause an ISO to lose its status as such.
8. Amendment of the Plan. The Board of Directors may amend the Plan
from time to time in such manner as it may deem advisable. Notwithstanding the
foregoing, (i) with respect to any amendments affecting the Director Plan, the
Plan provisions shall not be amended more than once every six months, other than
to comport with changes in the Code, the Employee Retirement Income Security
Act, or the rules thereunder, (ii) any amendment which would change the class of
individuals eligible to receive an Option, extend the expiration date of the
Plan, decrease the Option Price or increase the maximum number of shares as to
which Options may be granted or materially increase the benefits accruing to the
Optionees, will only be effective if such action is approved by a majority of
the outstanding voting stock of the Company within twelve months before or after
such action.
9. Continued Employment. The grant of an Option pursuant to the Plan
shall not be construed to imply or to constitute evidence of any agreement,
express or implied, on the part of the Company or the Bank to retain the
Optionee in the employ of the Company or the Bank, as a member of the Board of
Directors or in any other capacity, whichever the case may be.
10. Withholding of Taxes. Whenever the Company proposes or is required
to issue or transfer Option Shares, the Company shall have the right to (a)
require the recipient or transferee to remit to the Company an amount sufficient
to satisfy any federal, state and/or local withholding tax requirements prior to
the delivery or transfer of any certificate or certificates for such Option
Shares or (b) take whatever action it deems necessary to protect its interests.
11. Effective Date. This Stock Option Plan shall be effective as of
the date specified in Section 3 above.
<PAGE>
EXHIBIT "A"
Option Documents
FORM OF STOCK OPTION AGREEMENT - DIRECTOR PLAN
Mr./Ms.
Director Stock Option Agreement
Dear :
In view of your substantial contributions toward the achievement of the
business goals and objectives of First West Chester Corporation (the "Company")
and The First National Bank of West Chester (the "Bank") and the expectation of
your future contributions, the Board of Directors of the Company is pleased to
award you an option to purchase shares of the Common Stock of the Company
pursuant to the First West Chester Corporation 1995 Stock Option Plan (the
"Plan"). A copy of the Plan is attached to this letter agreement as Exhibit "A"
and should be read in conjunction with this letter agreement. [Please be advised
that the Plan and any options granted thereunder will not be effective until a
majority of the shareholders of the Company approve the Plan. The Company
intends to present the Plan for approval at its 1996 Annual Meeting.] This
letter will serve as a stock option agreement between you and the Company. The
Option awarded to you is subject to the following terms.
[1. APPROVAL BY SHAREHOLDERS:
The Option granted hereunder has been granted prior to Plan
approval by the shareholders of the Company and therefore, shall be subject to
such approval. Notwithstanding anything to the contrary herein or in the Plan,
this Option shall not be exercisable until such approval is obtained.]
2. NUMBER OF SHARES:
You are awarded an option ("Option") to purchase a total of
500 shares of the Common Stock of the Company (the "Option Shares").
3. TYPE OF OPTIONS:
The Option awarded to you is a "Nonqualified Option" as that
term is defined in the Plan.
<PAGE>
4. EXERCISE PRICE:
The shares may be purchased upon your exercise of this Option
for the price of $___.__ per share (the "Option Price").
5. DATE OF GRANT OF AWARD:
The grant date of the award of this Option is [Date] (the
"Grant Date").
6. EXERCISE:
Your Option may not be exercised for six months following the
Grant Date. Your Option expires on the tenth anniversary of the Grant Date (with
respect to any number of shares subject to this option not previously
exercised), but may expire earlier upon the first to occur of the following:
(a) The date set by the Board of Directors of the Company
to be an accelerated expiration date after a finding by the Board of Directors
of the Company that a change in the financial accounting treatment for Options
from that in effect on the date the Plan was adopted materially adversely
affects or, in the determination of such Board of Directors, may materially
adversely affect in the foreseeable future, the Company and/or the Bank;
(b) Expiration of three months from the date your
employment with the Company or the Bank terminates for any reason other than
disability, death or for Cause (as defined in the Plan); or
(c) Expiration of one year from the date the your
employment with the Company or the Bank terminates by reason of the your
disability or death.
7. NOTICE OF EXERCISE AND PAYMENT:
To exercise your Option, you must provide written notice of
the exercise marked for the attention of the Secretary of the Company specifying
the number of Option Shares to be purchased and satisfying the securities law
requirements set forth below. You shall also include payment of the Option Price
with such written notice in cash or bank check, payable to the order of the
Company. Upon receipt of such notice and payment, the Company will issue you a
certificate for the number of Option Shares with respect to which you have
exercised the Option.
8. SECURITIES LAW REQUIREMENTS:
Each exercise notice shall contain your acknowledgment in a
form and substance satisfactory to the Company that (a) such Option Shares are
being purchased for investment and not for distribution or resale, (b) you have
been advised and understand that (i) the Option Shares have not been registered
under the Securities Act and are "restricted securities" within the meaning of
Rule 144 under the Securities Act and are subject to restrictions on transfer
and (ii) the Company is under no obligation to register the Option Shares under
the Securities Act or to take any action which
<PAGE>
would make available to the Optionee any exemption from such registration, (c)
such Option Shares may not be transferred without compliance with all applicable
federal and state securities laws, and (d) an appropriate legend referring to
the foregoing restrictions on transfer and any other restrictions imposed under
the Option Documents may be endorsed on the certificates. Notwithstanding the
above, should the Company be advised by counsel that the issuance of Option
Shares upon the exercise of your Option should be delayed pending (A)
registration under federal or state securities laws, (B) the receipt of an
opinion that an appropriate exemption therefrom is available, (C) the listing or
inclusion of the shares on any securities exchange or in an automated quotation
system or (D) the consent or approval of any governmental regulatory body whose
consent or approval is necessary in connection with the issuance of such Option
Shares, the Company may defer the exercise of your Option until either such
event in A, B, C or D has occurred.
9. EXERCISE DATE:
The date on which the Company receives the documents specified
above in complete and otherwise acceptable form and the payments specified above
will be treated as the Exercise Date with respect to your exercise of the stock
option.
10. WITHHOLDING OF TAXES:
Upon exercise of your Option, the Company shall have the
right to (a) require you to remit to the Company an amount sufficient to satisfy
any federal, state and/or local withholding tax requirements prior to the
delivery or transfer of any certificate or certificates for such Option Shares
or (b) take whatever action it deems necessary to protect its interests.
11. NON-ASSIGNABILITY OF OPTION:
Except as provided by the Plan, the Option awarded to you is
exercisable only by you. The Option may not be transferred, assigned, pledged as
security or hypothecated in any way and is not subject to execution, attachment
or similar process. Upon any attempt by you to transfer, assign, pledge,
hypothecated or otherwise dispose of this Option or of any portion thereof or
upon the levy of any execution, attachment or similar process on this Option or
on any portion thereof, the Option awarded to you will immediately expire with
respect to the number of shares not exercised prior to such event.
12. RIGHTS IN SHARES SUBJECT TO OPTION:
You will not be treated as a holder of any of the shares
subject to this Option or of any rights of a holder of such shares unless and
until the shares are issued to you as evidenced by stock certificates.
13. AFFECT ON EMPLOYMENT RELATIONSHIP:
This letter is not an employment agreement or service
contract. Therefore, none of the rights awarded to you by this letter affect, in
any way, your employment or service relationship with the Company or the Bank.
<PAGE>
14. OPTION AWARDED SUBJECT TO PLAN PROVISIONS:
The Plan provisions take precedence over the provisions of
this letter agreement. Therefore, in the case of any inconsistency between any
provision of this letter agreement and any provision of the Plan in effect on
the Grant Date, the provision of the Plan will control.
15. COUNTERPARTS:
This letter agreement may be executed in one or more
counterparts each of which shall be deemed an original and all of which shall be
deemed one and the same agreement.
If you accept the Option award evidenced by this letter agreement,
subject to the terms stated above, you should date and sign the enclosed copy of
this letter in the spaces indicated and return it to the Company marked for the
attention of the Secretary.
First West Chester Corporation
By:___________________________
Chairman of the Board
I acknowledge that I have read this letter agreement and agree to accept the
stock option award evidenced by it according to the terms set forth in such
letter agreement.
[ Name of Grantee ]
- -------------------------------- ------------------
Signature Date
<PAGE>
FORM OF STOCK OPTION AGREEMENT - KEY EMPLOYEE PLAN
Mr./Ms.
Key Employee Stock Option Agreement
Dear :
In view of your substantial contributions toward the achievement of
the business goals and objectives of First West Chester Corporation (the
"Company") and The First National Bank of West Chester (the "Bank") and the
expectation of your future contributions, the Board of Directors of the Company
is pleased to award you an option to purchase shares of the Common Stock of the
Company pursuant to the First West Chester Corporation 1995 Stock Option Plan
(the "Plan"). A copy of the Plan is attached to this letter agreement as Exhibit
"A" and should be read in conjunction with this letter agreement. [Please be
advised that the Plan and any options granted thereunder will not be effective
until a majority of the shareholders of the Company approve the Plan. The
Company intends to present the Plan for approval at its 1996 Annual Meeting.]
This letter will serve as a stock option agreement between you and the Company.
The Option awarded to you is subject to the following terms.
[1. APPROVAL BY SHAREHOLDERS:
The Option granted hereunder has been granted prior to Plan
approval by the shareholders of the Company and therefore, shall be subject to
such approval. Notwithstanding anything to the contrary herein or in the Plan,
this Option shall not be exercisable until such approval is obtained.]
2. NUMBER OF SHARES:
You are awarded an option ("Option") to purchase a total of
____ shares of the Common Stock of the Company (the "Option Shares").
3. TYPE OF OPTIONS:
The Option awarded to you is an Incentive Stock Option or ISO
as such terms are defined in the Plan.
4. EXERCISE PRICE:
The shares may be purchased upon your exercise of this Option
for the price of $___.__ per share (the "Option Price").
5. DATE OF GRANT OF AWARD:
The grant date of the award of this Option is [Date] (the
"Grant Date").
6. EXERCISE:
Your Option may not be exercised for six months following the
Grant Date. Your Option expires on the tenth anniversary of the Grant Date (with
respect to any number of shares subject to this option not previously
exercised), but may expire earlier upon the first to occur of the following:
<PAGE>
(a) Five years from the Grant Date if, on such date the
you own, directly or by attribution, shares possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or the Bank);
(b) The date set by the Board of Directors of the Company
to be an accelerated expiration date after a finding by the Board of Directors
of the Company that a change in the financial accounting treatment for Options
from that in effect on the date the Plan was adopted materially adversely
affects or, in the determination of such Board of Directors, may materially
adversely affect in the foreseeable future, the Company and/or the Bank;
(c) Expiration of three months from the date your
employment with the Company or the Bank terminates for any reason other than
disability, death or for Cause (as defined in the Plan).
(d) Expiration of one year from the date the your
employment with the Company or the Bank terminates by reason of the your
disability or death;
(e) A finding by the Committee, after full consideration
of the facts presented on behalf of both the Company and you, that you have been
discharged from employment with the Company or the Bank for Cause (as defined in
the Plan). In the event of a finding that you have been discharged for Cause, in
addition to immediate termination of the Option, you shall automatically forfeit
all Option Shares for which the Company has not yet delivered the share
certificates upon refund of the Option Price; or
(f) The Committee can accelerate the expiration date in
the event of a "Change in Control" (as defined in the Plan), provided an the
Committee gives you written notice at least thirty (30) days before the date so
fixed.
7. NOTICE OF EXERCISE AND PAYMENT:
To exercise your Option, you must provide written
notice of the exercise marked for the attention of the Secretary of the Company
specifying the number of Option Shares to be purchased and satisfying the
securities law requirements set forth below. You shall also include payment of
the Option Price with such written notice in cash or bank check, payable to the
order of the Company. Upon receipt of such notice and payment, the Company will
issue you a certificate for the number of Option Shares with respect to which
you have exercised the Option.
8. SECURITIES LAW REQUIREMENTS:
Each exercise notice shall contain your
acknowledgment in a form and substance satisfactory to the Company that (a) such
Option Shares are being purchased for
<PAGE>
investment and not for distribution or resale, (b) you have been advised and
understand that (i) the Option Shares have not been registered under the
Securities Act and are "restricted securities" within the meaning of Rule 144
under the Securities Act and are subject to restrictions on transfer and (ii)
the Company is under no obligation to register the Option Shares under the
Securities Act or to take any action which would make available to the Optionee
any exemption from such registration, (c) such Option Shares may not be
transferred without compliance with all applicable federal and state securities
laws, and (d) an appropriate legend referring to the foregoing restrictions on
transfer and any other restrictions imposed under the Option Documents may be
endorsed on the certificates. Notwithstanding the above, should the Company be
advised by counsel that the issuance of Option Shares upon the exercise of your
Option should be delayed pending (A) registration under federal or state
securities laws, (B) the receipt of an opinion that an appropriate exemption
therefrom is available, (C) the listing or inclusion of the shares on any
securities exchange or in an automated quotation system or (D) the consent or
approval of any governmental regulatory body whose consent or approval is
necessary in connection with the issuance of such Option Shares, the Company may
defer the exercise of your Option until either such event in A, B, C or D has
occurred.
9. EXERCISE DATE:
The date on which the Company receives the documents specified
above in complete and otherwise acceptable form and the payments specified above
will be treated as the Exercise Date with respect to your exercise of the stock
option.
10. WITHHOLDING OF TAXES:
Upon exercise of your Option, the Company shall have the right
to (a) require you to remit to the Company an amount sufficient to satisfy any
federal, state and/or local withholding tax requirements prior to the delivery
or transfer of any certificate or certificates for such Option Shares or (b)
take whatever action it deems necessary to protect its interests.
11. NON-ASSIGNABILITY OF OPTION:
Except as provided by the Plan, the Option awarded to you is
exercisable only by you. The Option may not be transferred, assigned, pledged as
security or hypothecated in any way and is not subject to execution, attachment
or similar process. Upon any attempt by you to transfer, assign, pledge,
hypothecated or otherwise dispose of this Option or of any portion thereof or
upon the levy of any execution, attachment or similar process on this Option or
on any portion thereof, the Option awarded to you will immediately expire with
respect to the number of shares not exercised prior to such event.
<PAGE>
12. RIGHTS IN SHARES SUBJECT TO OPTION:
You will not be treated as a holder of any of the shares
subject to this Option or of any rights of a holder of such shares unless and
until the shares are issued to you as evidenced by stock certificates.
13. AFFECT ON EMPLOYMENT RELATIONSHIP:
This letter is not an employment agreement or service
contract. Therefore, none of the rights awarded to you by this letter affect, in
any way, your employment or service relationship with the Company or the Bank.
14. OPTION AWARDED SUBJECT TO PLAN PROVISIONS:
The Plan provisions take precedence over the provisions of
this letter agreement. Therefore, in the case of any inconsistency between any
provision of this letter agreement and any provision of the Plan in effect on
the Grant Date, the provision of the Plan will control.
15. COUNTERPARTS:
This letter agreement may be executed in one or more
counterparts each of which shall be deemed an original and all of which shall be
deemed one and the same agreement.
If you accept the Option award evidenced by this letter agreement,
subject to the terms stated above, you should date and sign the enclosed copy of
this letter in the spaces indicated and return it to the Company marked for the
attention of the Secretary.
First West Chester Corporation
By:___________________________
Chairman of the Board
I acknowledge that I have read this letter agreement and agree to accept the
stock option award evidenced by it according to the terms set forth in such
letter agreement.
[ Name of Grantee ]
- -------------------------------- -----------------
Signature Date
