SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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First West Chester Corporation
------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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|X| No fee required.
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(1) Title of each class of securities to which transaction applies:
______________________________________
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______________________________________
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pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was
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_______________________________________________________________
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_______________________________________________________________
<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 17, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of First
West Chester Corporation (the "Corporation") will be held on Tuesday, March 17,
1998, 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 II directors, with each director to serve
until the 2001 Annual Meeting of Shareholders and until the election and
qualification of his respective successor;
2. The approval of certain amendments to 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,
1998; 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 3,
1998, 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,
1997, accompanies this Notice and Proxy Statement.
THE BOARD OF DIRECTORS HOPES THAT YOU WELL 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.
<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 25, 1998, 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 17, 1998, at 10:00 a.m., at the West Chester Golf and Country
Club, 111 West Ashbridge Street, West Chester, Pennsylvania, 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 four Class II directors nominated by the Board of Directors; (ii)
for the approval of certain amendments to the Corporation's 1995 Stock Option
Plan as described in this Proxy Statement; (iii) for the ratification of the
appointment of Grant Thornton, LLP as the Corporation's independent public
accountants for the year ending December 31, 1998; 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 3,
1998 (the "Record Date"), are entitled to notice of, and to vote at, the Annual
Meeting. As of the Record Date, there were 2,296,133 shares of Common Stock
outstanding and entitled to one vote per share, without cumulative voting. 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 the Record Date, the Financial Management Services Department of
The First National Bank of West Chester (the "Bank"), a wholly-owned subsidiary
of the Corporation, held 429,807 shares of Common Stock, representing 18.7% of
the total outstanding shares of the Corporation's Common Stock. Of these shares,
265,130 shares (11.5% of the total outstanding shares) 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 164,677 shares of
Common Stock (7.2% of the total outstanding shares) 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, 1997 unless
otherwise noted, the number and percentage of shares of Common Stock 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 issued and outstanding shares of Common Stock (other than the Financial
Management Services Department of the Bank); (ii) each of the Named Executive
Officers of the Corporation (as defined under the heading "Executive
Compensation"); (iii) each of the directors and the nominees for directorship of
the Corporation individually; and (iv) all 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 II
directors.
<PAGE>
<TABLE>
<CAPTION>
Name and Address Number of Shares(1) Percentage(2)
BENEFICIAL OWNER
- ----------------
<S> <C> <C>
Jane C. and Lawrence E. MacElree 125,080 (3) 5.45%
7080 Goshen Road
Newtown Square, PA 19073
NAMED EXECUTIVE OFFICERS (4)
Charles E. Swope 86,658 (5) 3.76%
William E. Hughes, Sr. 6,380 (6) -----
James D. Gruver 8,194 (7) -----
Kevin C. Quinn 5,236 (8) -----
J. Duncan Smith 4,666 (9) -----
Peter J. D'Angelo 5,324 (10) -----
Eric W. Rohrbach 6,204 (11) -----
Maryann L. Himes 5,610 (12) -----
David W. Glarner 4,834 (13) -----
William D. Wagenmann, Jr. 100 (14) -----
Richard W. Kauffman 36 (15) -----
Linda M. Hicks 1,363 (16) -----
CLASS I DIRECTORS (TERM EXPIRING IN 2000)
John J. Ciccarone 75,190 (17) 3.27%
908 Sheridan Drive
West Chester, PA 19382
Clifford E. DeBaptiste 51,367 (18) 2.24%
Worthington and Miner Streets
West Chester, PA 19382
<PAGE>
Name and Address Number of Shares(1) Percentage(2)
J. Carol Hanson 3,046 (19) ----
1251 Morstein Road
West Chester, PA 19380
John B. Waldron 6,420 (20) ----
1423 Manorwood Drive
West Chester, PA 19382
CLASS II DIRECTOR (TERM EXPIRING IN 1998)
*M. Robert Clarke 5,000 (21) ----
10 Andrews Lane
Glenmoore, PA 19343
*Edward J. Cotter 21,341 (22) ----
500 North Franklin Street
West Chester, PA 19380
*David L. Peirce 12,148 (23) ----
395 Eaton Way
West Chester, PA 19380
*Charles E. Swope 86,658 (5) ----
9 North High Street
West Chester, PA 19380
CLASS III DIRECTORS (TERM EXPIRING IN 1999)
John A. Featherman, III 15,447 (24) ----
17 West Miner Street
West Chester, PA 19382
John S. Halsted 6,225 (25) ----
314 North Union Street
Kennett Square, PA 19348
Devere Kauffman 13,586 (26) ----
Riddle Village
311 Arlington
Media, PA 19063
All directors and
executive officers
as a group (22 persons) 344,375 14.66%
- ----------------------
See Notes starting on next page.
<PAGE>
<FN>
(1) Shares of Common Stock which are held in the Corporation's retirement
savings plan (the "Retirement Savings Plan") are reported as of December
31, 1997, the last date for which such information is available.
(2) Percentages are omitted for those owning less than one percent of the
shares of Common Stock outstanding.
(3) Of the 125,080 shares shown, Mrs. MacElree has sole voting and investment
power of 104,729 and Mr. MacElree has sole voting and investment power of
20,351 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 of the Named Executive Officers 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 86,658 shares shown, Mr. Swope has sole
voting and investment power of 52,030 shares; 7,604 shares are held by a
trust for the benefit of the Swope Foundation, of which Mr. Swope is
President; 2,559 shares are held by Mr. Swope's minor son; 9,215 shares are
held by Mr. Swope's wife; 7,250 shares are held in the Retirement Savings
Plan which has sole voting power with respect to such shares; and 8,000
shares are shares underlying options to purchase shares of Common Stock
which are exercisable within sixty days of December 31, 1997. 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
Retirement Savings Plan, may be deemed to be the beneficial owner of an
aggregate of a further 48,120 shares of Common Stock held in the Retirement
Savings Plan; Mr. Swope disclaims that he is the beneficial owner of such
shares.
(6) Of the 6,380 shares shown, Mr. Hughes shares, with his wife, voting and
investment power of 1,572 shares; 2,808 shares are held in the Retirement
Savings Plan which has sole voting power with respect to such shares; and
2,000 shares are shares underlying options to purchase shares of Common
Stock which are exercisable within sixty days of December 31, 1997.
(7) Of the 8,194 shares shown, Mr. Gruver has sole voting and investment power
of 1,056 shares; 3,379 shares are held in the Retirement Savings Plan which
has sole voting power with respect to such shares; and Mr. Gruver shares,
with his wife, voting and investment power of 3,759 shares. Mr. Gruver
resigned from office December 31, 1997.
(8) Of the 5,236 shares shown, Mr. Quinn shares, with his wife, voting and
investment power of 396 shares; shares with his mother, voting and
investment power of 100 shares; 740 shares are held in the Retirement
Savings Plan which has sole voting power with respect to such shares; and
4,000 shares are underlying options to purchase shares of Common Stock
which are exercisable within sixty days of December 31, 1997.
(9) Of the 4,666 shares shown, Mr. Smith shares, with his wife, voting and
investment power of 96 shares; 570 shares are held in the Retirement
Savings Plan which has sole voting power with respect to such shares; and
4,000 shares are shares underlying options to purchase shares of Common
Stock which are exercisable within sixty days of December 31, 1997.
(10) Of the 5,324 shares shown, Mr. D'Angelo shares, with his wife, voting and
investment power of 601 shares; 723 shares are held in the Retirement
Savings Plan; and 4,000 shares are shares underlying options to purchase
shares of Common Stock which are exercisable within sixty days of December
31, 1997.
(11) Of the 6,204 shares shown, Mr. Rohrbach has sole voting and investment
power of 1,192 shares; 1,012 shares are held in the Retirement Savings Plan
which has sole voting power with respect to such shares; and 4,000 shares
are shares underlying options to purchase shares of Common Stock which are
exercisable within sixty days of December 31, 1997.
<PAGE>
(12) Of the 5,610 shares shown, Mrs. Himes has sole investment and voting power
of 33 shares; shares with her son voting and investment power of 297
shares; 1,280 shares are held in the Retirement Savings Plan which has sole
voting power with respect to such shares; and 4,000 shares are shares
underlying options to purchase shares of Common Stock which are exercisable
within sixty days of December 31, 1997.
(13) Of the 4,834 shares shown, Mr. Glarner shares, with his wife, voting and
investment power of 524 shares; 610 shares are held in the Retirement
Savings Plan, which has sole voting power with respect to such shares; and
3,700 shares are shares underlying options to purchase shares of Common
Stock which are exercisable within sixty days of December 31, 1997.
(14) Mr. Wagenmann shares voting and investment power of the 100 shares shown
with his wife.
(15) All 36 shares shown are held in the Retirement Savings Plan which has sole
voting power with respect to such shares.
(16) Of the 1,363 shares shown, Mrs. Hicks has sole investment and voting power
of 295 shares; shares, with her husband, voting and investment power of 628
shares; and 440 shares are held in the Retirement Savings Plan which has
sole voting power with respect to such shares.
(17) Of the 75,190 shares shown, Mr. Ciccarone shares, with his wife, voting and
investment power of 73,057 shares; 133 shares are held by Mr. Ciccarone's
wife as custodian for his son; and 2,000 shares are shares underlying
options to purchase shares of Common Stock which are exercisable within
sixty days of December 31, 1997.
(18) Of the 51,367 shares shown, Mr. DeBaptiste has sole voting and investment
power of 49,367 shares; and 2,000 shares are shares underlying options to
purchase shares of Common Stock which are exercisable within sixty days of
December 31, 1997.
(19) Of the 3,046 shares shown, Ms. Hanson has sole voting and investment power
of 1,046 shares; and 2,000 shares are shares underlying options to purchase
shares of Common Stock which are exercisable within sixty days of December
31, 1997.
(20) Of the 6,420 shares shown, Mr. Waldron shares, with his wife, voting and
investment power of 4,420 shares; and 2,000 shares are shares underlying
options to purchase shares of Common Stock which are exercisable within
sixty days of December 31, 1997.
(21) Of the 5,000 shares shown, Mr. Clarke shares, with his wife, voting and
investment power of 3,000 shares; and 2,000 shares are shares underlying
options to purchase shares of Common Stock which are exercisable within
sixty days of December 31, 1997.
(22) Of the 21,341 shares shown, Mr. Cotter has sole voting and investment power
of 8,878 shares; Mr. Cotter's wife has sole voting and investment power of
10,463 shares; and 2,000 shares are shares underlying options to purchase
shares of Common Stock which are exercisable within sixty days of December
31, 1997.
(23) Of the 12,148 shares shown, Mr. Peirce has sole voting and investment power
of 10,148 shares; and 2,000 shares are shares underlying options to
purchase shares of Common Stock which are exercisable within sixty days of
December 31, 1997.
(24) Of the 15,447 shares shown, Mr. Featherman has sole voting and investment
power of 6,535 shares; 2,000 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 (such 2,000 shares are in Mr.
Featherman's account under the said Plan); Mr. Featherman shares voting and
investment power of 2,998 shares with his wife; 1,007 shares are held by
Mr. Featherman as custodian for his daughter; Mr. Featherman's wife has
sole voting and investment power of 907 shares; and 2,000 shares are shares
underlying options to purchase shares of Common Stock which are exercisable
within sixty days of December 31, 1997.
<PAGE>
(25) Of the 6,225 shares shown, Mr. Halsted has sole voting and investment power
of 2,625 shares; 1,200 shares are owned by the Gawthrop, Greenwood &
Halsted Profit Sharing Plan, of which Mr. Halsted is a trustee; 200 shares
are owned by Abstracting Company of Chester County, of which Mr. Halsted is
a shareholder and a director; Mr. Halsted's wife has sole voting and
investment power of 200 shares; and 2,000 shares are shares underlying
options to purchase shares of Common Stock which are exercisable within
sixty days of December 31, 1997.
(26) Of the 13,586 shares shown, Mr. Kauffman has sole voting and investment
power of 6,286 shares; Mr. Kauffman has power of attorney over 5,300 shares
owned by his wife and 2,000 shares are shares underlying options to
purchase shares of Common Stock which are exercisable within sixty days of
December 31, 1997.
</FN>
</TABLE>
GENERAL INFORMATION ABOUT THE BOARD OF DIRECTORS
There were seven (7) meetings of the Board of Directors of the
Corporation and twenty-nine (29) meetings of the Board of Directors of the Bank
during 1997. 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 in 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 during
the period in which such incumbent was a committee member.
Directors who are not also officers of the Corporation or Bank (each a
"non-employee director") generally receive a fee of $450 for each Board meeting
attended and $300 for each committee meeting attended. Additionally, a quarterly
fee of $100 is paid to Mr. Cotter for serving as the Secretary of the Board.
Pursuant to the 1995 Stock Option Plan (the "Plan"), options to purchase shares
of Common Stock are awarded to each director annually through September 30, 1999
according to formulas set forth in the Plan. During 1997, in accordance with
such formulas, each non-employee director received an option to purchase 1,000
shares of Common Stock. In addition, each director, including Mr. Swope,
received a cash bonus of $1,000 for 1997.
An amendment to the Plan has been proposed which would modify the
formula for non-employee director awards such that each non-employee director
would receive an option to purchase 1,500 shares of Common Stock on each of the
annual grant dates in 1998 and 1999. In addition, it is proposed that each
non-employee director receive an option to purchase 500 shares of Common Stock
upon approval of the proposal by the shareholders. See "Amendment of the 1995
Stock Option Plan" for a discussion of the Plan and these proposed amendments.
The Board of Directors of the Corporation does not have a standing
compensation, audit or nominating committee. These functions are performed on an
ad hoc basis by the Board of Directors as a whole. However, the Board of
Directors of the Corporation does have an Executive Committee, a Finance
Committee and a Stock Option Committee. The Board of Directors of the Bank has
an Executive Committee, a Personnel and Compensation Committee and several
committees for selected management functions. The membership of, and certain
other information relating to, the primary committees is set forth in the
following paragraphs.
The Executive Committee of the Board of Directors of the Corporation
consists of Messrs. Swope, Peirce and Cotter. Four (4) meetings were held during
1997. This Committee has authority to exercise the powers of the Board of
Directors of the Corporation in the management of the business and 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 1997. This Committee meets quarterly to review the overall financial
condition of the Bank and make recommendations for a quarterly dividend.
<PAGE>
The Stock Option Committee of the Board of Directors of the Corporation
consists of Messrs. Peirce and Featherman and administers the "Key Employee
Plan" under the Plan. Two (2) meetings were held during 1997.
The Executive Committee of the Board of Directors of the Bank consists
of Messrs. Swope, Cotter, Kauffman and Peirce. Four (4) meetings were held
during 1997. 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. Fourteen (14) meetings were
held during 1997. 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.
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 2000 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 1999 Annual Meeting. Each director also serves until
his or her earlier resignation or removal or until a successor has been elected
and qualified.
The Board of Directors presently consists of eleven directors due to
the resignation of Mr. Armstrong in December 1997. Subsequent to Mr. Armstrong's
resignation he continued to serve the Corporation as Director Emeritus until his
death in January 1998. Pursuant to the Corporation's Articles and By-Laws, the
remaining members of the Board of Directors have the exclusive authority to
appoint a director to fill the vacancy caused by the resignation of a director.
The Board of Directors will appoint a new director upon selection of a suitable
candidate.
At the Annual Meeting, four Class II directors are to be elected to
serve until the 2001 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 four nominees receiving the highest number of votes by the holders
of the Common Stock present or represented at the Annual Meeting and entitled to
vote thereat shall be elected as Class II directors. 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.
The names of the nominees for Class II directors of the Corporation,
their ages and certain other information as of February 1, 1998, is set forth as
follows:
<PAGE>
Name Age Position
---- --- --------
M. Robert Clarke 51 Director
Edward J. Cotter 77 Director
David L. Peirce 69 Director
Charles E. Swope 67 Director
Mr. Clarke has been a director of the Bank and the Corporation since
1993. Mr. Clarke is a certified public accountant and the President of Clarke,
Nicolini & Associates, Ltd., a provider of auditing, accounting and tax
services.
Mr. Cotter has been a director of the Bank since 1972 and a director
and Secretary of the Corporation since 1984. Mr. Cotter is the former Executive
Director of Barclay Friends Hall Corporation, a long term care facility.
Mr. Peirce has been a director of the Bank since 1973 and a director of
the Corporation since 1984. Mr. Peirce is the former President and CEO of
Denney-Reyburn Company, a paper converter.
Mr. Swope has been a director of the Bank since 1972, President of the
Bank since 1973, Chief Executive Officer of the Bank since 1978 and Chairman of
the Board of the Bank since 1987. He has been a director, President and Chief
Executive Officer of the Corporation since 1984 and Chairman of the Board of
Directors of the Corporation since 1987.
Recommendation of the Board of Directors
The Board of Directors has unanimously recommended the slate of
nominees for election as Class II directors. The Board of Directors recommends
that the shareholders vote FOR the election of such slate of nominees as Class
II directors of the Board of Directors of the Corporation.
DIRECTORS AND EXECUTIVE OFFICERS
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 Corporation Principal Occupations
---------------------------- ---------------------
Name & Age Position(s) with Bank Outside Directorships
---------- --------------------- ---------------------
<S> <C> <C>
John J. Ciccarone, Director since 1987 President, Omega Industries, Inc., a real
-------------------
69 Director since 1987 estate development company.
M. Robert Clarke, Director since 1993 Certified Public Accountant,
------------------- President of Clarke, Nicolini & Associates, Ltd.
51 Director since 1993
Edward J. Cotter, Director and Secretary Retired. Former Executive Director,
77 since 1984 Barclay Friends Hall Corporation, a long
Director since 1972 term care facility.
Clifford E. DeBaptiste, Director since 1984 Chairman, Supervisor and Director,
------------------- DeBaptiste Funeral Homes, Inc.;
73 Director since 1975 President, Perry Funeral Homes, Inc.
John A. Featherman, III, Director since 1985 Attorney, MacElree Harvey, Gallagher,
------------------- Featherman & Sebastian, Ltd.
59 Director since 1985
John S. Halsted, Director since 1991 Attorney, Gawthrop, Greenwood & Halsted,
------------------- P.C.; Solicitor, County of Chester.
64 Director since 1991
J. Carol Hanson, Director since 1995 Executive Director, Barclay Friends Hall
------------------- Corporation, a long term care facility.
50 Director since 1995
Devere Kauffman, Director since 1984 Former General Partner, Kauffman's, a
------------------- department store.
87 Director since 1968
David L. Peirce, Director since 1984 Former President and CEO,
------------------- Denney-Reyburn Company, a paper
69 Director since 1973 converter.
<PAGE>
John B. Waldron, Director since 1984 Associate, Arthur Hall Insurance Group;
------------------- Former Owner, John B. Waldon Insurance
67 Director since 1981 Agency.
Charles E. Swope, Director, President and CEO since President, CEO and Chairman of the
67 1984; Chairman of the Board since Corporation and the Bank.
1987
--------------------
Director since 1972, President
since 1973, CEO since 1978, Chairman
since 1987
Peter J. D'Angelo, N/A. Executive Vice President since 1997;
52 ---- Senior Vice President --
Executive Vice President since 1997; Commercial Loan Department and Cashier of
Senior Vice President since 1996. the Bank since 1996; Vice President since 1996.
David W. Glarner, N/A. Senior Vice President -- Mortgage Lending
47 ---- Department since 1996;
Senior Vice President since 1996. Vice President since 1983.
James D. Gruver, N/A. Senior Vice President --
51 ---- Operations since 1987. Resigned from
Senior Vice President since 1987. office December 31, 1997.
Linda M. Hicks, N/A. Senior Vice President -- Financial
44 ---- Management Services Department since
Senior Vice President since 1998. 1998; Vice President since 1990.
Maryann L. Himes, Assistant Secretary since 1984. Senior Vice President since 1998;
51 ------------------------------- Vice President and Assistant to the
Senior Vice President since 1998; President since 1996; Assistant to the
Vice President and Assistant President since 1988.
to President since 1996;
Assistant to President since 1988.
William E. Hughes, Sr. N/A. Executive Vice President --
64 ---- Lending since 1996; Senior Vice President
Executive Vice President since 1996; and Senior Loan Officer since 1984.
Senior Vice President and Senior
Loan Officer since 1984.
Richard W. Kaufmann, N/A. Senior Vice President -- Commercial Loan
50 ---- Department since 1998; Vice President
Senior Vice President since 1998. since 1996. Vice President of the
Philadelphia Business Banking Group of
Meridian Bank (1990 to 1995).
Kevin C. Quinn, Assistant Treasurer since 1986. Executive Vice President since 1998;
43 ------------------------------ Senior Vice President -- Financial
Executive Vice President since 1998; Management Services Department since
Senior Vice President since 1990. 1990.
Eric W. Rohrbach, N/A. Senior Vice President --
51 ---- Administration since 1987.
Senior Vice President since 1987.
J. Duncan Smith, Treasurer since 1993. Treasurer of Corporation since 1993.
39 ---------------------
Executive Vice President since 1998; Executive Vice President since 1998;
Senior Vice President since 1996; Senior Vice President -- Finance and
Vice President and Comptroller since Accounting since 1996; Vice President and
1993. Comptroller of the Bank since 1993. Vice
President and Chief Financial Officer of
Security First Bank (1988-1993).
William D. Wagenmann, Jr. N/A. Senior Vice President -- Human Resources
54 --- since 1997. Director of Human
Senior Vice President since 1997. Resources: Morgan, Lewis & Bockius (1994
to 1997) and Dechert, Price & Rhoads
(1991 to 1994).
</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 Chief Executive Officer
and the four most highly compensated executive officers of the Corporation or
the Bank (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) ($)(4) ($)(5)
-------- ---- ---- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Charles E. Swope, 1997 $288,750 $32,394 -- 6,000 $62,111
President, CEO and 1996 275,000 29,059 -- 4,000 61,220
Chairman of the 1995 243,853 17,476 -- 4,000 67,889
Corp. and the Bank
William E. Hughes, 1997 110,079 12,705 -- 3,000 16,694
Sr., Exec. V.P. 1996 104,837 12,449 -- 2,000 15,470
and Sr. Loan Officer 1995 99,845 7,937 -- 2,000 14,954
of the Bank
James D. Gruver, 1997 104,484 10,638 -- 3,000 34,481
Sr. Vice Pres. 1996 99,509 11,876 -- 2,000 12,938
of the Bank (6) 1995 94,771 7,589 -- 2,000 12,384
Eric W. Rohrbach, 1997 104,484 12,136 -- 3,000 13,659
Sr. Vice President 1996 99,509 11,876 -- 2,000 13,168
of the Bank 1995 94,771 7,589 -- 2,000 12,622
Kevin C. Quinn, 1997 95,000 10,927 -- 3,000 11,683
Exec. Vice President 1996 88,200 10,662 -- 2,000 11,130
of the Bank 1995 84,000 6,822 -- 2,000 6,047
J. Duncan Smith, 1997 91,163 10,779 -- 3,000 11,106
Treasurer of the Corp.; 1996 86,822 10,522 -- 2,000 10,577
Exec. Vice President 1995 82,688 6,759 -- 2,000 7,202
and Comptroller of the
Bank
- -----------------------
<FN>
(1) Amounts shown include cash compensation earned and accrued by the Named
Executive Officers as well as amounts earned but deferred at the
election of such officers.
(2) Amounts shown are bonuses paid during the specified fiscal year based
upon the performance of the Corporation and the Bank for the prior
fiscal year. In 1998, Messrs. Swope, Hughes, Gruver, Rohrbach, Quinn
and Smith were paid bonuses of $43,313, $11,008, $0, $10,448, $9,500
and $9,116, respectively, based upon the performance of the Corporation
and the Bank in 1997.
(3) The value of amounts paid for perquisites and other personal benefits,
securities or property paid to any of the Named Executive Officers does
not exceed 10% of the total of annual salary and bonus reported for
such person.
<PAGE>
(4) Amounts shown reflect the number of shares underlying options granted
on September 30 of the specified fiscal year pursuant to the Plan. See
"Stock Options."
(5) Amounts shown for 1997 include: (i) contributions to a qualified
defined contribution plan for the benefit of Messrs. Swope, Hughes,
Gruver, Rohrbach, Quinn and Smith of $8,100, $5,390, $5,071, $5,071,
$4,392 and $4,309, respectively; (ii) contributions to non-qualified,
supple-mental retirement plans for the benefit of Mr. Swope, Hughes,
Gruver, Rohrbach, Quinn and Smith of $16,388, $3,302, $3,135, $3,135,
$2,850 and $2,735, respectively; (iii) matching contributions to the
401(k) plan accounts of Messrs. Swope, Hughes, Gruver, Rohrbach, Quinn
and Smith of $5,631, $4,594, $3,977, $3,918, $3,600 and $3,456,
respectively; (iv) payments of $8,082, $3,408, $1,298, $1,535, $831 and
$606 for Messrs. Swope, Hughes, Gruver, Rohrbach, Quinn and Smith,
respectively, pursuant to a retirement life insurance plan; (v) $23,910
for the tax adjusted cost of Mr. Swope's life insurance policy; and
(vi) $21,000 to Mr. Gruver in connection with his resignation.
(6) Mr. Gruver resigned from office December 31, 1997.
</FN>
</TABLE>
Stock Options
The following table sets forth grants of stock options made during the
Corporation's fiscal year ended December 31, 1997, to each of the Named
Executive Officers of the Corporation:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value
At Assumed Annual Rates
Of Stock Price Appreciation
Individual Grants For Option Term(1)
----------------- ------------------
% of Total
Number of Options Granted Market
Options to Employees Exercise Price on Expiration
Name Granted in Fiscal Year Price Date of Grant Date 5% 10%
- ---- ------- -------------- ------- ------------- ------ ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Charles E. Swope 6,000 11.7% $ 31.00 $ 31.00 9/30/07 $ 116,974 $ 296,436
William E. Hughes, Sr. 3,000 5.8% 31.00 31.00 9/30/07 58,487 148,218
James D. Gruver 3,000 5.8% 31.00 31.00 9/30/07 58,487 148,218
Eric W. Rohrbach 3,000 5.8% 31.00 31.00 9/30/07 58,487 148,218
Kevin C. Quinn 3,000 5.8% 31.00 31.00 9/30/07 58,487 148,218
J. Duncan Smith 3,000 5.8% 31.00 31.00 9/30/07 58,487 148,218
- ----------------------
<FN>
(1) Assumes the price of the Corporation's Common Stock appreciates at a rate of 5% and 10%, respectively,
compounded annually for the ten year term of the options.
</FN>
</TABLE>
Exercise of Options
The following table sets forth information regarding the exercise of
stock options and the value of any unexercised stock options of each of the
Named Executive Officers of the Corporation during the fiscal year ended
December 31, 1997:
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Shares Acquired Value Options at Fiscal Year End Fiscal Year End(1)
Name on Exercise Realized Vested Unvested Vested Unvested
- ---- ----------- -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Charles E. Swope -- -- 14,000 -- $117,876 --
William E. Hughes, Sr. 2,000 $24,875 5,000 -- 27,562 --
James D. Gruver 4,000 52,938 3,000 -- 6,000 --
Eric W. Rohrbach -- -- 5,000 -- 27,562 --
Kevin C. Quinn -- -- 7,000 -- 58,938 --
J. Duncan Smith -- -- 7,000 -- 58,938 --
<FN>
(1) Based upon the average bid and asked prices for the Common Stock on December 31, 1997 of $33.00, as
quoted by F.J. Morrissey & Co., less the exercise price.
</FN>
</TABLE>
Employment Agreement
Effective January 1, 1998, Mr. Swope, the Corporation and the Bank
(collectively referred to in this section as the "Corporation") entered into a
new employment agreement (the "Agreement") with the effect of extending the term
of a previous employment agreement between Mr. Swope and the Corporation. The
Agreement is for a period of ten years, terminating on December 31, 2007, unless
terminated earlier in accordance with the Agreement. Pursuant to the Agreement,
Mr. Swope will serve as the President and Chief Executive Officer of the
Corporation and the Bank in 1998. Mr. Swope's employment thereafter shall be 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 as
determined by the Board of Directors from time to time, but which may not be
materially different from that which he received as of the date of the
Agreement. 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 written notice to the Corporation on or before December lst of
such year, 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
from receipt of notice of such breach or upon his conviction of a crime which is
a felony. 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, unless this Agreement is terminated by
Mr. Swope due to breach of the Agreement by the Corporation.
<PAGE>
Report of the Personnel and Compensation Committee
To: The Board of Directors
As members of the Personnel and Compensation Committee and the Stock
Option Committee (collectively referred to herein 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, 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 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.
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.
During 1997 the Committee engaged Grant Thornton, LLP, the independent
public accountants for the Corporation, as a compensation consultant, assisting
in a survey to insure that executive officers of the Corporation and the Bank
were continuing to be compensated in a competitive manner and to fine tune the
incentive program.
Mr. Swope's base salary was set at $288,750 effective January 1, 1997.
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
his rights under an Employment Agreement with the Corporation and the Bank which
is described elsewhere in this Proxy Statement. This Employment Agreement was
extended by the Board for a period of ten years to terminate on December 31,
2007, unless terminated earlier in accordance with the Employment Agreement.
The Incentive Plan for 1997 placed emphasis on the Corporation's
performance, including, but not limited to, improvement on return on assets,
return on equity, loan growth, average deposit growth, and the efficiency ratio.
Based upon these factors, the Committee awarded cash bonuses to each executive
officer in 1997 equal to 10% of such officer's annual base compensation and to
the Chief Executive Officer equal to 15% of such officer's annual base
compensation. Mr. Swope's bonus for 1997, which will be payable in 1998, was
$43,313. In addition, during 1997, Mr. Swope was granted Stock Options for 6,000
shares of the Corporation's common stock under the 1995 Stock Option Plan, a
director's bonus of $1,000, and an executive officer's bonus of $1,000 (after
taxes). Mr. Swope continues to provide leadership and vision through his tenure
as Chief Executive Officer and his compensation recognizes his ability and
dedication to enhance the long-term value of the Corporation.
Personnel and Compensation Committee
David L Peirce, Chairman
John A. Featherman, III
Compensation Committee Interlocks and Insider Participation
During 1997, 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 1997 and will be retained again during 1998.
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 1997, all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten-percent beneficial
owners were timely met.
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 transactions with the Bank in the ordinary
course of its business during 1997. All loans and commitments to lend money
extended 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 collectibility 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 1997
and will again be retained in 1998.
<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,
1993, 1994, 1995, 1996 and 1997, 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, 1992, in the Corporation's
Common Stock and in each of the foregoing indices and assumes reinvestment of
dividends.
[GRAPH OMITTED]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
FIRST WEST CHESTER CORP. 100.00 108.33 112.25 152.04 171.08 249.36
PEER GROUP 100.00 153.43 159.72 222.10 271.12 501.02
NASDAQ MARKET 100.00 119.95 125.94 163.35 202.99 248.30
</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.
AMENDMENT OF THE 1995 STOCK OPTION PLAN
Description of the Proposed Amendments
The Corporation's Board of Directors has approved a proposal to make
certain amendments to the Corporation's 1995 Stock Option Plan (also referred to
as the "Plan") which require the approval of the holders of a majority of the
outstanding voting stock of the Corporation. One amendment will increase the
maximum number of shares of the Corporation's common stock for which options may
be granted under the Plan from 250,000 shares to 403,750 shares, which would be
allocated as 331,750 shares available for award to key employees and 72,000
shares available for award to directors. Another amendment would modify the
formula by which options are awarded to directors to increase the annual award
to each eligible non-employee director from an option to purchase 1,000 shares
to an option to purchase 1,500 shares, and award options to purchase 500 shares
of the corporation's Common Stock to each eligible non-employee director upon
approval of such amendment by the Corporation's stockholders. The following
information provides a summary of the Plan as it is proposed to be amended.
Description of the Plan
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) the "Key
Employee Plan" and (ii) the "Director Plan." The Plan provides for up to 403,750
shares of Common Stock to be issued pursuant to the exercise of options granted
under the terms of the Plan. Of the 403,750 shares which may be issued under the
Plan, 331,750 shares are reserved for issuance under the Key Employee Plan and
72,000 shares are reserved for issuance under the Director Plan. Since the
Plan's inception, the Corporation has awarded options to purchase 126,500
shares, 93,500 under the Key Employee Plan and 33,000 under the Director Plan.
<PAGE>
The Key Employee Plan is administered by the Stock Option Committee of
the Board of Directors of the Corporation. 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:
(i) options to purchase up to 221,750 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, and (ii) options to purchase up to 110,000
shares of Common Stock will be granted to the executive officers of the Bank and
Corporation who are in the employ of the Bank or Corporation on any of five
annual grant dates through September 30, 1999 (each a "Grant Date"). On each
Grant Date, the President of the Corporation shall receive options to purchase
4,000 shares of Common Stock and each of the other executive officers then
holding office shall receive options to purchase such number of shares of Common
Stock equal to 18,000 divided by the then current number of executive officers.
Presently, the Corporation has eleven executive officers.
The Director Plan provides for the automatic award of options to each
non-employee director who is serving as such on a Grant Date (the "Annual
Director Options"). The options awarded on any Grant Date will entitle the
holder to purchase 1,500 shares of Common Stock, unless the number of
non-employee directors on such Grant Date exceeds 11, in which case each
non-employee director will receive an option for that number of shares equal to
16,500 divided by the number of non-employee directors. If a director is serving
on the Board of both the Corporation and the Bank, such director is only
eligible for a grant of options under the Director Plan as a director of the
Corporation. The Director Plan is administered by the Board of Directors.
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 in good faith, in the case of an option granted under 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 makers of the Common Stock, in the case of
an option granted under the Director Plan.
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) either three months or
one year (depending upon the Grant Date) following termination of the Optionee's
employ or service with the Corporation or Bank for any reason other than for
cause (for an option granted under the Key Employee Plan), or (e) in the case of
an option granted under the Key Employee Plan, immediately upon the
determination by the Stock Option Committee that an employee has been terminated
for cause.
During an Optionee's lifetime, such option may only be exercised by the
Optionee. 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.
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") if exercised prior to the date which is three months after
termination of employment. 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.
<PAGE>
Effect of Proposed Amendments
The effect of the proposed amendments will be (i) to increase the
number of shares of stock which may be issued upon exercise of options which the
administrators of the Plan are authorized to award in the future, from 250,000
shares to 403,750 shares, which includes increases of 136,750 shares allocated
to the Key Employee Plan and 17,000 shares allocated to the Director Plan; (ii)
to award options to purchase 500 shares of stock to each incumbent director upon
approval of the amendments (the "Additional Options"); and (iii) to increase the
number of shares of stock subject to the Annual Director Options which will be
awarded on the Grant Dates in 1998 and 1999, from 1,000 shares to 1,500 shares,
on each such Grant Date.
Set forth below is a table showing the increase in the potential
realizable value of benefits that will be received in 1998 by the non-executive
directors, Named Executive Officers and other officers of the Corporation or
Bank pursuant to (i) the Additional Options and (ii) the increased number of
Annual Director Options which would be awarded in 1998 if the amendments to the
Plan are adopted.
<TABLE>
<CAPTION>
Increase In Potential Realizable Value
At Assumed Annual Rates
Number of Of Stock Price Appreciation
Name and Position Option Shares For Option Term(1)
- ----------------- ------------- ------------------
5% 10%
-- ---
<S> <C> <C> <C>
Non-Executive Director
Group 11,000 $214,452 $543,466
Named Executive Officers (2) (2) (2)
Executive Officer Group (2) (2) (2)
Non-Executive Officer
Employee Group (2) (2) (2)
- --------------------
<FN>
(1) The increase in potential realizable value assumes that (i) each of
eleven non-executive directors receive an Additional Option to purchase
500 shares and an additional Annual Director Option to purchase 500
shares, each with an exercise price of $31.00; and (ii) the price of
the Corporation's Common Stock appreciates at a rate of 5% and 10%,
respectively, compounded annually for the ten year term of the option.
(2) It is not possible to meaningfully estimate the value of the benefits
which may be awarded under the Plan attributable to the additional
136,750 shares which may be issued pursuant to options which may be
awarded to key employees in the future, because the amounts, timing and
recipients of such awards are subject to the discretion of the
administrators of the Plan.
</FN>
</TABLE>
<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.
Incentive Stock Options. There is no immediate federal income tax
consequence to either an Optionee or the Corporation upon the grant of an ISO.
An Optionee will not have to recognize any income upon the exercise of an ISO,
and the Corporation will not be allowed any deduction, as long as the Optionee
does not dispose of the Shares within two years from the date the ISO was
granted or within one year from the date the Shares were transferred to the
Optionee (the "Holding Period Requirement"). Upon a sale of the Shares after
meeting the Holding Period Requirement, an Optionee will recognize a capital
gain (or loss) measured by the excess (or deficit) of the amount realized from
such sale over the option price of such Shares, but no deduction will be allowed
to the Corporation. Due to changes made by the Taxpayer Relief Act of 1997, if
Shares are sold after July 28, 1997, any capital gain recognized by an Optionee
from a sale of Shares will be taxed at a maximum rate of 20% if the Shares were
held for more than 18 months, or a maximum rate of 28%, if the shares were held
for at least one year, but not more than 18 months.
If an Optionee disposes of Shares before the Holding Period Requirement
is satisfied, the Optionee will recognize 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 option price of the Shares or (b)
the excess of the amount realized from such disposition over the option price of
the Shares. Where Shares are sold before the Holding Period Requirement is
satisfied, an Optionee will also recognize a short-term capital gain to the
extent that the amount realized from the disposition of the Shares exceeded the
fair market value of the Shares on the date of exercise.
An Optionee may under certain circumstances be permitted to pay all or
a portion of the option price of an ISO by delivering common stock of the
Corporation held for more than one year. If the common stock delivered by an
Optionee as payment of the option price was acquired through a prior exercise of
an ISO or an option granted under an employee stock purchase plan, and if the
holding period requirements applicable to such common stock have not yet been
met, the delivery of such common stock to the Corporation could be treated as a
taxable sale or disposition of such stock. In general, where an Optionee pays
the option price of an ISO by delivering common stock of the Corporation, the
Optionee will have a zero tax basis in the Shares received that are in excess of
the number of shares of common stock delivered in payment of the option price.
Optionees should consult their personal tax advisors before using common stock
of the Corporation to pay all or a portion of the option price of an option
granted under the Plan.
For alternative minimum tax purposes, regardless of whether an Optionee
satisfies the Holding Period Requirement, the excess of the fair market value of
the Shares on the exercise date over the option price will be treated as a
positive adjustment to the Optionee's alternative minimum taxable income for the
year the ISO is exercised. If the Shares are disposed of in the year the ISO was
exercised, however, the positive adjustment taken into account for alternative
minimum tax purposes will not exceed the gain realized on such sale. Exercise of
an ISO may thus result in liability for alternative minimum tax.
Non-qualified Stock Options. There is no federal income tax consequence
to either an Optionee or the Corporation upon the grant of an NQSO. Upon the
exercise of an NQSO, the Optionee will recognize ordinary compensation income in
an amount equal to the excess of the Fair Market Value of each Share on the date
of exercise over the option price, and the Corporation will be entitled to a
federal income tax deduction of the same amount. An Optionee's tax basis in
Shares acquired upon exercise of an NQSO will equal the fair market value of
such Shares on the date of exercise, and any subsequent gain or loss from the
sale of such Shares will be a short-term, mid-term or long-term capital gain or
loss, depending upon the holding period of such Shares.
<PAGE>
If an Optionee pays the option price of a NQSO by surrendering shares
of common stock held by the Optionee for at least one year then, to the extent
the Shares received upon exercise of the option do not exceed the number of
shares delivered, the Optionee will be treated as making a tax-free exchange of
stock and the new Shares received will have the same tax basis and holding
period as the shares given up. In such case, the Optionee will recognize
ordinary compensation income in an amount equal to the fair market value of the
Shares received in excess of the shares delivered in payment of the option
price. The basis of such additional Shares will equal their fair market value on
the date the option was exercised.
Recommendation of the Board of Directors
Approval of the proposed amendments to the Plan requires the
affirmative votes of the holders of a majority of the outstanding shares of
Common Stock entitled to vote at the 1998 Annual Meeting. Abstentions will have
the same effect on the outcome of such vote as a "no" 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
approval of the amendment of the Plan as described in this Proxy Statement.
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, 1998. This
appointment will be submitted to the shareholders for ratification at the 1998
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.
Recommendation of the Board of Directors
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, 1998.
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.
<PAGE>
SHAREHOLDER PROPOSALS
Proposals by shareholders intended to be presented at the next Annual
Meeting of Shareholders 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 28, 1998, to be included in the Corporation's Proxy
Statement and form of proxy for the 1999 annual meeting.
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.
ADDITIONAL INFORMATION
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, 1998. REQUESTS SHOULD BE DIRECTED TO MR. JOHN STODDART,
SHAREHOLDER RELATIONS OFFICER, 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 25, 1998
<PAGE>
APPENDIX A
PROXY PROXY
FIRST WEST CHESTER CORPORATION
ANNUAL MEETING OF SHAREHOLDERS, MARCH 17, 1998
THIS PROXY IS SOLICITED ON BEHALF OF
THE CORPORATION'S BOARD OF DIRECTORS
The undersigned hereby appoints Thomas R. Butler and N. Harlan Slack,
III, 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 3, 1998,
at the 1998 Annual Meeting of Shareholders to be held on March 17, 1998, or any
adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" (1) THE ELECTION OF THE
NOMINEES TO SERVES AS CLASS II DIRECTORS, (2) THE APPROVAL OF THE AMENDMENTS TO
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, 3 AND 4.
1. ELECTION OF FOUR CLASS II DIRECTORS (Term to expire in 2001)
FOR all nominees listed below WITHHOLD AUTHORITY to vote
(except as marked to the for all nominees listed below o
contrary below) o
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.)
M. ROBERT CLARKE, EDWARD J. COTTER, DAVID L. PEIRCE, CHARLES E. SWOPE
2. APPROVAL OF CERTAIN AMENDMENTS TO THE CORPORATION'S 1995 STOCK OPTION
PLAN AS DESCRIBED IN THE PROXY STATEMENT.
o FOR o ABSTAIN o AGAINST
3. PROPOSAL TO RATIFY THE APPOINTMENT OF GRANT THORNTON, LLP as the
independent public accountants of the Corporation for the year ending
December 31, 1998.
o FOR o ABSTAIN o AGAINST
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.
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:_________________________, 1998 _________________________(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
AMENDED AND RESTATED
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 (an Option which is not an ISO, and therefore is a nonqualified option,
is referred to herein as an "NQSO"). 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 403,750
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 403,750 Option Shares,
331,750 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 72,000 Option Shares shall be reserved for issuance to
non-employee Directors of the Company or the Bank under the Director Plan.
<PAGE>
(c) Key Employee Plan Options. Options granted under the Key Employee
Plan may be either ISOs or NQSOs. Under the Key Employee Plan, Options to
purchase up to 221,750 Employee Option Shares (and any Employee 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
110,000 Employee Option Shares shall be granted to key employees in accordance
with the following schedule:
<TABLE>
<CAPTION>
Grant Dates
-----------
September September September September September
18, 30, 30, 30, 30,
Key Employee 1995 1996 1997 1998 1999
- ------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
President 4,000 4,000 4,000 4,000 4,000
Option Option Option Option Option
Shares Shares Shares Shares Shares
Each of 9 Other
Executive Officers* 2,000 2,000 2,000 2,000 2,000
Option Option Option Option Option
Shares Shares Shares Shares Shares
<FN>
*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 18,000 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.
</FN>
</TABLE>
(d) Director Plan Options. . Options granted under the Director Plan
shall be NQSOs. 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 (i) an Option to purchase
1,000 Option Shares on each of the following dates: September 18, 1995,
September 30, 1996 and September 30, 1997, (ii) an Option to purchase 500 Option
Shares on March 17, 1998, and (iii) an Option to purchase 1,500 Option Shares on
each of the following dates: September 30, 1998 and September 30, 1999, each at
the Option Price 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".
3. Term of Plan.
------------
The Plan shall commence on September 18, 1995, but shall terminate unless the
Plan is approved by the stockholders 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 stockholders 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.
<PAGE>
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 event that the aggregate
fair market value of Option Shares with respect to which ISOs are exercisable
for the first time by an Optionee during any calendar year (determined as of the
date the ISO is granted) and any options granted under other incentive stock
option plans of the Company or the Bank exceed $100,000, the portion of such
options in excess of $100,000 shall be treated as options which are not ISOs in
accordance with Section 422(d) of the Code.
(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) 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. 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.
<PAGE>
(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
hereinabove;
(iii) Expiration of one year from the date the Optionee's
employment or service with the Company or the Bank terminates for any reason
other than circumstances described by Subsection (d)(v), below;
(iv) 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
(v) 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.
<PAGE>
(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 stockholders of the Company (or the Board of
Directors, if stockholder action is not required) approve a plan or other
arrangement pursuant to which the Company will be dissolved or liquidated;
(ii) the date the stockholders of the Company (or the Board of
Directors, if stockholder 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 stockholders of the Company (or the Board of
Directors, if stockholder action is not required) and the stockholders of the
other constituent corporation (or its board of directors if stockholder 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 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 Securities and Exchange Act of
1934, as amended (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 stockholders, 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
stockholders 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 a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder.
<PAGE>
(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.
(i) 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.
(ii) 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. The grant of Options pursuant to the Director Plan
will be pursuant to the formula as set forth in Section 2(d) above. The Board of
Directors of the Company may make such interpretation and construction of the
Director Plan as necessary from time to time in its sole discretion, such
interpretation and construction of the Director Plan to be final, binding and
conclusive.
(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 directors to operate and administer the Key Employee Plan. 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(d) 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.
<PAGE>
(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 stockholders, (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 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 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.
<PAGE>
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, the aggregate number of Option Shares
which is reserved for issuance under the Director Plan and the Key Employee
Plan, the number of Option Shares to be granted to each director under the
Director Plan, the number of Option Shares to be granted to each key employee
under the formula provision of the Key Employee Plan, and such other share
numbers set forth herein 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.
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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, and (ii)
with respect to any amendments affecting the Key Employee Plan, any amendment
which would change the eligibility of employees or the class of employees
eligible to receive an Option or increase the maximum number of shares as to
which Options may be granted, will only be effective if such action is approved
by the holders of a majority of the outstanding voting stock of the Company.
9. Continued Employment.
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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.
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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.
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This Stock Option Plan shall be effective as of the date specified in Section 3
above.
