As filed with the Securities and Exchange Commission on January
26,1996
Registration No.
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Chester County Security Fund, Inc.
_______________________________________________________________
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1726390
_______________________________________________________________
(State or other jurisdiction of (I. R. S. Employer
incorporation or organiza ion) Identification No.)
4781 North Congress Avenue, Lantana, Florida 33462
______________________________________________________________
(Address of Principal Executive Office) (Zip Code)
Chester County Security Fund, Inc. 1996 Stock Plan
_______________________________________________________________
(Full title of the plan)
Robert C. Hackney, Esquire
4521 PGA Blvd., Suite 264 Palm Beach Gardens, FL 33418
_______________________________________________________________
(Name and address of agent for service)
(407) 837-2913
_______________________________________________________________
Telephone number, including area code, of agent for service)
Calculation of Registration Fee
______________________________________________________________
Proposed
Proposed maximum
Title of Amount to be maximum aggregate Amount of
securities registered offering offering registration
to be price per price fee
registered share
Common Stock 1 million $5.50 $5,500,000 $ 1,897
(no par value) shares
PROSPECTUS
Chester County Security Fund, Inc.
4781 North Congress Avenue
Lantana, Florida 33462
1996 Stock Plan
1,000,000 Shares of Common Stock, no par value
______________________
All references herein to "Chester County" or the
"Corporation" mean Chester County Security Fund, Inc., unless
otherwise indicated by the context.
Chester County is hereby offering 1,000,000 shares of its
Common Stock, no par value, ("Common Stock") to holders of
options, awards of Common Stock or opportunities to purchase
Common Stock granted or to be granted under the Corporation's
1996 Stock Plan, which is described herein and the text of
which is incorporated herein by reference, upon exercise of
such options, or upon receipt of such Common Stock award or
purchase of Common Stock, in accordance with the terms and
conditions thereof.
________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_________________________
The date of this Prospectus is January 26, 1996.
______________________________________________________________
No dealer, salesman or other person has been authorized to
give any information or to make any representations other than
those contained in this Prospectus, and, if given or made, such
information or representation must not be relied upon as having
been authorized by the Corporation. This Prospectus does not
constitute an offer or solicitation by anyone in any state in
which such offer or solicitation is not authorized, or in which
the person making such offer or solicitation is not qualified
to do so, or to any person whom it is unlawful to make such
offer or solicitation. The delivery of this Prospectus at any
time does not imply that information herein is correct as of
any time subsequent to the date hereof.
THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY
THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE OF THIS PROSPECTUS. STATEMENTS IN THIS PROSPECTUS AS
TO THE PROVISIONS OF THE PLAN ARE NOT NECESSARILY COMPLETE AND
IN EACH INSTANCE REFERENCE IS MADE TO THE COPY OF THE PLAN
WHICH APPEARS AT APPENDIX A TO THE PROSPECTUS, AND EACH SUCH
STATEMENT IN THIS PROSPECTUS IS QUALIFIED IN ALL SUCH RESPECTS
BY SUCH REFERENCE.
Plan Information
General Plan Information
Chester County Security Fund, Inc., a Pennsylvania
corporation, located at 4781 North Congress Avenue, Lantana,
Florida 33462, is hereby offering 1,000,000 shares of its
common stock, no par value, ("Common Stock") to holders of
options, awards of Common Stock or opportunities to purchase
Common Stock granted or to be granted under the Chester County
Security Fund, Inc. 1996 Stock Plan (the "Plan"). All
references herein to "Chester County," the "Company" or the
"Corporation" mean Chester County Security Fund, Inc., unless
otherwise indicated by the context.
The Common Stock offered by this Prospectus is issuable
upon exercise of Stock Rights (as defined below) granted under
the Plan, which is described below. The purpose of the Plan is
to provide incentives to the employees of the Corporation, its
parent (if any) and its present or future subsidiaries by
providing them with opportunities to purchase stock in the
Corporation pursuant to options which qualify as "incentive
stock options" under Section 422A(b) of the Internal Revenue
Code of 1986 (the "Code") ("ISO" or "ISOs"). The Plan is also
intended to provide incentives to employees and consultants of
the Corporation and any of its subsidiaries by providing them
with (a) opportunities to purchase stock in the Corporation
pursuant to options which do not qualify as ISOs ("Non-
Qualified Options"); (b) awards of stock in the Corporation
("Awards"); and (c) opportunities to make direct purchases of
stock in the Corporation ("Purchases"). ISOs and Non-Qualified
Options are sometimes collectively referred to herein as
"Options". ISOs, Non-Qualified Options, Awards and Purchases
are collectively referred to herein as "Stock Rights".
This Plan was adopted by the Board on January 20, 1996,
and approved by the stockholders of the Corporation on January
26, 1996 at the annual Meeting of Stockholders. The Plan shall
expire on January 20, 2005 (except as to Options outstanding on
that date). Stock Rights may be granted under the Plan prior
to stockholder approval. The Board may terminate or amend the
Plan in any respect at any time, except that, without the
approval of the stockholders obtained within 12 months before
or after the Board adopts a resolution authorizing any of the
following actions: (a) the total number of shares that may be
issued under the Plan may not be increased (except by
adjustments pursuant to the Plan); (b) the provisions of the
Plan regarding eligibility for grants of ISOs may not be
modified (except by adjustment pursuant to the Plan); and (d)
the expiration date of the Plan may not be extended. Except as
provided in the Plan, in no event may action of the Board or
Stockholders alter or impair the rights of a grantee, without
his consent, under any Stock Right previously granted to him.
The Plan is not an employee benefit plan which is subject
to the provisions of the Employee Retirement Income Security
Act of 1974, and the provisions of Section 401(a) of the Code
are not applicable to the Plan.
Participants may obtain additional information about the
Plan and its administrators by writing to: Investor Relations,
4781 North Congress Avenue, Lantana, FL 33462, or calling (407)
837-3962.
The Plan shall be administered by either (i) the Board of
Directors of the Company (the "Board") so long as each Board
member is a disinterested director, i.e. a director who is not,
during the 1 year prior to service as an administrator of the
Plan, or during such service, granted or awarded equity
securities pursuant to the Plan or any other plan of the
Company or any of its affiliates; or (ii) a Stock Plan
Committee (the "Committee"), appointed by the Board, which
shall consist of two or more disinterested directors. All
references in this prospectus the "Committee" shall mean the
Board if no Committee has been appointed.
Subject to the terms of the Plan, the Board of Directors
has the authority to determine the persons to whom Stock Rights
shall be granted (subject to certain eligibility requirements
for grants of ISOs), the number of shares covered by each such
grant, in respect to ISOs, Non-qualified Options and Purchases,
the exercise or purchase price per share, the time or times at
which Stock Rights shall be granted, and other terms and
provisions governing the Stock Rights including the nature of
such Stock Right as an ISO, Non-qualified Option, Award or
Purchase, as well as the restrictions, if any, applicable to
shares of Common Stock issuable upon exercise of Stock Rights.
The interpretation or construction by the Board of Directors of
the Plan or any Stock Right granted under it shall be final.
The administrator of the Plan is the sole director, who is
also the chief executive officer and beneficial owner of
greater than 10% of the Company.
If the Board appoints a Committee to administer the Plan,
from time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove
members (with or without cause) and appoint new members in
substitution therefor, fill vacancies however caused, or remove
all members of the Committee and thereafter directly administer
the Plan.
Securities to be Offered
The Plan authorizes the grant of Stock Rights to acquire
1,000,000 shares of Common Stock. On January 25, 1996, the
average last sale price of the Corporation's Common Stock as
reported on the NASDAQ Bulletin board was $0.25 per share.
The stock subject to Options, Awards and Purchases shall
be authorized but unissued shares of Common Stock of the
Company, no par value (the "Common Stock"), or shares of Common
Stock reacquired by the Company in any manner. The aggregate
number of shares which may be issued pursuant to the Plan is
1,000,000, subject to adjustment as provided in the Plan. Any
such shares may be issued as ISOs, Non-Qualified Options or
Awards, or to persons or entities making Purchases, so long as
the number of shares issued does not exceed such number, as
adjusted. If any Option granted under the Plan shall expire or
terminate for any reason without having been exercised in full
or shall cease for any reason to be exercisable in whole or in
part, or if the Company shall reacquire any unvested shares
issued pursuant to Awards or Purchases, the unpurchased shares
subject to such Options and any unvested shares so reacquired
by the Company shall again be available for grants of Stock
Rights under the Plan.
Employees Who May Participate in the Plan
ISOs under the Plan may be granted to any employee of the
Corporation or any Related Corporation (as defined in the
Plan). As of January 26, 1996, the Corporation and its
subsidiaries had approximately ten (10) employees. Officers
and directors of the Corporation must also be employees in
order to receive ISOs under the Plan. Non-qualified Options,
Awards and Purchases may be granted to any director, officer,
employee or consultant of the Corporation or any Related
Corporation. Non-Qualified Options, Awards and authorizations
to make Purchases may be granted to any director (whether or
not an employee), officer, employee or consultant of the
Company or any Related Corporation. The Committee may take
into consideration a recipient's individual circumstances in
determining whether to grant an ISO, a Non-Qualified Option or
an authorization to make a Purchase. Granting of any Stock
Rights to any individual or entity shall neither entitle that
individual or entity to, nor disqualify him from, participation
in any other grant of Stock Rights.
Purchase of Securities Pursuant to the Plan and Payment
for Securities Offered
Eligible employees may elect to participate in the Plan at
any time prior to the Plan's termination.
Stock Rights may be granted under the Plan at any time on
or after January 20, 1996 and prior to January 20, 2005. The
Board of Directors may, with the consent of the holder of an
ISO, convert an ISO granted under the Plan to a Non-qualified
Option. Awards and the price of Purchases shall be at fair
market value as determined by the Board of Directors.
The exercise price per share of Non-qualified Options
granted under the Plan cannot be less than the lesser of the
book value per share of Common Stock as of the end of the
preceding fiscal year or 50% of the fair market value per share
of Common Stock on the date of grant.
The exercise price per share of ISOs granted under the
Plan cannot be less than the fair market value of the Common
Stock on the date of grant, or, in the case of ISOs granted to
employees holding more than ten percent of the total combined
voting power of all classes of stock of the Corporation or any
Related Corporation, 110% of the fair market value of the
Common Stock on the date of grant.
The Plan provides that each Option shall expire on the
date specified by the Board of Directors, but not more than
five years from its date of grant in the case of ISOs and five
years and one day in the case of Non-qualified Options.
However, in the case of any ISO granted to an employee owning
more than ten percent of the total combined voting power of all
classes of stock of the Corporation or any Related Corporation
such ISO shall expire on the date specified by the Board of
Directors, but not more than five years from its date of grant.
Each Option granted under the Plan shall be exercisable as
follows:
A. The Option shall either be fully exercisable at the time
of grant or shall become exercisable in such installments as
the Board of Directors may specify.
B. Once an installment becomes exercisable it shall remain
exercisable until expiration or termination of the Option,
unless otherwise specified by the Board of Directors.
C. Each Option may be exercised from time to time, in whole
or in part, up to the total number of shares with respect to
which it is then exercisable.
D. The Board of Directors shall have the right to accelerate
the date of exercise of any installment. (Subject to the
$100,00 per year limit on the fair market value of ISOs granted
to any employee which may become exercisable in any calendar
year).
In no event may the aggregate fair market value
(determined on the date of grant of an ISO) of Common Stock for
which ISOs granted to any employee are exercisable for the
first time by such employee during any calendar year (under all
stock option plans of the Corporation and any Related
Corporation) exceed $100,000; any portion of an ISO grant that
exceeds such $100,000 limit will be treated for tax purposes as
a Non-qualified Option. Otherwise, there is no restriction as
to the maximum or minimum amount of options an employee may
receive.
A Stock Right (or any part or installment thereof (shall
be exercised by giving written notice to the Company at its
principal office address. Such notice shall identify the Stock
Right being exercised and specify the number of shares to which
such Stock Right is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United
States dollars in cash or by check, or (b) at the discretion
of the Committee, through delivery of shares of Common Stock
having a fair market value equal as of the date of the exercise
to the cash exercise price of the Stock Right, or (c) at the
discretion of the Committee, by delivery of the grantee's
personal recourse note bearing interest payable not less than
annually at no less than 100% of the lowest applicable Federal
rate, as defined in Section 1274 (d) of the Code, or (a), (b),
and (c) above. If the Committee exercises its discretion to
permit payment of the exercise price of an ISO by means of the
methods set forth in clauses (b), (c), or (d) of the preceding
sentence, such discretion shall be exercised in writing at the
time of the grant of the ISO in question. The holder of a
Stock Right shall not have the rights of a shareholder with
respect to the shares covered by his Stock Right until the date
of issuance of a stock certificate to him for such shares.
Except as expressly provided in the Plan with respect to
changes in capitalization and stock dividends, no adjustment
shall be made for dividends or similar rights for which the
record date is before the date such stock certificate is
issued.
Status reports will be provided from time to time by the
Board of directors to participating employees regarding the
amount and status of their accounts.
The stock subject to Options, Awards and Purchases under
the Plan shall be authorized but unissued shares of Common
Stock of the Company, no par value (the "Common Stock"), or
shares of Common Stock reacquired by the Company in any manner.
No fees commissions or other charges shall be paid.
Resale Restrictions.
This Prospectus is not available for reoffers or resales
of Common Stock acquired under the Plan by persons who are
deemed to be "affiliates" of the Corporation, as that term is
defined in Rule 405 under the Securities Act of 1933, as
amended (the "Act"). Such reoffers or resales by affiliates
may be made only pursuant to a separate prospectus, (the
"reoffer prospectus") or an exemption from registration,
including pursuant to Rule 144.
Tax Effects of Plan Participation.
A. Incentive Stock Options. The following general rules are
applicable for Federal income tax purposes under the existing
law to employees who receive and exercise ISO's granted under
the Plan:
1. If the optionee does not own stock possessing more than
10% of the total voting power of the stock of the Corporation
or any Related Corporation (as defined in the Plan), or if the
optionee owns stock possession more than 10% of the total
voting power of the stock of the Corporation or any Related
Corporation and the exercise price is at least 110% of the fair
market value per share of the Corporation's Common Stock at the
date of grant, no taxable income results to the optionee upon
the grant of an ISO or upon the issuance of shares to him or
her upon exercise of the ISO.
2. No tax deduction is allowed to the Corporation upon either
grant or exercise of an ISO under the Plan.
3. If shares acquired upon exercise of an ISO are not
disposed of prior to the later of (i) two years following the
date the option was granted or (ii) one year following the date
shares are transferred to the optionee pursuant to the ISO
exercise, the difference between the amount realized on any
subsequent disposition of the shares and the exercise price
will be treated as capital gain or loss to the optionee.
4. If shares acquired upon exercise or an ISO are disposed of
before the expiration of one or both of the requisite holding
periods (a "Disqualifying Disposition"), then in most cases the
lesser of (i) any excess of the fair market value of the shares
at the time of exercise of the ISO over the exercise price of
(ii) the actual gain on disposition, will be treated as
compensation to the optionee and will be taxed as ordinary
income in the year of such disposition.
5. In any year that an optionee recognized compensation
income on a Disqualifying Disposition of stock acquired by
exercising an ISO, the Corporation will be entitled to a
corresponding deduction for income tax purposes if it satisfied
certain withholding requirements.
6. Any excess of the amount realized by the optionee as the
result of a Disqualifying Disposition over the sum of (i) the
exercise price and (ii) the amount of ordinary income
recognized under the above rules will be treated as either
long-term or short-term capital gain, depending upon the time
elapsed between receipt and disposition of the shares disposed
of.
An optionee may be entitled to exercise an ISO by
delivering share of the Corporation's Common Stock ("old
stock") to the Corporation in exchange for the Common Stock
received upon exercise of the ISO ("option stock"), if the
optionee's ISO agreement so provides. In general, if an
optionee exchanges old stock for option stock instead of, or in
addition to, paying part or all of the exercise price in cash,
no gain or loss will be recognized with respect to the exchange
of the old stock, and shares acquired upon exercise of the ISO
will not be subject to tax as explained above until the share
are sold. However, an exception exists to this rule when the
old stock is :statutory option stock" (as defined below) that
has been held for a period less than the applicable holding
periods under the Code. In that event, the optionee will
realize ordinary compensation income with respect to the old
stock in an amount equal to the lesser of (i) the excess of the
fair market value of the option stock on the date of exercise
of the ISO over the basis of the old stock, or (ii) the fair
market value of the old stock on the date it was originally
exercised over the original option exercise price. "Statutory
option stock" consists of stock acquired through the exercise
of a "qualified stock option", "Incentive stock option", an
option acquired under an "employee stock purchase plan" or a
"restricted stock option", as these terms are defined in the
Code. Further, if the old stock used to exercise an ISO is
Restricted Stock may be treated as the lapse of the
restrictions imposed on such restricted Stock under the rules
discussed below, and the optionee may recognize income as a
result.
B. Non-qualified Stock Options. A Non-qualified Option
granted under the Plan is taxed in accordance with Section 83
of the Code and the Regulations issued thereunder. The
following general rules are applicable to holder of such
options and to the Corporation for Federal income tax purposes
under existing law, based upon the assumptions that (i) the
options do not have a readily ascertainable fair market value
at the date of grant, and (ii) the Common Stock acquired by
exercising the Non-qualified Option is either transferable or
not subject to a substantial risk of forfeiture (as defined in
Regulations under Section 83 of the Code).
1. The optionee does not realize any taxable income upon the
grant of an Option, and the Corporation is not allowed a
business expense deduction by reason of such grant.
2. The optionee will recognize ordinary compensation income
at the time of exercise of the option in an amount equal to the
excess, if any, of the fair market value of the shares on the
date of exercise over the exercise price. In accordance with
the Regulations under the Code and applicable state law, the
Corporation will require the optionee to pay to the Corporation
an amount sufficient to satisfy withholding taxes in respect of
such compensation income at the time of the exercise of the
option. If the Corporation withholds stock to satisfy this
withholding tax obligation, instead of cash, the optionee
nonetheless will be required to include in income the fair
market value of the stock withheld.
3. When the optionee sells the shares, he or she will
recognize a capital gain or loss in an amount equal to the
difference between the amount realized upon the sale of the
shares and his or her basis in the shares (i. e., the exercise
price plus the amount taxed to the optionee as compensation
income). If the optionee holds the shares for longer than the
statutory holding period, this gain or loss will be a long-term
capital gain or loss. The statutory holding period is one
year.
4. In general, the Corporation will be entitled to a tax
deduction in the year in which compensation income is
recognized by the optionee.
An optionee may be entitled to exercise a Non-qualified
Option by delivering old stock to the Corporation in exchange
for the Common Stock received upon exercise of the option
("nonqualified option stock"), if the optionee's Non-qualified
Option agreement so provides. In general, if an optionee
exchanges old stock for nonqualified option stock instead of,
or in addition to, paying part or all of the exercise price in
cash, no gain or loss will be recognized with respect to the
exchange of the old stock. The optionee will recognize
ordinary compensation income, however, in an amount equal to
the excess, if any, of the fair market value of the old stock
(at the time of exercise) surrendered to acquire the
nonqualified option is Restricted Stock (as defined below), and
the Common Stock acquired on exercise of the nonqualified stock
option is not subject to restrictions substantially similar to
those imposed on such Restricted Stock will be treated as the
lapse of the restrictions imposed on such Restricted Stock
under the rules discussed below, and the optionee may recognize
income as a result.
C. Special Rules for Restricted Stock. Common stock that is
subject to restrictions on transfer and also to a substantial
risk of forfeiture (as defined in Regulations under Section 83
of the Code), referred to herein as "restricted Stock"., is
subject to special tax rules. If the Common Stock acquired on
the exercise on a Non-qualified Option or pursuant to an Award
or Purchase is Restricted Stock, the amount of income
recognized by the optionee generally will be determined as of
the time the restrictions lapse, and will be equal to the
difference between the amount paid for the Restricted Stock and
the fair market value of the Restricted Stock at that time. In
that case, the payment to the Corporation of withholding taxes
will be required as the income arises, i. e., at the time the
transfer restrictions on the stock lapse or the substantial
risk of forfeiture no longer exists. Officers and directors of
the Corporation who exercise nonqualified options (or who make
disqualifying dispositions of stock acquired upon exercise of
an ISO) receive stock treated as Restricted Stock because of
certain securities law rules applicable to such optionees.
If an optionee transfers Restricted Stock to the
Corporation to exercise an ISO, the restrictions on such
Restricted Stock will be deemed to have lapsed on the date of
transfer, and the optionee may recognize income at that time.
Similarly, if the optionee transfers Restricted Stock to the
Corporation to exercise a Non-qualified Option, and the stock
received by the optionee on exercise is not subject to
restrictions substantially similar to those imposed on such
Restricted Stock, the restrictions on that Restricted Stock
will be deemed to have lapsed on the date of transfer, and the
optionee may recognize income at that time. Restricted Stock
acquired by exercising an ISO generally is not subject to the
rules of Section 83, but rather to the rules discussed above
for ISOs.
Under Section 83(b) of the Code, an election is available
to the optionee to include in gross income, in the taxable year
that Restricted Stock is first transferred to the optionee, the
amount of any excess of the fair market value (as determined
under Section 83) of the Restricted Stock over the amount (if
any) paid for such stock. The election must be made within 30
days after the Restricted Stock is transferred to the optionee.
If this election is made, no further tax liability will arise
at the time the transfer restrictions on the Restricted Stock
lapse or the substantial risk of forfeiture no longer exists.
However, of shares of Restricted Stock for which a Section
83(b) election is in effect are forfeiture while such shares
are both nontransferable and subject to a substantial risk of
forfeiture, the loss realized by the optionee on the
forfeiture, for tax purposes, is limited to the amount paid for
such shares (not including any compensation income recognized
by the optionee at the time of transfer) less any amount
realized by the optionee on such forfeiture.
D. Awards and Purchases. The receipt of Common Stock of the
Corporation pursuant to an Award or Purchase made under the
Plan is taxed in accordance with the rules of Section 83 of the
Code and the Regulations issued thereunder. These rules are
discussed above under Nonqualified Stock Options and Special
Rules for Restricted Stock. For purposes of applying the
principals of Section 83 to Awards and Purchases (rather than
to the exercise of Non-qualified Options as discussed above),
(i) the "time of exercise" is equivalent to the time of Award
or Purchase, (ii) the "exercise price" with respect to an Award
is zero, and (iii) the "exercise price" with respect to a
Purchase is the price paid for the Common Stock acquired by
that Purchase.
E. Capital Gains. Long-term gains generally will be subject
to Federal income tax at the same rates as ordinary income.
F. Minimum Tax. In addition to the tax consequences
described above, the exercise of ISOs granted under the Plan
may result in a further "minimum tax" under the Code, as
follows: The Code provides that an "alternative minimum tax"
(at rates between 26%-28%) will be applied against a taxable
base which is equal to regular taxable income, adjusted for
certain limited deductions and losses, increased by items of
tax preference, and reduced by a statutory exemption ($33,750
for single individuals and $45,000 for joint return filers and
surviving spouses and $22,000 for married persons filing
separately, estates and trusts). The statutory exemption is
phased out for certain higher income taxpayers. The bargain
element at the time of exercise of an ISO, i. e., the amount by
which the value of the Common Stock received upon exercise of
the ISO exceeds the exercise price, constitutes an item of tax
preference for purposes of the alternative minimum tax. For
purposes of determining alternative minimum taxable income (but
not regular taxable income) for any subsequent year in which
the taxpayer sells the stock acquired by exercise of the ISO,
the basis of such stock will be its fair market value at the
time the ISO was exercised. A taxpayer is required to pay the
higher of his regular tax liability or the alternative minimum
tax. A taxpayer who pays alternative minimum tax attributable
to the exercise of an ISO may be entitled to a tax credit
against regular tax liability in later years.
G. Incentive Stock Option Changes. The Tax Reform Act of
1986 replaced the limitation (contained in prior law) on the
aggregate amount of ISOs which can be granted to an employee in
any calendar year with a limitation on the amount of ISOs which
can become first exercisable in any calendar year. Also, the
Act repealed the sequential exercise rule of prior law,
effective for incentive stock options granted after 1986. The
Plan incorporates the changes made by the Act.
Withdrawal From the Plan; Assignment of Interest
Non-qualified Options are subject to such termination and
cancellation provisions as may be determined by the Board of
Directors.
Only the optionee may exercise an Option; no assignment or
transfers are permitted, except that an Option may be
transferred by will or by the laws of descent and distribution.
Forfeitures and Penalties
If an ISO optionee ceases to be employed by the Company
and all Related Corporations other than by reason of death or
disability as defined in paragraph 10, no further installments
of his ISOs shall become exercisable, and his ISOs shall
terminate after the passage of 60 days from the date of
termination of his employment, but in no event later than on
their specified expiration dates, except to the extent that
such ISOs (or unexercised installments thereof) have been
converted into Non-Qualified Options pursuant to the Plan.
Leave of absence with written approval of the Board of
Directors shall not constitute an interruption of employment
provided that such approval contractually requires the
Corporation to continue the employment of the employee after
the leave of absence. Employment shall also be considered as
continuing uninterrupted during any other bona fide leave of
absence (including illness, military obligations or
governmental service) provided such leave does not exceed 90
days or, if longer, any period during which the employer's
right to reemployment is guaranteed by statute. Nothing in the
Plan shall be deemed to give any grantee of Stock Rights the
right to be retained in employment by the Corporation or a
Related Corporation for any period of time. Stock Rights
granted under the Plan shall not be affected by any change of
employment among the Corporation and a Related Corporation so
long as the optionee continues to be an employee of the
Corporation or a Related Corporation.
If an ISO optionee ceases to be employed by the Company
and all Related Corporations by reason of his death, any ISO of
his may be exercised, to the extent of the number of shares
with respect to which he could have exercised it on the date of
his death, by his estate, personal representative or
beneficiary who has acquired the ISO by will or by the laws of
descent and distribution, at any time prior to the earlier of
the ISO's specified expiration date or 180 days from the date
of the optionee's death.
If an ISO optionee ceases to be employed by the Company
and all Related Corporations by reason of his disability, he
shall have the right to exercise any ISO held by him on the
date of termination of employment, to the extent of the number
of shares with respect to which he could have exercised it on
that date, at any time prior to the earlier of the ISO's
specified expiration date or 180 days from the date of the
termination of the optionee's employment.
The Committee, at the written request of any optionee, may in
its discretion take such actions as may be necessary to convert
such optionee's ISOs (or any installments or portions of
installments thereof) that have not been exercised on the date
of conversion into Non-Qualified Options at any time prior to
the expiration of such ISOs, regardless of whether the optionee
is an employee of the Company or a Related Corporation at the
time of such conversion. Such actions may include, but not be
limited to, extending the exercise period or reducing the
exercise price of the appropriate installments of such options.
At the time of such conversion, the Committee (with the consent
of the Optionee) may impose such conditions on the exercise of
the resulting Non-Qualified Options as the Committee in its
discretion may determine, provided that such conditions shall
not be inconsistent with this Plan. Nothing in the Plan shall
be deemed to give any optionee the right to have such
optionee's ISOs converted into Non-Qualified Options, and no
such conversion shall occur until and unless the Committee
takes appropriate action. The Committee, with the consent of
the optionee, may also terminate any portion of any ISO that
has not been exercised at the time of such termination.
Outstanding Stock Rights are subject to adjustment as
described in the Plan under "Changes in Stock; Recapitalization
and Reorganization". Pursuant to the terms of the Plan, shares
subject to Stock Rights which for any reason expire or are
terminated unexercised as to such shares may again be the
subject of a grant under the Plan.
Exercise of an Option under the Plan is effected by a
written notice of exercise delivered to the Corporation at its
principal office together with payment for the shares in full
in cash or by check, or if authorized by the Board of Directors
in its discretion at the time of grant, in part or in full by
tendering shares of Common Stock of the Corporation or a full
recourse promissory note. Such written notice shall also
identify the Option being exercised and specify the number of
share as to which the Option is being exercised.
By allowing payment of the exercise price by delivering
shares of the Corporation, the Plan enables a participant to
increase his or her equity ownership in the Corporation without
a significant capital contribution. For example, assume that
the optionee has outstanding Options to purchase 100 shares of
the Corporation's stock at an exercise price of $5 per share
and that the stock is currently selling at $10 per share. One
share could be submitted for the receipt of two shares, which
could in turn be immediately resubmitted for the receipt of
four shares. There successive exchanges could theoretically
continue until all available Options were exercised. The
result, under this example, would be that an optionee would
obtain the value of the spread of $500 between the stock's
option exercise price and its market value without any cash
contribution and an investment equivalent only to the exercise
price of one share.
While the use of the stock payment method offers
significant advantages to an optionee, it is subject to certain
restrictions. Under recent amendments to the Code, the use of
the stock payment method will result in unfavorable tax
treatment to the optionee where the exchanged shares were
acquired under incentive stock options or certain other tax-
advantaged plans and the applicable period for disqualifying
dispositions has not expired. In addition, under accounting
principals, a charge against the Corporation's income may be
necessary for Options exercised by the use of the stock payment
method.
In the event shares of Common Stock of the Corporation
shall be subdivided or combined into a greater or smaller
number of shares or if, upon a merger, consolidation,
reorganization, split-up, liquidation, combination,
recapitalization or the like of the Corporation, the shares of
the Corporation's Common Stock shall be exchanged for other
securities of the Corporation or of another corporation, each
optionee shall be entitled to purchase such number of shares of
Common Stock or amount of other securities of the Corporation
or such other corporation as were exchangeable for the number
of shares of Common Stock of the Corporation which such
optionee would have been entitled to purchase except for such
action, and appropriate adjustments shall be made in the
purchase price per share to reflect such subdivision,
combination, or exchange. If any person holding restricted
Common Stock obtained by the exercise of an Option or by a
Purchase or Award receives new, additional or different
securities in connection with any corporate transaction
described in this paragraph, such new securities shall be
subject to all of the conditions and restrictions applicable to
the Common Stock with respect to which the new securities were
issued.
In the event the Corporation shall issue any of its shares
as a stock divided upon or with respect to the shares of stock
of the class which shall at the time be subject to Option, each
optionee upon exercising such an Option shall be entitled to
receive (for the purchase price paid upon such exercise) the
shares as to which he is exercising his Option and, in
addition thereto (at no additional cost), such number of shares
of the class or classes in which such stock dividend or
dividends were declared or paid, and such amount of cash in
lieu of fractional shares, as he would have received if he had
been the holder of the shares as to which he is exercising his
Option at all times between the date of grant of such option
and the date of its exercise.
Upon the happening of any of the foregoing events, the
class and aggregate number of shares reserved for issuance upon
the exercise of options under the Plan shall also be
appropriately adjusted to reflect the events described above.
Notwithstanding the foregoing, in respect to ISOs, the
adjustments described above shall be made only after the Board
of Directors, in consultation with legal counsel, determines
that such adjustments shall not constitute a modification of
such ISOs or would cause adverse tax consequences to the
holders of ISOs.
The Board of Directors may terminate or amend the Plan in
any respect at any time, except that, without the prior
approval of the holders of a majority of the outstanding shares
of Common Stock, (a) the total number of shares that may be
issued under the Plan may not be increased except as previously
described under "Changes in Stock; Recapitalization and
Reorganization", (b) the provisions regarding eligible
employees may not be modified; (c) the provisions regarding the
exercise price at which shares may be offered pursuant to ISOs
(except by adjustment referred to above); and (d) the
expiration date of the Plan may not be extended. No action of
the Board of Directors or shareholders, however, may, without
the consent of an optionee, alter or impair his rights under
any option previously granted to him.
Charges and Deductions and Liens Therefor
Upon the exercise of a Non-Qualified Option, the grant of
an Award, the making of a Purchase of Common Stock for less
than its fair market value, the making of a Disqualifying
Disposition or the vesting of restricted Common Stock acquired
on the exercise of a Stock Right hereunder, the Company, in
accordance with Section 3402(a) of the Code, may require the
optionee, Award recipient or purchaser to pay additional
withholding taxes in respect of the amount that is considered
compensation includible in such person's gross income. The
Committee in its discretion may condition (i) the exercise of
an Option, (ii) the grant of an Award, (iii) the making of a
Purchase of Common Stock for less than its fair market value,
or (iv) the vesting of restricted Common Stock acquired by
exercising a Stock Right on the grantee's payment of such
additional withholding taxes.
A Stock Right (or any part or installment thereof (shall
be exercised by giving written notice to the Company at its
principal office address. Such notice shall identify the Stock
Right being exercised and specify the number of shares to which
such Stock Right is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United
States dollars in cash or by check, or (b) at the discretion of
the Committee, through delivery of shares of Common Stock
having a fair market value equal as of the date of the exercise
to the cash exercise price of the Stock Right, or (c) at the
discretion of the Committee, by delivery of the grantee's
personal recourse note bearing interest payable not less than
annually at no less than 100% of the lowest applicable Federal
rate, as defined in Section 1274 (d) of the Code, or (a), (b),
and (c) above. If the Committee exercises its discretion to
permit payment of the exercise price of an ISO by means of the
methods set forth in clauses (b), (c), or (d) of the preceding
sentence, such discretion shall be exercised in writing at the
time of the grant of the ISO in question. The holder of a
Stock Right shall not have the rights of a shareholder with
respect to the shares covered by his Stock Right until the date
of issuance of a stock certificate to him for such shares.
Except as expressly provided in the Plan with respect to
changes in capitalization and stock dividends, no adjustment
shall be made for dividends or similar rights for which the
record date is before the date such stock certificate is
issued.
Additional Information.
The proceeds received by the Corporation from the sale of
shares pursuant to the Plan shall be used for general corporate
purposes. The Corporation's obligation to deliver shares is
subject to the approval of any governmental authority required
in connection with the sale or issuance of such shares. The
exercise of Non-qualified Options, Awards or Purchases for
less than fair market value may require the holders to
recognize ordinary income and pay additional withholding taxes
in respect of such income, and the Board of Directors may
condition the grant or exercise of an Option, Award or Purchase
on the payment to the Corporation of such taxes. An employee
is required to notify the Corporation in the event that he
disposes of stock acquired on the exercise of an ISO prior to
the later of two years from the date of grant or one year
from the date of exercise of the ISO. Unless terminated
earlier by the Board of Directors, the Plan will expire on
January 20, 2005.
Registrant Information and Employee Plan Annual Information.
Chester County Security Fund, Inc. is subject to the
informational requirements of the Securities Exchange Act of
1934 (the "Exchange Act") and in accordance therewith files
reports and other information with the Securities and Exchange
Commission. Such reports and other information may be
inspected and copied at the Public Reference Room of the
Commission, 450 5th Street, N.W., Room 1024, Washington, D. C.
20549, and at the Commission's regional offices in New York (26
Federal Plaza, New York, New York 10007), Chicago (Everett
McKinley Dirksen Building, 219 South Dearborn Street, Chicago,
Illinois 60604) and Los Angeles (5757 Wilshire Blvd., Suite 500
East, Los Angeles, California 90036-3648). Copies of such
material can also be obtained from the Public Reference Section
of the Commission, Washington, D. C. 20549 at prescribed
rates.
Incorporation of Certain Documents by Reference
The following documents filed with the Securities and
Exchange Commission by the Company are incorporated herein by
reference as of their respective dates as set forth therein:
(a) The Corporation's Form 10-K for the fiscal year ended
December 31, 1994.
(b) The Corporation's Form 8-K dated January 8, 1996.
(c) The Corporation's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1995, June 30, 1995, and September 30,
1995.
All documents subsequently filed by the Corporation
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934 after the date hereof and prior
to the filing of an post-effective amendment which indicates
that all securities offered herein have been sold or which
registers all such securities remaining unsold shall be deemed
to be incorporated herein by reference and to be a part hereof
from the date of filing of such documents.
The Corporation will provide without charge to each person
to whom a Prospectus is delivered, upon written oral request of
such person, a copy of any and all documents described above
(other than exhibits to such documents). Such requests should
be addressed to:
Investor Relations
Chester County Security Fund, Inc.
4781 North Congress Avenue
Lantana, FL 33462
(407) 837-3962
Report to Shareholders
The Corporation furnishes its stockholders with annual
reports containing consolidated financial statements that have
been examined and reported upon, with an opinion expressed by
independent certified public accountants, and quarterly reports
containing unaudited summaries of financial information for the
first three quarters of each fiscal year.
PART II
INFORMATION REQUIRED IN THE REGISTRATION
STATEMENT
Incorporation of Documents by Reference.
The following documents filed with the Securities and
Exchange Commission by the Company are incorporated herein by
reference as of their respective dates as set forth therein:
(a) The Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.
(b) The Corporation's Form 8-K dated January 8, 1996.
(c) The Corporation's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1995, June 30, 1995, and September 30,
1995.
All documents subsequently filed by the Corporation
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934 after the date hereof and prior
to the filing of an post-effective amendment which indicates
that all securities offered herein have been sold or which
registers all such securities remaining unsold shall be deemed
to be incorporated herein by reference and to be a part hereof
from the date of filing of such documents.
Report to Shareholders
The Corporation furnishes its stockholders with annual
reports containing consolidated financial statements that have
been examined and reported upon, with an opinion expressed by
independent certified public accountants, and quarterly reports
containing unaudited summaries of financial information for the
first three quarters of each fiscal year.
Description of Common Stock
The Corporation is authorized to issue 20,000,000 shares
of Common Stock, no par value. Each share of Common Stock is
entitled to share pro rata in dividends and distributions, if
any, with respect to the Common Stock, when and if declared by
the Board of Directors, from funds legally available therefor.
Under its loan agreement with the Bank of New England, the
Corporation cannot pay any dividends without the prior consent
of said Bank. No holder of any shares of Common Stock has any
preemptive or similar right to subscribe for any securities of
the Corporation. Upon liquidation, dissolution or winding up
of the Corporation and after payment of creditors, the assets
will be divided pro rata on a share-for-share basis among the
holders of the shares of Common Stock. The holders of shares
of Common Stock are not entitled to cumulative voting in the
election of Directors; they are entitled to one vote per share
with respect to all matters that are required by law to be
submitted to stockholders, including the election of Directors.
Accordingly, stockholders representing more than 50% of the
outstanding shares will have the ability to elect all of the
Directors.
Interests of Named Experts and Counsel.
Legal Opinion
The validity of the Common Stock offered hereby has been
passed upon by Robert C. Hackney & Associates, Chartered, a
Florida professional services corporation, 4521 P. G. A. Blvd.,
Suite 264, Palm Beach Gardens, FL 33418, counsel to the
Company. Robert C. Hackney, President of the Company, is a
partner in such firm.
Experts
The audited financial statements and schedules
incorporated by reference from the Corporation's Form 10-K for
the fiscal year ended December 31, 1994 and incorporated herein
by reference were examined and reported upon by independent
certified public accountants. Such financial statements are
incorporated herein in reliance upon the report of that firm
and upon their authority as experts in accounting and auditing.
Indemnification of Directors and Officers.
The Company's bylaws contain the broadest form of
indemnification for its officers and directors and former
officers and directors permitted under Florida law, including
provisions to indemnify the Company's directors, officers,
employees, and other agents against judgments, fines, amounts
paid in settlement, and other expenses in connection with
threatened, pending or completed suits, or proceedings against
such persons by reason of serving or having served as
directors, officers, employees or agents of the Company, except
in relation to matters with respect to which they are
determined to have not acted in good faith, or in a manner
which they did not believe was in the best interest of the
Company.
In addition, Florida law presently limits the personal
liability of a corporate director for monetary damages, except
where the director (i) breaches his or her fiduciary duties and
(ii) such breach constitutes or includes certain violations of
criminal law, a transaction from which the directors derived an
improper personal benefit, certain unlawful distributions or
certain other reckless, wanton or willful acts or misconduct.
Item 9. Undertakings.
The undersigned Registrant hereby undertakes to:
1. To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration
statement:
(i) To include any material information with respect
to the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
2. That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
3. To remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
4. That, for purposes of determining any liability under
the Securities Act of 1933, each filing of the registrant's
annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors and officers
or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion
of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
SIGNATURES
The Registrant. Pursuant to the requirements of the
Securities Act of 1933, the registrant certifies that it has
reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this
registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Lantana,
State of Florida, on January 26, 1996.
Chester County Security Fund, Inc.
By: Robert C. Hackney
Robert C. Hackney, Chief Executive Officer
Pursuant to the requirements of the Securities Act of
1933, this registration statement has been signed by the
following persons in the capacities and on the date indicated.
By: Robert C. Hackney
Robert C. Hackney, CEO, Sole Director
January 26, 1996
By: Raul E. Balsera
Raul E. Balsera, Chief Financial Officer
January 26, 1996
The Plan. Pursuant to the requirements of the Securities
Act of 1933, the Plan certifies that it has reasonable grounds
to believe that it meets all of the requirements for filing on
Form S-8 and has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Lantana, State of Florida, on
January 26, 1996.
Chester County Security Fund, Inc. 1996 Stock Plan
By: Robert C. Hackney
Robert C. Hackney, Sole Director
January 26, 1996
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<PERIOD-END> OCT-31-1995
<CASH> 130,533
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<RECEIVABLES> 45,137
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0
0
<OTHER-SE> 3,374,292
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