Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by Registrant |X|
Filed by a Party other than the Registrant | |
Check the appropriate box:
| | Preliminary Proxy Statement
|X| Definitive Proxy Statement
| | Definitive Additional Materials
| | Soliciting Material Pursuant to Paragraph 240.14a-11(c) or 240.14a-12
Sterling Financial Corporation
(Name of Registrant as Specified In Its Charter)
John E. Stefan
(Name of Person Filing Proxy Statement)
<PAGE>
March 28, 1997
Dear Shareholder:
The 1997 Annual Meeting of Shareholders of Sterling Financial Corporation
(the "Corporation") will be held at 9:00 a.m. on Tuesday, April 29, 1997, at the
Willow Valley Family Resort and Conference Center, 2416 Willow Street Pike,
Lancaster, Pennsylvania. You are cordially invited to attend the Annual Meeting
as well as a continental breakfast which will be held in the Palm Court at the
Resort and Conference Center at 8:00 a.m.
In addition to the election of four Class of 1999 Directors, shareholders
are being asked to approve the proposal to amend Article 5 of the Corporation's
amended Articles of Incorporation to increase the number of authorized shares of
the Corporation's Common Stock, par value $5.00 per share, from 10,000,000
shares to 35,000,000 shares. Shareholders are also being asked to consider the
proposal to ratify the selection of Trout, Ebersole & Groff as the Corporation's
certified public accountants. The formal Notice of Annual Meeting, Proxy
Statement and Proxy card are enclosed herewith. The 1995 Annual Report of
Sterling Financial Corporation is also enclosed. I hope you will take the
opportunity to review the material contained in the Annual Report, which
reflects a successful year in 1995.
It is important that your shares be represented at the Annual Meeting
whether or not you are personally able to attend. I urge you to sign and date
the enclosed Proxy and return it in the enclosed envelope as soon as possible.
If you do attend the meeting and wish to vote in person, you must give written
notice to the Secretary of the Corporation so that your Proxy will be superseded
by any ballot that you submit at the meeting.
Please indicate on the enclosed business reply card whether or not you
plan to attend the breakfast and return it to Sterling Financial Corporation.
I look forward to seeing you at the breakfast and Annual Meeting.
Sincerely,
John E. Stefan
Chairman of the Board,
President and Chief Executive Officer
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 29, 1997
TO THE SHAREHOLDERS OF STERLING FINANCIAL CORPORATION:
NOTICE IS HEREBY GIVEN that, pursuant to the call of its directors, the regular
Annual Meeting of the shareholders of Sterling Financial Corporation (the
"Corporation") will be held at the Willow Valley Family Resort and Conference
Center, 2416 Willow Street Pike, Lancaster, Pennsylvania, on Tuesday, April 29,
1997 at 9:00 a.m., prevailing time, for the purpose of considering and voting
upon the following matters:
1. ELECTION OF DIRECTORS. To elect three Class of 2000 directors to
serve for a three-year term until their successors are elected and
qualified.
2. STOCK INCENTIVE PLAN. To approve and ratify the adoption of the
Sterling Financial Corporation 1996 Stock Incentive Plan.
3. SELECTION OF AUDITORS. To ratify the selection of Trout, Ebersole &
Groff as the corporation's independent certified public accountants
for the year ending December 31, 1997.
4. OTHER BUSINESS. To consider and vote upon such other business as may
properly be brought before the meeting and any adjournment or post-
ponement thereof.
Only those shareholders of record at the close of business on March 14,
1997, shall be entitled to notice of and to vote at the meeting.
It is requested that you promptly sign the enclosed Proxy and return it in
the enclosed postpaid envelope. You are cordially invited to attend the
meeting. Your Proxy is revocable and may be withdrawn at any time by giving
written notice to the Secretary of the Corporation before it is voted
at the meeting or by executing a later dated Proxy and giving written
notice to the Secretary of the Corporation.
A copy of the 1996 Annual Report of Sterling Financial Corporation is
enclosed.
BY ORDER OF THE BOARD OF DIRECTORS
John E. Stefan
Chairman of the Board,
President and Chief Executive Officer
Lancaster, Pennsylvania
March 28, 1997
PROXY STATEMENT
Dated and to be mailed March 28, 1997
STERLING FINANCIAL CORPORATION
101 NORTH POINTE BOULEVARD
LANCASTER, PENNSYLVANIA 17601-4133
(717) 581-6030
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 29, 1997
TABLE OF CONTENTS
PAGE
GENERAL..................................................................1
Introduction...........................................................1
Date, Time and Place of Meeting........................................1
Shareholders Entitled to Vote..........................................1
Purpose of Meeting.....................................................1
Solicitation of Proxies................................................1
Revocability and Voting of Proxies.....................................2
Quorum and Voting of Shares............................................2
Principal Holders......................................................4
Beneficial Ownership of Executive Officers, Directors and Nominees.....5
Shareholder Proposals..................................................6
Recommendations of the Board of Directors..............................6
INFORMATION CONCERNING ELECTION OF DIRECTORS.............................7
General Information....................................................7
Information about Nominees and Continuing Directors....................8
Meetings and Committees of the Board of Directors.....................10
Officers and Executive Officers.......................................11
Executive Compensation................................................13
Compensation of Directors.............................................20
Transactions with Directors and Executive Officers....................20
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.................21
PROPOSAL TO APPROVE AND RATIFY THE ADOPTION OF THE STERLING FINANCIAL
CORPORATION 1996 STOCK INCENTIVE PLAN...................................21
RATIFICATION OF SELECTION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS...27
ADDITIONAL INFORMATION..................................................27
OTHER MATTERS...........................................................27
EXHIBITS................................................................28
Exhibit A - 1996 Stock Incentive Plan..................................28
GENERAL
Introduction
On June 30, 1987, The First National Bank of Lancaster County became a
wholly-owned subsidiary of Sterling Financial Corporation (sometimes referred to
herein as the "Corporation"), a Pennsylvania business corporation based in
Lancaster, Pennsylvania and organized for the purpose of becoming a bank holding
company. As of that date, the shareholders of The First National Bank of
Lancaster County became shareholders of Sterling Financial Corporation. At the
same time, The First National Bank of Lancaster County changed its name to Bank
of Lancaster County, N.A. (hereinafter referred to as "Bank of Lancaster County"
or the "Bank"). The meeting to which this Proxy Statement relates will be the
tenth Annual Meeting of the shareholders of Sterling Financial Corporation.
The principal executive office of the Corporation is located at 101 North
Pointe Boulevard, Lancaster, Pennsylvania 17601-4133. The telephone number for
the Corporation is (717) 581-6030. All inquiries should be directed to Ronald
L. Bowman, Vice President/Secretary of the Corporation.
Date, Time and Place of Meeting
The regular Annual Meeting of the shareholders of Sterling Financial
Corporation will be held on Tuesday, April 29, 1997 at 9:00 a.m. at the Willow
Valley Family Resort and Conference Center, 2416 Willow Street Pike, Lancaster,
Pennsylvania.
Shareholders Entitled to Vote
Shareholders of record at the close of business on March 14, 1997 shall be
entitled to vote at the meeting.
Purpose of Meeting
The shareholders will be asked to consider and vote upon the following
matters at the meeting: (1) to elect three Class of 2000 directors to serve for
a three-year term, (2) to approve and ratify the adoption of the Sterling
Financial Corporation 1996 Stock Incentive plan, (3) to vote upon a proposal to
ratify the selection of Trout, Ebersole & Groff as the Corporation's independent
certified public accountants for the year ending December 31, 1997, and (4) to
consider and vote upon such other business as may be properly brought before the
meeting and any adjournment or postponement thereof.
Solicitation of Proxies
This Proxy Statement and the enclosed form of proxy (the "Proxy")are being
furnished to shareholders of the Corporation on or about March 28, 1997 in
connection with the solicitation of proxies, in the accompanying form, by the
Board of Directors of the Corporation for use at the Annual Meeting of
shareholders to be held at 9:00 a.m. on Tuesday, April 29, 1997, and any
adjournments or postponements thereof.
The expense of soliciting proxies will be borne by the Corporation. In
addition to the use of the mails, directors, officers and employees of the
Corporation and the Bank of Lancaster County may, without additional
compensation, solicit proxies personally, by telephone, by telegraph, or by
telecopier.
Revocability and Voting of Proxies
The execution and return of the enclosed Proxy will not affect a
shareholder's right to attend the meeting and to vote in person. Any Proxy
given pursuant to this solicitation may be revoked by delivering written
notice of revocation to Ronald L. Bowman, Secretary of the
Corporation, or by executing a later dated Proxy and giving written
notice thereof to the Secretary of the Corporation at any time
before the Proxy is voted at the meeting. Shares represented by proxies
on the accompanying Proxy, if properly signed and returned, will be
voted in accordance with the specifications made thereon by the
shareholders. Any Proxy not specifying to the contrary will be voted FOR the
election of the three nominees identified in this Proxy Statement, FOR the
approval and ratification of the adoption of the Sterling Financial Corporation
1996 Stock Incentive Plan and FOR the proposal to ratify the selection of
independent certified public accountants for the year ending December 31, 1997.
Although the Board of Directors knows of no other business to be presented, in
the event that any other matters are properly brought before the meeting, any
Proxy given pursuant to this solicitation will be voted in accordance with the
recommendations of the management of Sterling Financial Corporation.
Shares held for the account of shareholders who participate in the
Dividend Reinvestment and Stock Purchase Plan will be voted in
accordance with the instructions of each shareholder as set forth in his
Proxy. If a shareholder who participates in the Dividend Reinvestment and
Stock Purchase Plan does not return a Proxy, the shares held for
his account by the Plan Agent will not be voted.
Shares held for the account of employees who participate in the Employees
Stock Plan will be voted by the Plan Trustee in accordance with the instructions
of each participant as set forth in the separate Proxy sent to him/her with
respect to his/her Employees Stock Plan shares. Shares with respect to which a
separate Employees Stock Plan Proxy is not returned will be voted by the Plan
Trustee in the same proportion as shares with respect to which voting
instructions have been received.
Quorum and Voting of Shares
At the close of business on March 14, 1997, which is the record date for
determination of shareholders entitled to receive notice of and to vote at the
meeting and any adjournment or postponement thereof, the Corporation had
outstanding 6,224,830 shares of common stock, par value $5.00 per share (the
"Common Stock"). There is no other class of stock authorized or outstanding.
As of the record date, 71,276 shares of Common Stock were held by the Trust
Department of the Bank of Lancaster County as sole fiduciary, which shares
represent in the aggregate approximately 1.15 percent of the shares outstanding
and will be voted FOR the election of the three nominees identified in this
Proxy Statement, FOR the approval and ratification of the adoption of
the Sterling Financial Corporation 1996 Stock Incentive Plan and
FOR the proposal to ratify the selection of independent certified public
accountants.
A majority of the outstanding Common Stock present in person or by Proxy
constitutes a quorum for the conduct of business. Each share is entitled to one
vote on all matters submitted to a vote of the shareholders. A majority of the
votes cast at a meeting at which a quorum is present is required in order to
approve any matter submitted to a vote of the shareholders, except in cases
where the vote of a greater number of shares is required by law or
under the Articles of Incorporation or Bylaws of the Corporation.
In the case of the election of directors, the candidates receiving
the greatest number of votes shall be elected
to the Board of Directors. A majority of the votes cast at a meeting at which a
quorum is present is required in order to ratify the selection of auditors.
Under Pennsylvania law and the Bylaws of the Corporation, the presence
of a quorum is required for each matter to be acted upon at the Annual
Meeting. Votes withheld and abstentions will be counted in determining the
presence of a quorum for the particular matter. Broker non-votes
will not be counted in determining the presence of a quorum
for the particular matter as to which the broker withheld authority.
Assuming the presence of a quorum, the three nominees for director
receiving the highest number of votes cast by shareholders entitled to vote for
the election of directors shall be elected. Votes withheld from a nominee and
broker non-votes will not be cast for such nominee.
Assuming the presence of a quorum, the affirmative vote of a majority of
all votes cast by shareholders is required for the approval and ratification of
the adoption of the Sterling Financial Corporation 1996 Stock Incentive Plan and
the ratification of the selection of independent auditors. Abstentions and
broker non-votes are not deemed to constitute "votes cast" and, therefore, do
not count either for or against such approval and ratification. Abstentions and
broker non-votes, however, have the practical effect of reducing the number of
affirmative votes required to achieve a majority for each such matter by
reducing the total number of shares voted from which the required
majority is calculated.
Principal Holders
To the knowledge of the Corporation, no person owned of record or
beneficially on February 28, 1997 more than five percent of the outstanding
Common Stock, except as follows:
Name and Address Amount and
of Beneficial Nature of Beneficial Percent
Title of Class Owner Ownership(1) of Class
Common Stock, Howard E. Groff
$5.00 par value 111 E. State Street
per share Quarryville, PA 17566 717,853(2) 11.53%
Common Stock, Bank of Lancaster
$5.00 par value County Employees Stock
per share Plan c/o Trust
Department
101 North Pointe Boulevard
Lancaster, PA 17601-4133 524,698(3) 8.43%
________________________
(1) Beneficial ownership of shares of the common stock of the
Corporation is determined in accordance with Securities and Exchange
Commission Rule 13d-3, which provides that a person shall be
deemed to own any stock which he, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise has or
shares: (i) voting power, which includes the power to vote or to direct
the voting of the stock, or (ii) investment power, which includes the
power to dispose or direct the disposition of the stock, or has the
right to acquire beneficial ownership within 60 days after March 14,
1997.
(2) Mr. Groff holds sole voting and investment power on 716,328 shares.
(3) Shares held for the account of Plan participants are voted by the Plan
Trustee in accordance with the instructions given by the individual
participants.
Beneficial Ownership of Executive Officers, Directors and Nominees
The following table sets forth as of February 28, 1997, the amount and
percentage of the Common Stock beneficially owned by each director, each
nominee, each named executive officer and all executive officers, directors
and nominees of the Corporation as a group.
Name of
Individual Amount and
or Identity Nature of Beneficial Percent of
of Group Ownership(1)(2) Class (3)
Richard H. Albright, Jr. 32,772(4) ---
Robert H. Caldwell 5,133(5) ---
Howard E. Groff, Jr. 23,436(6) ---
Joan R. Henderson 719(7) ---
J. Robert Hess 83,290(8) 1.34%
Calvin G. High 16,098(9) ---
J. Roger Moyer, Jr. 32,140(10) ---
E. Glenn Nauman 34,467(11) ---
Jere L. Obetz 15,676(12) ---
John E. Stefan 130,005(13) 2.09%
Glenn R. Walz 8,073(14) ---
All Executive Officers,
Directors and Nominees
as a Group (18 persons) 432,068 6.94%
________________________
(1) Beneficial ownership of shares of the common stock of the
Corporation is determined in accordance with Securities and
Exchange Commission Rule 13d-3, which provides that a person
shall be deemed to own any stock which he, directly or indirectly,
through any contract, arrangement, understanding, relationship or
otherwise has or shares: (i) voting power, which includes the power to
vote or to direct the voting of the stock, or (ii) investment power,
which includes the power to dispose or direct the disposition of the
stock, or has the right to acquire beneficial ownership within 60 days
after March 14, 1997. Unless otherwise indicated in a footnote
appearing below, all shares reported in the table above are owned
directly by the reporting person.
(2) Rounded to the nearest whole share.
(3) Less than one percent (1%) unless otherwise indicated.
(4) Includes 2,763 shares owned jointly with spouse, 10,466 owned directly
by spouse and 4,160 shares owned by spouse as custodian for children.
(5) Includes 684 shares owned directly by spouse.
(6) Includes 4,101 shares owned directly by spouse and 9,985 shares owned
as custodian for children.
(7) Includes 10 shares owned jointly with spouse and 195 shares owned directly
by spouse.
(8) Includes 29,408 shares owned jointly with spouse, 4,421 shares owned
directly by spouse, 10,160 shares owned as custodian for children and
14,519 shares owned in trust for the benefit of grandchildren.
(9) Includes 12,370 shares owned jointly with spouse.
(10) Includes 24,634 shares held by Trustee under the Employees Stock Plan,
1,249 shares owned jointly with spouse, 14 shares owned directly by
spouse, 960 shares owned as custodian for child, 166 shares owned
directly by child and 4,575 shares owned directly by mother for whom
Mr. Moyer holds power of attorney and with respect to which Mr. Moyer
shares voting and investment power. Mr. Moyer disclaims beneficial
ownership of shares owned directly by his child.
(11) Includes 32,772 shares owned directly by spouse and 853 shares owned
directly by mother.
(12) Includes 13,409 shares held by Trustee under the Employees Stock Plan
and 2,267 shares owned directly by spouse. Mr. Obetz disclaims beneficial
ownership of shares owned directly by his spouse.
(13) Includes 44,951 shares held by Trustee under the Employees Stock Plan,
2,487 shares owned jointly with spouse, 45,864 shares owned directly
by spouse, and 10,632 shares owned directly by child. Mr. Stefan
disclaims beneficial ownership of shares owned directly by his spouse.
(14) Includes 6,097 shares owned directly by spouse and 704 shares owned as
custodian for children.
Shareholder Proposals
Shareholder proposals intended to be presented at the 1998 Annual Meeting
must be received at the administrative headquarters of Sterling Financial
Corporation at 101 North Pointe Boulevard, Lancaster, Pennsylvania not later
than Monday, December 1, 1997 in order to be included in the proxy
statement and proxy form to be prepared by the Corporation in
connection with the 1998 Annual Meeting.
Recommendations of the Board of Directors
The Board of Directors recommends that the shareholders vote FOR the
election of the three nominees identified in this Proxy Statement, FOR the
proposal to approve and ratify the adoption of the Sterling Financial
Corporation 1996 Stock Incentive Plan and FOR the proposal to ratify the
selection of independent certified public accountants for the
year ending December 31, 1997.
INFORMATION CONCERNING ELECTION OF DIRECTORS
General Information
The Bylaws of the Corporation provide that the Board of Directors shall
consist of not less than one nor more than 25 persons and that the directors
shall be classified with respect to the time they shall severally hold office by
dividing them into three classes, each consisting as nearly as possible of
one-third of the number of the whole Board of Directors. The Bylaws further
provide that the directors of each class shall be elected for a term of
three years, so that the term of office of one class of directors
shall expire at the Annual Meeting each year. Finally, the
Bylaws provide that the number of directors in
each class of directors shall be determined by the Board of Directors.
A majority of the Board of Directors may increase the number of directors
between meetings of the shareholders. Any vacancy occurring in the Board of
Directors, whether due to an increase in the number of directors, resignation,
retirement, death or any other reason, may be filled by appointment by the
remaining directors. Any director who is appointed to fill a vacancy shall hold
office until the next Annual Meeting of the shareholders and until his/her
successor is elected and shall have qualified. There is a mandatory retirement
provision in the Bylaws that states that the office of a director shall be
considered vacant at the Annual Meeting of shareholders next following his/her
attaining the age of 70 years.
The Board of Directors has presently fixed the number of directors at ten.
There are three directors whose terms of office will expire at the 1997 Annual
Meeting. There are seven continuing directors whose terms of office will expire
at the 1998 or 1999 Annual Meeting, respectively. The Board of Directors
proposes to nominate the following three persons for election to the Board of
Directors for the term specified:
Nominees for Class of 2000 Directors
For a Term of Three Years
Robert H. Caldwell
J. Robert Hess
J. Roger Moyer,Jr.
Each of the above nominees is presently a director of the Corporation and
also a director of the Bank of Lancaster County.
In the event that any of the foregoing nominees are unable to accept
nomination or election, any proxy given pursuant to this solicitation will be
voted in favor of such other persons as the management of the Corporation may
recommend. However, the Board of Directors has no reason to believe that any of
its nominees will be unable to accept nomination or to serve as a director if
elected.
Section 2.3 of the Bylaws of the Corporation requires that nominations,
other than those made by or on behalf of the existing management of the
Corporation, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a shareholder's notice shall be delivered to
or received at the principal executive office of the Corporation not less than
90 days prior to the anniversary date of the immediately preceding meeting of
shareholders of the Corporation called for the election of directors. The
chairman of the meeting is required to determine whether nominations have been
made in accordance with the requirements of the Bylaws and, if he determines
that a nomination was not made in accordance with the Bylaws, he
shall so declare at the Annual Meeting and the defective
nomination shall be disregarded.
Information about Nominees and Continuing Directors
Information concerning the three persons to be nominated for election to
the Board of Directors of Sterling Financial Corporation at the 1997 Annual
Meeting and concerning the seven continuing directors is set forth in the table
that appears below:
Principal Occupation
for the Past 5 years
and Position held with
Director the Corporation and
Name and Age Since(1) Bank of Lancaster County
Class of 2000 - Nominees - For a Term of Three Years
Robert H. Caldwell 1991 Retired Senior Executive
(66) Vice President and
Director, Armstrong World
Industries, Inc.
(manufacturer, building
materials, home furnishings
and industrial specialties)
J. Robert Hess 1971 President, B&E Realty;
(66) President, Hessco
Construction Co.; Partner,
Sycamore Industrial Park;
Broker and Partner,
Kingsway Realty
J. Roger Moyer, Jr. 1994 Executive Vice President
(48) and Assistant Secretary of
Sterling Financial
Corporation since 1994;
Vice President from 1987 to
1994; and Executive Vice
President and Assistant
Secretary of Bank of
Lancaster County since
1994; Senior Vice
President/Chief
Administrative Officer from
1985 to 1994
Class of 1998 - Continuing Directors
Richard H. Albright, Jr. 1985 Dentist, Specialist,
(54) Practice Limited to
Orthodontics
Howard E. Groff, Jr. 1988 Vice President, Howard E.
(50) Groff Co. (fuel oil sales
and service)
John E. Stefan 1979 Chairman of the Board,
(57) President and Chief
Executive Officer of
Sterling Financial
Corporation since 1994;
President and Chief
Executive Officer from 1987
to 1994; and Chairman of
the Board, President and
Chief Executive Officer of
Bank of Lancaster County
since 1994; President and
Chief Executive Officer
from 1979 to 1994
Glenn R. Walz 1988 President, Walz, Deihm,
(50) Geisenberger, Bucklen &
Tennis, P.C. (Certified
Public Accountants)
Class of 1999 - Continuing Directors
Joan R. Henderson 1995 President, J.R. Henderson &
(54) Associates, Inc. (Corporate
Event Planning and Fund
Raising)
Calvin G. High 1976 Senior Vice President, High
(64) Industries, Inc. (Real
Estate and Construction
Group); Partner, High
Properties
E. Glenn Nauman 1976 Retired Chairman of the Board
(64) and retired Director,
Nauman Construction
(building contractor)
________________________
(1) Includes service as a Director of Bank of Lancaster County, N.A.
Meetings and Committees of the Board of Directors
The Board of Directors of the Corporation has a standing Audit Committee
but does not have a standing Nominating Committee or Compensation Committee. The
Bank of Lancaster County has a standing Audit Committee and Compensation
Committee. The Bank of Lancaster County does not have a standing Nominating
Committee. The Compensation Committee of the Bank of Lancaster County has been
acting on behalf of the Corporation and will continue to do so until the
Corporation appoints a committee.
Members of the Audit Committee of the Corporation and the Bank of
Lancaster County during 1996 were Richard H. Albright, Jr., Chairman,
and Messrs. High, Nauman and Walz. The principal duties of the
Audit Committee include reviewing significant audit and
accounting principles, policies and practices, reviewing
performance of internal auditing procedures, reviewing reports of examination
received from regulatory authorities, and recommending annually to the Board of
Directors the engagement of an independent certified public accountant. The
Audit Committee met four times during 1996.
Members of the Compensation Committee of the Bank of Lancaster County
during 1996 were Robert H. Caldwell, Chairman and Messrs. Hess, High, Nauman and
Walz. The principal duties of the Compensation Committee include the
establishment of policies dealing with various compensation plans for the Bank
of Lancaster County and the Corporation. In addition,
the Committee makes recommendations to the Board with
respect to the compensation paid to senior
executives. The Committee also oversees personnel matters. The Compensation
Committee met five times during 1996.
The Board of Directors met 12 times during 1996. All directors attended
75 percent or more of the aggregate number of meetings of the Board
of Directors and of the various committees of the Board of Directors
on which they serve.
Officers and Executive Officers
The following persons are the officers and executive officers of the
Corporation:
Office Held with the Corporation and
Bank of Lancaster County and
Name Age Term in Office
John E. Stefan 57 Chairman of the Board, President and
Chief Executive Officer of Sterling
Financial Corporation since 1994;
President and Chief Executive Officer
of Sterling Financial Corporation from
1987 to 1994 and Chairman of the
Board, President and Chief Executive
Officer of the Bank of Lancaster
County since 1994; President and Chief
Executive Officer from 1979 to 1994.
J. Roger Moyer, Jr. 48 Executive Vice President and Assistant
Secretary of Sterling Financial
Corporation since 1994; Vice President
of Sterling Financial Corporation from
1987 to 1994 and Executive Vice
President and Assistant Secretary of
the Bank of Lancaster County since
1994; Senior Vice President/Chief
Administrative Officer from 1985 to
1994.
Jere L. Obetz 48 Senior Vice President/Treasurer and
Chief Financial Officer of Sterling
Financial Corporation since 1995;
Vice President/Treasurer and Chief
Financial Officer of Sterling
Financial Corporation from 1994 to
1995; Vice President of Sterling
Financial Corporation from 1987 to
1994 and Senior Vice President/Chief
Financial Officer of the Bank of
Lancaster County since 1992.
Ronald L. Bowman 53 Vice President/Secretary of Sterling
Financial Corporation since 1994;
Secretary/Treasurer of Sterling
Financial Corporation from 1987 to
1994 and Vice President/Corporate
Financial Secretary of the Bank of
Lancaster County since 1995; Vice
President/Comptroller from 1971 to
1995.
John C. Boyer, Jr. 41 Vice President of Sterling Financial
Corporation since 1995 and Vice
President/Business Development of the
Bank of Lancaster County since August
1992; previously Vice President-
Private Banker for CoreStates/Hamilton
Bank.
Nancy H. Draude 39 Vice President of Sterling Financial
Corporation since 1987 and Vice
President/Marketing of the Bank of
Lancaster County since 1984.
Beverly Wise Hill 37 Vice President of Sterling Financial
Corporation since 1993 and Senior Vice
President/Human Resources of the Bank
of Lancaster County since 1995; Vice
President/Human Resources from 1992 to
1995; previously Senior Vice President
of Fulton Financial Corp. from January
1992 to December 1992 and Vice
President/Director of Human Resources
of Fulton Bank from January 1989 to
January 1992
Donald L. Neff 45 Vice President of Sterling Financial
Corporation since 1988 and Senior
Vice President/Operations of the Bank
of Lancaster County since 1992.
Sharon K. Owens 36 Vice President of Sterling Financial
Corporation since 1993; Director of
Audit of Sterling Financial
Corporation from 1989 to 1993 and
Vice President/Audit of the Bank of
Lancaster County since 1992.
William K. Poole 36 Vice President of Sterling Financial
Corporation since 1994 and Senior Vice
President/Chief Lending Officer of the
Bank of Lancaster County since 1995;
Vice President/Senior Commercial Loan
Officer from 1991 to 1995.
________________________
Executive Compensation
The officers of the Corporation do not receive any additional compensation
for their services as such, beyond the compensation paid to them as officers of
the Bank of Lancaster County. Shown below is information concerning annual and
long-term compensation for services in all capacities to the Corporation and to
the Bank of Lancaster County for the fiscal years ended December 31, 1996, 1995
and 1994 to those persons who were, at December 31, 1996, (i) the Chief
Executive Officer and (ii) the other most highly compensated executive
officers of the Corporation to the extent that such person's
annual salary and bonus exceeded $100,000:
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards Payouts
------------------- ------ -------
Other Securities
Name and Annual Restricted Underlying All Other
Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation Awards SAR's Payouts sation(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John E. Stefan 1996 $254,114 $64,961 (1) none 6,000 none $3,779
Chairman of the 1995 242,008 60,585 (1) none none none 3,928
Board, President 1994 223,776 38,738 (1) none none none 3,894
and Chief Executive
Officer of Sterling
Financial
Corporation and
Bank of Lancaster
County, N.A.
J. Roger Moyer, Jr. 1996 $134,630 $26,294 (1) none 3,000 none $3,779
Executive Vice 1995 123,823 25,033 (1) none none none 3,776
President of 1994 112,221 20,378 (1) none none none 3,635
Sterling Financial
Corporation and
Bank of Lancaster
County, N.A.
Jere L. Obetz 1996 $94,432 $19,079 (1) none 2,500 none $2,841
Senior Vice 1995 87,100 18,358 (1) none none none 2,728
President/Chief 1994 80,634 17,068 (1) none none none 2,713
Financial Officer of
Sterling Financial
Corporation and Bank
Bank of Lancaster
County, N.A.
________________________
</TABLE>
(1) Perquisites and other personal benefits which do not exceed the lesser of
$50,000 or 10% of total annual salary and bonus are not disclosed.
(2) Amounts shown in each year represent contributions for the benefit of
Mr. Stefan, Mr. Moyer and Mr. Obetz pursuant to the Employees Stock Plan
performance incentive feature of the Plan as described on pages 17 and
18 of this Proxy Statement.
Option Exercises and Fiscal Year-End Values
Shown below is information with respect to options granted in the last
fiscal year to purchase the Corporation's Common Stock under the 1996 Stock
Incentive Plan to the named officers of the Corporation and the Bank of
Lancaster County and held by them at December 31, 1996. Options under the
1996 Stock Incentive Plan were granted pending shareholder
approval at the 1997 Annual Meeting.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants For Option Term
% of Total
Options/SARs
Options/ Granted to Exercise or
SARs Employees in Base Price Expiration
Name Granted(#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
John E. Stefan 6,000(1) 18.3% $24.30(2) 12/16/06 $91,692 $232,368
J. Roger Moyer, Jr. 3,000(1) 9.1% 24.30(2) 12/16/06 45,846 116,184
Jere L. Obetz 2,500(1) 7.6% 24.30(2) 12/16/06 38,205 96,820
</TABLE>
(1) These options granted December 16, 1996, pending shareholder approval,
and under the terms of the 1996 Stock Incentive Plan, are exercisable
one third per year for three years commencing on December 16, 1997.
(2) The base price of the grant is adjustable in the event of any change in
the number of issued and outstanding shares of stock which results
from a stock split, reverse stock split, payment of a stock dividend
or any other change in the capital structure of the Corporation.
Aggregated Option Exercises and Fiscal Year-End Values
Shown below is information with respect to all exercises of stock options
awarded to the named officers during the last fiscal year as well as the fiscal
year-end option values for each named executive officer under the 1996 Stock
Incentive Plan and held by them at December 31, 1996. Options under the 1996
Stock Incentive Plan were granted pending shareholder approval at the 1997
Annual Meeting.
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-money
Options/SARs at Options/SARs at
Fiscal Year-End(#) Fiscal Year-end($)(1)
Shares Acquired Value
Name On Exercise(#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
John E. Stefan --- --- ---/6,000(2) ---/$7,080
J. Roger Moyer, Jr. --- --- ---/3,000(2) ---/$3,540
Jere L. Obetz --- --- ---/2,500(2) ---/$2,950
</TABLE>
(1) Market value of underlying securities based on the average of the average
of the closing bid and ask quotations for five (5) trading days immediately
preceding December 31, 1996, minus the exercise price.
(2) Shares granted under the 1996 Stock Incentive Plan, pending shareholder
approval.
Board Compensation Committee Report on Executive Compensation
Role of the Compensation Committee and Compensation Philosophy
The objectives of the Compensation Committee are to establish the
Corporation's compensation philosophy and to monitor compensation programs and
related practices for conformity with that philosophy. The Compensation
Committee believes that the Corporation should maintain a competitive
compensation structure with a strong emphasis toward paying for an employee's
contribution and performance. Therefore, the financial interests of the
shareholders are served by closely aligning, particularly for executive
management, year end financial results with an employee's reward for
performance. Accordingly, the Committee and the Corporation adhere to the
concept of pay-for-performance thus increasing the opportunity
to maximize shareholder value.
The compensation of the Corporation's and the Bank's top executives is
reviewed and approved annually by the Board of Directors. The top executives
whose compensation is determined by the Committee include the President and
Chief Executive Officer, the Executive Vice President, all senior
vice presidents and all senior management employees.
As a guideline for review in determining competitive base salaries, the
Committee uses information from salary survey sources from Pennsylvania banks
with assets from $500 million to $1 billion, as
well as peer banks located in the surrounding geographic region. Many local
competitors, which are represented in the above peer groups, share similar
performance results to the Bank of Lancaster County. These peer group banks
have been utilized because of common industry issues and competition
for the same executive talent. The peer group used as a guideline for
review in determining executive compensation is not the same peer group
that appears in the Shareholder Return Performance Graph.
The Compensation Committee is comprised of five non-employee directors who
are listed below. The Committee met five times during 1996.
CEO Compensation
The Board of Directors has determined that the Chief Executive Officer's
1996 compensation of $319,075, comprised of $254,114 in base annual salary and
$64,961 in bonus is appropriate in light of the following 1996 Corporation
performance accomplishments: (1) a 9.08 percent increase in net income; (2) a
15.01 percent return on equity; and (3) a 7.44 percent increase in assets.
While there is no direct correlation between the increase in Chief
Executive Officer base salary and the above criteria, the Compensation
Committee did review 1995 Corporate performance, as well as
the peer bank comparisons mentioned previously, in order to recommend
a 5 percent increase in base salary over the previous year.
The Chief Executive Officer's annual performance incentive (bonus) is tied
directly to the organizations's performance results by rewarding Mr. Stefan for
growth in the Corporation's net income. Mr. Stefan's total bonus of $64,961
represents an increase of 7.2 percent over the total bonus paid in 1995.
In addition, for the first time, Mr. Stefan was awarded an incentive stock
option, pending shareholder approval. This option to purchase 6,000 shares of
Corporation Stock is listed in the table on page 13. In addition, the Incentive
Stock Option program itself is described on page 21 and 22.
Executive Officer Compensation
Base salary ranges for executive positions are determined by evaluating
the responsibilities of the positions, required skills and experiences and the
average compensation paid for similar positions within peer banks of similar
asset size and within the Corporation's geographic market region. Annual base
salary increases were determined by the Committee based on its subjective
analysis of the individual's contribution to the Corporation's strategic goals
and objectives, and by taking into account any additional or new
responsibilities assumed by the individual in connection with promotions
or organizational changes. In determining whether
strategic goals and objectives have been achieved, the Board of Directors
considers among numerous factors the following: the Corporation's performance
as measured by earnings, revenues, return on assets, return on equity,
market share, total assets and non-performing loans.
Although the performance and increases in base salary were measured in light of
these factors, there is no direct correlation between any specific criterion and
the employees' base compensation, nor is there any specific weight provided to
any such criteria in the Committee's analysis. The determination by the
Committee is subjective after review of all information, including the above, it
deems relevant.
The executive officers of the Corporation and the Bank have an annual
management incentive bonus tied directly to the Corporation's performance
results. Similar to the Chief Executive Officer, the executive officers'
bonuses are directly dependent upon the organization's growth in
net income. In addition, for the first time, executive
officers have been awarded incentive
stock options to encourage ownership in the Corporation and provide continued
focus on enhancing shareholder value. The incentive stock option program is
described on pages 21 and 22.
In addition to base salary and the management incentive bonus, executive
officers of the Corporation and the Bank may participate currently in the
following annual and long-term incentive plans:
Bank of Lancaster County, N.A.
Employees Stock Plan
Total compensation opportunities available to the employees of the Bank
are influenced by general labor market conditions, the specific
responsibilities of the individual and the individual's contributions to the
Corporation's success. Individuals are reviewed annually on an
anniversary year basis. The Bank strives to offer compensation that
is competitive with that offered by employers of
comparable size in the banking industry, as well as those within the
Corporation's and the Bank's reasonable market area. Through these compensation
policies, the Corporation strives to meet its strategic goals and objectives to
its constituencies and to provide compensation that is fair and meaningful to
its employees.
Compensation Committee
Robert H. Caldwell, Chairman
J. Robert Hess
Calvin G. High
E. Glenn Nauman
Glenn R. Walz
Shareholder Return Performance Graph
Set forth below is a line graph comparing the yearly dollar change in the
cumulative total shareholder return on the Corporation's common stock against
the cumulative total return of the S&P 500 Stock Index and the Peer Group
Index for the period of five fiscal years commencing January 1, 1992
and ending December 31, 1996. The shareholder return shown on the
graph below is not necessarily indicative of future performance.
Comparison of Five-Year Cumulative Total Return
Sterling Financial Corporation Common Stock, S&P 500 & Peer Group Indices
1991 1992 1993 1994 1995 1996
ACNB Corp. 100.00 136.18 199.11 155.18 194.07 186.24
CNB Financial Corp. 100.00 104.40 109.20 141.01 144.42 183.54
Citizens & Northern Corp.100.00 106.19 175.16 194.25 223.67 283.92
Drovers Bancshares Corp. 100.00 131.63 168.93 177.04 217.92 242.36
First West Chester Corp. 100.00 118.43 137.22 141.91 192.92 216.86
Franklin Financial
Services Corp. 100.00 116.17 182.97 185.28 228.44 277.19
Hanover Bancorp Inc. 100.00 154.39 221.87 264.09 276.31 283.24
Penn Security Bank
& Trust Co. 100.00 110.74 147.56 190.81 196.88 211.50
Penns Woods Bancorp Inc. 100.00 118.41 204.86 244.68 286.70 355.24
PennRock Financial
Services Corp. 100.00 130.04 191.35 282.02 201.34 200.18
Peer Group Total 1,000.00 1,226.58 1,738.23 1,976.29 2,162.64 2,440.26
Peer Group Index 100.00 122.66 173.82 197.63 216.26 244.03
Sterling Financial Corp. 100.00 152.02 239.94 316.80 323.61 310.32
S & P 500 417.09 435.71 466.45 459.27 615.93 740.74
S & P 500 Index 100.00 104.46 111.83 110.11 147.67 177.60
________________________
(1) The Peer Group for which information appears above includes the
following companies: ACNB Corporation; CNB Financial Corporation;
Citizens and Northern Corporation; Drovers Bancshares Corporation; First
West Chester Corporation; Franklin Financial; Hanover Bancorp, Inc.;
Penn Security Bank and Trust Company; PennRock Financial Services;
Penns Woods Bancorp, Inc.; and Sterling Financial Corporation.
These companies were selected based on four criteria: total assets
between $255 million and $765 million; market capitalization greater
than $48 million; headquarters located in Pennsylvania; and not
quoted on NASDAQ. This is the same Peer Group as 1995.
Employees Stock Plan
The Bank of Lancaster County maintained during 1996 an Employees Stock
Plan (the "Plan") which was approved by the shareholders in 1982.
Substantially all Plan assets are invested in the Corporation Common Stock.
All employees of the Bank of Lancaster County who have attained
the age of 18, have completed one year of service and worked at least
1,000 hours per year are eligible to participate
in the Plan. Outside Directors are not eligible to participate in the Plan.
Employees of Town & Country, Inc., a wholly-owned subsidiary of the Bank of
Lancaster County participate only in the salary deferral feature of the Plan.
The Plan has two components, a salary deferral feature and a performance
incentive feature. Under the salary deferral feature of the Plan, a participant
may make voluntary contributions to the Plan each year of between two percent
and six percent of compensation. The Bank of Lancaster County will
make a matching contribution equal to 25 percent of each
participant's voluntary contributions. Effective January 1, 1997, the
Plan was amended to allow employees to make voluntary contributions up to a
maximum of 10% of total compensation. The provision for the matching
contribution remains the same with Bank of Lancaster County contributing 25% of
each participant's contribution up to 6%. Under the
performance incentive feature of the Plan, the Bank of Lancaster County
contributes to the Plan each year an amount determined by the Board of Directors
on the basis of the achievement by the Bank of Lancaster County of certain
performance objectives; contributions to the Plan may not exceed the amount
which is deductible under the Internal Revenue Code. Contributions
made by the Bank of Lancaster County to the Plan pursuant to the
performance incentive feature are allocated to participants
who are employees of Bank of Lancaster County in the
same proportion that each participant's compensation bears to the aggregate
compensation of all participants.
Voluntary contributions to the Plan are fully vested at all times.
Matching contributions and contributions made by the Bank of Lancaster County to
the Plan vest at the rate of 20 percent per year for each year of service. In
general terms, benefits under the Plan may be paid to participants upon
retirement, termination of employment, disability or death. A participant may
under certain circumstances make earlier withdrawals (to the extent of his/her
interest in the Plan attributable to voluntary contributions made by him/her)
upon a showing of financial hardship.
The Plan was revised in 1987 for the purpose of adopting certain
conforming amendments necessary in order to reflect the occurrence of the
holding company reorganization. The Plan was again amended on March 8,
1988 and was approved by the shareholders at the 1988
Annual Meeting. In addition, on December 27, 1994
the Plan was amended by the Board of Directors to provide for employees to make
their voluntary contributions on a pre-federal income tax basis commencing on
January 1, 1995.
Pension Plan
The Bank of Lancaster County Pension Plan (the "Plan") is a qualified
non-contributory defined benefit pension plan that provides retirement
benefits to employees of the Bank of Lancaster County and to employees
of Town & Country, Inc., a wholly-owned subsidiary of the
Bank of Lancaster County. All employees who have completed one
year of service, work at least 1,000 hours per year and
who have attained the age of 21 are eligible to participate in the Plan.
Outside directors do not participate in the Plan. Employees
become 100 percent vested upon the completion of five years of service.
Contributions to the Plan are made
by the Bank of Lancaster County and are determined actuarially.
Benefits under the Plan (which are not integrated with Social Security
benefits) are based upon average monthly compensation (determined on the basis
of the highest five consecutive years' base compensation preceding retirement)
and years of credited service. For purposes of determining benefits payable
under the Plan, the term "compensation" is defined to mean base salary only
and does not include overtime pay or bonuses. Compensation paid to
Messrs. Stefan, Moyer and Obetz during 1996 and covered by the
Plan was $150,000, $134,630, and $94,432, respectively.
As of December 31, 1996, Messrs. Stefan, Moyer and Obetz
had accrued 17, 19 and 25 years of credited service, respectively, under
the Plan for benefit accrual purposes.
The following table indicates, for purposes of illustration, the
approximate annual retirement benefit that would be payable under the Plan, in
the form of a straight life annuity with 120 months' certain period, at age 65,
under various assumptions as to average annual compensation and years of
credited service. The benefit amounts set forth below are not subject to
further deduction for Social Security or other offset amounts. Under the
Internal Revenue Code of 1986, as amended, the maximum annual retirement
benefit that may be paid in the form of a straight life annuity with 120
months' certain period under a qualified defined benefit plan such as the
Plan is $109,390 (subject to adjustment based upon increases
in the Consumer Price Index). In addition, salary in excess of $150,000
(effective in the year 1994) is disregarded in determining a participant's
retirement benefit pursuant to regulations of the Internal Revenue Service.
Average
Annual
Compensation Years of Credited Service
10 20 30 40
$100,000 $15,000 $30,000 $45,000 $60,000
125,000 18,750 37,500 56,250 75,000
150,000 22,500 45,000 67,500 90,000
175,000 22,500 45,000 67,500 90,000
200,000 22,500 45,000 67,500 90,000
225,000 22,500 45,000 67,500 90,000
250,000 22,500 45,000 67,500 90,000
275,000 22,500 45,000 67,500 90,000
300,000 22,500 45,000 67,500 90,000
________________________
Retirement Restoration Plan
Bank of Lancaster County adopted a Restoration Plan during 1996 for any
officer whose compensation exceeded $150,000. The plan is designed to "restore"
the level of benefits lost to these employees under certain qualified retirement
plans because of Internal Revenue Code restrictions.
The plan is designed to mirror the provisions set forth in the qualified
retirement plans available to all Bank of Lancaster County employees--the
defined benefit pension plan, and the employee stock or 401(k) plan. The
plan allows for the calculation of benefits on an officer's
salary in excess of $150,000. The effective date of the Plan is May 1, 1996.
Employment Agreement
In April of 1983, the Bank of Lancaster County entered into a five year
employment agreement (the "Employment Agreement") with John E. Stefan under the
terms of which the Bank engaged Mr. Stefan as its President and Chief Executive
Officer. Unless previously terminated or unless notice of intention not to
renew is given by either party, the Employment Agreement is subject to automatic
renewal for additional terms of five years each. The Employment Agreement
may be terminated by the Bank of Lancaster County: (i) without cause, in
which case Mr. Stefan is entitled to receive his then current salary for the
unexpired balance of the term of the Employment Agreement; or (ii) with cause,
in which case Mr. Stefan's right to receive salary and benefits under
the Employment Agreement terminates as of the effective date
of termination. In the event of any change in control of the
Corporation or the Bank of Lancaster County, the right of the
Bank of Lancaster County to terminate the Employment Agreement without cause
expires and the term of the Employment Agreement is extended automatically. The
obligations of the Bank of Lancaster County under the Employment Agreement have
been jointly and severally assumed by the Corporation.
Compensation of Directors
The directors of the Corporation do not receive any additional
compensation for their services as such, beyond the compensation paid to
them as directors of the Bank of Lancaster County. Each member of the Board of
Directors of the Bank of Lancaster County is paid an annual
fee of $8,500 for his/her services as a director. This fee is based on
attendance of at least 75 percent of the Board meetings held during a
calendar year. If a director attends less than 75 percent
of the Board meetings held, the director's fee would be reduced by $650 per
meeting missed. In addition to the foregoing, each director is paid $275 for
each meeting attended of a committee of which he or she is a member. Directors
fees are not paid to directors who are also salaried officers of the Bank of
Lancaster County.
Transactions with Directors and Executive Officers
Some of the directors and executive officers of the Corporation and the
companies with which they are associated were customers of and had banking
transactions with the Bank of Lancaster County during 1996. All loans and loan
commitments made to such persons and to the companies with which they are
associated were made in the ordinary course of bank business, on substantially
the same terms (including interest rates, collateral and repayment terms) as
those prevailing at the time for comparable transactions with other persons, and
did not involve more than a normal risk of collectibility or present other
unfavorable features. It is anticipated that similar transactions will be
entered into by the Bank of Lancaster County in the future.
The contracting firm of Nauman Construction was paid $174,193 in 1996 in
connection with construction, renovations and leasehold improvements at various
offices of the Bank of Lancaster County. E. Glenn Nauman, a director of the
Corporation and the Bank of Lancaster County, is retired Chairman of the Board
and retired director of Nauman Construction.
The Bank of Lancaster County entered into a lease agreement (the "Lease
Agreement") in 1984 with High Properties, under the terms of which High
Properties constructed and leased to the Bank of Lancaster County a building at
525 Greenfield Road, Lancaster, Pennsylvania. The building was occupied in
October of 1984 and served as the administrative headquarters of the Corporation
and the Bank of Lancaster County until August 1995. Bank of Lancaster County
has also maintained a branch office in this building since October 1984 and
continues to maintain a branch office at this location. The term of the lease
is 15 years and is subject to renewal. The monthly rent is $12,331.70.
Total rent payments of $140,950.64 were paid by the Bank of
Lancaster County to High Properties during 1996 pursuant to the
Lease Agreement. On January 10, 1997, a sublease
agreement was signed under the terms of which Bank of Lancaster County will
sublease to High Employee Services, Ltd. 4,424 square feet of this building.
The term of the lease is two years and eight months to coincide with the
original lease expiration date on this building. Total rent to be received
over this period of time is $159,264.
Efforts are being made to secure tenants for the
additional available space in this building. Calvin G. High, a director of the
Corporation and the Bank of Lancaster County, is a partner in High Properties.
Additionally, on October 29, 1992, the Bank of Lancaster County entered into a
lease agreement with High Properties, under the terms of which High Properties
leased to Bank of Lancaster County office space at 1858 Charter Lane, Suite 102,
Lancaster, Pennsylvania. Occupancy took place January 18, 1993. The term of
the lease was originally five (5) years. The lease was amended February 1,
1994 in order to lease additional space. The term of
the lease is four (4) years. Base rent for the entire term is $118,089.24.
Total rent payments of $29,920.68 were paid by Bank of
Lancaster County during 1996 pursuant to this Lease Agreement.
During 1996, the Bank exercised an early termination clause on this lease at a
cost of $5,250. Therefore, this lease terminated January 31, 1997. High
Associates, Ltd. and High Construction, Inc., divisions of High Industries,
Inc., were paid $386,312 in 1996 in connection with construction,
renovations and leasehold improvements at various offices
of Bank of Lancaster County and for various other services performed.
Calvin G. High, a director of the Corporation
and the Bank of Lancaster County is Senior Vice President of High Industries.
SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors, executive officers and shareholders owning in excess of
10 percent of the Corporation's outstanding equity stock to file initial reports
of ownership and reports of changes in ownership of common stock and other
equity securities of the Corporation with the Securities and Exchange
Commission. Based on a review of copies of such reports
received by it, and on the statements of the respective reporting person,
the Corporation believes that all Section 16(a)
filing requirements were complied with in a timely fashion.
PROPOSAL TO APPROVE AND RATIFY THE ADOPTION OF THE STERLING FINANCIAL
CORPORATION
1996 STOCK INCENTIVE PLAN
On November 19, 1996, the Board of Directors adopted the Sterling Financial
Corporation 1996 Stock Incentive Plan (the "Plan") and reserved 500,000 shares
of Common Stock for issuance under the Plan. The purpose of the Plan is to
advance the development, growth and financial condition of the
Corporation and its subsidiaries by providing incentives through participation
in the appreciation of capital stock of the Corporation in
order to secure, retain and motivate personnel responsible for
the operation and management of the Corporation and its
subsidiaries. The Plan is designed to attract and retain individuals of
outstanding ability to employment with the Corporation and its subsidiaries, to
encourage employees to acquire proprietary interests in the Corporation, to
continue employment with the Corporation and its subsidiaries and to render
superior performance during such employment.
The Plan will be deemed effective as of November 19, 1996, if the Plan
receives approval by the shareholders, and will continue in effect until all
awards under the Plan either have lapsed, been exercised, satisfied or canceled
according to the terms under the Plan. The shares of stock that may be issued
under the Plan shall not exceed in the aggregate 500,000 shares of the Common
Stock, par value $5.00 per share, as may be adjusted from time to time due to
stock splits, payments of stock dividends or other changes in the structure of
the Corporation's capital.
The Plan will be administered by a committee consisting only of non-
employee directors (the "Committee") and, except as otherwise permitted by
certain securities laws, who have not, during the year prior to commencing
service on the Committee been, nor will, while a member of the Committee, be,
granted any awards under the Plan, or any other Plan of the Corporation that
provides for discretionary grants or awards. Persons eligible to receive awards
under the Plan shall be those key officers and other management employees of the
Corporation and its subsidiaries as determined by the Committee.
Awards
Awards made under the Plan may be in the form of (i) options to purchase
stock intended to qualify as incentive stock options under Sections 421 and 422
of the Internal Revenue Code ("Code") (referred to herein as "Qualified
Options"), (ii) options which do not so qualify (referred to herein as
"Non-Qualified Options"), (iii) stock appreciation rights ("SARs"); and (iv) and
restricted stock (referred to herein as "Restricted Stock"). Every award made
to a person under the Plan is exercisable during his or her lifetime only by the
recipient and is not saleable, transferable or assignable by the recipient
except by will or pursuant to applicable laws of descent and distribution.
Generally, awards may be exercised in whole or in part.
Funds received by the Corporation from the exercise of any award shall be
used for its general corporate purposes. The Committee may permit
an acceleration of previously established exercise terms
of any award as, when, under such facts and circumstances, and subject to such
other or further requirements and conditions as the Committee may deem necessary
or appropriate, including, but not limited to, upon a change of control of the
Corporation (as defined in the Plan).
Qualified Options
Qualified Options shall not be awarded under the Plan more than 10 years
after the date the Plan is adopted by the Board of Directors or approved by the
shareholders, whichever is earlier and are only exercisable upon the expiration
of six months after the date of the award and shall not continue beyond the
expiration of 10 years beyond the date of the award. The purchase price of the
stock subject to any Qualified Option, as determined by the Committee, shall not
be less than the stock's fair market value (as defined in the Plan) at the time
the option is awarded or less than its par value. If the recipient of a
Qualified Option ceases to be employed by the Corporation, or subsidiary
thereof, for any reason other than his or her death or disability,
the Committee may permit the recipient to exercise such option during
its remaining term for a period not more than three months
after cessation of employment. If the recipient ceases to be
employed by the Corporation, or subsidiary thereof, due to
his or her disability, the three month period will be extended to a 12 month
period. If the recipient ceases to be employed by the Corporation, or
subsidiary thereof, due to his or her death, the Committee
may permit the recipient's qualified personal representatives,
or any persons who acquire the options pursuant to his or
her will or the laws of descent and distribution, to exercise
such option during its remaining term for a period not to exceed 12 months after
the recipient's death to the extent that the option was then and remains
exercisable.
Non-Qualified Options
Similar to Qualified Options, Non-Qualified Options are only exercisable
upon the expiration of six months after the date of the award and shall not
continue beyond the expiration of 10 years beyond the date of the award. If a
recipient of a Non-Qualified Option ceases to be eligible under the Plan before
the option lapses or before it is fully exercised, the Committee may permit the
recipient to exercise the option during its remaining term, to the extent that
the option was then and remains exercisable, for such time period and under such
terms and conditions as may be prescribed by the Committee. The purchase price
of a share of stock pursuant to a Non-Qualified Option, as determined by the
Committee, shall not be less than the stock's fair market value (as defined in
the Plan) at the time such option is awarded.
Stock Appreciation Rights
SARs may be granted either alone, or in connection with another previously
or contemporaneously granted award (other than another SAR). Each SAR entitles
its recipient to receive, upon exercise, all or a portion of the excess of (i)
the fair market value at the time of such exercise of a specified number of
shares of stock as determined by the Committee, over (ii) a specified price as
determined by the Committee of such number of shares of stock that, on a per
share basis, is not less that the stock's fair market value at the time the SAR
is awarded. Upon exercise of any SAR, the recipient is either paid in cash, in
stock or a combination thereof, as determined by the Committee. SARs are only
exercisable upon the expiration of six months after the date of the award and
shall not continue beyond the expiration of 10 years beyond the date of the
award; however, no SAR connected with another award shall be exercisable beyond
the last date that such other connected award may be exercised. If a recipient
of a SAR ceases to be eligible under the Plan before it lapses or before it is
fully exercised, the Committee may permit the recipient to exercise such SAR
during its remaining term, to the extent that the SAR was then and remains
exercisable, for such time period and under such terms and conditions as may be
prescribed by the Committee.
Restricted Stock
Restricted Stock is stock that may be acquired by and issued to a recipient
at such time, for such or for no purchase price, and under and subject to such
transfer, forfeiture and other restrictions, conditions, or terms as are
determined by the Committee, including but not limited to, prohibitions against
transfer, substantial risks of forfeiture within the meaning of Section 83 of
the Code, and attainment of performance or other goals, objectives or
standards, all for or applicable to time periods, determined by the Committee.
A recipient of restricted stock has the rights of a shareholder,
including without limitation, the right to vote the shares and
receive dividends on the shares. During the period of any restrictions,
conditions, or terms applicable to the restricted stock, however, the
shares, the right to vote the shares and to receive dividends
on the shares may not be sold, assigned, transferred, exchanged, pledged,
hypothecated, encumbered or otherwise disposed of except as permitted by the
Plan or the respective award. Each certificate for shares of
restricted stock will bear a restrictive legend until all
conditions or restrictions lapse or are satisfied. If a recipient's
employment with the Corporation or its subsidiaries
ceases, for any reason, prior to lapse or satisfaction of the restrictions,
conditions or terms applicable to the restricted stock, all stock subject to
unexpired restrictions is forfeited absolutely by the recipient to the
Corporation.
Federal Tax Consequences
An employee who receives Qualified Options will not recognize taxable
income on the grant or the exercise of the option. If the stock acquired by the
exercise of a Qualified Option is held until the later of: (i) two years from
the date of the grant, and (ii) one year from the date of exercise,
any gain (or
loss) recognized on the sale or exchange of the stock will be treated as
long-term capital gain (or loss), and the Corporation will not be entitled to
any income tax deduction. If stock acquired on exercise of a
Qualified Option is sold or exchanged before the expiration
of the required holding period, the employee will recognize ordinary
income in the year of disposition in an amount
equal to the difference between the option price and the lesser of the fair
market value of the stock on the date of exercise, or the selling price. In the
event of a disqualifying disposition, the Corporation will be entitled to an
income tax deduction in the year of such disposition in an amount equal to the
amount of ordinary income recognized by the employee.
An employee who receives a Non-Qualified Option will not recognize taxable
income on the grant of the option, however upon exercise, he or she will
recognize ordinary income in an amount equal to the excess of the fair market
value of the stock on the date that the option is exercised over the purchase
price paid for the stock. The Corporation will be entitled to an income tax
deduction in the year of exercise in an amount equal the amount of income
recognized by the employee.
A SAR is not taxed at the time it is granted, even if it is immediately
exercisable. A SAR is taxed at exercise. If cash is received at exercise, the
payment is considered compensation income to the recipient, and the Corporation
may take a deduction for this expense. In addition, the Corporation receives a
deduction equal to the amount included in income by the recipient.
The recipient of restricted stock is deemed to have received gross income
in an amount equal to the excess of the fair market value of the stock over the
amount paid for the stock, if any, by the recipient at the time that all
restrictions applicable to the stock lapse or are satisfied. If the restricted
stock is forfeited prior to the lapse or satisfaction of restrictions, there are
tax consequences to the recipient. The Corporation will be entitled to a
deduction equal to the amount included in the income of the recipient in the
Corporation's taxable year in which or with which ends the taxable year of the
recipient in which the income was included.
New Plan Benefits Table
1996 Stock Incentive Plan
Dollar
Name and Position Value ($)(1) Number of Options
John E. Stefan
Chairman of the
Board, President
and Chief Executive
Officer of Sterling
Financial
Corporation and
Bank of Lancaster
County, N.A. $ 7,080 6,000
J. Roger Moyer, Jr.
Executive Vice
President of
Sterling Financial
Corporation and
Bank of Lancaster
County, N.A. $ 3,540 3,000
Jere L. Obetz
Senior Vice
President/Chief
Financial Officer of
Sterling Financial
Corporation and Bank
Bank of Lancaster
County, N.A. $ 2,950 2,500
All Executive officers
as a group (four persons) $13,806 11,700
Non-executive director group $ 0 0
Non-executive officer
employee group (twenty
persons) $24,957 21,150
(1) Dollar value is the difference between the market value at December 31, 1996
and the exerciseable price at grant date, times the number of options.
The foregoing discussion of the Plan consists of only a summary and is
qualified in its entirety by reference to the full text of the Plan attached as
Exhibit "A" to this proxy statement. Exhibit "A" is deemed to be an integral
part of this Proxy Statement and incorporated in its entirety by reference.
The Board of Directors recommends a vote FOR the following resolution which
will be presented at the Annual Meeting:
"RESOLVED, that the Sterling Financial Corporation 1996 Stock
Incentive Plan, the text of which is set forth in full and in its entirety
in the proxy statement for the 1997 Annual Meeting of Shareholders as
Exhibit "A", is hereby approved, adopted, ratified and confirmed by the
shareholders of the Corporation."
The approval and ratification of the Plan requires the affirmative vote of
at least a majority of all votes cast by shareholders. Proxies solicited by the
Board of Directors will be voted for the foregoing resolution unless
shareholders specify to the contrary on their proxies.
RATIFICATION OF SELECTION OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors of the Corporation has selected the firm of Trout,
Ebersole & Groff as independent certified public accountants to audit the books,
records and accounts of the Corporation and the Bank of Lancaster County for the
year 1997, subject to ratification by vote of a majority of the shares of Common
Stock represented at the 1997 Annual Meeting. Trout, Ebersole & Groff has
served as independent certified public accountants for the Corporation
and its predecessor, the Bank of Lancaster County, since 1979.
In the event that the shareholders do not ratify the
selection of Trout, Ebersole & Groff, the selection of independent
certified public accountants will be reconsidered and made by the
Board of Directors.
A representative of Trout, Ebersole & Groff is expected to be present at
the 1997 Annual Meeting and will be given an opportunity to make a statement if
he should so desire and to be available to respond to appropriate questions.
The Board of Directors recommends that the shareholders vote FOR the
ratification of the selection of Trout, Ebersole & Groff as independent
certified public accountants for the fiscal year ending December 31, 1997.
ADDITIONAL INFORMATION
A COPY OF THE ANNUAL REPORT OF THE CORPORATION ON FORM 10-K FOR ITS FISCAL
YEAR ENDED DECEMBER 31, 1996, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, INCLUDING FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, IS
AVAILABLE WITHOUT CHARGE TO SHAREHOLDERS UPON WRITTEN REQUEST ADDRESSED TO
RONALD L. BOWMAN, VICE PRESIDENT/SECRETARY, STERLING FINANCIAL CORPORATION,
101 NORTH POINTE BOULEVARD, LANCASTER, PENNSYLVANIA 17601-4133.
OTHER MATTERS
The Board of Directors of the Corporation knows of no matters other than
those discussed in this Proxy Statement that will be presented at the 1997
Annual Meeting. However, if any other matters are properly brought
before the meeting, any Proxy given pursuant to this
solicitation will be voted in accordance with the recommendations of the
management of the Corporation.
BY ORDER OF THE BOARD OF DIRECTORS
JOHN E. STEFAN
Chairman of the Board,
President and
Chief Executive Officer
Lancaster, Pennsylvania
March 28, 1997
EXHIBIT A
STERLING FINANCIAL CORPORATION
1996 STOCK INCENTIVE PLAN
1. Purpose. The purpose of this Stock Incentive Plan (the "Plan") is to
advance the development, growth and financial condition of Sterling Financial
Corporation (the "Corporation") and each subsidiary thereof as defined in
Section 424 of the Internal Revenue Code of 1986, as amended (the "Code"),
by providing incentives through participation in the appreciation of capital
stock of the Corporation so as to secure, retain and motivate personnel
who may be responsible for the operation and management of the affairs of the
Corporation and any such subsidiary now or hereafter
existing ("Subsidiary").
2. Term. The Plan shall become effective as of the date it is adopted by
the Corporation's Board of Directors (the "Board"), so long as the Corporation's
stockholders duly approve the Plan within twelve (12) months either before or
after the date of the Board's adoption of the Plan. Any and all options and
rights awarded under the Plan ("Awards") before it is so approved by the
Corporation's stockholders shall be conditional upon and may not be exercised
before timely obtainment of such approval, and shall lapse upon the failure
thereof. If the Plan is so approved, it shall continue in effect until all
Awards either have lapsed or been exercised, satisfied or cancelled according to
their terms under the Plan.
3. Stock. The shares of stock that may be issued under the Plan shall not
exceed in the aggregate 500,000 shares of the Corporation's common stock, par
value $5.00 per share (the "Stock"), as may be adjusted pursuant to paragraph 18
hereof. Such shares of Stock may be either authorized and unissued shares of
Stock, or authorized shares of Stock issued by the Corporation and subsequently
reacquired by it as treasury stock. Under no circumstances shall any fractional
shares of Stock be issued or sold under the Plan or any Award. Except as may be
otherwise provided in the Plan, any Stock subject to an Award that for any
reason lapses or terminates prior to its exercise as to such Stock shall
become and again be available under the Plan.
The Corporation shall reserve and keep available, and shall duly apply
for any requisite governmental authority to issue
or sell the number of shares of Stock needed to satisfy the requirements of the
Plan while in effect. The Corporation's failure to obtain any such governmental
authority deemed necessary by the Corporation's legal counsel for the lawful
issuance and sale of Stock under the Plan shall relieve the Corporation of any
duty, or liability for the failure to issue or sell such Stock as to which such
authority has not been obtained.
4. Administration. The Plan shall be administered by a committee (the
"Committee") consisting exclusively of two (2) or more non-employee directors
from the Board serving for such terms as determined, selected and appointed by
the Board. The Board shall fill all vacancies occurring in the Committee's
membership, and at any time and for any reason may add additional members to the
Committee or may remove members from the Committee and appoint their
successors, except as otherwise permitted under Section 16(b) of the
Securities Exchange Act of 1934, as amended, and applicable rules and
regulations thereto, a member of the Committee must be a director
of the Corporation and during the year prior to commencing service
on the Committee, and while a member of the Committee, was not
granted or awarded any Awards, allocations or other options or rights of or with
respect to Stock or any other equity securities of the Corporation or its
affiliates pursuant to the Plan or any other plan of the Corporation or its
affiliates which provides for grants or awards. A majority of the Committee's
membership shall constitute a quorum for the transaction of all business of the
Committee, and all decisions and actions taken by the Committee shall be
determined by a majority of the members of the Committee attending a meeting at
which a quorum of the Committee is present.
The Committee shall be responsible for the management and operation of the
Plan and, subject to its provisions, shall have full, absolute and final power
and authority, exercisable in its sole discretion: to interpret and construe the
provisions of the Plan, adopt, revise and rescind rules and regulations relating
to the Plan and its administration, and decide all questions of fact arising in
the application thereof; to determine what, to whom, when and under what facts
and circumstances Awards shall be made, and the form, number, terms, conditions
and duration thereof, including but not limited to when exercisable, the number
of shares of Stock subject thereto, and Stock option purchase prices; to adopt,
revise and rescind procedural rules for the transaction of the Committee's
business, subject to any directives of the Board not inconsistent with the
provisions or intent of the Plan or applicable provisions of law; and to
make all other determinations and decisions, take all actions and do
all things necessary or appropriate in and for the
administration of the Plan. The Committee's determinations, decisions
and actions under the Plan, including but not limited to those described above,
need not be uniform or consistent, but may be different
and selectively made and applied, even in similar circumstances and among
similarly situated persons. Unless contrary to the provisions of the Plan, all
decisions, determinations and actions made or taken by the Committee shall be
final and binding upon the Corporation and all interested persons, and their
heirs, personal and legal representatives, successors, assigns and
beneficiaries. No member of the Committee or of the Board shall
be liable for any decision, determination or
action made or taken in good faith by such person under or with
respect to the Plan or its administration.
5. Awards. Awards may be made under the Plan in the form of: (a)
"Qualified Options" to purchase Stock that are intended to qualify for certain
tax treatment as incentive stock options under Sections 421 and 422 of the Code,
(b) "Non-Qualified Options" to purchase Stock that are not intended to qualify
under Sections 421-424 of the Code, (c) Stock appreciation rights ("SARs"), or
(d) "Restricted Stock". More than one Award may be granted to an eligible
person, and the grant of any Award shall not prohibit the grant of any other
Award, either to the same person or otherwise, or impose any obligation upon the
person to whom granted to exercise the Award. All Awards and the terms and
conditions thereof shall be set forth in written agreements, in such form and
content as approved by the Committee from time to time, and shall be subject to
the provisions of the Plan whether or not contained in such agreements.
Multiple Awards for a particular person may be set forth in a single
written agreement or in multiple agreements, as determined
by the Committee, but in all cases each
agreement for one or more Awards shall identify each of the Awards thereby
represented as a Qualified Option, Non-Qualified Option, SAR, or Restricted
Stock, as the case may be. Every Award made to a person (a "Recipient")
shall be exercisable during his or her lifetime only by the Recipient,
and shall not be salable, transferable or assignable by the
Recipient except by his or her Will or
pursuant to applicable laws of descent and distribution.
6. Eligibility. Persons eligible to receive Awards shall be those key
officers and other management employees of the Corporation and each Subsidiary
as determined by the Committee. In no case, however, shall any
current member of the Committee be eligible to receive any Awards.
A person's eligibility to receive Awards shall not confer upon
him or her any right to receive any Awards;
rather, the Committee shall have the sole authority, exercisable in its
discretion consistent with the provisions of the Plan, to select when, to whom
and under what facts and circumstances Awards will be made. Except as otherwise
provided, a person's eligibility to receive, or actual receipt of Awards under
the Plan shall not limit or affect his or her benefits under or eligibility to
participate in any other incentive or benefit plan or program of the Corporation
or its affiliates.
7. Qualified Options. In addition to other applicable provisions of the
Plan, all Qualified Options and Awards thereof shall be under and subject to the
following terms and conditions:
(a) No Qualified Option shall be awarded more than ten
(10) years after the date the Plan is adopted by the Board
or the date the Plan is approved by the Corporation's
stockholders, whichever date is earlier;
(b) The time period during which any Qualified Option
is exercisable, as determined by the Committee, shall not
commence before the expiration of six (6) months or continue
beyond the expiration of ten (10) years after the date such
Option is awarded;
(c) If the Recipient of a Qualified Option ceases to
be employed by the Corporation or any Subsidiary for any
reason other than his or her death, the Committee may permit
the Recipient thereafter to exercise such Option during its
remaining term for a period of not more than three (3)
months after such cessation of employment to the extent that
the Option was then and remains exercisable, unless such
employment cessation was due to the Recipient's disability
as defined in Section 422(e)(3) of the Code, in which case
such three (3) month period shall be twelve (12) months; if
the Recipient dies while employed by the Corporation or a
Subsidiary, the Committee may permit the Recipient's
qualified personal representatives, or any persons who
acquire the Qualified Option pursuant to his or her Will or
laws of descent and distribution, thereafter to exercise
such Option during its remaining term for a period of not
more than twelve (12) months after the Recipient's death to
the extent that the Option was then and remains exercisable;
the Committee may impose terms and conditions upon and for
<PAGE>
said exercise of such Qualified Option after such cessation
of the Recipient's employment or his or her death;
(d) The purchase price of a share of Stock subject to
any Qualified Option, as determined by the Committee, shall
not be less than the Stock's fair market value at the time
such Option is awarded, as determined under paragraph 13
hereof, or less than the Stock's par value.
8. Non-Qualified Options. In addition to other applicable
provisions of the Plan, all Non-Qualified Options and Awards
thereof shall be under and subject to the following terms
and conditions:
(a) The time period during which any Non-Qualified
Option is exercisable, as determined by the Committee, shall
not commence before the expiration of six (6) months or
continue beyond the expiration of ten (10) years after the
date such Option is awarded;
(b) If a Recipient of a Non-Qualified Option, before
its lapse or full exercise, ceases to be eligible under the
Plan, the Committee may permit the Recipient thereafter to
exercise such Option during its remaining term, to the
extent that the Option was then and remains exercisable, for
such time period and under such terms and conditions as may
be prescribed by the Committee;
(c) The purchase price of a share of Stock subject to
any Non-Qualified Option, as determined by the Committee,
shall not be less than the Stock's fair market value at the
time such Option is awarded, as determined under paragraph
13 hereof.
9. Stock Appreciation Rights. In addition to other
applicable provisions of the Plan, all SARs and Awards thereof shall be under
and subject to the following terms and conditions:
(a) SARs may be granted either alone, or in connection
with another previously or contemporaneously granted Award
(other than another SAR) so as to operate in tandem
therewith by having the exercise of one affect the right to
exercise the other, as and when the Committee may determine;
however, no SAR shall be awarded in connection with a
Qualified Option more than ten (10) years after the date the
Plan is adopted by the Board or the date the Plan is
approved by the Corporation's stockholders, whichever date
is earlier;
(b) Each SAR shall entitle its Recipient to receive
upon exercise of the SAR all or a portion of the excess of
(i) the fair market value at the time of such exercise of a
specified number of shares of Stock as determined by the
Committee, over (ii) a specified price as determined by the
Committee of such number of shares of Stock that, on a per
share basis, is not less than the Stock's fair market value
at the time the SAR is awarded;
(c) Upon exercise of any SAR, the Recipient shall be
paid either in cash or in Stock, or in any combination
thereof, as the Committee shall determine; if such payment
is to be made in Stock, the number of shares thereof to be
issued pursuant to the exercise shall be determined by
dividing the amount payable upon exercise by the Stock's
fair market value at the time of exercise;
(d) The time period during which any SAR is
exercisable, as determined by the Committee, shall not
commence before the expiration of six (6) months or continue
beyond the expiration of ten (10) years after the date such
SAR is awarded; however, no SAR connected with another Award
shall be exercisable beyond the last date that such other
connected Award may be exercised;
(e) If a Recipient of a SAR, before its lapse or full
exercise, ceases to be eligible under the Plan, the
Committee may permit the Recipient thereafter to exercise
such SAR during its remaining term, to the extent that the
SAR was then and remains exercisable, for such time period
and under such terms and conditions as may be prescribed by
the Committee;
(f) No SAR shall be awarded in connection with any
Qualified Option unless the SAR (i) lapses no later than the
expiration date of such connected Option, (ii) is for not
more than the difference between the Stock purchase price
under such connected Option and the Stock's fair market
value at the time the SAR is exercised, (iii) is
transferable only when and as such connected Option is
transferable and under the same conditions, (iv) may be
exercised only when such connected Option may be exercised,
and (v) may be exercised only when the Stock's fair market
value exceeds the Stock purchase price under such connected
Option.
10. Restricted Stock. In addition to other applicable provisions of the
Plan, all Restricted Stock and Awards thereof shall be under and subject to the
following terms and conditions:
(a) Restricted Stock shall consist of shares of Stock
that may be acquired by and issued to a Recipient at such
time, for such or no purchase price, and under and subject
to such transfer, forfeiture and other restrictions,
conditions or terms as shall be determined by the Committee,
including but not limited to prohibitions against transfer,
substantial risks of forfeiture within the meaning of
Section 83 of the Code, and attainment of performance or
other goals, objectives or standards, all for or applicable
to such time periods as determined by the Committee;
(b) Except as otherwise provided in the Plan or the
Restricted Stock Award, a Recipient of shares of Restricted
Stock shall have all the rights as does a holder of Stock,
including without limitation the right to vote such shares
and receive dividends with respect thereto; however, during
the time period of any restrictions, conditions or terms
applicable to such Restricted Stock, the shares thereof and
the right to vote the same and receive dividends thereon
shall not be sold, assigned, transferred, exchanged,
pledged, hypothecated, encumbered or otherwise disposed of
except as permitted by the Plan or the Restricted Stock
Award;
(c) Each certificate issued for shares of Restricted
Stock shall be deposited with the Secretary of the
Corporation, or the office thereof, and shall bear a legend
in substantially the following form and content:
This Certificate and the shares of Stock hereby
represented are subject to the provisions of the
Corporation's Stock Incentive Plan and a certain
agreement entered into between the owner and the
Corporation pursuant to said Plan. The release of this
Certificate and the shares of Stock hereby represented
from such provisions shall occur only as provided by
said Plan and agreement, a copy of which are on file in
the office of the Secretary of the Corporation.
Upon the lapse or satisfaction of the restrictions,
conditions and terms applicable to such Restricted Stock, a
certificate for the shares of Stock free thereof without
such legend shall be issued to the Recipient;
(d) If a Recipient's employment with the Corporation
or a Subsidiary ceases for any reason prior to the lapse of
the restrictions, conditions or terms applicable to his or
her Restricted Stock, all of the Recipient's Restricted
Stock still subject to unexpired restrictions, conditions or
terms shall be forfeited absolutely by the Recipient to the
Corporation without payment or delivery of any consideration
or other thing of value by the Corporation or its
affiliates, and thereupon and thereafter neither the
Recipient nor his or her heirs, personal or legal
representatives, successors, assigns, beneficiaries, or any
claimants under the Recipient's Last Will or laws of descent
and distribution, shall have any rights or claims to or
interests in the forfeited Restricted Stock or any
certificates representing shares thereof, or claims against
the Corporation or its affiliates with respect thereto.
11. Exercise. Except as otherwise provided in the Plan, Awards may be
exercised in whole or in part by giving written notice thereof to the Secretary
of the Corporation, or his or her designee, identifying the Award being
exercised, the number of shares of Stock with respect thereto, and other
information pertinent to exercise of the Award. The purchase price of the
shares of Stock with respect to which an Award is exercised shall be paid with
the written notice of exercise, either in cash or in Stock at its then
current fair market value, or in any combination thereof, as the
Committee shall determine; provided, that if the Stock tendered
as payment for a Qualified Option was acquired through the exercise of a
Qualified Option, the Recipient must have held
such Stock for a period not less than the holding period described in Code
Section 422(a)(1). Funds received by the Corporation from the exercise of any
Award shall be used for its general corporate purposes.
The number of shares of Stock subject to an Award shall be reduced by the
number of shares of Stock with respect to which the Recipient has exercised
rights under the Award. If a SAR is awarded in connection with another Award,
the number of shares of Stock that may be acquired by the Recipient under the
other connected Award shall be reduced by the number of shares of Stock with
respect to which the Recipient has exercised his or her SAR, and the number of
shares of Stock subject to the Recipient's SAR shall be reduced by the number of
shares of Stock acquired by the Recipient pursuant to the other connected
Award.
The Committee may permit an acceleration of previously established exercise
terms of any Awards or the lapse of restrictions thereon as, when, under such
facts and circumstances, and subject to such other or further requirements and
conditions as the Committee may deem necessary or appropriate. In addition: (a)
if the Corporation or its stockholders execute an agreement to dispose of all or
substantially all of the Corporation's assets or capital stock by means of sale,
merger, consolidation, reorganization, liquidation or otherwise, as a result of
which the Corporation's stockholders as of immediately before such transaction
will not own at least fifty percent (50%) of the total combined voting power of
all classes of voting capital stock of the surviving entity (be it the
Corporation or otherwise) immediately after the consummation of such
transaction, thereupon any and all Awards immediately shall become and remain
exercisable with respect to the total number of shares of
Stock still subject thereto for the remainder of their respective terms
unless the transaction is not consummated and the agreement expires or is
terminated, in which case thereafter all Awards shall
be treated as if said agreement never had been executed; (b) if there is an
actual, attempted or threatened change in the ownership of at least twenty-five
percent (25%) of all classes of voting capital stock of the Corporation, as
determined by the Committee in its sole discretion, through the acquisition of,
or an offer to acquire such percentage of the Corporation's voting capital stock
by any person or entity, or persons or entities acting in concert or as a group,
and such acquisition or offer has not been duly approved by the Board, thereupon
any and all Awards immediately shall become and remain exercisable with respect
to the total number of shares of Stock still subject thereto for the
remainder of their respective terms; or (c) if during any period of two
(2) consecutive years, the individuals who at the beginning of
such period constituted the Board, cease for any reason to constitute at
least a majority of the Board, unless the election of each director of the
Board, who was not a director of the Board at the beginning of such 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, thereupon any and all Awards immediately shall become and remain
exercisable with respect to the total amount of shares of Stock still subject
thereto for the remainder of their respective terms. If an event described in
(a), (b) or (c) occurs, the Committee shall immediately notify the Recipients in
writing of the occurrence of such event and their rights under this paragraph
11.
12. Withholding. Whenever the Corporation is about to issue or transfer
Stock pursuant to any Award, the Corporation may require the Recipient to remit
to the Corporation an amount sufficient to satisfy fully any federal, state and
other jurisdictions' income and other tax withholding requirements prior to the
delivery of any certificates for such shares of Stock. Whenever payments are to
be made in cash to any Recipient pursuant to his or her exercise of an Award,
such payments shall be made net after deduction of all amounts sufficient to
satisfy fully any federal, state and other jurisdictions' income and other tax
withholding requirements.
13. Value. Where used in the Plan, the "fair market value" of Stock or
Options or rights with respect thereto, including Awards, shall mean and be
determined by: (a) in the event that the Stock is listed on an established
exchange, the closing price of the Stock on the relevant date or, if no trade
occurred on that day, on the next preceding day on which a trade occurred,
(b) in the event that the Stock is not listed on an established exchange,
but is then quoted on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"), the average of
the average of the closing bid and asked quotations of the Stock for
the five (5) trading days immediately preceding the
relevant date, or (c) in the event that the Stock is not then listed on an
established exchange or quoted on NASDAQ, the average of the average of the
closing bid and asked quotations of the Stock for five (5) trading days
immediately preceding the relevant date as reported by such brokerage
firms which are then making a market in the Stock. In the event that the
Stock is not listed on an established exchange, quoted on
NASDAQ, and no closing bid and asked quotations are available,
fair market value shall be determined in good faith by
the Committee. In the case of (b) or (c) above, in the event that no
closing bid or asked quotation is available on one or more of such
trading days, fair market value shall be determined by reference to the
five (5) trading days immediately preceding the relevant date on which
closing bid and asked quotations are available.
14. Amendment. To the extent permitted by applicable law, the Board may
amend, suspend, or terminate the Plan at any time; provided, however, that: (a)
no amendment may be adopted that permits an Award to be granted to any member of
the Committee; (b) with respect to qualified options, except as specified in
paragraph 18 hereof, no amendment may be adopted that will increase the number
of shares reserved for Awards under the Plan, change the option price, or
change the provisions required for compliance with Section 422 of the Code and
regulations issued thereunder. The amendment or termination of this Plan shall
not, without the consent of the Recipients, alter or impair any rights or
obligations under any Award previously granted hereunder.
In addition and subject to the foregoing, the Committee may prescribe other
or additional terms, conditions and provisions with respect to the grant or
exercise of any or all Awards as the Committee may determine necessary or
appropriate for such Awards and the Stock subject thereto to qualify under and
comply with all applicable laws, rules and regulations, and changes therein,
including but not limited to the provisions of Sections 421 and 422 of the Code
and Section 16 of the Securities Exchange Act of 1934, as amended. Without
limiting the generality of the preceding sentence, each Qualified Option, and
any SAR awarded in connection therewith, shall be subject to such other and
additional terms, conditions and provisions as the Committee may deem necessary
or appropriate in order to qualify such Option, or connected Option and SAR, as
an incentive stock option under Section 422 of the Code, including but not
limited to the following provisions:
(i) the aggregate fair market value, at the time such
Option is awarded, of the Stock subject thereto and of any
Stock or other capital stock with respect to which incentive
stock options qualifying under Sections 421 and 422 of the
Code are exercisable for the first time by the Recipient
during any calendar year under the Plan and any other plans
of the Corporation or its affiliates, shall not exceed
$100,000.00; and
(ii) No Qualified Option, or any SAR in connection
therewith, shall be awarded to any person if at the time of
such Award, such person owns Stock possessing more than ten
percent (10%) of the total combined voting power of all
classes of capital stock of the Corporation or its
affiliates, unless at the time such Option or SAR is awarded
the Stock purchase price under such Option is at least one
hundred and ten percent (110%) of the fair market value of
the Stock subject to such Option and the Option (and any SAR
connected therewith) by its terms is not exercisable after
the expiration of five (5) years from the date it is
awarded.
From time to time, the Committee may rescind, revise and add to any of such
terms, conditions and provisions as may be necessary or appropriate to have any
Awards be or remain qualified and in compliance with all applicable laws, rules
and regulations, and may delete, omit or waive any of such terms, conditions or
provisions that are no longer required by reason of changes in applicable laws,
rules or regulations.
15. Continued Employment. Nothing in the Plan or any Award shall confer
upon any Recipient or other persons any right to continue in the employment of,
or maintain any particular relationship with the Corporation or its affiliates,
or limit or affect any rights, powers or privileges that the Corporation or its
affiliates may have to supervise, discipline and terminate such Recipient or
other persons, and the employment and other relationships thereof. However, the
Committee may require as a condition of making and/or exercising any Award that
its Recipient agree to, and in fact provide services, either as an employee or
in another capacity, to or for the Corporation or any Subsidiary for such time
period following the date the Award is made and/or exercised as the
Committee may prescribe. The immediately preceding sentence shall not apply
to any Qualified Option to the extent such application would
result in disqualification of said Option as an incentive
stock option under Sections 421 and 422 of the Code.
16. General Restrictions. Each Award shall be subject to the requirement
and provision that if at any time the Committee determines it necessary or
desirable as a condition of or in consideration of making such Award, or the
purchase or issuance or Stock thereunder, (a) the listing, registration or
qualification of the Stock subject to the Award, or the Award itself, upon any
securities exchange or under any federal or state securities or other laws, (b)
the approval of any governmental authority, or (c) an agreement by the Recipient
with respect to disposition of any Stock (including without limitation that at
the time of the Recipient's exercise of the Award, any Stock thereby acquired is
being and will be acquired solely for investment purposes and without any
intention to sell or distribute such Stock), then such Award shall not be
consummated in whole or in part unless such listing, registration,
qualification, approval or agreement shall have been appropriately effected or
obtained to the satisfaction of the Committee and legal counsel
for the Corporation.
17. Rights. Except as otherwise provided in the Plan, the Recipient of
any Award shall have no rights as a holder of the Stock subject
thereto unless and until one or more certificates for the
shares of such Stock are issued and delivered to the Recipient.
No adjustments shall be made for dividends, either
ordinary or extraordinary, or any other distributions with respect to Stock,
whether made in cash, securities or other property, or any rights with respect
thereto, for which the record date is prior to the date that any certificates
for Stock subject to an Award are issued to the Recipient pursuant to his or her
exercise thereof. No Award, or the grant thereof, shall limit or affect the
right or power of the Corporation or its affiliates to adjust, reclassify,
recapitalize, reorganize or otherwise change its or their capital or business
structure, or to merge, consolidate, dissolve, liquidate or sell any or all of
its or their business, property or assets.
18. Adjustments. In the event of any change in the number of issued and
outstanding shares of Stock which results from a stock split, reverse stock
split, payment of a stock dividend or any other change in the capital structure
of the Corporation, the Committee shall proportionately adjust the maximum
number of shares subject to each outstanding Award, and (where appropriate)
the purchase price per share thereof (but not the total
purchase price under the Award), so that upon exercise or realization
of such Award, the Recipient shall receive the same number of shares he
or she would have received had he or she been the holder
of all shares subject to his or her outstanding Award and immediately before the
effective date of such change in the number of issued and outstanding shares of
Stock. Such adjustments shall not, however, result in the issuance of
fractional shares. Any adjustments under this paragraph 18 shall be made
by the Committee, subject to approval by the Board.
No adjustments shall be made that would cause
a Qualified Option to fail to continue to qualify as an incentive stock option
within the meaning of Section 422 of the Code.
In the event the Corporation is a party to any merger, consolidation or
other reorganization, any and all outstanding Awards shall apply and relate to
the securities to which a holder of Stock is entitled after such merger,
consolidation or other reorganization. Upon any liquidation or dissolution of
the Corporation, any and all outstanding Awards shall terminate upon
consummation of such liquidation or dissolution, but prior to such
consummation shall be exercisable to the extent that the same otherwise
are exercisable under the Plan.
19. Forfeiture. Notwithstanding anything to the contrary in this Plan, if
the Committee finds after full consideration of the facts presented on behalf of
the Corporation and the involved Recipient, that he or she has been engaged in
fraud, embezzlement, theft, commission of a felony, or dishonesty in the course
of his or her employment by the Corporation or any Subsidiary that has damaged
it, or that the Recipient has disclosed trade secrets of the Corporation or its
affiliates, the Recipient shall forfeit all rights under and to all unexercised
Awards, and all exercised Awards under which the Corporation has not yet
delivered payment or certificates for shares of Stock (as the case may be), all
of which Awards and rights shall be automatically canceled. The decision of the
Committee as to the cause of the Recipient's discharge from employment with the
Corporation or any Subsidiary and the damage thereby suffered shall be final for
purposes of the Plan, but shall not affect the finality of the Recipient's
discharge by the Corporation or Subsidiary for any other purposes. The
preceding provisions of this paragraph shall not apply to any Qualified
Option to the extent such application would result in disqualification
of said Option as an incentive stock option under Sections
421 and 422 of the Code.
20. Indemnification. In and with respect to the administration of the
Plan, the Corporation shall indemnify each present and future member of the
Committee and/or of the Board, who shall be entitled without further action on
his or her part to indemnity from the Corporation for all damages, losses,
judgments, settlement amounts, punitive damages, excise taxes, fines, penalties,
costs and expenses (including without limitation attorneys' fees and
disbursements) incurred by such member in connection with any threatened,
pending or completed action, suit or other proceedings of any nature,
whether civil, administrative, investigative or criminal, whether formal
or informal, and whether by or in the right or name of the
Corporation, any class of its security holders, or otherwise, in which
such member may be or have been involved, as a party or otherwise, by
reason of his or her being or having been a member of the
Committee and/or of the Board, whether or not he or she continues to be such a
member. The provisions, protection and benefits of this paragraph shall apply
and exist to the fullest extent permitted by applicable law to and for the
benefit of all present and future members of the Committee and/or of the Board,
and their respective heirs, personal and legal representatives, successors and
assigns, in addition to all other rights that they may have as a matter of law,
by contract, or otherwise, except (a) as may not be allowed by applicable law,
(b) to the extent there is entitlement to insurance proceeds under insurance
coverage provided by the Corporation on account of the same matter or proceeding
for which indemnification hereunder is claimed, or (c) to the extent there is
entitlement to indemnification from the Corporation, other than under this
paragraph, on account of the same matter or proceeding for which indemnification
hereunder is claimed.
21. Miscellaneous. Any reference contained in this Plan to a particular
section or provision of law, rule or regulation, including but not limited to
the Internal Revenue Code of 1986 and the Securities Exchange Act of 1934,
both as amended, shall include any subsequently enacted or
promulgated section or provision of law, rule or regulation,
as the case may be, of similar import. With respect to persons
subject to Section 16 of the Securities Exchange Act of
1934, as amended, transactions under this Plan are intended to comply
with all applicable conditions of Rule 16b-3 or any successor rule that
may be promulgated by the Securities and Exchange Commission,
to the extent any provision of this
Plan or action by the Committee fails to so comply, it shall be deemed null and
void, to the extent permitted by applicable law and deemed advisable by the
Committee, and to the extent that there are additional requirements under Rules
16b-3, it is the responsibility of the participants to satisfy such
requirements. Where used in this Plan: the plural shall include the singular,
and unless the context otherwise clearly requires, the singular shall include
the plural; and, the term "affiliates" shall
mean each and every Subsidiary and any parent of the
Corporation. The captions of the numbered paragraphs contained in this Plan are
for convenience only, and shall not limit or affect the meaning, interpretation
or construction of any of the provisions of the Plan.
P R O X Y
ANNUAL MEETING OF SHAREHOLDERS
To Be Held On April 30, 1996
STERLING FINANCIAL CORPORATION
101 North Pointe Boulevard
Lancaster, Pennsylvania 17601-4133
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Mary W. Wentz and Thomas Wright, and each
or any of them, as proxies, with full power of substitution, to represent and
vote, all of the shares of STERLING FINANCIAL CORPORATION common stock held of
record by the undersigned on March 14, 1997, at the Annual Meeting of the
shareholders to be held at the Willow Valley Family Resort and Conference
Center, 2416 Willow Street Pike, Lancaster, Pennsylvania, on Tuesday,
April 29, 1997, at 9:00 a.m. prevailing time, and at any adjournment
or postponement thereof, with all of the powers the undersigned
would possess if personally present thereat, as indicated on the
reverse side of this card.
The shares represented by this Proxy will be voted as directed below. If
no directions are given, the shares represented by this Proxy will be voted FOR
Nominees listed in Proposal 1 and FOR Proposals 2 and 3.
This proxy also confers authority as to other business as may properly
come before the meeting and any adjournment or postponement thereof.
The Board of Directors at present knows of no other business
to be brought before this meeting, but if any other business
is brought before the meeting, the shares represented by this Proxy
will be voted in accordance with the recommendations of
the management of Sterling Financial Corporation.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement dated March 28, 1997, and hereby revoke(s) all
other proxies heretofore given by the undersigned in connection with this
meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. PLEASE
SIGN, DATE AND RETURN THIS PROXY AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU
PLAN TO ATTEND THIS MEETING. THIS PROXY IS REVOCABLE AT ANY TIME BEFORE IT IS
EXERCISED AND MAY BE WITHDRAWN IF YOU ELECT TO ATTEND THE MEETING, GIVE WRITTEN
NOTIFICATION TO THE SECRETARY OF THE CORPORATION AND VOTE IN PERSON.
Please mark your
votes as in this
example.
1. ELECTION OF CLASS OF FOR WITHHELD Nominees:
2000 DIRECTORS TO Robert H. Caldwell
SERVE FOR A THREE- J. Robert Hess
YEAR TERM J. Roger Moyer, Jr.
INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominees's name on the line provided below.
FOR AGAINST ABSTAIN
2. PROPOSAL TO APPROVE AND RATIFY THE ADOPTION OF
THE STERLING FINANCIAL CORPORATION 1996 STOCK
INCENTIVE PLAN
The Board of Directors recommends a vote FOR this proposal.
FOR AGAINST ABSTAIN
3. PROPOSAL TO RATIFY THE SELECTION OF TROUT,
EBERSOLE & GROFF AS THE CORPORATION'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR
THE YEAR ENDING DECEMBER 31, 1997
SIGNATURE(S) DATE ,1997
Please sign exactly as your name appears hereon. If stock is jointly held,
each joint owner should sign. If signing for a corporation or a partnership,
or as attorney or fiduciary, indicate your full title. If more
than one fiduciary is involved, all should sign.