DIMECO INC, DEF 14A, 2000-03-31

DIMECO INC
DEF 14A, 2000-03-31
STATE COMMERCIAL BANKS

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DIMECO, INC.
PROXY
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 27, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby constitutes and appoints Jerome D. Theobald and
Susan Wright and each and any of them, proxies of the undersigned, with full
power of substitution, to vote all of the shares of Dimeco, Inc. (the
"Company") that the undersigned may be entitled to vote at the Annual Meeting
of Shareholders of the Company to be held at the Operations Center of The
Dime Bank, 120 Sunrise Avenue, Honesdale, Pennsylvania 18431, on Thursday,
April 27, 2000, at 2:00 p.m. Eastern Standard Time, and at any adjournment or
postponement of the meeting as follows:

1. ELECTION OF CLASS B DIRECTORS

JOHN S. KIESENDAHL BARBARA J. GENZLINGER JOHN F. SPALL

[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
above (except as provided to vote for all
to the contrary below) nominees listed above

(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)

-----------------------------------------------------------

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES LISTED ABOVE.
- ------------------------------------------------------------------------------
2. APPROVAL AND ADOPTION OF THE DIMECO, INC. 2000 STOCK INCENTIVE PLAN

[ ] FOR [ ] AGAINST [ ] ABSTAIN

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
- ------------------------------------------------------------------------------
3. APPROVAL AND ADOPTION OF THE DIMECO, INC. 2000 INDEPENDENT DIRECTORS STOCK
OPTION PLAN

[ ] FOR [ ] AGAINST [ ] ABSTAIN

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
- ------------------------------------------------------------------------------
4. RATIFICATION OF THE SELECTION OF S. R. SNODGRASS, A.C., CERTIFIED PUBLIC
ACCOUNTANTS, AS THE AUDITORS OF THE COMPANY FOR THE YEAR ENDING DECEMBER
31, 2000.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
- ------------------------------------------------------------------------------
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and any adjournment or
postponement of the meeting.
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES LISTED ABOVE AND FOR PROPOSALS 2, 3 AND 4.

Dated , 2000
----------------------------

----------------------------------------

----------------------------------------
Signature(s)
Number of Shares Held of
Record on March 17, 2000:
---------------

THIS PROXY MUST BE DATED, SIGNED BY THE SHAREHOLDER AND RETURNED PROMPTLY TO
THE COMPANY IN THE ENCLOSED ENVELOPE. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE. IF MORE THAN ONE
TRUSTEE, ALL SHOULD SIGN. IF STOCK IS HELD JOINTLY, EACH OWNER MUST SIGN.

<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO THE SHAREHOLDERS OF DIMECO, INC.:

Dimeco, Inc. (the "Company") hereby gives notice that the Annual Meeting
of Shareholders will be held at 2:00 p.m., Eastern Standard Time, on Thursday,
April 7, 2000, at the Operations Center of The Dime Bank, 120 Sunrise Avenue,
Honesdale, Pennsylvania 18431, for the following purposes:

1. To elect three Class B Directors to serve for a three-year term and
until their successors are properly elected and qualified.

2. To approve and adopt the Dimeco, Inc. 2000 Stock Incentive Plan.

3. To approve and adopt the Dimeco, Inc. 2000 Independent Directors
Stock Option Plan.

4. To ratify the selection of S. R. Snodgrass, A.C., Certified Public
Accountants, of Wexford, Pennsylvania, as the independent auditors of
the Company for the fiscal year ending December 31, 2000.

5. To transact such other business as may properly come before the
Annual Meeting and any adjournment or postponement of the meeting.

Only those shareholders of record at the close of business, at 5:00 p.m.,
on Friday, March 17, 2000, may vote at the Annual Meeting.

A copy of the Company's Annual Report for the fiscal year ended
December 31, 1999, is being mailed with this notice.

You are urged to mark, sign, date and promptly return your proxy in the
enclosed, postage-prepaid envelope. By so doing, you will assure that your
shares will be voted in accordance with your wishes whether or not you
personally attend the meeting. The return of your proxy will also help to
assure the presence of a quorum at the meeting. Finally, the prompt return of
your signed proxy, regardless of the number of shares you hold, will aid the
Company in reducing the expense of additional proxy solicitation. The giving
of such proxy does not affect your right to vote in person if you attend the
meeting and give written notice to the Secretary of the Company.

By Order of the Board of Directors

Joseph J. Murray
President & Chief Executive Officer

Honesdale, Pennsylvania
April 1, 2000

<PAGE>
PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD APRIL 27, 2000

GENERAL

INTRODUCTION, DATE, PLACE AND TIME OF MEETING

Dimeco, Inc. (the "Company"), a Pennsylvania business corporation and
registered bank holding company, is furnishing this Proxy Statement in
connection with the solicitation by the Board of Directors of proxies to be
voted at the Annual Meeting of Shareholders of the Company and any
adjournment or postponement of the meeting. The Annual Meeting will be held
at the Operations Center of The Dime Bank, 120 Sunrise Avenue, Honesdale,
Pennsylvania 18431, on Thursday, April 27, 2000, at 2:00 p.m., Eastern
Standard Time.

The main office of the Company is located at The Dime Bank, 820 Church
Street, Honesdale, Pennsylvania 18431. The Dime Bank is the wholly-owned
subsidiary of the Company and its sole subsidiary. The telephone number for
the Company is (570) 253-1970. All inquiries should be directed to Joseph J.
Murray, President and Chief Executive Officer.

The Company is first sending this Proxy Statement and the enclosed form
of proxy to shareholders of the Company on or about April 1, 2000.

SOLICITATION

By properly filling out, signing and returning the accompanying form of
proxy in the enclosed postage-prepaid envelope, a shareholder is appointing
the proxy holders to vote his or her shares in accordance with the
shareholder's directions on the proxy. Unless a proxy specifies to the
contrary, the proxy holders will vote the shares held by the shareholder
giving the proxy as follows:

FOR the election of the three nominees for Class B Director named below;
FOR the approval and adoption of the Dimeco, Inc. 2000 Stock Incentive
Plan;
FOR the approval and adoption of the Dimeco, Inc. 2000 Independent
Directors Stock Option Plan; and
FOR the ratification of the selection of S. R. Snodgrass, A.C., Certified
Public Accountants of Wexford, Pennsylvania, as the independent auditors
for the Company for the year ending December 31, 2000.

The execution and return of the enclosed proxy will not affect a
shareholder's right to attend the Annual Meeting and vote in person, after
giving written notice to the Secretary of the Company of his or her intent to
vote in person.

The Company will pay for preparing, assembling, mailing and soliciting
proxies. In addition to the use of the mails, certain directors, officers and
employees of the Company intend to solicit proxies personally, by telephone
and by facsimile. The Company will arrange with brokerage houses and other
custodians, nominees and fiduciaries to forward proxy solicitation material to
the beneficial owners of stock held of record by these persons. Upon request,
the Company will reimburse such custodians for their reasonable forwarding
expenses.

RIGHT OF REVOCATION

A shareholder who executes and returns a proxy may revoke the proxy at
any time before it is voted only by:

Giving written notice of the revocation to Mr. Gerald Weniger,
Secretary, Dimeco, Inc., 820 Church Street, Honesdale,
Pennsylvania, 18431, telephone: (570)253-1970;
Executing a later-dated proxy and giving written notice of this fact
to the Secretary of the Company; or
Giving written notice to the Secretary of the Company that the
shareholder intends to vote in person at the Annual Meeting.

VOTING SECURITIES AND RECORD DATE

At the close of business on March 17, 2000, the Company had outstanding
735,728 shares of common stock, $.50 par value per share.

1
<PAGE>

Only holders of common stock on the Company's records as of the close of
business on March 17, 2000, may vote at the Annual Meeting. On all matters
to come before the Annual Meeting, each share of common stock entitles its
holder to one vote.

QUORUM

Pennsylvania law requires the presence of a quorum prior to the
transaction of business at the Annual Meeting. Section 3.1 of the By-Laws of
the Company provides that the presence, in person or by proxy, of shareholders
entitled to cast at least a majority of the votes which all shareholders are
entitled to cast, shall constitute a quorum for the transaction of business at
the 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 votes which the broker withheld authority. Those shareholders present,
in person or by proxy, may adjourn the meeting to another time and place if a
quorum is lacking.

VOTE REQUIRED FOR APPROVAL

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 the nominee.

Assuming the presence of a quorum, approval and adoption of the Dimeco,
Inc. 2000 Stock Incentive Plan and the Dimeco, Inc. 2000 Independent Directors
Stock Option Plan each requires the affirmative vote of a majority of all
shares entitled to vote (meaning, a majority of the number of shares
outstanding on the record date). Abstentions and broker non-votes, which do
not count either for or against a proposal, have the practical effect of
reducing the number of affirmative votes required to achieve a majority for
the matter by reducing the total number of shares voted from which the
required majority is calculated.

Assuming the presence of a quorum, the affirmative vote of a majority of
the votes cast by all shareholders, in person or by proxy, who are entitled to
vote at the Annual Meeting will be sufficient to approve the selection of S.R.
Snodgrass, A.C., Certified Public Accountants, as the auditors of the Company
for the year ending December 31, 2000. Abstentions and broker non-votes, which
do not count either for or against a proposal, have the practical effect of
reducing the number of affirmative votes required to achieve a majority for
the matter by reducing the total number of shares voted from which the
required majority is calculated.

PRINCIPAL BENEFICIAL OWNERS OF THE COMPANY'S STOCK

PRINCIPAL OWNERS

As of March 17, 2000 there was no person who owned of record or who is
known by the Board of Directors to be the beneficial owner of more than five
percent (5%) of the Company's outstanding common stock.

2
<PAGE>

BENEFICIAL OWNERSHIP BY OFFICERS, DIRECTORS AND NOMINEES

The following table indicates the amount and percentage of the common
stock of the Company beneficially owned by each director, each nominee and all
officers and directors of the Company as a group as of March 17, 2000. All
shares reported have been rounded to the nearest whole share and are
individually owned by the reporting person unless otherwise indicated.

Name of Individual Amount and Nature of Percent of
or Identity of Group Beneficial Ownership(1)(2) Class(3)
- -------------------- -------------------------- ----------
Robert E. Genirs(4) 1,000 -----
Barbara Jeanne Genzlinger(5) 457 -----
John S. Kiesendahl(5)(8) 11,270 1.53%
Joseph J. Murray(4)(9) 1,471 -----
Thomas A. Peifer(4)(7) 7,259 -----
William E. Schwarz(6) 5,550 -----
Henry M. Skier(6) 35,267 4.79%
John F. Spall(5)(7) 11,459 1.56%
Gerald J. Weniger(6) 2,696 -----

All Officers and Directors as a
Group (11 persons in total) 78,268 10.64%
- ------------------------------
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definitions of "beneficial ownership" set forth in
the General Rules and Regulations of the Securities and Exchange
Commission ("SEC") and may include securities owned by or for the
individual's spouse and minor children and any other relative who has
the same home, as well as securities to which the individual has or
shares voting or investment power or has the right to acquire
beneficial ownership within 60 days after March 17, 2000. Beneficial
ownership may be disclaimed as to certain of the securities.
(2) Information furnished by the Directors and the Company.
(3) Less than one percent (1%) unless otherwise indicated.
(4) A Class A Director whose term expires in 2002.
(5) A Class B Director whose term expires in 2000 and a nominee for Class B
Director whose term expires in 2003.
(6) A Class C Director whose term expires in 2001.
(7) All shares are held jointly with his spouse.
(8) Includes 1,638 shares held individually by Mr. Kiesendahl, 2,456 shares
held by his stepson who resides with Mr. Kiesendahl and 7,176 shares
held by Woodloch Pines, Inc., of which Mr. Kiesendahl is the President.
(9) Includes 1,459 shares held jointly by Mr. Murray with his spouse and 12
shares held by his son who resides with Mr. Murray.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than
ten percent of a registered class of the Company's equity securities (in this
case the Company's common stock), to file reports of ownership and changes in
ownership with the Securities and Exchange Commission, (the "SEC"). SEC
regulation require officers, directors and greater than ten-percent
shareholders to furnish the Company with copies of all Section 16(a) forms
that they file.

Based solely on its review of the copies of such forms received by it, or
on written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during the period
January 1, 1999 through December 31, 1999 all filing requirements applicable
to its officers, directors and greater than ten-percent shareholders were
complied with.

3
<PAGE>

ELECTION OF DIRECTORS

The Company has a classified Board of Directors with staggered three-year
terms of office. In a classified board, the directors are generally divided
into separate classes of equal number with the terms of the separate classes
expiring in successive years. The Company's Board is divided into three
classes. Thus, at the 2000 Annual Meeting of Shareholders, successors to the
current Class B directors whose terms expire in 2000 shall be elected to hold
office for a term of three years.

In addition, there is no cumulative voting for the election of directors.
Accordingly, each share of common stock entitles its holder to cast only one
vote for each nominee. For example, if a shareholder owns 100 shares of
common stock, he or she may cast up to 100 votes for each of the nominees for
director in the class to be elected. Only the affirmative vote of at least a
majority of the shares of common stock represented at the Annual Meeting can
elect a nominee to the office of director.

The Board of Directors of the Company has nominated the current Class B
directors to serve as Class B directors for the next three-year term of
office. The nominees for re-election this year are as follows:

John S. Kiesendahl, director of the Company since 1992
Barbara J. Genzlinger, director of the Company since 1998
John F. Spall, director of the Company since 1999

Each nominee has consented to serve a three year term of office and until
his/her successor is elected and qualified.

Unless otherwise instructed, the proxy holders will vote the Proxies
received by them for the election of the three nominees for Class B director
named above. If any nominee should become unavailable for any reason, the
proxy holders will vote the proxies in favor of a substitute nominee as the
Board of Directors of the Company shall determine. The Board of Directors has
no reason to believe the nominees named will be unable to serve if elected. A
majority of directors of the Company may fill any vacancy occurring on the
Board of Directors of the Company for any reason until the expiration of the
term of vacancy. Also, pursuant to Section 10.2 of the Company's By-Laws, the
Board of Directors may from time to time fix the number of directors and their
classifications, except that the number of directors may not be less than
three.

INFORMATION AS TO NOMINEES AND DIRECTORS

The following table contains certain information with respect to the
current Class A directors, the current Class B directors who are also the
nominees for Class B director and Class C directors. The terms of office for
class A, B and C directors expire in 2002, 2000 and 2001, respectively.

Position Held with
Company and Bank
Age as of and Principal Occupation Director Since
Name March 17, 2000 for Past Five Years Company/Bank
- ---- -------------- ------------------------ --------------
CLASS A DIRECTORS WHOSE TERM EXPIRES IN 2002
- --------------------------------------------

Joseph J. Murray 60 President and Chief Executive 1992/1991
Officer of the Company and
the Bank

Thomas A. Peifer 57 Superintendent of the 1992/1987
Wallenpaupack Area
School District

Robert E. Genirs 64 Retired 1998; prior 1998/1998
Chief Financial Officer-
Lehman Brothers

4
<PAGE>

CURRENT CLASS B DIRECTORS WHOSE TERM EXPIRES IN 2000 AND NOMINEES FOR CLASS B
- -----------------------------------------------------------------------------
DIRECTORS WHOSE TERM WILL EXPIRE IN 2003
- ----------------------------------------

John S. Kiesendahl 53 President -Woodloch 1992/1985
Pines, Inc. (resort)

Barbara J. Genzlinger 48 Owner - Settlers Inn 1998/1998
(bed & breakfast)

John F. Spall 53 Attorney-at-Law 1999/ 1999

CLASS C DIRECTORS WHOSE TERM EXPIRES IN 2001
- --------------------------------------------

William E. Schwarz 57 Chairman of the Board of 1992/1971
the Company and the Bank
President - Edw. J. Schwarz, Inc.
(automobile dealership)

Henry M. Skier 59 President and Treasurer - 1992/1982
A. M. Skier Agency, Inc.
(independent insurance agency)

Gerald J. Weniger 69 Secretary of the Company
Assistant Secretary of the Bank 1992/1986
Retired - 1998; prior
President - Weniger Electronics,
Inc. (retail electronic equipment)

During 1999, the Board of Directors of the Company held seven meetings.
Directors received no additional remuneration for attendance at meetings of
the Board of Directors of the Company. The Board of Directors of the Bank
held 27 meetings.

Each of the Directors, with the exception of Mr. Genirs and Mr. Skier,
attended at least 75% of the total number of meetings of the Company. Each of
the Directors, with the exception of Mr. Genirs and Mr. Skier, attended at
least 75% of the total number of meetings of the Bank's Board of Directors.
At present, the Board of Directors of the Company has no standing
committees. The Company does not have a nominating committee. A shareholder
who desires to propose an individual for consideration by the Board of
Directors as a nominee for director should submit a proposal in writing to the
Secretary of the Company in accordance with Section 10.1 of the Company's
By-Laws.

5
<PAGE>

INFORMATION AS TO COMPENSATION OF EXECUTIVES AND DIRECTORS

EXECUTIVE COMPENSATION

The following table sets forth the total compensation for services in all
capacities paid by the Company and the Bank during 1999, 1998 and 1997 to the
Company's and the Bank's President and Chief Executive Officer. No other
officer of the Company and the Bank had total annual salary and bonus that
exceeded $100,000 during 1999, 1998 or 1997.

<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE(1)

Annual Compensation
-------------------------------------------------------
Name and Fiscal Other Annual All Other
Principal Position Year Salary($) Bonus($) Compensation($) Compensation($)
- -------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <S>
Joseph J. Murray, President 1999 131,017 3,878 77,123(2) -
and Chief Executive Officer 1998 130,179 8,650 55,203(3) -
of the Company and Bank 1997 132,592 8,000 45,132(4) -
=================================================================================================
</TABLE>
(1) From January 1, 1997 through December 31, 1999, the Company did not pay
any long-term compensation in the form of stock options, stock
appreciation rights, restricted stock or any other long-term
compensation, nor did it make any long-term incentive plan payments.
Accordingly, no such information is presented in the Summary Compensation
Table set forth above.
(2) Includes $56,702 vested benefit in salary continuation plan, a $9,198
contribution to Mr. Murray's 401(k) profit sharing plan, $10,086 as the
incremental costs for an automobile made available to Mr. Murray and
$1,137 representing various medical, disability and life insurance
premiums.
(3) Includes $40,377 vested benefit in salary continuation plan, a $7,688
contribution to Mr. Murray's 401(k) profit sharing plan, $6,210 as the
incremental costs for an automobile made available to Mr. Murray and $928
representing various medical, disability and life insurance premiums.
(4) Includes $26,405 vested benefit in salary continuation plan, a $9,324
contribution to Mr. Murray's 401(k) profit-sharing plan, $7,351 as the
incremental costs for an automobile made available to Mr. Murray and
$2,052 representing various medical, disability and life insurance
premiums.

SALARY CONTINUATION PLAN FOR EXECUTIVE OFFICERS

Joseph J. Murray has served as the Company's and the Bank's President and
Chief Executive Officer since 1993 and Executive Vice President and Chief
Executive Officer of the Bank since 1986. Maureen H. Beilman has served as
the Company's and the Bank's Treasurer since 1993, the Bank's Secretary from
1997 until 1999, the Company's Assistant Secretary since 1997, as Chief
Financial Officer of the Company and the Bank since 1999 and Controller of the
Bank from 1988 until 1999. Gary C. Beilman has served as Vice President of
the Company from 1993 to 1999, as Vice President of the Bank from 1989 until
1999 and as Senior Vice President of the Company and the Bank since 1999. As
a result of these officers' active involvement and experience in the affairs
of the Bank, the Bank has depended upon, and continues to depend upon, their
continued employment. The Bank does not maintain employment contracts or key
man insurance, other than in connection with the salary continuation plans
below, with respect to Messrs. Murray and Beilman and Ms. Beilman. However,
in 1995, the Bank entered into agreements to establish a non-qualified salary
continuation plan (the "Salary Continuation Plan") for these officers. If an
officer continues to serve as an officer of the Bank until he or she attains
age sixty-five (65), the Bank agrees to pay that officer 120 guaranteed
consecutive monthly payments commencing on the first day of the month
following the officer's 65th birthday. If the officer attains sixty-five (65)
years of age, but dies before receiving all of the guaranteed monthly payments
or dies before age sixty-five (65) while serving as an officer, then the Bank
will make the remaining payments to that officer's designated beneficiary or
to the representative of his or her estate. The Bank has obtained life
insurance (designating the Bank as beneficiary) on the life of each
participating officer in an amount which is intended to cover the Bank's
obligations under the Salary Continuation Plan, based upon certain actuarial
assumptions. In 1999, the Bank accrued $49,768 as an expense for the Salary
Continuation Plan. Income realized from increases in the cash surrender
values of the life insurance policies in 1999 was $57,342.

<PAGE>
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION

The Board of Directors of Dimeco, Inc. is responsible for the governance
of the Company and its subsidiary, The Dime Bank. In fulfilling its fiduciary
duties, the Board of Directors acts in the best interests of the Company's
shareholders, customers and the communities served by the Company and the
Bank. To accomplish the strategic goals and objectives of the Company, the
Board of Directors engages competent persons who undertake to accomplish these
objectives with integrity in a cost-effective manner. The compensation of
these individuals is part of the Board of Directors' fulfillment of its
duties to accomplish the Company's strategic mission. The Bank provides
compensation to the employees of the Company and the Bank.

The fundamental philosophy of the Company's and the Bank's compensation
program is to offer competitive compensation opportunities for all employees
based on the individual's contribution and personal performance. The
compensation program is administered by a Compensation Committee comprised of
all outside directors. The objectives of the Committee are to establish a
fair compensation policy to govern executive officers' base salaries and
incentive plans to attract and motivate competent, dedicated and ambitious
managers whose efforts will enhance the products and services of the Company,
the results of which will be improved profitability, increased dividends to
our shareholders and subsequent appreciation in market value of our shares.

The compensation of the Company's and Bank's top executive officers 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 Senior Vice President and the Chief Financial
Officer and Treasurer and all other Vice Presidents. As a guideline for
review in determining base salaries, the committee uses information composed
of a Pennsylvania peer group, "L.R. Webber Associates, Inc. Survey Report"
which includes peer group banks with assets of $100,000,000 to $199,999,000.

CHIEF EXECUTIVE OFFICER COMPENSATION

The Board of Directors has determined that the CEO's 1999 compensation of
$131,017 is appropriate in light of the following Company performance
accomplishments over the past five years:

sixty-eight percent (68%) increase in net income
seventy percent (70%) increase in net loans
sixty-three percent (63%) increase in deposits
sixty-nine percent (69%) increase in total assets

In addition, the Company, through its Bank subsidiary, has introduced a number
of new products over this time frame and expanded its role in the camping
industry, a profitable sector for the Company. Mr. Murray introduced the team
management style which has proven to be a very effective method of including
all levels of management in the operation of the Company. There is, however,
no direct correlation between the CEO's compensation, the CEO's increase in
compensation and any of the above criteria, nor is there any weight given by
the committee to any of the above specific individual criteria. Such increase
in the CEO's compensation is based on the committee's subjective determination
after review of all information that it deems relevant, including the above.

EXECUTIVE OFFICERS COMPENSATION

The Board of Directors establishes the compensation of the Company's and
the Bank's executive officers. Compensation increases were determined by the
committee based on its subjective analysis of each individual's contribution
to the Company's strategic goals and objectives. In determining whether
strategic goals have been achieved, the Board of Directors considers among
numerous factors, the following: the Company's performance as measured by
earnings, revenues, return on assets, return on equity, market share, total
assets and non-performing loans. In addition, the expansion of the Company's
penetration in the camping industry and implementation of the team management
style was considered. Although performance and increases in compensation
were measured in light of these factors, there is no direct correlation
between 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.

7
<PAGE>

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
Company's success. Individuals are reviewed annually on a calendar year
basis. The Bank strives to offer compensation that is competitive with that
offered by employers of comparable size in our industry. Through these
compensation policies, the Company strives to meet its strategic goals and
objectives to its constituencies and provide compensation that is fair and
meaningful to its employees.

Submitted By The Board of Directors Acting
as the Executive Compensation Committee:
Joseph J. Murray John S. Kiesendahl
William E. Schwarz Thomas A. Peifer
Gerald J. Weniger Henry M. Skier
Robert E. Genirs Barbara J. Genzlinger
John F. Spall

BOARD OF DIRECTORS INTERLOCKS AND INSIDER PARTICIPATION IN
COMPENSATION DECISIONS

Joseph J. Murray, President and Chief Executive Officer of the Company
and the Bank is a member of the Board of Directors. Mr. Murray makes
recommendations to the Board of Directors regarding compensation for all
employees. The recommendations are submitted to the entire Board of
Directors to be voted upon to establish compensation policies. Mr. Murray
does not participate in the discussions and decision relating to his base
salary and cash bonus.

DIRECTORS' COMPENSATION

Each outside Director of the Bank, with the exception of Mr. Spall,
received $11,000 for his or her services as a Director in 1999. Mr. Spall
received $10,083; he was appointed to serve on the Board of Directors in
February 1999 and his compensation was prorated accordingly. In 1999, the
Directors of the Bank received $87,083, in the aggregate, for attendance at
Board meetings. Directors received no remuneration for attendance at meetings
of the Board of Directors of the Company.

DIRECTOR DEFERRED COMPENSATION PLANS

The Bank has entered into agreements with two directors to establish
non-qualified deferred compensation plans (the "Director Deferred Compensation
Plans"). Mr. Skier is deferring substantially all of the payment of his
directors' fees described above. The plan is equal to a sum of money measured
by the collateral assignment portion between the Director and the Bank
accruing during the term of his appointment in connection with the Director's
agreement with the Bank. If the Director's appointment is terminated due to
his death or disability while still named as a Director of the Bank, the Bank
shall make the payment at the termination of service, if disabled, or to his
beneficiary, if deceased. The plan is fully funded by a split dollar life
insurance policy on the life of Mr. Skier. The plan for Mr. Kiesendahl is
recorded by the Bank in a deferred compensation account for his benefit. He
is entitled to receive all amounts credited to the account as of the date of
termination of service. If termination is due to his death, his beneficiary
will be entitled to receive all amounts credited to the account as of the date
of his death, either in installments or as a lump sum, at the Bank's
discretion. Mr. Kiesendahl chose not to defer any portion of his director's
fees during 1999. Although Messrs. Skier and Kiesendahl are the only
Directors who have entered into these agreements as of this date, the Bank has
offered these plans to all Directors and may enter into substantially similar
plans with its remaining Directors.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

There have been no material transactions since January 1, 1999, nor are
any such transactions currently proposed, to which the Company or the Bank was
or is to be a party and in which any director or executive officer of the
Company, or any beneficial owner of more than 5% of the common stock of the
Company (or any associate thereof, respectively), had or will have a material
interest. The Company and the Bank have engaged in and intend to continue to
engage in banking and financial transactions in the ordinary course of
business with directors and executive officers of the Company and the Bank and
their respective associates on comparable terms and with similar interest
rates as those prevailing from time to time for other non-affiliated customers
of the Company and the Bank. Total loans outstanding from the Company and the
Bank, at December 31, 1999, to the Company's and the Bank's officers and
directors as a group and members of their immediate families and companies

8
<PAGE>

in which they had an ownership interest of 10% or more was $3,486,369 or 20.0%
of the Bank's total equity capital accounts. This was the largest amount of
indebtedness outstanding at any time during fiscal year 1999 to the above
identified group. Such loans do not involve more than the normal risk of
collectibility nor do they present other unfavorable features.

EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth selected information about the principal
officers of the Company, each
of whom is selected by the Board of Directors and each of whom holds office at
the discretion of the Board
of Directors. All reported shares have been rounded to the nearest whole
share.

<TABLE>
<CAPTION>
Number of
Bank Company Shares Age as of
Office/Position Held Employee Beneficially March 17,
Name With Company Since Since Owned 2000
- ---- --------------- ----- ------- -------------- ---------
<S> <S> <C> <C> <C> <C>
William E. Schwarz Chairman 1993 (1) 5,550 57

Joseph J. Murray(2) President and CEO 1993 1986 1,471 60

Gerald J. Weniger Secretary 1993 (1) 2,696 69

Maureen H. Beilman(2) CFO, Treasurer
and Asst. Secretary 1999 1988 900 44

Gary C. Beilman(2) Sr. Vice President 1999 1989 939 45
</TABLE>
- ----------------------------------------------
(1) Messrs. Schwarz and Weniger have never been full-time employees of the
Bank.
(2) Messrs. Murray and Beilman and Ms. Beilman are full-time employees of the
Bank. Mr. Beilman is Ms. Beilman's brother-in-law.

EXECUTIVE OFFICERS OF THE BANK

The following table sets forth selected information about the principal
officers of the Bank, each of whom is selected by the Board of Directors of
the Bank and each of whom holds office at the discretion of the Board of
Directors of the Bank. All shares reported have been rounded to the
nearest share.

Joseph J. Murray President and CEO 1993 1986 1,471 60

Gary C. Beilman(2) Sr. Vice President 1999 1989 939 45

Maureen H. Beilman(2) CFO and Treasurer 1999 1988 900 44

L. Jill George Vice President 1999 1983 313 38
</TABLE>
- ----------------------------------------------
(1) Messrs. Schwarz and Weniger have never been full-time employees of the
Bank.
(2) Mr. Beilman is Ms. Beilman's brother-in-law.

9
<PAGE>
APPROVAL AND ADOPTION OF THE
DIMECO, INC.
2000 STOCK INCENTIVE PLAN

On March 16, 2000, the Board of Directors adopted the Dimeco, Inc. 2000
Stock Incentive Plan, subject to approval by the shareholders at the annual
meeting. The Board of Directors reserved 60,000 shares of common stock for
issuance under the Stock Incentive Plan subject to future adjustment for stock
splits and stock dividends. The terms and effect of the Stock Incentive Plan
are summarized below. This summary highlights selected information from the
2000 Stock Incentive Plan and may not contain all of the information that is
important to an individual shareholder. To understand the plan fully, and for
more complete descriptions of the terms of the plan, you should carefully read
the 2000 Stock Incentive Plan that is attached to this proxy statement as
"Exhibit A". "Exhibit A" is deemed to be an integral part of this proxy
statement.

The purposes of the Stock Incentive Plan are as follows:

to advance the Company's and the Bank's development, growth and
financial condition by providing additional incentives to key
officers and other employees by encouraging them to acquire stock
ownership in the Company;
to secure, retain and motivate personnel who may be responsible for
the Company's and the Bank's operation and management; and
to encourage employees to contribute to enhanced corporate
performance.

TERM

The Stock Incentive Plan became effective on the date the Board of
Directors adopted it, subject to shareholder approval and will remain
effective until all awards under the plan either have lapsed, been exercised,
satisfied or canceled. The Board may amend, suspend, or terminate the plan at
any time and under no circumstances can awards be granted after the 10th
anniversary of the plan's effective date, or March 16, 2010.

ADMINISTRATION

The Board of Directors or a committee of at least two members of the
Board administers and interprets the plan. The committee also determines
which key officers and other Company and Bank employees qualify for awards
under the Stock Incentive Plan and their associated terms and conditions. A
person's eligibility to receive an award will not exclude him or her from
participation in any other Company or Bank incentive or benefit plan or
program.

AWARDS

The committee may issue awards under the Stock Incentive Plan in the form
of:

Qualified Options -- options to purchase stock intended to qualify
for tax treatment as incentive stock options under Internal Revenue
Code Sections 421 and 422; these options have specific tax benefits
to recipients; or

Non-Qualified Options -- options to purchase stock not intended to
qualify for tax treatment under Internal Revenue Code Sections 421
through 424; or

Stock Appreciation Rights -- rights that entitle its holder, upon
exercise of the right, to receive from the issuer, in cash or
common stock, an amount equal to the excess of the market value of
the underlying common stock over the exercise price of the right;
or

Restricted Stock -- stock that is restricted as to transferability
and subject to forfeiture for a set period of time unless certain
conditions are met.

The committee, in its sole discretion, determines the awards and their
terms and conditions. Generally, awards may be exercised in whole or in part.
The Company will use funds received from the exercise of awards for its
general corporate purposes. The committee may permit the acceleration of any
award's exercise terms when the situation warrants. However, the committee
may impose other requirements and conditions consistent with the objective of
the plan. In addition, the Stock Incentive Plan provides for acceleration of
the exercise terms of all outstanding awards if a change of control of the
corporation occurs.

10
<PAGE>
FEDERAL INCOME 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) 18 months
from the award's grant date, and (ii) one year from the award's exercise date,
any gain (or loss) recognized on the stock's sale or exchange will be treated
as long-term capital gain (or loss), and the corporation will not receive any
income tax deduction. If stock acquired by the exercise of a qualified option
is sold or exchanged before the expiration of the required holding period, the
employee recognizes ordinary income in the year the disposition occurred in an
amount equal to the difference between the option price and the lesser of the
stock's fair market value on the exercise date, or the selling price. In the
event of a disqualifying disposition, the corporation is entitled to an income
tax deduction in the year the disposition occurred in an amount equal to the
amount of ordinary income the employee recognized.

An employee who receives a non-qualified option will not recognize
taxable income on the grant of the award. 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 is entitled to an income
tax deduction in the year of exercise in an amount equal to the amount of
income the employee recognized.

An employee who receives a stock appreciation right will not recognize
taxable income on the grant of the award. However, upon the exercise of the
stock appreciation right, the employee will recognize ordinary income in an
amount equal to the cash or the fair market value of the stock received. The
corporation is entitled to an income tax deduction in the year the employee
exercises the stock appreciation in an amount equal to the amount of income
the employee recognized.

An employee who receives restricted stock will not recognize taxable
income on the grant of the award if the restricted stock is non-transferable
and subject to a substantial risk of forfeiture. The employee will recognize
taxable income the first time that the rights in the restricted stock are
transferable, or are not subject to a substantial risk of forfeiture,
whichever occurs earlier. The employee will recognize taxable income in an
amount equal to the excess of the fair market value of the restricted stock at
that time, over the amount paid for the restricted
stock. However, an employee may elect to include in his or her taxable income
for the tax year when the stock is deemed transferred to the employee, the
excess of the fair market value of the restricted stock at the time of the
award, over the amount paid for the restricted stock. The corporation is
entitled to an income tax deduction, in an amount equal to the taxable income
the employee recognized, for the corporation's taxable year in which the
employee recognizes taxable income.

This tax discussion is a summary and provided for the shareholders'
convenience. The federal income tax consequences to any plan recipient and to
the Company may vary from those described above, depending upon individual
actions and circumstances.

As of March 16, 2000, fifteen executive officers and employees were
eligible to participate in the Stock Incentive Plan. No awards have been made
under the plan as of the date of this proxy statement. Future grants by the
committee are not presently determinable, nor is it possible to predict the
benefits that may be granted or allocated to particular individuals or groups
for 2000 and beyond. Currently, the Board of Directors has no definite plans
to issue any benefits under the Stock Incentive Plan.

The Board of Directors recommends a vote FOR the following resolution
that will be presented at the annual meting:

"RESOLVED, that the Dimeco, Inc. 2000 Stock
Incentive Plan, the text of which is set forth
in its entirety in "Exhibit A" to the proxy
statement for the 2000 Annual Meeting of
Shareholders, is hereby approved, adopted,
ratified and confirmed by the shareholders
of the Company."

A majority of shareholders entitled to vote must vote in the affirmative
to approve and adopt the Stock Incentive Plan. The proxy holders will vote
FOR the above resolution unless shareholders specify otherwise on their proxy
cards.

The Board of Directors recommends a vote FOR the proposal to approve and
adopt the Dimeco, Inc. 2000 Stock Incentive Plan.

11
<PAGE>
APPROVAL AND ADOPTION OF
DIMECO, INC.'S
2000 INDEPENDENT DIRECTORS STOCK OPTION PLAN

On March 16, 2000, the Board of Directors adopted the Dimeco, Inc. 2000
Independent Directors Stock Option Plan, subject to shareholder approval at
the annual meeting. The Board of Directors reserved 25,000 shares of common
stock for issuance under the plan subject to future adjustments due to stock
splits, payments of stock dividends or other changes in the Company's capital
structure. The terms and effect of the plan are summarized below. This
summary highlights selected information from the 2000 Independent Directors
Stock Option Plan and may not contain all of the information that is important
to an individual shareholder. To understand the plan fully, and for more
complete descriptions of the terms of the plan, shareholders should carefully
read the 2000 Independent Directors Stock Option Plan, attached to this proxy
statement as "Exhibit B". "Exhibit B" is deemed to be an integral part of
this proxy statement.

The purposes of the 2000 Independent Directors Stock Option Plan are as
follows:

to secure, retain and motivate non-employee Company directors;
to advance the Company's and the Bank's development, growth and
financial condition by providing additional incentives to non-
employee directors by encouraging them to acquire stock ownership in
the Company; and
to align the interests of non-employee directors with the interests
of shareholders, including the interest in the appreciation of the
Company's common stock.

TERM
The 2000 Independent Directors Stock Option Plan became effective on the
date the Board of Directors adopted it, subject to shareholder approval and
will remain effective until all awards under the plan either have lapsed, been
exercised, satisfied or canceled. The Board may amend, suspend, or terminate
the plan at any time and under no circumstances can awards be granted after
the 10th anniversary of the plan's effective date, or March 16, 2010.

ADMINISTRATION

The Board of Directors or a committee of at least two members of the
Board administers and interprets the plan. The committee also determines the
number of stock options to be awarded under the plan and their associated
terms and conditions. A director's eligibility to receive an award will not
exclude him or her from participation in any other Company or Bank incentive
or benefit plan or program.

ELIGIBILITY AND GRANTS

Only directors who are not officers or employees of the Company or the
Bank are eligible to receive awards under the plan. Each non-employee
director will be granted stock options annually on the first business day of
January, with the exception of the first annual award of options. The first
annual stock option awards will be made at the organizational meeting of the
Board following the Company's 2000 Annual Meeting of Shareholders. The
purchase price of a share of common stock subject to a stock option will be
the fair market value, as defined in the plan, on the grant date. The
recipient may exercise his or her stock options for ten years after the grant
date.

If a director ceases to be a director for any reason, the remaining
portion of that director's unexercised stock options terminates one year after
the director's termination date. If a director dies prior to the expiration
of that director's stock options without having fully exercised his or her
stock options, then, to the extent that the stock options were exercisable at
the time of death, the deceased director's legal representative or beneficiary
may exercise the stock options within one year after the director's death.

12
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES

The options issued pursuant to the plan will not qualify as incentive
stock options within the meaning of Sections 421 and 422 of the Internal
Revenue Code. Under the provisions of the Code as in effect on the date of
this proxy statement, a director 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 exercise date over the purchase
price paid for the stock. The Company is entitled to an income tax deduction
in the year the option was exercised in an amount equal to the amount of
income the director recognized.

The Board of Directors recommends a vote FOR the following resolution
which will be presented at the annual meeting:

"RESOLVED, that the Dimeco, Inc. 2000 Independent
Directors Stock Option Plan, the text of which is
set forth in its entirety in "Exhibit B" to the proxy
statement for the 2000 Annual Meeting of Shareholders,
is hereby approved, adopted, ratified and confirmed by
the shareholders of the Company."

The Board of Directors recommends a vote FOR the proposal to approve and
adopt the Dimeco, Inc. 2000 Independent Directors Stock Option Plan.

RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS

Unless instructed to the contrary, it is intended that votes will be cast
pursuant to the proxies for the ratification of the selection of S. R.
Snodgrass, A.C., Certified Public Accountants, of Wexford, Pennsylvania
("Snodgrass"), as the Company's independent public accountants for its fiscal
year ending December 31, 2000. The Company has been advised by Snodgrass that
none of its members has any financial interest in the Company. Ratification
of Snodgrass will require an affirmative vote of a majority of the shares of
Common Stock represented at the Annual Meeting. Snodgrass served as the
Company's independent public accountants for the Company's 1999 fiscal year.

In addition to performing customary audit services, Snodgrass assisted
the Company with the preparation of its federal and state tax returns,
provided consulting services and provided assistance in connection with
regulatory matters, charging the Company for such services at its customary
hourly billing rates. These non-audit services were approved by the Company's
and the Bank's Board of Directors, after due consideration of the effect of
the performance thereof on the independence of the accountants and after the
conclusion by the Company's and the Bank's Board of Directors that there was
no effect on the independence of the accountants. Snodgrass was engaged by
the Bank's Board of Directors to perform internal audit, compliance and loan
review services in 1999 and has been hired to perform the same services in
2000. The issue of independence as it pertains to the external audit services
provided by Snodgrass has been reviewed by the Board of Directors. They
believe that this arrangement will not compromise the independence of
Snodgrass in their role as external auditor.

In the event that the shareholders do not ratify the selection of
Snodgrass as the Company's independent public accountants for the 2000 fiscal
year, another accounting firm will be chosen to provide independent public
accountant audit services for the 2000 fiscal year. The Board of Directors
recommends that the shareholders vote FOR the ratification of the selection of
Snodgrass as the auditors for the Company for the year ending December 31,
2000.

It is understood that even if the selection of Snodgrass is ratified, the
Board of Directors, at its discretion, may direct the appointment of a new
independent auditing firm at any time during the year if the Board of
Directors determines that such a change would be in the best interest of the
Company and its shareholders.

<PAGE>

LEGAL PROCEEDINGS

In the opinion of the management of the Company, there are no proceedings
pending to which the Company and the Bank is a party or to which its property
is subject, which, if determined adversely to the Company and the Bank, would
be material in relation to the Company's and the Bank's undivided profits or
financial condition. There are no proceedings pending other than ordinary
routine litigation incident to the business of the Company and the Bank. In
addition, no material proceedings are pending or are known to be threatened or
contemplated against the Company and the Bank by government authorities.

ANNUAL REPORT

A copy of the Company's Annual Report for its fiscal year ended December
31, 1999, is being mailed with this Proxy Statement. A representative of
Snodgrass, the accounting firm which examined the financial statements in the
Annual Report, will attend the Annual Meeting. This representative of
Snodgrass will have the opportunity to make a statement, if he or she desires
to do so, and will be available to respond to any appropriate questions
presented by shareholders at the Annual Meeting.

SHAREHOLDER PROPOSALS

Any shareholder, who in accordance with and subject to the provisions of
the proxy rules of the SEC, wishes to submit a proposal for inclusion in the
Company's Proxy Statement for its 2001 Annual Meeting of Shareholders must
deliver such proposal in writing to the Secretary of Dimeco, Inc. at the
principal executive offices of the Company at The Dime Bank, 820 Church
Street, Honesdale, Pennsylvania 18431, not later than Wednesday, December 1,
2000.

OTHER MATTERS

The Board of Directors does not know of any matters to be presented for
consideration other than the matters described in the Notice of Annual Meeting
of Shareholders, but if any matters are properly presented, it is the
intention of the persons named in the accompanying Proxy to vote on such
matters in accordance with their judgment.

ADDITIONAL INFORMATION

Upon written request of any shareholder, a copy of the Company's report
on Form 10-KSB for its fiscal year ended December 31, 1999, including the
financial statements and the schedules thereto, required to be filed with the
SEC, may be obtained, without charge, from Maureen H. Beilman, Chief
Financial Officer, Dimeco, Inc., 120 Sunrise Avenue, P.O. Box 509, Honesdale,
Pennsylvania 18431, telephone: (570) 253-1970.

In addition, a copy of the Annual Disclosure Statement of The Dime Bank
may also be obtained, without charge, from Maureen H. Beilman, Chief Financial
Officer.

<PAGE>

EXHIBIT A
DIMECO, INC.

2000 STOCK INCENTIVE PLAN

1. Purpose. The purpose of this Stock Incentive Plan (the "Plan") is to
------- advance the development, growth and financial condition of Dimeco,
Inc. (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 the
common stock of the Corporation to secure, retain and motivate personnel
who may be responsible for the operation and for management of the affairs
of the Corporation and any 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"), and shall be
presented for approval at the next meeting of the Corporation's
shareholders. Any and all options and rights awarded under the Plan (the
"Awards") before it is approved by the Corporation's shareholders shall be
conditioned upon, and may not be exercised before, receipt of shareholder
approval, and shall lapse upon failure to receive such approval. Unless
previously terminated by the Board, the Plan shall terminate on, and no
options shall be granted after the tenth anniversary of the effective date
of the Plan.

3. Stock. Shares of the Corporation's common stock (the "Stock"), that may
----- be issued under the Plan shall not exceed, in the aggregate, 60,000
shares, as may be adjusted pursuant to Section 19 hereof. Shares may be
either authorized and unissued shares, or authorized shares, issued by and
subsequently reacquired by the Corporation as treasury stock. Under no
circumstances shall any fractional shares be awarded under the Plan.
Except as may be otherwise provided in the Plan, any Stock subject to an
Award that, for any reason, lapses or terminates prior to exercise, shall
again become available for grant under the Plan. While the Plan is in
effect, the Corporation shall reserve and keep available the number of
shares of Stock needed to satisfy the requirements of the Plan. The
Corporation shall apply for any requisite governmental authority to issue
shares under the Plan. 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 the Stock.

4. Administration. The ability to control and manage the operation and
-------------- administration of the Plan shall be vested in the Board or
in a committee of two or more members of the Board, selected by the Board
(the "Committee"). The Committee shall have the authority and discretion
to interpret the Plan, to establish, amend and rescind any rules and
regulations relating to the Plan, to determine the terms and provisions of
any agreements made pursuant to the Plan, and to make any and all
determinations that may be necessary or advisable for the administration
of the Plan. Any interpretation of the Plan by the Committee and any
decision made by the Committee under the Plan is final and binding.
The Committee shall be responsible and shall have full, absolute and final
power of authority 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 the stock
option exercise prices. The Committee shall make all other determinations
and decisions, take all actions and do all things necessary or appropriate
in and for the administration of the Plan. 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, which 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, which are
not intended to qualify under Sections 421 through 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 another Award, either to the same person
or otherwise, or impose any obligation to exercise on the participant.
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.

15
<PAGE>
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 or Stock Appreciation Right, as the case may be.

6. Eligibility. Persons eligible to receive Awards shall be those key
----------- officers and other employees of the Corporation and each
Subsidiary, as determined by the Committee. A person's eligibility to
receive an Award shall not confer upon him or her any right to receive an
Award. Except as otherwise provided, a person's eligibility to receive,
or actual receipt of an Award 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 of 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) The maximum number of shares of Stock that may be issued by options
intended to be Qualified Options shall be 60,000 shares.

(b) 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 shareholders, whichever is earlier;

(c) 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 the Qualified Option is awarded;

(d) If a participant, who was awarded 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 participant
thereafter to exercise the option during its remaining term for a
period of not more than three (3) months after cessation of
employment to the extent that the Qualified Option was then and
remains exercisable, unless such employment cessation was due to the
participant's disability, as defined in Section 22(e)(3) of the Code,
in which case the three (3) month period shall be twelve (12) months;
if the participant dies while employed by the Corporation or a
Subsidiary, the Committee may permit the participant's qualified
personal representatives, or any persons who acquire the Qualified
Option pursuant to his or her Will or laws of descent and
distribution, to exercise the Qualified Option during its remaining
term for a period of not more than twelve (12) months after the
participant's death to the extent that the Qualified Option was then
and remains exercisable; the Committee may impose terms and
conditions upon and for the exercise of a Qualified Option after the
cessation of the participant's employment or his or her death;

(e) The purchase price of Stock subject to any Qualified Option shall not
be less than the Stock's fair market value at the time the Qualified
Option is awarded and shall not be less than the Stock's par value;
and

(f) Qualified Options may not be sold, transferred or assigned by the
participant except by will or the laws of descent and distribution.

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
shall not commence before the expiration of six (6) months or
continue beyond the expiration of ten (10) years after the date the
Non-Qualified Option is awarded;

(b) If a participant, who was awarded a Non-Qualified Option, ceases to
be eligible under the Plan, before lapse or full exercise of the
option, the Committee may permit the participant to exercise the
option during its remaining term, to the extent that the option was
then and remains exercisable, or 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 shall not be less than the Stock's par value; and

16
<PAGE>
(d) Except as otherwise provided by the Committee, Non-Qualified Stock
Options granted under the Plan are not transferable except as
designated by the participant by Will and the laws of descent and
distribution.

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 the participant 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, or if the SAR is connected with
another Award, such lesser percentage of the Stock purchase price
thereunder as may be determined by the Committee;

(c) Upon exercise of any SAR, the participant 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; 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 participant holding a SAR, before its lapse or full exercise,
ceases to be eligible under the Plan, the Committee may permit the
participant 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 participant 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 participant holding 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;

17
<PAGE>
(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 2000 STOCK
INCENTIVE PLAN AND A CERTAIN AGREEMENT ENTERED INTO BETWEEN THE
HOLDER AND THE CORPORATION PURSUANT TO THE PLAN. THE RELEASE OF
THIS CERTIFICATE AND THE SHARES OF STOCK HEREBY REPRESENTED FROM
SUCH PROVISIONS SHALL OCCUR ONLY AS PROVIDED BY THE 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 the Restricted Stock, a certificate for the
shares of Stock free of restrictions and without the legend shall be
issued to the participant;

(d) If a participant'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 participant's Restricted Stock still subject to unexpired
restrictions, conditions or terms shall be forfeited absolutely by
the participant 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 participant nor
his or her heirs, personal or legal representatives, successors,
assigns, beneficiaries, or any claimants under the participant'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 to be 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 securities of the Corporation, including securities issuable
hereunder, at its then current fair market value, or in any combination
thereof, as the Committee shall determine. 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
participant 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 participant under the other
connected Award shall be reduced by the number of shares of Stock
with respect to which the participant has exercised his or her SAR,
and the number of shares of Stock subject to the participant's SAR
shall be reduced by the number of shares of Stock acquired by the
participant pursuant to the other connected Award.

The Committee may permit an acceleration of previously established
exercise terms of any Awards 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 shareholders execute an agreement to
dispose of all or substantially all of the Corporation's assets or
stock by means of sale, merger, consolidation, reorganization,
liquidation or otherwise, as a result of which the Corporation's
shareholders, immediately before the transaction, will not own at
least fifty percent (50%) of the total combined voting power of all
classes of voting stock of the surviving entity (be it the
Corporation or otherwise) immediately after the consummation of the
transaction, then any and all outstanding Awards shall immediately
become and remain exercisable or, if the transaction is not
consummated, until the agreement relating to the transaction expires
or is terminated, in which case, all Awards shall be treated as if
the agreement was never 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 stock of the Corporation through the acquisition of, or an
offer to acquire such percentage of the Corporation's voting 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, then any and all outstanding awards shall immediately
become and remain exercisable; or

18
<PAGE>
(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) then any and all Awards
shall immediately become and remain exercisable.

12. Right of First Refusal. Each written agreement for an Award may contain a
---------------------- provision that requires as a condition to
exercising a Qualified Option or a Non Qualified Option that the
participant agree prior to selling, transferring or otherwise disposing of
any shares of Stock obtained through the exercise of the Award to first
offer such shares of Stock to
the Corporation for purchase. The terms and conditions of such right of
first refusal shall be determined by the Committee in its sole and
absolute discretion, provided that the purchase price shall be at least
equal to the Stock's fair market value as determined under paragraph 14
below, and shall be subject to all applicable federal and state laws,
rules and regulations.

13. Withholding. When a participant exercises a stock option or Stock
----------- Appreciation Right awarded under the Plan, the Corporation, in
its discretion and as required by law, may require the participant 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 shares of
Stock. At the Committee's discretion, remittance may be made in cash,
shares already held by the participant or by the withholding by the
Corporation of sufficient shares issuable pursuant to the option to
satisfy the participant's withholding obligation.

14. Value. Where used in the Plan, the "fair market value" of Stock or any
----- options or rights with respect thereto, including Awards, shall mean
and be determined by (a) the average of the highest and lowest reported
sales prices thereof on the principal established domestic securities
exchange on which listed, and if not listed, then (b) the average of the
dealer "bid" and "ask" prices thereof on the over-the-counter market, as
reported by the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), in either case as of the specified or
otherwise required or relevant time, or if not traded as of such
specified, required or relevant time, then based upon such reported sales
or "bid" and "ask" prices before and/or after such time in accordance with
pertinent provisions of and principles under the Code and the regulations
promulgated thereunder.

15. Amendment. To the extent permitted by applicable law, the Board may
--------- amend, suspend, or terminate the Plan at any time. The
amendment or termination of this Plan shall not, without the consent of
the participants, alter or impair any rights or obligations under any
Award previously granted hereunder.

From time to time, the Committee may rescind, revise and add to any
of the terms, conditions and provisions of the Plan or of an Award as
necessary or appropriate to have the Plan and any Awards thereunder
be or remain qualified and in compliance with all applicable laws,
rules and regulations, and the Committee may delete, omit or waive
any of the terms conditions or provisions that are no longer required
by reason of changes of applicable laws, rules or regulations,
including but not limited to, the provisions of Sections 421 and 422
of the Code, Section 16 of the Securities Exchange Act of 1934, as
amended, (the "1934 Act") and the rules and regulations promulgated
by the Securities and Exchange Commission. Without limiting the
generality of the preceding sentence, each Qualified Option shall be
subject to such other and additional terms, conditions and provisions
as the Committee may deem necessary or appropriate in order to
qualify as a Qualified Option under Section 422 of the Code,
including, but not limited to, the following provisions:

(a) At the time a Qualified Option is awarded, the aggregate fair
market value 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 participant during any
calendar year under the Plan and any other plans of the
Corporation or its affiliates, shall not exceed $100,000.00; and

(b) No Qualified Option, shall be awarded to any person if, at the
time of the Award, the person owns shares of the stock of the
Corporation possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation
or its affiliates, unless, at the time the Qualified Option is
awarded, the exercise price of the Qualified Option is at least
one hundred and ten percent (110%) of the fair market value of
the Stock on the date of grant and the option, by its terms, is
not exercisable after the expiration of five (5) years from the
date it is awarded.

19
<PAGE>
16. Continued Employment. Nothing in the Plan or any Award shall confer upon
-------------------- any participant or other persons any right to
continue in the employ 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 the participant. However, the
Committee may require, as a condition of making and/or exercising any
Award, that a participant 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 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 the option
under Sections 421 and 422 of the Code.

17. General Restrictions. If the Committee or Board determines that it is
-------------------- necessary or desirable to: (a) list, register or
qualify 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) obtain the approval of any governmental authority, or (c) enter
into an agreement with the participant with respect to disposition of any
Stock (including, without limitation, an agreement that, at the time of
the participant's exercise of the Award, any Stock thereby acquired is and
will be acquired solely for investment purposes and without any intention
to sell or distribute the Stock), then such Award shall not be consummated
in whole or in part unless the listing, registration, qualification,
approval or agreement, as the case may be, shall have been appropriately
effected or obtained to the satisfaction of the Committee and legal
counsel for the Corporation.

18. Rights. Except as otherwise provided in the Plan, participants shall have
------ no rights as a holder of the Stock unless and until one or more
certificates for the shares of Stock are issued and delivered to the
participant.

19. Adjustments. In the event that the shares of common stock of the
----------- Corporation, as presently constituted, shall be changed into
or exchanged for a different number or kind of shares of common stock or
other securities of the Corporation or of other securities of the
Corporation or of another corporation (whether by reason of merger,
consolidation, recapitalization, reclassification, split-up, combination
of shares or otherwise) or if the number of such shares of common stock
shall be increased through the payment of a stock dividend, stock split or
similar transaction, then, there shall be substituted for or added to each
share of common stock of the Corporation that was theretofore
appropriated, or which thereafter may become subject to an option under
the Plan, the number and kind of shares of common stock or other
securities into which each outstanding share of the common stock of the
Corporation shall be so changed or for which each such share shall be
exchanged or to which each such shares shall be entitled, as the case may
be. Each outstanding Award shall be appropriately amended as to price
and other terms, as may be necessary to reflect the foregoing events.

If there shall be any other change in the number or kind of the
outstanding shares of the common stock of the Corporation, or of any
common stock or other securities in which such common stock shall
have been changed, or for which it shall have been exchanged, and if
a majority of the disinterested members of the Committee shall, in
its sole discretion, determine that such change equitably requires an
adjustment in any Award that was theretofore granted or that may
thereafter be granted under the Plan, then such adjustment shall be
made in accordance with such determination.

The grant of an Award under the Plan shall not affect in any way the
right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or
business structure, to merge, to consolidate, to dissolve, to
liquidate or to sell or transfer all or any part of its business or
assets.

Fractional shares resulting from any adjustment in Awards pursuant to
this Section 19 may be settled as a majority of the members of the
Board of Directors or of the Committee, as the case may be, shall
determine.

To the extent that the foregoing adjustments relate to common stock
or securities of the Corporation, such adjustments shall be made by a
majority of the members of the Board or of the Committee, as the case
may be, whose determination in that respect shall be final, binding
and conclusive. Notice of any adjustment shall be given by the
Corporation to each holder of an Award that is so adjusted.

20. 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 participant, 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 by any Subsidiary and such action has damaged the
Corporation or the Subsidiary, as the case may be, or that the participant
has disclosed trade secrets of the Corporation or its affiliates, the
participant shall forfeit all rights

20
<PAGE>
under and to all unexercised Awards, and under and to 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 participant'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 participant'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 the option as an incentive
stock option under Sections 421 and 422 of the Code.

21. Indemnification. In and with respect to the administration of the Plan,
--------------- the Corporation shall indemnify each member of the
Committee and/or of the Board, each of whom shall be entitled, without
further action on his or her part, to indemnification 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 the 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 the member may be or may 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 a
member of the Committee or of the Board. The provisions, protection and
benefits of this Section 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) to the extent there is entitlement to
insurance proceeds under insurance coverages provided by the Corporation
on account of the same matter or proceeding for which indemnification
hereunder is claimed, or (b) to the extent there is entitlement to
indemnification from the Corporation, other than under this Section, on
account of the same matter or proceeding for which indemnification
hereunder is claimed.

22. Taxes. The issuance of shares of Common Stock under the Plan shall be
----- subject to any applicable taxes or other laws or regulations of the
United States of America and any state or local authority having
jurisdiction there over.

23. Miscellaneous. (a) Any reference contained in this Plan to particular
------------- section or provision of law, rule or regulation, including
but not limited to the Code and the 1934 Act, shall include any
subsequently enacted or promulgated section or provision of law, rule or
regulation, as the case may be. With respect to persons subject to
Section 16 of the 1934 Act, transactions under this Plan are intended to
comply with all applicable conditions of Section 16 and the rules and
regulations promulgated thereunder, or any successor rules and regulations
that may be promulgated by the Securities and Exchange Commission, and 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.

(b) 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.

(c) The captions of the numbered Sections 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.

21
<PAGE>
EXHIBIT B
DIMECO, INC.

2000 INDEPENDENT DIRECTORS STOCK OPTION PLAN

1. Purpose. The 2000 Independent Directors Stock Option Plan (the "Plan")
------- was established to advance the development, growth and financial
condition of Dimeco, Inc. (the "Corporation") and its subsidiaries, by
providing an incentive, through participation in the appreciation of the
capital stock of the Corporation, and thereby securing, retaining and
motivating members of the Corporation's Board of Directors who are not
officers or employees of the Corporation or any subsidiary thereof ( the
"non-employee directors").

2. Term. The Plan shall become effective as of the date it is adopted by the
---- Corporation's Board of Directors (the "Board"), and shall be
presented for approval at the next meeting of the Corporation's
shareholders. Any and all options awarded under the Plan before it is
approved by the Corporation's shareholders shall be conditioned upon, and
may not be exercised before, receipt of shareholder approval, and shall
lapse upon failure to receive such approval. Unless previously terminated
by the Board, the Plan shall terminate on, and no options shall be granted
after the tenth anniversary of the effective date of the Plan.

3. Stock. The shares of the Corporation's common stock (the "Common Stock")
----- issuable under the Plan shall not exceed 25,000 shares. The amount
of Common Stock issuable under the Plan may be adjusted pursuant to
Section 10 hereof. The Common Stock issuable hereunder may be either
authorized and unissued shares of Common Stock, or authorized shares of
Common Stock issued by the Corporation and subsequently reacquired by it
as treasury stock, or shares purchased in open market transactions. Under
no circumstances shall fractional shares be issued under the Plan. The
Corporation's failure to obtain any governmental authority deemed
necessary by the Corporation's legal counsel for the proper grant of the
stock options under this Plan and/or the issuance of Common Stock under
the Plan shall relieve the Corporation of any duty or liability for the
failure to grant stock options under the Plan and/or issue Common Stock
under the Plan as to which such authority has not been obtained.

4. Stock Options. Stock options shall be granted under the Plan to each non-
------------- employee director of the Corporation, annually, on the first
business day of January, with the exception of the first annual award of
options. The first annual award of options to be made hereunder shall be
made at the first organizational meeting of the Board immediately
following the 2000 annual meeting of shareholders. Each non-employee
director who is a member of the Corporation's Board of Directors on the
grant date shall be awarded stock options to purchase shares of Common
Stock (the "Stock Options") as may from time to time be determined in the
sole discretion of the Board of Directors or the Committee and shall be
subject to the following terms and conditions:

(a) The time period during which any Stock Option is exercisable shall be
ten (10) years after the date of grant.

(b) If a director, who has received an award pursuant to the Plan,
ceases to be a member of the Board of Directors for any reason and is
not designated as "Director Emeritus" by the remaining members of the
Board of Directors at the time of such cessation, then the director
may exercise the Stock Option not more than twelve (12) months after
such cessation. If a director, who has received an award pursuant to
the Plan dies, the director's qualified personal representative, or
any person who acquires a Stock Option pursuant to the director's
Will or the laws of descent and distribution, may exercise such Stock
Option during its remaining term for a period of not more than twelve
(12) months after the director's death to the extent that the Stock
Option would then be and remains exercisable.

(c) The purchase price of a share of Common Stock subject to a Stock
Option shall be the fair market value of the Common Stock on the date
of grant, as determined under Section 6 hereof.

(d) The Stock Option shall be made by a written agreement in the form,
attached hereto as Exhibit "A," with such changes therein as may be
determined by the Committee ( as such term is defined in Section 12
hereof) (the "Stock Option Agreement").

<PAGE>

5. Exercise. Except as otherwise provided in the Plan, a Stock Option may be
-------- exercised in whole or in part by giving written notice thereof to
the Secretary of the Corporation, or his designee, identifying the Stock
Option being exercised, the number of shares of Common Stock with respect
thereto, and other information pertinent to the exercise of the Stock
Option. The purchase price of the shares of Common Stock with respect to
which a Stock Option is exercised shall be paid with the written notice of
exercise, either in cash or in Common Stock, including Common Stock
issuable hereunder, at its then current fair market value, or any
combination of cash or Common Stock. Funds received by the Corporation
from the exercise of any Stock Option shall be used for its general
corporate purposes. The number of shares of Common Stock subject to a
Stock Option shall be reduced by the number of shares of Common Stock with
respect to which the director has exercised rights under the related Stock
Option Agreement.

If the Corporation or its shareholders 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 shareholders 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 outstanding Stock Options shall
immediately become exercisable until the consummation of such transaction, or
if not consummated, until the agreement therefor expires or is terminated, in
which case thereafter all Stock Options shall be treated as if the agreement
never had been executed. If during any period of two (2) consecutive years,
the individuals, who at the beginning of such period, constituted the Board of
Directors, cease for any reason to constitute at least a majority of the Board
of Directors (unless the election of each director of the Board of Directors,
who was not a director of the Board of Directors 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 outstanding Stock Options shall immediately become exercisable.
If there is an actual, attempted or threatened change in the ownership of at
least twenty-five percent (25%) of any class of voting stock of the
Corporation through the acquisition of, or an offer to acquire, such
percentage of the Corporation's voting 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 of Directors, thereupon any and
all outstanding Stock Options shall immediately become exercisable.

6. Value. Where used in the Plan, the "fair market value" of Stock or any
----- options or rights with respect thereto, including Awards, shall
mean and be determined by (a) the average of the highest and lowest
reported sales prices thereof on the principal established domestic
securities exchange on which listed, and if not listed, then (b) the
average of the dealer "bid" and "ask" prices thereof on the over-the-
counter market, as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"), in either case as of the
specified or otherwise required or relevant time, or if not traded as of
such specified, required or relevant time, then based upon such reported
sales or "bid" and "ask" prices before and/or after such time in
accordance with pertinent provisions of and principles under the Code and
the regulations promulgated thereunder.

7. Continued Relationship. Nothing in the Plan or in any Stock Option shall
---------------------- confer upon any director any right to continue his
relationship with the Corporation as a director, or limit or affect any
rights, powers or privileges that the Corporation or its affiliates may
have to supervise, discipline and terminate such director, and the
relationships thereof.

8. General Restrictions. The Board of Directors may require, in its
-------------------- discretion, (a) the listing, registration or
qualification of the Common Stock issuable pursuant to the Plan on any
securities exchange or under any federal or state securities or other
laws, (b) the approval of any governmental authority, or (c) an execution
of an agreement by any director with respect to disposition of any Common
Stock (including, without limitation, that at the time of the director's
exercise of the Stock Option, any Common Stock thereby acquired is being
and will be acquired solely for investment purposes and without any
intention to sell or distribute the Common Stock). If the Board of
Directors so requires, then Stock Options shall not be exercised, in
whole or in part, unless such listing, registration, qualification,
approval or agreement has been appropriately effected or obtained to the
satisfaction of the Board of Directors and legal counsel for the
Corporation. Notwithstanding anything to the contrary herein, a director
shall not sell, transfer or otherwise dispose of any shares of Common
Stock acquired pursuant to a Stock Option unless at least six (6) months
have elapsed from the date the Stock Option was granted and, in any event,
the transfer or disposition is made in accordance with Section 16 of the
Securities Exchange Act of 1934, as amended, and as the same may be
amended from time to time.

9. Rights. Except as otherwise provided in the Plan, a director shall have
------ no rights as a holder of the Common Stock subject to a Stock Option
unless and until one or more certificates for the shares of Common Stock
are issued and delivered to the director. No Stock Option, 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.

<PAGE>

10. Adjustments. In the event that the shares of Common Stock of the
----------- Corporation, as presently constituted, shall be changed into
or exchanged for a different number or kind of shares of Common Stock or
other securities of the Corporation or of other securities of the
Corporation or of another corporation (whether by reason of merger,
consolidation, recapitalization, reclassification, split-up, combination
of shares or otherwise) or if the number of such shares of Common Stock
shall be increased through the payment of a stock dividend, stock split or
similar transaction, then, there shall be substituted for or added to each
share of Common Stock of the Corporation that was theretofore
appropriated, or that thereafter may become subject to a Stock Option
under the Plan, the number and kind of shares of Common Stock or other
securities into which each outstanding share of the Common Stock of the
Corporation shall be so changed or for which each such share shall be
exchanged or to which each share shall be entitled, as the case may be.
Each outstanding Stock Option shall be appropriately amended as to price
and other terms, as may be necessary to reflect the foregoing events.

If there shall be any other change in the number or kind of the outstanding
shares of Common Stock of the Corporation, or of any Common Stock or other
securities into which such Common Stock shall have been changed, or for which
it shall have been exchanged, and if a majority of the members of the Board of
Directors shall, in their sole discretion, determine that the change equitably
requires an adjustment in any Stock Option that was theretofore granted or
that may thereafter be granted under the Plan, then such adjustment shall be
made in accordance with the determination.

The grant of a Stock Option pursuant to the Plan shall not affect, in any way,
the right or power of the Corporation to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge, to
consolidate, to dissolve, to liquidate or to sell or transfer all or any part
of its business or assets.

Fractional shares resulting from any adjustment in a Stock Option pursuant to
this Section 10 may be settled as a majority of the members of the Board of
Directors or of the Committee, as the case may be, shall determine.

To the extent that the foregoing adjustments relate to Common Stock or
securities of the Corporation, such adjustments shall be made by a majority of
the members of the Board of Directors or of the Committee, as the case may be,
whose determination in that respect shall be final, binding and conclusive.
Notice of any adjustment shall be given by the Corporation to each holder of a
Stock Option that is so adjusted.

11. Forfeiture. Notwithstanding anything to the contrary in this Plan, if an
---------- option holder is engaged in fraud, embezzlement, theft,
commission of a felony, or dishonesty in the course of his relationship
with the Corporation or its affiliates, or has disclosed trade secrets of
the Corporation or its affiliates, the option holder shall forfeit all
rights under and to all unexercised Stock Options, and all exercised
Stock Options for which the Corporation has not yet delivered certificates
for shares of Common Stock, and all rights to receive Stock Options shall
be automatically canceled.
12. Administration. The ability to control and manage the operation and
-------------- administration of the Plan shall be vested in the Board of
Directors or in a committee of two or more members of the Board of
Directors, selected by the Board of Directors (the "Committee"). The
Committee shall have the authority and discretion to interpret the Plan,
to establish, amend and rescind any rules and regulations relating to the
Plan, to determine the terms and provisions of any agreements made
pursuant to the Plan, and to make any and all determinations that may be
necessary or advisable for the administration of the Plan. Any
interpretation of the Plan by the Committee and any decision made by it
under the Plan is final and binding.

13. Miscellaneous. Any reference contained in this Plan to a particular
------------- section or provision of law, rule or regulation shall
include any subsequently enacted or promulgated section or provision of
law, rule or regulation, as the case may be. 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 the Rule and the regulations promulgated thereunder or any
successor rule that may be promulgated by the Securities and Exchange
Commission. To the extent any provision of this Plan fails to so comply,
it shall be deemed null and void, to the extent permitted by applicable
law, subject to the provisions of Section 15, below. 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
masculine shall include the feminine. The captions of the numbered
Sections 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.

14. Transferability. Except as otherwise provided by the Board of Directors,
--------------- Stock Options granted under the Plan are not transferable
except as designated by the participant by will and the laws of descent
and distribution.

15. Amendment. The Plan may be amended, suspended or terminated, without
--------- notice, by a majority vote of the Board of Directors of the
Corporation.

16. Taxes. The issuance of shares of Common Stock under the Plan shall be
----- subject to any applicable taxes or other laws or regulations of the
United States of America and any state or local authority having
jurisdiction there over.