EXHIBIT 1
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING
SECURITIES THAT HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933
MEMORANDUM DATED AS OF APRIL 19, 1995
AS AMENDED SEPTEMBER 8, 1997
PRIME BANCORP, INC.
COMMON STOCK
(par value $1.00)
353,617 SHARES
Offered as described within pursuant to
options which may be granted
to employees of the Company under the Company's
1989 INCENTIVE STOCK OPTION PLAN
(as amended and restated effective April 19, 1995)
The shares of common stock, $1.00 par value ("Common Stock") of Prime
Bancorp, Inc. (the "Company"), a corporation formed under the laws of the
Commonwealth of Pennsylvania, referred to in this Memorandum are offered to
those persons who are to be granted stock options ("Options") to purchase
such Common Stock to be granted pursuant to the Prime Bancorp, Inc. 1989
Incentive Stock Option Plan, as amended and restated effective April 19,
1995 (the "Plan"). The terms and conditions of the options are governed by
the provisions of the Plan and the Option agreements between the Company
and participating optionees.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
________________________
This Memorandum does not constitute an offer to sell, or a
solicitation to buy any of the securities offered hereby in any state or
jurisdiction or to any person in which or to whom it is unlawful to make
such offer or solicitation.
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INTRODUCTION
This Memorandum relates to shares of common stock, $1.00 par value
("Common Stock") of Prime Bancorp, Inc. (the "Company"), issuable upon the
exercise of the stock options ("Options") granted to employees under the
Company's Key Employee Stock Option Plan (the "Plan").
A Registration Statement with respect to the shares of Common Stock
offered pursuant to the Plan has been filed with the Securities and
Exchange Commission. This Memorandum, which sets forth information
concerning the Plan and the Company, is distributed to participating
employees pursuant to the Securities Act of 1933, as amended (the
"Securities Act"). A copy of the Plan and the Company's Annual Report for
the latest fiscal year are attached to this Prospectus.
DESCRIPTION OF THE PLAN
Purpose
The Plan was adopted by the Board of Directors on November 5, 1988 and
approved at the annual meeting of the Company's shareholders on October 18,
1989. The amended and restated Plan was adopted by the Board of Directors
on December 21, 1994 and approved at the annual meeting of the Company's
shareholders on April 19, 1995. The purpose of the Plan is to promote the
growth and general prosperity of the Company and its subsidiary financial
institution(s) by permitting the Company to grant options to purchase
shares of its common Stock. The Plan is designed to help attract and
retain superior personnel for positions of substantial responsibility with
the Company and its subsidiary financial institution(s) and to provide key
employees with an additional incentive to contribute to the success of the
Company and its subsidiary financial institution(s). Incentive stock
options may be granted under the plan to employees, including employees who
are also directors. The Plan also provides for the granting of
nonincentive options to directors who are not employees. Unless sooner
terminated by the shareholders of the Company or the Board, the Plan
remains in effect for a period of ten years from the date of the Plan's
adoption by the Board, or December 21, 2004.
Employee Retirement Income
Security Act of 1974 ("ERISA")
The Plan is not a qualified deferred compensation plan under section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"). The
Company believes that the Plan is not subject to any of the provisions of
ERISA.
Administration of Plan
The Plan is administered by the Compensation Committee of the
Company's Board of Directors (the "Committee"). The members of the
Committee are appointed by the Company's Board of Directors to serve until
their respective successors have been appointed. Presently, Joseph A.
Fluehr, III, Erwin T. Straw and Ernest Larenz serve as members of the
Committee.
The Committee has the sole discretion to select the employees
(including an employee who is an officer or a director of the Company) and
the directors to whom options may be granted, to determine the amounts of
such grants and to interpret, construe and implement the Plan.
The address and telephone number that you may use to obtain additional
information about the Plan and its administration are as follows:
Prime Bancorp, Inc.
7111 Valley Green Road
Fort Washington, Pennsylvania 19340
Attention: James J. Lynch
(215) 836-2400
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Shares Available Under the Plan
An aggregate of 353,617 shares of Common Stock of the Company are
authorized for Options granted from time to time.
Eligibility
Full-time employees, including an employee who is a director or an
officer, and non-employee directors of the Company and any of its
subsidiaries are eligible for selection to receive Options under the Plan.
Since the Plan provides for discretion in the selection of persons to whom
grants will be made, it is impossible to determine the number of persons
who will participate.
Option Price
The purchase price for Common Stock under each Option shall be not
less than the Fair Market Value of the Common Stock at the time the Option
is granted, but in no event less than the par value of the Stock. The
Option price is to be paid in full at the time an Option is exercised in
cash or in shares of Common Stock with a current Fair Market Value
equivalent to the Option price. However, if an option is to be granted to
an optionee who at the time the option is granted owns more than 10% of the
voting power or value of all classes of stock of the Company, (i) that
option shall not be exercisable after the expiration of 5 years after the
date of grant of the option, and (ii) the purchase price for shares
acquired pursuant to the exercise of that option shall be at least 110% of
the fair market value of the shares subject to the option at the time the
option is granted.
Exercise and Duration
Options granted under the Plan are exercisable during a period of 10
years from the date of grant. If an optionee ceases to be employed by the
Company, the employee's Option terminates immediately. If the optionee's
cessation of employment is due to retirement with the Company's consent,
the optionee may exercise the Option within three months after cessation of
employment. If an optionee dies while employed by the Company, or within
three months after having retired with the Company's consent, the executor
or administrator, legatee or heir, if there be no executor or administrator
shall have the right to exercise the Option to the extent the deceased
Optionee was entitled to exercise the Option.
Transferability of Options
No Option granted under the Plan is transferable except pursuant to a
qualified domestic relations order or, by will or pursuant to the laws of
descent and distribution, and then only to the spouse or children of the
Optionee.
Adjustments, Modification or Termination
The Plan provides for appropriate adjustments of the provisions of
outstanding Options and the number of shares available for future awards in
the event of any changes in the outstanding Common Stock by reason of
merger, stock splits or similar events.
The Board of Directors may terminate, amend or modify the plan at any
time; provided, however, that no such action of the Board of Directors
shall in any manner affect any Option theretofore granted to an optionee
under the Plan without the consent of the optionee.
General
Neither the granting of an option nor the execution of an Option
agreement affects the terms and conditions of an optionee's employment. In
the absence of a specific agreement to the contrary, the Company may
terminate an optionee's employment at any time, subject to applicable state
or federal employment laws.
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The proceeds received by the Company from the sale of Common Stock
pursuant to the exercise of the Options will be used for general corporate
purposes. The grant of an Option under the Plan will not impose any
obligation on the optionee to exercise the Option.
Restrictions on Resale of Common Stock by Affiliates
A person who is an "affiliate" of the Company may not resell shares of
Common Stock received by such employee upon exercise of Options under the
Plan, except pursuant to an effective registration statement under the
Securities Act of 1933 (the "Securities Act") or in accordance with Rule
144 promulgated under the Securities Act or another exemption available
under the Securities Act. For purposes of the Securities Act, an employee
will be considered to be an "affiliate" of the Company if such employee
directly or indirectly controls the Company.
Under section 16(b) of the Securities Exchange Act of 1934 (the
"Exchange Act"), each person who beneficially owns more than 10% of any
class of equity security of the Company (such as the Common Stock) and each
director or officer of the Company may be liable to the Company for profit
realized from any purchase and sale (or sale purchase) of any equity
security of the Company within a period of less than six months.
Each person should consult with legal counsel as to such person's
status as an "affiliate" of the Company and the applicability of section
16(b) of the Exchange Act to such person, the receipt and exercise of
Options under the Plan by such person and the sale of shares of Common
Stock acquired by such person under the Plan.
Tax Information
The following discussion is intended only as a summary of the general
federal income tax effects of die grant and exercise of Options and the
disposition of shares of Common Stock acquired upon the exercise of
Options. The federal, state and local income tax consequences to any
particular taxpayer will depend upon his or her individual circumstances.
Accordingly, each person should seek the advice of a qualified tax adviser
regarding such person's participation in the Plan.
Except for Options granted to directors of the Company or any of its
subsidiaries who are not also employees, and with certain additional
exceptions discussed below, Options granted to employees (including
employees who are also directors) will be treated as "incentive stock
options" ("ISOs") within the meaning of Section 422 of the Code.
Recipients of Options will not realize income at the time of grant.
In addition, under the special rules applicable to ISOs, recipients of ISOs
will not realize taxable income upon exercise of their Options. The excess
of the fair market value - at the time of exercise - of the shares of
Common Stock acquired pursuant to the exercise of ISOs over the exercise
price will be taken into account, however, in determining the recipient's
liability, if any, for the alternative minimum tax.
Provided a recipient of an ISO holds the shares of Common Stock
acquired pursuant to the exercise of the ISO for at least one year, and
until at least the two-year anniversary of the date the ISO was granted
("Required Holding Period"), he or she will realize long-term capital gain
upon the sale or other disposition of the shares equal to the amount
realized on such sale or other disposition minus the exercise price of the
shares. The Company will not be entitled to an income tax deduction as a
consequence of the grant or exercise of the ISO; and, provided the
recipient holds the shares acquired pursuant to the exercise of the ISO for
the Required Holding Period, the Company will not be entitled to an income
tax deduction as a consequence of the sale or other disposition of the
shares.
If, however, the recipient sells or otherwise disposes of the shares
of Common Stock acquired pursuant to the exercise of the ISO before the
expiration of the Required Holding Period, the recipient will realize
ordinary income at that time equal to the excess of the fair market value
of the shares at the time of exercise over the exercise price for those
shares (or, if less, the excess of the fair market value of the shares at
the time of sale or other disposition over the exercise price); and the
Company will be entitled to an income tax deduction in the amount of
ordinary income realized by the recipient.
In two situations, Options will not qualify as ISOs, and will be
subject to different federal income tax treatment. These situations are as
follows:
An Option issued to a recipient who owns or is deemed to own more than
10% of the total combined voting power of all classes of stock of the
Company will not be an ISO if the exercise price is not at least 110%
of the fair market value at the time of the grant or if the period
during which the Option may be exercised is longer than five years.
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To the extent that the fair market value (as of the date(s) of grant)
of Common stock subject to all Options issued to a recipient which
become exercisable for the first time in any calendar year exceeds
$100,000, such options will not be ISOs.
All Options issued to a non-employee director of the Company or any of
the Company's subsidiaries will not be ISO's.
Upon exercise of an Option that is not an ISO, the recipient will
realize ordinary income equal to the excess of the fair market value on the
date of exercise over the exercise price. Ordinary income realized as a
result of the exercise of Options will constitute "wages" subject to
withholding under federal law, in the case of an employee of the Company,
or "self-employment" income in the case of a non-employee director of the
Company or any of its subsidiaries. The Company will be entitled to a
deduction upon exercise of Options that are not ISOs, in an amount equal to
the amount of ordinary income realized by the holder of the Option upon
exercise.
Any gain or loss recognized upon the sale or exchange of shares of
Common Stock acquired pursuant to the exercise of an Option that is not an
ISO Plan will generally be treated as capital gain or loss and will be
long-term or short-term depending on whether the shares have been held for
more than 12 months after the date of exercise of Options for such shares.
For tax years beginning after 1993, the maximum marginal federal
income tax rate on ordinary income is 39.6%. The maximum federal income tax
rate imposed on net capital gain, however, is 28%. In the case of property
held for more than 18 months and sold after July 28, 1997, however, the
maximum tax rate is 20%. In certain circumstances, the federal income tax
rate on capital gains may be lower. Net capital gain means the excess of
net long-term capital gain over net short-term capital loss. Any net
short-term capital gain will be taxed at rates for ordinary income.
Description of Common Stock
The authorized capital stock of the Company consists of 13,000,000
shares of Common Stock and 2,000,000 shares of serial preferred stock, each
with a par value of $1.00 per share.
All shares of Common Stock are entitled to participate ratably in
distributions and in such dividends as may be declared by the Board of
Directors out of funds legally available therefor. Subject to the prior
rights of creditors, all shares of Common Stock issued and outstanding are,
in the event of liquidation, entitled to participate pro rata in all the
remaining assets of the Company. All holders of the Common Stock have full
voting rights and are entitled to one vote for each share held of record on
all matters submitted to a vote of such shareholders. Since the Common
Stock does not have cumulative voting rights, holders of more than 50% of
the outstanding shares can elect all directors of the Company and thereby
control the Company.
Incorporation and Availability of Other Information
The following documents filed by the Company with the Securities and
Exchange Commission (the "Commission") are, as of their respective dates,
incorporated by reference in this memorandum:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, dated March 30, 1997;
(b) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1997 dated May 15, 1997; and
(c) the Company's current Report(s) on Form 8-K dated January 10,
1997; and
(d) the description of the Common Stock contained in the Company's S-4
Registration Statement (No.33-13741) dated October 8, 1996, as amended by
Amendment No. 1 filed October 31, 1996; and
All documents filed by the Company with the Commission pursuant to
sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date
hereof and prior to the filing with the Commission of an amendment that
indicates that all shares of Common Stock registered for sale under the
plan have been sold or that deregisters all such shares then remaining
unsold shall be deemed to be incorporated by reference in this Memorandum
from the date of filing of such documents.
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Upon written or oral request by a Plan participant, the Company will
deliver a copy of each of the documents described in the two preceding
paragraphs to such participant free of charge. To request any or all of
such documents, a Plan participant may use the following address or
telephone number:
Prime Bancorp, Inc.
7111 Valley Green Road
Fort Washington, Pennsylvania 19340
Attention: James J. Lynch, President & CEO
(215) 836-2400
The Company will also deliver to each Plan participant who does not
own any securities of the Company a copy of each report, proxy statement
and other communication that the Company distributes to its security
holders generally. Such materials will be sent at the time that it is sent
to the Company's security holders and, if not received by any such Plan
participant, may be obtained free of charge upon written or oral request
using the address or telephone number set forth in the preceding paragraph.
* * * * *
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