DELAWARE FIRST
FINANCIAL CORPORATION
400 Delaware Ave. [302] 421-9090
Wilmington, DE 19801-1588 [302] 984-1520 fax
July 17, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Delaware First Financial Corporation (the "Company"). The meeting will be
held at the Dupont Country Club, Rockland Road, Wilmington, Delaware 19803, on
Wednesday, August 19, 1998 at 4:00 p.m., Eastern Time. The matters to be
considered by stockholders at the Annual Meeting are described in the
accompanying materials.
It is very important that you be represented at the Annual Meeting
regardless of the number of shares you own or whether you are able to attend the
meeting in person. We urge you to mark, sign, and date your proxy card today and
return it in the envelope provided, even if you plan to attend the Annual
Meeting. This will not prevent you from voting in person, but will ensure that
your vote is counted if you are unable to attend. For the reasons set forth in
the Proxy Statement, the Board unanimously recommends that you vote "FOR" each
matter to be considered.
Your continued support of and interest in Delaware First Financial
Corporation are sincerely appreciated.
Sincerely,
/s/Ernest J. Peoples
Ernest J. Peoples
Interim President and Chief Executive Officer
DELAWARE FIRST FINANCIAL CORPORATION
400 Delaware Avenue
Wilmington, Delaware 19801
(302) 421-9090
-----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on August 19, 1998
-----------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Annual
Meeting") of Delaware First Financial Corporation (the "Company") will be held
at the Dupont Country Club, Rockland Road, Wilmington, Delaware 19803, on
Wednesday, August 19, 1998 at 4:00 p.m., Eastern Time, for the following
purposes, all of which are more completely set forth in the accompanying Proxy
Statement:
(1) To elect one director for a term of three years and until his
successor is elected and qualified;
(2) To consider and approve the adoption of the 1998 Stock Option Plan;
(3) To consider and approve the adoption of the 1998 Recognition and
Retention Plan and Trust Agreement;
(4) To ratify the appointment by the Board of Directors of Deloitte &
Touche LLP as the Company's independent auditors for the year ending December
31, 1998;
(5) To transact such other business as may properly come before the
meeting or any adjournment thereof. Management is not aware of any other such
business.
The Board of Directors has fixed July 10, 1998 as the voting record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting. Only those stockholders of record as of the close of
business on that date will be entitled to vote at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Lori N. Richards
Lori N. Richards
Secretary
Wilmington, Delaware
July 17, 1998
- --------------------------------------------------------------------------------
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING
OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
- --------------------------------------------------------------------------------
DELAWARE FIRST FINANCIAL CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
August 19, 1998
This Proxy Statement is furnished to holders of common stock, $.01 par
value per share ("Common Stock"), of Delaware First Financial Corporation (the
"Company"), the holding company of Delaware First Bank, FSB (the "Bank"). The
Company acquired all of the Bank's common stock issued in connection with the
conversion of the Bank from mutual to stock form in December 1997. Proxies are
being solicited on behalf of the Board of Directors of the Company to be used at
the Annual Meeting of Stockholders ("Annual Meeting") to be held at the Dupont
Country Club, Rockland Road, Wilmington, Delaware 19803, on August 19, 1998 at
4:00 p.m., Eastern Time, for the purposes set forth in the Notice of Annual
Meeting of Stockholders. This Proxy Statement is first being mailed to
stockholders on or about July 17, 1998.
The proxy solicited hereby, if properly signed and returned to the
Company and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, each
proxy received will be voted FOR the matters described below and, upon the
transaction of such other business as may properly come before the meeting, in
accordance with the best judgment of the persons appointed as proxies. Any
stockholder giving a proxy has the power to revoke it at any time before it is
exercised by (i) filing with the Secretary of the Company written notice thereof
(Lori N. Richards, Secretary, Delaware First Financial Corporation, 400 Delaware
Avenue, Wilmington, Delaware 19801); (ii) submitting a duly-executed proxy
bearing a later date; or (iii) appearing at the Annual Meeting and giving the
Secretary notice of his or her intention to vote in person. Proxies solicited
hereby may be exercised only at the Annual Meeting and any adjournment thereof
and will not be used for any other meeting.
VOTING
Only stockholders of record at the close of business on July 10, 1998
("Voting Record Date") will be entitled to vote at the Annual Meeting. On the
Voting Record Date, there were 1,157,000 shares of Common Stock outstanding and
the Company had no other class of equity securities outstanding. The presence in
person or by proxy of at least a majority of the issued and outstanding shares
of capital stock entitled to vote is necessary to constitute a quorum at the
Annual Meeting. Each share of capital stock is entitled to one vote at the
Annual Meeting on all matters properly presented at the meeting. Directors are
elected by a plurality of the votes cast with a quorum present. Abstentions are
considered in determining the presence of a quorum and will not affect the
plurality vote required for the election of directors. The affirmative vote of
the holders of a majority of the total votes present in person or by proxy is
required to ratify the appointment of the independent auditors. Under rules of
the New York Stock Exchange, the proposal for ratification of the auditors is
considered a "discretionary" item upon which brokerage firms may vote in their
discretion on behalf of their clients if such clients have not furnished voting
instructions and for which there will not be "broker non-votes."
The affirmative vote of the holders of a majority of the total votes
eligible to be cast in person or by proxy at the Annual Meeting is required for
approval of the proposals to approve the 1998 Stock Option Plan (the "Option
Plan") and the 1998 Recognition and Retention Plan and Trust Agreement (the
"Recognition Plan"). Under rules applicable to broker-dealers, the proposals to
approve the Option Plan and the Recognition Plan are considered "non-
discretionary" items upon which brokerage firms may not vote in their discretion
on behalf of their clients if such clients have not furnished voting
instructions and for which there may be "broker non-votes" at the meeting.
Because of the required votes, abstentions and broker non-votes will have the
same effect as a vote against the proposals to approve the Option Plan and the
Recognition Plan.
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR
AND EXECUTIVE OFFICERS
Election of Directors
The Bylaws of the Company presently provide that the Board of Directors
shall consist of not less than five nor more than 15 persons. In accordance with
the Bylaws, the Board currently consists of six members. The Articles of
Incorporation and Bylaws of the Company presently provide that the Board of
Directors shall be divided into three classes as nearly equal in number as
possible. The members of each class are to be elected for a term of three years
or until their successors are elected and qualified, with one class of directors
to be elected annually. There are no arrangements or understandings between the
Company and any person pursuant to which such person has been elected a
director. Stockholders of the Company are not permitted to cumulate their votes
for the election of directors.
Other than J. Bayard Cloud , who is the father of Thomas B. Cloud, no
director or executive officer of the Company is related to any other director or
executive officer of the Company by blood, marriage or adoption, and each of the
nominees currently serve as a director of the Company.
Unless otherwise directed, each proxy executed and returned by a
stockholder will be voted for the election of the nominee for director listed
below. If the person named as nominee should be unable or unwilling to stand for
election at the time of the Annual Meeting, the proxies will nominate and vote
for a replacement nominee recommended by the Board of Directors. At this time,
the Board of Directors knows of no reason why the nominee listed below may not
be able to serve as a director if elected. Ages are reflected as of March 31,
1998.
Nominee for Director for Three-Year Term Expiring in 2001
Positions Held with Director
Name Age the Company Since
- --------------------------------- ----------- ----------------------------------------- -------------------
Ernest J. Peoples 65 Interim President and Chief Executive 1964
Officer and Vice Chairman
The Board of Directors recommends that you vote FOR the election of the above
nominee for director.
Members of the Board of Directors Continuing in Office
Directors Whose Terms Expire in 1999
Positions Held with Director
Name Age the Company Since
- -------------------------------- ----------- ----------------------------------------- -------------------
J. Bayard Cloud 85 Chairman 1945
Alan B. Levin 43 Director 1993
2
Directors Whose Terms Expire in 2000
Positions Held with Director
Name Age the Company Since
- -------------------------------- ----------- ----------------------------------------- -------------------
Thomas B. Cloud 49 Director 1972
Larry D. Gehrke 52 Director 1988
Dr. Robert L. Schweitzer 48 Director 1997
Set forth below is information with respect to the principal
occupations of the above listed individuals during at least the last five years,
unless otherwise noted.
J. Bayard Cloud has been Chairman of the Board since January 1, 1983.
He previously served as President of the Bank from 1961 to 1982. He is the
father of Thomas B. Cloud.
Thomas B. Cloud has been President and Chief Executive Officer of
United Electric Supply Company, Inc. since December 1, 1995. Mr. Cloud was
employed by this firm in 1973 and has served the firm in various capacities
including Controller, Vice President of Finance and Chief Financial Officer and
Executive Vice President. The firm employs over 190 individuals and distributes
electric products to industrial, institutional and electrical construction
customers in a five state area. Mr. Cloud is the son of J. Bayard Cloud.
Larry D. Gehrke is a director and Vice President of Bellevue Holding
Company of Wilmington, Delaware, a real estate development concern. He has been
employed there since 1972. He holds real estate brokerage licenses from the
State of Delaware and the Commonwealth of Pennsylvania.
Alan B. Levin is Chairman, President and Chief Executive Officer of
Happy Harry's, Inc., a privately held pharmacy chain in Delaware with
approximately 1,100 employees. He is a member of the Delaware Bar and a former
chairman of the Delaware Workforce Development Council and Delaware Private
Industry Council. He was formerly a member of the State Attorney General's
Office in Delaware.
Ernest J. Peoples is the Interim President, Chief Executive Officer and
Vice Chairman of the Board.
Dr. Robert W. Schweitzer is Professor of Finance at the University of
Delaware, located in Newark, Delaware. He also serves as a faculty member of the
Stonier School of Banking and the National School of Banking at Fairfield
University.
Stockholder Nominations
Article II of the Company's Bylaws governs nominations for election to
the Board of Directors and requires all such nominations, other than those made
by the Board, to be made at a meeting of stockholders called for election of
directors, and only by a stockholder who has complied with the notice provisions
in that section. The Bylaws set forth specific requirements with respect to
stockholder nominations.
Committees and Meeting of the Board of Company and the Bank
The Board of Directors of the Company meets on a monthly basis and may
have additional special meetings. During the year ended December 31, 1997, the
Board of Directors of the Company held 12 regular meetings. No director attended
fewer than 75% of the total number of Board meetings or committee meetings on
which he served that were held during this period, except Mr. Levin who attended
52% of such meetings. The standing committees of the Board include the
following:
3
Executive Committee. The Executive Committee meets as needed. It makes
recommendations to the full Board and acts on policies adopted by the full Board
in the absence of the meeting of the entire full Board. The committee did not
meet during the year ended December 31, 1997. The committee is composed of
Messrs. Peoples (Chairman), J. Bayard Cloud and Thomas Cloud.
Appraisal Committee. The Appraisal Committee consists of Messrs.
Peoples (Chairman), J. Bayard Cloud and Gehrke. The members of the committee
review the appraisals of the real estate collateral for certain loans. The
Appraisal Committee met four times in 1997.
Personnel Committee. The Personnel Committee reviews and prepares
recommendations for annual salary adjustment and bonuses. The committee also
administers the Bank's various benefit plans. It consists of Messrs. Gehrke
(Chairman), Levin and Dr. Schweitzer. The committee met four times during 1997.
Audit Committee. The Audit Committee meets with the Company's
independent certified public accountants annually to review the results of the
annual audit and other related matters. This committee, which met twice in 1997,
presently consists of Messrs. J. Bayard Cloud (Chairman), Peoples and Levin.
Asset/Liability Committee. The Asset/Liability Committee was
established in 1997 and currently meets monthly. It consists of Mr. Thomas Cloud
(Chairman) and Dr. Schweitzer. The Asset/Liability Committee is principally
responsible for management of the Company's interest rate risk.
Executive Officers Who Are Not Directors
The following executive officers do not serve on the Board. There are
no arrangements or understandings between the Company and any person pursuant to
which such person serves as an executive officer.
Jerome P. Arrison has been employed by the Bank since August 1989. He
is currently the Chief Operating Officer, Executive Vice President and
Treasurer.
Genevieve B. Marino joined the Bank in November 1995 as the Director of
Marketing and Communications. She assumed her current position, Vice President
of Retail Banking Services, in July 1997. From November 1993 to November 1995
she was the Advertising and Communications Manager of Wilmington Savings Fund
Society, FSB. Prior to that, she served in other capacities in the Wilmington
Savings Fund Society marketing department.
Lori N. Richards assumed her current position as Vice President of
Finance and Administration in July 1997. From June 1996 to July 1997 she was the
Controller of the Bank. From September 1994 to June 1996 she was an accounting
supervisor at Lanxide Corporation located in Newark, Delaware. From May 1991 to
September 1994 she served as a senior financial accountant at TA Instruments,
Inc. in New Castle, Delaware. She is a Certified Public Accountant.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), requires the Company's officers and directors, and persons who own
more than 10% of the Company's Common Stock, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC") and the
National Association of Securities Dealers, Inc. Officers, directors and greater
than 10% stockholders are required by regulation to furnish the Company with
copies of all Section 16(a) forms they file. The Company knows of no person who
owns 10% more of the Company's Common Stock.
Based sole on review of the copies of such forms furnished to the
Company, or written representations from its officers and directors, the Company
believes that during, and with respect to, the year ended December 31, 1997, the
Company's officers and directors satisfied the reporting requirements
promulgated under Section 16(a) of the 1934 Act.
4
BENEFICIAL OWNERSHIP OF COMMON STOCK
BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Voting Record Date, certain
information as to the Common Stock beneficially owned by (i) each person or
entity, including any "group" as that term is used in Section 13(d)(3) of the
1934 Act, who or which was known to the Company to be the beneficial owner of
more than 5% of the issued and outstanding Common Stock, (ii) the directors of
the Company, (iii) those executive officers of the Company whose salary and
bonus exceeded $100,000 in 1997, and (iv) all directors and executive officers
of the Company and the Bank as a group.
Common Stock Beneficially Owned as of
Name of Beneficial Owner July 10, 1998(1)
- ----------------------------------------------------- ----------------------------------------------
No. %
--------------------- ----------------------
Delaware First Financial Corporation Employee 83,304(2) 7.2%
Stock Ownership Plan and Trust
400 Delaware Avenue
Wilmington, Delaware 19801
Jeffrey L. Gendell, et al. 114,500(3) 9.9
200 Park Avenue
Suite 3900
New York, New York 10166
Directors:
J. Bayard Cloud 1000 *
Thomas B. Cloud 6,154(4) *
Larry D. Gehrke 5,000(5) *
Alan B. Levin 1,500 *
Ernest J. Peoples 1,000 *
Executive Officer:
Jerome P. Arrison 1,234(6) *
All directors and executive officers of the Company 20,790 1.8
and the Bank as a group (nine persons)
- ------------------------------------
* Represents less than 1% of the outstanding Common Stock.
(1) Based upon filings made pursuant to the 1934 Act and information
furnished by the respective individuals. Under regulations promulgated
pursuant to the 1934 Act, shares of the Company's Common Stock are
deemed to be beneficially owned by a person if he or she directly or
indirectly has or shares (i) voting power, which includes the power to
vote or to direct the voting of the shares, or (ii) investment power,
which includes the power to dispose or to direct the disposition of the
shares. Unless otherwise indicated, the named beneficial owner has sole
voting and dispositive power with respect to the shares.
(Footnotes continued on next page)
5
(2) The Delaware First Employee Stock Ownership Plan Trust ("Trust") was
established pursuant to the Delaware First Employee Stock Ownership
Plan ("ESOP") by an agreement between the Company and Wilmington Trust
Company who acts as trustee of the plan ("Trustee"). As of July 10,
1998, 9,256 shares held in the Trust have been allocated to the
accounts of participating employees. The 83,304 unallocated shares held
in the Trust as of July 10, 1998 will be voted by the Trustee in
accordance with its fiduciary duty as Trustee. The amount of Common
Stock beneficially owned by all directors and executive officers as a
group does not include the shares held by the Trust.
(3) Mr. Gendell is the managing member of Tontine Management, L.L.C., a
limited liability company organized under the laws of the State of
Delaware ("TM") and Tontine Overseas Associates, L.L.C., a limited
liability company organized under the laws of the State of Delaware
("TOA"). TM is the general partner of Tontine Financial Partners, L.P.,
a Delaware limited partnership ("TFP"). TOA serves as the investment
manager to TFP Overseas Funds, Ltd., a company organized under the laws
of the Cayman Islands ("TFPO"). TFP and TFPO directly own 93,750 and
20,750 shares of the Company's Common Stock, respectively. The business
address of Mr. Gendell and TM, TOA, TFP and TFPO is 200 Park Avenue,
Suite 3900, New York, New York 10166.
(4) Includes 1,768 shares held by Mr. Cloud's spouse and 100 shares held by
each of Mr. Cloud's children.
(5) Includes 500 shares held by Mr. Gehrke's spouse.
(6) Includes 1,134 shares of the Company's common stock allocated to Mr.
Arrison under the ESOP which the Trustees will vote in accordance with
Mr. Arrison's instructions.
6
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth a summary of
certain information concerning the compensation paid by the Bank for services
rendered in all capacities during the year ended December 31, 1997 and 1996 to
the former President and Chief Executive Officer and to the current Executive
Vice President and Chief Operating Officer. No other executive officers of the
Company or the Bank had total annual compensation in excess of $100,000 during
fiscal 1997.
============================================================================================================================
Annual Compensation Long-Term
Compensation
-------------------------------------- --------------------
Other Restricted
Annual Stock All Other
Name and Year Salary Bonus Compensation Awards Options Compensation
Principal Position (1) (2)
- ----------------------------------------------------------------------------------------------------------------------------
Ronald P. Crouch 1997 $ 120,000 $ 0 $ 0 $ 0 0 $11,341
President and Chief 1996 116,595 11,132 12,873 0 0 0
Executive Officer (3)
- ----------------------------------------------------------------------------------------------------------------------------
Jerome P. Arrison 1997 $ 101,000 $ 0 $ 0 $ 0 0 $11,341
Executive Vice President 1996 96,606 8,921 12,840 0 0 0
and Chief Operating
Officer
============================================================================================================================
- ---------------
(1) Amounts reflect the Bank's contribution to its defined contributory
pension plan on behalf of the employee during 1996. Annual compensation
does not include amounts attributable to other miscellaneous benefits
received by the executive officers. The costs to the Bank of providing
such other miscellaneous benefits during 1997 did not exceed the lesser
of $50,000 or 10% of the total salary and bonus paid to or accrued for
the benefit of such individual executive officer.
(2) Consists of amounts allocated during the year ended December 31, 1997
on behalf of each individual pursuant to the ESOP.
(3) Mr. Crouch served as President and Chief Executive Officer of the
Company and the Bank until his resignation from such positions on May
20, 1998. Ernest J. Peoples has been appointed as the Interim President
and Chief Executive Officer of both the Company and the Bank. In
connection with Mr. Crouch's resignation, the Bank and Mr. Crouch
entered into an Agreement and General Release (the "Agreement").
Pursuant to the Agreement, the Bank has agreed to continue to pay Mr.
Crouch's base salary through March 31, 1999. However, if Mr. Crouch
obtains employment between January 1, 1999 and March 31, 1999 at a
lower base salary, the Bank will be obligated to pay only the
difference between Mr. Crouch's new base salary and his base salary at
the time of resignation. In addition, the Bank has agreed to continue
to pay for miscellaneous benefits, including medical, dental,
disability and life insurance through March 31, 1999 or until Mr.
Crouch obtains comparable benefits, whichever comes first. The Bank
estimates that the aggregate cost of the Agreement to the Bank is
approximately $118,000, all of which will be expensed in the quarter
ended June 30, 1998.
Bonus Compensation. The Bank has a bonus compensation plan pursuant to
which officers can receive bonus compensation up to 20% of their salaries if
certain performance goals are met at the discretion of the Board of Directors.
During 1997, Mr. Crouch and Mr. Arrison did not receive bonuses.
401(k) Plan. In 1997, the Bank established a contributory savings plan
for employees which meets the requirements of Section 401(k) of the Internal
Revenue Code of 1986, as amended (the "Code"). All employees who are at least 21
years old and who have completed at least one year of service may elect to
contribute a percentage of their compensation to the plan each year subject to
certain maximums imposed by federal law. The Bank matches 25% of each employee's
contribution, on the first 2% of that employee's contribution. Participants are
fully vested in the amounts they contribute to the 401(k). Participants are
fully vested in amounts contributed to the plan on their behalf by the Bank as
employer matching contributions after seven years of service. Benefits under the
401(k) plan
7
are payable in the event of a participant's retirement, death, disability, or
termination of employment. Normal retirement age under the 401(k) plan is 65
years of age.
Pension Plan. The Bank terminated its noncontributory tax-qualified
defined pension benefit plan effective December 17, 1997. The excess funds will
be distributed pro rata to the participants.
Employee Stock Ownership Plan. The Bank has established an employee
stock ownership plan (the "ESOP") to allow participating employees to share in
its growth and profits. Participating employees are all employees who have
completed one year of service with the Bank and have attained the age of 21.
The ESOP is funded by tax-deductible contributions made by the Bank in
cash or common stock. All contributions to the ESOP will be held in the trust
which is part of the ESOP and will be invested primarily in Company Common
Stock.
To receive an allocation, a participant must be credited with at least
1,000 hours of service during the year and be employed by the Bank on the last
day of the year, or have terminated employment during the year as a result of
death, disability (as defined in the ESOP) or retirement at or after attaining
age 65. A participant becomes vested in his account balance as follows: after 1
year of service - 20%, 2 years - 40%, 3 years - 60%, 4 years - 80%, 5 years or
more - 100%. Full vesting is accelerated upon retirement at or after age 65,
death, disability, or termination of the ESOP, provided such acceleration is not
prohibited by applicable law.
The Board of Directors has appointed the Personnel Committee to
administer the ESOP and to serve as the ESOP Committee. Wilmington Trust Company
has been engaged as the ESOP Trustee. The Personnel Committee is responsible for
administering the ESOP and for instructing the ESOP Trustee regarding the
investment of any ESOP funds which cannot be invested in Company Common Stock.
Director Compensation
Each of the non-employee directors is paid an annual retainer of
$2,000. Additionally, each non-employee director receives $300 for each board
meeting attended and $300 for each committee meeting attended. The maximum fee
for meetings attended for any director is $300 per day so that if both a board
and committee meeting are held on the same day the maximum payment for
attendance is $300.
J. Bayard Cloud, the Chairman of the Board, receives a special retainer
of $28,800 per year and Ernest J. Peoples, the Vice Chairman, receives a special
retainer of $27,000 per year. These retainers are paid based on their service as
Chair and Vice Chair of the Board and for their review of appraisals.
Additionally, a supplemental pension benefit is paid to J. Bayard Cloud. For
1997 the amount of that benefit was $15,468. Wilmington wage tax is also paid
for all non-employee directors. This tax is currently 1.25% of gross earnings.
Wilmington wage withholding for 1997 was $1,183. Total aggregate fees paid to
the current directors for the year ended December 31, 1997 were $117,915.
Deferred Non-employee Director Compensation Program
The Bank has a deferred non-employee director compensation program,
whereby directors may defer their fees. Currently, Mr. Gehrke participates in
this program. Pursuant to this program, directors defer their fees until their
retirement or resignation from the Board of Directors. For the year ended
December 31, 1997, $8,101 of fees were deferred pursuant to this program. Fees
deferred pursuant to this program are subject to the general rights of the
Bank's creditors.
8
Transactions With Certain Related Persons
The Company offers loans to its directors and officers. These loans are
currently made in the ordinary course of business with the same collateral,
interest rates and underwriting criteria as those of comparable transactions
prevailing at the time and do not involve more than the normal risk of
collectibility or present other favorable features. Under current law, the
Company's loans to directors and executive officers are required to be made on
substantially the same terms, including interest rates, as those prevailing for
comparable transactions and must not involve more than the normal risk of
repayment or present other favorable features. Additionally, all loans to such
persons must be approved in advanced by a disinterested majority of the Board of
Directors. At December 31, 1997, the Company's loans to directors and executive
officers totaled approximately $511,000, or 3.2% of the Company's retained
earnings at that date.
PROPOSAL TO ADOPT THE 1998 STOCK OPTION PLAN
General
The Board of Directors has adopted the Option Plan which is designed to
attract and retain qualified personnel in key positions, provide officers and
key employees with a proprietary interest in the Company and as an incentive to
contribute to the success of the Company and reward key employees for
outstanding performance. If stockholder approval is obtained, options to acquire
shares of Common Stock will be awarded to officers, key employees and directors
of the Company and the Bank with an exercise price equal to the fair market
value of the Common Stock on the date of grant.
Description of the Option Plan
The following description of the Option Plan is a summary of its terms
and is qualified in its entirety by reference to the Option Plan, a copy of
which is attached hereto as Appendix A.
Administration. The Option Plan will be administered and interpreted by
a committee of the Board of Directors ("Committee") that is comprised solely of
two or more non-employee directors. The members of the Committee will initially
consist of Messrs. Gehrke, Levin and Dr. Schweitzer.
Stock Options. Under the Option Plan, the Board of Directors or the
Committee will determine which officers, key employees and non-employee
directors will be granted options, whether such options will be incentive or
compensatory options (in the case of options granted to employees), the number
of shares subject to each option, the exercise price of each option, whether
such options may be exercised by delivering other shares of Common Stock and
when such options become exercisable. The per share exercise price of an
incentive stock option shall at least equal to the fair market value of a share
of Common Stock on the date the option is granted, and the per share exercise
price of a compensatory stock option shall at least equal the greater of par
value or the fair market value of a share of Common Stock on the date the option
is granted.
Unless stated otherwise at the time of grant, all options granted to
participants under the Option Plan shall become vested and exercisable at the
rate of 20% per year on each annual anniversary of the date the options were
granted, and the right to exercise shall be cumulative. Notwithstanding the
foregoing, no vesting shall occur on or after a participant's employment or
service with the Company is terminated for any reason other than his death or
disability. Unless the Committee or Board of Directors shall specifically state
otherwise at the time an option is granted, all options granted to participants
shall become vested and exercisable in full on the date an optionee terminates
his employment or service with the Company or a subsidiary company because of
his death or disability. In addition, all stock options will become vested and
exercisable in full on the date an optionee terminates his employment or service
with the Company or a subsidiary company due to retirement or as the result of a
change in
9
control of the Company if, as of such date of retirement or change in control of
the Company: (i) such treatment is either authorized or is not prohibited by
applicable laws and regulations, or (ii) an amendment to the Option Plan
providing for such treatment has been approved by the stockholders of the
Company at a meeting of stockholders held more than one year after the
consummation of the Conversion.
Each stock option or portion thereof shall be exercisable at any time
on or after it vests and is exercisable until the earlier of ten years after its
date of grant or three months after the date on which the optionee ceases to be
employed (or in the service of the Board of Directors in the case of
non-employee directors) by the Company, unless extended by the Committee or the
Board of Directors to a period not to exceed three years from such termination.
However, failure to exercise incentive stock options within three months after
the date on which the optionee's employment terminates may result in adverse tax
consequences to the optionee. If an optionee dies while serving as an employee
or a non-employee director or terminates employment or service as a result of
disability without having fully exercised his options, the optionee or the
optionee's executors, administrators, legatees or distributees of his estate
shall have the right to exercise such options during the twelve-month period
following the earlier of his death or termination due to disability, provided no
option will be exercisable more than ten years from the date it was granted.
Stock options are non-transferable except by will or the laws of
descent and distribution. Notwithstanding the foregoing, an optionee who holds
non-qualified options may transfer such options to his or her spouse, lineal
ascendants, lineal descendants, or to a duly established trust for the benefit
or one or more of these individuals. Options so transferred may thereafter be
transferred only to the optionee who originally received the grant or to an
individual or trust to whom the optionee could have initially transferred the
option. Options which are so transferred shall be exercisable by the transferee
according to the same terms and conditions as applied to the optionee.
Payment for shares purchased upon the exercise of options may be made
either in cash, or, if permitted by the Committee or the Board with respect to
awards to employees, by delivering shares of Common Stock (including shares
acquired pursuant to the exercise of an option) or other property with a fair
market value equal to the total option price, by withholding some of the shares
of Common Stock which are being purchased upon exercise of an option, or any
combination of the foregoing. To the extent an optionee already owns shares of
Common Stock prior to the exercise of his or her option, such shares could be
used (if permitted by Committee or the Board) as payment for the exercise price
of the option. If the fair market value of a share of Common Stock at the time
of exercise is greater than the exercise price per share, this feature would
enable the optionee to acquire a number of shares of Common Stock upon exercise
of the option which is greater than the number of shares delivered as payment
for the exercise price. In addition, an optionee can exercise his or her option
in whole or in part and then deliver the shares acquired upon such exercise (if
permitted by the Committee or the Board) as payment for the exercise price of
all or part of his options. Again, if the fair market value of a share of Common
Stock at the time of exercise is greater than the exercise price per share, this
feature would enable the optionee to either (1) reduce the amount of cash
required to receive a fixed number of shares upon exercise of the option or (2)
receive a greater number of shares upon exercise of the option for the same
amount of cash that would have otherwise been used. Because options may be
exercised in part from time to time, the ability to deliver Common Stock as
payment of the exercise price could enable the optionee to turn a relatively
small number of shares into a large number of shares.
Stock Appreciation Rights. Under the Option Plan, the Board of
Directors or the Committee is authorized to grant rights to optionees ("stock
appreciation rights") under which an optionee may surrender any exercisable
incentive stock option or compensatory stock option or part thereof in return
for payment by the Company to the optionee of cash or Common Stock in an amount
equal to the excess of the fair market value of the shares of Common Stock
subject to option at the time over the option price of such shares, or a
combination of cash and Common Stock. Stock appreciation rights may be granted
concurrently with the stock options to which they relate or at any time
thereafter which is prior to the exercise or expiration of such options.
Number of Shares Covered by the Option Plan. A total of 115,700 shares
of Common Stock has been reserved for future issuance pursuant to the Option
Plan. In the event of a stock split, reverse stock split, subdivision, stock
10
dividend or any other capital adjustment, the number of shares of Common Stock
under the Option Plan, and the exercise price per share under any option or
stock appreciation right shall be adjusted to reflect such increase or decrease
in the total number of shares of Common Stock outstanding or such capital
adjustment. The Option Plan provides that grants to each employee and each
non-employee director shall not exceed 25% and 5% of the shares of Common Stock
available under the Option Plan, respectively. Awards made to non-employee
directors in the aggregate may not exceed 30% of the number of shares available
under the Option Plan.
Amendment and Termination of the Option Plan. Unless sooner terminated,
the Option Plan shall continue in effect for a period of ten years from April
22, 1998, the date that the Option Plan was adopted by the Board of Directors.
Termination of the Option Plan shall not affect any previously granted Awards.
Federal Income Tax Consequences. Under current provisions of the Code,
as regards incentive stock options, an optionee who meets certain holding period
requirements will not recognize income at the time the option is granted or at
the time the option is exercised, and a federal income tax deduction generally
will not be available to the Company any time as a result of such grant or
exercise.
Section 162(m) of the Code generally limits the deduction for certain
compensation in excess of $1 million per year paid by a publicly-traded
corporation to its chief executive officer and the four other most highly
compensated executive officers ("covered executive"). Certain types of
compensation, including compensation based on performance goals, are excluded
from the $1 million deduction limitation. In order for compensation to qualify
for this exception: (i) it must be paid solely on account of the attainment of
one or more preestablished, objective performance goals; (ii) the performance
goal must be established by a compensation committee consisting solely of two or
more outside directors, as defined; (iii) the material terms under which the
compensation is to be paid, including performance goals, must be disclosed to
and approved by stockholders in a separate vote prior to payment; and (iv) prior
to payment, the compensation committee must certify that the performance goals
and any other material terms were in fact satisfied (the "Certification
Requirement").
Final Treasury regulations issued in July 1996 provide that
compensation attributable to a stock option is deemed to satisfy the requirement
that compensation be paid solely on account of the attainment of one or more
performance goals if: (i) the grant is made by a compensation committee
consisting solely of two or more outside directors, as defined; (ii) the plan
under which the option is granted states the maximum number of shares with
respect to which options may be granted during a specified period to any
employee; and (iii) under the terms of the option, the amount of compensation
the employee could receive is based solely on an increase in the value of the
stock after the date of grant or award. The Certification Requirement is not
necessary if these other requirements are satisfied.
The Option Plan has been designed to meet the requirements of Section
162(m) of the Code and, as a result, the Company believes that compensation
attributable to stock options granted under the Option Plan in accordance with
the foregoing requirements will be fully deductible under Section 162(m) of the
Code. If the non-excluded compensation of a covered executive exceeded $1
million, however, compensation attributable to other awards, such as restricted
stock, may not be fully deductible unless the grant or vesting of the award is
contingent on the attainment of a performance goal determined by a compensation
committee meeting specified requirements and disclosed to and approved by the
stockholders of the Company. The Board of Directors believes that the likelihood
of any impact on the Company from the deduction limitation contained in Section
162(m) of the Code is remote at this time.
The above description of tax consequences under federal law is
necessarily general in nature and does not purport to be complete. Moreover,
statutory provisions are subject to change, as are their interpretations, and
their application may vary in individual circumstances. Finally, the
consequences under applicable state and local income tax laws may not be the
same as under the federal income tax laws.
Accounting Treatment. Neither the grant nor the exercise of an
incentive stock option or a non-qualified stock option under the Stock Option
Plan currently requires any charge against earnings under generally accepted
accounting principles. In October 1995, the Financial Accounting Standards Board
("FASB") issued Statement of Financial
11
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," which is effective for transactions entered into after December
15, 1995. This Statement establishes financial accounting and reporting
standards for stock-based employee compensation plans. This Statement defines a
fair value method of accounting for an employee stock option or similar equity
instrument and encourages all entities to adopt that method of accounting for
all of their employee stock compensation plans. However, it also allows an
entity to continue to measure compensation cost for those plans using the
intrinsic value method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." Under the fair value method,
compensation cost is measured at the grant date based on the value of the award
and is recognized over the service period, which is usually the vesting period.
Under the intrinsic value method, compensation cost is the excess, if any, of
the quoted market price of the stock at grant date or other measurement date
over the amount an employee must pay to acquire the stock. The Company
anticipates that it will use the intrinsic value method, in which event pro
forma disclosure will be included in the footnotes to the Company's financial
statements to show what net income and earnings per share would have been if the
fair value method had been utilized. If the Company elects to utilize the fair
value method, its net income and earnings per share may be adversely affected.
Stockholder Approval. Stockholder ratification of the Option Plan will
satisfy National Association of Securities Dealers Automated Quotation System
("NASDAQ") listing, federal tax and Office of Thrift Supervision ("OTS")
requirements.
Regulatory Requirements. The Option Plan and the Recognition Plan (the
"Plans") comply with applicable OTS regulations and are required to be submitted
to the OTS after approval by stockholders. No assurance can be given as to
whether the OTS will raise any objections to the Plans as presented to
stockholders or whether the OTS may require modifications to be made to the
Plans. A vote for approval of the Plans shall be deemed to be a vote for
approval of the Plans as the same may be required to be modified by the OTS,
provided that the change is not material as determined by the Company. The
Company will not make any modification to the Plans which would increase the
level of benefits from that presented. Non-objection to the Plans by the OTS
shall not constitute approval or endorsement of the Plans by the OTS.
Under OTS regulations, certain stock benefit plans established or
implemented within one year following the completion of a mutual to stock
conversion are required to contain certain restrictions and limitations, which
are contained in the Plans. Specifically, the OTS regulations provide, among
other provisions, that awards begin vesting no earlier than one year from the
date the plans are approved by stockholders, shall not vest at a rate in excess
of 20% per year and shall not provide for accelerated vesting except in the case
of disability or death. Recently, the OTS has authorized the elimination of
these provisions more than one year after a conversion, provided that
stockholder approval of such amendments to the plans is obtained. The Plans
provide that in the event of termination of service following a change in
control of the Company or retirement, vesting of awards would accelerate if, as
of such date: (i) such treatment is either authorized or is not prohibited by
applicable law and regulations, or (ii) amendments to the Plans providing for
such treatment has been approved by the stockholders of the Company at a meeting
of stockholders held more than one year after the consummation of the
Conversion. The Company currently plans to submit amendments to the Plans to
stockholders at its first meeting of stockholders held one year after the
Conversion in order to remove these restrictions and to provide that new awards
granted after such stockholder approval shall vest at the rate determined by the
Board or the Committee at the time of grant and that both existing and new
awards shall accelerate and vest upon termination of service to the Company upon
retirement or following a change in control of the Company.
The Board of Directors recommends that stockholders vote FOR adoption
of the 1998 Stock Option Plan.
12
PROPOSAL TO ADOPT THE 1998 RECOGNITION
AND RETENTION PLAN AND TRUST AGREEMENT
General
The Board of Directors of the Company has adopted the Recognition Plan,
the objective of which is to enable the Company to provide officers, key
employees and directors with a proprietary interest in the Company and as an
incentive to contribute to its success. Officers, key employees and directors
(including emeritus directors) of the Company and the Bank who are selected by
the Board of Directors of the Company or members of a committee appointed by the
Board will be eligible to receive benefits under the Recognition Plan. If
stockholder approval is obtained, shares will be granted to officers, key
employees and directors as determined by the Committee or the Board of
Directors.
Description of the Recognition Plan
The following description of the Recognition Plan is a summary of its
terms and is qualified in its entirety by reference to the Recognition Plan, a
copy of which is attached hereto as Appendix B.
Administration. A committee of the Board of Directors of the Company
will administer the Recognition Plan, which shall consist of at least two
non-employee directors of the Company. The members of the Committee will
initially consist of Messrs. Gehrke, Levin and Dr. Schweitzer who will also
serve as trustees of the trust established pursuant to the Recognition Plan
("Trust"). The trustees will have the responsibility to invest all funds
contributed by the Company to the Trust.
Upon stockholder approval of the Recognition Plan, the Company will
acquire Common Stock on behalf of the Recognition Plan, in an amount necessary
to purchase the number of shares of Common Stock equal to 4% of the Common Stock
or 46,280 shares. It is currently anticipated that these shares will be acquired
through open market purchases to the extent available, although the Company
reserves the right to issue previously unissued shares or treasury shares to the
Recognition Plan. The issuance of new shares by the Company would be dilutive to
the voting rights of existing stockholders and to the Company's book value per
share and earnings per share.
Grants. Unless stated otherwise at the time of grant, shares of Common
Stock granted pursuant to the Recognition Plan will be in the form of restricted
stock payable over a five-year period at a rate of 20% per year, beginning one
year from the anniversary date of the grant. A recipient will be entitled to all
voting and other stockholder rights with respect to shares which have been
earned and allocated under the Recognition Plan. However, until such shares have
been earned and allocated, they may not be sold, pledged or otherwise disposed
of and are required to be held in the Trust. In addition, any cash dividends or
stock dividends declared in respect of unvested share awards will be held by the
Trust for the benefit of the recipients and such dividends, including any
interest thereon, will be paid out proportionately by the Trust to the
recipients thereof as soon as practicable after the share awards become earned.
If a recipient terminates employment or service with the Company for
reasons other than death, disability or retirement, the recipient will forfeit
all rights to the allocated shares under restriction. All shares subject to an
award held by a recipient whose employment or service with the Company or any
subsidiary terminates due to death or disability shall be deemed earned as of
the recipient's last day of employment or service with the Company or any
subsidiary and shall be distributed as soon as practicable thereafter. In
addition, in the event that a recipient's employment or service with the Company
or any subsidiary terminates due to retirement or following a change in control
of the Company all shares subject to an award held by a recipient shall be
deemed earned as of the recipient's last day of employment with or service to
the Company or any subsidiary and shall be distributed as soon as practicable
thereafter, provided that as of the date of such retirement or change in control
such treatment is either authorized or is not prohibited by applicable laws and
regulations.
Federal Income Tax Consequences. Pursuant to Section 83 of the Code,
recipients of Recognition Plan awards will recognize ordinary income in an
amount equal to the fair market value of the shares of Common Stock granted
13
to them at the time that the shares vest and become transferable. A recipient of
a Recognition Plan award may also elect, however, to accelerate the recognition
of income with respect to his or her grant to the time when shares of Common
Stock are first transferred to him or her, notwithstanding the vesting schedule
of such awards. The Company will be entitled to deduct as a compensation expense
for tax purposes the same amounts recognized as income by recipients of
Recognition Plan awards in the year in which such amounts are included in
income.
Accounting Treatment. For a discussion of SFAS No. 123, see "Proposal
to Adopt the 1998 Stock Option Plan - Description of Option Plan - Accounting
Treatment." Under the intrinsic value method, the Company will also recognize a
compensation expense as shares of Common Stock granted pursuant to the
Recognition Plan vest. The amount of compensation expense recognized for
accounting purposes is based upon the fair market value of the Common Stock at
the date of grant to recipients, rather than the fair market value at the time
of vesting for tax purposes. The vesting of plan share awards will have the
effect of increasing the Company's compensation expense.
Stockholder Approval. No shares will be granted under the Recognition
Plan unless the Recognition Plan is approved by stockholders.
Shares to be Granted. The Board of Directors of the Company adopted the
Recognition Plan and the Committee established thereunder intends to grant
shares to executive officers, key employees and non-employee directors
(including emeritus directors) of the Company and the Bank. However, the
individual recipients and specific amounts of such awards have not yet been
determined. The Recognition Plan provides that grants to each employee and each
non-employee director shall not exceed 25% and 5% of the shares of Common Stock
available under the Recognition Plan, respectively. Awards made to non-employee
directors in the aggregate may not exceed 30% of the number of shares available
under the Recognition Plan.
Regulatory Requirements. For a discussion of the OTS requirements
related to the Recognition Plan see "Proposal to Adopt the 1998 Stock Option
Plan - Description of the Option Plan - Regulatory Requirements."
The Board of Directors recommends that stockholders vote FOR adoption
of the 1998 Recognition and Retention Plan and Trust Agreement.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors of the Company has appointed Deloitte & Touche
LLP, independent certified public accountants, to perform the audit of the
Company's financial statements for the year ending December 31, 1998, and
further directed that the selection of auditors be submitted for ratification by
the stockholders at the Annual Meeting.
The Company has been advised by Deloitte & Touche LLP that neither that
firm nor any of its associates has any relationship with the Company or its
subsidiaries other than the usual relationship that exists between independent
certified public accountants and clients. Deloitte & Touche LLP will have one or
more representatives at the Annual Meeting who will have an opportunity to make
a statement, if they so desire, and who will be available to respond to
appropriate questions.
The Board of Directors recommends that you vote FOR the ratification of
the appointment of Deloitte & Touche LLP as independent auditors for the year
ending December 31, 1998.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have included in the proxy
materials of the Company relating to the next annual meeting of stockholders of
the Company, which is scheduled to be held in May 1999, must be received at the
principal executive offices of the Company, 400 Delaware Avenue, Wilmington,
Delaware 19801, Attention: Lori N. Richards, Secretary, no later than March 20,
1999. If such proposal is in compliance with all of the requirements of Rule
14a-8 under the 1934 Act, it will be included in the proxy statement and set
forth on the form
14
of proxy issued for such annual meeting of stockholders. It is urged that any
such proposals be sent by certified mail, return receipt requested.
ANNUAL REPORTS
A copy of the Company's Annual Report to Stockholders for the year
ended December 31, 1997 accompanies this Proxy Statement. Such annual report is
not part of the proxy solicitation materials.
Upon receipt of a written request, the Company will furnish to any
stockholder without charge a copy of the Company's Annual Report on Form 10-KSB
for 1997 required to be filed under the 1934 Act. Such written requests should
be directed to Herbert P. Bowersock, III, Investor Relations Coordinator,
Delaware First Financial Corporation, 400 Delaware Avenue, Wilmington, Delaware
19801. The Form 10-KSB is not part of the proxy solicitation materials.
OTHER MATTERS
Each proxy solicited hereby also confers discretionary authority on the
Board of Directors of the Company to vote the proxy with respect to the election
of any person as a director if the nominee is unable to serve or for good cause
will not serve, matters incident to the conduct of the meeting, and upon such
other matters as may properly come before the Annual Meeting. Management is not
aware of any business that may properly come before the Annual Meeting other
than the matters described above in this Proxy Statement. However, if any other
matters should properly come before the meeting, it is intended that the proxies
solicited hereby will be voted with respect to those other matters in accordance
with the judgment of the persons voting the proxies.
The cost of the solicitation of proxies will be borne by the Company.
The Company has retained Regan & Associates, a professional proxy solicitation
firm, to assist in the solicitation of proxies. Such firm will be paid a fee of
$4,500, plus reimbursement for out-of-pocket expenses up to $2,500. The Company
will reimburse brokerage firms and other custodians, nominees and fiduciaries
for reasonable expenses incurred by them in sending the proxy materials to the
beneficial owners of the Company's Common Stock. In addition to solicitations by
mail, directors, officers and employees of the Company may solicit proxies
personally or by telephone without additional compensation.
YOUR VOTE IS IMPORTANT! WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY
CARD AND RETURN IT TODAY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
15
APPENDIX A
DELAWARE FIRST FINANCIAL CORPORATION
STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
Delaware First Financial Corporation (the "Corporation") hereby
establishes this Stock Option Plan (the "Plan") upon the terms and conditions
hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
The purpose of this Plan is to improve the growth and profitability of
the Corporation and its Subsidiary Companies by providing Employees and
Non-Employee Directors with a proprietary interest in the Corporation as an
incentive to contribute to the success of the Corporation and its Subsidiary
Companies, and rewarding those Employees for outstanding performance. All
Incentive Stock Options issued under this Plan are intended to comply with the
requirements of Section 422 of the Code, and the regulations thereunder, and all
provisions hereunder shall be read, interpreted and applied with that purpose in
mind.
ARTICLE III
DEFINITIONS
3.01 "Award" means an Option or Stock Appreciation Rights granted
pursuant to the terms of this Plan.
3.02 "Bank" means Delaware First Bank, FSB the wholly owned subsidiary
of the Corporation.
3.03 "Board" means the Board of Directors of the Corporation or of the
Bank.
3.04 "Change in Control of the Corporation" shall be deemed to have
occurred if: (i) any "person" as such term is used in Sections 13(d) and 14(d)
of the Exchange Act (other than the Corporation and any trustee or other
fiduciary holding securities under any employee benefit plan of the
Corporation), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 25% or more of the combined voting power of the
Corporation's then outstanding securities; (ii) during any period of two
consecutive years (not including any period prior to the adoption of the Plan),
individuals who at the beginning of such period constitute the Board of
Directors, and any new director whose election by the Board of Directors or
nomination for election by the Corporation's stockholders was approved by a vote
of at least two-thirds of the directors then still in office who either were
directors at the beginning of the two-year period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority of the Board of Directors; (iii) the stockholders
of the Corporation approve a merger or consolidation of the Corporation with any
other corporation, other than a merger or consolidation that would result in the
voting securities of the Corporation outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of the Corporation outstanding immediately
after such merger or consolidation; or (iv) the stockholders of the Corporation
approve a plan of complete liquidation of the Corporation or an agreement for
the sale or disposition by the Corporation of all or substantially all of the
Corporation's assets. If any of the events enumerated in clauses (i) through
(iv) occur, the Board shall determine the effective date of the Change in
Control resulting therefrom for purposes of the Plan.
A-1
3.05 "Code" means the Internal Revenue Code of 1986, as amended.
3.06 "Committee" means a committee of two or more directors appointed by
the Board pursuant to Article IV hereof, each of whom shall be a Non-Employee
Director as defined in Rule 16b-3(b)(3)(i) of the Exchange Act or any successor
thereto.
3.07 "Common Stock" means shares of the common stock, $.01 par value
per share, of the Corporation.
3.08 "Disability" means any physical or mental impairment which
qualifies an Employee for disability benefits under the applicable long-term
disability plan maintained by the Corporation or a Subsidiary Company, or, if no
such plan applies, which would qualify such Employee for disability benefits
under the Federal Social Security System.
3.09 "Effective Date" means the day upon which the Board approves this
Plan.
3.10 "Employee" means any person who is employed by the Corporation or a
Subsidiary Company, or is an Officer of the Corporation or a Subsidiary Company,
but not including directors who are not also Officers of or otherwise employed
by the Corporation or a Subsidiary Company.
3.11 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
3.12 "Fair Market Value" shall be equal to the fair market value per
share of the Corporation's Common Stock on the date an Award is granted. For
purposes hereof, the Fair Market Value of a share of Common Stock shall be the
closing sale price of a share of Common Stock on the date in question (or, if
such day is not a trading day in the U.S. markets, on the nearest preceding
trading day), as reported with respect to the principal market (or the composite
of the markets, if more than one) or national quotation system in which such
shares are then traded, or if no such closing prices are reported, the mean
between the high bid and low asked prices that day on the principal market or
national quotation system then in use, or if no such quotations are available,
the price furnished by a professional securities dealer making a market in such
shares selected by the Committee.
3.13 "Incentive Stock Option" means any Option granted under this Plan
which the Board intends (at the time it is granted) to be an incentive stock
option within the meaning of Section 422 of the Code or any successor thereto.
3.14 "Non-Employee Director" means a member of the Board who is not an
Officer or Employee of the Corporation or any Subsidiary Company and shall
include any individual who, at any time after the date of adoption of the Plan,
serves the Board in an advisory or emeritus capacity.
3.15 "Non-Qualified Option" means any Option granted under this Plan
which is not an Incentive Stock Option.
3.16 "Offering" means the offering of Common Stock to the public
pursuant to a Plan of Conversion adopted by the Corporation and the Bank.
3.17 "Officer" means an Employee whose position in the Corporation or
Subsidiary Company is that of a corporate officer, as determined by the Board.
3.18 "Option" means a right granted under this Plan to purchase Common
Stock.
3.19 "Optionee" means an Employee or Non-Employee Director or former
Employee or Non-Employee Director to whom an Option is granted under the Plan.
3.20 "Retirement" means a termination of employment upon or after
attainment of age sixty-five (65) or such earlier age as may be specified in any
applicable plans or policies maintained by the Corporation or a Subsidiary
Company.
A-2
3.21 "Stock Appreciation Right" means a right to surrender an Option in
consideration for a payment by the Corporation in cash and/or Common Stock, as
provided in the discretion of the Committee in accordance with Section 8.11.
3.22 "Subsidiary Companies" means those subsidiaries of the Corporation,
including the Bank, which meet the definition of "subsidiary corporations" set
forth in Section 425(f) of the Code, at the time of granting of the Option in
question.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Duties of the Committee. The Plan shall be administered and
interpreted by the Committee, as appointed from time to time by the Board
pursuant to Section 4.02. The Committee shall have the authority to adopt, amend
and rescind such rules, regulations and procedures as, in its opinion, may be
advisable in the administration of the Plan, including, without limitation,
rules, regulations and procedures which (i) deal with satisfaction of an
Optionee's tax withholding obligation pursuant to Section 12.02 hereof, (ii)
include arrangements to facilitate the Optionee's ability to borrow funds for
payment of the exercise or purchase price of an Award, if applicable, from
securities brokers and dealers, and (iii) include arrangements which provide for
the payment of some or all of such exercise or purchase price by delivery of
previously-owned shares of Common Stock or other property and/or by withholding
some of the shares of Common Stock which are being acquired. The interpretation
and construction by the Committee of any provisions of the Plan, any rule,
regulation or procedure adopted by it pursuant thereto or of any Award shall be
final and binding in the absence of action by the Board of Directors.
4.02 Appointment and Operation of the Committee. The members of the
Committee shall be appointed by, and will serve at the pleasure of, the Board.
The Board from time to time may remove members from, or add members to, the
Committee, provided the Committee shall continue to consist of two or more
members of the Board, each of whom shall be a Non-Employee Director as defined
in Rule 16b-3(b)(3)(i) of the Exchange Act or any successor thereto. The
Committee shall act by vote or written consent of a majority of its members.
Subject to the express provisions and limitations of the Plan, the Committee may
adopt such rules, regulations and procedures as it deems appropriate for the
conduct of its affairs. It may appoint one of its members to be chairman and any
person, whether or not a member, to be its secretary or agent. The Committee
shall report its actions and decisions to the Board at appropriate times but in
no event less than one time per calendar year.
4.03 Revocation for Misconduct. The Board of Directors or the Committee
may by resolution immediately revoke, rescind and terminate any Option, or
portion thereof, to the extent not yet vested, previously granted or awarded
under this Plan to an Employee who is discharged from the employ of the
Corporation or a Subsidiary Company for cause, which, for purposes hereof, shall
mean termination because of the Employee's personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law,
rule, or regulation (other than traffic violations or similar offenses) or final
cease-and-desist order. Options granted to a Non-Employee Director who is
removed for cause pursuant to the Corporation's Certificate of Incorporation
shall terminate as of the effective date of such removal.
4.04 Limitation on Liability. Neither the members of the Board of
Directors nor any member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan, any rule, regulation
or procedure adopted pursuant thereto or for any Awards granted hereunder. If
any members of the Board of Directors or a member of the Committee is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of anything done or not done by him in such capacity under or with
respect to the Plan, the Corporation shall, subject to the requirements of
applicable laws and regulations, indemnify such member against all liabilities
and expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in the best interests of the Corporation and its
Subsidiary Companies and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful.
4.05 Compliance with Law and Regulations. All Awards granted hereunder
shall be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency as may
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be required. The Corporation shall not be required to issue or deliver any
certificates for shares of Common Stock prior to the completion of any
registration or qualification of or obtaining of consents or approvals with
respect to such shares under any federal or state law or any rule or regulation
of any government body, which the Corporation shall, in its sole discretion,
determine to be necessary or advisable. Moreover, no Option or Stock
Appreciation Right may be exercised if such exercise would be contrary to
applicable laws and regulations.
4.06 Restrictions on Transfer. The Corporation may place a legend upon
any certificate representing shares acquired pursuant to an Award granted
hereunder noting that the transfer of such shares may be restricted by
applicable laws and regulations.
ARTICLE V
ELIGIBILITY
Awards may be granted to such Employees or Non-Employee Directors of the
Corporation and its Subsidiary Companies as may be designated from time to time
by the Board of Directors or the Committee. Awards may not be granted to
individuals who are not Employees or Non-Employee Directors of either the
Corporation or its Subsidiary Companies. Non-Employee Directors shall be
eligible to receive only Non-Qualified Options.
ARTICLE VI
COMMON STOCK COVERED BY THE PLAN
6.01 Option Shares. The aggregate number of shares of Common Stock which
may be issued pursuant to this Plan, subject to adjustment as provided in
Article IX, shall be 115,700 shares, which is equal to 10.0% of the shares of
Common Stock issued in the Offering. None of such shares shall be the subject of
more than one Award at any time, but if an Option as to any shares is
surrendered before exercise, or expires or terminates for any reason without
having been exercised in full, or for any other reason ceases to be exercisable,
the number of shares covered thereby shall again become available for grant
under the Plan as if no Awards had been previously granted with respect to such
shares. Notwithstanding the foregoing, if an Option is surrendered in connection
with the exercise of a Stock Appreciation Right, the number of shares covered
thereby shall not be available for grant under the Plan. During the time this
Plan remains in effect, grants to each Employee and each Non-Employee Director
shall not exceed 25% and 5% of the shares of Common Stock available under the
Plan, respectively.
6.02 Source of Shares. The shares of Common Stock issued under the Plan
may be authorized but unissued shares, treasury shares, shares purchased by the
Corporation on the open market or from private sources for use under the Plan,
or, if applicable, shares held in a grantor trust created by the Corporation.
ARTICLE VII
DETERMINATION OF
AWARDS, NUMBER OF SHARES, ETC.
The Board of Directors or the Committee shall, in its discretion,
determine from time to time which Employees and Non-Employee Directors will be
granted Awards under the Plan, the number of shares of Common Stock subject to
each Award, whether each Option will be an Incentive Stock Option or a
Non-Qualified Stock Option and the exercise price of an Option. In making
determinations with respect to Employees there shall be taken into account the
duties, responsibilities and performance of each respective Employee, his
present and potential contributions to the growth and success of the
Corporation, his salary and such other factors as the Board of Directors or the
Committee shall deem relevant to accomplishing the purposes of the Plan.
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ARTICLE VIII
OPTIONS AND STOCK APPRECIATION RIGHTS
Each Option granted hereunder shall be on the following terms and
conditions:
8.01 Stock Option Agreement. The proper Officers on behalf of the
Corporation and each Optionee shall execute a Stock Option Agreement which shall
set forth the total number of shares of Common Stock to which it pertains, the
exercise price, whether it is a Non-Qualified Option or an Incentive Stock
Option, and such other terms, conditions, restrictions and privileges as the
Board of Directors or the Committee in each instance shall deem appropriate,
provided they are not inconsistent with the terms, conditions and provisions of
this Plan. Each Optionee shall receive a copy of his executed Stock Option
Agreement.
8.02 Awards to Employees and Non-Employee Directors. Specific Awards to
Employees and Non- Employee Directors shall be made to such persons and in such
amounts as are determined by the Board of Directors or the Committee. However,
the aggregate amount of Awards made to all Non-Employee Directors may not exceed
34,710 shares (or 30% of the number of shares available under this Plan) and no
individual Non-Employee Director may receive Awards in excess of 5,785 shares
(or 5% of the number of shares available under this Plan).
8.03 Option Exercise Price.
(a) Incentive Stock Options. The per share price at which the
subject Common Stock may be purchased upon exercise of an Incentive Stock Option
shall be no less than one hundred percent (100%) of the Fair Market Value of a
share of Common Stock at the time such Incentive Stock Option is granted, except
as provided in Section 8.10(b), and subject to any applicable adjustment
pursuant to Article IX hereof.
(b) Non-Qualified Options. The per share price at which the
subject Common Stock may be purchased upon exercise of a Non-Qualified Option
shall be no less than one hundred percent (100%) of the Fair Market Value of a
share of Common Stock at the time such Non-Qualified Option is granted, and
subject to any applicable adjustment pursuant to Article IX hereof.
8.04 Vesting and Exercise of Options.
(a) General Rules. Incentive Stock Options and Non-Qualified
Options granted hereunder shall become vested and exercisable at the rate of 20%
per year on each annual anniversary of the date the Option was granted, and the
right to exercise shall be cumulative. Notwithstanding the foregoing, no vesting
shall occur on or after an Employee's employment with the Corporation and all
Subsidiary Companies is terminated for any reason other than his death or
Disability. In determining the number of shares of Common Stock with respect to
which Options are vested and/or exercisable, fractional shares will be rounded
up to the nearest whole number if the fraction is 0.5 or higher, and down if it
is less.
(b) Accelerated Vesting. Unless the Committee shall specifically
state otherwise at the time an Option is granted, all Options granted hereunder
shall become vested and exercisable in full on the date an Optionee terminates
his employment with or service to the Corporation or a Subsidiary Company
because of his death or Disability. All options hereunder shall become
immediately vested and exercisable in full on the date of a Change in Control of
the Company or on the date an Optionee terminates his employment or service to
the Corporation or a Subsidiary Company due to Retirement if, as of such date of
such Retirement or Change in Control of the Corporation, such treatment is
either authorized or is not prohibited by applicable laws and regulations.
8.05 Duration of Options.
(a) General Rule. Except as provided in Sections 8.05(b) and
8.10, each Option or portion thereof granted to Employees and Non-Employee
Directors shall be exercisable at any time on or after it vests and becomes
exercisable until the earlier of (i) ten (10) years after its date of grant or
(ii) three (3) months after the date on which the Optionee ceases to be employed
(or in the service of the Board of Directors in the case of Non-Employee
Directors) by the Corporation and all Subsidiary Companies, unless the Board of
Directors or the Committee in its
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discretion decides at the time of grant or thereafter to extend such period of
exercise upon termination of employment or service from three (3) months to a
period not exceeding three (3) years.
(b) Exceptions. If an Employee dies while in the employ of the
Corporation or a Subsidiary Company or terminates employment with the
Corporation or a Subsidiary Company as a result of Disability without having
fully exercised his Options, the Optionee or the executors, administrators,
legatees or distributees of his estate shall have the right, during the
twelve-month period following the earlier of his death or termination due to
Disability, to exercise such Options. If a Non-Employee Director dies while
serving as a Non-Employee Director or terminates his service to the Corporation
or a Subsidiary Company as a result of Disability without having fully exercised
his Options, the Non-Employee Director or the executors, administrators,
legatees or distributees of his estate shall have the right, during the
twelve-month period following the earlier of his death or termination due to
Disability, to exercise such Options. In no event, however, shall any Option be
exercisable more than ten (10) years from the date it was granted.
8.06 Nonassignability. Options shall not be transferable by an Optionee
except by will or the laws of descent or distribution, and during an Optionee's
lifetime shall be exercisable only by such Optionee or the Optionee's guardian
or legal representative. Notwithstanding the foregoing, or any other provision
of this Plan, an Optionee who holds Non-Qualified Options may transfer such
Options to his or her spouse, lineal ascendants, lineal descendants, or to a
duly established trust for the benefit of one or more of those individuals.
Options so transferred may thereafter be transferred only to the Optionee who
originally received the grant or to an individual or trust to whom the Optionee
could have initially transferred the Option pursuant to this Section 8.06.
Options which are transferred pursuant to this Section 8.06 shall be exercisable
by the transferee according to the same terms and conditions as applied to the
Optionee.
8.07 Manner of Exercise. Options may be exercised in part or in whole
and at one time or from time to time. The procedures for exercise shall be set
forth in the written Stock Option Agreement provided pursuant to Section 8.01.
8.08 Payment for Shares. Payment in full of the purchase price for
shares of Common Stock purchased pursuant to the exercise of any Option shall be
made to the Corporation upon exercise of such Option. All shares sold under the
Plan shall be fully paid and nonassessable. Payment for shares may be made by
the Optionee in cash or, at the discretion of the Board of Directors or the
Committee in the case of Awards to Employees, by delivering shares of Common
Stock (including shares acquired pursuant to the exercise of an Option) or other
property equal in Fair Market Value to the purchase price of the shares to be
acquired pursuant to the Option, by withholding some of the shares of Common
Stock which are being purchased upon exercise of an Option, or any combination
of the foregoing.
8.09 Voting and Dividend Rights. No Optionee shall have any voting or
dividend rights or other rights of a stockholder in respect of any shares of
Common Stock covered by an Option prior to the time that his name is recorded on
the Corporation's stockholder ledger as the holder of record of such shares
acquired pursuant to an exercise of such Option.
8.10 Additional Terms Applicable to Incentive Stock Options. All Options
issued under the Plan as Incentive Stock Options will be subject, in addition to
the terms detailed in Sections 8.01 to 8.09 above, to those contained in this
Section 8.10.
(a) Notwithstanding any contrary provisions contained elsewhere
in this Plan and as long as required by Section 422 of the Code, the aggregate
Fair Market Value, determined as of the time an Incentive Stock Option is
granted, of the Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year, under
this Plan and stock options that satisfy the requirements of Section 422 of the
Code under any other stock option plan or plans maintained by the Corporation
(or any parent or Subsidiary Company), shall not exceed $100,000.
(b) Limitation on Ten Percent Stockholders. The price at which
shares of Common Stock may be purchased upon exercise of an Incentive Stock
Option granted to an individual who, at the time such Incentive Stock Option is
granted, owns, directly or indirectly, more than ten percent (10%) of the total
combined voting power of all classes of stock issued to stockholders of the
Corporation or any Subsidiary Company, shall be no less than one
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hundred and ten percent (110%) of the Fair Market Value of a share of the Common
Stock of the Corporation at the time of grant, and such Incentive Stock Option
shall by its terms not be exercisable after the earlier of the date determined
under Section 8.04 or the expiration of five (5) years from the date such
Incentive Stock Option is granted.
(c) Notice of Disposition; Withholding; Escrow. An Optionee shall
immediately notify the Corporation in writing of any sale, transfer, assignment
or other disposition (or action constituting a disqualifying disposition within
the meaning of Section 421 of the Code) of any shares of Common Stock acquired
through exercise of an Incentive Stock Option within two (2) years after the
grant of such Incentive Stock Option or within one (1) year after the
acquisition of such shares, setting forth the date and manner of disposition,
the number of shares disposed of and the price at which such shares were
disposed of. The Corporation shall be entitled to withhold from any compensation
or other payments then or thereafter due to the Optionee such amounts as may be
necessary to satisfy any withholding requirements of federal or state law or
regulation and, further, to collect from the Optionee any additional amounts
which may be required for such purpose. The Committee may, in its discretion,
require shares of Common Stock acquired by an Optionee upon exercise of an
Incentive Stock Option to be held in an escrow arrangement for the purpose of
enabling compliance with the provisions of this Section 8.10(c).
8.11 Stock Appreciation Rights.
(a) General Terms and Conditions. The Board of Directors or the
Committee may, but shall not be obligated to, authorize the Corporation, on such
terms and conditions as it deems appropriate in each case, to grant rights to
Optionees to surrender an exercisable Option, or any portion thereof, in
consideration for the payment by the Corporation of an amount equal to the
excess of the Fair Market Value of the shares of Common Stock subject to the
Option, or portion thereof, surrendered over the exercise price of the Option
with respect to such shares (any such authorized surrender and payment being
hereinafter referred to as a "Stock Appreciation Right"). Such payment, at the
discretion of the Board of Directors or the Committee, may be made in shares of
Common Stock valued at the then Fair Market Value thereof, or in cash, or partly
in cash and partly in shares of Common Stock.
The terms and conditions set with respect to a Stock Appreciation Right
may include (without limitation), subject to other provisions of this Section
8.11 and the Plan, the period during which, date by which or event upon which
the Stock Appreciation Right may be exercised (which shall be on the same terms
as the Option to which it relates pursuant to Section 8.04 hereunder); the
method for valuing shares of Common Stock for purposes of this Section 8.11; a
ceiling on the amount of consideration which the Corporation may pay in
connection with exercise and cancellation of the Stock Appreciation Right; and
arrangements for income tax withholding. The Board of Directors or the Committee
shall have complete discretion to determine whether, when and to whom Stock
Appreciation Rights may be granted.
(b) Time Limitations. If a holder of a Stock Appreciation Right
terminates service with the Corporation, the Stock Appreciation Right may be
exercised only within the period, if any, within which the Option to which it
relates may be exercised. Notwithstanding the foregoing, any election by an
Optionee to exercise the Stock Appreciation Rights provided in this Plan shall
be made during the period beginning on the third business day following the
release for publication of quarterly or annual financial information required to
be prepared and disseminated by the Corporation pursuant to the requirements of
the Exchange Act and ending on the twelfth business day following such date. The
required release of information shall be deemed to have been satisfied when the
specified financial data appears on or in a wire service, financial news service
or newspaper of general circulation or is otherwise first made publicly
available.
(c) Effects of Exercise of Stock Appreciation Rights or Options.
Upon the exercise of a Stock Appreciation Right, the number of shares of Common
Stock available under the Option to which it relates shall decrease by a number
equal to the number of shares for which the Stock Appreciation Right was
exercised. Upon the exercise of an Option, any related Stock Appreciation Right
shall terminate as to any number of shares of Common Stock subject to the Stock
Appreciation Right that exceeds the total number of shares for which the Option
remains unexercised.
(d) Time of Grant. A Stock Appreciation Right granted in
connection with an Incentive Stock Option must be granted concurrently with the
Option to which it relates, while a Stock Appreciation Right granted
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in connection with a Non-Qualified Option may be granted concurrently with the
Option to which it relates or at any time thereafter prior to the exercise or
expiration of such Option.
(e) Non-Transferable. The holder of a Stock Appreciation Right
may not transfer or assign the Stock Appreciation Right otherwise than by will
or in accordance with the laws of descent and distribution, and during a
holder's lifetime a Stock Appreciation Right may be exercisable only by the
holder.
ARTICLE IX
ADJUSTMENTS FOR CAPITAL CHANGES
The aggregate number of shares of Common Stock available for issuance
under this Plan, the number of shares to which any Award relates and the
exercise price per share of Common Stock under any Option shall be
proportionately adjusted for any increase or decrease in the total number of
outstanding shares of Common Stock issued subsequent to the effective date of
this Plan resulting from a split, subdivision or consolidation of shares or any
other capital adjustment, the payment of a stock dividend, return of capital, or
other increase or decrease in such shares effected without receipt or payment of
consideration by the Corporation. If, upon a merger, consolidation,
reorganization, liquidation, recapitalization or the like of the Corporation,
the shares of the Corporation's Common Stock shall be exchanged for other
securities of the Corporation or of another corporation, each recipient of an
Award shall be entitled, subject to the conditions herein stated, to purchase or
acquire such number of shares of Common Stock or amount of other securities of
the Corporation or such other corporation as were exchangeable for the number of
shares of Common Stock of the Corporation which such optionees would have been
entitled to purchase or acquire except for such action, and appropriate
adjustments shall be made to the per share exercise price of outstanding
Options. In the event the Corporation declares a special cash dividend or return
of capital in an amount per share which exceeds 10% of the fair market value of
a share of Common Stock as of the date of declaration, the per share exercise
price of all previously granted Awards which remain unexercised as of the date
of such declaration shall be proportionately adjusted to give effect to such
special cash dividend or return of capital as of the date of payment of such
special cash dividend or return of capital; provided that the adjustments to the
per shares exercise price shall satisfy the criteria set forth in Emerging
Issues Task Force 90-9 (or any successor thereto) so that the adjustments do not
result in compensation expense, and provided further that if such adjustment
with respect to incentive stock options would be treated as a modification of
the outstanding incentive stock options with the effect that, for purposes of
Section 422 and 425(h) of the Code, and the rules and regulations thereunder,
new incentive stock options would be deemed to be granted, then no adjustment to
the per share exercise price of outstanding incentive stock options shall be
made.
ARTICLE X
AMENDMENT AND TERMINATION OF THE PLAN
The Board may, by resolution, at any time terminate or amend the Plan
with respect to any shares of Common Stock as to which Awards have not been
granted, subject to any applicable regulatory requirements and any required
stockholder approval or any stockholder approval which the Board may deem to be
advisable for any reason, such as for the purpose of obtaining or retaining any
statutory or regulatory benefits under tax, securities or other laws or
satisfying any applicable stock exchange listing requirements. The Board may
not, without the consent of the holder of an Award, alter or impair any Award
previously granted or awarded under this Plan as specifically authorized herein.
ARTICLE XI
EMPLOYMENT RIGHTS
Neither the Plan nor the grant of any Awards hereunder nor any action
taken by the Committee or the Board in connection with the Plan shall create any
right on the part of any Employee or Non-Employee Director of the Corporation or
a Subsidiary Company to continue in such capacity.
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ARTICLE XII
WITHHOLDING
12.01 Tax Withholding. The Corporation may withhold from any cash
payment made under this Plan sufficient amounts to cover any applicable
withholding and employment taxes, and if the amount of such cash payment is
insufficient, the Corporation may require the Optionee to pay to the Corporation
the amount required to be withheld as a condition to delivering the shares
acquired pursuant to an Award. The Corporation also may withhold or collect
amounts with respect to a disqualifying disposition of shares of Common Stock
acquired pursuant to the exercise of an Incentive Stock Option, as provided in
Section 8.10(c).
12.02 Methods of Tax Withholding. The Board of Directors or the
Committee is authorized to adopt rules, regulations or procedures which provide
for the satisfaction of an Optionee's tax withholding obligation by the
retention of shares of Common Stock to which the Employee would otherwise be
entitled pursuant to an Award and/or by the Optionee's delivery of
previously-owned shares of Common Stock or other property.
ARTICLE XIII
EFFECTIVE DATE OF THE PLAN; TERM
13.01 Effective Date of the Plan. This Plan shall become effective on
the Effective Date, and Awards may be granted hereunder as of or after the
Effective Date and prior to the termination of the Plan, provided that no
Incentive Stock Option issued pursuant to this Plan shall qualify as such unless
this Plan is approved by the requisite vote of the holders of the outstanding
voting shares of the Corporation at a meeting of stockholders of the Corporation
held within twelve (12) months of the Effective Date. Notwithstanding the
foregoing or anything to the contrary in this Plan, the implementation of this
Plan and any Awards granted pursuant hereto shall be subject to the receipt of
any applicable regulatory approvals or non-objections and to the approval of the
Corporation's stockholders.
13.02 Term of Plan. Unless sooner terminated, this Plan shall remain in
effect for a period of ten (10) years ending on the tenth anniversary of the
Effective Date. Termination of the Plan shall not affect any Awards previously
granted and such Awards shall remain valid and in effect until they have been
fully exercised or earned, are surrendered or by their terms expire or are
forfeited.
ARTICLE XIV
MISCELLANEOUS
14.01 Governing Law. To the extent not governed by federal law, this
Plan shall be construed under the laws of the State of Delaware.
14.02 Pronouns. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun, and the singular shall include the plural.
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APPENDIX B
DELAWARE FIRST FINANCIAL CORPORATION
RECOGNITION AND RETENTION PLAN AND TRUST AGREEMENT
ARTICLE I
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 Delaware First Financial Corporation (the "Corporation") hereby
establishes a Recognition and Retention Plan (the "Plan") and Trust (the
"Trust") upon the terms and conditions hereinafter stated in this Recognition
and Retention Plan and Trust Agreement (the "Agreement").
1.02 The Trustee hereby accepts this Trust and agrees to hold the Trust
assets existing on the date of this Agreement and all additions and accretions
thereto upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to retain personnel of experience and
ability in key positions by providing Employees and Non-Employee Directors of
the Corporation and of Delaware First Bank, FSB (the "Bank") with a proprietary
interest in the Corporation as compensation for their contributions to the
Corporation, the Bank, and any other Subsidiaries and as an incentive to make
such contributions in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Agreement with an
initial capital letter, unless the context clearly indicates otherwise, shall
have the meanings set forth below. Wherever appropriate, the masculine pronouns
shall include the feminine pronouns and the singular shall include the plural.
3.01 "Bank" means Delaware First Bank, FSB, the wholly-owned subsidiary
of the Corporation.
3.02 "Beneficiary" means the person or persons designated by a Recipient
to receive any benefits payable under the Plan in the event of such Recipient's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Recipient's surviving spouse, if any,
or if none, his estate.
3.03 "Board" means the Board of Directors of the Corporation or of the
Bank.
3.04 "Change of Control of the Corporation" shall be deemed to have
occurred if: (i) any "person" as such term is used in Sections 13(d) and 14(d)
of the Exchange Act (other than the Corporation and any trustee or other
fiduciary holding securities under any employee benefit plan of the
Corporation), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 25% or more of the combined voting power of the
Corporation's then outstanding securities; (ii) during any period of two
consecutive years (not including any period prior to the adoption of the Plan),
individuals who at the beginning of such period constitute the Board of
Directors, and any new director whose election by the Board of Directors or
nomination for election by the Corporation's stockholders was approved by a vote
of at least two-thirds of the directors then still in office who either were
directors at the beginning of the two-year period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority of the Board of Directors; (iii) the stockholders
of the Corporation approve a merger or consolidation of the Corporation with any
other corporation, other than a merger or consolidation that would result in the
voting securities of the Corporation outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of the Corporation outstanding immediately
after such merger or consolidation; or (iv) the stockholders of the
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Corporation approve a plan of complete liquidation of the Corporation or an
agreement for the sale or disposition by the Corporation of all or substantially
all of the Corporation's assets. If any of the events enumerated in clauses (i)
through (iv) occur, the Board shall determine the effective date of the Change
in Control resulting therefrom for purposes of the Plan.
3.05 "Code" means the Internal Revenue Code of 1986, as amended.
3.06 "Committee" means the committee appointed by the Board pursuant to
Article IV hereof.
3.07 "Common Stock" means shares of the common stock, $.01 par value
per share, of the Corporation.
3.08 "Disability" means any physical or mental impairment which
qualifies an Employee for disability benefits under the applicable long-term
disability plan maintained by the Corporation or any Subsidiary or, if no such
plan applies, which would qualify such Employee for disability benefits under
the Federal Social Security System.
3.09 "Effective Date" means the day upon which the Board approves this
Plan.
3.10 "Employee" means any person who is employed by the Corporation, the
Bank, or any Subsidiary, or is an officer of the Corporation, the Bank, or any
Subsidiary, including officers or other employees who may be directors of the
Corporation.
3.11 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
3.12 "Non-Employee Director" means a member of the Board who is not an
Employee, and shall include any individual who, at any time after the date of
adoption of the Plan, serves the Board in an advisory or emeritus capacity.
3.13 "Plan Shares" or "Shares" means shares of Common Stock held in the
Trust which may be distributed to a Recipient pursuant to the Plan.
3.14 "Plan Share Award" or "Award" means a right granted under this Plan
to receive a distribution of Plan Shares upon completion of the service
requirements described in Article VII.
3.15 "Recipient" means an Employee or Non-Employee Director who receives
a Plan Share Award under the Plan.
3.16 "Retirement" means a termination of employment upon or after
attainment of age sixty-five (65) or such earlier age as may be specified in
applicable plans or policies of the Corporation, a Subsidiary or in a
Recipient's Plan Share Award.
3.17 "Subsidiary" means Delaware First Bank, FSB and any other
subsidiaries of the Corporation or the Bank which, with the consent of the
Board, agree to participate in this Plan.
3.18 "Trustee" means such firm, entity or persons approved by the Board
of Directors to hold legal title to the Plan for the purposes set forth herein.
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ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Role of the Committee. The Plan shall be administered and
interpreted by the Committee, which shall consist of two or more members of the
Board, each of whom shall be a Non-Employee Director as defined in Rule
16b-3(b)(3)(i) of the Exchange Act or any successor thereto. The Committee shall
have all of the powers allocated to it in this and other Sections of the Plan.
The interpretation and construction by the Committee of any provisions of the
Plan or of any Plan Share Award granted hereunder shall be final and binding in
the absence of action by the Board of Directors. The Committee shall act by vote
or written consent of a majority of its members. Subject to the express
provisions and limitations of the Plan, the Committee may adopt such rules,
regulations and procedures as it deems appropriate for the conduct of its
affairs. The Committee shall report its actions and decisions with respect to
the Plan to the Board at appropriate times, but in no event less than one time
per calendar year.
4.02 Role of the Board. The members of the Committee and the Trustee
shall be appointed or approved by, and will serve at the pleasure of, the Board.
The Board may in its discretion from time to time remove members from, or add
members to, the Committee, and may remove or replace the Trustee, provided that
any directors who are selected as members of the Committee shall be Non-Employee
Directors.
4.03 Limitation on Liability. No member of the Board or the Committee
shall be liable for any determination made in good faith with respect to the
Plan or any Plan Shares or Plan Share Awards granted under it. If a member of
the Board or the Committee is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of anything done or not
done by him in such capacity under or with respect to the Plan, the Corporation
shall, subject to the requirements of applicable laws and regulations, indemnify
such member against all liabilities and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in the best interests of the
Corporation and any Subsidiaries and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
4.04 Compliance with Laws and Regulations. All Awards granted hereunder
shall be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency as may be required.
ARTICLE V
CONTRIBUTIONS
5.01 Amount and Timing of Contributions. The Board shall determine the
amount (or the method of computing the amount) and timing of any contributions
by the Corporation and any Subsidiaries to the Trust established under this
Plan. Such amounts may be paid in cash or in shares of Common Stock and shall be
paid to the Trust at the designated time of contribution. No contributions by
Employees or Directors shall be permitted.
5.02 Investment of Trust Assets; Number of Plan Shares. Subject to
Section 8.02 hereof, the Trustee shall invest all of the Trust's assets
primarily in Common Stock. The aggregate number of Plan Shares available for
distribution pursuant to this Plan shall be 46,280 shares of Common Stock, which
shares shall be purchased from the Corporation and/or from stockholders thereof
by the Trust with funds contributed by the Corporation. During the time this
Plan remains in effect, Awards to each Employee and each Non-Employee Director
shall not exceed 25% and 5% of the shares of Common Stock available under the
Plan, respectively.
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ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 Awards to Non-Employee Directors. Plan Share Awards to Non-Employee
Directors shall be made to such persons and in such amounts as determined by the
Board of Directors of the Committee. However, Plan Share Awards up to 13,884
shares (or 30% of the number of shares available under this Plan) shall be made
to Non- Employee Directors in the aggregate and no individual Non-Employee
Director may receive Plan Share Awards in excess of 2,314 shares (or 5% of the
number of shares available under this Plan).
6.02 Awards to Employees. Plan Share Awards may be made to such
Employees as may be selected by the Board of Directors or the Committee. In
selecting those Employees to whom Plan Share Awards may be granted and the
number of Shares covered by such Awards, the Committee shall consider the
duties, responsibilities and performance of each respective Employee, his
present and potential contributions to the growth and success of the
Corporation, his salary and such other factors as shall be deemed relevant to
accomplishing the purposes of the Plan. The Board of Directors or the Committee
may but shall not be required to request the written recommendation of the Chief
Executive Officer of the Corporation other than with respect to Plan Share
Awards to be granted to him.
6.03 Form of Allocation. As promptly as practicable after a
determination is made pursuant to Sections 6.01 or 6.02 that a Plan Share Award
is to be issued, the Board of Directors or the Committee shall notify the
Recipient in writing of the grant of the Award, the number of Plan Shares
covered by the Award, and the terms upon which the Plan Shares subject to the
Award shall be distributed to the Recipient. The date on which the Board of
Directors or the Committee makes the determination with respect to Plan Share
Awards shall be considered the date of grant of the Plan Share Award. The Board
of Directors or the Committee shall maintain records as to all grants of Plan
Share Awards under the Plan.
6.04 Allocations Not Required to any Specific Employee. Notwithstanding
anything to the contrary in Section 6.02 hereof, no Employee shall have any
right or entitlement to receive a Plan Share Award hereunder, such Awards being
at the total discretion of the Board of Directors or the Committee.
ARTICLE VII
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earning Plan Shares; Forfeitures.
(a) General Rules. Subject to the terms hereof, Plan Share Awards
shall be earned by a Recipient at the rate of twenty percent (20%) of the
aggregate number of Shares covered by the Award as of each annual anniversary of
the date of grant of the Award. If the employment of an Employee or service as a
Non-Employee Director is terminated prior to the fifth (5th) annual anniversary
of the date of grant of a Plan Share Award for any reason (except as
specifically provided in subsections (b), (c) and (d) below), the Recipient
shall forfeit the right to any Shares subject to the Award which have not
theretofore been earned. In the event of a forfeiture of the right to any Shares
subject to an Award by an Employee, such forfeited Shares shall become available
for allocation pursuant to Section 6.02 hereof as if no Award had been
previously granted with respect to such Shares. No fractional shares shall be
distributed pursuant to this Plan.
(b) Exception for Terminations Due to Death, Disability or
Retirement. Notwithstanding the general rule contained in Section 7.01(a), all
Plan Shares subject to a Plan Share Award held by a Recipient whose employment
with or service to the Corporation or any Subsidiary terminates due to death or
Disability shall be deemed earned as of the Recipient's last day of employment
with or service to the Corporation or any Subsidiary and shall be distributed as
soon as practicable thereafter; provided, however, that Awards shall be
distributed in accordance with Section 7.03(a). In addition, in the event that a
Recipient's employment with or service to the Corporation or any Subsidiary
terminates due to Retirement, all Plan Shares subject to a Plan Share Award held
by a Recipient shall be deemed earned as of the Recipient's last day of
employment with or service to the Corporation or any Subsidiary and shall be
distributed as soon as practicable thereafter; provided, however, that Awards
shall be distributed in accordance with Section 7.03(a) and, as of the date of
such Retirement, such treatment is either authorized or is not prohibited by
applicable laws and regulations.
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(c) Exception for Terminations after a Change in Control of the
Corporation. Notwithstanding the general rule contained in Section 7.01(a), all
Plan Shares subject to a Plan Share Award held by a Recipient shall be deemed to
be earned in the event of a Change in Control of the Corporation if, as of the
date of such Change in Control of the Corporation, such treatment is either
authorized or is not prohibited by applicable laws and regulations.
(d) Revocation for Misconduct. Notwithstanding anything
hereinafter to the contrary, the Board may by resolution immediately revoke,
rescind and terminate any Plan Share Award, or portion thereof, previously
awarded under this Plan, to the extent Plan Shares have not been distributed
hereunder, whether or not yet earned, in the case of an Employee who is
discharged from the employ of the Corporation or any Subsidiary for cause (as
hereinafter defined). Termination for cause shall mean termination because of
the Employee's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order. Plan Share
Awards granted to a Non-Employee Director who is removed for cause pursuant to
the Corporation's Articles of Incorporation shall terminate as of the effective
date of such removal.
7.02 Distribution of Dividends. Any cash dividends (including special
large and nonrecurring dividends including one that has the effect of a return
of capital to the Corporation's stockholders) or stock dividends declared in
respect of each unvested Plan Share Award will be held by the Trust for the
benefit of the Recipient on whose behalf such Plan Share Award is then held by
the Trust and such dividends, including any interest thereon, will be paid out
proportionately by the Trust to the Recipient thereof as soon as practicable
after the Plan Share Awards become earned. Any cash dividends or stock dividends
declared in respect of each vested Plan Share held by the Trust will be paid by
the Trust, as soon as practicable after the Trust's receipt thereof, to the
Recipient on whose behalf such Plan Share is then held by the Trust.
7.03 Distribution of Plan Shares.
(a) Timing of Distributions: General Rule. Plan Shares shall be
distributed to the Recipient or his Beneficiary, as the case may be, as soon as
practicable after they have been earned.
(b) Form of Distributions. All Plan Shares, together with any
Shares representing stock dividends, shall be distributed in the form of Common
Stock. One share of Common Stock shall be given for each Plan Share earned and
distributable. Payments representing cash dividends shall be made in cash.
(c) Withholding. The Trustee may withhold from any cash payment
or Common Stock distribution made under this Plan sufficient amounts to cover
any applicable withholding and employment taxes, and if the amount of a cash
payment is insufficient, the Trustee may require the Recipient or Beneficiary to
pay to the Trustee the amount required to be withheld as a condition of
delivering the Plan Shares. The Trustee shall pay over to the Corporation or any
Subsidiary which employs or employed such Recipient any such amount withheld
from or paid by the Recipient or Beneficiary.
(d) Restrictions on Selling of Plan Shares. Plan Share Awards may
not be sold, assigned, pledged or otherwise disposed of prior to the time that
they are earned and distributed pursuant to the terms of this Plan. Following
distribution, the Board of Directors or the Committee may require the Recipient
or his Beneficiary, as the case may be, to agree not to sell or otherwise
dispose of his distributed Plan Shares except in accordance with all then
applicable federal and state securities laws, and the Board of Directors or the
Committee may cause a legend to be placed on the stock certificate(s)
representing the distributed Plan Shares in order to restrict the transfer of
the distributed Plan Shares for such period of time or under such circumstances
as the Board of Directors or the Committee, upon the advice of counsel, may deem
appropriate.
7.04 Voting of Plan Shares. After a Plan Share Award has been made, the
Recipient shall be entitled to direct the Trustee as to the voting of the Plan
Shares which are covered by the Plan Share Award and which have not yet been
earned and distributed to him, subject to rules and procedures adopted by the
Committee for this purpose. All shares of Common Stock held by the Trust which
have not been awarded under a Plan Share Award and shares which have been
awarded as to which Recipients have not directed the voting shall be voted by
the Trustee in the same
B-5
proportion as voted by the Trustee for shares allocated and which the Trustee
receives directions for such vote by Recipients.
ARTICLE VIII
TRUST
8.01 Trust. The Trustee shall receive, hold, administer, invest and make
distributions and disbursements from the Trust in accordance with the provisions
of the Plan and Trust and the applicable directions, rules, regulations,
procedures and policies established by the Board of Directors or the Committee
pursuant to the Plan.
8.02 Management of Trust. It is the intent of this Plan and Trust that
the Trustee shall have complete authority and discretion with respect to the
arrangement, control and investment of the Trust, and that the Trustee shall
invest all assets of the Trust in Common Stock to the fullest extent
practicable, except to the extent that the Trustee determine that the holding of
monies in cash or cash equivalents is necessary to meet the obligations of the
Trust. In performing their duties, the Trustee shall have the power to do all
things and execute such instruments as may be deemed necessary or proper,
including the following powers:
(a) To invest up to one hundred percent (100%) of all Trust
assets in Common Stock without regard to any law now or hereafter in force
limiting investments for trustees or other fiduciaries. The investment
authorized herein may constitute the only investment of the Trust, and in making
such investment, the Trustee is authorized to purchase Common Stock from the
Corporation or from any other source, and such Common Stock so purchased may be
outstanding, newly issued, or treasury shares.
(b) To invest any Trust assets not otherwise invested in
accordance with (a) above, in such deposit accounts, and certificates of
deposit, obligations of the United States Government or its agencies or such
other investments as shall be considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at any
time held or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be registered
in the name of a nominee, without the addition of words indicating that such
security is an asset of the Trust (but accurate records shall be maintained
showing that such security is an asset of the Trust).
(e) To hold cash without interest in such amounts as may in the
opinion of the Trustee be reasonable for the proper operation of the Plan and
Trust.
(f) To employ brokers, agents, custodians, consultants and
accountants.
(g) To hire counsel to render advice with respect to their
rights, duties and obligations hereunder, and such other legal services or
representation as the Trustee deems desirable.
(h) To hold funds and securities representing the amounts to be
distributed to a Recipient or his Beneficiary as a consequence of a dispute as
to the disposition thereof, whether in a segregated account or held in common
with other assets of the Trust.
Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of court for the exercise of any power
herein contained, or give bond.
B-6
8.03 Records and Accounts. The Trustee shall maintain accurate and
detailed records and accounts of all transactions of the Trust, which shall be
available at all reasonable times for inspection by any legally entitled person
or entity to the extent required by applicable law, or any other person
determined by the Board of Directors or the Committee.
8.04 Expenses. All costs and expenses incurred in the operation and
administration of this Plan shall be borne by the Corporation or, in the
discretion of the Corporation, the Trust.
8.05 Indemnification. Subject to the requirements of applicable laws and
regulations, the Corporation shall indemnify, defend and hold the Trustee
harmless against all claims, expenses and liabilities arising out of or related
to the exercise of the Trustee's powers and the discharge of its duties
hereunder, unless the same shall be due to the Trustee's gross negligence or
willful misconduct.
ARTICLE IX
MISCELLANEOUS
9.01 Adjustments for Capital Changes. The aggregate number of Plan
Shares available for distribution pursuant to the Plan Share Awards and the
number of Shares to which any Plan Share Award relates shall be proportionately
adjusted for any increase or decrease in the total number of outstanding shares
of Common Stock issued subsequent to the effective date of the Plan resulting
from any split, subdivision or consolidation of shares or other capital
adjustment, or other increase or decrease in such shares effected without
receipt or payment of consideration by the Corporation.
9.02 Amendment and Termination of Plan. The Board may, by resolution, at
any time amend or terminate the Plan and the Trust (including amendments which
may result in the merger of the Plan or the Trust with and into other plans or
trusts of the Corporation or successor thereto), subject to any applicable
regulatory requirements and any required stockholder approval or any stockholder
approval which the Board may deem to be advisable for any reason, such as for
the purpose of obtaining or retaining any statutory or regulatory benefits under
tax, securities or other laws or satisfying any applicable stock exchange
listing requirements. The Board may not, without the consent of the Recipient,
alter or impair his Plan Share Award except as specifically authorized herein.
Upon termination of the Plan, the Recipient's Plan Share Awards shall be
distributed to the Recipient in accordance with the terms of Article VII hereof.
9.03 Nontransferable. During the lifetime of the Recipient, Plan Shares
may only be earned by and paid to the Recipient who was notified in writing of
the Award pursuant to Section 6.03, provided that Plan Share Awards and rights
to Plan Shares shall be transferable by a Recipient to his or her spouse, lineal
ascendants, lineal descendants, or to a duly established trust. Plan Share
Awards so transferred may not again be transferred other than to the Recipient
who originally received the grant of Plan Share Awards or to an individual or
trust to whom such Recipient could have transferred Plan Share Awards pursuant
to this Section 9.03. Plan Share Awards which are transferred pursuant to this
Section 9.03 shall be subject to the same terms and conditions as would have
applied to such Plan Share Awards in the hands of the Recipient who originally
received the grant of such Plan Share Award. No Recipient or Beneficiary shall
have any right in or claim to any assets of the Plan or Trust, nor shall the
Corporation or any Subsidiary be subject to any claim for benefits hereunder.
9.04 Employment or Service Rights. Neither the Plan nor any grant of a
Plan Share Award or Plan Shares hereunder nor any action taken by the Trustee,
the Committee or the Board in connection with the Plan shall create any right on
the part of any Employee or Non-Employee Director to continue in such capacity.
9.05 Voting and Dividend Rights. No Recipient shall have any voting or
dividend rights or other rights of a stockholder in respect of any Plan Shares
covered by a Plan Share Award, except as expressly provided in Sections 7.02 and
7.04 above, prior to the time said Plan Shares are actually earned and
distributed to him.
B-7
9.06 Governing Law. To the extent not governed by federal law, the Plan
and Trust shall be governed by the laws of the State of Delaware.
9.07 Effective Date. This Plan shall be effective as of the Effective
Date, and Awards may be granted hereunder as of or after the Effective Date and
as long as the Plan remains in effect. Notwithstanding the foregoing or anything
to the contrary in this Plan, the implementation of this Plan and any Awards
granted pursuant hereto are subject to the receipt of any applicable regulatory
approvals or non-objections and approval of the Corporation's stockholders.
9.08 Term of Plan. This Plan shall remain in effect until the earlier of
(1) ten (10) years from the Effective Date, (2) termination by the Board, or (3)
the distribution to Recipients and Beneficiaries of all assets of the Trust.
9.09 Tax Status of Trust. It is intended that the trust established
hereby be treated as a Grantor Trust of the Corporation under the provisions of
Section 671 et seq. of the Code, as the same may be amended from time to time.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officers and the corporate seal to be affixed
and duly attested, and the initial Trustee established pursuant hereto have duly
and validly executed this Agreement, all as of this 22nd day of April 1998.
DELAWARE FIRST FINANCIAL CORPORATION
By /s/ Ernest J. Peoples
---------------------
Ernest J. Peoples
Interim President and Chief Executive Officer
ATTEST:
By: /s/ Lori N. Richards
---------------------
Lori N. Richards TRUSTEE
By: /s/ Larry D. Gehrke
------------------------
Larry D. Gehrke
By: /s/ Alan B. Levin
------------------------
Alan B. Levin
By: /s/ Robert L. Schweitzer
------------------------
Dr. Robert L. Schweitzer
B-8
REVOCABLE PROXY
DELAWARE FIRST FINANCIAL CORPORATION
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 19, 1998
The undersigned, being a stockholder of Delaware First Financial
Corporation ("Company") as of July 10, 1998, hereby authorizes Jerome P. Arrison
and Lori N. Richards or any successors thereto as proxies with full powers of
substitution, to represent the undersigned at the Annual Meeting of Stockholders
of the Company to be held at the DuPont Country Club, Rockland Road, Wilmington,
Delaware 19803 on Wednesday, August 19, 1998 at 4:00 p.m., Eastern Time, and at
any adjournment of said meeting, and thereat to act with respect to all votes
that the undersigned would be entitled to cast, if then personally present, as
follows:
1. ELECTION OF DIRECTOR
Nominee for a three-year term expiring 2001:
Ernest J. Peoples
[ ] For [ ] Withhold
2. PROPOSAL to adopt the 1998 Stock Option Plan.
[ ] For [ ] Against [ ] Abstain
3. PROPOSAL to adopt the Company's Recognition and Retention Plan and Trust.
[ ] For [ ] Against [ ] Abstain
4. PROPOSAL to ratify the appointment of the Board of Directors of Deloitte &
Touche LLP as the Company's independent auditors for the fiscal year ending
December 31, 1998.
[ ] For [ ] Against [ ] Abstain
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE ABOVE PROPOSALS.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR
USE AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST 19, 1998 AND AT
ANY ADJOURNMENT THEREOF.
SHARES OF THE COMPANY'S COMMON STOCK WILL BE VOTED AS SPECIFIED. IF RETURNED,
BUT NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
BOARD OF DIRECTORS' NOMINEE TO THE BOARD OF DIRECTORS, FOR THE 1998 STOCK OPTION
PLAN, FOR THE RECOGNITION AND RETENTION PLAN AND TRUST, FOR RATIFICATION OF THE
COMPANY'S INDEPENDENT AUDITORS, AND OTHERWISE AT THE DISCRETION OF THE PROXIES,
YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO THE TIME IT IS VOTED AT THE
ANNUAL MEETING.
Please be sure to sign and date
this Proxy in the box below.
-------------------------------
Date
-------------------------------
Stockholder sign above
-------------------------------
Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope provided.
DELAWARE FIRST FINANCIAL CORPORATION
PLEASE SIGN ABOVE EXACTLY AS YOUR NAME(S) APPEAR(S) ON THIS PROXY. WHEN
SIGNING IN A REPRESENTATIVE CAPACITY, PLEASE GIVE FULL TITLE. WHEN SHARES ARE
HELD JOINTLY, ONLY ONE HOLDER NEED SIGN.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY