Portions of this exhibit have been redacted and are the subject of a
confidential treatment request filed with the Secretary of the Securities and
Exchange Commission.

 

 

FIRST CHESTER COUNTY CORPORATION

 

 

EXECUTIVE INCENTIVE PLANS

 

ANNUAL INCENTIVE PLAN

 

LONG TERM INCENTIVE PLAN

 

 

 

 

 

With Exhibits A, B and C effective for 2008

 

 

FIRST CHESTER COUNTY CORPORATION

EXECUTIVE INCENTIVE PLAN

ANNUAL INCENTIVE AND LONG TERM INCENTIVE PLANS

 

 

ARTICLE I – Introduction

 

A vital component of the success of First Chester County Corporation
(“Corporation”) is the ability of the executive management team to meet and
achieve performance objectives consistent with the strategic objectives of the
Corporation and the best interests of its shareholders. The ability to grow and
manage the Corporation in a positive manner is critical to the Corporation’s
future success.

This Executive Incentive Plan (“Plan”), which includes both an Annual Incentive
Plan and a Long Term Incentive Plan, has been developed as a meaningful
compensation tool to encourage the growth and proper management of the
Corporation. The major purposes of the Plan are:

 

•

To motivate and reward executives for positive performance of the Corporation on
an annual basis;

 

•

To provide additional compensation to executives that is directly linked to
their individual and collective performance; and

 

•

To emphasize the long term growth and profitability of the Corporation.

The focus of this Plan is to provide an incentive for the executive team to
achieve annual and longer term performance objectives that are coordinated with
the objectives of the Corporation.

ARTICLE II – Definitions

2.1

The following definitions shall be used in this Plan:

 

“Board of Directors” means the Board of Directors of the Corporation.

 

“CEO” means the chief executive officer of the Corporation, as appointed by the
Board

 

of Directors.

“Change in Ownership or Effective Control” has the meaning provided in
regulations issued pursuant to Section 409A of the Code.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

“Corporation” means First Chester County Corporation.

“Disability” means that a person is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
that can be expected to result in death or can be expected to last for a
continuous period of not less than twelve months. Disability shall be determined
by the Board of Directors in consultation with the medical experts it selects.

 

The “Effective Date” of the Plan is January 1, 2006.

 

“Employee” means any individual regularly employed by the Corporation.

“Participant” means an Employee chosen to participate in this Plan pursuant to
the terms of Article III.

“Plan” means the First Chester County Corporation Executive Incentive Plan, as
set forth in this document, and any amendments adopted by the Board of
Directors. The Plan includes within it two types of incentive arrangements – the
Annual Incentive Plan and the Long Term Incentive Plan.

 

“Plan Year” means the calendar year.

“President” means the President of the Corporation, as appointed by the Board of
Directors.

 

2

 

ARTICLE III – Participation

 

3.1       (a)       Participation in the Plan will be determined at the
beginning of each Plan Year by the CEO and the President, and will be approved
by the Board of Directors. To participate, an Employee must be a regular
employee of the Corporation with on-going responsibilities that are executive in
nature and that have a meaningful impact on the Corporation’s results.
Participation in the Plan by the CEO and the President will be approved annually
by the Board of Directors. Generally, Participants will include officers at the
Senior Vice President level and above.

1.         Exhibit A will list Participants each year in the Annual Incentive
Plan and Exhibit C, the Participants in the Long Term Incentive Plan. Those
exhibits may include multiple levels of participation. These levels will
generally be based upon position responsibility.

2.         An Employee may become a new Participant during the Plan Year if
newly hired. Any awards will be pro-rated for the portion of the year in which
participation occurs, unless otherwise approved by the Board. The CEO and the
President will make the final determination (with Board approval) of new
participation during the Plan Year for any position other than that of CEO or
President. The Board of Directors will decide on the participation of any new
CEO or President.

3.         A Participant’s eligibility will cease at the termination of
employment (other than retirement, death or disability) and the Participant will
not receive any awards under the Plan for the Plan Year of employment
termination. Termination as a result of retirement (as defined in the
Corporation’s retirement plans), death or disability will result in pro-rated
awards under the Plan through the last working date for the Plan Year in which
termination occurred.

 

3

 

ARTICLE IV – Performance Factors under the Annual Incentive Plan

 

4.1       (a)       The Annual Incentive benefits provided under the Plan are
based upon the Corporation’s financial performance factors, which may be amended
as provided in Section 7.2. In general, these factors will be measures such as
return on assets, return on equity, net income, earnings per share or similar
indicators. The factors and weighing of the factors are determined at the
beginning of each Plan Year. Each factor has quantifiable objectives consisting
of threshold, target and optimum goals. Additionally, a portion of each
Participant’s award may be based on unit, team, functional area, and individual
performance objectives that are determined by management at the beginning of
each Plan Year. Generally, the CEO and President will have most or all of their
performance based on the Corporation’s overall performance, and other
Participants will have a proportionately greater level of their award based on
individual performance or the performance of an area of responsibility.

(b)       The Corporation’s performance factors for each year’s Annual Incentive
awards under the Plan will be set forth in Exhibit B, which may be changed from
time to time. Individual Participant objectives will be established after
discussion between the Participant and the Participant’s manager (usually the
CEO or President).

ARTICLE V – Award Calculation and Distribution under the Annual Incentive Plan

 

5.1       Awards under the Plan are calculated according to determination of the
established performance factors at the end of each Plan Year. The Corporation’s
performance between the threshold and target, and between the target and optimum
will be interpolated. Unit, team, and functional area performance, if
applicable, is determined by the CEO and the President. Individual performance
is determined by each Participant’s manager, as approved by the CEO and the
President. An individual Participant’s performance that does not meet the
position’s

 

4

 

requirements (an annual performance evaluation that is less than satisfactory)
will result in no award granted to that Participant for that Plan Year even
though the Corporation’s performance is above threshold. If the Corporation’s
performance is below the threshold, no award (including no individual award)
will be granted under the Annual Incentive portion of the Plan for that Plan
Year.

5.2       Annual awards are paid in cash less required income tax withholding.
Payment will be within two and a half months after the end of the Plan Year. Any
Participant terminating employment (except by retirement, death, or disability)
prior to the actual payment of the award will forfeit that award. The award
schedule for each Plan Year is found with the performance factors in Exhibit B,
as changed from time to time.

ARTICLE VI – Long Term Incentive Provisions

6.1       The Participants in the Long Term Incentive portion of the Plan will
be chosen from time to time by the CEO and the President, subject to the
approval of the Board of Directors. The participation of the CEO and the
President will be determined each year by the Board of Directors.

6.2       The Employees chosen to participate will be listed on Exhibit C, which
may be changed from time to time.

6.3       The Long Term Incentive portion of the Plan will consist of restricted
stock grants, under the following terms:

(a)       Grants will be made within two and a half months after the end of the
Plan year, following specific approval by the Board of Directors (or a committee
thereof) based upon the performance for the prior year.

 

(b)

The amount of each grant shall be determined as follows: Participants shall be

 

5

 

divided into categories as determined by the CEO and the President, subject to
the approval of the Board of Directors (and, in the case of the CEO and
President, as determined by the Board of Directors). Each category shall have a
different range of grant sizes. The lowest level of grant will be the threshold,
the middle level the target, and the highest level the optimum. The number of
shares in each level of each category will be set forth in Exhibit C, which may
be changed each year.

(c)       The determination of which level of grant will be made will be
determined by the Corporation’s net income for each year, and based on the
Corporation’s overall Annual Incentive Plan for that year.

(d)       The shares granted pursuant to the prior subparagraph will vest at the
rate determined by the Board of Directors at the time each grant is approved.
Vesting may occur at different rates for grants made in different years. It
shall be a condition of vesting that the Participant has been continuously
employed by the Corporation subsequent to the grant and is actively employed on
each vesting date. Vesting will be accelerated to 100% in the event the
Participant retires, dies or becomes disabled, and also upon a Change in
Ownership or Effective Control of the Corporation.

(e)       Dividends on the shares granted will be paid to the Participant
without regard to vested status.

 

6

 

ARTICLE VII – Administration

 

7.1       The Board of Directors may amend or terminate the Plan at any time and
in any respect. This includes the right to terminate the participation of any or
all Participants under the Plan during the Plan Year with respect to that Plan
Year or to amend the amount of the awards which may be granted under the Plan
with respect to any Plan Year at any time prior to the final determination and
approval of any such grants.

7.2       Participation, performance factors, thresholds, targets and any other
participation features may change from time to time, according to the
performance of the Corporation and the strategic objectives of the Corporation,
at the discretion of the Board of Directors. Any adjustments to the financial
performance results used in this Plan because of extraordinary gains or losses
or other items must be approved by the Board of Directors.

7.3       The Plan does not constitute a contract of employment, and
participation in the Plan does not give any Employee the right to be retained in
the service of the Corporation or any right or claim to an award under the Plan.

7.4       Any right of a Participant or his or her beneficiary to the payment of
an award under this Plan may not be assigned, transferred, pledged or
encumbered.

7.5       In the event that a Participant dies, his benefits payable under the
Plan will be paid as soon as practicable to the beneficiaries chosen by the
Participant or, if none are chosen, to the beneficiaries selected pursuant to
the Corporation’s retirement plans.

7.6       This Plan will be administered and interpreted in accordance with the
laws of the Commonwealth of Pennsylvania.

 

FIRST CHESTER COUNTY CORPORATION

 

By:_____________________

 

Title:

 

7

 

Exhibit A – Participation

Plan Year 2008

 

(Participating employees and their participant categories should be listed at
the beginning of each year and adjusted for changes in participation throughout
the year.)

 

Category 1 –

John A. Featherman, III - Chief Executive Officer

 

Kevin C. Quinn – President

 

Category 2 –

Sheri Ashman – Executive Office of Marketing

 

John E. Balzarini – Chief Financial Officer

 

Clay Henry – Executive Officer Trust & Investment Services

 

Deborah R. Pierce – Executive Officer of Human Resources and Administration

 

Anthony J. Poluch – Executive Officer of Business Development

 

Michelle E. Venema – Executive Officer of Business Banking

 

Karen D. Walter – Executive Officer of Retail Banking

 

Category 3 –

Linda Hicks – Chief Fiduciary Officer

 

Tom Imler – Senior Trust Business Development Manager

 

Richard W. Kaufmann – Credit Policy Officer

 

Lynn Mander – Chief Investment Officer

 

Richard D. McMullen – Senior Mgr. Retail Lending

 

Donna J. Steigerwalt – Branch Administrator

 

Michael T. Steinberger – Senior Commercial Real Estate Loan Officer

 

Andrew H. Stump – Senior Commercial Loan Officer

 

Patricia A. Travaglini – Senior Residential Mortgage Loan Officer

 

 

 

 

 

 

8

 

 

EXHIBIT B - BANK PERFORMANCE FACTORS AND AWARD SCHEDULE

PLAN YEAR 2008

 

Category 1 – CEO and President Positions

 

COMPANY GOALS

Performance Measures

Net Income (50%)

Threshold

Budget Target

Stretch Target

Optimum

$ **

$ **

$ **

$ **

 

 

 

 

 

 

 

 

Return on Average Equity (50%)

Threshold

Budget Target

Stretch Target

Optimum

** %

** %

** %

** %

 

 

 

 

 

 

 

 

AWARDS

(% of Base Pay)

Threshold

Budget Target

Stretch Target

Optimum

8%

** %

** %

40%

 

 

 

Parameters

 

1.

Company measures will be 50% Net Income and 50% ROAE.

 

2.

Both Financial Measures must meet threshold to initiate an award in the plan.

 

3.

Will interpolate awards between threshold, budget target, stretch target and
optimum.

 

4.

Will pay for performance above optimum at a scale of one-half the increase
between target and optimum.

 

5.

Pay is defined as total base pay for the applicable plan year.

 

** This portion has been redacted pursuant to a confidential treatment request.

 

 

9

 

 

Category 2 – EVP Positions

 

COMPANY GOALS

Performance Measures

Net Income (50%)

Threshold

Budget Target

Stretch Target

Optimum

$ **

$ **

$ **

$ **

 

 

 

 

Return on Average Equity (50%)

Threshold

Budget Target

Stretch Target

Optimum

** %

** %

** %

** %

 

 

 

 

COMPANY GOAL AWARD

(% of Base Pay)

Threshold

Budget Target

Stretch Target

Optimum

4%

** %

** %

20%

 

 

 

 

FUNCTIONAL AREA/INDIVIDUAL GOAL AWARD

(% of Base Pay)

Minimum Performance

Meets Goals/Target

Exceptional Performance

1%

** %

10%

 

 

 

 

TOTAL AWARDS

(ASSUMING INDIVIDUAL PERFORMANCE "MEETS GOALS")(% of Base Pay)

Threshold

Budget Target

Stretch Target

Optimum

8%

** %

** %

24%

 

Parameters

 

1.

Company measures will be 50% Net Income and 50% ROAE.

 

2.

Both Financial Measures must meet threshold and Individual Performance must meet
Minimum Performance to initiate an award in the plan.

 

3.

Will interpolate between threshold, budget target, stretch target and optimum.

 

4.

Will pay for performance above optimum at a scale of one-half the increase
between target and optimum.

 

5.

Pay is defined as total base pay for the applicable plan year.

 

6.

Functional area/individual goals will be established at the beginning of each
year.

 

** This portion has been redacted pursuant to a confidential treatment request.

 

10

 

Category 3 – SVP Positions

 

COMPANY GOALS

Performance Measures

Net Income (50%)

Threshold

Budget Target

Stretch Target

Optimum

$ **

$ **

$ **

$ **

 

 

 

 

Return on Average Equity (50%)

Threshold

Budget Target

Stretch Target

Optimum

** %

** %

** %

** %

 

 

 

 

COMPANY GOAL AWARD

(% of Base Pay)

Threshold

Budget Target

Stretch Target

Optimum

2%

** %

** %

12%

 

 

 

 

FUNCTIONAL AREA/INDIVIDUAL GOAL AWARD

(% of Base Pay)

Minimum Performance

Meets Goals/Target

Exceptional Performance

2%

** %

8%

 

 

 

 

TOTAL AWARDS

(ASSUMING INDIVIDUAL PERFORMANCE "MEETS GOALS")

(% of Base Pay)

Threshold

Budget Target

Stretch Target

Optimum

6%

** %

** %

16%

 

Parameters

 

1.

Company measures will be 50% Net Income and 50% ROAE.

 

2.

Both Financial Measures must meet threshold and Individual Performance must meet
Minimum Performance to initiate an award in the plan.

 

3.

Will interpolate between threshold, budget target, stretch target and optimum.

 

4.

Will pay for performance above optimum at a scale of one-half the increase
between target and optimum.

 

5.

Pay is defined as total base pay for the applicable plan year.

 

6.

Functional area/individual goals will be established at the beginning of each
year.

 

** This portion has been redacted pursuant to a confidential treatment request.

 

11

 

Exhibit C – Long Term Incentive Plan

Plan Year 2008

 

2008 GRANT PARAMETERS - RECOMMENDED

 

Following are the parameters for the 2008 restricted stock grant for executives
at First Chester County Corporation:

 

I.

Participants/Categories

 

Category 1

John A. Featherman

Kevin C. Quinn

 

Category 2

Sheri Ashman

John E. Balzarini

Clay Henry

Deborah R. Pierce

Anthony J. Poluch

Michelle E. Venema

Karen D. Walter

 

Category 3

Linda M. Hicks

Thomas A. Imler

Richard W. Kaufmann

Lynn Mander

Richard D. McMullen

Donna J. Steigerwalt

Michael T. Steinberger

Andrew H. Stump

Patricia A. Travaglini

 

 

II.         Grant Date: TBD in accordance with action of the Personnel and
Compensation Committee

 

III.

Grant Size

 

Threshold

Target

Maximum

 

v

Category 1

1,500

3,000

4,500

shares

 

v

Category 2

750

1,500

2,250

shares

 

v

Category 3

325

650

975

shares

 

Numbers of shares will not be interpolated between points for performance
between points.

 

12

 

IV.

Restrictions

 

 

A.

Performance – size of grant to be determined by company Earnings Per Share and
Efficiency Ratio performance for 2010 – threshold, target, and maximum are
outlined below

 

To be measured in 2011 based upon performance for the year ending 12/31/10

 

Threshold

Target

Maximum

EPS (60%)

$ ** (** %)

$ ** (** %)

$ ** (** %)

Efficiency Ratio (40%)

** %

** %

** %

 

At least one performance measure threshold must be met for an award to be paid.
EPS is weighted 60% of award and Efficiency Ratio is weighted 40%.

 

 

B.

Vesting – the shares will vest on the third anniversary of date of grant as
approved by the Board of Directors, subject to Participant’s continued
employment as provided in Plan (assuming threshold performance is met)

 

V.

Expense/Taxation

 

A.

Fair market value will be expensed on pro rata basis over remainder of vesting
period, when deemed that an award will be paid, according to accounting
practices

 

B.

Participant – ordinary income at fair market value as restrictions are
met/vested; participant responsible for payment of tax withholding due upon
vesting

 

VI.

Dividends

 

v

Paid immediately from date of grant on all shares awarded, including shares
granted but not vested; taxable as ordinary income

 

VII.

Change of Control, Retirement, Death, Disability

 

v

Accelerate vesting of shares at Change of Control

 

v

Possible acceleration of vesting at Retirement, Death & Disability – determined
by Personnel & Compensation Committee

 

 

 

 

 

** This portion has been redacted pursuant to a confidential treatment request.

 

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