UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )

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Univest Corporation

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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14 North Main Street

P. O. Box 64197

Souderton, Pennsylvania 18964

 

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

April 8, 2008

 

 

TO THE HOLDERS OF COMMON STOCK:

 

The Annual Meeting of Shareholders of Univest Corporation of Pennsylvania will be held on Tuesday, April 8, 2008, at 10:45 a.m., in the Univest Building, 14 North Main Street, Souderton, Pennsylvania.

 

Univest’s Board of Directors recommends a vote:

 

 

Other business, of which none is anticipated, as may properly come before the meeting or any postponements or adjournments thereof will be transacted.

 

The close of business on February 21, 2008, has been fixed by the Board of Directors as the record date for the determination of shareholders entitled to notice of and to vote at the annual meeting.

 

The accompanying proxy statement forms a part of this notice.

 

SEPARATE PROXY CARDS ARE ENCLOSED TO SHAREHOLDERS FOR THE PURPOSE OF VOTING ALL THEIR SHARES OF THE CORPORATION’S COMMON STOCK.

 

IT IS IMPORTANT THAT EACH SHAREHOLDER EXERCISE HIS/HER RIGHT TO VOTE. Whether or not you plan to attend the meeting, please take a moment now to cast your vote over the Internet or by telephone in accordance with the instructions set forth on the enclosed proxy card, or alternatively, to complete, sign, and date the enclosed proxy card and return it in the postage-paid envelope we have provided in order that your shares will be represented at the meeting. If you attend the meeting, you may vote in person.

 

By Order of the Board of Directors

 

WILLIAM S. AICHELE

Chairman

 

KAREN E. TEJKL

Secretary

 

March 7, 2008

 

PROXY STATEMENT

 

Univest Corporation of Pennsylvania (Univest or Corporation) is a one-bank holding company organized by Union National Bank and Trust Company of Souderton under the Bank Holding Company Act of 1956, as amended. Univest elected to become a Financial Holding Company in 2000 as provided under Title I of the Gramm-Leach-Bliley Act, and is subject to supervision by the Federal Reserve System. The Principal subsidiary of the Corporation is Univest National Bank and Trust Co. (Bank). Union National Bank and Trust Company of Souderton and Pennview Savings Bank (which was a wholly owned subsidiary of the Corporation) were merged together on January 18, 2003 with Union National Bank and Trust Company of Souderton being the surviving entity. Upon the completion of the merger, Union National Bank and Trust Company of Souderton’s name was changed to Univest National Bank and Trust Co.

 

The accompanying proxy is solicited by the Board of Directors (Board) of Univest Corporation of Pennsylvania, 14 North Main Street, P.O. Box 64197, Souderton, Pennsylvania 18964, for use at the Annual Meeting of Shareholders to be held April 8, 2008, and at any adjournment thereof. Copies of this proxy statement and proxies to vote the Common Stock are being sent to the shareholders on or about March 7, 2008. Any shareholder executing a proxy may revoke it at any time by giving written notice to the Secretary of the Corporation before it is voted. Some of the officers of the Corporation or employees of the Bank and other subsidiary companies or employees of StockTrans, Inc., the Corporation’s transfer agent, may solicit proxies personally and by telephone, if deemed necessary. The Corporation will bear the cost of solicitation and will reimburse brokers or other persons holding shares of the Corporation’s voting stock in their names, or in the names of their nominees, for reasonable expense in forwarding proxy cards and proxy statements to beneficial owners of such stock.

 

The person named in the proxy will vote in accordance with the instructions of the shareholder executing the proxy, or in the absence of any such instruction, for or against on each matter in accordance with the recommendations of the Board set forth in the proxy.

 

Univest’s Board of Directors recommends a vote:

 

 

The Board has fixed the close of business on February 21, 2008, as the record date for the determination of shareholders entitled to notice and to vote at the Annual Meeting. As of February 21, 2008, there were 14,873,904 issued and 12,843,507 outstanding shares of Common Stock (exclusive of 2,030,397 shares held as treasury stock which will not be voted).

 

Holders of record of the Corporation’s Common Stock on February 21, 2008 will be entitled to one vote per share on all business of the meeting. The matters of business listed in this proxy will be decided by majority vote of the shares represented at the meeting. Certain other matters, of which none are anticipated to be voted upon at the meeting, may require super majority approval as specified by the amended Articles of Incorporation. The presence in person or by proxy of the holders of the majority of the outstanding shares of Common Stock will constitute a quorum for the transaction of business at the meeting.

As of February 21, 2008, Univest National Bank and Trust Co. held 1,226,740 shares or 9.6% of the Corporation’s outstanding Common Stock in various trust accounts in a fiduciary capacity in its Trust Department. No one trust account has 5% or more of the Corporation’s Common Stock.

 

A copy of the Annual Report to Shareholders, including financial statements for the year ended December 31, 2007, was mailed on March 7, 2008 to each shareholder of record as of February 21, 2008. The Annual Report is not a part of the proxy soliciting material.

 

SPECIAL CAUTIONARY NOTICE REGARDING
FORWARD-LOOKING STATEMENTS

 

The information contained in this Proxy Statement and the documents that have been incorporated herein by reference may contain forward-looking statements. When used or incorporated by reference in disclosure documents, the words “believe,” “anticipate,” “estimate,” “expect,” “project,” “target,” “goal” and similar expressions are intended to identify forward-looking statements within the meaning of section 27A of the Securities Act of 1933. Such forward-looking statements are subject to certain risks, uncertainties and assumptions, including those set forth below:

 

 

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected or projected. These forward-looking statements speak only as of the date of the report. Univest expressly disclaims any obligation to publicly release any updates or revisions to reflect any change in Univest’s expectations with regard to any change in events, conditions or circumstances on which any such statement is based.

 

ELECTION OF DIRECTORS AND ALTERNATE DIRECTORS

 

The person named in the accompanying proxy intends to vote to elect as directors the nominees listed below in each case, unless authority to vote for directors is withheld in the proxy. The Bylaws authorize the Board to fix the number of Directors to be elected from time to time. By proper motion, it has established the number at four Class III Directors each to be elected for a three-year term expiring in 2011 and a pool of three Alternate Directors each to be elected for a one-year term expiring in 2009.

 

The nominating committee has recommended the slate of nominees listed below for election as Class III Directors and Alternate Directors. Management is informed that all the nominees are willing to serve as directors, but if any of them should decline or be unable to serve, the persons named in the proxy will vote for the election of such other person or persons as may be designated by the Board, unless the Board reduces the number of directors in accordance with the Corporation’s Bylaws.

The following information, as of February 21, 2008, is provided with respect to the nominees for election to the Board.

 

The following directors are not subject to election now as they were elected in prior years for terms expiring in future years.

 

 

 

The following information, as of February 21, 2008, is provided with respect to the Named Executive Officers of the Corporation not serving as a Director or Alternate Director of the Board.

 

Beneficial Ownership of Directors and Officers

 

 

 

 

Compliance with Section 16 (a) of the Securities Exchange Act of 1934

 

Section 16 (a) of the Securities Exchange Act of 1934 requires the Corporation’s directors and executive officers, and persons who own more than ten percent of a registered class of the Corporation’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of Common Shares and other equity securities of the Corporation. Officers, directors and greater than ten percent shareholders are required by SEC regulations to furnish the Corporation with copies of all Section 16 (a) forms they file.

 

To the Corporation’s knowledge, based solely on a review of the copies of such reports furnished to the Corporation and written representations that no other reports were required during the fiscal year ended December 31, 2007, all Section 16 (a) reports by its officers, directors and greater than ten percent beneficial owners were timely filed except reports filed by: John U. Young (Indirect for his wife, Kathleen K. Young) for the purchase of 75 shares of Common Stock of the Corporation on March 7, 2007; and Kenneth H. Hochstetler for the direct purchase of 434 shares of Common Stock of the Corporation on December 20, 2007 through the exercise of stock options, which were inadvertently filed late.

 

The Board, the Board’s Committees and Their Functions

 

The Corporation’s Board met eleven (11) times during 2007. All of the directors attended at least 75% of the meetings of the Board and of the committees of which they were members. All directors are encouraged to attend the annual meeting of Shareholders. In 2007, all Directors were present at the annual shareholder’s meeting. The Board has established a number of committees, including the Audit Committee, the Compensation Committee and the Nominating and Governance Committee, each of which is described below.

 

All shareholder correspondence to the Board may be sent to the Corporation and will be forwarded to the appropriate Board member or committee chair. To contact any Board members or committee chairs, please mail your correspondence to:

 

Univest Corporation

Attention (Board Member’s name)

Office of the Corporate Secretary

14 N. Main Street

P.O. Box 64197

Souderton, PA 18964

Board of Director Committees for the Fiscal Year Ended December 31, 2007

 

 

 

Audit Committee

 

The Audit Committee’s responsibilities include: annual review of and recommendation to the Board for the selection of the Corporation’s independent registered public accounting firm, review with the internal auditors and independent registered public accounting firm the overall scope and plans for the respective audits as well as the results of such audits, and review with management and the internal auditors and independent registered public accounting firm the effectiveness of accounting and financial controls, and interim and annual financial reports. All of the members of the Audit Committee are independent as defined in the listing standards of the NASDAQ Stock Market and SEC regulations.

 

The Board has determined that Merrill S. Moyer, Chairman of the Audit Committee, meets the requirements adopted by the Securities and Exchange Commission and the NASDAQ Stock Market for qualification as an audit committee financial expert. Mr. Moyer has past employment experience with the Corporation as a Chief Executive Officer, including active supervision of the Chief Financial Officer and other senior financial officers, providing him with a high level of financial sophistication, as well as a comprehensive knowledge of internal controls and audit committee functions. He has served as Chairman of the Audit Committee since 1999. An audit committee financial expert is defined as a person who has the following attributes: (i) an understanding of generally accepted accounting principles and financial statements; (ii) the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves; (iii) experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements, or experience actively supervising one or more persons engaged in such activities; (iv) an understanding of internal controls and procedures for financial reporting; and (v) an understanding of audit committee functions.

 

The identification of a person as an audit committee financial expert does not impose on such person any duties, obligations or liability that are greater than those that are imposed on such person as a member of the Audit

Committee and the Board in the absence of such identification. Moreover, the identification of a person as an audit committee financial expert for purposes of the regulations of the Securities and Exchange Commission does not affect the duties, obligations or liability of any other member of the Audit Committee or the Board. Additionally, a person who is determined to be an audit committee financial expert will not be deemed an “expert” for purposes of Section 11 of the Securities Act of 1933.

 

The Board approved an updated Audit Committee Charter in January 2008. At the February 2007 meeting of the Audit Committee, the Committee re-approved the Audit and Non-Audit Services Pre-Approval Policy. Copies of these documents may be found on the Corporation’s Web Site: www.univest.net in the “INVESTORS” section under Governance Documents.

 

REPORT OF THE AUDIT COMMITTEE

 

The Audit Committee (Committee) met seven (7) times in 2007. The Committee has reviewed and discussed the audited consolidated financial statements of the Corporation for the year ended December 31, 2007, with the Corporation’s management. The Committee has discussed with KPMG LLP (KPMG), the Corporation’s independent registered public accounting firm for the fiscal year ended December 31, 2007, the matters required to be discussed by Statement on Auditing Standards (SAS) No. 114 (The Auditors Communication with Those Charged with Governance.) SAS No. 114 supersedes SAS No. 61 (Communication with Audit Committees).

 

The Committee has also received the written disclosures and the letter from KPMG required by Independence Standards Board Standard No. 1 (Independence Discussion with Audit Committees), and the Committee has discussed the independence of KPMG with that firm.

 

Based on the Committee’s review and discussions noted above, the Committee recommended to the Board that the Corporation’s audited consolidated financial statements be included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2007, for filing with the Securities and Exchange Commission.

 

UNIVEST AUDIT COMMITTEE:

 

Merrill S. Moyer, Chairman

Norman L. Keller

P. Gregory Shelly

John U. Young

Appointment of Independent Registered Public Accounting Firm for 2008

 

On November 13, 2007, the Corporation retained KPMG LLP (KPMG) as its independent registered public accounting firm for the fiscal year ending December 31, 2008. The selection of the independent registered public accounting firm was recommended and approved by the Audit Committee.

 

Prior to 2004, shareholder ratification of the selection of the independent registered public accounting firm for the Corporation was requested at the annual shareholder meeting. In the spirit of the corporate governance requirements of the Sarbanes-Oxley Act of 2002, and Section 10A — (m)(2) of the Securities Exchange Act of 1934, as amended, which states — “The audit committee of each issuer, in its capacity as a committee of the board of directors, shall be directly responsible for the appointment, compensation, and oversight of the work of any registered public accounting firm employed by the issuer (including resolution of disagreements between management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work, and each such registered public accounting firm shall report directly to the audit committee” — the Audit Committee, with the approval of the Board, has determined that a ratification vote would inhibit the committee’s ability to make timely decisions with respect to the appointment and/or dismissal of the independent registered public accounting firm and has therefore recommended removal of the ratification vote from the proxy process.

 

A representative from KPMG, as independent registered public accounting firm for the current fiscal year, is expected to be present at the Annual Meeting and will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

 

Independent Registered Public Accounting Firm Fees

 

The following table presents fees for professional services rendered by KPMG for the integrated audit, including an audit of the Corporation’s annual financial statements and internal controls over financial reporting, and fees billed for other services rendered by KPMG:

 

 

 

EXECUTIVE AND DIRECTOR COMPENSATION

 

COMPENSATION DISCUSSION AND ANALYSIS

 

The principal objective of the Corporation is to maximize shareholder value through the development and enhancement of the Corporation’s business operations. To further that objective, the Corporation’s executive compensation program is designed to:

 

 

An executive’s total compensation is composed of three primary components: base salary compensation, annual incentive compensation, and long-term incentive compensation. Each component is based on individual and group performance factors, which are measured objectively and subjectively by the Compensation Committee.

 

EXECUTIVE COMPENSATION

 

BASE SALARY COMPENSATION

 

The Compensation Committee’s approach is to offer competitive salaries in comparison with market practices. The Committee annually examines market compensation levels and trends observed in the labor market. For its purposes, the Compensation Committee has defined the labor markets as the pool of executives who are currently employed in similar positions in companies with similar asset size, with special emphasis placed on salaries paid by companies that constitute the banking industry. Market information is used as a frame of reference for annual salary adjustments and starting salaries.

 

The Compensation Committee makes salary decisions in a structured annual review. The Compensation Committee considers decision-making responsibilities, experience, work performance and achievement of key goals, and team-building skills of each position as the most important measurement factors in its annual reviews. To help quantify these measures, the committee has, from time to time, enlisted the assistance of independent compensation consultants. Base salaries are determined by considering the experience and responsibilities of the individual executive officer with a target of paying at the median (50%) level of our peer group adjusted for overall performance of

the individual executive. Base salaries are adjusted annually and are in effect for the period January 1 through December 31.

 

During 2007, the Corporation engaged Pearl, Meyer & Partners to accumulate comparative data on the Corporation’s peer group which the Compensation Committee utilized in adjusting the base salary of its executive group. The Corporation’s peer group, eighteen (18) institutions of similar asset size and regional location, consists of: National Penn Bancshares, Inc.; S&T Bancorp, Inc.; Harleysville National Corporation; Independent Bank Corp.; Sandy Spring Bancorp, Inc.; Washington Trust Bancorp, Inc.; Hudson Valley Holding Corp.; Lakeland Bancorp, Inc.; Tompkins Financial Corporation; OceanFirst Financial Corp.; Peoples Bancorp Inc.; Parkvale Financial Corporation; Omega Financial Corporation; First Defiance Financial Corp.; Arrow Financial Corporation; First United Corporation; Peapack-Gladstone Financial Corp.; and Oak Hill Financial, Inc.

 

Increases in base salary compensation during 2007 were based on individual performance and a selected peer group compensation review performed by the Corporation’s independent compensation consultants.

 

Compensation for Group Life Insurance premiums, hospitalization and medical plans, and other personal benefits are provided to all full-time employees and part-time employees averaging a certain number of hours and do not discriminate in favor of officers of the Corporation or its subsidiaries.

 

ANNUAL INCENTIVES

 

Univest established a non-equity annual incentive plan to reward executive officers for accomplishing annual financial objectives. The weighted financial measures and related targets for the plan are set forth in the preceding fiscal year by the Compensation Committee. The annual incentive program consists primarily of cash bonuses paid for: 1) individual performance to reinforce the critical focus of our executive officers on certain annual objectives that have significant impact on our long-term performance strategy; and 2) meeting annual Corporation performance goals (annual net income, efficiency ratio, return on average assets, return on average equity or other annual performance targets as set by the Compensation Committee). An executive may receive up to 50% of their annual incentive bonus in shares of the Corporation’s stock which the Corporation will match with a restricted stock grant. The restricted stock grant will vest ratably over a five-year period. The purpose of this deferral option is to further align the executive’s interests with those of the shareholders, promote retention and keep the executive focused on the long-term viability, performance and stability of the Corporation.

For the year-ended December 31, 2007, based on the projected performance goals, the threshold was set at a 40% payout, the target was established at a 100% payout and a maximum was established at a 150% payout; if the projected performance goals are less than the established threshold amounts, there is no payout. Understanding that actual results will not equal the Target, Threshold or Stretch goals exactly, the Annual Incentive Compensation plan provides for laddered payouts based on actual results compared to Target as detailed in the table below:

 

 

The above payout will be based 25% on the performance of the individual and contribution to the organization in the particular year and 75% on the achievement of the Corporation’s performance targets for the year. Each individual performance metric will have a threshold, target and stretch component. The performance metrics which will be measured each will have a 25% weighting and will be:

 

 

For the year ended December 31, 2007, results of the Corporation and individual performance resulted in an incentive pay-out compared to target of 52.75%. The 52.75% is comprised of an individual performance component equating to 10% (for each of the named executive officers) and the Corporation’s performance targets component of 42.75% (no incentive pay-out for net income, a 64% incentive payout for return on average assets, a 76% incentive pay-out for return on average equity, and an 88% incentive payout for the efficiency ratio.)

 

For the year ended December 31, 2006, based on the projected net income growth, the threshold was set at a 40% payout, the target was established at a 100% payout and a maximum was established at 145% payout; if net income growth is less than the established threshold amount, there is no payout. The threshold for net income growth was not achieved for the year-ended December 31, 2006; therefore there were no annual incentive plan payouts.

LONG-TERM INCENTIVES

 

Stock-Based Compensation

 

The long-term incentive program consists primarily of stock options and restricted stock grants, which are granted based on the Corporation’s performance compared to its selected peers, which consists of ten high-performing financial institutions located within or close to the Corporation’s market area, with respect to certain financial measures. The purpose of the program is to align management’s interests with those of our shareholders, promote employee retention and also to ensure management’s focus on the long-term stability and performance of the Corporation. The Corporation’s target is to pay out incentive compensation, both short-term and long-term, at the median (50%) level of our peer group.

 

At the Annual Meeting in 2003, the shareholders approved the Univest 2003 Long-Term Incentive Plan. The purpose of the plan is to enable employees of the Corporation to: (i) own shares of stock in the Corporation, (ii) participate in the shareholder value which has been created, (iii) have a mutuality of interest with other shareholders and (iv) enable the Corporation to attract, retain and motivate key employees of particular merit. Participation in the 2003 Long-Term Incentive Plan is determined by the Compensation Committee. The plan authorizes the Committee to grant both stock and/or cash-based awards through incentive and non-qualified stock options, stock appreciation rights, restricted stock, and/or long-term performance awards to participants. With respect to these grants, 1,500,000 shares were set aside for these long-term incentives. At the time of an award grant, the Committee will determine the type of award to be made and the specific conditions upon which an award will be granted (i.e. term, vesting, performance criteria, etc.).

 

Upon a change in control: any stock appreciation rights outstanding for at least six months and any stock options awarded which have been held for at least six months shall become fully vested and exercisable; restrictions applicable to any restricted stock award shall lapse and such shares shall be deemed fully vested; the value of all outstanding stock options, stock appreciation rights and restricted stock awards shall be cashed out on the basis of the change in control price; and any outstanding long-term performance awards shall be vested and paid out based on the prorated target results for the performance periods in question.

 

Long-term incentive compensation currently consists of a combination of stock options and restricted stock. The granting of options will occur annually on December 31 and is not contingent on the achievement of annual targets described under Annual Incentives.

 

Restricted stock grants will be granted each year on December 31, but only will be “awarded” based on how the Corporation performs compared to its select peer group, determined based on year-to-date September 30 results, with respect to the following financial metrics:

 

 

If the Corporation performs better than 75% of its selected peer group with respect to both return on average assets and return on average equity, the Corporation will achieve its “Target” payout. If the Corporation performs better than 50% of its select peer group with respect to both return on average assets and return on average equity, the Corporation will achieve its “Threshold” payout. Finally, if the Corporation performs better than all companies in its select peer group with respect to return on average assets and return on average equity, the Corporation will achieve its “Stretch” payout. The number of restricted shares ultimately awarded will then vest ratably over a three-year period.

 

 

Post-Retirement Plans

 

Univest provides a qualified pension plan to all employees and non-qualified pension plans for certain executive officers. The Defined Benefit Pension Plan (DBPP) is a nondiscriminatory retirement plan which qualifies under the Internal Revenue Code. The DBPP is a noncontributory defined benefit retirement plan covering substantially all employees of the Corporation and its wholly owned subsidiaries. In order to be eligible for the DBPP, employees must complete one year of service (defined as working more than 1,000 hours) and attain age 21. The DBPP is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA.) The DBPP is administered by a Pension Committee appointed by the Board of Directors of the Corporation. The Pension Committee has appointed Univest National Bank and Trust Co., a wholly owned subsidiary of the Corporation, as trustee of the DBPP. Employer contributions are based on amounts required to be funded under the provisions of ERISA. No contributions are required or permitted by the participants.

 

The normal retirement date is the first day of the month in which the participant’s 65th birthday occurs and he/she has completed five years of credited service. The normal annual retirement benefit amount is 1.5% of average earnings for each year of credited service up to 20 years plus 0.5% of average earnings for each year of credited service in excess of 20, plus 0.25% of average earnings in excess of the average Social Security wage base for each year of credited service up to 35 years.

 

Each participant who has at least 10 years of service and who has attained age 55 may elect to retire early within the 10-year period immediately prior to his normal retirement age. These participants who elect and qualify for early retirement are considered fully vested by the DBPP. The early retirement benefit is based on credited service and average earnings at early retirement date without reduction on the date when the participant’s age plus years of service equal 85, but not before age 62 or after age 65. Benefits are reduced from that retirement date by 6% per year for the first five years and 4% per year thereafter to age 55.

 

Participants are not vested until they have completed five years of service, at which time they become fully vested in the DBPP. Participants may elect to receive pension benefits in the form of a joint and survivor annuity, a life annuity, or a lump-sum payment.

 

A vested participant who dies before the annuity starting date and who has a surviving spouse shall have his death benefit paid to his surviving spouse in the form of a pre-retirement survivor annuity and may have his death benefit distributed to his beneficiaries within five years after his death.

 

While the Corporation has not expressed any intent to do so, the DBPP may be discontinued at any time, subject to the provisions of ERISA. In the event such discontinuance results in termination of the DBPP, the DBPP provides that the net assets of the plan shall be allocated among the participants in the order provided for in ERISA. To the

extent there are unfunded vested benefits other than benefits becoming vested by virtue of termination of the DBPP, ERISA provides that such benefits are payable to participants by the Pension Benefit Guaranty Corporation (PBGC) up to specified limitations.

 

Should the DBPP terminate at some future time, its assets generally will not be available on a pro rata basis to provide participants’ benefits. Whether a particular participant’s accumulated plan benefits will be paid depends on both the priority of those benefits and the level of benefits guaranteed by the PBGC at that time. Some benefits may be fully or partially provided for by the then-existing assets and the PBGC guaranty while other benefits may not be provided for at all.

 

The non-qualified plans include a Supplemental Retirement Plan and a Supplemental Non-Qualified Pension Plan inclusive of a Medical Reimbursement Plan and Split-Dollar Life Insurance. These non-qualified plans generally provide an additional retirement benefit paid to the employee beginning at age 65 for a term between 10 and 15 years, plus death benefits. An employee, upon attaining the age of 60, may elect early retirement and be entitled to receive this benefit based upon the employee’s accrual balance as of the early retirement date.

 

The Supplemental Retirement Plan (SERP) was established in 1994 for employees whose date of hire was prior to January 1, 1994, were a current participant in the qualified pension plan for at least five years and whose benefit under the qualified pension plan was affected by the changes made to the Internal Revenue Code Section 401(a)(17) as enacted in the Omnibus Budget Reconciliation Act of 1993. The SERP establishes a payment to the participant that equates to the difference between: the payment amount of the qualified plan retirement benefit to which the participant would have been entitled under the qualified plan if such benefit were computed subject to Code Section 401(a)(17) as in effect prior to the effective date of the Omnibus Budget Reconciliation Act of 1993; and the amount of the qualified plan retirement benefit actually payable to the participant. Under a change in control, no termination of the SERP shall directly or indirectly deprive any current or former participant or surviving spouse of all or any portion of the SERP benefit of which has commenced prior to the effective date of such change in control.

 

The Supplemental Non-Qualified Pension Plan (SNQPP) was established in 1981 for employees who have served for several years, with ability and distinction, in one of the primary policy-making senior level positions at Univest, with the understanding that the future growth and continued success of Univest’s business may well reflect the continued services to be rendered by these employees and Univest’s desire to be reasonably assured that these employees will continue to serve and realizing that if these employees would enter into competition with Univest, it would suffer severe financial loss. The SNQPP was established prior to the existence of a 401K Deferred Savings Plan, the Employee Stock Purchase Plan and the Long-Term Incentive Plans and therefore is not actively offered to new participants. At the age of 65 years, covered employees will receive annual payments equivalent to fifty percent of their annual salary at their retirement date, adjusted annually thereafter by a percentage of the change in the Consumer Price Index (CPI). Between the ages of 60 and 65, covered employees may choose early retirement and receive payments under the SNQPP based on the employee’s accrual balance, adjusted annually thereafter by a percentage of the change in the CPI. The benefit period is a maximum of fifteen years. Benefits will continue to be paid to the employee’s beneficiary upon employee’s death for the remainder of the benefit period. Payments under the SNQPP are capped each year and adjusted annually by a percentage of the change in the CPI. In 2007 the maximum benefit payable was $107 thousand. Upon a change in control, the covered employee is entitled to a lump sum benefit equal to the present value of his accrued balance using the ten-year Treasury yield. Upon a change in control where Univest is not the surviving company, the SNQPP is not automatically terminated and the obligations under the SNQPP become the obligations of the surviving company. The SNQPP contains a non-compete clause under which payments will be forfeited by those covered retirees and employees who compete with Univest.

The SNQPP also includes a Medical Reimbursement Plan providing covered employees, who maintain a medical insurance policy during retirement, reimbursements for uncovered medical expenses up to $5,000 per annum during the benefit period.

 

During 2000, Univest purchased Bank Owned Life Insurance (BOLI) to offset the funding needs of future obligations under these non-qualified pension plans. The SNQPP includes a Split-Dollar Agreement which provides the covered employee’s beneficiary a fixed dollar amount of the death proceeds under the BOLI. The fixed dollar amounts payable range between $100,000 and $250,000.

 

Income tax regulations require the inclusion of nonqualified deferred compensation benefits as wages for Social Security and Medicare tax purposes. The non-qualified plan benefits and vesting provisions are reviewed annually, the covered employees’ Social Security and Medicare wages reflect includable nonqualified deferred compensation, and appropriate taxes are withheld.

 

On an optional basis, all officers and employees who have attained the age of 21 and have completed one month of continuous service may participate in the Deferred Salary Savings Plan (DSSP). In the year 2007, participants may defer from up to a maximum of $15,000 if under age 50 and $20,000 if over age 50. After employees complete 6 months of service, the Corporation or its subsidiaries will make a matching contribution of 50% of the first 6% of the participant’s salary. All contributions are invested via a trust. The Corporation’s matching contributions for 2007 and 2006, amounting to $507,000 and $440,000, respectively, are vested at 50% at the end of two years, 75% at the end of three years, and 100% at the end of four years. Benefit payments normally are made in connection with a participant’s retirement. The DSSP permits early withdrawal of the money under certain circumstances. Under current Internal Revenue Service regulations, the amount contributed to the plan and the earnings on those contributions are not subject to Federal income tax until they are withdrawn from the plan.

 

OTHER PERQUISITES

 

Certain named executive officers receive expense allowances, a car allowance and/or country club membership dues. These perquisites are determined by the Compensation Committee under the same methodologies for and in conjunction with base salary compensation. Univest also provides certain named executive officers with personal tax preparation services; these services are provided by a Certified Public Accounting firm other than Univest’s Independent Auditors, KPMG LLP.

 

FUTURE COMPENSATION DETERMINATION

 

The Committee will continue to reassess Univest’s executive compensation program in order to ensure that it promotes the long-term objectives of Univest, encourages growth in shareholder value, provides the opportunity for management investment in the Corporation, and attracts and retains top-level executives who will manage strategically in 2008 and beyond.

 

TAX CONSIDERATIONS

 

Internal Revenue Code Section 162(m) imposes a limitation on the deduction for certain executive officers’ compensation unless certain requirements are met. The Corporation and the Compensation Committee have carefully considered the impact of these tax laws and have taken certain actions intended to preserve the Corporation’s tax deduction with respect to any affected compensation.

 

DIRECTOR COMPENSATION

 

For the year ended December 31, 2007, each non-employee Director or Alternate Director was paid an annual retainer fee of $10,000. Each non-employee Director receives a fee of $800 for each Board Meeting of Univest Corporation of Pennsylvania or Univest National Bank and Trust Co. which he/she attends. Each Alternate Director receives a “consultant fee” of $800 for each Board meeting of Univest Corporation of Pennsylvania or Univest National Bank and Trust Co. which he/she attends. Only one fee is paid to the Director or Alternate Director if these Boards meet on a concurrent basis. Non-employee Directors or Alternate Directors who attend committee meetings of the Board receive a fee ranging from $450 to $750 for each meeting attended.

 

The Corporation offers a Director Fee Deferral Plan under which the directors can voluntarily contribute all or a portion of their director fees. These deferred fees accumulate value either based on the Bank’s average cost of total time deposits and purchased funds or the Corporation’s stock index, as elected by the director. The deferred fees remain the property of the Corporation until it is contractually obligated to pay such fees to the director upon termination, death or a change in election.

 

Certain directors who were formerly employed by Univest continue to receive retirement benefits under the qualified pension plan and nonqualified pension plans. Under the 1993 Univest Long-Term Incentive Plan and the Univest 2003 Long-Term Incentive Plan, optionees may exercise their vested stock options up to two years after their retirement date. Benefits under these retirement and stock-based compensation plans were incentives for continued employment as executive officers for Univest and not compensation to such individuals to serve as directors for Univest. None of these directors served in the capacity of a principal or named executive officer during 2007. Therefore, these amounts are not reflected in the Director Compensation table.

 

CONCLUSION

 

Through the programs described above, a significant portion of the Corporation’s executive compensation is linked directly to individual and corporate performance and growth in shareholder value. The Committee intends to continue the policy of linking executive compensation to individual and corporate performance and growth in shareholder value, recognizing that the business cycle from time to time may result in an imbalance for a particular period.

 

The following tables set forth for the fiscal years ending December 31, 2007 and 2006, the compensation which the Corporation and its subsidiaries paid to its principal executive officer, principal financial officer and three other named executive officers. These tables should be read in conjunction with the “Compensation Discussion and Analysis” section of this Proxy.

SUMMARY COMPENSATION TABLE

 

 

 

GRANTS OF PLAN-BASED AWARDS

 

 

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

 

 

 

OPTIONS EXERCISED AND STOCK VESTING TABLE

 

 

 

 

PENSION BENEFITS

 

 

 

NONQUALIFIED DEFERRED COMPENSATION

 

Univest does not currently have any non-qualified contributory deferred compensation plans available to the named executive officers.

 

OTHER POTENTIAL POST-EMPLOYMENT PAYMENTS

 

Certain triggering events could potentially affect the amounts of compensation reported in the above tables. Triggering events would include retirement, early-retirement, termination by reason of disability, death or cause, or a change in control of the Corporation. None of the named executive officers in the tables above has an individual change in control or employment agreement, but provisions for these triggering events are addressed within the 1993 and 2003 Long-term Incentive Plans, the Defined Benefit Pension Plan (DBPP), the Supplemental Retirement Plan (SERP) and the Supplemental Non-Qualified Pension Plan (SNQPP).

 

1993 and 2003 Long-term Incentive Plan

 

Upon a change in control, stock options and restricted stock awards which have been held for at least six months shall become fully vested. Upon retirement, early-retirement or termination by reason of disability, the Compensation Committee may elect to accelerate the vesting period to allow all stock options to become fully vested and exercisable up to a period of two years after the date of such retirement, early-retirement or disability date and may elect to accelerate the vesting period of all restricted stock awards. Upon termination by death, the Compensation Committee may elect to accelerate the vesting period to allow all stock option awards to become fully vested, and exercisable by the legal representative of such employee’s estate or legatee of such employees’ will for a period of one year from the date of death and may elect to accelerate the vesting period of all restricted stock awards. There are no acceleration provisions for the willful termination of employment or termination of employment for cause. Upon the willful termination of employment, the optionee would have the lesser of three-months or the remaining term to exercise any vested stock options. Upon termination of employment for cause, all vested and unvested stock options will immediately terminate.

The following table demonstrates the impact under different triggering events if such event occurred on December 31, 2007:

 

 

 

Defined Benefit Pension Plan (DBPP)

 

Each participant who has at least 10 years of service and who has attained age 55 may elect to retire early within the 10-year period immediately prior to his normal retirement age. These participants who elect and qualify for early retirement are considered fully vested by the DBPP. The early retirement benefit is based on credited service and average earnings at early retirement date without reduction on the date when the participant’s age plus years of service equal 85, but not before age 62 or after age 65. Benefits are reduced from that retirement date by 6% per year for the first five years and 4% per year thereafter to age 55. A vested participant who dies before the annuity starting date and who has a surviving spouse shall have his death benefit paid to his surviving spouse in the form of a pre-retirement survivor annuity and may have his death benefit distributed to his beneficiaries within five years after his death. None of the triggering events would impact the vested balance of a named executive officer’s benefit under the DBPP.

 

Supplemental Retirement Plan (SERP)

 

Under a change in control, no termination of the SERP shall directly or indirectly deprive any current or former participant or surviving spouse of all or any portion of the SERP benefit which has commenced prior to the effective date of such change in control. None of the triggering events would impact the vested balance of a named executive officer’s benefit under the SERP.

Supplemental Non-Qualified Pension Plan (SNQPP)

 

Upon a change in control where Univest is not the surviving company, the SNQPP is not automatically terminated and the obligations under the SNQPP become the obligations of the surviving company. Upon a change in control or death of the covered employee prior to their retirement date, the covered employee, or employee’s designated beneficiary is entitled to a lump sum benefit equal to the present value of his accrued balance using the ten-year Treasury yield. The “accrued balance” is the projected lump sum of the employee’s retirement benefit payable upon the employee’s attainment of age 65. Upon early-retirement, which is obtainable at the age of sixty, the employee is entitled to the accrual balance payable over fifteen years, adjusted annually thereafter by a percentage of the change in the Consumer Price Index (CPI). Upon termination of employment due to disability, the employee is entitled to the accrual balance payable, commencing at age 65, provided that the amount of the retirement benefit shall be based on the accrual balance on the date of termination due to disability, increased by an interest factor equal to the interest factor used in determining the accrual balance. If an employee terminated due to disability, and a change of control occurs prior to this employee reaching the age of 65, the employee is entitled to a lump sum benefit equal to the present value of his accrued balance using the ten-year Treasury yield. The SNQPP contains a non-compete clause under which payments will be forfeited by those covered retirees and employees who compete with Univest. If the employee is terminated for a reason other than death, retirement, early-retirement, disability, or a change in control, the benefits under the SNQPP are forfeited by the employee. The only named executive officers who are participants in the SNQPP are William S. Aichele, Wallace H. Bieler and K. Leon Moyer. If at December 31, 2007, any one of these participant’s employment was terminated for a reason other than death, retirement, early-retirement, disability, or a change in control, the benefits shown in the Pension Benefits table would be forfeited. If a change in control had occurred at December 31, 2007, these participants would benefit from a lump sum payment equal to their present value of accumulated benefit, in the Pension Benefits table above, plus the following amounts: for William S. Aichele, $556,691; for Wallace H. Bieler, $32,346; and for K. Leon Moyer, $531,696.

DIRECTOR COMPENSATION

 

The following table illustrates compensation received by non-employee directors and alternate directors not covered in the Summary Compensation Table for the year ended December 31, 2007:

 

 

 

 

RELATED PARTY TRANSACTIONS

 

During 2007, some of the directors and executive officers, including their immediate family members and affiliated organizations, had lending relationships and other banking transactions with us as customers of Univest’s banking subsidiary, Univest National Bank and Trust Co. In management’s opinion, these transactions were made in the ordinary course of business and on substantially the same terms, including interest rates, collateral and repayment terms, as those prevailing at the time for other comparable transactions with other nonaffiliated persons; they did not involve more than normal collection risk and do not present other unfavorable features. It is anticipated that similar transactions will occur in the future.

These transactions were made in compliance with applicable law, including Section 13(k) of the Securities and Exchange Act of 1934 and Federal Reserve Board Regulation O. As of December 31, 2007, loans to executive officers, directors, and their affiliates represented 28.1% of total shareholders’ equity in Univest Corporation.

 

In addition to these banking transactions and lending relationships, some directors and their affiliated entities provide services or otherwise do business with Univest and its affiliated entities; all such transactions are handled in the ordinary course of business and are reviewed by the Audit Committee on a quarterly basis, at which time transactions with directors are monitored to verify their independent status as a director. During 2007, the Corporation and its subsidiaries paid $2.5 million to H. Mininger & Son, Inc. for building expansion projects which were in the normal course of business on substantially the same terms as available from others. H. Ray Mininger, a non-independent Director of the Corporation, is President of H. Mininger & Son, Inc.

 

UNIVEST CORPORATION OF PENNSYLVANIA
BOARD COMPENSATION COMMITTEE

 

The Compensation Committee of the Board (Committee) for the fiscal year ended December 31, 2007 was comprised of five independent members appointed by the Board: James L. Bergey, R. Lee Delp, Charles H. Hoeflich, Thomas K. Leidy, and Merrill S. Moyer.

 

The Committee’s responsibilities include reviewing and approving corporate goals and objectives, including financial performance and shareholder return, relevant to approving the annual compensation of the Corporation’s CEO, executive officers, and other key management personnel through consultation with management and the Corporation’s independent professional compensation consultants. Recommendations are made to the Board with respect to overall incentive-based compensation plans, including equity based plans, which includes a review of the Corporation’s management development and succession plans. In addition, the Committee will review and recommend changes to the annual retainer and committee fee structure for non-employee directors on the Board. The Committee’s charter is available at the Corporation’s website on the internet: www.univest.net in the “INVESTORS” section under Governance Documents.

 

Management’s role in the compensation process includes: evaluating employee performance; establishing corporate goals and objectives; and recommending the salary levels and option awards for all employees other than the top three named-executive officers. The Committee may retain an outside consultant to assist in the evaluation of any individual executive compensation, incentive programs, or any other matter deemed appropriate by the Committee and to provide for the appropriate funding of such consulting or advisory firm.

COMPENSATION COMMITTEE REPORT

 

The Compensation Committee (Committee) met eight (8) times in 2007. The Committee has reviewed and discussed the Compensation Discussion and Analysis for the year-ended December 31, 2007 with the Corporation’s management.

 

Based on the Committee’s review and discussions noted above, the Committee recommended to the Board that the Corporation’s Compensation Discussion and Analysis be incorporated into the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2007, for filing with the Securities and Exchange Commission, and be included in this proxy statement on Schedule 14A, for filing with the Securities and Exchange Commission.

 

UNIVEST COMPENSATION COMMITTEE:

 

Charles H. Hoeflich, Chairman

R. Lee Delp

Thomas K. Leidy

Merrill S. Moyer

 

CORPORATE GOVERNANCE DISCLOSURE

 

CODE OF CONDUCT

 

The Corporation has adopted a Code of Conduct for all directors and a Code of Conduct for all officers and employees including the CEO and senior financial officers. It is the responsibility of every Univest director, officer and employee to maintain a commitment to high standards of ethical conduct and to avoid any potential conflicts of interest. The Codes are designed not only to promote clear and objective standards for compliance with laws and accurate financial reporting — they also contain an accountability mechanism that ensures consistent enforcement of the codes and protection for persons reporting questionable behavior, including a fair process for determining possible violations. The Codes of Conduct are available on our website at www.univest.net in the “INVESTORS” section under Governance Documents.

 

Any waiver of the Codes of Conduct for directors or executive officers must be approved by the Board or a committee of the Board and disclosed on Form 8-K within two days. Any waivers would also be posted on our website within two business days. The waiver reporting requirement process was established in 2003, and there have been no waivers.

 

NOMINATING AND GOVERNANCE COMMITTEE

 

The Nominating and Governance Committee met one (1) time during the fiscal year ending December 31, 2007. All members of the Committee are independent as defined by the listing standard rules of the NASDAQ Stock Market and the SEC Regulations. The primary purpose of the Committee is to identify individuals for nomination as members of the Board and Board committees as appropriate for the Corporation to discharge its duties and operate in an effective manner to further enhance shareholder value. The Nominating Committee charter is available for shareholder review on the internet at www.univest.net in the “INVESTORS” section under Governance Documents, or by requesting a copy in writing from the Secretary of the Corporation. Members of the Committee at December 31, 2007 were: James L. Bergey, R. Lee Delp, Charles H. Hoeflich, Thomas K. Leidy, and Merrill S. Moyer.

 

The Nominating and Governance Committee recommended to the Board the slate of nominees included in this proxy statement for election to the Board of Directors at the annual meeting of shareholders.

Univest has three Alternate Directors who are elected annually by the Corporation’s shareholders and serve for one-year terms. The Alternate Director position provides an avenue for the Corporation to nurture future directors that the Board of Directors has determined would qualify as a nominee for the Board of Directors. These alternate directors, by attending board meetings on a regular basis without a vote, stay informed of the activities and condition of the Corporation and stay abreast of general industry trends and any statutory or regulatory developments. The pace of change in today’s financial industry makes it imperative that the Corporation maintain a fully informed Board.

 

The Nominating and Governance Committee is responsible for identifying and evaluating individuals qualified to become Board members and to recommend such individuals to the Board for nomination. In fulfilling its responsibilities to select qualified and appropriate director candidates, the Committee will seek to balance the existing skill sets of current board members with the need for other diverse skills and qualities that will complement the Corporation’s strategic vision. All candidates must possess an unquestionable commitment to high ethical standards and have a demonstrated reputation for integrity. Other facts to be considered include an individual’s business experience, education, civic and community activities, knowledge and experience with respect to the issues impacting the financial services industry and public companies, as well as the ability of the individual to devote the necessary time to service as a Director. A majority of the Directors on the Board must meet the criteria for “independence” established by the NASDAQ Stock Market, and the Committee will consider any conflicts of interest that might impair that independence.

 

All nominees will be evaluated in the same manner, regardless of whether they are recommended by the Nominating and Governance Committee or recommended by a shareholder.

 

Shareholder Nominations

 

Article II, Section 17 of the Corporation’s Bylaws governs the process of nominations for election to the Board of Directors. Nominations made by Shareholders entitled to vote for the election of Directors shall be made by notice, in writing, delivered or mailed by registered return receipt mail, postage prepaid, to the Secretary of the Corporation, not less than fifty (50) days prior to any meeting of the Shareholders called for the election of Directors provided, however, that if less than twenty-one (21) days notice of the meeting is given Shareholders, such a nomination shall be delivered or mailed to the Secretary of the Corporation not later than the close of business on the seventh (7th) day following the date on which the notice of the meeting was mailed to the Shareholders.

 

Such notification shall contain the following information to the extent known to the shareholder intending to nominate any candidate for election to the Board of Directors:

 

a. The name, ages and resident addresses of each of the proposed nominees;

 

b. The principal occupation or employment and business address of each proposed nominee; and

 

 

d. The name and resident address of the notifying Shareholder;

 

e. The number of shares owned by the notifying Shareholder.

 

The nomination for a Director who has not previously served as a Director shall be made from among the then serving Alternate Directors. Nomination for Alternate Directors shall be made in the same manner as Directors and in accordance with the then applicable provisions of the bylaws for such nominations. Any nomination for Director or Alternate Director made by a Shareholder that is not made in accordance herewith may be disregarded by the

Nominating Committee of the Board, if there be one, or, if not, by the Secretary of the meeting, and the votes cast for such nominee may be disregarded by the judges of election.

 

PROPOSALS

 

Proposal 1 — Election of Directors

 

The election of four Class III directors each for a three-year term expiring in 2011 and until their successor is elected and qualified.

 

 

The Board of Directors recommends a vote for Proposal 1.

 

Proposal 2 — Election of Alternate Directors

 

The election of three alternate directors each for a one-year term expiring in 2009 and until their successor is elected and qualified.

 

 

The Board of Directors recommends a vote for Proposal 2.

 

Proposal 3 — Approval of Amended and Restated Univest 2003 Long-Term Incentive Plan

 

Introduction

 

In 2003, the Board of Directors and the shareholders approved the Univest 2003 Long-Term Incentive Plan (the “Original Plan”), which is intended, by providing for equity-based compensation, to permit employees of the Corporation to own shares of stock in the Corporation, to participate in the shareholder value that has been created, to have a mutuality of interest with other shareholders and to enable the Corporation to attract, retain and motivate key employees of particular merit.

 

The American Jobs Creation Act of 2004 added Section 409A to the U.S Internal Revenue Code of 1986, as amended (the “Code”), effective January 1, 2005. Section 409A places restrictions on payments or benefits that are classified as “deferred compensation” under that section. Final regulations were issued in 2007 and employers have until December 31, 2008 to bring their plan documents into compliance with the requirements of Section 409A.

 

On February 22, 2008, the Board of Directors approved the Amended and Restated Univest 2003 Long-Term Incentive Plan (the “Amended Plan”), which is intended to bring the Original Plan document into compliance with Section 409A. The Original Plan has been administered in good faith compliance with Section 409A, as permitted by the guidance under Section 409A, since January 1, 2005. The Board of Directors is requesting that the stockholders approve the Amended Plan.

The following summary of the major features of the Amended Plan is qualified in its entirety by reference to the actual text of the Amended Plan, set forth as Appendix A.

 

Description of the Plan

 

Administration

 

The Amended Plan is administered by a committee of not less than two Directors appointed by the Board of Directors (the “Committee”). Members of the Committee must be Non-Employee Directors, as defined by Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934. The Committee has the authority to select the eligible employees to whom awards are made and to establish the types, amounts and terms and conditions of awards to be granted. The Committee may adopt, alter and repeal rules and guidelines for the administration of the Amended Plan and has the authority to interpret the provisions of the Amended Plan and any grants made under it. Decisions of the Committee are final and binding on both the Corporation and Amended Plan participants.

 

Eligibility

 

Officers and other employees of the Corporation and its subsidiaries and affiliates are eligible to participate in the Amended Plan. The Amended Plan does not permit grants to non-employee Directors.

 

Stock Subject to the Amended Plan

 

Shares awarded under the Amended Plan may be authorized and unissued shares or treasury shares. A maximum of 1,500,000 shares of common stock is available for issuance under the Amended Plan. The Original Plan provided for a maximum of 1,000,000 shares, subject to adjustment for changes in the Corporation’s capital structure. As a result of a stock split, that number was adjusted to 1,500,000 shares. In the event of the termination, expiration or forfeiture of any award, the shares associated with that award will become available for future issuance under the Amended Plan. No more than 1,000,000 shares may be granted as awards of incentive stock options and no more than 250,000 shares may be granted in any calendar year.

The following table shows awards granted under the Original Plan:

 

 

 

 

The following table shows information relating to all of the Corporation’s equity plans:

 

Equity Compensation Plan Information

 

 

Stock Options

 

The Committee may award nonqualified stock options and incentive stock options, with or without stock appreciation rights. The option price may not be less than 100% of the fair market value on the date of grant. Incentive stock options may not have a term of more than ten years and nonqualified options may not have a term of more than ten years and one day. The Committee may determine vesting schedules with respect to stock options and acceptable payment methods. Unless otherwise determined by the Committee at grant or as a result of the death of an optionee, stock options are not exercisable for six months after the date of grant.

 

Stock options may only be transferred by will or by the laws of descent and distribution.

Stock Appreciation Rights

 

Stock appreciation rights (“SARs”) may be granted only in conjunction with all or part of any stock option grant. SARs will be subject to such terms and conditions as are determined by the Committee. SARs are exercisable only at the time and to the extent that the related stock option is exercisable. Upon exercise of a SAR, the optionee will receive cash and/or shares of stock, as determined by the Committee, equal to the excess of the fair market value on the exercise date of one share of stock over the option price per share specified in the related stock option, multiplied by the number of shares with respect to which the SARs have been exercised.

 

Restricted Stock

 

Shares of restricted stock may be issued alone or in addition to other awards under the Amended Plan on such terms and conditions, including performance goals, as the Committee determines. During the period of restriction, the participant may not sell, transfer or pledge the restricted stock. The Committee may provide for the lapse of restrictions in installments and may accelerate or waive the restrictions. During the period of restriction, the participant will have all the rights of a shareholder of the Corporation, including the right to vote the shares and the right to receive cash dividends, provided that the Committee may require that dividends be reinvested in restricted stock.

 

Long-Term Performance Awards

 

Long-term performance awards may be awarded alone or in addition to other awards under the Amended Plan. The Committee will determine the performance period, the performance objectives and the extent to which the performance awards have been earned. Payment of long-term performance awards may be made in the form of cash or stock, including restricted stock. In the event of special or unusual events or circumstances affecting the application of one or more performance objectives, the Committee may revise the performance objectives and/or underlying factors and criteria to the extent deemed appropriate to avoid unintended windfalls or hardship.

 

Change in Control

 

In the event of a change in control, as defined in the Amended Plan, any SAR outstanding for at least six months and any stock options held for at least six months from the date of grant will become fully vested and exercisable. The restrictions applicable to any restricted stock awards will lapse and the shares will be deemed fully vested. The value of all outstanding stock options, stock appreciation rights and restricted stock awards will be cashed out on the basis of the fair market value as of the date the change in control occurs. No payment will be made that would, when aggregated with other payments made to the employee, result in an excess parachute payment for which the Corporation would not receive a federal income tax deduction by reason of Section 280G of the Code.

 

Amendments and Termination

 

The Board of Directors may amend, alter or discontinue the Amended Plan at any time, provided that no amendment, alteration or discontinuance may impair the rights of a participant with respect to a stock option, SAR, restricted stock grant or long-term performance award without the participant’s consent, or increase the total number of shares reserved for issuance, except as expressly provided in the Amended Plan, or change the employees or class of employees eligible to participate without the approval of the Corporation’s shareholders.

Term

 

No stock option, stock appreciation right, restricted stock award or long-term performance award may be granted after April 7, 2013.

 

Federal Income Tax Information

 

The following is a summary of the principal United States federal income taxation consequences to employees and to the Corporation with respect to participation in the Amended Plan. This summary is not exhaustive and does not discuss the income tax laws of any city or state in which a participant may reside. This discussion is intended for the information of shareholders considering how to vote with respect to this proposal and not as tax guidance to participants in the Amended Plan.

 

Incentive Stock Options

 

Incentive stock options granted under the Amended Plan are intended to be eligible for the favorable federal income tax treatment accorded “incentive stock options” under the Code. There generally are no federal income tax consequences to the participant or the Corporation by reason of the grant or exercise of an incentive stock option. However, the exercise of an incentive stock option may subject the participant to alternative minimum tax liability or increase the participant’s alternative minimum tax liability, if any.

 

If a participant holds stock acquired through exercise of an incentive stock option for more than two years from the date on which the option was granted and more than one year after the date the option was exercised for those shares, any gain or loss on a disposition of those shares (a “qualifying disposition”) will be a long-term capital gain or loss. Upon such a qualifying disposition, the Corporation will not be entitled to any income tax deduction.

 

Generally, if the participant disposes of the stock before the expiration of either of these holding periods (a “disqualifying disposition”), then at the time of disposition the participant will realize taxable ordinary income equal to the lesser of (i) the excess of the stock’s fair market value on the date of exercise over the exercise price, or (ii) the participant’s actual gain, if any, on the purchase and sale. The participant’s additional gain or loss upon the disqualifying disposition will be a capital gain or loss, which will be long-term or short-term depending on whether the stock was held for more than one year.

 

To the extent the participant recognized ordinary income by reason of a disqualifying disposition, generally the Corporation will be entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code, and the satisfaction of a tax reporting obligation) to a corresponding income tax deduction in the tax year in which the disqualifying disposition occurs.

 

Nonqualified Stock Options

 

No taxable income is recognized by a participant upon the grant of a nonqualified stock option. Upon exercise of a nonqualified stock option, the participant will recognize ordinary income equal to the excess, if any, of the fair market value of the purchased shares on the exercise date over the exercise price paid for those shares. Generally, the Corporation will be entitled (subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code, and the satisfaction of a tax reporting obligation) to a corresponding income tax deduction in the tax year in which such ordinary income is recognized by the participant.

 

Upon disposition of the stock, the participant will recognize a capital gain or loss equal to the difference between the selling price and the sum of the amount paid for such stock plus any amount recognized as ordinary income upon

acquisition of the stock. Such gain or loss will be long-term or short-term depending on whether the stock was held for more than one year.

 

Stock Appreciation Rights

 

No taxable income is recognized upon the receipt of an SAR. Upon exercise of the SAR, the fair market value of the shares received is recognized as ordinary income to the participant in the year of such exercise. Generally, with respect to employees, the Corporation is required to withhold from the payment made on exercise of the SAR or from regular wages or supplemental wage payments an amount based on the ordinary income recognized. Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of a tax reporting obligation, the Corporation will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the participant.

 

Restricted Stock

 

No taxable income is recognized upon the receipt of a restricted stock grant. The award becomes taxable when it is no longer subject to a “substantial risk of forfeiture” (it becomes vested or transferable). The participant will recognize ordinary income when the restrictions lapse equal to the excess of the fair market value of the shares on the date the restrictions lapse over the price paid for those shares, if any. Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of a tax reporting obligation, the Corporation will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the participant.

 

Upon disposition of the stock, the participant will recognize a capital gain or loss equal to the difference between the selling price and the sum of the amount paid for such stock, if any, plus any amount recognized as ordinary income upon the lapse of restrictions on the stock. Such gain or loss will be long-term or short-term depending on whether the stock was held for more than one year after vesting

 

At the time of grant, a participant may choose to recognize the difference between the fair market value of the stock and the purchase price paid for the stock, if any, as ordinary income by filing, within thirty days of the grant date, an election pursuant to Section 83(b) of the Code. In the event of such an election, the participant will not recognize income upon vesting of the restricted stock award. Upon a subsequent disposition of the stock, the participant will recognize a capital gain or loss equal to the difference between the selling price and the sum of the amount paid for such stock, if any, plus any amount recognized as ordinary income at the time of grant. In the case of a Section 83(b) election, the holding period for determining whether such gain or loss will be long-term or short-term commences as of the date of grant. In the event that shares of restricted stock are forfeited, the participant will not be entitled to a refund of the tax paid pursuant to the Section 83(b) election and any loss deduction may be limited to the purchase price, if any, paid by the participant for the restricted stock.

 

Long-Term Performance Awards

 

Upon receipt of cash or stock (other than restricted stock) as payment of a long-term performance award, the participant will recognize ordinary income in the amount of the cash or the fair market value of the stock on the date of receipt. Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of a tax reporting obligation, the Corporation will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the participant.

Upon disposition of the stock, the participant will recognize a capital gain or loss equal to the difference between the selling price and the amount recognized as ordinary income upon the receipt of the stock. Such gain or loss will be long-term or short-term depending on whether the stock was held for more than one year.

 

Potential Limitation on Company Deductions

 

Section 162(m) of the Code denies a deduction to any publicly-held corporation for compensation paid to certain “covered employees” to the extent that compensation to such covered employee exceeds $1 million in a taxable year. It is possible that certain compensation attributable to awards under the Amended Plan, when combined with all other types of compensation received by a covered employee from the Corporation, could cause this limitation to be exceeded in any particular year, but the Corporation believes this is unlikely.

 

The Board of Directors recommends a vote for Proposal 3. The affirmative vote of a majority of all outstanding shares is required to approve this amendment. Abstentions and broker non-votes will not constitute or be counted as votes cast for purposes of the Meeting. All Proxies will be voted FOR approval of the amendment unless a shareholder specifies to the contrary on the shareholder’s proxy card.

 

SHAREHOLDER PROPOSALS

 

Proposals by shareholders which are intended to be presented at the Corporation’s 2009 Annual Meeting must be received by the Corporation no later than December 22, 2008, to be eligible for inclusion in the Proxy Statement and proxy relating to that meeting.

 

According to the bylaws of the Corporation, a proposal for action to be presented by any shareholder at an annual or special meeting of shareholders shall be out of order unless specifically described in the Corporation’s notice to all shareholders of the meeting and the matters to be acted upon thereat or unless the proposal shall have been submitted in writing to the Chairman and received at the principal executive offices of the Corporation at least 120 days prior to the date of such meeting, and such proposal is, under law, an appropriate subject for shareholder action.

 

OTHER BUSINESS

 

The Board and Management do not intend to present to the meeting any business other than as stated above. They know of no other business which may be presented to the meeting. If any matter other than those included in this proxy statement is presented to the meeting, the person named in the accompanying proxy will have discretionary authority to vote all proxies in accordance with their best judgment.

 

SHAREHOLDERS ARE URGED TO VOTE. Please take a moment now to cast your vote over the Internet or by telephone in accordance with the instructions set forth on the enclosed proxy card, or alternatively, to complete, sign, and date the enclosed proxy, solicited on behalf of the Board of Directors, and return it at once in the postage-paid envelope we have provided. The proxy does not affect the right to vote in person at the meeting and may be revoked prior to the call for a vote.

 

By Order of the Board of Directors

Souderton, Pennsylvania

WILLIAM S. AICHELE

Chairman

March 7, 2008

KAREN E. TEJKL

Secretary

APPENDIX A

 

UNIVEST CORPORATION OF PENNSYLVANIA

 

AMENDED AND RESTATED

 

UNIVEST 2003 LONG-TERM INCENTIVE PLAN

 

Section 1.  Purpose; Definitions

 

The name of this plan is the Amended and Restated Univest 2003 Long-Term Incentive Plan (the “Plan”). The purpose of the Plan is to enable certain employees of Univest Corporation of Pennsylvania (the “Corporation”) to (i) own shares of stock, or stock-based rights, in the Corporation, (ii) participate in the shareholder value which has been created, (iii) have a mutuality of interest with other shareholders and (iv) enable the Corporation to attract, retain and motivate key employees of particular merit.

 

For the purposes of the Plan, the following terms shall be defined as set forth below:

 

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

 

b. “Cause” means a felony conviction of a Participant or the failure of a Participant to contest prosecution for a felony, or a Participant’s willful misconduct or dishonesty, any of which is directly and materially harmful to the business or reputation of the Corporation.

 

c. “Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.

 

d. “Committee” means the Committee referred to in Section 2 of the Plan. If at any time no Committee shall be in office, then the functions of the Committee specified in the Plan shall be exercised by the Compensation Committee of the Board.

 

e. “Corporation” means Univest Corporation of Pennsylvania, a corporation organized under the laws of the State of Pennsylvania, or any successor organization.

 

f. “Disability” means the inability 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.

 

g. “Non-Employee Director” shall have the meaning set forth in Rule 16b-3(b)(3)(i) as promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934 (the “Exchange Act”), or any successor definition adopted by the Securities and Exchange Commission.

 

h. “Fair Market Value” means, for all purposes under the Plan, the last reported sale price of the Stock on the relevant national securities exchange for the applicable date.

 

i. “Incentive Stock Option” means any Stock Option intended to be and designated as an “Incentive Stock Option” within the meaning of Section 422 of the Code.

 

j. “Long-Term Performance Award” or “Long Term Award” means an award made pursuant to Section 8 below that is payable in cash and/or Stock (including Restricted Stock) in accordance with the terms of the grant, based on Corporation, business unit and/or individual performance.

 

k. “Non-Qualified Stock Option” means any Stock Option that is not an Incentive Stock Option.

l. “Participant” means an employee to whom an award is granted pursuant to the Plan.

 

m. “Plan” means this Amended and Restated Univest 2003 Long-Term Incentive Plan, as hereinafter amended from time to time. The Plan continues in effect the Univest 2003 Long-Term Incentive Plan to the extent that the Plan is not inconsistent therewith. In all other respects, the Plan is effective January 1, 2008.

 

n. “Restricted Stock” means an award of shares of Stock that is subject to restrictions pursuant to Section 7 below.

 

o. “Rules” means Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the regulations promulgated thereunder.

 

p. “Securities Broker” means the registered securities broker acceptable to the Corporation who agrees to effect the cashless exercise of an Option pursuant to Section 5(1) hereof.

 

q. “Stock” means the Common Stock of the Corporation.

 

r. “Stock Appreciation Right” means the right, pursuant to an award granted under Section 6 below, to surrender to the Corporation all (or a portion) of a Stock Option in exchange for an amount equal to the difference between (i) the Fair Market Value, as of the date such Stock option (or such portion thereof) is surrendered, of the shares of Stock covered by such Stock Option (or such portion thereof), and (ii) the aggregate exercise price of such Stock Option (or such portion thereof).

 

s. “Stock Option” or “Option” means any option to purchase shares of Stock (including Restricted Stock, if the Committee so determines) granted pursuant to Section 5 below.

 

Section 2.  Administration

 

The Plan shall be administered by a Committee of not less than two Non-Employee Directors, who shall be appointed by the Board of Directors of the Corporation and who shall serve at the pleasure of the Board; provided, however, that at any time no such Committee is emplaced, the Compensation Committee of the Board shall exercise the Committee’s functions as described herein and any reference to the Committee shall in such circumstances be deemed a reference to such Compensation Committee.

 

The Committee shall have the authority to grant to eligible employees, pursuant to the terms of the Plan: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock and/or (iv) Long-Term Performance Awards.

 

In particular, the Committee shall have the authority:

 

(i) to select the officers and other employees of the Corporation to whom Stock Options, Stock Appreciation Rights, Restricted Stock and Long-Term Performance Awards may from time to time be granted hereunder;

 

(ii) to determine whether and to what extent Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock and Long-Term Performance Awards, or any combination thereof, are to be granted hereunder;

 

(iii) to determine the number of shares to be covered by each award granted hereunder;

 

(iv) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder: including, but not limited to, the share price and any restriction or limitation, or any vesting acceleration or forfeiture waiver regarding any Stock Option or other award and/or the shares of Stock relating thereto, based on such factors as the Committee shall determine, in its sole discretion;

(v) to determine whether and under what circumstances a Stock Option may be settled in cash or stock;

 

(vi) to determine whether and under what circumstances a Stock Option may be exercised without a payment of cash under Section 5(l) ; and

 

(vii) to determine whether, to what extent and under what circumstances, consistent with the requirements of Code Section 409A, Stock and other amounts payable with respect to an award under this Plan shall be deferred either automatically or at the election of the participant.

 

The Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable; to interpret the terms and provisions of the Plan and any award issued under the Plan (and any agreements relating thereto); and to otherwise supervise the administration of the Plan.

 

All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on all persons, including the Corporation and Plan Participants.

 

Section 3.  Stock Subject to the Plan

 

a. Stock Subject to Plan. The stock to be subject or related to awards under the Plan shall be shares of the Corporation’s Stock and may be either authorized and unissued or held in the treasury of the Corporation. The maximum number of shares of Stock authorized with respect to the grant of awards under the Plan, subject to adjustment in accordance with paragraph 3(d) below, shall be 1,500,000 shares of Stock, not more than 1,000,000 shares of which may be granted under awards of Incentive Stock Options.

 

Notwithstanding the foregoing, no individual shall receive, over the term of the Plan, awards covering in the aggregate more than 30% of the shares of Stock authorized for grant under the Plan.

 

b. Computation of Stock Available for the Plan. For the purpose of computing the total number of shares of Stock available for awards under the Plan, there shall be debited against the total number of shares of Stock determined to be available pursuant to paragraphs (a) and (c) of this Section 3, the maximum number of shares of Stock subject to issuance upon exercise of Options or other stock-based awards then outstanding under the Plan. However, in any calendar year, the total number of shares of Stock with respect to which awards may be granted under this Plan shall not exceed, subject to adjustment in accordance with paragraph 3(d) below, 250,000 shares.

 

c. Unused, Forfeited and Reacquired Shares. Shares of Stock not distributed as a result of unexercised or partially unexercised and terminated awards, or shares of Stock under awards in which the rights to receive or retain Stock have otherwise been terminated, expired or forfeited, and with respect to which Stock no material benefit was received by a Participant (e.g., dividends), shall again be made available for distribution in connection with future awards under the Plan to the extent not inconsistent with available exemptions under the Rules. Any shares made available for distribution in connection with future awards under this Plan pursuant to this paragraph (c) shall be added to the shares then otherwise remaining available pursuant to paragraph (a) of this Section 3.

 

d. Other Adjustment. In the event of any merger, reorganization, consolidation, recapitalization, Stock dividend, or other change in corporate structure affecting the Stock, such substitution or adjustment shall be made in the aggregate number of shares reserved for issuance under the Plan, in the number and option price of shares subject to outstanding Options granted under the Plan and in the number and price of shares subject to other awards made under the Plan, as may be determined to be appropriate by the Committee in its sole discretion; provided, however, that any such adjustments shall be made in a manner consistent with the regulations under Code Section 409A so as not to cause the Plan or any award under the Plan to become subject to the application of Code Section 409A, and

provided further, to the extent consistent with the foregoing, the number of shares subject to any award shall always be a whole number. Such adjusted option price shall also be used to determine the amount payable by the Corporation upon the exercise of any Stock Appreciation Right associated with any Stock Option.

 

Section 4.  Eligibility

 

Officers and other employees of the Corporation (but excluding members of the Committee and any person who serves only as a director) and/or its Subsidiaries and Affiliates are eligible to be granted awards under the Plan.

 

Section 5.  Stock Options