Form of Warrant Agreement

WARRANT AGREEMENT


Agreement, dated as of this ____ day of ______, 2002, by and between 1ST COLONIAL BANCORP, INC., a Pennsylvania corporation (the "Company") and STOCK TRANS, INC. (the "Warrant Agent").


W I T N E S S E T H


WHEREAS, the Company is offering for sale up to _______ Units (the "Units"), each Unit consisting of one share of the Company's Common Stock, no par value (the "Common Stock"), and one Warrant (the "Warrant") which entitles the holder thereof to purchase one share of Common Stock at the purchase price of $_____ per share at any time on or before ______ __, 2005.


WHEREAS, the Company desires to appoint the Warrant Agent to act on its behalf in connection with the (i) issuance, transfer and exchange of the certificates representing the Warrants (the "Warrant Certificates"), (ii) the exercise of the Warrants by the holders thereof (together with any registered successors or assigns, the "Holders") and (iii) the adjustment of the Warrants in certain events as contained herein in accordance with the terms of the Warrants and this Agreement;


NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:


ARTICLE I


APPOINTMENT OF WARRANT AGENT


The Company hereby appoints the Warrant Agent as its agent to issue the Warrant Certificates, as set forth herein, subject to resignation or replacement of the Warrant Agent as provided herein. The Warrant Agent agrees to accept such appointment, subject to the terms and conditions as set forth herein and to issue, transfer and exchange the Warrant Certificates pursuant to the terms provided for herein and to notify the Company's transfer agent to issue the certificates representing the appropriate number of shares of Common Stock (or other consideration) upon exercise of the Warrants. The Company agrees to issue and honor the Warrants on the terms and conditions as herein set forth and to instruct its transfer agent to issue its Common Stock (or other securities) upon notice from the Warrant Agent of the proper exercise of any Warrant. The Warrant Agent is hereby empowered to enforce any rights of the Holders for the benefit of any Holders, subject to the terms and conditions contained herein.


ARTICLE II


ISSUANCE OF WARRANT CERTIFICATES


2.1 Form of Warrant Certificate. All Warrants shall be issued substantially in the form of the Warrant Certificate annexed hereto as Exhibit A. The terms of such Warrant Certificate are incorporated herein by reference.


2.2 Execution of Warrants. The Warrants shall be issued in registered form only. No Warrants shall have been duly and validly issued until a Holder has received a Warrant Certificate executed by the president or executive vice president of the Company and the secretary or treasurer of the Company and such Certificate is countersigned by an authorized officer of the Warrant Agent. All Warrant Certificates shall bear the Company's corporate seal. Any Warrant Certificates may be executed by the officers of the Company by means of a facsimile signature. The Warrant Agent shall maintain the register of all Holders.


2.3 Maximum Number of Warrants. The Company hereby authorizes the Warrant Agent to issue up to __________ Warrants, subject to adjustment as hereafter provided in Section 4 hereof.


2.4 Initial Holders. The Company shall deliver to the Warrant Agent a list of the names of the persons who shall be the initial Holders of the Warrants and the number of Warrants to which each such person is entitled. The Warrant Agent is hereby authorized by the Company to promptly issue Warrant Certificates for up to __________ Warrants upon receipt of the written request of the Company, which shall include the list referred to in the preceding sentence. The Company shall deliver to the Warrant Agent, along with this Warrant Agreement, a sufficient number of duly executed Warrant Certificates. The Warrant Certificates requested by the Company shall be completed and countersigned by the Warrant Agent and promptly delivered to the Company to be mailed or delivered to the Holders pursuant to the terms hereof.


2 When requested by the Warrant Agent, from time to time hereafter, the Company will execute additional Warrant Certificates in blank for the Warrant Agent to issue hereunder.


2.5 Rights of a Holder. Subject to adjustment as provided herein, each Warrant shall evidence the right to purchase one share of the Company's Common Stock at the Warrant Price of $_____. Following the Expiration Date, as defined in Section 3.1 below, any Warrant not previously exercised shall be null and void.


ARTICLE III


EXERCISE OF WARRANT


3.1 Exercise Period. The Warrants may be exercised, in whole or in part, at any time commencing __________ __, 2002, but not later than 5:00 P.M., New Jersey time, on __________ __, 2005 (the "Expiration Date"). If the Expiration Date is not a Business Day, it shall automatically be extended to 5:00 P.M. on the next day which is a Business Day. Business Day means any day other than a Saturday, Sunday, or holiday on which banks in New Jersey are authorized or required by law or executive order to close.


3.2 Means of Exercise. In order to exercise a Warrant, the Holder must present and surrender the Warrant Certificate to the Warrant Agent at its office, with the Subscription Form on the back of the Warrant Certificate duly executed and it must be accompanied by payment in full, in the form of cash or by certified or official bank check payable to the order of the Company or its successor, of the aggregate Warrant Price for the number of shares of Common Stock specified in such Subscription Form. The Warrant Agent shall immediately pay over to the Company any funds received upon such exercise of Warrants.


3.3 Issuance of Common Stock. Upon the request of the Warrant Agent, the Company shall promptly deliver or cause its transfer agent to deliver to the Holder exercising a Warrant a certificate or certificates evidencing the shares of Common Stock purchased when any Warrant is validly exercised.


3.4 Certain Exercise Provisions. If any Warrant is exercised in part only, a new Warrant Certificate, dated the date of such exercise, evidencing the rights of the Holder thereof to purchase the balance of the shares of Common Stock purchasable under such original Warrant


3 shall promptly be issued to such Holder. Upon receipt of any Warrant Certificate by the Warrant Agent, at its office, in proper form for exercise and accompanied by payments as herein provided, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Holder.


ARTICLE IV


ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES
PURCHASABLE AND OTHER TERMS IN CERTAIN EVENTS


The Warrant Price and the number of shares of Common Stock purchasable upon exercise of any Warrant and the other terms and conditions of the Warrant shall be subject to adjustment and modification as follows in the circumstances provided:


4.1 Declaration of Stock Dividend, Splits, Reverse Splits or Reclassification or Reorganization.


(a) In case the Company shall declare any dividend or other distribution upon its outstanding shares of Common Stock payable in Common Stock or shall subdivide its outstanding shares of Common Stock into a greater number of shares, then the number of shares of Common Stock which may thereafter be purchased upon the exercise of any Warrant shall be increased in proportion to the increase in the number of shares of Common Stock outstanding through such dividend or subdivision and the Warrant Price per share shall be decreased in such proportion. In case the Company shall at any time combine the outstanding shares of its Common Stock into a smaller number of shares, the number of shares of Common Stock which may thereafter be purchased upon the exercise of any Warrant shall be decreased in proportion to the decrease in the number of shares of Common Stock outstanding through such combination and the Warrant Price per share shall be increased in such proportion. The Company shall cause a notice to be mailed to each Holder at least ten (10) days prior to the applicable record date for the activity covered by this Section 4.1(a). The Company's failure to give the notice required by this Section 4.1(a) or any defect therein shall not affect the validity of the activity covered by this Section 4.1(a).


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(b) In case the Company shall at any time (i) distribute any rights, options or warrants to all holders of shares of Common Stock, (ii) issue other securities to all holders of shares of Common Stock by reclassification of its shares of Common Stock, or (iii) issue by means of a capital reorganization other securities of the Company in lieu of the Common Stock or in addition to the Common Stock, then the number of shares purchasable upon exercise of each Warrant immediately prior thereto shall be adjusted so that the Holder of each Warrant shall be entitled to receive the kind and number of shares or other securities of the Company that the Holder would have owned or have been entitled to receive after the happening of the event described above, had such Warrant been exercised immediately prior to the happening of such event or any record date with respect thereto. The Company shall cause a notice to be mailed to each Holder at least ten (10) days prior to the applicable record date for the activity covered by this Section 4.1(b). The Company's failure to give the notice required by this Section 4.1(b) or any defect therein shall not affect the validity of the activity covered by this Section 4.1(b).


(c) An adjustment made pursuant to this Section 4.1 shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.


(d) For the purpose of this Section 4.1, the term "shares of Common Stock" shall mean (x) the class of stock designated as the Common Stock at the date of this Warrant Agreement, or (y) any other class of stock resulting from successive changes or reclassifications of such shares consisting solely of changes in par value, from no par value to par value or from par value to no par value. In the event that at any time, as a result of an adjustment made pursuant to this Section 4.1, the Holder shall become entitled to purchase any shares of the Company other than shares of Common Stock, thereafter the number of such other shares so purchasable upon exercise of each Warrant and the Warrant Price of such shares shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares of Common Stock contained in this Section 4.1.


4.2 Liquidation, Dissolution or Winding Up. Notwithstanding any other provisions hereof, in the event of the liquidation, dissolution, or winding up of the affairs of the Company (other than in connection with a consolidation, merger or sale or conveyance of all or substantially all of its assets outside of the ordinary course of business), the right to exercise this


5 Warrant shall terminate and expire at the close of business on the last full business day before the earliest date fixed for the payment of any distributable amount on the Common Stock. The Company shall cause a notice to be mailed to each Holder at least ten (10) days prior to the applicable record date for such payment stating the date on which such liquidation, dissolution or winding up is expected to become effective, and the date on which it is expected that holders of shares of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property or assets (including cash) deliverable upon such liquidation, dissolution or winding up, and that each Holder may exercise outstanding Warrants during such ten (10) day period and, thereby, receive consideration in the liquidation on the same basis as other previously outstanding shares of the same class as the shares acquired upon exercise. The Company's failure to give notice required by this Section 4.2 or any defect therein shall not affect the validity of such liquidation, dissolution or winding up.


4.3 Merger, Consolidation, Etc.


(a) In case of any consolidation with or merger of the Company into another corporation or sale or conveyance of all or substantially all of its assets outside of the ordinary course of business (such consolidation, merger, sale or conveyance, collectively referred to hereinafter as a "Change") then, as a condition of such Change, lawful and adequate provisions shall be made whereby the Holders shall thereafter have the right to receive upon payment of the Warrant Price in effect immediately prior to such Change, upon the basis and upon the terms and conditions specified in this Agreement (including but not limited to all provisions contained in this Section 4.3), and in lieu of the shares of the Company's Common Stock purchasable upon the exercise of the Warrants, such shares of stock, securities, cash or assets which such Holder would have been entitled to receive after the happening of such Change had such Warrant been exercised immediately prior to such Change. The provisions of this Section 4.3 shall similarly apply to successive Changes. The Company shall cause a notice to be mailed to each Holder at least ten (10) days prior to the applicable record date for the Change covered by this Section 4.3(a) and shall provide notice of the Change and shall set forth the first and last date on which the Holder may exercise outstanding Warrants. The Company's failure to give the notice required by this Section 4.3(a) or any defect therein shall not affect the validity of the Change covered by this Section 4.3(a).


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(b) Notwithstanding the foregoing, if as a result of such Change, holders of the Company Common Stock shall receive consideration other than solely in shares of stock or other securities in exchange for their Company Common Stock, the Company may, at its option, fulfill its obligation hereunder by causing the Notice required by Section 4.3(a) hereof to include notice to Holders of the opportunity to exercise their Warrants before the applicable record date for the Change, and thereby receive consideration in the Change, on the same basis as other previously outstanding shares of the Company Common Stock. If the notice specified in the ...