PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
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or Section 240.14a-12
FRANKLIN FINANCIAL SERVICES 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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PROXY STATEMENT
Dated and to be Mailed March 28, 2000
FRANKLIN FINANCIAL SERVICES CORPORATION
20 South Main Street
P.O. Box 6010
Chambersburg, PA 17201-6010
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON April 25, 2000
TABLE OF CONTENTS
Page
GENERAL INFORMATION...........................................3
Date, Time, and Place of Meeting..............................3
Shareholders Entitled to Vote.................................3
Purpose of Meeting............................................3
Solicitation of Proxies.......................................3
Revocability and Voting of Proxies............................3
Voting of Shares and Principal Holders Thereof................4
Shareholder Proposals.........................................6
Recommendation of the Board of Directors......................7
INFORMATION CONCERNING THE ELECTION OF DIRECTORS..............7
General Information...........................................7
Information about Nominees and Continuing Directors...........8
Meetings and Committees of the Board of Directors.............10
Compensation of Directors.....................................11
Executive Officers............................................7
Executive Compensation and Related Matters....................11
Transactions with Directors and Executive Officers...........18
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS.............19
ADDITIONAL INFORMATION.......................................20
OTHER MATTERS................................................20
FRANKLIN FINANCIAL SERVICES CORPORATION
20 South Main Street
P.O. Box 6010
Chambersburg, PA 17201-6010
(717)264-6116
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD April 25, 2000
TO THE SHAREHOLDERS OF FRANKLIN FINANCIAL SERVICES CORPORATION:
Notice is hereby given that, pursuant to the call of its
directors, the regular Annual Meeting of Shareholders of
FRANKLIN FINANCIAL SERVICES CORPORATION, Chambersburg,
Pennsylvania, will be held on Tuesday, April 25, 2000, at
10:30 A.M. at the Lighthouse Restaurant, 4301 Philadelphia
Avenue, Chambersburg, Pennsylvania, for the purpose of
considering and voting upon the following matters:
1. ELECTION OF DIRECTORS. To elect the three nominees
listed in the accompanying Proxy Statement for the term
specified.
2. OTHER BUSINESS. To consider such other business as may
properly be brought before the meeting and any
adjournments thereof.
Only those shareholders of record at the close of business
on March 10, 2000, shall be entitled to notice of and to vote at
the Annual Meeting.
Please mark, date and sign the enclosed Proxy and return it
in the enclosed postpaid envelope as soon as possible, whether
or not you plan to attend the meeting. You are cordially
invited to attend the meeting and the luncheon to be held
following the meeting. If you attend the meeting, you may
withdraw your proxy and vote your shares in person.
A copy of the Annual Report of Franklin Financial Services
Corporation is enclosed.
BY ORDER OF THE BOARD OF
DIRECTORS
APRIL E. ROSENBAUM
Secretary
Enclosures
March 28, 2000
GENERAL INFORMATION
Date, Time, and Place of Meeting
The regular Annual Meeting of the shareholders of Franklin
Financial Services Corporation (hereinafter, "Franklin
Financial") will be held on Tuesday, April 25, 2000, at
10:30 a.m. at the Lighthouse Restaurant, 4301 Philadelphia
Avenue, Chambersburg, Pennsylvania.
Shareholders Entitled to Vote
Shareholders of record at the close of business on
March 10, 2000, are entitled to notice of and to vote at the
meeting.
Purpose of Meeting
Shareholders will be asked to consider and vote upon the
following matters at the Annual Meeting: (1) the election of
three directors, and (2) such other business as may be properly
brought before the meeting and any adjournments thereof.
Solicitation of Proxies
This Proxy Statement is furnished in connection with the
solicitation of proxies, in the accompanying form, by the Board
of Directors of Franklin Financial for use at the Annual Meeting
and any adjournments thereof.
The expense of soliciting proxies will be borne by Franklin
Financial. In addition to the use of the mails, directors,
officers, and employees of Franklin Financial and of any
subsidiary may, without additional compensation, solicit proxies
personally or by telephone.
Farmers and Merchants Trust Company of Chambersburg
(hereinafter, "F&M Trust") is a wholly owned subsidiary of
Franklin Financial. This Proxy Statement, while prepared in
connection with the Annual Meeting of Shareholders of Franklin
Financial, contains certain information relating to F&M Trust
which will be identified where appropriate.
Revocability and Voting of Proxies
The execution and return of the enclosed proxy will not
affect a shareholder's right to attend the meeting and to vote
in person. Any proxy given pursuant to this solicitation may be
revoked by delivering written notice of revocation to April E.
Rosenbaum, Secretary of Franklin Financial, at any time before
the proxy is voted at the meeting. Unless revoked, any proxy
given pursuant to this solicitation will be voted at the meeting
in accordance with the instructions thereon of the shareholder
giving the proxy. In the absence of instructions, all proxies
will be voted FOR the election of the three nominees identified
in this Proxy Statement. The enclosed proxy confers upon the
persons named as proxies therein discretionary authority to vote
the shares represented thereby on all matters that may come
before the meeting in addition to the scheduled items of
business, including unscheduled shareholder proposals and
matters incident to the conduct of the meeting. Although the
Board of Directors knows of no other business to be presented,
in the event that any other matters are brought before the
meeting, the shares represented by any proxy given pursuant to
this solicitation will be voted in accordance with the
recommendations of the management of Franklin Financial.
Shares held for the account of shareholders who participate
in the Dividend Reinvestment Plan will be voted in accordance
with the instructions of each shareholder as set forth in his
proxy. If a shareholder who participates in the Dividend
Reinvestment Plan does not return a proxy, the shares held for
his account under the Dividend Reinvestment Plan will not be
voted.
Voting of Shares and Principal Holders Thereof
At the close of business on December 31, 1999, Franklin
Financial had issued and outstanding 2,792,468 shares of common
stock; there is no other class of stock outstanding. As of such
date, 162,402 shares of Franklin Financial common stock were
held by the Trust Department of F&M Trust as sole fiduciary
(representing approximately 5.8% of such shares outstanding) and
will be voted FOR the election of the three nominees identified
in this Proxy Statement.
A majority of the outstanding common stock present in
person or by proxy will constitute a quorum for the conduct of
business at the Annual Meeting. Abstentions and broker
non-votes will be treated as shares that are present and
entitled to vote for purposes of determining the presence of a
quorum. Each share is entitled to one vote on all matters
submitted to a vote of the shareholders. A majority of the
votes which all shareholders present in person or by proxy are
entitled to cast at a meeting at which a quorum is present is
required to approve any matter submitted to a vote of the
shareholders, unless a greater vote is required by law or by the
Articles of Incorporation or Bylaws. In the case of the
election of directors, the three candidates receiving the
highest number of votes shall be elected directors of Franklin
Financial; accordingly, in the absence of a contested election,
votes withheld from a particular nominee or nominees will not
influence the outcome of the election.
To the knowledge of Franklin Financial, no person owned of
record or beneficially on December 31, 1999 more than five
percent (5%) of the outstanding common stock of Franklin
Financial, except as set forth in the table which follows.
Amount and Nature of
Name and Address of Beneficial Ownership Percent
Title of Class Beneficial Owner as of 12/31/99 of Class
Common stock, Farmers and Merchants Trust 162,402 shares(1) 5.8%
$1.00 par value Company of Chambersburg
Per share Trust Department
20 South Main Street
P.O. Box 6010
Chambersburg, PA 17201-6010
FOOTNOTE
[FN]
(1) Shares are held on behalf of various trusts, estates and
other accounts, with respect to which F&M Trust acts as
sole fiduciary. The Trust Department of F&M Trust also
holds shared voting or dispository authority with respect
to an additional 18,903 shares
Shareholder Proposals
Pursuant to Rule 14a-8 promulgated by the Securities and
Exchange Commission (hereafter the "SEC") and Section 2.4 of the
Bylaws of Franklin Financial, shareholder proposals intended to
be presented at the 2001 Annual Meeting of the shareholders of
Franklin Financial must be received at the executive offices of
Franklin Financial no later than November 28, 2000, in order to
be included in the proxy statement and proxy form to be prepared
by Franklin Financial in connection with the 2001 Annual
Meeting. A shareholder proposal which does not satisfy the
notice and other requirements of SEC Rule 14a-8 and the Bylaws
of Franklin Financial is not required to be included in Franklin
Financial's proxy statement and proxy form and may not be
presented at the 2001 Annual Meeting. All shareholder proposals
should be sent to: Franklin Financial Services Corporation,
Attention: President, 20 South Main Street, P.O. Box 6010,
Chambersburg, Pennsylvania 17201-6010.
Recommendation of the Board of Directors
The Board of Directors recommends that the shareholders
vote FOR the election of the three nominees identified in this
Proxy Statement.
INFORMATION CONCERNING THE ELECTION OF DIRECTORS
General Information
The Bylaws of Franklin Financial provide that the Board of
Directors shall consist of not less than five nor more than
25 persons and that the directors shall be classified with
respect to the time they shall severally hold office by dividing
them into three classes, each consisting as nearly as possible
of one-third of the number of the whole Board of Directors. The
Bylaws further provide that the directors of each class shall be
elected for a term of three years so that the term of office of
one class of directors shall expire in each year. Finally, the
Bylaws provide that the number of directors in each class of
directors shall be determined by the Board of Directors.
A majority of the Board of Directors may increase the
number of directors between meetings of shareholders. Any
vacancy occurring in the Board of Directors, whether due to an
increase in the number of directors, resignation, retirement,
death, or any other reason, may be filled by appointment by the
remaining directors. Any director who is appointed to fill a
vacancy shall hold office until his successor is duly elected by
the shareholders at the next Annual Meeting at which directors
in his class are elected.
The Board of Directors has determined that the Board shall
consist of 12 directors. There are three directors whose terms
of office will expire at the 2000 Annual Meeting and nine
continuing directors whose terms of office will expire at the
2001 or 2002 Annual Meeting. The Board of Directors proposes to
nominate the following three persons for election to the Board
of Directors for the term specified below:
CLASS C
For a Term of
Three Years
Donald A. Fry H. Huber McCleary Charles M. Sioberg
In the event that any of the foregoing nominees is unable
to accept nomination or election, the shares represented by any
proxy given pursuant to this solicitation will be voted in favor
of such other persons as the management of Franklin Financial
may recommend. However, the Board of Directors has no reason to
believe that any of its nominees will be unable to accept
nomination or to serve as a director if elected.
Section 3.5 of Article III of the Bylaws of Franklin
Financial requires, among other things, that a shareholder who
wishes to nominate a candidate for election to the Board of
Directors must provide advance written notice to Franklin
Financial, which notice must contain certain prescribed
information and must be delivered to the President of Franklin
Financial not less than 90 days prior to the anniversary date of
the immediately preceding Annual Meeting. The Chairman of the
meeting must determine whether a nomination has been made in
accordance with the requirements of the Bylaws and, if he
determines that a nomination is defective, such nomination and
any votes cast for the nominee shall be disregarded.
Information about Nominees and Continuing Directors
Information concerning the three persons to be nominated
for election to the Board of Directors of Franklin Financial at
the 2000 Annual Meeting and concerning the nine continuing
directors is set forth in the table which follows. The table
also includes information concerning shares of Franklin
Financial common stock owned beneficially by executive officers
who are named in the Summary Compensation Table appearing
elsewhere in this Proxy Statement and by all directors and
executive officers as a group.
Shares of Stock of
Franklin Financial
Business Experience, Beneficially Owned
Including Principal and Percentage
Occupation for the of Total
Past 5 Years, and Director Outstanding Stock
Name and Age Other Directorships(1) Since(2) as of 12/31/99(3)
Class A - Continuing
Directors - Term
Expires in 2002
G. Warren Elliott(45) Franklin County Commissioner; 1994 1,233 *
Regional Representative, General
Code Publishers (legal publisher)
Dennis W. Good, Jr.(64) Partner, McGuire, Woods, Battle & 1988 30,964 1.11%
Boothe, LLP (law firm)
William E. Snell, Jr. President and Chief Executive 1995 21,351 *
(51) Officer, Franklin Financial and
F&M Trust; formerly President and
Chief Executive Officer,
Commonwealth Bank, and President
and Chief Operating Officer,
Commonwealth Bancshares
Corporation (1990-1995)
Martha B. Walker(53) Partner, Walker & MacBride, a 1979 9,655 *
Division of Barley, Snyder
Senft & Cohen, LLC (law firm)
Robert G. Zullinger(67) Chairman of the Board, Franklin 1981 32,693 1.17%
Financial and F&M Trust; formerly
President and Chief Executive
Officer, Franklin Financial
and F&M Trust (1981-1996)
Class B - Continuing
Directors - Term
Expires in 2001
Charles S. Bender, II Executive Vice President, 1981 61,399 2.20%
(55) Franklin Financial and F&M Trust
Omer L. Eshelman(66) Retired - formerly President and 1992 18,553 *
Chief Executive Officer, Mont
Alto State Bank
Jeryl C. Miller(59) Vice President and Secretary, 1983 14,238 *
Charles W. Karper, Inc.
(trucking industry)
Stephen E. Patterson Shareholder, Patterson Kiersz, 1998 800 *
(55) PC (law firm)
Class C Nominees
Donald A. Fry(50) President, ANDOCO, Inc., 1998 945 *
trading as Cumberland Valley
Rental (uniform rental)
H. Huber McCleary(61) President, McCleary Oil Co. 1990 34,720 1.24%
(service station operator and
fuel oil distributor)
Charles M. Sioberg(58) Vice President, Martin & Martin, 1982 4,616 *
Inc. (engineers)
All directors and 247,221 8.85%
executive officers as
a group (15 persons)
* The number of shares shown represents less than one percent
of the total number of shares of common stock outstanding.
[FN]
FOOTNOTES
1. No nominee or continuing director is a director of any other
company which has one or more classes of securities
registered with the Securities and Exchange Commission
pursuant to Section 12 or which is required to file periodic
reports with the Securities and Exchange Commission pursuant
to Section 15(d) of the Securities Exchange Act of 1934.
2. Reflects service as a director of Franklin Financial and
service as a director of F&M Trust, predecessor of Franklin
Financial.
3. Beneficial ownership of shares of the common stock of
Franklin Financial is determined in accordance with
Securities and Exchange Commission Rule 13d-3d(1) which
provides that a person shall be deemed to own any stock with
respect to which he, directly or indirectly, through any
contract, arrangement, understanding, relationship, or
otherwise has or shares: (i) voting power, which includes
the power to vote or to direct the voting of the stock, or
(ii) investment power, which includes the power to dispose
or to direct the disposition of the stock.
4. Each director and executive officer has sole voting and
investment power with respect to the shares shown above,
except that voting and investment power with respect to a
total of 37,235 shares is shared with spouses, children or
other family members. The shares shown above include a
total of 56,977 shares which are held by spouses, children
or other family members or by trusts or estates with respect
to which a director or executive officer serves as trustee
or executor and shares subject to a power of attorney in
favor of a director or executive officer, beneficial
ownership of which is in each case disclaimed. Also
included in the shares shown above are a total of
36,228 shares of unvested restricted stock issued under the
Long-Term Incentive Plan of 1990 and a total of 1,793 shares
issuable under the Employee Stock Purchase Plan.
Meetings and Committees of the Board of Directors
The Board of Directors of Franklin Financial has standing
Audit, Nominating and Personnel Committees.
Members of the Audit Committee during 1999 were Jeryl C.
Miller, Chairman, and Messrs. Eshleman, Good, Sioberg and
Zullinger. Jay L. Benedict, Jr., who retired from the Board of
Directors at the end of last year, was an ex-officio member of
the Audit Committee. The Audit Committee met five times during
1999. The Audit Committee is responsible for overseeing the
internal accounting and auditing methods and procedures of
Franklin Financial and its subsidiaries and for recommending
annually to the Board of Directors the engagement of an
independent public accounting firm to examine the consolidated
financial statements of Franklin Financial.
Members of the Nominating Committee during 1999 were Jay L.
Benedict, Jr., Chairman, and Messrs. Bender, Elliott, McCleary,
Patterson, Sioberg and Snell. The Nominating Committee, which
was established in September of 1999, did not meet during the
past year. The Nominating Committee is responsible, among other
things, for recommending to the Board of Directors persons to be
nominated for election to the Board and persons to be appointed
to fill vacancies on the Board.
Members of the Personnel Committee during 1999 were Jay L.
Benedict, Chairman, and Messrs. Elliott, Good, Miller and
Patterson. The Personnel Committee met three times during the
past year. The Personnel Committee is responsible, among other
things, for administering the Long-Term Incentive Plan of 1990
and the Employee Stock Purchase Plan and, in conjunction with
the Personnel Committee of the Board of Directors of F&M Trust,
overseeing the administration of Franklin Financial's
compensation policies and employee benefits plans.
The Board of Directors of Franklin Financial met eight
times during 1999. All incumbent directors attended at least
75 percent of the meetings of the Board of Directors and the
committees on which they served.
Compensation of Directors
With the exception of the Chairman of the Board, each
director of Franklin Financial who is not a salaried officer of
Franklin Financial or one of its subsidiaries is paid an annual
retainer of $3,800 and receives a fee of $150 for each committee
meeting attended. The Chairman of the Board receives an annual
retainer of $21,000, but does not receive a fee for attending
committee meetings.
Executive Officers
The following persons are the executive officers of
Franklin Financial:
Name Age Office Held
William E. Snell, Jr. 51 President and Chief Executive
Officer of Franklin Financial
and F&M Trust since 1996;
President of Franklin Financial
and F&M Trust since 1995
Charles S. Bender, II 55 Executive Vice President of
Franklin Financial since 1983
and of F&M Trust since 1981
Theodore D. McDowell 49 Executive Vice President of
Franklin Financial and F&M Trust
since 1999
Elaine G. Meyers 52 Treasurer and Chief Financial
Officer of Franklin Financial
and Senior Vice President/
Finance of F&M Trust since 1988
Kenneth D. Sauders 55 Investment and Asset/Liability
Manager of Franklin Financial
since 1997 and Senior Vice
President of F&M Trust since
1995
Executive Compensation and Related Matters
Summary of Cash and Certain Other Compensation
The following table provides certain summary information
concerning compensation paid or accrued by Franklin Financial
and F&M Trust to William E. Snell, Jr., the Chief Executive
Officer of Franklin Financial, and to each of the other most
highly compensated executive officers of Franklin Financial
whose combined 1999 salary and bonus compensation exceeded
$100,000.
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name Other Securities All
And Annual Restricted Underlying Other
Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation Awards(1) SARs Payouts(2) sation(3)
($) ($) ($) ($) (#) ($) ($)
William E. Snell, Jr. 1999 $164,788 $1,648 None None None None $5,964
President and
Chief Financial 1998 160,000 9,600 None None None None 8,114
Officer
1997 160,000 None None None None None 5,198
Charles S. Bender, II 1999 $112,442 $1,120 None None None None $5,541
Executive Vice
President 1998 114,450 6,867 None None None None 7,014
1997 114,450 None None None None None 4,258
[FN]
FOOTNOTES
(1) No restricted stock awards were granted in 1999.
Messrs. Snell and Bender held 10,987 and 15,714 shares,
respectively, of previously issued restricted stock with an
aggregate value of $223,860 and $320,173, respectively, as
of December 31, 1999. Dividends are paid on those shares
if and to the extent paid on Franklin Financial common
stock generally.
(2) Consists of the dollar value of shares of previously issued
restricted stock and restricted cash awards which vested
during the year indicated. No such shares or cash awards
vested in 1999.
(3) Consists exclusively of matching contribution and short-
term incentive plan additional contribution to
Section 401(k) Profit Sharing Plan.
Defined Benefit Pension Plan
The defined benefit pension plan maintained by F&M Trust
(the "Plan") was amended on November 14, 1997, effective
January 1, 1998, to reduce future benefit accruals under the
Plan's benefit formula. The following table shows, for the
salary levels and years of service indicated, the annual pension
benefit, before a Social Security offset of 0.6 percent (0.6%)
of covered compensation for each year of service to a maximum of
35 years (but without reflecting the maximum pension benefit
limitations established under Section 415 of the Internal
Revenue Code), payable under the Plan commencing at age 65 under
the pension benefit formula effective January 1, 1998 (and
assuming all years of service are earned after January 1, 1998):
PENSION PLAN TABLE
Years of Service
Covered
Remuneration 5 10 15 20 25 30 35
$50,000 $ 3,750 $ 7,500 $11,250 $15,000 $18,750 $22,500 $26,250
$75,000 5,625 11,250 16,875 22,500 28,125 33,750 39,375
$100,000 7,500 15,000 22,500 30,000 37,500 45,000 52,500
$125,000 9,375 18,750 28,125 37,500 46,875 56,250 65,625
$150,000 11,250 22,500 33,750 45,000 56,250 67,500 78,750
$160,00 and Over 12,000 24,000 36,000 48,000 60,000 72,000 84,000
Compensation covered by the Plan is calculated by
determining the average of a participant's highest five
consecutive years' compensation (generally, salary and bonus as
reported in the Summary Compensation Table appearing above) in
the ten years preceding normal retirement. A participant's
compensation for these purposes is limited by Section 401(a)(7)
of the Internal Revenue Code of 1986, as amended (the "Code")
for each calendar year. Current compensation covered by the
plan for the year ended December 31, 1999 for Messrs. Snell and
Bender was $156,429 and $122,909, respectively. As of
December 31, 1999, Messrs. Snell and Bender were credited with
4.67 and 24.92 years of service, respectively, for benefit
accrual purposes under the Plan.
The normal retirement benefit under the Plan is a single-
life annuity equal to the sum of the following:
(i) 1.15 percent (1.15%) of the average of the highest five
consecutive years' compensation in the 10 years
preceding normal retirement, multiplied by a
participant's number of years of service from the date
of employment to December 31, 1997, plus
(ii) 0.90 percent (0.90%) of the such compensation multiplied
by a participant's number of years of service from
January 1, 1998, through the date of retirement, plus
(iii) 0.60 percent (0.60%) of such compensation in excess of
Social Security covered compensation (the taxable wage
base averaged over the 35-year period ending with the
last day of the calendar year in which the participant
attains Social Security retirement age), multiplied by a
participant's total number of years of service (up to a
maximum of 35 years) from the date of employment to the
retirement date.
This benefit is limited by the maximum benefit as specified
under Section 415 of the Code.
The Plan was amended November 24, 1999, effective
January 1, 2000, to give a cost-of-living adjustment to retirees
and beneficiaries with a retirement date on or before January 1,
1999. The increase is equal to 1.50% of the retiree's and
beneficiary's monthly pension payment for each complete year
measured from the later of October 1, 1994 and the retiree's and
beneficiary's retirement date to January 1, 2000.
Compensation Committee Report on Executive Compensation
The Personnel Committee of the Board of Directors of
Franklin Financial (the "Committee") administers the executive
compensation programs of Franklin Financial and its
subsidiaries. The Committee consists of five independent
directors.
Executive Compensation Policies
Executive compensation at Franklin Financial consists of
two components: base salary and incentive programs. The
Committee has established an executive compensation policy to
assist it in administering these two components of executive
compensation.
The Franklin Financial's executive compensation policy is
designed to provide its executives with a total compensation
package that is fair in light of competitive compensation
practices, that attracts and retains qualified executives, that
places a portion of total pay at risk (to be earned through the
achievement of performance goals), and that helps to align
management's interests with those of shareholders. Fair pay is
defined as pay levels that are at or approach the median of
competitive compensation practices.
Competitive compensation practices are determined from time
to time, as follows. The Committee uses data from banking
industry compensation surveys to determine median pay practices
for similar positions at comparably sized organizations.
Compensation disclosures made by a peer group of comparably
sized Pennsylvania banks are also used to determine competitive
pay practices at the top management level. This group of
Pennsylvania banking organizations bears no direct relationship
to those companies represented in the Media General Regional
Northeast Bank Index appearing in the stock performance graph
set forth elsewhere in this Proxy Statement because the
companies represented in this Index are too numerous and because
some are too small and others too large for appropriate and
meaningful compensation comparisons. Additionally, the
Committee's understanding of competitive salary increases is
used in estimating competitive pay levels.
The Committee uses incentive programs to link total
executive compensation to the performance of Franklin Financial.
These programs provide executives with an opportunity to earn a
combination of cash and stock awards contingent upon the
achievement of corporate earnings objectives.
Relationship of Performance to Executive Compensation
The Committee employs a short-term incentive plan to link
senior officer compensation to the success in meeting annual
goals based upon the net income of the corporation. The 1999
plan included a range of net income targets and within that
range of targets, senior officer incentive payouts could range
from 1% to 4% of annual salary, with an additional 401(k) Profit
Sharing Plan contribution ranging from 1/2% to 2% of salary (up
to applicable limitations under the Internal Revenue Code).
Messrs. Snell and Bender each participated in this program. As
a result of the corporation achieving net income of
$5.084 Million in 1999, Messrs. Snell and Bender were awarded
cash bonuses of $1,648 and $1,120 respectively, and additional
401(k) Profit Sharing Plan contributions of $800 and $616,
respectively, under the short-term incentive plan.
The Committee administers a long-term incentive plan for
members of senior management, which includes Messrs. Snell and
Bender. Other senior officers also participate in this plan.
Under the plan, participants receive awards of restricted stock
and cash, which awards are subject to accelerated vesting if
Franklin Financial meets or exceeds certain annual and/or
cumulative net income performance goals established at the time
of grant of the award. To the extent not previously vested, the
restricted stock portion of the award will vest in full upon the
expiration of 10 years from the date of grant. The cash portion
of an award, to the extent not vested after the expiration of
five years, is forfeited.
Achievement of an annual or cumulative net income
performance goal results in the vesting of a portion of the
restricted stock award and a distribution of a portion of the
cash award. Failure to meet either goal in a given year results
in the permanent forfeiture of that year's portion of the cash
award. Furthermore, failure to meet the annual or cumulative
net income goals means that no restricted shares vest that year.
After the expiration of ten years from the date of the award,
however, all unvested shares of restricted stock will vest,
provided that the participant remains an employee of Franklin
Financial or one of its subsidiaries.
In 1999, Franklin Financial had net income of
$5.084 Million. This resulted in basic earnings per share of
$1.86, return on assets of 1.18%, and return on equity of
12.95%. This level of earnings did not meet the annual or
cumulative net income goals for 1999 established under the long-
term incentive plan. Accordingly, no cash awards were
distributed and no accelerated vesting of restricted shares
occurred.
1999 Compensation of the Chief Executive Officer
The Committee at its December 1998 meeting discussed its
compensation policy as summarized above and competitive pay
practices, balanced with Franklin Financial's strategic
initiative to control overhead expenses. After considering
several alternatives, the Committee determined that Mr. Snell's
base salary would be increased by 3% to $164,800 in 1999.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code, enacted in
1993, brought about a limitation on the deductibility for
federal income tax purposes of annual compensation in excess of
$1 million payable to certain senior officers of publicly held
companies. Qualifying performance-based compensation is not
subject to this limitation if certain conditions are met. The
Committee does not foresee current compensation arrangements
exceeding this level. Accordingly, the Committee has no plans
to modify the compensation policies of Franklin Financial in
response to the provisions of Section 162(m) of the Code. The
Committee will evaluate this matter on an ongoing basis.
The foregoing report is furnished by
Jay L. Benedict, Jr., Chairman of the
Personnel Committee, and Messrs. Elliott,
Good, Miller and Patterson, who served
as members of the Personnel Committee
during 1999.
Performance Graph
The Securities and Exchange Commission requires that a
publicly held company include in its proxy statement a stock
performance graph comparing its five-year cumulative total
return to shareholders with the returns generated by an
industry-specific index (or peer group index) and with the
return generated by a broad market index.
The following graph compares the cumulative total return to
shareholders of Franklin Financial with the Media General Market
Weighted NASDAQ Index (a broad market index prepared by Media
General Financial Services) and with the Media General Regional
Northeast Bank Index (an industry index also prepared by Media
General Financial Services) for the five year period ended
December 31, 1999, in each case assuming an initial investment
of $100 on December 31, 1994 and the reinvestment of all
dividends.
December 31 December 31 December 31 December 31 December 31 December 31
1994 1995 1996 1997 1998 1999
Franklin
Financial $100 $122.25 $149.91 $242.68 $226.56 $160.33
NASDAQ
Index $100 $152.03 $202.24 $348.83 $364.13 $335.06
Regional
Northeast
Bank Index $100 $129.71 $161.18 $197.16 $278.08 $450.46
Transactions with Directors and Executive Officers
Some of the directors and executive officers of Franklin
Financial and F&M Trust and the companies with which they are
associated were customers of and had banking transactions with
F&M Trust in the ordinary course of business during 1999. All
loans and commitments to loan made to such persons and the
companies with which they are associated were made on
substantially the same terms, including interest rates,
collateral, and repayment terms, as those prevailing at the time
for comparable transactions with other persons and did not
involve more than a normal risk of collectibility or present
other unfavorable features. It is anticipated that F&M Trust
will enter into similar transactions in the future.
Martha B. Walker, a member of the Boards of Directors of
Franklin Financial and F&M Trust, is a partner in the law firm
of Barley, Snyder, Senft & Cohen (hereafter, "BSS&C"). BSS&C
has provided legal services to Franklin Financial and F&M Trust
for many years and is expected to continue to do so in the
future.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934
requires that the directors and certain officers of Franklin
Financial file with the Securities and Exchange Commission
reports of ownership and changes in ownership with respect to
shares of Franklin Financial common stock beneficially owned by
them. Based solely upon its review of copies of such reports
furnished to it and written representations made by its
directors and those officers who are subject to such reporting
requirements, Franklin Financial believes that during the
calendar year ended December 31, 1999, all filing requirements
applicable to its directors and officers were complied with.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
On July 8, 1999, the Board of Directors of Franklin
Financial determined that it would discontinue the engagement of
Arthur Andersen LLP ("Arthur Andersen") as independent auditors
and approved the engagement of Beard & Company, Inc., Certified
Public Accountants ("Beard & Company") as independent auditors
for the fiscal year ending December 31, 1999. The Board's
decision was based upon the recommendation of its Audit
Committee, which interviewed several independent certified
public accounting firms (including Arthur Andersen) prior to
making its recommendation. Franklin Financial did not consult
with Beard & Company on any matter during its two most recent
fiscal years.
The reports of Arthur Andersen on the financial statements
of Franklin Financial for the years ended December 31, 1997 and
1998 did not contain an adverse opinion or disclaimer of
opinion, nor were such reports qualified or modified as to
uncertainty, audit scope or accounting principles. There were
no disagreements between Franklin Financial and Arthur Andersen
on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure during its
two most recent fiscal years or during any subsequent interim
period, which disagreements, if not resolved to the satisfaction
of Arthur Andersen, would have caused Arthur Andersen to make
reference to the subject matter of the disagreement in
connection with its reports on the financial statements of
Franklin Financial for such years.
It is anticipated that Franklin Financial will engage Beard
& Company as its auditors for the year ending December 31, 2000.
Representatives of Beard & Company are expected to be
present at the Annual Meeting, will have an opportunity to make
a statement if they desire to do so and will be available to
respond to appropriate questions.
ADDITIONAL INFORMATION
A copy of the Annual Report of Franklin Financial on
Form 10-K as filed with the Securities and Exchange Commission,
including financial statements and financial statement
schedules, is available without charge to shareholders upon
written request addressed to William E. Snell, Jr., President
and Chief Executive Officer, Franklin Financial Services
Corporation, 20 South Main Street, P.O. Box 6010, Chambersburg,
Pennsylvania 17201-6010.
OTHER MATTERS
The Board of Directors of Franklin Financial knows of no
matters, other than those discussed in this Proxy Statement,
which will be presented at the 2000 Annual Meeting. However, if
any other matters are properly brought before the meeting, any
proxy given pursuant to this solicitation will be voted in
accordance with the recommendations of the management of
Franklin Financial.
BY ORDER OF THE BOARD OF
DIRECTORS
APRIL E. ROSENBAUM
Secretary
Chambersburg, Pennsylvania
March 28, 2000
APPENDIX
FRANKLIN FINANCIAL SERVICES CORPORATION
PROXY ANNUAL MEETING OF SHAREHOLDERS TO BE HELD April 25, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints April E. Rosenbaum and
Mark R. Hollar, and each or either of them, as proxies, with
full power of substitution, to vote as directed below all of the
shares of Franklin Financial Services Corporation common stock
held of record on March 10, 2000 by the undersigned and by the
Plan Agent for the account of the undersigned under the Dividend
Reinvestment Plan at the Annual Meeting of Shareholders to be
held on Tuesday, April 25, 2000, at 10:30 a.m. at the Lighthouse
Restaurant, 4301 Philadelphia Avenue, Chambersburg,
Pennsylvania, and at any adjournment thereof, as follows:
1. ELECTION OF THREE DIRECTORS FOR A TERM OF THREE YEARS
[ ] FOR all nominees listed below* [ ] WITHHOLD AUTHORITY
to vote for all nominees listed
below
Donald A. Fry H. Huber McCleary Charles M. Sioberg
*INSTRUCTION: If you wish to withhold authority to vote
for any individual nominee, strike a line
through the nominee's name.
(continued on reverse side)
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS GIVEN,
THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED AND FOR THE
PROPOSAL TO ADOPT THE STOCK COMPENSATION PLAN OF 2000.
This proxy also confers authority as to any other business which
may be brought before the meeting or any adjournment thereof.
If any other business is presented at the meeting, the shares
represented by this proxy will be voted in accordance with the
recommendations of the management of Franklin Financial Services
Corporation.
Dated: _________________, 2000
________________________
Signature
________________________
Signature
IMPORTANT: Please sign exactly
as your name or names appear
hereon. Joint owners should
each sign. If you sign as agent
or in any other representative
capacity, please state the
capacity in which you sign.
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