SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/_/ Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
QNB CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee Required.
1) Title of each class of securities to which transaction applies:
_____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
/_/ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
1) Amount previously paid: _________________________________________________
2) Form, Schedule or Registration No. ______________________________________
3) Filing party: ___________________________________________________________
4) Date filed: _____________________________________________________________
___________
*Set forth the amount on which the filing fee is calculated and state how it was
determined.
[LOGO OF QNB]
April 14, 2000
Dear Shareholder:
The 2000 Annual Meeting of Shareholders of QNB Corp. will be held at the
offices of The Quakertown National Bank, 320 West Broad Street, Quakertown,
Pennsylvania 18951 on Tuesday, May 16, 2000, at 11:00 a.m., local time. Notice
of the annual meeting, QNB's proxy statement, proxy card and 1999 annual report
are enclosed.
At this year's annual meeting, you are being asked to elect three Class III
directors. This proposal is fully described in the accompanying proxy statement,
which you are urged to read carefully.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY ENDORSED THE CANDIDATES FOR
ELECTION. WE RECOMMEND THAT YOU VOTE "FOR" ALL THREE CANDIDATES.
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the meeting in
person, please mark, date and sign the enclosed proxy card and return it in the
envelope provided.
If you have any questions with regard to the annual meeting, please contact
our Assistant Corporate Secretary, L. Jane Mann, at (215) 538-5600, extension
5670.
Thank you for your cooperation and continuing support.
Sincerely,
/s/ Thomas J. Bisko
- -------------------
Thomas J. Bisko
President and
Chief Executive Officer
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF QNB CORP.
-------------------------------
TO BE HELD ON MAY 16, 2000
Notice is hereby given that the 2000 Annual Meeting of Shareholders of QNB
Corp. will be held at the offices of The Quakertown National Bank, 320 West
Broad Street, Quakertown, Pennsylvania 18951, on Tuesday, May 16, 2000 at 11:00
a.m., local time, for the following purposes:
(1) To elect three Class III directors; and
(2) To transact any other business properly presented at the annual meeting or
any adjournment(s) of the meeting.
The Board of Directors fixed the close of business on March 31, 2000 as the
record date for the purpose of determining those shareholders entitled to notice
of and to vote at the annual meeting, either in person or by proxy.
All shareholders are cordially invited to attend the annual meeting.
Whether or not you plan to attend the annual meeting, you are requested to mark,
date, sign and mail the enclosed proxy in the envelope supplied, as soon as
possible. At any time prior to the proxy being voted, it is revocable by written
notice to QNB in accordance with the instructions set forth in the enclosed
proxy statement including or by voting at the meeting in person. If you attend
the annual meeting, you may withdraw your proxy before it is voted and then vote
your shares in person.
By Order of the Board of Directors,
/s/ Charles M. Meredith, III
- ----------------------------
Charles M. Meredith, III
Secretary
Quakertown, Pennsylvania
April 14, 2000
QNB Corp.
10 North Third Street
P.O. Box 9005
Quakertown, Pennsylvania 18951
(215) 538-5600
------------------
PROXY STATEMENT
2000 ANNUAL MEETING OF SHAREHOLDERS - MAY 16, 2000
This proxy statement is being furnished to holders of the common stock,
par value $1.25 per share, of QNB Corp. in connection with the solicitation of
proxies by the Board of Directors for use at the 2000 Annual Meeting of
Shareholders. The annual meeting will be held at the offices of The Quakertown
National Bank at 320 West Broad Street, Quakertown, Pennsylvania 18951, on May
16, 2000 at 11:00 a.m., local time.
As of the date of this proxy statement, the Board of Directors knows of no
business that will be presented for consideration at the annual meeting other
than that referred to in the enclosed Notice of Annual Meeting. As to other
business, if any, properly presented at the annual meeting, executed proxies
will be voted in accordance with the judgment of the person or persons voting
the proxy.
The cost of solicitation of proxies will be paid by QNB. QNB will
reimburse brokerage firms and other custodians, nominees, and fiduciaries for
reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of QNB's common stock. In addition to solicitations by mail,
directors, officers, and employees of QNB and the bank may solicit proxies
personally or by telephone, without additional compensation.
These proxy materials are first being mailed to shareholders on or about
April 14, 2000.
Date, Time and Place of Meeting
The annual meeting will be held on Tuesday, May 16, 2000 at 11:00 a.m.,
local time, at the bank's offices at 320 West Broad Street, Quakertown,
Pennsylvania 18951.
Outstanding Securities; Quorum; Voting Rights; and Record Date
The close of business on March 31, 2000 was fixed as the record date for
the purpose of determining those shareholders entitled to notice of, and to vote
at, the annual meeting and any adjournments or postponements of the meeting. As
of the close of business on that date, QNB had issued and outstanding 1,439,273
shares of common stock.
Shareholders are entitled to one vote for each share of common stock held
of record on the record date with respect to each matter to be voted on at the
annual meeting.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of the common stock on the record date is necessary to
constitute a quorum at the annual meeting.
1
Solicitation of Proxies
The Board of Directors solicits this proxy for use at QNB's 2000 annual
meeting of shareholders.
Voting and Revocability of Proxies
Shares of common stock represented by properly executed proxies will,
unless the proxies have previously been revoked, be voted in accordance with the
instructions indicated on the proxies. If no instructions are indicated on the
proxies, the shares will be voted FOR the election of QNB's nominees to the
Board of Directors. The Board of Directors does not anticipate that any matters
will be presented at the annual meeting other than as set forth in the
accompanying Notice of Annual Meeting. In the event that any other matters are
properly presented at the annual meeting, proxies will be voted in the
discretion of the proxy holders as to such matters.
A shareholder who executes and returns a proxy has the power to revoke it
at any time before it is voted by delivering to Mr. Charles M. Meredith, III,
Secretary of QNB, at the offices of QNB, at the address indicated above, either
a written notice of the revocation or a duly executed later-dated proxy, or by
attending the annual meeting and voting in person after giving notice of the
revocation.
2
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 31, 2000, the number of shares
of common stock, par value $1.25 per share, beneficially owned by each current
director and nominee, by each executive officer, and by all directors, nominees
and executive officers of QNB and the bank, as a group. Unless otherwise
indicated, shares are held individually. The address for each person is 320 West
Broad Street, P.O. Box 9005, Quakertown, Pennsylvania 18951.
Amount and Nature of Percentage of
Name of Beneficial Owner Beneficial Ownership (1)(2) Class (3)
- ------------------------ --------------------------- -------------
Norman L. Baringer, Director 6,000 (4) *
Thomas J. Bisko, Director 15,972 (5) 1.08%
President/Chief Executive Officer (Corp. and Bank)
Kenneth F. Brown, Jr., Director 54,801 (6) 3.71%
Dennis Helf, Director 6,996 (7) *
Donald T. Knauss, Director 48,376 (8) 3.27%
Bret H. Krevolin, Executive Vice President/ 9,270 (9) *
Chief Financial Officer (Bank)
Chief Accounting Officer (Corp.)
Bryan S. Lebo, Senior Vice President of 8,217 (10) *
Lending (Bank)
G. Arden Link, Director (Bank) 2,600 (11) *
Charles M. Meredith III, Director 41,300 (12) 2.79%
Gary S. Parzych, Director 3,550 (13) *
Henry L. Rosenberger, Director 10,600 (14) *
Mary Ann Smith, Senior Vice President/ 10,689 (15) *
Chief Information Officer (Bank)
Edgar L. Stauffer, Director 45,111 (16) 3.05%
Robert C. Werner, Executive Vice President/ 10,601 (17) *
Chief Operating Officer (Bank)
Vice President (Corp.)
Existing Directors, Nominees
& Executive Officers
as a Group (14 persons) 274,083 18.54%
- ----------------------------------
* Less than 1.00%
3
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definitions of "beneficial ownership" set forth in the
General Rules and Regulations of the Securities and Exchange Commission and
may include securities owned by or for the individual's spouse and minor
children and any other relative who has the same home, as well as
securities that the individual has, or shares, voting or investment power
or has the right to acquire beneficial ownership within 60 days after March
31, 2000. Beneficial ownership may be disclaimed as to certain of the
securities.
(2) Includes 23,300 immediately exercisable options and 16,000 options that
become exercisable over time or that could be exercisable immediately upon
a change of control of the corporation.
(3) Numbers are rounded-off to the nearest one-hundredth percent.
(4) Includes 3,348 shares owned jointly by Mr. Baringer with his wife, Nancy,
and 950 shares held in her individual capacity.
(5) Includes 6,058 shares owned jointly by Mr. Bisko with his wife,
Barbara; 40 shares held of record by Mr. Bisko's daughter, as to which Mr.
Bisko has the sole voting and dispositive power; and 4,800 exercisable
options and 3,200 options that become exercisable over time awarded under
the Stock Incentive Plan.
(6) Includes 54,001 shares owned jointly by Mr. Brown with his wife, Pamela.
(7) Includes 6,196 shares owned jointly by Mr. Helf with his wife, Mary.
(8) Includes 8,964 shares owned by Mr. Knauss's wife, Ruth.
(9) Includes 1,470 shares owned jointly by Mr. Krevolin with his wife,
Susan, and 4,600 exercisable options and 3,200 options that become
exercisable over time awarded under the Stock Incentive Plan.
(10) Includes 300 shares owned jointly by Mr. Lebo with his wife, Elaine,
and 4,600 exercisable options and 3,200 options that become exercisable
over time awarded under the Stock Incentive Plan.
(11) Includes 167 shares owned jointly by Mr. Link with his wife, Dorothy.
(12) Includes 5,292 shares owned jointly by Mr. Meredith with his wife,
Elizabeth; 2,396 shares held in her individual capacity; and 4,200 shares
held of record by Franklin & Meredith, Inc.
(13) Includes 1,000 shares owned by Mr. Parzych's wife, Karen, and 1,000 shares
held of record by Eugene T. Parzych, Inc.
(14) Includes 6,300 shares held of record by Rosenberger Companies, Ltd.
(15) Includes 812 shares owned jointly by Ms. Smith with her husband,
Randall; 208 shares held of record by Ms. Smith's children, as to which Ms.
Smith has the sole voting and dispositive power; and 4,600 exercisable
options and 3,200 options that become exercisable over time awarded under
the Stock Incentive Plan.
(16) Includes 29,496 shares owned jointly by Mr. Stauffer with his wife, Mary
Blake, and 4,383 shares held in her individual capacity.
(17) Includes 2,580 shares owned jointly by Mr. Werner with his wife,
Judith, and 4,700 exercisable options and 3,200 options that become
exercisable over time awarded under the Stock Incentive Plan.
4
BENEFICIAL OWNERSHIP OF SECURITIES
On March 31, 2000, 1,439,273 shares of common stock, par value $1.25 per
share were issued, outstanding and entitled to vote. The following table sets
forth the names of persons who, directly or indirectly, are known to QNB's
management to be the beneficial owners (as determined in accordance with Rule
13d-3 under the Securities Exchange Act of 1934), of at least 5% of QNB's
outstanding common stock as of March 31, 2000.
Name and Address of Number of Shares Percentage of
Beneficial Owner Owned (1) Class (2)
- ------------------- ---------------- -------------
James C. Ebbert 117,628 (3) 8.17%
303 Edgemont Avenue
Quakertown, PA 18951
- -----------------------------
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definitions of "beneficial ownership" set forth in the
General Rules and Regulations of the Securities and Exchange Commission and
may include securities owned by or for the individual's spouse and minor
children and any other relative who has the same home, as well as
securities to which the individual has, or shares, voting or investment
power or has the right to acquire beneficial ownership within 60 days after
March 31, 2000. Beneficial ownership may be disclaimed as to certain of the
securities.
(2) Numbers are rounded off to the nearest one-hundredth percent.
(3) These shares are owned jointly by Mr. Ebbert with his wife, Martha.
5
PROPOSAL I
ELECTION OF DIRECTORS
The Board of Directors
QNB's Articles of Incorporation and QNB's By-Laws provide that the Board
of Directors shall consist of nine members and shall be divided into three
classes, Class I, Class II, and Class III, which shall be as nearly equal in
number as possible. The three directors currently constituting Class III have
been nominated for re-election at the annual meeting. Directors in Class I and
Class II will hold office until the 2001 and 2002 annual meetings, respectively.
The Nominees
At the annual meeting, three directors will be elected. Each director so
elected will hold office until the 2003 annual meeting of shareholders and until
his successor in office is duly qualified and elected.
To the extent given discretion, the persons named in the accompanying
proxy intend to vote FOR each of the nominees listed below. In the event that
any nominee should decline to serve or be unable to serve, the persons named as
proxies may vote for the election of such person or persons as the Board of
Directors recommends. The Board of Directors does not maintain a Nominating
Committee.
Set forth below, with respect to each director nominee, is his name, age,
the time period served as a director and his principal occupation(s) or
employment and business affiliation(s) at present and during the last five
years.
Voting Requirements
The three director candidates are required to be elected by the affirmative
vote of a majority of the outstanding shares on the record date. Votes may be
cast in favor or withheld for any or all of the nominees.
Abstentions and broker non-votes will neither be counted for nor against a
nominee, but the shares represented by any abstention or broker non-vote will be
considered present at the annual meeting for quorum purposes.
RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT EACH OF THESE NOMINEES
BE ELECTED AS A CLASS III DIRECTOR.
6
CURRENT CLASS III DIRECTORS AND NOMINEES FOR THREE YEAR TERM EXPIRING IN 2003
Dennis Helf
Age 53; Private Investment Advisor from 1995 to present; Partner, Grim
Biehn Thatcher & Helf (law firm), Quakertown, PA from 1980 to December
1995; a Director of the Bank since January 1996; a Director of QNB since
May 1997.
Donald T. Knauss
Age 74; Secretary of QNB from 1984 to April 1994; Secretary of the Bank
from 1968 to April 1994; Retired, E.W. Knauss & Son, Inc. (meat
processing), Quakertown, PA; Chairman of the Board, E.W. Knauss & Son, Inc.
from 1986 to 1996; a Director of the Bank since 1954; a Director of QNB
since 1984.
Thomas J. Bisko
Age 52; Chief Executive Officer of the Bank and QNB from March 1988 to
present; President of the Bank from September 1985 to present; Treasurer of
QNB from February 1986 to present; President of QNB from May 1986 to
present; a Director of QNB and the Bank since 1985.
Continuing Directors Serving Until 2001 (Class I Directors)
Gary S. Parzych
Age 44; President, Eugene T. Parzych, Inc. (construction company),
Trumbauersville, PA from 1980 to present; President, Finland Leasing
Company, Inc. (real estate holding company), Trumbauersville, PA from June
1986 to present; Director of Quakertown Community School Board from January
1987 to present; a Director of QNB and the Bank since 1995.
Norman L. Baringer
Age 69; Retired, Baringer Assoc. Inc. (insurance, real estate brokerage),
Quakertown, PA; President, Baringer Assoc. Inc. from 1985 to 1995; a
Director of QNB and the Bank since 1992.
Charles M. Meredith, III
Age 64; Secretary of QNB and the Bank from April 1994 to present;
Co-Owner, Franklin & Meredith Inc. (commercial publisher), Quakertown, PA;
a Director of the Bank since 1968; a Director of QNB since 1984.
Continuing Directors Serving Until 2002 (Class II Directors)
Kenneth F. Brown, Jr.
Age 44; President, McAdoo & Allen, Inc. (manufacturer of inorganic
pigment and leather products), Quakertown, PA from September 1989 to
present; Executive Vice President, McAdoo & Allen, Inc. from April 1976 to
August 1989; a Director of QNB and the Bank since 1993.
Henry L. Rosenberger
Age 54; President of Rosenberger Companies, Ltd. from 1998 to present.
Chairman/CEO, Rosenberger's Cold Storage, Inc. (refrigerated storage),
Hatfield, PA from 1993 to 1998; President, Rosenberger's Cold Storage, Inc.
from June 1981 to 1996; Chairman/CEO, Rosenberger's Cold Transport, Inc.
(refrigerated trucks) from 1996 to 1998; President, Rosenberger's Cold
Transport, Inc. from October 1984 to 1996; President, Dock Woods Community,
Inc. (retirement community) from January 1988 to present; a Director of QNB
and the Bank since 1984.
Edgar L. Stauffer
Age 62; Co-Owner, Stauffer Manufacturing Corporation (manufacturer and
importer of industrial work gloves and safety equipment), Red Hill, PA from
August 1959 to present; Co-Owner, H. Texier Glove Corporation, Inc. from
September 1983 to December 1999; a Director of the Bank since 1983; a
Director of QNB since 1984.
7
THE BOARDS OF DIRECTORS OF QNB AND THE BANK
Each current director of QNB is also a current member of the bank's Board
of Directors. G. Arden Link is only a member of the bank's Board of Directors.
QNB's Board of Directors met 13 times in 1999. The bank's Board of
Directors met 20 times during such period. All current directors attended at
least 75% of the aggregate of (1) the total number of meetings of the Board of
Directors (held for the period for which he has been a director) and (2) the
total number of meetings held by all committees of the board on which he served
(during the periods that he served).
QNB's Board of Directors established the following committees, among
others:
EXECUTIVE COMMITTEE. The Executive Committee is authorized to exercise all
of the authority of the Board of Directors in the management of QNB between
Board meetings, unless otherwise provided in QNB's By-Laws. The Executive
Committee did not meet in 1999. The members of the Executive Committee are
Directors Bisko, Helf, Knauss, Meredith and Stauffer.
COMPENSATION COMMITTEE. The Compensation Committee's primary function is to
review and determine the compensation of present and proposed senior members of
QNB's management. The Compensation Committee met one time in 1999. The members
of the Compensation Committee are Directors Helf, Knauss, Meredith, Rosenberger,
and Stauffer.
AUDIT COMMITTEE. The Audit Committee recommends the engagement and
discharge of the independent certified public accountants, reviews their annual
audit plan and the results of their auditing activities, and considers the range
of audit and non-audit fees. It also reviews the general audit plan, scope and
results of QNB's procedures for internal auditing. The reports of examination of
QNB and its subsidiary by state and federal bank regulatory examiners are
reviewed by the Audit Committee. The bank also has a standing Audit Committee
which performs the same functions as QNB's Audit Committee. The members of QNB's
and the bank's Audit Committee are Directors Baringer, Link, Meredith, and
Rosenberger. The Audit Committee of QNB and the bank met three times in 1999.
COMPENSATION OF THE BOARD OF DIRECTORS.
Each director of QNB is also a member of the bank's Board of Directors.
During 1999, directors, with the exception of those who are full-time employees
of QNB or the bank, received an annual fee of $5,000. In addition, each director
received a fee of $400 for each Board meeting attended. Directors are not
reimbursed for QNB Board meetings. Members of the committees of the Board of
Directors also received $200 from January to April and $150 thereafter for each
committee meeting attended, provided the committee meeting was not held as part
of a scheduled Board meeting.
MANAGEMENT INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee makes recommendations to the Board of Directors
concerning general guidelines on compensation of employees and specific
recommendations for Mr. Bisko. The membership of the committee consists solely
of outside directors.
8
EXECUTIVE COMPENSATION
Since the formation of QNB in 1984, none of its executive officers have
received any separate compensation from QNB. Thomas J. Bisko, Robert C. Werner,
and Bret H. Krevolin are the only executive officers of QNB that are also
executive officers of the bank. The following information is furnished
concerning the chief executive officer and the executive officers of QNB or the
bank whose aggregate remuneration from the bank exceeded $100,000 during the
fiscal years ended December 31, 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------- -----------------------
AWARDS PAY-OUTS
------- ---------
OTHER RESTRICTED
ANNUAL STOCK OPTIONS/ ALL OTHER
SALARY BONUS COMPEN- AWARDS SARS PAY-OUTS COMPEN-
NAME AND POSITION YEAR ($) ($) SATION ($) (#) ($) SATION
($)
- -----------------------------------------------------------------------------------------------------------------------------------
Thomas J. Bisko 1999 $182,628 $18,263 $0 $0 1600 Shares $0 $12,425 (1)
President and 1998 $180,284 $18,028 $0 $0 1600 Shares $0 $12,270 (1)
Chief Executive Officer 1997 $176,576 $17,658 $0 $0 1600 Shares $0 $12,800 (1)
Robert C. Werner 1999 $122,250 $12,225 $0 $0 1600 Shares $0 $9,780 (2)
Executive Vice President 1998 $117,548 $11,755 $0 $0 1600 Shares $0 $9,405 (2)
Chief Operating Officer 1997 $113,027 $11,302 $0 $0 1600 Shares $0 $9,129 (2)
Bryan S. Lebo 1999 $99,438 $9,944 $0 $0 1600 Shares $0 $7,955 (3)
Senior Vice President 1998 $95,624 $9,562 $0 $0 1600 Shares $0 $7,651 (3)
Senior Lending Officer 1997 $91,936 $9,194 $0 $0 1600 Shares $0 $7,425 (3)
Bret H. Krevolin 1999 $98,637 $9,864 $0 $0 1600 Shares $0 $7,891 (4)
Executive Vice President 1998 $94,389 $9,439 $0 $0 1600 Shares $0 $7,553 (4)
Chief Financial Officer 1997 $90,325 $9,033 $0 $0 1600 Shares $0 $7,293 (4)
Mary Ann Smith 1999 $94,277 $9,428 $0 $0 1600 Shares $0 $7,587 (5)
Senior Vice President 1998 $90,042 $9,004 $0 $0 1600 Shares $0 $7,225 (5)
Chief Information Officer 1997 $83,940 $8,394 $0 $0 1600 Shares $0 $6,833 (5)
- --------------------------------
(1) Includes the bank's contributions to the 401(k) and Money Purchase
Pension Plans of $12,425, $12,270 and $12,800 for Mr. Bisko for 1999,
1998, and 1997, respectively.
(2) Includes the bank's contributions to the 401(k) and Money Purchase
Pension Plans of $9,780, $9,405 and $9,129 for Mr. Werner for 1999,
1998, and 1997, respectively.
(3) Includes the bank's contributions to the 401(k) and Money Purchase
Pension Plans of $7,955, $7,651 and $7,425 for Mr. Lebo for 1999, 1998,
and 1997, respectively.
(4) Includes the bank's contributions to the 401(k) and Money Purchase
Pension Plans of $7,891, $7,553 and $7,293 for Mr. Krevolin for 1999,
1998, and 1997, respectively.
(5) Includes the bank's contributions to the 401(k) and Money Purchase
Pension Plans of $7,587, $7,225 and $6,833 for Ms. Smith for 1999,
1998, and 1997, respectively.
9
STOCK OPTION GRANTS FOR 1999
The following table reflects grants of stock options to Mr. Bisko, Mr.
Werner, Mr. Lebo, Mr. Krevolin and Ms. Smith in fiscal year 1999.
OPTION GRANTS IN LAST FISCAL YEAR (1)
POTENTIAL
% OF TOTAL REALIZABLE VALUE
OPTIONS AT ASSUMED
GRANTED TO EXERCISE ANNUAL RATES OF
OPTIONS EMPLOYEES OR BASE STOCK APPRECIATION
GRANTED IN FISCAL PRICE EXPIRATION FOR OPTION TERM (2)
NAME (#) YEAR ($/SHARE) DATE 5% 10%
($) ($)
- ---------------------------------------------------------------------------------------------------------------------
Thomas J. Bisko 1600 10.8% $37.00 01/12/2009 $37,232 $94,352
President
Chief Executive Officer
Robert C. Werner 1600 10.8% $37.00 01/12/2009 $37,232 $94,352
Executive Vice President
Chief Operating Officer
Bryan S. Lebo 1600 10.8% $37.00 01/12/2009 $37,232 $94,352
Senior Vice President
Of Lending
Bret H. Krevolin 1600 10.8% $37.00 01/12/2009 $37,232 $94,352
Executive Vice President
Chief Financial Officer
Mary Ann Smith 1600 10.8% $37.00 01/12/2009 $37,232 $94,352
Senior Vice President
Chief Information Officer
- --------------------------
(1) All options granted were qualified stock options pursuant to the 1998
Stock Option Plan. The options granted vest and become exercisable after
the third anniversary of their grant date.
(2) In order to realize the potential value of the stock options, QNB's common
stock would be approximately $60.27 and $95.97 at a 5% and 10%
appreciation rate, respectively.
AGGREGATE OPTION EXERCISES AND OPTION VALUES
The following table provides information as to stock options exercised by
Mr. Bisko, Mr. Werner, Mr. Lebo, Mr. Krevolin and Ms. Smith in 1999 and the
value of stock options held by each officer at year-end 1999 measured in terms
of the $29.50 closing price (average of the bid and asked price) of QNB's common
stock on December 31, 1999. Some stock options are immediately exercisable while
others become exercisable over time.
10
AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END STOCK OPTION VALUES
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT 12/31/99 OPTIONS AT 12/31/99
ACQUIRED ON VALUE (EXERCISABLE/ (EXERCISABLE/
EXERCISE REALIZED UNEXERCISABLE) UNEXERCISABLE)
NAME (#) ($) (#) ($)
- -----------------------------------------------------------------------------------------------------------------------------------
Thomas J. Bisko 1,600 $32,400 6,400/1,600 $13,600/$0
Robert C. Werner 700 $14,175 6,200/1,600 $12,750/$0
Bryan S. Lebo 0 $ 0 4,600/1,600 $ 0/$0
Bret H. Krevolin 500 $10,125 6,000/1,600 $11,900/$0
Mary Ann Smith 1,000 $20,250 6,000/1,600 $11,900/$0
EMPLOYMENT AGREEMENTS
On September 2, 1986, QNB and Mr. Bisko entered into an employment
agreement for a term of 27 years, commencing immediately and terminating on
December 31, 2013 provided however, that the employment agreement may be
terminated by either party upon five years' prior written notice. Under the
terms of the employment agreement, Mr. Bisko is to be employed as the President
of the Bank and to render services as may be reasonably required of him from
time to time by the Board of Directors. Mr. Bisko may be discharged at any time
for just and proper cause, except that, following a change of control of QNB
(which is defined as any one person or group obtaining voting control of 25% or
more of QNB's outstanding common stock), Mr. Bisko's employment may only be
terminated if he materially breaches his obligations under the employment
agreement, fails or refuses to comply with the proper and reasonable written
policies of the Board of Directors, or is convicted of a felony. If Mr. Bisko's
employment is terminated for reasons other than, among others, discharge for
cause, a change in control of QNB, or death or disability, Mr. Bisko is entitled
to receive a lump sum severance payment equal to five times his then current
base salary. If Mr. Bisko were terminated at the minimum base salary of $187,011
as of January 1, 2000, he would be entitled to receive a maximum lump sum
payment equal to $935,055. Such a provision may be deemed to be "anti-takeover"
in nature inasmuch as it may discourage a potential acquiror who may desire to
replace Mr. Bisko with a new president. In the event of Mr. Bisko's death or
disability, QNB shall pay either to Mr. Bisko, his estate, or his designated
beneficiary, an amount equal to his then current base salary in equal monthly
installments, which amounts may be reduced based upon the receipt of any life or
disability insurance proceeds from policies maintained by and at the expense of
QNB.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
QNB's Board of Directors is responsible for the governance of QNB and its
subsidiary. In fulfilling its fiduciary duties, the Board of Directors acts in
the best interests of QNB's shareholders, customers and the communities served
by QNB and its subsidiary. To accomplish QNB's strategic goals and objectives,
the Board of Directors engages competent persons who undertake to accomplish
these objectives with integrity and in a cost-effective manner. The compensation
of these individuals is part of the Board of Directors' fulfillment of its
duties to accomplish QNB's strategic mission.
11
The fundamental philosophy of QNB's and the bank's compensation program is
to offer competitive compensation opportunities for all employees based on the
individual's contribution and personal performance. The compensation program is
administered by a compensation committee comprised of four outside directors who
are listed below. The objective of the committee is to establish a fair
compensation policy to govern all salaries in order to attract and motivate
competent, dedicated and ambitious managers whose efforts will enhance the
products and services of QNB, the results of which may include improved
profitability, increased dividends to our shareholders and subsequent
appreciation in the market value of our shares. While general guidelines are
provided for all employees, the compensation committee makes specific
recommendations for Mr. Bisko.
Mr. Bisko's compensation is reviewed and approved annually by the Board of
Directors. As a guideline for review in determining Mr. Bisko's base salary, the
committee primarily uses information provided by the Larry Webber survey of
Pennsylvania financial institutions operating within QNB's general market area.
The compensation committee focuses on the survey data for financial institutions
ranging from $300 million to $499 million operating in Southeastern
Pennsylvania. This survey includes however, banks with assets of $29 million to
$2.9 billion and is different than the peer group used for the performance
graph. The peer group on the performance graph includes both larger regional
banks and banks nationwide with assets between $250 million and $500 million.
Pennsylvania peer group banks have been used because of common industry issues
and competition for the same executive talent group.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Bisko's base salary is $187,011 for 2000, subject to an annual review
and adjustment, based upon the Social Security cost of living increase. Mr.
Bisko's base pay is determined annually by the compensation committee. In
addition, Mr. Bisko has a five-year compensation agreement whereby he is
eligible to receive a cash bonus equivalent to 10% of his salary each year over
the five-year term of the agreement provided certain financial goals are
achieved. The goals are based on QNB increasing its earnings per share by a
compounded 10% per year. The earnings per share growth amounts are based on
levels achieved in 1996, the base year of the plan. In addition to the annual
bonus, Mr. Bisko is also eligible to receive in the fifth year of the plan,
2001, an additional 10% bonus for every year that corporate goals were met over
the term of the agreement, provided the fifth year target is met. Mr. Bisko
shall also be reimbursed for all reasonable and necessary expenses related to
his duties.
The bank provides Mr. Bisko, for the benefit of his named beneficiary, with
a salary continuation agreement. In the event of Mr. Bisko's death, the
agreement provides his beneficiary with monthly income for 180 consecutive
months. The agreement is enforceable only while Mr. Bisko remains employed by
the bank. If Mr. Bisko's employment is terminated for any reason other than
death, all rights under the agreement will be terminated. The benefits are
funded through an insurance policy with the cost limited to the annual premium
on the policy.
The Bank provides Mr. Bisko with a membership to a country club. Mr. Bisko
is reimbursed for the cost of all business related meals at the club. Mr. Bisko
is not reimbursed for any personal meals at the country club.
This report is submitted by the Compensation Committee:
Edgar L. Stauffer, Chairperson; Donald T. Knauss, Henry L. Rosenberger, Charles
M. Meredith, III, Dennis Helf
STOCK INCENTIVE PLAN
QNB maintains two stock option plans administered by QNB's Compensation
Committee. The committee determines, among other things, the employees to whom
awards are granted, the type of awards, and the amount, size, timing and terms
of such awards.
12
Both plans provide for the granting of either non-qualified stock options
or incentive stock options. The exercise price of an option is the fair market
value of QNB's common stock at the date of grant as defined in the plans.
Participation in the plan is limited to those full-time officers and other key
executive employees of QNB or the bank who are in positions in which their
decisions, actions, and counsel have a significant impact upon QNB's
profitability and success. QNB directors who are not otherwise full-time
officers or employees of QNB or the bank are not eligible to participate in the
plan. The 1988 Plan authorized the issuance of 82,000 shares. These options
expire 5 years from the date of grant. The 1988 Plan expired on February 23,
1998. No additional shares may be granted under this plan. As of December 31,
1999, 73,050 options were granted and 38,400 options were outstanding under the
1988 Plan. At present, an aggregate of 15,406 shares of common stock have been
issued pursuant to options granted under this plan.
The 1998 Plan authorized the issuance of 100,000 shares. The time periods
by which any option is exercisable under the 1998 Plan is determined by the
committee but may not commence before the expiration of six months or continue
beyond the expiration of ten years after the date the option is awarded. As of
December 31, 1999, 17,600 options were granted and outstanding under the 1998
Plan.
EMPLOYEE STOCK PURCHASE PLAN
At QNB's 1996 annual meeting, the shareholders approved QNB's Employee
Stock Purchase Plan. This plan offers eligible employees an opportunity to
purchase, from QNB, shares of common stock at a 5% discount from fair market
value (as defined in the plan). The plan authorizes the issuance of 25,000
shares. The initial offering period of the plan commenced on December 1, 1996.
As of March 31, 2000, 3,873 shares were issued under the plan.
13
STOCK PERFORMANCE GRAPH
Set forth below is a performance graph comparing the yearly cumulative
total shareholder return on QNB's common stock with:
o the yearly cumulative total shareholder return on stocks included in the
NASDAQ Market Index, a broad market index,
o the yearly cumulative total shareholder return on the SNL Mid-Atlantic
Bank Index, a group encompassing virtually all publicly traded banking
companies in New York, New Jersey, Pennsylvania, Delaware, Maryland, and
the District of Columbia (103 companies) and
o the yearly cumulative total shareholder return on the SNL $250M to $500M
Bank Index, a group encompassing 113 publicly traded banking companies
with assets between $250 million and $500 million.
This index was added because it is more representative of banking companies
with characteristics similar to QNB. All of these cumulative total returns are
computed assuming the reinvestment of dividends at the frequency with which
dividends were paid during the applicable years.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN
QNB CORP., MID-ATLANTIC BANKS & NASDAQ MARKET INDEX
[GRAPHIC]
In the printed version of the document, a line graph
appears which depicts the following plot points:
Period Ending
---------------------------------------------------------------
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- -------- --------
QNB Corp. 100.00 142.53 167.40 174.09 203.55 157.26
NASDAQ -- Total US* 100.00 141.33 173.89 213.07 300.25 542.43
SNL Mid-Atlantic Bank Index 100.00 160.04 229.66 326.41 361.87 459.77
SNL $250M-$500M Bank Index 100.00 134.95 175.23 303.07 271.41 252.50
14
EXECUTIVE OFFICERS OF QNB
The following list sets forth the names of the executive officers of QNB,
and other significant employees, their respective ages, positions held, recent
business experience with QNB and the Bank, and the period they have served in
their respective capacities.
THOMAS J. BISKO
Age 52; Chief Executive Officer of the Bank and QNB from March 1988 to present;
President of the Bank from September 1985 to present; President of QNB from May
1986 to present; Treasurer of QNB from February 1986 to present.
ROBERT C. WERNER
Age 42; Executive Vice President/Chief Operating Officer of the Bank from
January 1994 to present; Senior Vice President/Chief Financial Officer of the
Bank from January 1989 to December 1993; Vice President of QNB from October 1988
to present.
BRET H. KREVOLIN
Age 37; Executive Vice President/Chief Financial Officer of the Bank from
January 2000 to present; Chief Accounting Officer of QNB from January 1992 to
present; Senior Vice President/Chief Financial Officer of the Bank from January
1995 to December 1999; Vice President/Controller of the Bank from August 1989 to
December 1994.
BRYAN S. LEBO
Age 43; Senior Vice President/Senior Lending Officer of the Bank from January
1995 to present; Executive Vice President of Lehigh Valley Bank from 1992 to
1994.
MARY ANN SMITH
Age 46; Senior Vice President/Chief Information Officer of the Bank from January
1999 to present; Senior Vice President/Operations of the Bank from January 1995
to December 1998; Vice President/Operations of the Bank from January 1988 to
December 1994.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
QNB and the bank have not entered into any material transactions, proposed
or consummated, with any director or executive officer of QNB or the bank, or
any associate of the foregoing persons, with the exception of that disclosed
below. QNB and the bank have engaged in and intend to continue to engage in
banking and financial transactions in the ordinary course of business with
directors and officers of QNB and the bank and their associates on comparable
terms with similar interest rates as those prevailing from time to time for
other bank customers.
Total loans outstanding from the bank at December 31, 1999, to QNB's and
the bank's officers and directors as a group, members of their immediate
families and companies in which they had an ownership interest of 10% or more
amounted to $4,014,000, or approximately 16.2% of the bank's total equity
capital. The bank made these loans in the ordinary course of business, on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons, and did
not involve more than the normal risk of collection or present other unfavorable
features. The aggregate amount of indebtedness outstanding as of the latest
practicable date, February 23, 2000, to the above described group was
$3,697,000.
During 1999, QNB entered into an agreement with Eugene T. Parzych, Inc., of
which Director Gary S. Parzych is President, approved by the Board of Directors,
for the improvement and renovation of the bank's offices. The total paid to
Eugene T. Parzych, Inc. during 1999 was $333,000.
15
NOMINATIONS AND SHAREHOLDER PROPOSALS
Nominations for election to the Board of Directors may be made by any
shareholder if made in writing and delivered or mailed to the President of QNB,
not less than 14 days or more than 50 days prior to any shareholder meeting
called for the election of directors, provided however, that if less than 21days
notice of the meeting is given to shareholders, the nomination shall be mailed
or delivered to the President of QNB not later than the close of business on the
7th day following the day on which the notice of the meeting was mailed. The
notification must contain the following information to the extent known to the
notifying shareholder:
(a) the name and address of each proposed nominee;
(b) the principal occupation of each proposed nominee;
(c) the total number of shares of QNB common stock that will be voted for
each proposed nominee;
(d) the name and residential address of the notifying shareholder;
(e) the number of shares of QNB common stock owned by the notifying
shareholder.
Nominations not made in accordance with these provisions may be disregarded by
the Chairman at the annual meeting.
Any shareholder proposal for the 2001 annual meeting must be submitted, in
writing, to the Secretary of QNB in accordance with the proxy rules of the
Securities and Exchange Commission prior to December 15, 2000. Any shareholder
proposal not submitted in accordance with the foregoing may be disregarded by
the Chairman at the annual meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires QNB's
officers and directors and persons who own more than 10% of QNB's common stock
to file reports of ownership and changes in ownership with the Securities and
Exchange Commission. Officers, directors and greater than 10% owners are
required by Securities and Exchange Commission regulations to furnish QNB with
copies of all Section 16(a) forms they file.
To the Board of Directors' knowledge, based solely on review of the copies
of such reports furnished to QNB during fiscal year ended December 31, 1999, all
Section 16(a) filing requirements applicable to its executive officers and
directors were complied with except for Kenneth F. Brown, Jr. who filed one form
late reporting one transaction.
OTHER MATTERS
Management is not aware of any business to come before the annual meeting
other than those matters described in the proxy statement and the accompanying
notice of annual meeting. However, if any other matters should properly come
before the annual meeting, it is intended that the proxies hereby solicited will
be voted with respect to those other matters in accordance with the judgment of
the persons voting the proxies.
If there are not sufficient votes for approval of any of the matters to be
acted upon at the annual meeting, the annual meeting may be adjourned to permit
the further solicitation of proxies.