UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
NATIONAL PENN BANCSHARES, INC.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
(2) Aggregate number of securities to which transaction applies:
N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
(4) Proposed maximum aggregate value of transaction:
N/A
(5) Total fee paid:
N/A
[ ] Fee paid previously with preliminary materials.
[ ] 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 Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
NATIONAL PENN BANCSHARES, INC.
----------------------------------------
NOTICE
OF
ANNUAL MEETING OF SHAREHOLDERS
to be held April 28, 1998
----------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of National Penn Bancshares, Inc. (the "Company") will be held on
April 28, 1998, at 4:00 P.M. (Local Time) at the Gilbertsville Fire Company,
1456 East Philadelphia Avenue, Gilbertsville, Pennsylvania, for the following
purposes:
(1) to elect three Class II directors to hold office for three years from
the date of election and until their successors shall have been
elected and qualified; and
(2) to consider and act upon a proposal to amend the Company's Articles of
Incorporation to increase the number of authorized common shares to 50
million, as described in the accompanying Proxy Statement; and
(3) To consider and act upon a proposal to amend the Company's Articles of
Incorporation to increase the maximum number of directors of the
Company to 15 persons and permit a change in the number of directors
at any time, as described in the accompanying Proxy Statement; and
(4) to transact such other business as may properly be presented at the
Meeting.
Shareholders of record at the close of business on March 13, 1998, will be
entitled to notice of, and to vote at, the Meeting.
SHAREHOLDERS ARE URGED TO SIGN, DATE, AND RETURN THE ENCLOSED PROXY IN THE
ENVELOPE PROVIDED.
BY ORDER OF THE BOARD OF DIRECTORS
SANDRA L. SPAYD
Secretary
March 20, 1998
<PAGE>
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of National Penn Bancshares, Inc. (the
"Company"), parent company of National Penn Bank ("NPB"), for use at the
Company's Annual Meeting of Shareholders to be held April 28, 1998 (the
"Meeting"). The Proxy Statement and the accompanying proxy are first being
mailed to shareholders of the Company on or about March 20, 1998. The expense of
soliciting proxies will be borne by the Company. It is expected that the
solicitation of proxies will be primarily by mail. The Company's directors,
officers, and employees may also solicit proxies personally, by telephone, and
by telegraph.
The execution and return of the enclosed proxy will not affect a
shareholder's right to attend the Meeting and vote in person. Any shareholder
giving a proxy may revoke it at any time before it is exercised by submitting
written notice of its revocation or a subsequently executed proxy to the
Secretary of the Company, or by attending the Meeting and electing to vote in
person. Only shareholders of record at the close of business on March 13, 1998,
are entitled to notice of, and to vote at, the Meeting. On that date, there were
10,508,978 of the Company's common shares outstanding, each of which will be
entitled to one vote at the Meeting.
The presence, in person or by proxy, of shareholders entitled to cast a
majority of all the votes entitled to be cast at the Meeting will constitute a
quorum. Abstentions, broker non-votes and withhold authority votes all count for
the purpose of determining a quorum.
If a shareholder is a participant in the Company's Dividend Reinvestment
Plan and/or Employee Stock Purchase Plan, the proxy card sent to such
shareholder will represent the number of shares registered in such shareholder's
name and the number of shares credited to such shareholder's Dividend
Reinvestment Plan account and/or Employee Stock Purchase Plan account.
If the enclosed proxy is appropriately marked, signed, and returned in time
to be voted at the Meeting, the shares represented by the proxy will be voted in
accordance with the instructions marked thereon. Signed proxies not marked to
the contrary will be voted "FOR" the election, as directors, of the Board of
Directors' nominees, "FOR" the proposal to amend the Company's Articles of
Incorporation to increase authorized common shares, and "FOR" the proposal to
amend the Company's Articles of Incorporation to increase the maximum number of
directors and to permit a change in the number of directors at any time. Signed
proxies will be voted "FOR" or "AGAINST" any other matter which properly comes
before the Meeting or any adjournment thereof, in the discretion of the persons
named as proxyholders.
The Company's Annual Report for the year ended December 31, 1997, is
enclosed herewith. The Annual Report of the Company has been furnished to
shareholders for their information. No part of the Annual Report is incorporated
by reference into this Proxy Statement.
1
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
General
The Articles of Incorporation of the Company provide that the Company's
business shall be managed by a Board of Directors of not less than eight and not
more than twelve persons. The Board of Directors of the Company, as provided in
the Company's Articles of Incorporation, is divided into three classes: Class I,
Class II, and Class III, with each class being as nearly equal in number as
possible. The Board of Directors of the Company presently consists of ten
members, with three directors in Class I, four directors in Class II and three
directors in Class III.
Three Class II directors will be elected at the Meeting. The term of office
of the Class II directors elected at the Meeting will expire on the date of the
annual meeting of the Company's shareholders in 2001. The term of office of the
continuing directors in Class III and Class I will expire on the date of the
annual meeting of the Company's shareholders in 1999 and 2000, respectively.
The Board of Directors has nominated Frederick H. Gaige, Lawrence T. Jilk,
Jr. and C. Robert Roth for election as Class II directors. Each of these persons
is presently a Class II director of the Company. The Company's Bylaws provide
for the mandatory retirement of directors upon attainment of age 72.
Accordingly, John J. Dau, a Class II director, will serve until the Meeting
whereupon he will retire as a director of the Company.
The Bylaws of the Company permit nominations for election to the Board of
Directors to be made by the Board of Directors or by any shareholder entitled to
vote for the election of directors. Nominations for director made by
shareholders (other than the Board of Directors) must be made, in writing,
delivered or mailed to the Company not less than fourteen days prior to the date
of a shareholders' meeting. Such notice must contain the same information to the
extent known to the notifying shareholder as that required to be stated by the
Company in its Proxy Statement with respect to nominees of the Board of
Directors. Any nominations that are not made in this manner or any votes cast at
the Meeting for any candidate not duly nominated may be disregarded by the
chairman of the Meeting. No notice of nomination for election as a director has
been received from any shareholder as of the date of this Proxy Statement.
The three nominees who receive the highest number of votes cast at the
Meeting will be elected as Class II directors. Abstentions and broker non-votes
will not constitute or be counted as "votes" cast for the purpose of the
election of directors. Shares represented by properly executed proxies in the
accompanying form will be voted for the nominees named below unless otherwise
specified in the proxy by the shareholder. Any shareholder who wishes to
withhold authority from the proxyholders to vote for the election of directors
or to withhold authority to vote for any individual nominee may do so by marking
his or her proxy to that effect. No proxy may be voted for a greater number of
persons than the number of nominees named. If any nominee should become unable
to serve, the persons named in the proxy may vote for another nominee. The
Company's management, however, has no present reason to believe that any nominee
listed below will be unable to serve as a director, if elected.
2
<PAGE>
The Nominees and Continuing Directors
The following table sets forth the principal occupation, age, and certain
other information as to the nominees for election as Class II directors, and the
continuing Class III and Class I directors, as of March 1, 1998:
<TABLE>
<CAPTION>
Director of
Principal Occupation(s) the Company
Name During Last Five Years Age Since (1)
<S> <C> <C> <C>
NOMINEES AS CLASS II DIRECTORS
TO SERVE UNTIL 2001
FREDERICK H. GAIGE(3) Dean & Campus Executive Officer, 60 1997
Penn State, Berks - Lehigh Valley College.
LAWRENCE T. JILK, JR.(4) President and Chief Executive Officer 59 1978
of the Company; Chairman of NPB.
C. ROBERT ROTH(3) District Justice. 50 1990
CONTINUING CLASS III DIRECTORS
TO SERVE UNTIL 1999
PATRICIA L. LANGIOTTI(3)(4) President, Creative Management 51 1992
Concepts (management consulting);
Chief Executive Officer, Brubacher
Excavating, Inc.
HAROLD C. WEGMAN, D.D.S.(2) Dentist practicing in the Reading 70 1980
area.
WAYNE R. WEIDNER(4) Executive Vice President of the 55 1985
Company; Chief Executive Officer
and President of NPB.
CONTINUING CLASS I DIRECTORS
TO SERVE UNTIL 2000
JOHN H. BODY(2)(3)(4) Manager, General Services, Air 64 1981
Products and Chemicals, Inc.
J. RALPH BORNEMAN, JR.(2)(3) President, Body-Borneman Asso- 59 1992
ciates, Inc. (insurance).
KENNETH A. LONGACRE(2)(4) Chief Executive Officer, Farm & 64 1993
Home Oil Company.
<FN>
- ------------------------
(1) Includes period served as director of NPB prior to formation of the
Company.
(2) Member of Compensation Committee of the Company.
(3) Member of Audit Committee of the Company.
(4) Member of Executive Committee of the Company.
</FN>
</TABLE>
3
<PAGE>
Security Ownership of Management
The following table sets forth information concerning the number of common
shares of the Company held as of March 1, 1998, by each nominee for director,
each present director, each named executive officer set forth in the
compensation tables beginning on page 11, and all directors and executive
officers as a group.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership
Sole Shared
Total Voting and Voting and Percent
Name of Beneficial Investment Investment of
Beneficial Owner Ownership Power Power Class(1)
<S> <C> <C> <C> <C>
Directors and Nominees
John H. Body(4) 89,547 86,772 2,775 -
J. Ralph Borneman, Jr.(4) 19,583 9,141 10,442 -
John J. Dau(4)(5) 262,647 74,835 187,812 2.5%
Frederick H. Gaige(2) 268 268 0 -
Lawrence T. Jilk, Jr.(2)(3) 56,652 45,700 10,952 -
Patricia L. Langiotti(4) 5,932 5,300 632 -
Kenneth A. Longacre(4) 91,793 91,793 0 -
C. Robert Roth(2)(4) 12,567 5,982 6,585 -
Harold C. Wegman, D.D.S.(4) 128,750 67,566 61,184 1.2%
Wayne R. Weidner(3) 98,530 92,056 6,474 -
Other Named Executive Officers
William H. Sayre(3)(6) 15,919 14,270 1,649 -
Garry D. Koch(3) 5,582 5,550 32 -
Gary L. Rhoads(3) 21,858 19,871 1,987 -
Russell J. Kunkel(7) 1,444 1,444 0 -
All Directors and Executive Officers
as a Group (15 Persons)(3)(4) 814,351 523,130 291,221 7.7%
- ------------------------
<FN>
(1) Unless otherwise indicated, amount owned does not exceed 1% of the total
number of common shares outstanding as of March 1, 1998.
(2) Indicates a nominee for election as a Class II director at the Annual
Meeting of Shareholders.
(3) Includes shares allocated under the Company's Capital Accumulation Plan.
Includes the following shares which may be acquired by exercise of vested
options granted to officers under the Company's stock compensation plans:
Mr. Jilk - 40,665 shares, Mr. Weidner - 81,913 shares, Mr. Sayre - 11,000
shares, Mr. Koch - 4,675 shares, and Mr. Rhoads - 16,360 shares. Does not
include shares which may be acquired in the future by exercise of options
granted under the Company's stock compensation plans which options are not
presently exercisable.
(4) Includes the following shares which may be acquired by exercise of vested
options granted to non-employee directors under the Company's stock option
plan for non-employee directors: Mr. Body - 10,289 shares, Mr. Borneman -
5,145 shares, Mr. Dau - 14,699 shares, Ms. Langiotti - 734 shares, Mr.
Longacre - 3,674 shares, Mr. Roth - 3,674 shares, and Dr. Wegman - 11,025
shares. Does not include shares which may be acquired in the future by
exercise of options granted under the Company's stock option plan for
non-employee directors which options are not presently exercisable.
(5) Mr. Dau retires as a director of the Company as of the Meeting date.
(6) Mr. Sayre retired effective December 31, 1997.
(7) Mr. Kunkel resigned effective September 5, 1997.
</FN>
</TABLE>
4
<PAGE>
PROPOSAL 2
AMENDMENT OF THE COMPANY'S ARTICLES OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
The Board of Directors has approved an amendment to Article Fifth of the
Company's Articles of Incorporation which, if adopted, would increase the number
of authorized common shares of the Company from 26,666,667 shares, par value
$1.875, to 50,000,000 shares, without par value. The Board recommends that
shareholders approve this amendment.
At March 13, 1998, there were 10,508,978 of the Company's common shares
issued and outstanding. Of the remaining 16,157,689 authorized shares, 2,514,404
shares are reserved for issuance under the Company's dividend reinvestment and
various stock-based compensation and employee benefit plans, leaving 13,643,285
common shares available for issuance.
The Board believes that it is advisable to have a greater number of
authorized but unissued common shares available for various corporate programs
and purposes. The Board also believes that the concept of "par value" should be
eliminated as it is no longer provided for in Pennsylvania law applicable to the
Company.
The Company may from time to time consider acquisitions and mergers, stock
dividends or stock splits, and public or private financings to provide the
Company with capital, which may involve the issuance of additional common shares
or securities convertible into common shares. Also, additional common shares may
be necessary to meet anticipated future obligations under the Company's dividend
reinvestment plan and other stock-based compensation and employee benefit plans.
The Board believes that having authority to issue additional common shares will
avoid the possible delay and significant expense of calling and holding a
special meeting of shareholders to increase authorized capital.
The Company has no present plan, agreement or understanding involving the
issuance of its common shares except for shares required or permitted to be
issued under the Company's dividend reinvestment plan, other stock-based
compensation and employee benefit plans, and under the Company's shareholder
rights plan. It is possible, however, that merger and acquisition opportunities
involving the issuance of common shares will develop. It is also possible that
an increase in the market price for the Company's common shares, and conditions
in the capital markets generally, may make a stock dividend, a stock split or a
public offering of the Company's stock desirable. In each of the past 20 years,
the Company has paid a 5% or greater stock dividend and/or split its common
stock. The Board believes that an increase in the number of authorized common
shares of the Company will enhance its ability to respond promptly to any such
opportunities.
If this proposal is approved, the additional authorized common shares may
be issued for such consideration, cash or otherwise, at such times and in such
amounts as the Board of Directors may determine without shareholder approval,
except to the extent that shareholder approval is required by applicable law or
rules. Because the Company's common shares are traded on the Nasdaq National
Market tier of the Nasdaq Stock Market, under applicable rules of the National
Association of Securities Dealers, Inc., shareholder approval must be obtained
prior to the issuance of shares for certain purposes, including the issuance of
greater than 20% of the Company's then outstanding shares in connection with an
acquisition or merger.
Although the Board presently intends to employ the additional common shares
solely for the purposes set forth above, such shares could be used by the Board
to dilute the stock ownership of persons seeking to obtain control of the
Company, thereby possibly discouraging or deterring a non-negotiated attempt to
obtain control of the Company and making removal of incumbent management more
difficult. The proposal, however, is not a result of, nor does the Board have
any knowledge of, any effort to accumulate the Company's common shares or to
obtain control of the Company by means of a merger, tender offer, solicitation
in opposition to the Board or otherwise. The proposal is not part of any plan by
the Board to adopt a series of proposals relating to a possible takeover of the
Company, and the Board has no present intention of soliciting a shareholder vote
on any other such proposal.
The authorization of additional common shares will not, by itself, have any
effect on the rights of present shareholders. Shareholders do not have
preemptive rights to subscribe for or purchase additional common shares. The
issuance of additional shares authorized by the amendment for corporate purposes
other than a stock split or stock dividend could have a dilutive effect on
earnings and book value per common share and on the voting power of common
shareholders at the time of issuance.
5
<PAGE>
Article Ninth of the Company's Articles of Incorporation authorizes the
issuance of 1,000,000 shares of preferred stock, which the Board has the power
to issue as a class or in series and to determine the voting power, if any,
dividend rates, conversion or redemption prices, designations, rights,
preferences and limitations of the shares in the class or in each series. The
proposed amendment to Article Fifth of the Company's Articles of Incorporation
will not increase or otherwise affect the Company's authorized preferred stock.
As of March 13, 1998, the Company had no outstanding shares of preferred stock.
The text of Article Fifth, as proposed to be amended, is as follows:
"FIFTH. The total number of Common Shares that the Corporation shall
have authority to issue is 50,000,000 without par value."
The Board recommends a vote FOR this amendment. The affirmative vote of a
majority of the votes cast by all shareholders entitled to vote at the Meeting
is required to approve this amendment. Abstentions and broker non-votes will not
constitute or be counted as "votes" cast on this matter, so they will have no
effect on the outcome. All proxies will be voted FOR approval of the amendment
unless a shareholder specifies to the contrary on such shareholder's proxy card.
6
<PAGE>
PROPOSAL 3
AMENDMENT OF THE COMPANY'S ARTICLES OF INCORPORATION
TO INCREASE MAXIMUM NUMBER OF DIRECTORS
The Board of Directors has approved an amendment to Article Eighth,
Paragraph (a), of the Company's Articles of Incorporation which, if adopted,
would increase the maximum number of directors of the Company from 12 to 15 and
would permit a change in the size of the Board at any time. The Board recommends
that shareholders approve this amendment.
Article Eighth of the Company's Articles of Incorporation provides for a
"classified" or "staggered" Board of Directors; that is, a system in which the
directors are divided into three classes, as nearly equal in size as is
possible; one class of directors is elected annually; and each class serves for
a three-year term. The classified Board was approved by the Company's
shareholders in 1984.
The adoption by the Company, and by many other companies, of a classified
Board reflected widespread concern over hostile and non-negotiated attempts to
acquire control of corporations to the potential disadvantage of shareholders. A
classified board was, and is, widely viewed as discouraging proxy contests for
the election of directors, or acquisitions of substantial blocks of stock, by a
person or group seeking to acquire control of a company, because the extended
term of directors could operate to prevent the acquisition of control of the
board in a relatively short period of time. The Board also believes a classified
board of directors promotes stability and continuity among a company's
directors. The proposed amendment to Article Eighth would not change the
Company's classified Board structure.
Article VIII, Paragraph (a), presently provides that the Board of Directors
may not have less than 8 nor more than 12 members, the exact number determined
annually by the Board prior to holding of the annual meeting of shareholders.
Since 1984, the Board has varied in size between 8 and 11 members, with the
three classes of Board members generally varying between 3 and 4 members each
depending on the size of the overall Board. Upon conclusion of the Meeting, the
Board will consist of 9 members, three in each class.
The Board of Directors believes that it is advisable to have the
flexibility at any time to increase the size of the Board to 15 members, while
retaining the classified nature of the Board.
The Company may from time to time consider acquisitions and mergers in
which it may be desirable to provide that certain directors or officers of the
to-be-acquired or merged company will serve on the Company's Board of Directors
after consummation of the transaction. This is especially likely if the
shareholders of the to-be-acquired or merged company are to receive the
Company's common shares in the transaction, not cash, and thus are to have a
continuing interest as shareholders in the Company. In addition, outside of the
merger and acquisition context, the Board may also find other qualified
individuals whose service as directors would facilitate the Company's pursuit of
other business opportunities.
Although the Company has no present plan, agreement or understanding
involving the election of additional persons to its Board of Directors, the
Board believes that having authority at any time to increase the size of the
Board to 15 will better permit the Company to better pursue these various
opportunities.
The proposed amendment would not change the provisions of Article Eighth
governing the filling of Board vacancies. Any vacancy, including any that might
arise from an increase in the size of the Board after adoption of the proposed
amendment, can be filled by a vote of a majority of the remaining directors.
Directors so elected by the Board must be elected in the three classes in such a
manner as to keep the three classes as nearly equal in size as is possible. Any
such director holds office for the remainder of the term of the class to which
he has been elected.
The text of Article Eighth, Paragraph (a), as proposed to be amended, is as
follows:
"(a) The Board of Directors will consist of not less than eight and
not more than fifteen directors, as determined from time to time by
resolution of the Board of Directors."
The Board recommends a vote FOR this amendment. The affirmative vote of
two-thirds of the outstanding common shares entitled to vote at the Meeting is
required to approve this amendment. Abstentions and broker non-votes will not
constitute or be counted as "votes" cast on this matter, so they will have the
same effect as "no" votes. All proxies will be voted FOR approval of the
amendment unless a shareholder specifies to the contrary on such shareholder's
proxy card.
7
<PAGE>
ADDITIONAL INFORMATION
Board and Committee Meetings
The Company's Board of Directors met nine times during 1997. The Company's
Board of Directors has an Executive Committee, a Compensation Committee and an
Audit Committee and is authorized, under the Company's Bylaws, to create other
committees. At present, no other committee has been established. The Company's
Executive Committee, which met twice during 1997, may exercise the authority of
the Board to the extent permitted by law during intervals between meetings of
the Board. The Company's Compensation Committee, which met twice during 1997, is
responsible for the approval and administration of the base salary level and
annual incentive compensation programs, as well as the long-term incentive
compensation program, for executive officers and other officers of the Company.
The Compensation Committee is comprised solely of directors who are not
employees of the Company. The Company's Audit Committee, which met four times
during 1997, is responsible for reporting to the Board on the general financial
condition of the Company and the results of the annual audit. During 1997, each
director of the Company attended at least 75% of the aggregate of all meetings
of the Company's Board of Directors and Board committees on which they served.
Directors' Compensation
Each director of the Company who is not an employee of the Company or NPB
(each of whom also presently serves as a director of NPB) annually receives a
$5,000 retainer for serving as a director if he attends at least 75% of the
Board's meetings, plus $250 for each Board committee meeting attended (or $125
if the meeting is held on the same day as a Board or another Board committee
meeting). Each non-employee director of NPB currently receives $500 for each NPB
Board meeting attended, and $250 for each Board committee attended (or $125 if
the meeting is held on the same day as a Board or another Board committee
meeting). Non-employee directors of the Company or NPB also receive $125 per
Board or Board committee meeting if such meeting is held by telephone conference
call. Messrs. Dau and Longacre, as non-employee directors of Investors Trust
Company ("ITC"), a Company subsidiary, receive $250 for each ITC Board meeting
attended.
Under a directors' fee plan, non-employee directors of the Company or of
its subsidiaries may elect to receive payment of their compensation as directors
either in cash or in the Company's common shares or to defer such compensation
for subsequent payment in cash or the Company's common shares. During 1997, the
Company accrued a total of $106,041 in director compensation. Of this amount,
$35,500 was paid currently in cash or stock. The balance of $70,541 was deferred
compensation of which $32,416 will be paid in cash and $38,125 will be paid in
stock.
Under a stock option plan for non-employee directors of the Company, each
non-employee director receives annually on the first business day of the year a
non-qualified stock option for 734 common shares (subject to adjustment on
account of stock dividends or splits) at an exercise price equal to the stock's
fair market value on the date of grant. The options become exercisable two years
from the date of grant, subject to acceleration if an actual or potential change
of control of the Company occurs, and expire ten years from the date of grant.
Report of the Compensation Committee
Compensation Philosophy. The Compensation Committee of the Company's Board
of Directors (the "Committee") believes that the maximization of corporate
performance and, in turn, shareholder value, depends largely on establishing a
close alignment between the financial interests of shareholders and those of the
Company's employees, especially its senior management, and retaining
experienced, qualified management. Accordingly, the Committee follows a
pay-for-performance philosophy.
In addition to base salary and benefits, the Company maintains an incentive
compensation program closely tied to corporate results and a stock compensation
plan for managerial employees.
The Committee intends to place at risk a major portion of senior managers'
compensation by emphasizing compensation earned through achievement of the
Company's financial goals and through appreciation in the market value of the
Company's stock. The Committee seeks to provide a high level of overall
compensation to senior managers if a high level of profitability is achieved.
Base Salary. Base salaries of executive officers are determined by
evaluating the responsibilities of their positions and by comparing salaries
paid in the marketplace to those of executives with similar experience and
responsibilities at other bank holding companies. In making this comparison, the
Committee utilizes management compensation data available from commercial
8
<PAGE>
sources. In keeping with the pay-for-performance concept, base salaries are
generally targeted somewhat below the average salary levels of the companies
covered by the data reviewed by the Committee. Although the Company's financial
performance is considered, salary decisions are generally not tied to any
financial performance factor or other criteria for the Company and are made
independently of decisions on other components of the Company's compensation
package.
For 1997, the Committee reviewed an independent salary study of
Pennsylvania bank holding companies, broken down by asset size, including data
on chief executive officer compensation. This group is more narrowly defined
than are the financial institutions in the Nasdaq Bank Stock Index included in
the performance graph on page 14, which Index includes many larger banking
companies throughout the United States. The Committee believes salary
comparisons should be made primarily with Pennsylvania companies of roughly
comparable size.
The Committee established Mr. Jilk's base salary, effective April 13, 1997,
at $287,605, a 7% increase over his 1996 salary level. This placed Mr. Jilk's
base compensation somewhat below the average base compensation of the chief
executive officers of comparable bank holding companies, as reflected in the
compensation data reviewed by the Committee. The Committee credited Mr. Jilk
with great success in managing the growth of the Company's assets, new product
development and technological change, at the same time leading the Company to
another record financial performance.
Benefits. The Company provides various benefits to its employees, including
its executive officers, such as life and disability insurance and the Company's
qualified pension plan.
Short-Term Incentive Compensation. Executive officers and other
participants approved by the Committee are eligible to earn bonuses under the
Company's Executive Incentive Plan (the "Plan"). Such bonuses are a function of
(1) the size of the bonus fund, determined by the Committee each year, without
discretion, pursuant to the Plan; (2) the number of participants in the Plan,
determined by the Committee each year; and (3) the Committee's subjective
evaluation of the participants' respective contributions to the Company's
success for the year.
Under the Plan, at the beginning of a fiscal year, the Committee
establishes both internal and external financial performance goals for the
Company for that year. For 1997, the internal goal was for the Company's net
operating income before securities transactions to exceed such income for 1996;
the external goal was for the Company's net operating income before securities
transactions (profits or losses on securities sales of banks or bank holding
companies or their successors in which the Company has or had a 20% ownership
interest are included as operating income), as a percent of average realized
common equity, to exceed the average of such income, as a percent of average
realized common equity, for a group of bank holding companies selected by the
Committee. This comparison group is established annually based on common traits
with the Company, such as asset size and geographic location. For 1997, there
were nine Pennsylvania bank holding companies in this group. This group is
subject to change as companies are acquired and is more narrowly defined than
are the financial institutions in the Nasdaq Bank Stock Index included in the
performance graph on page 14. The Committee believes that short-term financial
performance should be measured against that of companies located in or near the
Company's market area.
At the end of each year, the Committee determines the extent to which the
Company's internal and external goals are met. If both goals are met, a bonus
fund is determined by a formula set forth in the Plan. Under this formula, the
size of the bonus fund is determined solely by the extent to which the Company
exceeds its external goal. The maximum bonus fund is established if the
Company's external goal is achieved by 30% or more. If either goal is not met,
no bonus fund is established.
The Plan provides for a maximum cash bonus of 50% of base salary for the
Company's President and Executive Vice President. For other officers, the Plan
provides, depending on their positions, maximum cash bonuses of 35% or 25% of
base salary.
Given the Company's goal to provide incentives for its managers to remain
with the Company, the Plan also provides that each participant eligible for a
maximum cash bonus of 50% or 35% also is awarded a bonus equal to one-third of
his or her cash bonus, but this award is subject to a five-year mandatory
deferral and risk of forfeiture. If, at the end of five years, the participant
is still employed or has retired at age 60 or later, the participant becomes
entitled to the amount of the deferred bonus plus interest, together with a
matching contribution from the Company. A deferred bonus is forfeited if the
recipient does not satisfy the requirements for a matching contribution, except
in the case of death or a change in control of the Company.
In 1997, the Company met both its internal and external financial
performance goals, the latter by 22.5%. Based on the resulting size of the bonus
fund, the number of Plan participants, and the Committee's subjective
performance evaluations of Plan
9
<PAGE>
participants for 1997, including Mr. Jilk, the Committee awarded Mr. Jilk a cash
bonus of $143,803 and a mandatory deferred bonus of $47,934. In evaluating Mr.
Jilk's performance, the Committee noted the Company's record earnings in 1997,
73.7% total shareholder return for 1997, and Mr. Jilk's leadership in continuing
to position the Company for long-term profitable growth.
Stock Option Grants. The Committee grants stock options annually to
executive officers and other employees at an exercise price equal to 100% of the
stock's fair market value on the date of grant. The goal in granting stock
options has been, and is, to provide a vehicle for long-term incentive
compensation through financial rewards dependent on future increases in the
market value of the Company's stock. Thus, executive officers are encouraged to
manage the Company with a view toward maximizing long-term shareholder value.
In determining the number of options to be granted in 1997 to officers and
employees, including the Company's executive officers, the Committee considered
publicly available management compensation data (including data on options)
concerning other bank holding companies, the number of options already held by
executive officers and others, potential dilution, vesting requirements, the
number of the Company's shares outstanding, and the financial performance of the
Company to the date of grant. While the Committee considered this information,
it did not apply any specific quantitative or qualitative criteria or assign any
specific weights to these factors; the grants were made in the subjective
judgment of the Committee. In 1997, the Committee granted stock options for a
total of 190,015 shares or 1.79% of the Company's shares outstanding at December
31, 1996, including stock options for 41,065 shares granted to Mr. Jilk.
Given the Company's goal to provide incentives for its managers to remain
with the Company, stock options may be exercised only to the extent they are
vested. Under the Officers' and Key Employees' Stock Compensation Plan approved
by shareholders in 1997, options vest in 20% increments over a five-year period.
If an option holder's employment with the Company terminates other than upon
death or retirement at age 60 or later, non-vested options terminate.
Tax Law. Under a federal income tax law adopted in 1993, compensation to
executives of public companies in excess of $1 million per year that is not
"performance-based" is not deductible for income tax purposes. Given the
Company's current executive compensation levels, the Committee does not
anticipate this tax law will affect the Company, but the Committee will continue
to monitor the situation. To the extent the Committee develops new executive
compensation plans or programs, it intends to structure them so that
compensation thereunder will be deemed "performance-based" under this income tax
law.
John H. Body, Chairman Kenneth A. Longacre
J. Ralph Borneman, Jr. Harold C. Wegman
John J. Dau
10
<PAGE>
Executive Compensation Summary
The following table sets forth annual and long-term compensation for
services in all capacities to the Company during the years 1995 through 1997 of
those persons who were (i) the Company's Chief Executive Officer, (ii) the other
four most highly compensated executive officers of the Company who were serving
as executive officers as of December 31, 1997, and (iii) one additional
individual who would have been included pursuant to paragraph (ii) but for the
fact that he was not serving as an executive officer on December 31, 1997
(collectively the "named executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
Securities
Restricted Underlying
Name and Other Annual Stock Options/ LTIP All Other
Principal Salary Bonus(1) Compensation Awards SARs Payouts Compensation
Position Year ($) ($) ($) ($) (#) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lawrence T. Jilk, Jr 1997 $289,740 $191,737 0 0 41,065 0 $ 59,419(2)
President & Chief 1996 268,760 169,050 0 0 41,067 0 56,734
Executive Officer 1995 254,927 169,050 0 0 45,276 0 49,218
Wayne R. Weidner 1997 191,327 133,333 0 0 35,200 0 40,649(2)
Executive Vice 1996 175,716 112,472 0 0 35,200 0 38,924
President 1995 167,181 112,472 0 0 38,808 0 34,803
William H. Sayre(3) 1997 139,000 55,787 0 0 11,000 0 4,613(2)
Vice Chairman 1996 129,045 55,786 0 0 14,667 0 3,713
of NPB 1995 117,661 55,786 0 0 16,171 0 2,942
Garry D. Koch 1997 98,997 46,667 0 0 7,000 0 11,819(2)
Executive Vice 1996 85,345 37,333 0 0 4,933 0 2,134
President of NPB 1995 81,084 37,333 0 0 5,292 0 2,027
Gary L. Rhoads 1997 85,349 42,933 0 0 6,000 0 10,666(2)
Treasurer & Chief 1996 71,432 30,736 0 0 4,667 0 2,171
Financial Officer 1995 64,993 30,736 0 0 4,851 0 1,625
Russell J. Kunkel(4) 1997 107,204 33,333 0 0 0 0 173,429(2)
Vice Chairman 1996 92,534 33,333 0 0 13,333 0 0
of NPB 1995 0 0 0 0 0 0 0
<FN>
- -------------
(1) Includes 25% mandatory deferral of total award under the Company's
Executive Incentive Plan.
(2) Consists of 50% matching contributions by the Company under the Capital
Accumulation Plan (a 401(k) plan) ($4,750 for Mr. Jilk, $4,644 for Mr.
Weidner, $4,613 for Mr. Sayre, $3,180 for Mr. Koch, $2,987 for Mr. Rhoads
and $4,750 for Mr. Kunkel); Company's matching contribution with respect to
previously awarded, mandatorily deferred amounts under the Company's
Executive Incentive Plan paid in accordance with the Plan ($48,717 for Mr.
Jilk, $31,870 for Mr. Weidner, $8,640 for Mr. Koch, and $7,679 for Mr.
Rhoads); life insurance annual premiums of $2,005 and $2,748 for Messrs.
Jilk and Weidner; and long-term disability insurance premiums of $3,947 and
$1,387 for Messrs. Jilk and Weidner. For Mr. Kunkel, it also includes a
one-time lump sum severance payment of one year's salary and benefits of
$168,679.
(3) Mr. Sayre retired effective December 31, 1997.
(4) Mr. Kunkel resigned effective September 5, 1997.
</FN>
</TABLE>
11
<PAGE>
Option Grants
The following table summarizes certain information regarding option grants
during fiscal 1997 to the named executives:
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants Grant Date Value
Number of Grant Date
Securities % of Total Present Value
Underlying Options Based on
Options Granted to Exercise or Black-Scholes
Granted(1) Employees in Base Price(2) Model(4)
Name (#) Fiscal Year ($/Share) Expiration Date(3) ($)
(a) (b) (c) (d) (e) (f)
<S> <C> <C> <C> <C> <C>
Lawrence T. Jilk, Jr 41,065 20.96% $32.125 1/11/08 $480,461
Wayne R. Weidner 35,200 17.97% $32.125 1/11/08 $411,840
William H. Sayre 11,000 5.62% $32.125 12/31/00 $128,700
Garry D. Koch 7,000 3.57% $32.125 1/11/08 $ 81,900
Gary L. Rhoads 6,000 3.06% $32.125 1/11/08 $ 70,200
Russell J. Kunkel 0 -- -- -- --
- --------
<FN>
(1) Each option only becomes exercisable if the holder remains an employee
after the grant date in accordance with the following vesting schedule:
20% per year on the first through fifth anniversary dates of grant. All
amounts represent stock options; the Company's stock compensation plans do
not provide for the issuance of stock appreciation rights.
(2) Under the terms of the Company's stock compensation plans, all options
must be granted with an exercise price equal to the fair market value of
the stock on the date of grant. The exercise price for an option must be
paid in cash; an optionee exercising a non-qualified stock option may
elect to surrender a percentage of the shares otherwise issuable to cover
any required withholding taxes upon compliance with detailed procedural
rules set forth in the plans.
(3) In the event of termination of employment other than for retirement at age
60 or later or death, or for "cause," the non-vested portion of any option
will lapse immediately and the unexercised vested portion of any option
will lapse no later than three months after termination of employment. In
the event of termination of employment upon retirement at age 60 or later
or death, the nonvested portion of any option will vest immediately and
the option, to the extent remaining unexercised, will lapse no later than
three years after termination of employment. In the event of termination
of employment for "cause," all unexercised options lapse immediately.
(4) Based upon the Black-Scholes option valuation model, which estimates the
present dollar value of the Company's common stock options to be $11.70
per share under option. The actual value, if any, an executive may realize
will depend on the excess of the stock price over the exercise price on
the date the option is exercised, so that there is no assurance the value
realized will be at or near the value estimated by the Black-Scholes
model. The assumptions underlying the Black-Scholes model include (a) an
expected volatility of 31.5%, (b) a risk-free rate of return of 5.89%,
which approximates the 10-year, zero-coupon Treasury bond rate, (c) the
Company's average common shares dividend yield of 2.55% on the grant date,
(d) an expected term of 9.17 years, and (e) an expected turnover of 5%.
</FN>
</TABLE>
12
<PAGE>
Option Exercises and Fiscal Year-End Option Values
The following table summarizes certain information regarding exercises of
stock options during fiscal 1997 and the value of outstanding options at the end
of fiscal 1997 for the named executives:
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Value of Unexercised
Number of Securities In-the-Money
Shares Underlying Unexercised Options/SARs
Acquired on Options/SARs at FY-End at FY-End(2)
Exercise Value Realized(1) Exercisable Unexercisable Exercisable Unexercisable
Name (#) ($) (#) (#) ($) ($)
(a) (b) (c) (d) (e) (f) (g)
<S> <C> <C> <C> <C> <C> <C>
Lawrence T. Jilk, Jr 90,495 $1,713,769 40,665 190,848 $ 429,853 $2,024,261
Wayne R. Weidner 18,484 $ 208,004 81,913 162,685 $1,396,859 $1,716,633
William H. Sayre 14,522 $ 149,866 60,808 0 $ 644,120 0
Garry D. Koch 5,830 $ 62,753 4,675 24,705 $ 70,729 $ 239,204
Gary L. Rhoads 0 0 17,363 22,119 $ 338,251 $ 217,727
Russell J. Kunkel 0 0 0 0 0 0
<FN>
- ----------
(1) Represents the aggregate market value of the underlying common shares at
the date of exercise minus the aggregate exercise price for options
exercised.
(2) "In-the-Money Options" are stock options with respect to which the market
value of the underlying common shares exceeded the exercise price at
December 31, 1997. The value of such options is determined by subtracting
the aggregate exercise price for such options from the aggregate fair
market value of the underlying common shares on December 31, 1997.
</FN>
</TABLE>
Pension Plan
The Company has a noncontributory, defined-benefit Pension Plan covering
employees who have reached 20 1/2 years of age and completed 1,000 hours of
service with the Company. The following table shows the annual retirement
benefits payable under the plan in the form of a joint and survivor annuity for
a range of compensation and years of service classifications. The amounts shown
in the table are based on an employee who is presently age 65 and has had a
constant salary for the past five years and are not subject to offset for social
security or other amounts. As of December 31, 1997, Messrs. Jilk, Weidner,
Sayre, Koch, Rhoads and Kunkel were credited with 20, 35, 5, 14, 25 and 1 years
of service under the plan, respectively.
Pension Plan Table
<TABLE>
<CAPTION>
Years of Service
Salary 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$ 75,000 $ 16,313 $ 21,750 $ 27,188 $ 32,625 $ 38,063
100,000 22,875 30,500 38,125 45,750 53,375
125,000 29,438 39,250 49,063 58,875 68,688
125,000 36,000 48,000 60,000 72,000 84,000
150,000 38,625 51,500 64,375 77,250 90,125
175,000(1) 38,625 51,500 64,375 77,250 90,125
200,000(1) 38,625 51,500 64,375 77,250 90,125
225,000(1) 38,625 51,500 64,375 77,250 90,125
250,000(1) 38,625 51,500 64,375 77,250 90,125
275,000(1) 38,625 51,500 64,375 77,250 90,125
300,000(1) 38,625 51,500 64,375 77,250 90,125
325,000(1) 38,625 51,500 64,375 77,250 90,125
350,000(1) 38,625 51,500 64,375 77,250 90,125
13
<PAGE>
<FN>
- ----------
(1) Salary in excess of $160,000 is disregarded in determining a participant's
retirement benefit. The 1997 compensation covered by the plan (all salary)
for Messrs. Jilk, Weidner, Sayre, Koch, Rhoads and Kunkel was $160,000,
$160,000, $139,000, $98,997, $85,349 and $160,000, respectively.
</FN>
</TABLE>
The Company is also contractually obligated to provide Messrs. Jilk and
Weidner with additional retirement benefits for a specified time period. See
"Transactions with Management and Others" herein.
Performance Graph
The following performance graph compares the performance of the Company's
common shares to the Nasdaq Stock Market Total Return Index and to the Nasdaq
Bank Stock Index for the Company's last five fiscal years. The graph assumes
that the value of the investment in the Company's common shares and each index
was $100 at December 31, 1992, and that all dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
Among National Penn Bancshares, Nasdaq Stock Market Total Return Index,
& Nasdaq Bank Stock Index
(The Performance Graph appears here. See the table below for plot points.)
<TABLE>
<CAPTION>
December 31,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
National Penn Bancshares, Inc. 100 161 108 117 133 231
Nasdaq Stock Market Total Return 100 115 112 159 195 240
Nasdaq Bank Stocks 100 114 114 169 224 377
</TABLE>
14
<PAGE>
Transactions with Management and Others
The Company is a party to deferred compensation agreements with Lawrence T.
Jilk, Jr. and Wayne R. Weidner. Each of these agreements will provide the
executive with a retirement annuity of approximately 65% of his final average
base salary for a specified 15-year period. If Messrs. Jilk and Weidner had
retired at December 31, 1997, they would have been entitled to receive
retirement annuities of $128,134 and $88,842 respectively, per year. These
amounts would have included the retirement benefits payable to these executives
under the Company's Pension Plan. The deferred compensation agreements also
provide that, following a "change in control" (as defined in the agreements) of
the Company or NPB, an executive whose employment is terminated without cause or
who resigns following an adverse change in the terms of his employment,
including reduction in title or responsibilities, reduction in compensation or
benefits (except in the case of a reduction for all employees generally),
failure to nominate the executive for election to the Board of Directors of the
Company or NPB, reassignment of the executive beyond a thirty-minute commute
from Boyertown, Pennsylvania, or increased travel requirements, will receive a
lump-sum cash severance payment equal, generally, to 299% of the executive's
average annual compensation for the five years preceding the change in control.
The Company is also a party to "change-in-control" agreements with Garry D.
Koch and Gary L. Rhoads. These agreements provide lump-sum cash severance
benefits under the same circumstances as the deferred compensation agreements
with Messrs. Jilk and Weidner. The benefits for Messrs. Koch and Rhoads would be
200% and 150%, respectively, of the executive's average annual compensation for
the five years preceding the change in control.
Certain directors and officers of the Company, and the companies with which
they are associated, are customers of, and during 1997 had banking transactions
with, NPB in the ordinary course of business. Similar transactions may be
expected to occur in the future. All loans, and commitments to loan, involved in
such transactions were made under substantially the same terms, including
interest rates, collateral, and repayment terms, as those prevailing at the time
for comparable transactions with other persons and, in the opinion of NPB's
management, do not involve more than the normal risk of collection or present
other unfavorable features. As of December 31, 1997, loans to officers,
directors, and affiliates represented 3.2% of shareholders' equity in the
Company.
Auditors
Grant Thornton LLP, certified public accountants, conducted the Company's
audit for 1997. Representatives of Grant Thornton LLP are expected to be present
at the Meeting, will be given an opportunity to make a statement if they desire
to do so, and will be available to respond to appropriate questions from
shareholders.
Principal Shareholders
The following table sets forth the persons or groups known by the Company
to own more than 5% of its common shares as of March 1, 1998:
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent of
of Beneficial Owner of Beneficial Ownership Common Shares
<S> <C> <C>
Investors Trust Company 588,463 (1)(2) 5.6%
2201 Ridgewood Road, #180
Wyomissing, PA 19610
James K. Overstreet 1,466,389 (3) 13.9%
315 Natlie Road
Phoenixville, PA 19460
- ----------
<FN>
(1) 374,077 of these shares are held by Investors Trust Company ("ITC"), a
wholly-owned subsidiary of the Company, as trustee or executor on behalf of
various trusts and estates. Pursuant to the provisions of the applicable
governing instruments and/or in accordance with the applicable principles
of fiduciary law, ITC has the right and power, exercisable alone, to vote
and to dispose of 86,355 of these shares, and exercisable with a
co-fiduciary, to vote and to dispose of 287,722 of these shares, so long as
such action is in the best interest of such trust or estate and the
beneficiaries or principals thereof.
</FN>
</TABLE>
15
<PAGE>
(2) 214,386 of these shares are held by ITC as trustee under the Company's
Capital Accumulation Plan. ITC has the right and power to vote these shares
in accordance with Plan provisions and applicable law. ITC has the right
and power to dispose of these shares only to the extent necessary to meet
the liquidity needs of the Plan.
(3) These shares are owned of record by persons or entities identified by Mr.
Overstreet in filings made by him with regulatory authorities and with the
Company, as being parties through which he holds common shares of the
Company. 63,145 of these shares are held by Mr. Overstreet's wife, Evelyn
M. Overstreet, and 7,979 owned by a limited partnership in which Mr.
Overstreet is a partner.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons who own more than ten percent of a registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Officers,
directors, and greater than ten-percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on review of the copies of such forms furnished to the
Company, and/or written representations that no Forms 5 were required, the
Company believes that, during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to its officers, directors, and
greater than ten-percent beneficial owners were complied with except that Garry
D. Koch inadvertently filed a Form 3 one day late.
Other Matters
Management knows of no business other than as described above that is
planned to be brought before the Meeting. Should any other matters arise,
however, the persons named on the enclosed proxy will vote thereon according to
their best judgment.
Shareholder Proposals for Next Annual Meeting
Any shareholder proposal for consideration at the annual meeting of
shareholders to be held in 1998 must be received by the Company at its principal
offices not later than November 25, 1998, in order for it to be considered for
inclusion in the Company's proxy materials relating to the 1999 annual meeting
of shareholders.
BY ORDER OF THE BOARD OF DIRECTORS
SANDRA L. SPAYD
Secretary
16
<PAGE>
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
NATIONAL PENN BANCSHARES, INC.
The undersigned hereby appoints Earl Mutter, Harry D. Yoder and William M.
Moeller proxies, each with power to act without the others and with power of
substitution, and hereby authorizes them to represent and vote, as designated on
the other side, all the shares of stock of National Penn Bancshares, Inc. (the
"Company") standing in the name of the undersigned with all powers which the
undersigned would possess if present at the Annual Meeting of Shareholders of
the Company to be held April 28, 1998 or any adjournment thereof.
(Continued, and to be marked,
dated and signed, on the other side)
<PAGE>
This proxy when properly executed will be voted in the manner directed by the
undersigned shareholder. If no direction is made, this proxy will be voted FOR
proposals 1, 2 and 3.
1. Election of Class II Directors:
___ FOR all nominees listed to the right (except as marked to the
contrary).
___ WITHHOLD AUTHORITY to vote for all nominees listed to the right.
NOMINEES: Frederick H. Gaige, Lawrence T. Jilk, Jr. and C. Robert Roth.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
---------------------------------------------------------------------------
2. Proposal to increase the authorized common shares of the Company to
50,000,000.
___ FOR ___ AGAINST ___ ABSTAIN
3. Proposal to increase the maximum size of the Board of Directors to 15
persons.
___ FOR ___ AGAINST ___ ABSTAIN
4. In their discretion, the proxy holders are authorized to vote upon such
other business as may come before the meeting.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated: __________________, 1998
________________________________
(Signature)
________________________________
(Signature if held jointly)
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
