<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the Com-
mission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule14a-11(c) or Rule14a-12
SUSQUEHANNA BANCSHARES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
(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 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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Susquehanna Bancshares, Inc.
April 26, 1999
TO OUR SHAREHOLDERS:
On behalf of our entire Board of Directors, I cordially invite you to
attend our Annual Meeting of Shareholders on Friday, May 28, 1999. At the
meeting, you will be asked to elect four members to the Board of Directors'
Class of 2002 for the coming three years, two members to the Board of Directors'
Class of 2001 for the coming two years, and one member to the Board of
Directors' Class of 2000 for the coming year. We will also report on
Susquehanna's 1998 business results and other matters of interest to
shareholders.
Information about the matters to be acted on at the meeting is contained in
the accompanying Notice of Annual Meeting and Proxy Statement. Also enclosed
with this Proxy Statement are your proxy voting card and the 1998 Annual Report.
I would like to take this opportunity to remind you that your vote is very
important. Please take a moment now to complete, sign and date the enclosed
proxy voting card and return it in the postage-paid envelope we have provided.
I look forward to seeing you at the meeting.
Sincerely,
/s/ Robert S. Bolinger
Robert S. Bolinger
President and
Chief Executive Officer
<PAGE>
Susquehanna Bancshares, Inc.
26 North Cedar Street, P.O. Box 1000
Lititz, PA 17543-7000
April 26, 1999
NOTICE OF ANNUAL MEETING
On Friday, May 28, 1999, Susquehanna Bancshares, Inc. will hold its 1999
Annual Meeting of Shareholders at the Quality Inn & Suites, 2363 Oregon Pike,
Lancaster, Pennsylvania. The meeting will begin at 10:00 a.m. Only
shareholders of Susquehanna, their proxies and invited guests of Susquehanna may
attend the Annual Meeting.
Only shareholders of record at the close of business on April 16, 1999 can
vote at this meeting or any adjournments that may take place. At the meeting we
will:
1. Elect four members to the Board of Directors' Class of 2002 for
the coming three years;
2. Elect two members to the Board of Directors' Class of 2001 for the
coming two years;
3. Elect one member to the Board of Directors' Class of 2000 for the
coming year; and
4. Attend to other business properly presented at the meeting.
Your Board of Directors recommends that you vote in favor of the director
nominees presented in this Proxy Statement.
At the meeting we will also report on Susquehanna's 1998 business results
and other matters of interest to shareholders.
A copy of Susquehanna's 1998 Annual Report is also enclosed. The
approximate date of mailing for this Proxy Statement and proxy voting card is
April 26, 1999.
By Order of the Board of Directors
/s/ Richard M. Cloney
Richard M. Cloney
Secretary
Lititz, Pennsylvania
April 26, 1999
2
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TABLE OF CONTENTS
INTRODUCTION..........................................................4
General..............................................................4
Record Date for, and Voting at, the Annual Meeting...................4
Proxies for the Annual Meeting.......................................5
PRINCIPAL HOLDERS OF VOTING SECURITIES AND HOLDINGS OF MANAGEMENT.....5
ELECTION OF DIRECTORS AND EXECUTIVE OFFICERS..........................6
THE CLASS OF 2001.....................................................8
THE CLASS OF 2000.....................................................9
Board Committees and Meetings.......................................11
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION..........................12
Compensation of Directors and Executive Officers....................12
Compliance with Section 16(a) of the Exchange Act...................13
Report of the Compensation Committee................................13
Overall Policy.....................................................13
Base Salaries......................................................14
Annual Bonus.......................................................15
Susquehanna's Performance Award Plan...............................16
Susquehanna Phantom Stock Appreciation Plan........................18
Equity Compensation Plan...........................................19
Executive Deferred Income Plan.....................................23
General............................................................24
Conclusion.........................................................24
Summary Compensation Table.........................................25
Description of Certain Plans and Employment Contracts...............28
Executive Employment Contracts.....................................28
Change of Control Plans............................................29
Pension Plans......................................................30
Cash Balance Pension Plan...........................................32
Stock Price Performance Graph.......................................34
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................35
INDEPENDENT PUBLIC ACCOUNTANTS.......................................35
SHAREHOLDER PROPOSALS................................................36
OTHER MATTERS........................................................36
3
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Susquehanna Bancshares, Inc.
26 North Cedar Street, P.O. Box 1000
Lititz, PA 17543-7000
PROXY STATEMENT
April 26, 1999
INTRODUCTION
General
On Friday, May 28, 1999, Susquehanna Bancshares, Inc. will hold its 1999
Annual Meeting of Shareholders at the Quality Inn & Suites, 2363 Oregon Pike,
Lancaster, Pennsylvania. The meeting will begin at 10:00 a.m. At the meeting,
you will be asked to elect four members to the Board of Directors' Class of 2002
for the coming three years, two members to the Class of 2001 for the coming two
years, one member to the Class of 2000 for the coming year, and to attend to any
other business properly presented at the meeting. Only shareholders of
Susquehanna, their proxies and invited guests of Susquehanna may attend the
Annual Meeting.
This Proxy Statement was prepared under the direction of Susquehanna's
Board of Directors to solicit your proxy for use at the Annual Meeting. The
approximate date of mailing for this Proxy Statement and proxy voting card is
April 26, 1999.
Record Date for, and Voting at, the Annual Meeting
Only shareholders of record of Susquehanna common stock at the close of
business on Friday, April 16, 1999, may vote at the Annual Meeting. As of April
16, 1999, 36,937,459 shares of Susquehanna common stock, par value $2.00 per
share, were issued and outstanding and entitled to vote at the Annual Meeting.
A majority of the issued and outstanding shares of common stock is required
to constitute a quorum at the Annual Meeting. They may be present at the meeting
or represented by proxy. Each share of Susquehanna common stock is entitled to
one vote on each matter to be presented at the meeting. The Bank of New York,
our Transfer Agent, will tabulate the votes cast by proxy or in person at the
Annual Meeting.
At the Annual Meeting, each share of Susquehanna common stock is entitled
to one vote in the election of the four directors to the Class of 2002, one vote
in the election of the two directors to the Class of 2001, and one vote in the
election of the one director to the Class of 2000. You will be entitled to cast
one vote for each share held by you for each candidate nominated, but will not
be entitled to cumulate your votes. The four nominees to the Class of 2002
receiving the highest number of votes will be elected to the Board of Directors'
Class of 2002; the two nominees to the Class of 2001 receiving the highest
number of votes will be elected to the Board of Directors' Class of 2001; and
the one nominee to the Class of 2000 receiving the highest number of votes will
be elected to the Board of Directors' Class of 2000.
Brokers that are member firms of the New York Stock Exchange and who hold
shares in street name for customers have the discretion to vote those shares
with respect to certain matters if they have not received instructions from the
beneficial owners. Brokers will have this discretionary authority with respect
to the election of directors. The brokers' failure to vote shares will have no
effect in the outcome of the election of directors because such shares will not
be considered present and entitled to vote with respect to such matters.
As to all other matters, the vote of the holders of a majority of the
Susquehanna common stock present in person or represented by proxy will decide
any question brought before the Annual Meeting, unless the question is one for
which, by express provision of statute or of Susquehanna's Articles or Bylaws, a
different vote is required. Generally, abstentions on these matters will have
the same effect as a negative vote because under Susquehanna's Bylaws, these
matters require the affirmative vote of the holders of a majority of Susquehanna
common stock
4
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present in person or represented by proxy at the Annual Meeting. Broker non-
votes will have no effect because such shares will not be considered present and
entitled to vote on such matters.
Your Board of Directors unanimously recommends that you vote "FOR" the
election of the four director nominees to the Class of 2002, "FOR" the election
of the two director nominees to the Class of 2001, and "FOR" the election of the
one director nominee to the Class of 2000.
Proxies for the Annual Meeting
You may revoke your proxy for the Annual Meeting at any time after its
submission and before it is exercised by:
. submitting written notice of revocation of your proxy to the
Secretary of Susquehanna prior to voting at the Annual Meeting;
. submitting a later dated proxy received by the Secretary of
Susquehanna; or
. appearing at the Annual Meeting and requesting a revocation of the
proxy. Your appearance alone at the Annual Meeting will not of
itself constitute a revocation of your proxy.
All shares represented by valid proxies will be voted in the manner
specified in the proxies.
Your proxy, unless you otherwise specify in the proxy, will be voted FOR:
. the election of the persons nominated for directors by
Susquehanna's management; and
. adjournment in situations in which Susquehanna's management moves
to adjourn the Annual Meeting.
Where you have appropriately specified how your proxy is to be voted, it
will be voted in accordance with your direction. You may designate a person or
persons other than those named in the enclosed proxy voting card to vote your
shares at the Annual Meeting or any adjournment of the meeting.
Your Board of Directors knows of no business that will be presented for
consideration at the Annual Meeting other than the matters described in this
Proxy Statement and those incidental to the conduct of the Annual Meeting. It
is not anticipated that other matters will be brought before the Annual Meeting.
If, however, other matters are duly brought before the Annual Meeting or any
adjournments of the meeting, the persons you appoint as proxies will have the
discretion to vote or act on such matters according to their best judgment.
Directors, officers and employees of Susquehanna may solicit proxies from
Susquehanna shareholders, either personally or by telephone, telegraph or other
form of communication. These persons will not receive any additional
compensation for these services. Susquehanna will request that the Notice of
Annual Meeting, this Proxy Statement, the proxy voting card and related
materials, if any, be forwarded to beneficial owners and expects to reimburse
banks, brokers and other persons for their reasonable out-of-pocket expenses in
handling these materials. Susquehanna will bear the costs of all such
solicitations.
PRINCIPAL HOLDERS OF VOTING SECURITIES AND HOLDINGS OF MANAGEMENT
To the knowledge of Susquehanna's management, no person owns beneficially
more than 5% of Susquehanna's common stock.
The shares of Susquehanna common stock deemed to be owned beneficially by
each director, each nominee for election to the office of director, and by all
directors and executive officers as a group as of February 26, 1999, is set
forth in the following table:
5
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<TABLE>
<CAPTION>
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Name of Beneficial Owner Nature and Amount of Beneficial Percentage of Outstanding
Ownership of Susquehanna Common Susquehanna Common Stock
Stock(1)
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<S> <C> <C>
James G. Apple(7) 39,430 0.107%
Robert S. Bolinger 43,403 0.117%
Richard M. Cloney(3) 8,804 0.024%
Trudy B. Cunningham 1,161 0.003%
John M. Denlinger 47,535 0.129%
Owen O. Freeman, 90,297 0.244%
Jr.(2)(8)
Henry H. Gibbel(5) 189,562 0.513%
Marley R. Gross 3,211 0.009%
T. Max Hall(6) 10,306 0.028%
Edward W. Helfrick(4) 242,316 0.656%
C. William Hetzer, Jr.(2) 6,750 0.018%
Guy W. Miller, Jr.(2) 3,631 0.010%
George J. Morgan 11,129 0.030%
Clyde R. Morris(3) 33,586 0.091%
William J. Reuter(2) 7,587 0.020%
Roger V. Wiest 35,050 0.095%
All Directors, Nominees
and 835,871 2.263%
Officers as a Group
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</TABLE>
__________________
(1) Unless otherwise indicated, shares shown as beneficially owned are held
individually by the person indicated or jointly with spouse or children
living in the same household, individually by the spouse or children living
in the same household, or as trustee, custodian or guardian for minor
children living in the same household.
(2) Nominee for three year term expiring in 2002.
(3) Nominee for the two year term expiring in 2001.
(4) Nominee for the one year term expiring in 2000.
(5) Mr. Gibbel has sole beneficial ownership with respect to 151,351 shares and
shares beneficial ownership with his wife with respect to 24,327 shares.
Solely Mr. Gibbel's wife beneficially owns 13,884 shares. Mr. Gibbel is
also an officer and director of Gibbel Foundation, Inc., Penn Charter
Mutual Insurance Co., and Lititz Mutual Insurance Co. These three
organizations hold 7,030 shares, 28,125 shares, and 244,687 shares,
respectively, to which Mr. Gibbel disclaims beneficial ownership.
(6) Mr. Hall has sole beneficial ownership of 8,857 shares. In addition,
1,449 shares are held in a Keogh Plan for the benefit of Mr. Hall.
(7) Mr. Apple has sole beneficial ownership with respect to 13,528 shares. In
addition, 25,902 shares are held in trust under the John A. Apple,
Deceased, Marital Trust, with respect to which Mr. Apple shares beneficial
ownership.
(8) Mr. Freeman has sole beneficial ownership with respect to 84,815 shares.
In addition, he shares beneficial ownership of 5,482 shares with children
and grandchildren.
__________________
ELECTION OF DIRECTORS AND EXECUTIVE OFFICERS
Susquehanna's Board of Directors currently consists of 14 directors.
William J. Reuter and Guy W. Miller, Jr.'s election to the Class of 2002 will
result in an increase in the Board to 16 directors. The Board is classified
into three classes, one of which is elected each year to serve a term of three
years. This year, we are electing directors to each of the classes in order to
assure balance among the classes. Directors of each class hold office until the
expiration of the term for which they were elected and their successors have
qualified or until the annual meeting following their attaining the age of 72
years.
6
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At the Annual Meeting, four persons will be elected to the Class of 2002,
two persons will be elected to the Class of 2001, and one person will be elected
to the Class of 2000. The candidates nominated to their respective class who
receive the highest number of votes will be elected. In the election, you will
be entitled to cast one vote for each share held by you for each of the four
candidates to the Class of 2002, one vote for each share held by you for each of
the two candidates to the Class of 2001, and one vote for each share held by you
for the one candidate to the Class of 2000, but will not be entitled to cumulate
your votes.
The Board of Directors has nominated four members of the Class of 2002, two
members to the Class of 2001, and one member to the Class of 2000. Any holder
of Susquehanna common stock may make additional nominations for election to the
Board of Directors. Each nomination must be made in writing and delivered or
mailed to the President of Susquehanna not less than 14 days prior to the Annual
Meeting. The notification must contain the following information to the extent
known by the notifying shareholder without unreasonable effort or expense:
. the name and address of each proposed nominee;
. the principal occupation of each proposed nominee;
. the total number of shares of Susquehanna capital stock that will
be voted by the notifying shareholder for the proposed nominee;
. the name and residence address of the notifying shareholder; and
. the number of shares of Susquehanna capital stock owned by the
notifying shareholder.
The Class of 2002
Management's nominees for the Class of 2002 are C. William Hetzer, Jr.,
William J. Reuter, Guy W. Miller, Jr. and Owen O. Freeman, Jr. Messrs. Hetzer
and Freeman are currently directors of Susquehanna. Mr. Reuter is currently a
director of Susquehanna Bancshares South, Inc. and Farmers & Merchants Bank and
Trust, both Susquehanna subsidiaries, and Susquehanna Bank, a subsidiary of
Susquehanna Bancshares South, Inc. Mr. Miller is currently a director of
Citizens National Bank of Southern Pennsylvania, also a Susquehanna subsidiary.
C. William Hetzer, Jr. C. William Hetzer, Jr. has been a member of
Susquehanna's Board since 1989.
Owen O. Freeman, Jr. Owen O. Freeman, Jr. was appointed to Susquehanna's
Board in January, 1999, in connection with Susquehanna's acquisition of First
Capitol Bank. Mr. Freeman is presently the Chairman of the Board of Directors
of First Capitol Bank and has served in that capacity since the bank was
organized in l988. From 1988 to 1997, Mr. Freeman was also the Chairman of the
Board of Commonwealth State Bank located in Newton, Pennsylvania. Mr. Freeman
was one of the principal organizers of both First Capitol Bank and Commonwealth
State Bank. Prior to his involvement with both of these banks, Mr. Freeman was
the President and Chief Executive Officer of The Broad Street National Bank of
Trenton, New Jersey, from 1978 until 1985. Prior to that, Mr. Freeman spent 20
years with the Harrisburg National Bank and Trust Company (1958 -78), which
later became Commonwealth National Bank. He was Senior Vice President and
Senior Lending Officer at Commonwealth National Bank prior to becoming the
President and Chief Executive Officer of The Broad Street National Bank of
Trenton.
Mr. Freeman is a member of the Pennsylvania Association of Community
Bankers and was its Chairman in 1995-96. He was on the national board of
directors of the Independent Bankers Association of America from 1982 to 1987,
and completed a five year term (1980 -85) as a member of the Community Bank
Advisory Council of the Federal Reserve Bank of Philadelphia. He is currently
the Chairman of the northeast region of the Political Action Committee of the
Independent Bankers Association of America.
Mr. Freeman was a member of the Board of Directors of the Trenton YMCA ,
and the President of and a member of the Mercer Unit New Jersey Association of
Retarded Citizens. He was also a member of the George Washington Boy Scouts of
America and the Rescue Mission of Trenton. He was Treasurer and a Board member
of
7
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the Mercer County Chamber of Commerce. He was a member of the Trenton Rotary
Club for 20 years, and was its President in 1982-83. Mr. Freeman also received
the Trenton Rotary Club - Paul Harris Fellow in 1987.
William J. Reuter. William J. Reuter is currently the Chairman of the
Board of Directors of Farmers & Merchants Bank and Trust, a subsidiary of
Susquehanna. He is also a member of the Board of Directors of Susquehanna
Bancshares South, Inc. (also a Susquehanna subsidiary), Susquehanna Bank (a
subsidiary of Susquehanna Bancshares South, Inc.) and Atlantic First Title Co.
(a subsidiary of Farmers & Merchants Bank and Trust). He is the President and
Chief Executive Officer of Farmers & Merchants Bank and Trust and Susquehanna
Bank. He is a Senior Vice President of Susquehanna. He is also the President
of Susquehanna Bancshares South, Inc., Farmers and Merchants Insurance Agency,
Inc. (a subsidiary of Farmers & Merchants Bank and Trust) and Reisterstown
Service Corporation (a subsidiary of Susquehanna Bank). Prior to his election
as President of Farmers & Merchants Bank and Trust in 1985, he was employed by
Equitable Bank, N.A., in Baltimore, Maryland (1973-1985).
Mr. Reuter is a graduate of Archbishop Curley High School, holds a B.S.
Degree in Business Management from the University of Baltimore and graduated
from the University of Maryland Banking School. He is a graduate of the
inaugural class of Leadership Maryland in 1993. For 22 years he served in the
Maryland Air National Guard--retiring at the rank of E-7 in 1988.
Mr. Reuter is presently Vice President and Director of the Maryland Bankers
Association and a Director and a member of the Executive Committee of the
Maryland Chamber of Commerce. In 1998 he began serving on the Banking Board for
the State of Maryland Department of Labor, Licensing and Regulation. He served
as a Director of the Bank Administration Institute from 1994 through 1998.
Mr. Reuter is a past President of the Greater Hagerstown Committee, the
Maryland Symphony Orchestra and the United Way of Washington County. In 1993
Governor Parris Glendening appointed him a Trustee of the Hagerstown Community
College. He has also served on the Governor's Joint Executive-Legislative Task
Force to Study Commercial Gaming Activities in Maryland. He is Chairman of the
PenMar Development Corporation, a Director of the Rocky Gap Foundation, and an
Advisory Board member of the Greenebaum Cancer Center (University of Maryland).
He has served as Chairman or committee member on various Task Forces involving
the City of Hagerstown, Washington County Board of Education, Washington County
Government and the State of Maryland.
In 1995 the Hagerstown-Washington County Chamber of Commerce recognized him
as its Business Person of the Year. He is a Paul Harris Fellow and is past
President of the Baltimore Junior Association of Commerce where he received the
Theodore R. McKeldin Award in 1979.
Guy W. Miller, Jr. Guy W. Miller, Jr. has been a member of the board of
directors of Citizens National Bank of Southern Pennsylvania, a Susquehanna
subsidiary, since 1996. During this time, he has served on both the Audit and
Compensation Review Committees of the bank. He has also been a member of the
bank's Board of Associates since 1993.
Mr. Miller is also the President, Chief Executive Officer and primary
shareholder of Homes By Keystone, Inc., a modular home manufacturer in
Waynesboro, Pennsylvania, licensed to build and market modular homes in
Pennsylvania, Maryland, West Virginia and Virginia. Prior to his association
with Homes By Keystone, Inc. in 1968, he was associated with Landis Tool
Company, the word's largest producer of cylindrical grinding machines, as a
machinist, draftsman and salesman.
Mr. Miller is also a long-standing member of the Pennsylvania Home Builders
Association (1968 to present).
THE CLASS OF 2001
Management's nominees for the Class of 2001 are Richard M. Cloney and Clyde
R. Morris, both of whom are currently directors of Susquehanna. Mr. Cloney is
currently a director of Susquehanna Bancshares South, Inc. Mr. Morris is
currently a director of the First American National Bank of Pennsylvania, a
Susquehanna subsidiary.
8
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Richard M. Cloney. Richard M. Cloney has been a member of Susquehanna's
Board since 1985.
Clyde R. Morris. Clyde R. Morris was appointed to Susquehanna's Board in
January, 1999, in connection with Susquehanna's acquisition of First American
National Bank of Pennsylvania. Mr. Morris has been the Chairman of the Board of
First American National Bank since January 1990, and has been a member of its
board of directors since 1977. He has also been the President of Morris
International, Inc., since 1966 and a member of the Allegheny Community College
Board since 1993. Mr. Morris has also served as the First Vice President of the
UPMC Board of Memorial Hospital of Bedford County since 1986, the Chairman of
the Building and Grounds Committee of UPMC Memorial Hospital of Bedford County
since 1980, and the First Vice President of the Everett Cemetery Board since
1979.
THE CLASS OF 2000
Management's nominee for the Class of 2000 is Edward W. Helfrick, who is
currently a director of Susquehanna.
Edward W. Helfrick. Edward W. Helfrick has been a member of Susquehanna's
Board since 1985.
In the absence of instructions to the contrary, proxies will be voted in
favor of the election of Susquehanna management's nominees. In the event any of
the nominees should become unavailable, it is intended that the proxies will be
voted for substitute nominee(s) chosen by management. Susquehanna's management
has no present knowledge that any of the nominees will be unavailable to serve.
The name and age of each nominee and continuing director of Susquehanna, as well
as their business experience (including their principal occupation and the
period during which he or she has served as a director), is set forth in the
following table.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Business Experience
Including Principal Occupation for Past Five Director Present Term
Name, Address(1) Age Years Since Expires
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Guy W. Miller, Jr.(2) 53 President, Homes by Keystone, Inc. --- ---
William J. Reuter(2) 49 Director and President, Susquehanna Bancshares --- ---
South, Inc.; Director, President and Chief
Executive Officer, Susquehanna Bank; Chairman,
President and CEO of Farmers & Merchants Bank
and Trust; Senior Vice President, Susquehanna
Owen O. Freeman, Jr.(2) 64 Chairman of the Board, First Capitol Bank 1999 1999
C. William Hetzer, Jr.(2) 67 President, C. William Hetzer, Inc. 1989 1999
(General Contractor)
Richard M. Cloney(3) 57 Vice President and Secretary, Susquehanna; 1985 1999
Executive Vice President, Farmers First Bank;
Director and President, Susque-Bancshares
Leasing Co., Inc., Director and Vice Chairman,
Susquehanna Bancshares South, Inc.
Clyde R. Morris(3) 70 Chairman of the Board, First American National 1999 1999
Bank of Pennsylvania; President, Morris
International, Inc.
Edward W. Helfrick(4) 71 State Senator, Commonwealth of Pennsylvania 1985 1999
since 1980. Other Affiliations: President,
Rand Realty Co.; President and Treasurer, Norco
Equipment Co.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Business Experience
Including Principal Occupation for Past Five Director Present Term
Name, Address(1) Age Years Since Expires
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert S. Bolinger 62 President & Chief Executive Officer, 1982 2000
Susquehanna; Chairman, Farmers First Bank;
Chairman, Susquehanna Bancshares South, Inc.;
President & CEO, Susquehanna Bancshares East,
Inc.; President & CEO, Susque-Bancshares Life
Insurance Company, Inc.
Henry H. Gibbel 64 President, Lititz Mutual Insurance Co. & Penn 1982 2000
Charter Mutual Insurance Co. (Insurance Company)
George J. Morgan 68 President, Morgan, Hallgren, Crosswell & Kane, 1982 2000
P.C. (Law Firm)
Roger V. Wiest 58 Managing and Senior Partner, Wiest, Saylor, 1992 2000
Muolo, Noon & Swinehart (Law Firm)
James G. Apple 63 President, Butter Krust Baking Co., Inc. 1992 2001
Trudy B. Cunningham 56 Associate Dean of Engineering, Bucknell 1998 2001
University
John M. Denlinger 59 Retired Division Manager, Denlinger Building 1985 2001
Materials, a Division of Carolina Holdings, Inc.
Marley R. Gross 66 President, Marley R. Gross Ford, Inc. 1995 2001
T. Max Hall 64 Attorney and Managing Partner, McNerney, Page, 1986 2001
Vanderlin and Hall; Chairman of the Board, Data
Papers, Inc.; Chairman of the Board, Data Papers
of North Carolina, Inc.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
_______________________
(1) The business address for all directors of Susquehanna is Susquehanna
Bancshares, Inc., 26 North Cedar Street, Lititz, PA 17543.
(2) Susquehanna management nominees for election at the Annual Meeting for terms
expiring 2002.
(3) Susquehanna management nominees for election at the Annual Meeting for terms
expiring 2001.
(4) Susquehanna management nominee for election at the Annual Meeting for the
term expiring 2000.
Messrs. Gibbel, Morgan, Denlinger and Bolinger are directors of
Farmers First Bank, a Susquehanna subsidiary, and have been directors of that
bank and its predecessor for more than five years. Messrs. Apple, Helfrick and
Wiest are directors of First National Trust Bank, a Susquehanna subsidiary, and
have been directors of that bank for more than five years. Ms. Cunningham has
been a director of First National Trust Bank since 1996, and has been an
Associate Dean of Engineering at Bucknell University for more than five years.
Mr. Miller has been a director of Citizens National Bank of Southern
Pennsylvania since 1996 and has been associated with Homes By Keystone, Inc. for
more than the past five years. Mr. Hall is a director of Williamsport National
Bank, a Susquehanna subsidiary, and has been a director of that bank for more
than five years. Mr. Reuter has been a director of Farmers & Merchants Bank and
Trust, a Susquehanna subsidiary, for more than the past five years. He has also
been a director of Susquehanna Bank, a Susquehanna subsidiary, since 1997. Mr.
Gross was formerly a director for more than five years of Spring Grove National
Bank, a Susquehanna subsidiary which was merged into Farmers First Bank in 1996.
Mr. Hetzer is a director of Farmers & Merchants Bank and Trust, a Susquehanna
subsidiary, and has been a director of that bank for more than five years. Mr.
Morris is a director of the First
10
<PAGE>
American National Bank of Pennsylvania, a Susquehanna subsidiary, and has been a
director of that bank for more than five years. He was appointed to the
Susquehanna Board in January, 1999, in connection with Susquehanna's acquisition
of the First American National Bank of Pennsylvania. Mr. Freeman is a director
of First Capitol Bank, a Susquehanna subsidiary, and has been a director of that
bank for more than five years. Messrs. Bolinger, Cloney, Denlinger, Morgan and
Reuter also serve as directors of Susquehanna Bancshares South, Inc., a wholly-
owned subsidiary of Susquehanna. Messrs. Bolinger, Denlinger, Morgan and Wiest
also serve as directors of Susquehanna Bancshares East, Inc., a wholly-owned
subsidiary of Susquehanna. Mr. Bolinger also serves as a director of First
Capitol Bank, a Susquehanna subsidiary.
T. Max Hall is a partner in the law firm of McNerney, Page, Vanderlin and
Hall located in Williamsport, Pennsylvania. During the last fiscal year,
McNerney, Page, Vanderlin and Hall was retained to provide legal services to
Williamsport National Bank. Also, Roger V. Wiest is a partner in the law firm
of Wiest, Saylor, Muolo, Noon & Swinehart located in Sunbury, Pennsylvania.
During the last five years, Wiest, Saylor, Muolo, Noon & Swinehart was retained
to provide services to First National Trust Bank. George J. Morgan is a
shareholder and President in the law firm of Morgan, Hallgren, Crosswell & Kane,
P.C. located in Lancaster, Pennsylvania. During the last fiscal year, Morgan,
Hallgren, Crosswell & Kane, P.C. was retained to provide legal services to
Susquebanc Lease Co., a Susquehanna subsidiary. See "CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS."
All of the directors of Susquehanna are outside directors except Messrs.
Bolinger, Cloney, and, if elected, Reuter.
Board Committees and Meetings
Susquehanna's Board has two standing committees, an Audit Committee and a
Compensation Committee, both of which were established in 1987. The members of
both committees are all outside directors.
Audit Committee. The principal purposes of the Audit Committee are to meet
with Susquehanna's independent accountants and:
. review the scope and results of Susquehanna's annual audit;
. review the reports of examination of regulatory agencies and the
replies to the reports; and
. review information pertaining to internal auditing and
Susquehanna's systems of internal controls.
The directors serving on the Audit Committee in 1998 were James G. Apple,
T. Max Hall, Robert C. Reymer, Jr., and Roger V. Wiest. The Audit Committee met
four times during 1998.
Compensation Committee. The principal purposes of the Compensation
Committee are to review and approve:
. key executive salary policy;
. systems for distribution of incentive compensation or bonuses; and
. the design of any new supplemental compensation programs applicable
to executive compensation.
The directors serving on the Compensation Committee in 1998 were John M.
Denlinger, Henry H. Gibbel, Edward W. Helfrick, C. William Hetzer, Jr. and
George J. Morgan. The Compensation Committee met five times during 1998.
The Board of Directors has no other standing committees. It operates as a
committee of the whole for all other matters including nominations.
11
<PAGE>
Susquehanna's Board met seven times during the last fiscal year. Each of
the directors attended at least 75% of the meetings of the Board of Directors
and the committees of the Board on which they served that were held in the
fiscal year in the period during which they served as a director, except that
Mr. O'Connell, a retiring director, attended fewer than 75% of the total
meetings of the Board of Directors and committees of the Board on which he
served.
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
Compensation of Directors and Executive Officers
Directors currently receive an annual fee of $5,000 and a payment of $800
for attendance at each Board of Directors' meeting except telephonic meetings,
where the compensation is $250. Directors are paid $800 for each committee
meeting that they attend, unless the committee meets on the day of a meeting of
the entire Board, in which case the fee is $250.
The executive officers of Susquehanna, their ages and their positions with
Susquehanna, is set forth in the following table:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Name Age Title
------------------------------------------------------------------------------------------
<S> <C> <C>
Robert S. Bolinger 62 President & Chief Executive Officer
William J. Reuter 49 Senior Vice President
Gregory A. Duncan 43 Senior Vice President Administration
William T. Belden 50 Vice President
Frederick W. Bisbee 60 Vice President
Richard M. Cloney 57 Vice President and Secretary
Drew K. Hostetter 44 Vice President, Treasurer and Chief Financial Officer
Charles W. Luppert 57 Vice President
------------------------------------------------------------------------------------------
</TABLE>
Robert S. Bolinger and Richard M. Cloney are also principal executive
officers of Farmers First Bank and have been employed by that bank in
substantially equivalent positions for more than the past five years. Mr.
Bolinger has also served as a principal executive officer of Susquehanna
Bancshares South, Inc. since its inception in 1994, and has also been a
principal executive officer of Susquehanna Bancshares East, Inc., since its
inception in April 1997. William T. Belden is also a principal executive
officer of Farmers First Bank, having been appointed as President and Chief
Operating Officer, effective January 17, 1995, and promoted to President and
Chief Executive Officer on March 22, 1999. Prior to assuming his present
position, Mr. Belden served as a Vice President with PNC Bank from January 1973
to January 1995. Frederick W. Bisbee is also the principal executive officer of
First National Trust Bank and has been employed by that bank in a substantially
equivalent position for more than the past five years. Gregory A. Duncan is
also the principal executive officer of Citizens National Bank of Southern
Pennsylvania and has been employed by that bank in a substantially equivalent
position since 1992. Drew K. Hostetter was appointed Treasurer of Susquehanna,
effective May 31, 1996, replacing J. Stanley Mull, Jr., who retired, and was
appointed to his present position effective January 1, 1998. He previously
served as Assistant Treasurer at Susquehanna, having joined the company in
December, 1994. Prior to joining Susquehanna, Mr. Hostetter served as Senior
Vice President and Corporate Controller of MNC Financial, Baltimore, Md., from
January 1990 to March 1994. Charles W. Luppert is also the principal executive
officer of Williamsport National Bank and has been employed by that bank in a
substantially equivalent position for more than the past five years. William J.
Reuter is also the principal executive officer of Farmers & Merchants Bank and
Trust and has been employed by that bank in a substantially equivalent position
for more than the past five years. In 1996 Mr. Reuter was named an executive
officer of Susquehanna Bancshares South, Inc. and, in 1997, its wholly-owned
subsidiary, Susquehanna Bank.
There are no family relationships among the executive officers of
Susquehanna nor are there arrangements or understandings between any of them and
any other person pursuant to which any of them was selected as an officer of
Susquehanna.
12
<PAGE>
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires Susquehanna's
officers and directors, and persons who own more than ten percent of a
registered class of Susquehanna'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 Susquehanna with copies of all Section 16(a) forms
they file.
Based solely on its review of the copies of forms received by it, and
written representations from certain reporting persons that no Forms 5 were
required for those persons, Susquehanna believes that, during the period January
1 - December 31, 1998, all filing requirements applicable to its officers,
directors and greater than ten-percent beneficial owners were satisfied, with
the exception of Messrs. Hall, Hetzer and Luppert, who each inadvertently did
not timely file a Form 4, and Mrs. Cunningham, who inadvertently did not timely
file a Form 3.
Report of the Compensation Committee
The Compensation Committee of Susquehanna's Board is composed entirely of
independent outside directors. The Committee is charged with responsibility
for:
. assuring that key management personnel of Susquehanna and its
affiliates are effectively compensated in terms of salaries,
supplemental compensation and benefits which are internally
equitable and externally competitive in order to allow Susquehanna
to attract and retain qualified personnel; and
. developing and initiating incentive programs and plans that will
serve to attract and retain qualified personnel in key management
positions of Susquehanna and its affiliates.
Overall Policy
Susquehanna's executive compensation program is designed to be closely
linked to corporate performance and returns to shareholders. To this end,
Susquehanna has developed an overall compensation strategy and specific
compensation plans that tie a significant portion of executive compensation to
Susquehanna's success in meeting specified performance goals and to appreciation
in Susquehanna's stock price. The overall objectives of this strategy are:
. to attract and retain the best possible executive talent;
. to motivate executives to achieve the goals inherent in
Susquehanna's business strategy;
. to link executive and shareholder interests through equity based
plans; and
. to provide a compensation package that recognizes individual
contributions as well as overall business results.
Each year the Compensation Committee conducts a review of Susquehanna's
executive compensation program. The Compensation Committee believes that
Susquehanna's most direct competitors for executive talent are not necessarily
all of the companies that would be included in a peer group established for
comparing shareholder returns. Successful executives in the banking industry
have a broad range of opportunities in the financial industry generally, either
with larger or smaller institutions, or with related industry groups or
unrelated industry groups in some instances (a chief financial officer, for
example). Many of these companies are not publicly traded. The annual
compensation reviews permit an ongoing evaluation of the link between
Susquehanna's performance and its executive compensation in the context of the
compensation programs of other companies.
The Compensation Committee determines the compensation for the Susquehanna
officers designated as participants in the Susquehanna Long Term Incentive
Plans, set forth in more detail below. This includes all individuals whose
compensation is set forth in the "Summary Compensation Table" which follows.
The
13
<PAGE>
Compensation Committee believes that utilization of this approach ensures
consistency throughout the executive compensation program. In reviewing the
individual performance of the executives whose compensation is detailed in this
Proxy Statement (other than that of the President and Chief Executive Officer of
Susquehanna), the Compensation Committee solicits and considers the views of Mr.
Bolinger.
The key elements of executive compensation consist of base salary, annual
short term and long term incentive bonus, and in the past, a "Phantom" stock
appreciation plan, which has been superseded by an Equity Compensation Plan.
The Compensation Committee's policies with respect to each of these elements,
including the basis for the compensation awarded to Mr. Bolinger, Susquehanna's
President and Chief Executive Officer, are discussed below. In addition, while
the elements of compensation described below are considered separately, the
Compensation Committee takes into account the full compensation package afforded
by Susquehanna to the individual, including pension benefits, severance plans,
insurance and other benefits, as well as the programs described below.
Base Salaries
Base salaries for new executive officers are initially determined by
evaluating the responsibilities of the position held and the experience of the
individual, and by reference to the competitive marketplace for executive
talent, including a comparison to base salaries for comparable positions at
other companies.
Annual salary adjustments are determined by evaluating the performance of
Susquehanna and of each executive officer, and also take into account new
responsibilities. In the case of executive officers with responsibility for a
particular business unit, the unit's financial results are also considered.
Business units include each of Susquehanna's subsidiary banks and thrifts, and
its leasing company, as well as discrete and identifiable operating areas,
including commercial lending, retail lending and operations and finance, among
others.
In conducting its deliberations, the Compensation Committee makes use of an
executive compensation survey prepared by nationally recognized consultants on
executive compensation matters. The survey for 1998 analyzed compensation paid
to executives at participating financial institutions with assets between $100
million and $5 billion.
The survey describes the compensation paid to executives at various
management levels. The base salary of all similar positions within the survey
group was used as the basis for calculating a midpoint for each job description
within Susquehanna's management program. The Compensation Committee then
established a range around the midpoint, with 80% of the midpoint as the minimum
and 120% of the midpoint as the maximum.
The salaries of Susquehanna's principal officers were compared to the
midpoint, and increases were awarded in the context of individual performance
and contribution, as explained below, with each salary targeted to fall within
the midpoint range. Accordingly, salaries which are established by the
Compensation Committee may slightly exceed or fall below the median range. Mr.
Bolinger's salary falls within the range established for the position he
occupies.
In evaluating an executive officer's performance, the Compensation
Committee looks to his/her accomplishments, which are based on qualitative and
quantitative measures, and the results produced by the executive officer, which
are based on quantitative measures. In determining accomplishments and results,
the Compensation Committee considers the following corporate and business unit
performance factors:
<TABLE>
<S> <C>
Corporate Performance Factors: Business Unit Performance Factors:
. the earnings growth of Susquehanna and the . the revenues of the business unit for which the
subsidiary bank with which the executive officer executive officer has responsibility
serves
. the asset growth of Susquehanna and the subsidiary . the business unit's growth in earnings
bank with which the executive officer serves
. the ability of the executive officer to demonstrate . the business unit's results expressed in terms of
management skills savings realized or efficiencies achieved
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
. the effective use of the executive officer's time
within his/her business unit
. the executive officer's management skills (which
include improving operations, planning and organizing,
responding to change, communication skills and working
with others)
. the business unit and/or executive officer's
development of new products or lines of business
</TABLE>
In determining the quantitative measures, the Compensation Committee looks,
in part, to the Uniform Bank Performance Results which is published quarterly by
the Federal Financial Institution Examination Council. This material measures
and compares each Susquehanna bank subsidiary against other banks in its peer
group in over 40 different financial areas. The peer groups used include banks
between $100 million and $300 million in size and between $500 million and $1
billion in size. The basis for the bank's performance in these areas in
relation to the business unit and the bank in which the executive serves allows
the committee to assess that individual's and his or her business unit's
quantitative success.
A majority of the financial institutions participating in the salary survey
are included in the line of business group which is indexed in Susquehanna's
Stock Price Performance Graph, set forth in this Proxy Statement. All of the
financial institutions which are indexed in the Stock Price Performance Group
are reported in the Uniform Bank Performance Results.
In considering the various factors that are weighed in this process, no
differentiation as to weighting or relative importance has been established;
rather the members of the Compensation Committee are permitted to assign a
weight and importance to each factor as they, in their discretion, deem
appropriate.
In determining the compensation package to be awarded to Messrs. Bolinger,
Cloney, Luppert, Bisbee and Reuter, the Compensation Committee did not attach
particular weight to the employment agreements between these individuals and
Susquehanna other than to recognize that the employment agreements provide that
base salary will be set at a rate agreed between the parties, or in the absence
of agreement, increased on the basis of the Consumer Price Index. These
executive officers have agreed to the base salary increases made by the
Compensation Committee.
With respect to the base salary granted to Mr. Bolinger in 1998, the
Compensation Committee took into account a comparison of base salaries of chief
executive officers of peer companies based on the salary survey, Susquehanna's
success in meeting its return on equity goals in 1997, the performance of
Susquehanna common stock and the assessment by the Compensation Committee of Mr.
Bolinger's individual performance. The Compensation Committee also took into
account the fact that Mr. Bolinger served in a dual capacity as Chief Executive
Officer of both Susquehanna and Farmers First Bank, the longevity of Mr.
Bolinger's service to Susquehanna and Farmers First Bank, and its belief that
Mr. Bolinger is a representative of Susquehanna and Farmers First Bank to the
public by virtue of his stature in the community and the industry. Mr. Bolinger
was granted a base salary of $380,000 for 1998, an increase of 2.98% over his
$369,000 base salary for 1997.
Annual Bonus
Each subsidiary of Susquehanna maintains an annual cash bonus program in
which all persons employed by that subsidiary on a certain date are eligible to
participate. The amount of the bonus is determined based upon utilization of a
"performance bonus calculation" which is a formula relationship based on return
on average assets and net income growth for the subsidiary and return on average
capital and earnings per share growth for Susquehanna that produces a
"performance bonus percentage." In general, the subsidiary employees'
performance bonus percentage is based 50% on the performance of their respective
subsidiary and 50% on the performance of Susquehanna, while Susquehanna
employees' performance bonus is based 100% on the performance of Susquehanna. A
"performance bonus percentage" is adopted by the Board of Directors of each
subsidiary and Susquehanna and uniformly applied to the salaries of each
eligible employee. Performance bonus percentages
15
<PAGE>
differed at each subsidiary and Susquehanna and ranged between 6.10% at
Susquehanna Bancshares South, Inc., to 11.8% at Farmers First Bank. Mr. Bolinger
participated in the Susquehanna performance bonus program in 1998 and thus
earned a bonus of 9.0% of his base salary under this plan which represented
$33,895. The total of annual bonuses awarded to all executive officers of
Susquehanna in 1998 was $240,318.
Susquehanna's Performance Award Plan
Susquehanna's Performance Award Plan is a long-term incentive program
administered by the Compensation Committee, designed to provide incentives to
key executive officers based upon the financial performance of Susquehanna and
its subsidiaries.
Susquehanna's Board adopted the Performance Award Plan on October 14, 1986.
The Performance Award Plan was approved for an initial three-year period,
referred to as an Earnout Period, which began on January 1, 1986, and ended
December 31, 1988. Three subsequent Earnout Periods were approved running from
January 1, 1989, through December 31, 1991, from January 1, 1992, through
December 31, 1994, and from January 1, 1995, through December 31, 1997. No
additional Earnout Periods have been approved.
The express purpose of the Performance Award Plan is to provide key
executives with an increased incentive to make significant and extraordinary
contributions to the long-term performance and growth of Susquehanna and its
subsidiaries, to join the common interests of Susquehanna and key executives,
and to attract and retain executives of exceptional ability.
The Performance Award Plan is administered by the Compensation Committee
which has full and complete authority in its discretion, but subject to the
express provisions of the Performance Award Plan, to:
. select the executives entitled to participate in the Performance
Award Plan;
. determine the amount of the performance awards to be granted;
. determine the time or times at which the awards will be granted;
. establish the terms and conditions upon which the awards will
become payable under the Performance Award Plan;
. remove any restrictions and conditions upon the awards; and
. make all of the determinations deemed necessary or desirable for
the administration of the Performance Award Plan.
As indicated, however, the Board of Directors reserves the right to determine
whether the Performance Award Plan will be continued for successive Earnout
Periods.
Pursuant to the Performance Award Plan, a Target Award is established for
each executive officer selected by the Compensation Committee to participate in
the Performance Award Plan for the applicable Earnout Period. The Earnout
Periods are three-year periods coterminous with the corresponding fiscal years
of Susquehanna. As indicated, Earnout Periods ended on December 31, 1988,
December 31, 1991, December 31, 1994 and December 31, 1997.
At the end of each Earnout Period, the percentage of the Target Award that
was achieved by each participant with respect to that period is calculated from
Incentive Award Tables which are based on a comparison of the performance of
both Susquehanna and its subsidiaries for the Earnout Period in relation to
certain Internal and External Criteria designated in advance by the Compensation
Committee. The award actually received by the participant represents a
percentage of the Target Award and is based on the performance of Susquehanna
and the subsidiary with which the participant serves.
16
<PAGE>
During the Earnout Period, 60% of the actual award is based on the
subsidiary's performance and 40% is based on Susquehanna's performance. The
performance of the subsidiary and of Susquehanna is measured against "Internal
Criteria" and "External Criteria." In each case, the Criteria consists of
return on average assets, return on equity, equity/asset ratio and
asset/employee ratio. The Internal Criteria assesses Susquehanna and the
subsidiary's success during the earnout period in achieving certain goals (i.e.,
benchmarks) which are established by the Compensation Committee in consultation
with independent consultants, and which constitute returns and ratios designed
to put Susquehanna's consolidated operations at a high level of profitability
and performance if achieved. The External Criteria compare Susquehanna and the
subsidiary's actual performance in each area of the Criteria against the
performance of their respective peers, on a national, regional and local level.
The peers against which Susquehanna's performance is measured are generally
included within the line of business group indexed in Susquehanna's Stock
Performance Graph, although the national peer group is larger than the line of
business group.
As noted, the award earned by each executive officer is based principally
on the success of the subsidiary (60%) and the balance (40%) on the success of
Susquehanna. The specific Criteria carry the following aggregated weights:
. return on average assets -- 42.5% . equity/asset ratio -- 20.0%
. return on equity -- 20.0% . asset/employee ratio -- 17.5%.
Effective with the Fourth Earnout Period, which ended on December 31, 1997, the
award for Mr. Cloney was computed based principally upon the success of
Susquehanna (78%) and the balance (22%) on the success of Farmers First Bank.
Prior to the commencement of any Earnout Period, the Compensation Committee
designates the participants in the Performance Award Plan, the Target Award for
each participant with respect to that Earnout Period, the relevant Internal and
External Criteria, the Peer Groups for external comparison with respect to that
Earnout Period, and establishes the Incentive Award Table with respect to that
period.
The percentage of the Target Award achieved by each plan participant is
payable in three installments with one-half of the amount earned payable on or
before June 1 of the calendar year commencing immediately following the
conclusion of the Earnout Period and the remaining one-half paid in two equal
installments over the next two years with each such subsequent installment
payable on January 1 of each of the two such following years. Amounts received
under the Performance Award Plan are paid only in cash.
No amounts will be paid to any participant under the Performance Award Plan
with respect to an Earnout Period:
. if Susquehanna has experienced a net loss during the Earnout
Period, taken as a whole, but only if the Board is comprised of a
majority of "continuing directors" as defined in Susquehanna's
Articles in effect on January 1, 1987; or
. to particular participants, if the subsidiary whose performance
provides the subsidiary measure of the participant's benefit under
the Performance Award Plan has experienced a net loss over the
Earnout Period, taken as a whole.
The Performance Award Plan provides for acceleration under certain
circumstances as set forth in the plan.
A participant may also forfeit earned performance awards if the
participant's employment with Susquehanna or its subsidiaries is terminated
pursuant to certain circumstances described in the Performance Award Plan.
17
<PAGE>
Based on the performance of Susquehanna and its subsidiaries for the Fourth
Earnout Period that ended December 31, 1997, the performance award applicable to
each qualifying participant. for the first installment, representing 50% of the
total award, under the Fourth Earnout Period was as follows:
Richard M. Cloney $34,201
Gregory A. Duncan $12,846
William T. Belden $ 9,961
Compared to its peers under the External Criteria in 1997, the last year
for which data is available, Susquehanna's performance ranged between the 20th
and 83rd percentile brackets with the lowest performance in return on equity and
the highest in equity/asset ratio. The performance of Farmers First Bank, which
represented the subsidiary component of Mr. Cloney's compensation, placed it
between the 28th percentile and the 100th percentile brackets measured against
the External Criteria, with the lowest performance in asset/employee ratio and
the highest in return on assets.
Susquehanna Phantom Stock Appreciation Plan
On May 31, 1996, the Phantom Stock Plan was terminated and replaced by the
Equity Compensation Plan. All previously awarded interests outstanding under
the Phantom Stock Plan on May 31, 1996, were converted into cash and Susquehanna
stock based upon the amount earned by each participant determined in accordance
with generally accepted accounting principles. To replace the Phantom Stock
Plan, the Compensation Committee granted stock options under the Equity
Compensation Plan to participants included in the Phantom Stock Plan and
directors as set forth on the following table:
- --------------------
. Other Performance Award Plan participants for the Fourth Earnout Period
previously designated by the Compensation Committee have voluntarily terminated
their participation in the plan.
18
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Options Exercise
Participant Granted* Price* Grant Date Expiration Date
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bolinger 65,570 $13.00 5-31-96 5-31-2006
Cloney 46,863 13.00 5-31-96 5-31-2006
Mull 33,750 13.00 5-31-96 5-31-2000
Reuter 29,700 13.00 5-31-96 5-31-2006
Bisbee 27,963 13.00 5-31-96 5-31-2006
Belden 25,070 13.00 5-31-96 5-31-2006
Luppert 23,913 13.00 5-31-96 5-31-2006
Duncan 23,913 13.00 5-31-96 5-31-2006
Krantz 22,370 13.00 5-31-96 5-31-2006
Showers 20,636 13.00 5-31-96 5-31-2006
Strausbaugh 17,357 13.00 5-31-96 5-31-2000
Walsh 15,429 13.00 5-31-96 5-31-2006
Keim 13,113 13.00 5-31-96 5-31-2006
Apple 2,250 13.00 5-31-96 5-31-2006
Denlinger 2,250 13.00 5-31-96 5-31-2006
Gibbel 2,250 13.00 5-31-96 5-31-2006
Gross 2,250 13.00 5-31-96 5-31-2006
Hall 2,250 13.00 5-31-96 5-31-2006
Helfrick 2,250 13.00 5-31-96 5-31-2006
Hetzer 2,250 13.00 5-31-96 5-31-2006
Morgan 2,250 13.00 5-31-96 5-31-2006
O'Connell 2,250 13.00 5-31-96 5-31-2006
Reymer 2,250 13.00 5-31-96 5-31-2006
Wiest 2,250 13.00 5-31-96 5-31-2006
-------
Total 390,397
- -----------------------------------------------------------------------------
</TABLE>
*These stock options become exercisable one-third on May 31, 1999, one-third on
May 31, 2000, and one-third on May 31, 2001, except for Mull and Strausbaugh
whose options were exercisable immediately. Adjusted to reflect 3-for-2 stock
split in 1998.
Equity Compensation Plan
On April 17, 1996, Susquehanna's Board adopted the Equity Compensation
Plan, which superseded the Phantom Stock Plan. Susquehanna's shareholders
approved the Equity Compensation Plan on May 31, 1996 at the Annual Meeting of
Shareholders. Subject to adjustment in certain circumstances as discussed
below, the Equity Compensation Plan authorizes up to 1,462,500 shares of
Susquehanna common stock for issuance pursuant to the terms of the plan. If and
to the extent options granted under the Equity Compensation Plan terminate,
expire or are canceled without being exercised, or if any shares of restricted
stock are forfeited, the shares subject to such option or award again will be
available for purposes of the plan.
The Equity Compensation Plan is administered and interpreted by the
Compensation Committee. After receiving recommendations from management, the
Compensation Committee has the sole authority to determine:
. the persons to whom options and/or awards will be granted under the
Equity Compensation Plan;
. the type, size and terms of the options granted under the plan;
. the time when the options and/or awards will be granted and the
duration of the exercise period; and
. any other matters arising under the Equity Compensation Plan.
19
<PAGE>
A person may serve on the Compensation Committee only if he or she is not
eligible, and has not been eligible, to receive a discretionary grant under the
Equity Compensation Plan for at least one year before his or her appointment.
Nondiscretionary grants of stock options to non-employee directors under the
plan are not included in this prohibition.
Incentives under the Equity Compensation Plan consist of incentive stock
options, non-qualified stock options, restricted stock grants, Phantom Stock
Rights and stock appreciation rights. All grants are subject to the terms and
conditions set forth in the Equity Compensation Plan and to other terms and
conditions consistent with the Equity Compensation Plan as the Compensation
Committee deems appropriate and as are specified in writing by the Compensation
Committee to the designated individual in his or her respective Grant Letter.
The Compensation Committee must approve the form and provisions of each Grant
Letter to an individual.
Officers, employee directors and other employees of Susquehanna or an
affiliate designated by Susquehanna are eligible to participate in the Equity
Compensation Plan. Non-employee directors do not participate in the Equity
Compensation Plan beyond an initial grant of an option to acquire 11,250 shares
to each present and newly added director. Non-employee directors receive a
grant of an option to purchase 2,250 shares in their first year of participation
in the plan, and 2,250 shares in each of the next following years (up to a
total, aggregate grant of 11,250 shares). The options may be exercised to the
extent of one-third on the third anniversary of the date of the grant, one-third
on the fourth anniversary of the date of the grant, and one-third on the fifth
anniversary of the date of grant. As of April 30, 1999, approximately 17 senior
officers and such other as yet undetermined number of employees as the
Compensation Committee shall select were eligible to participate in the Equity
Compensation Plan. After receiving recommendations from Susquehanna management,
the Compensation Committee selects the persons to receive grants and determines
the number of shares of Susquehanna common stock subject to a particular grant.
No grantee may receive options, stock appreciation rights, Phantom Stock Rights
or restricted stock awards for more than 450,000 shares of Susquehanna common
stock for any calendar year.
Incentive Stock Options and Non-Qualified Stock Options. The Compensation
Committee may grant options qualifying as incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1996, as amended, and/or
other stock options in accordance with the terms and conditions set forth in the
Equity Compensation Plan or any combination of incentive stock options or non-
qualified stock options.
The exercise price of Susquehanna common stock subject to an incentive
stock option or a non-qualified stock option is the fair market value of
Susquehanna's common stock on the date the option is granted.
The Compensation Committee determines the option exercise period for each
option; provided, however, that the exercise period may not exceed 10 years from
the date of grant. Unless otherwise provided in the Grant Letter, each option
will fully vest upon the earliest of:
. the grantee's retirement date;
. five years from the date of Grant;
. the grantee's death or disability (within the meaning of
Susquehanna's long-term disability program); or
. the occurrence of a change of control (discussed below) of
Susquehanna.
A grantee may exercise an option by delivering notice of exercise to the
Secretary of Susquehanna with accompanying full payment of the option price.
The grantee may pay the option price in cash or, with the Compensation
Committee's consent, by delivering shares of Susquehanna common stock already
owned by the grantee and having a fair market value on the date of exercise
equal to the option price, or with a combination of cash and shares. The
grantee must pay the option price and the amount of withholding tax due, if any,
at the time of exercise. Shares of Susquehanna common stock are not issued or
transferred upon exercise of the option until the option price and the
withholding obligation are fully paid. Generally, unless provided otherwise in
the Grant
20
<PAGE>
Letter, the right to exercise any grant terminates 90 days following termination
of the participant's relationship in Susquehanna.
Restricted Stock Grant. Susquehanna may issue or transfer shares of
Susquehanna common stock under a restricted stock grant pursuant to the Equity
Compensation Plan. Shares of Susquehanna common stock issued pursuant to a
restricted stock grant are issued for cash or services rendered having a value,
as determined by Susquehanna's Board, at least equal to the par value of the
Susquehanna common stock subject to the grant. The Compensation Committee
grants to each grantee a number of shares of Susquehanna common stock determined
in its sole discretion, but no greater than the maximum limit described above.
If a grantee's employment terminates during the period, if any, designated in
the Grant Letter as the period during which the transfer of the shares is
restricted (i.e., a "Restriction Period"), the restricted stock grant terminates
with respect to all shares covered by the grant as to which the restrictions on
transfer have not lapsed, and those shares of Susquehanna common stock must be
immediately returned to Susquehanna. During the Restriction Period, a grantee
may not sell, assign, transfer, pledge or otherwise dispose of the shares of
Susquehanna common stock to which a Restriction Period applies, except to a
successor grantee in the event of the grantee's death. All restrictions imposed
under the restricted stock grant lapse upon the expiration of the applicable
Restriction Period. In addition, the Compensation Committee may determine as to
any or all restricted grants that all restrictions will lapse under such other
circumstances as it deems equitable.
Stock Appreciation Rights. The Compensation Committee may grant stock
appreciation rights, or SARs, to any grantee in tandem with a stock option, for
all or a portion of the applicable option, either at the time the option is
granted or, in the case of a non-qualified stock option, at any time thereafter
while the option remains outstanding. The number of SARs granted to a grantee
which are exercisable during any given period of time may not exceed the number
of shares of Susquehanna common stock which the grantee may purchase upon the
exercise of the related stock option during such period of time. Upon the
exercise of an option, the SARs relating to the Susquehanna common stock covered
by the option terminate. Upon the exercise of a SAR, the related option
terminates to the extent of an equal number of shares of Susquehanna common
stock.
Upon a grantee's exercise of some or all of his or her SARs, the grantee
receives in settlement of his or her SARs an amount equal to the value of the
stock appreciation for the number of SARs exercised, payable in cash,
Susquehanna common stock or a combination of cash and Susquehanna common stock.
The stock appreciation for a SAR is the difference between the exercise price
specified for the related option and the fair market value of the underlying
Susquehanna common stock on the date of exercise of the SAR. The Equity
Compensation Plan provides that the exercise price of a SAR is the greater of
the exercise price or option price of the related stock option, or the fair
market value of a share of Susquehanna common stock as of the date of grant of
the SAR.
A SAR is exercisable only during the period when the option to which it
relates is also exercisable, except that in no event may a person who is subject
to Section 16 of the Securities Exchange Act of 1934, as amended, exercise a SAR
during the first six months after it is granted (except in the event of the
retirement, death or disability of the grantee, if the related stock option is
then exercisable).
Phantom Stock Rights. The Equity Compensation Plan includes phantom stock
appreciation rights under a program substantially similar to the Phantom Stock
Plan that was maintained by Susquehanna. With the adoption of the Equity
Compensation Plan, the Phantom Stock Plan was terminated as a separate plan but
its provisions have been incorporated in and have become a part of the Equity
Compensation Plan. Any inconsistency between the terms of the Equity
Compensation Plan and the Phantom Stock Plan will be resolved in favor of the
terms of the Equity Compensation Plan. Interests previously awarded under the
Phantom Stock Plan and outstanding at the time of adoption of the Equity
Compensation Plan were subject to conversion to cash and Susquehanna stock based
upon the amount earned determined in accordance with generally accepted
accounting principles but subject to the Phantom Stock Plan participant's
acceptance.
Susquehanna's Board may amend or terminate the Equity Compensation Plan at
any time, except that Susquehanna's shareholders also must approve any
amendment to the plan:
21
<PAGE>
. that materially increases the benefits accruing to participants
under the Equity Compensation Plan;
. increases the aggregate number (or individual limit for any
grantee) of shares of Susquehanna common stock that may be issued
or transferred under the Equity Compensation Plan;
. materially modifies the requirements as to eligibility for
participation in the plan; or
. modifies the provisions for determining the fair market value of
Susquehanna common stock.
The Equity Compensation Plan will terminate on May 31, 2006, unless the
Board of Directors terminates it sooner, or, with the approval of the
shareholders, extends it. Any termination or amendment of the Equity
Compensation Plan that occurs after a grant is made will not result in the
termination or amendment of the grant unless the grantee consents or unless the
Compensation Committee revokes a grant because the terms are contrary to
applicable law. The termination of the Equity Compensation Plan will not impair
the power and authority of the Compensation Committee with respect to any
outstanding grants.
If there is any change in the number or kind of shares of Susquehanna
common stock through the declaration of stock dividends, or through a
recapitalization, stock split, or combinations or exchanges of such shares, or
merger, recapitalization or consolidation of Susquehanna, reclassification or
change in the par value or by reason of any other extraordinary or unusual
event, the number of shares of Susquehanna common stock available for grants and
the number of such shares covered by outstanding grants, and the price per share
of the applicable market value of such grants, will be proportionately adjusted
by the Compensation Committee to reflect any increase or decrease in the number
or kind of issued shares of Susquehanna common stock.
In the event of a change of control of Susquehanna, all options outstanding
under the Equity Compensation Plan will become immediately exercisable; and all
restrictions on the transfer of shares with respect to a restricted stock grant
which have not, prior to such date, been forfeited, will immediately lapse. A
change of control of Susquehanna will be deemed to have taken place if:
. any person or group (except for Susquehanna or any employee benefit
plan of Susquehanna or of any affiliate) becomes the beneficial
owner in the aggregate of 20% or more of the equity of Susquehanna
then outstanding;
. any person or group purchases substantially all of the assets of
Susquehanna;
. Susquehanna is liquidated or dissolved;
. at least a majority of Susquehanna's Board at any time does not
consist of individuals who were elected, or nominated for election,
by directors in office at the time of such election or nomination;
or
. Susquehanna merges or consolidates with any other corporation and
is not the surviving corporation.
A grant under the Equity Compensation Plan will not be construed as
conferring upon any grantee a contract of employment or service, and will not
confer upon the grantee any rights upon termination of employment or service
(other than certain limited rights as to the exercise of a stock option for a
designated period of time following termination).
On May 29, 1998, additional non-qualified stock options to acquire 224,224
shares were granted to directors and officers of Susquehanna.
22
<PAGE>
Executive Deferred Income Plan
In addition to the above-referenced executive compensation plans, a select
group of management or highly compensated employees, as well as outside
directors of the Board, may participate in the Executive Deferred Income Plan.
The Executive Deferred Income Plan for Susquehanna and its subsidiaries became
effective January 1, 1999. The plan is designed to allow participants to defer a
portion of their current income on a pre-tax basis and receive a tax-deferred
return on their deferrals.
The plan is administered by an Administrator selected by the Compensation
Committee. The Administrator serves at the pleasure of the Compensation
Committee and may be removed or replaced by the committee pursuant to procedures
established by the committee. The Administrator may be a participant under the
plan and receives no compensation for serving as Administrator (but is
reimbursed for expenses incurred).
The Administrator operates, administers, interprets, construes and
constructs the plan, including, without limitation, correcting any error or
defect, supplying any omission or reconciling any inconsistency in the plan. The
Administrator's determination as to the proper interpretation, construction or
application of any term or provision of the plan is final, binding and
conclusive with respect to all interested persons and entities. The
Administrator will be indemnified by Susquehanna to the fullest extent permitted
by law for any action taken in his or her capacity as Administrator, except if
the Administrator is finally adjudged to have been guilty of criminal misconduct
in the performance of his or her duties.
Participation in the plan is limited to:
. a select group of management or highly compensated employees who
are nominated by Susquehanna's chief executive officer and approved
by the Compensation Committee; and
. outside directors of the Board.
Participation in the plan is voluntary and is made annually.
The Executive Deferred Income Plan allows participants to defer pre-tax a
portion of his or her base salary (or director fees) and annual bonus in excess
of the participant's contributions to the 401(k) plan (discussed below), and to
earn tax-deferred interest on these deferrals. Under the plan, a participant
must make a minimum deferral of $3,000 per year, and may make a maximum deferral
of 75% of his or her base annual salary and 100% of his or her bonus (an outside
director must defer 100% of his or her compensation to participate). Susquehanna
does not make any matching contributions to a participant's account under the
plan. The percentage or dollar amount of a participant's annual base salary
elected for deferral is divided by the number of pay periods in a plan year and
that amount is deducted from each of the participant's pay checks for that year.
The percentage or dollar amount of bonus elected for deferral will be withheld
from a participant's paycheck when the amount would otherwise have been paid.
The deferral schedule cannot be altered by a participant.
A participant must elect a deferral of his or her annual base salary and/or
bonus under the plan prior to the commencement of a plan year (i.e., a calendar
year). A participant's deferral election for any given plan year is irrevocable,
except in very limited circumstances including disability, unpaid leaves of
absence and under very extraordinary financial emergencies. For subsequent plan
years, participants have the option, before the end of the prior plan year and
within deadlines set by the Administrator, to change the amount of annual base
salary and bonus he or she would like deferred.
The amounts deferred by a participant under the plan are invested in fund
options, ranging from conservative to aggressive, selected by the participant. A
participant may change his or her investment options on a monthly basis.
Under the plan, each year's deferrals will be paid as designated by the
participant on that year's deferral election form. A participant's deferrals for
each calendar year are considered a separate "plan within a plan", meaning that
a participant can select to receive his or her compensation and bonus at
different times. A
23
<PAGE>
participant can therefore pick a different distribution for each year's
deferrals. Participants may elect to receive distributions from the Plan:
. at their retirement date (i.e., the first day of the month
coincident with or next following the later to occur of the date a
participant turns 65, or 55 if he or she has completed 5 years of
employment, in a lump sum, or annually over five to ten years; or
. at a date specified by the participant prior to his or her
retirement date (referred to as an interim distribution). All
interim distributions are received in a lump sum, and must be for a
period in excess of a minimum deferral period (which is three years
following the end of a plan year).
Additionally, a participant may receive a distribution of his or her
account if:
. the participant leaves Susquehanna, becomes disabled or dies prior
to retirement (in which case the participant's account balance will
be paid to him or her or his or her beneficiary in one lump sum);
or
. a participant dies after his or her retirement date (in which case
his or her beneficiary will receive a lump sum, except that if the
recipient of such payments is the surviving spouse, the election of
installments, if applicable, will remain in effect).
In addition, a participant may elect at any time to make a withdrawal
election of his or her account, less a 10% withdrawal penalty. This penalty
applies to a participant's entire account balance. If a participant makes such a
withdrawal, he or she is precluded from participating in the plan in the future.
The plan is a nonqualified plan and distributions may not be rolled over
into a tax-qualified retirement plan or IRA.
The plan is an unfunded plan. Susquehanna's obligation under the plan is
that of an unsecured promise to pay money in the future. Amounts payable to
participants or their beneficiaries under the plan will be paid exclusively from
the general assets of Susquehanna. Any assets Susquehanna may set aside to help
pay benefits remain the general assets of Susquehanna and can be reached by
Susquehanna's creditors.
Susquehanna's Board may amend or terminate the plan at any time; provided,
however, that the plan's provisions relating to termination and amendment also
need the consent of at least two-thirds of all affected participants.
Additionally, unless a particular participant (or his or her beneficiary in the
event of the participant's death) consents in writing, no amendment or
termination will adversely affect any rights of the participant or beneficiary
to any amounts that are required to be allocated and credited under the plan to
his or her account, to the extent credited as of the date of the amendment.
General
Section 162(m) of the Internal Revenue Code generally provides that a
publicly held reporting company such as Susquehanna may not deduct, as an
expense, amounts paid to any executive officer in excess of $1 million per year.
Because the compensation paid Susquehanna's most highly compensated officer
amounted to $418,360, which is substantially below the $1 million threshold
called for in Section 162, the Compensation Committee has not adopted a formal
policy on awarding compensation in excess of this threshold.
Conclusion
Through the programs described above, a significant portion of
Susquehanna's executive compensation is linked directly to individual and
corporate performance and stock price appreciation. In 1998, as in previous
years, performance-based variable elements played a major role in the
Compensation Committee's executive compensation determinations, including those
relating to Mr. Bolinger. The Compensation Committee intends to continue the
policy of linking executive compensation to Susquehanna's performance and return
to shareholders,
24
<PAGE>
recognizing that rises and falls in the business cycle from time to time must be
recognized, and may result in an apparent imbalance for a particular period.
The Susquehanna Bancshares, Inc. Compensation Committee:
John M. Denlinger C. William Hetzer, Jr.
Henry H. Gibbel George J. Morgan
Edward W. Helfrick
Summary Compensation Table
The cash compensation paid to, as well as the value of stock awards and
other payments earned by, Susquehanna's five most highly compensated executive
officers during 1998 and the prior two years is set forth in the following
table. Except for director fees paid by Susquehanna, all "annual compensation"
was received from Farmers First Bank, Farmers & Merchants Bank and Trust, First
National Trust Bank, Susquehanna Bancshares South, Inc. or Williamsport National
Bank.
[Table on following page]
25
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
- ------------------------------------------------------------------------------
Other
Annual
Compen-
Name Principal Position Year Salary(5) Bonus(6) sation(7)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Robert S. President and Chief 1998 $376,610 $33,895 -
Bolinger(1) Executive Officer 1997 366,227 71,750 -
of Susquehanna 1996 365,969 67,448 -
Richard M. Vice President and 1998 $258,848 $23,296 -
Cloney(1) Secretary of 1997 254,330 28,994 -
Susquehanna 1996 259,464 52,702 -
William J. Senior Vice 1998 $231,923 $20,873 -
Reuter(2) President of 1997 213,846 35,529 -
Susquehanna; 1996 170,385 24,453 -
President of
F & M; President of
Susquehanna South;
President of
Susquehanna Bank
Frederick Vice President of 1998 $156,698 $12,536 -
W. Susquehanna; 1997 153,293 20,329 -
Bisbee(3) President of First 1996 148,467 16,877 -
National
Charles W. Vice President of 1998 $155,481 $15,548 -
Luppert(4) Susquehanna; 1997 152,596 18,617 -
President of 1996 148,462 22,073 -
Williamsport
National
- ------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Long Term Compensation
- ----------------------------------------------------------------------------------------------------------------------
Stock
Appreciation Stock All Other
Rights Options LTIP SAR Compensation
Name Principal Position Year (# of Units)(8) Granted(9) Payouts(10) Payouts(11) (12)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert S. President and Chief 1998 - 59,420 $ 0 $ 0 $4,800
Bolinger(1) Executive Officer 1997 - 13,872 32,288 0 4,800
of Susquehanna 1996 - 65,570 32,288 204,753 4,500
Richard M. Vice President and 1998 - 5,625 $34,201 $ 0 $4,800
Cloney(1) Secretary of 1997 - 6,903 13,389 0 4,800
Susquehanna 1996 - 46,863 13,389 112,583 4,500
William J. Senior Vice 1998 - 14,516 $ 0 $ 0 $4,800
Reuter(2) President of 1997 - 4,653 3,539 0 4,800
Susquehanna; 1996 - 29,700 3,539 74,462 4,500
President of
F & M; President of
Susquehanna South;
President of
Susquehanna Bank
Frederick Vice President of 1998 - 14,009 $ 0 $ 0 $4,800
W. Susquehanna; 1997 - 4,653 4,578 0 4,599
Bisbee(3) President of First 1996 - 27,963 4,578 73,158 4,454
National
Charles W. Vice President of 1998 - 15,977 $ 0 $ 0 $4,800
Luppert(4) Susquehanna; 1997 - 4,653 7,176 0 4,574
President of 1996 - 23,913 7,176 70,116 4,454
Williamsport
National
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
__________________
(1) Messrs. Bolinger and Cloney have employment contracts with Susquehanna and
receive their annual compensation, other than director's fees (where
applicable), from Farmers First Bank.
(2) Mr. Reuter has an employment contract with Susquehanna, and receives his
annual compensation from Farmers & Merchants Bank and Trust and Susquehanna
Bank.
(3) Mr. Bisbee has an employment contract with Susquehanna and receives his
annual compensation from First National Trust Bank.
(4) Mr. Luppert has an employment contract with Susquehanna and receives his
annual compensation from Williamsport National Bank.
(5) Includes all fees payable to directors of Susquehanna or its subsidiaries
including fees payable to directors who have elected to defer receipt under
the Directors' Deferred Compensation Plan. Payment of such fees is
deferred until retirement. The sums in participants' accounts are fully
vested and may be withdrawn in accordance with such plan.
(6) Includes any general or performance based bonuses paid by Farmer &
Merchants Bank and Trust, Farmers First Bank, First National Trust Bank or
Williamsport National Bank.
(7) The aggregate value of perquisites received did not exceed the lesser of
$50,000 or 10% of total salary and bonuses set forth in this table. No
other applicable compensation was received.
(8) Represents number of units awarded under Susquehanna's Phantom Stock Plan
discussed above.
(9) Represents number of stock options granted under Susquehanna's Equity
Compensation Plan discussed above. Adjusted to reflect 3-for-2 stock split
in 1998.
(10) Represents payments under Susquehanna's Performance Award Plan discussed
above.
(11) Represents payments under Susquehanna's Phantom Stock Appreciation Plan
discussed above. In June 1996, payments on the 1992 and 1995 grants based
upon amounts earned through May 31, 1996, in accordance with generally
accepted accounting principles were accelerated as the Phantom Stock Plan
was terminated and replaced by the Equity Compensation Plan (stock
options).
(12) Represents payments made by Susquehanna into the Susquehanna 401(k) Plan on
behalf of each participant, as more fully discussed below.
_____________________
STOCK OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
Potential Realizable
--------------------
Number of % of Total Value at Assumed
--------- ---------- ----------------
Securities Options Annual Rates of Stock
---------- ------- ---------------------
Underlying Granted to Price Appreciation for
---------- ---------- ----------------------
Options Employees in Exercise Expiration Option Term
------- ------------ -------- ---------- -----------
Name Granted* Fiscal Year Price* Date 5% 10%
---- -------- ------------ ------ ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Robert S. Bolinger 59,420 30.1 $24.75 5-30-2008 $925,169 $2,344,119
Richard M. Cloney 5,625 2.9 24.75 5-30-2008 87,581 221,906
William J. Reuter 14,516 7.4 24.75 5-30-2008 226,014 572,656
Frederick W. Bisbee 14,009 7.1 24.75 5-30-2008 218,120 552,655
Charles W. Luppert 15,977 8.1 24.75 5-30-2008 248,762 630,293
</TABLE>
*Adjusted to reflect 3-for-2 stock split in 1998.
27
<PAGE>
AGGREGATED OPTIONS EXERCISED IN 1998 AND DECEMBER 31, 1998 OPTION VALUES
<TABLE>
<CAPTION>
Shares Value of Unexercised In-
------ ------------------------
Acquired Number of Securities Underlying the-money Options at
-------- ------------------------------- --------------------
on Value Unexercised Options at December 31, December 31, 1998
-- ----- ----------------------------------- -----------------
Exercise Realized 1998 Exercisable/unexercisable* Exercisable/unexercisable
-------- -------- ------------------------------- -------------------------
NAME (#) ($) (#) ($)
---- --- --- --- ---
<S> <C> <C> <C> <C>
ROBERT S. BOLINGER 0 0 13,872 / 124,990 41,921 / 489,723
Richard M. Cloney 0 0 6,903 / 52,488 20,861 / 350,006
William J. Reuter 0 0 4,653 / 44,216 14,061 / 221,820
Frederick W. Bisbee 0 0 4,653 / 41,972 14,061 / 208,847
Charles W. Luppert 0 0 4,653 / 39,890 14,061 / 178,599
</TABLE>
*Adjusted to reflect 3-for-2 stock split in 1998.
Description of Certain Plans and Employment Contracts
Executive Employment Contracts
Susquehanna has five-year employment contracts with Messrs. Bolinger and
Cloney which were executed in 1984 and renewed most recently in 1996. The
employment contracts for Messrs. Bolinger and Cloney were not renewed in 1997,
with the effect that both employment contracts will expire on February 28, 2001.
The contracts provide for base salaries for the first twelve months following
execution. In subsequent years, the base compensation is as agreed upon between
Susquehanna and the officers, and in the absence of an agreement, is increased
based on the Suburban Consumer Price Index for Suburban Wage Earners prepared by
the United States Department of Labor. The contracts also provide fringe
benefits comparable to those generally supplied to other salaried employees of
Farmers First Bank. If the officer becomes permanently disabled, he is entitled
to all benefits under the contract, other than bonuses, for a period of not less
than six months.
The employment contracts may be terminated by Susquehanna if the officer is
responsible for a loss to Susquehanna or Farmers First Bank in excess of Farmers
First Bank's loan loss reserve or for actions bringing discredit to the business
reputation or goodwill of Farmers First Bank. Upon any termination described
above, the officer will be entitled to receive the base salary and all other
benefits provided by the contract for a period of one year reduced, however, by
any compensation received, during the period, from any other employment entered
into. Following any such termination, Susquehanna may require the officer to
perform his duties under the contract for up to three months and hold himself
reasonably available for advice and consultation for an additional period of
nine months.
In addition, the officer may terminate the contract on two months' notice
to Susquehanna. Susquehanna may terminate the contract immediately for breach
of the contract by the officer, upon a felony conviction of the officer or on
commission by the officer of a material fraudulent act against Susquehanna or
Farmers First Bank. If Susquehanna terminates the contract for any reason other
than those set forth above, or if the officer resigns upon being reduced to a
position of materially lesser authority, stature or responsibility, the officer
will be entitled to a lump sum payment of the amounts he would have received
under the contract for the balance of its term plus the value of other benefits
to which he was entitled under the agreement.
Susquehanna's Board has approved three-year employment contracts with
Messrs. Bisbee, Reuter, Luppert and Duncan. The form of these employment
contracts is substantially similar, in material respects, to the executive
employment contracts existing between Susquehanna and Messrs. Bolinger and
Cloney. Messrs. Bisbee's, Reuter's, Luppert's and Duncan's contracts, however,
provide certain relief in the event that a change of control occurs. Each may
terminate his employment within twelve months following a change of control if
there occurs an
28
<PAGE>
adverse change in his respective circumstances (as set forth in his respective
employment contracts). For purposes of these contracts, a "change of control" is
deemed to occur when a person shall acquire control of Susquehanna or the
applicable subsidiary.
Change of Control Plans
Each of Susquehanna's Equity Compensation Plan (which superseded the
Phantom Stock Plan), Performance Award Plan and Executive Deferred Income Plan,
contains change of control provisions.
Equity Compensation: In the event of a change of control of Susquehanna,
all options outstanding under the Equity Compensation Plan will become
immediately exercisable, and all restrictions on the transfer of shares with
respect to a restricted stock grant which have not, prior to such date, been
forfeited will immediately lapse. A change of control of Susquehanna will be
deemed to have taken place if:
. any person or group (except for Susquehanna or any employee benefit
plan of Susquehanna or of any affiliate) shall become the
beneficial owner in the aggregate of 20% or more of the equity of
Susquehanna then outstanding;
. any person or group purchases substantially all of the assets of
Susquehanna;
. Susquehanna is liquidated or dissolved;
. at least a majority of Susquehanna's Board at any time does not
consist of individuals who were elected, or nominated for election,
by directors in office at the time of such election or nomination;
or
. Susquehanna merges or consolidates with any other corporation and
is not the surviving corporation.
Performance Award Plan: Under the Performance Award Plan, 100% of the
Target Award applicable to a then-current Earnout Period becomes due and payable
to each participant if:
. any entity or person becomes the beneficial owner of, or shall
obtain voting control, over 25% or more of the outstanding shares
of Susquehanna common stock;
. the shareholders of Susquehanna and the shareholders of any other
constituent corporation approve a definitive agreement to merge or
consolidate Susquehanna with or into another corporation other than
a merger or consolidation of Susquehanna in which holders of shares
of Susquehanna common stock immediately prior to the merger or
consolidation have at least 60% of the ownership of common stock of
the surviving corporation immediately after the merger or
consolidation, which common stock is then held substantially in the
same proportion as such holders' ownership of Susquehanna common
stock immediately prior to the merger or consolidation; or
. the shareholders of Susquehanna approve a definitive agreement to
sell or otherwise dispose of all or substantially all of the assets
of Susquehanna.
Upon the occurrence of any of the above events, the Target Award is deemed
earned and immediately payable in full with the same force and effect as if all
performance criteria had been achieved for the entire Earnout Period, whether or
not such is the case.
29
<PAGE>
Executive Deferred Income Plan: In the event of a change of control, the
full amount of any remaining unpaid vested benefits credited to accounts
maintained under the deferred compensation ledger for each participant in the
Executive Deferred Income Plan will be paid as follows:
. A participant who voluntarily terminates his or her employment in
connection with a change in control will be paid the full amount of
any remaining unpaid vested benefits credited to his or her
accounts in a single lump sum.
. A participant whose employment is involuntarily terminated in
connection with a change in control will be paid the full amount of
any remaining unpaid vested benefits credited to his or her
accounts in accordance with the form of benefit elected by the
participant at the time his or her election to defer annual base
salary and/or bonus is made; provided, however, that any election
to receive installments at a later determination date or upon the
participant's retirement date will be accelerated and begin as soon
as administratively practicable following the participant's
termination.
A participant's termination of employment within six months before or
twelve months after a change of control will be presumed to be in connection
with the change of control. Under the Executive Deferred Income Plan, a "change
of control" means and will be deemed to have occurred upon the happening of any
one or more of the following occurrences, or prior thereto, the happening of
such occurrence has not received the approval of a majority of the disinterested
members of Susquehanna's Board, as applicable:
. a liquidation or dissolution of Susquehanna (excluding transfers to
subsidiaries) or the sale of all or substantially all of
Susquehanna's assets;
. as a result of a tender offer, stock purchase, other stock
acquisition, merger, consolidation, recapitalization, reverse split
or sale or transfer of assets, any person or group becomes
beneficial owner (as all such terms are defined in the Securities
Exchange Act of 1934), directly or indirectly, of securities of
Susquehanna representing 20% of Susquehanna's then outstanding
common stock; provided, however, that for purposes of the plan, a
person or group does not include Susquehanna or any employee
benefit plan (or related trust) sponsored or maintained by
Susquehanna or any of its subsidiaries;
. if at least a majority of Susquehanna's Board at any time does not
consist of individuals who were elected, or nominated for election,
by directors in office at the time of such election or nomination;
or
. Susquehanna merges or consolidates with any other corporation
(other than an affiliate of Susquehanna) and is not the surviving
corporation (or survives only as s subsidiary of another
corporation).
Pension Plans
Effective January 1, 1989, Susquehanna and each of its subsidiaries adopted
a defined benefit pension plan (the "Retirement Income Plan") under which
benefits are determined by "Final Average Compensation" as defined below. This
plan covers employees of Susquehanna and its subsidiaries upon their attaining
age 21 and the completion of one year's service in which 1,000 hours are worked.
All participants in predecessor plans maintained by Susquehanna's subsidiaries
as of January 1, 1989, became members of the Retirement Income Plan effective
that date.
Participants under the Retirement Income Plan are entitled to an annual
retirement pension at normal retirement age of 65 equal to 1.5% of Final Average
Compensation up to the Social Security Covered Compensation level plus 2% of
Final Average Compensation in excess of Social Security Covered Compensation,
30
<PAGE>
multiplied by years of credited service up to a maximum of 25 years. Final
Average Compensation means the average earnings during the five highest-paid
consecutive calendar years of employment with Susquehanna affiliates. Social
Security Covered Compensation means the compensation upon which a Social
Security benefit at Social Security Normal Retirement Age will be calculated as
defined in regulations.
Participants with 15 years of service are eligible for early retirement at
age 55, in which event retirement benefits are actuarially reduced.
Effective January 1, 1994, the Board adopted a Supplemental Executive
Retirement Plan ("Supplemental Plan") which will provide for benefits lost under
the Retirement Income Plan on account of Internal Revenue Code Sections
401(a)(17) and 415 which limit the compensation and benefits under a qualified
retirement plan. Selected participants of the Retirement Income Plan are
eligible for benefits under the Supplemental Plan.
The annual benefits under both the Retirement Income and the Supplemental
Plans upon normal retirement at age 65 to persons in specified salary
classifications, assuming election by the employee of payment only in the form
of a life annuity, is set forth below:
THE SUSQUEHANNA BANCSHARES RETIREMENT AND RESTORATION PLANS
ANNUAL NORMAL RETIREMENT BENEFIT FOR PARTICIPANT
TURNING AGE 65 IN 1998
<TABLE>
<CAPTION>
YEARS OF SERVICE AT RETIREMENT
--------------------------------------------------
FINAL AVERAGE
COMPENSATION 15 20 25 30 35
------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$125,000 $ 35,165 $ 46,887 $ 58,609 $ 58,609 $ 58,609
150,000 42,665 56,887 71,109 71,109 71,109
175,000 50,165 66,887 83,609 83,609 83,609
200,000 57,665 76,887 96,109 96,109 96,109
225,000 65,165 86,887 108,609 108,609 108,609
250,000 72,665 96,887 121,109 121,109 121,109
300,000 87,665 116,887 146,109 146,109 146,109
350,000 102,665 136,887 171,109 171,109 171,109
400,000 117,665 156,887 196,109 196,109 196,109
450,000 132,665 176,887 221,109 221,109 221,109
500,000 147,665 196,887 246,109 246,109 246,109
</TABLE>
For purposes of the Retirement Income Plan, as of December 31, 1998,
Messrs. Bolinger, Cloney, Luppert, Bisbee and Reuter had 23, 22, 28, 25 and 24
credited years of service respectively. Only the base salary of Messrs.
Bolinger, Cloney, Luppert, Bisbee and Reuter is compensation covered under the
Retirement Income Plan. Other components of such officers' total compensation
do not affect benefits payable under the Retirement Income Plan. In 1998, Mr.
Bolinger's base salary was $376,610, Mr. Cloney's base salary was $258,848, Mr.
Bisbee's base salary was $156,698, Mr. Luppert's base salary was $155,481, and
Mr. Reuter's base salary was $231,923.
Also, effective January 1, 1989, Susquehanna and each of its subsidiaries
adopted a 401(k) plan under which employees may defer portions of their income
on a pre-tax basis. The 401(k) plan covers employees of Susquehanna and its
subsidiaries upon their attaining age 21 and the completion of one year of
service in which 1,000 hours are worked. All members of predecessor thrift or
401(k) plans as of January 1, 1989, became Participants in the Susquehanna
401(k) plan effective that date.
Participants under the Susquehanna 401(k)plan are allowed to defer between
1% and 15% of their compensation during the year. Subject to Board discretion,
Susquehanna will match 100% of the first 3% of employee deferrals. These funds
will be accumulated under the 401(k) Plan until paid out at termination,
31
<PAGE>
disability, death or retirement. The 401(k) plan allows for loans and hardship
withdrawals within legal limitations.
The vested portion of matching contributions made to the 401(k) plan during
1998 on behalf of the individual officers named above and the Executive Officers
as a group are as follows:
Robert S. Bolinger $ 4,800
Richard M. Cloney $ 4,800
Frederick W. Bisbee $ 4,800
Charles W. Luppert $ 4,800
William J. Reuter $ 4,800
Executive Officers as a group $49,033
Cash Balance Pension Plan
Effective January 1, 1998, Susquehanna converted the Retirement Income Plan
into a Defined Benefit Cash Balance Pension Plan.
All employees who were a participant in the Retirement Income Plan had the
value of their benefit under that plan converted into the opening Cash Balance
Account under the new Cash Balance Pension Plan. The opening balance equals
105% of the present value of each employee's total future benefit payments
carried through December 31, 1997, under the Retirement Income Plan.
Employees age 55 and older with 10 or more years of service as of January
1, 1998, are "grandfathered" and will receive a benefit no less than the amount
determined under the plan provisions in effect December 31, 1997.
Contributions on behalf of participants are made at the end of the year (or
at the time of termination of employment if the participant was working at a
pace to get 1,000 hours and receiving a benefit payout immediately).
Contributions are based on a formula that provides participants an employer
credit, or allocation each year as a percentage of the participant's pay. The
employer credit is based on the sum of the employee's attained age and credited
service.
Annual Employer
---------------
Employee's Age Allocation
-------------- ----------
Plus Service* (% of Pay)
------------- ----------
Less than 30 3%
30-39 4%
40-49 5%
50-59 6%
60-69 7%
70-79 8%
80-89 9%
90-99 10%
100 or more 11%
*Age is determined based on completed years as of
January 1, and Service is full years of Credited
Service as defined in the Plan as of January 1.
32
<PAGE>
Interest is credited to each participant based on the 1-Year U.S. Treasury
Bill for the Plan Year using the auction average for November of the preceding
year (for example, 4.53% for the 1999 Plan Year). Interest credits are on a
daily basis until retirement benefits commence.
The Cash Balance Pension Plan defines eligible compensation as W-2 pay
during the Plan Year, including deferrals to any 401(k) plan and pretax
contributions for health and welfare premiums. This includes bonus, incentives
and commissions that were not included under the Retirement Income Plan.
Participation begins on the July 1 or January 1 nearest attainment of age
21 and completion of a year of service (with 1,000 hours). Participants who
complete one thousand hours of service in a plan year (or who are on a pace and
terminate during a plan year) are eligible for an employer allocation.
Participants have the same optional forms of payment under the Cash Balance
Pension Plan that were available under the Retirement Income Plan.
The death benefit is the annuitized value of the participant's Cash Balance
Account payable at what would have been the participant's earliest retirement
age, after adjustment to reflect 100% Joint and Survivor annuity payment form.
Normal Retirement is age 65. Reaching age 55 with 15 years of service
attains early retirement. The benefit equals the annuitized value of the
participant's Cash Balance Account as of the retirement commencement date.
Transitioning to the new plan required the creation of an "opening account
balance." The opening account balance was calculated based upon each
participant's accrued benefit under the former plan as of December 31, 1997.
The initial balance equaled 105% of the present value of their accrued benefit
under the former plan. The actuarial assumptions used to determine the opening
balance were as follows:
. Interest Rate: 30 year Treasury rate as of August 1997 (6.58%)
. Mortality Table: 1983 GAM, weighted 50% male and 50% female
. Retirement Age: Age 65 for all employees
Any benefits, rights and features that were available to participants under
the Retirement Income Plan as of December 31, 1997, will continue to be
available to participants in the future (with respect to the benefits they had
accrued under the Retirement Income and predecessor plans through December 31,
1997).
33
<PAGE>
THE SUSQUEHANNA BANCSHARES CASH BALANCE AND RESTORATION PLANS
ANNUAL NORMAL RETIREMENT BENEFIT FOR PARTICIPANT
TURNING AGE 65 IN 1998
YEARS OF SERVICE AT RETIREMENT
-------------------------------------------------
FINAL AVERAGE
COMPENSATION 15 20 25 30 35
- ---------------- -- -- -- -- --
$125,000 $17,721 $ 25,833 $ 34,424 $ 45,006 $ 55,705
150,000 21,265 31,000 41,309 54,009 66,848
175,000 24,809 36,166 48,194 63,011 77,990
200,000 28,353 41,332 55,078 72,011 89,131
225,000 31,897 46,499 61,964 81,013 100,274
250,000 35,441 51,667 68,847 90,014 111,412
300,000 42,530 61,999 82,617 108,016 133,695
350,000 49,618 72,333 96,387 126,020 155,979
400,000 56,706 82,667 110,158 144,022 178,262
450,000 63,794 92,999 123,925 162,024 200,543
500,000 70,883 103,333 137,696 180,028 222,830
Assumptions:
Cash Balance Plan in effect all years.
Salary Scale...............................3.0%
Interest credit rate.......................6.5%
Interest rate for annuity
conversion................................7.0%
Mortality..................................GAM83 unisex
- --------------------
Stock Price Performance Graph
The following graph compares for fiscal years 1993 through 1998 the yearly
change in the cumulative total return to holders of Susquehanna common stock
with the cumulative total return of the Nasdaq Total Return Index (the "Nasdaq
Index"), a broad market in which Susquehanna participates, and of an index
comprised of all publicly traded banks in asset size $1-5 billion, compiled by
an independent research firm (the "Bank Index"). The graph depicts the total
return on an investment of $100 based on both stock price appreciation and
reinvestment of dividends for Susquehanna, and the companies represented by the
Nasdaq Index and the Bank Index.
The Bank Index consists of Susquehanna's bank peers relative to size as
measured by total assets. It is believed that these Bank Index companies are
comparable to Susquehanna in terms of size and all businesses engaged in. There
can be no assurance that Susquehanna's stock performance will continue into the
future with the same or similar trends depicted in the graph below.
34
<PAGE>
SUSQUEHANNA BANCSHARES, INC.
[LINE GRAPH APPEARS HERE]
Stock Price Performance
<TABLE>
<CAPTION>
Period Ending December 31
- ------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Susquehanna Bancshares, Inc. $100.00 $ 85.06 $105.93 $144.23 $246.80 $202.90
NASDAQ -Total US 100.00 $ 97.75 $138.26 $170.01 $208.58 $293.21
SNL $1B-$5B Bank Index 100.00 $105.28 $141.58 $183.54 $306.09 $305.38
- ------------------------------------------------------------------------------------------
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain directors and executive officers of Susquehanna and its
subsidiaries, including their immediate families and companies in which they are
principal owners (more than 10%), were indebted to banking subsidiaries. All
these transactions were made in the ordinary course of business, were made 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 collectibility or present other
unfavorable features. At December 31, 1998, these loans totaled $26.5 million,
which represented 6.8% of stockholder's equity.
During 1998, the law firms in which directors Hall, Morgan, and Wiest are
principals, received fees from Susquehanna affiliates in amounts which did not
exceed 5% of their respective firm's gross revenues for that year.
INDEPENDENT PUBLIC ACCOUNTANTS
Susquehanna has engaged PricewaterhouseCoopers L.L.P., independent public
accountants, to audit its financial statements for the year ended December 31,
1998. Susquehanna expects to engage PricewaterhouseCoopers as its independent
public accountants for the year 1999. Representatives of PricewaterhouseCoopers
are expected to be present at the Annual Meeting and will have an opportunity to
make a statement if they desire to do so. They are expected to be available to
respond to appropriate questions from Susquehanna's shareholders.
35
<PAGE>
SHAREHOLDER PROPOSALS
Shareholder proposals for the 2000 Annual Meeting of Susquehanna
shareholders must be received by the Secretary of Susquehanna no later than
December 27, 1999, in order to be considered for inclusion in the proxy
statement and form of proxy relating to such 2000 Susquehanna Annual Meeting.
OTHER MATTERS
Susquehanna knows of no business which will be presented at the Annual
Meeting other than the election of directors. However, if other matters come
before the meeting, it is the intention of the proxy agents to vote upon such
matters in accordance with their judgment in such matters.
By Order of the Board of Directors,
/s/ Richard M. Cloney
Richard M. Cloney
Secretary
36
<PAGE>
April 26, 1999
SUSQUEHANNA BANCSHARES, INC. 26 North Cedar Street, Lititz, PA 17543
Dear Shareholder:
On behalf of our entire Board of Directors, I cordially invite you to attend our
Annual Meeting of Shareholders on Friday, May 28, 1999. At the meeting, you will
be asked to elect four members to the Board of Directors' Class of 2002 for the
coming three years, two members to the Board of Directors' Class of 2001 for the
coming two years and one member to the Board of Directors' Class of 2000 for the
coming year. We will also report on Susquehanna's 1998 business results and
other matters of interest to shareholders.
Information about the matters to be acted on at the meeting is contained in the
accompanying Notice of Annual Meeting and Proxy Statement. The 1998 Annual
Report is also enclosed.
I would like to take this opportunity to remind you that your vote is very
important. Please take a moment now to complete, sign and date the attached
proxy voting card and return it in the postage-paid envelope we have provided.
I look forward to seeing you at the meeting.
Sincerely,
/s/ Robert S. Bolinger
Robert S. Bolinger
President and Chief Executive Officer
Detach Proxy Card Here
- --------------------------------------------------------------------------------
----------
----------
*(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided. Such a
mark will be deemed a vote "FOR" all nominees to the Class other than those
listed as exceptions.)
*Exceptions ____________________________________________________________________
FOR all nominees [x] WITHHOLD AUTHORITY to vote [x] *EXCEPTIONS [x]
listed below for all nominees listed below
1. Election of Directors to the Class of 2002
Nominees: C. William Hetzer, Jr., William J. Reuter, Guy W. Miller, Jr., and
Owen O. Freeman, Jr.
2. Election of Directors to the Class of 2001
Nominees: Richard M. Cloney, Clyde R. Morris
3. Election of Director to the Class of 2000
Nominee: Edward W. Helfrick
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
Check here if you: Plan to attend the
Annual Meeting [x]
Have written comments
or change of address
on this card [x]
Want to discontinue
duplicate Annual
Reports [x]
Please sign exactly as your shares are issued. Joint owners should each sign.
Attorneys, trustees, executors, administrators, guardians or corporate officers
should state full title.
Dated:___________________________________________,1999
________________________________________________________
Signature
________________________________________________________
Signature
Votes must be indicated
(x) in Black or Blue ink. [x]
(Please sign, date and return this proxy in the enclosed postage prepaid
envelope.)
- --------------------------------------------------------------------------------
Please Detach Here
You must Detach This Portion of the Proxy Card
Before Returning it in the Enclosed Envelope
<PAGE>
SUSQUEHANNA BANCSHARES, INC.
Annual Meeting of Shareholders
May 28, 1999 at 10:00 AM
Quality Inn and Suites
2363 Oregon Pike, Lancaster, PA
Only Shareholders of Susquehanna, their proxies, and invited guests of
Susquehanna may attend the Annual Meeting.
Directions:
From Philadelphia, New Jersey and New York:
From the NJ turnpike, take Route 76/276 (PA turnpike). Follow PA turnpike
west to Exit #21. Follow Route 222 South for about 12 miles. Exit onto Route
272/Oregon Pike. Go to the stop sign, turn left onto 272 South. Follow for
about 1 1/2miles to the first traffic light. The hotel is 100 feet ahead on
the left.
From Harrisburg, Pittsburgh and Ohio:
Follow PA turnpike (Route 76) East to Exit #19. Take Route 283 East for about
30 miles where it will join Route 30 East. Exit at Route 501/Lititz Pike.
Continue straight, through the traffic light. At the next traffic light, turn
left onto Route 272/Oregon Pike North. Go through 3 traffic lights. Continue
for an additional 100 yards. The hotel is on the right, before the 4th
traffic light.
From Baltimore, Washington, D.C. and Virginia:
Follow Route 695 North to Route 83 North. Follow Route 83 North to York, PA.
Follow Route 30 East for about 35 miles. Upon arrival of Lancaster, stay in
the right lane for local exits. Follow signs to Route 272 Oregon Pike.
Continue straight, through two traffic lights (Fruitville Pike and Lititz
Pike). At the next traffic light, turn left onto Route 272/Oregon Pike North.
Go through 3 traffic lights. Continue for an additional 100 yards. The hotel
is on the right, before the 4th traffic light.
From Northern New Jersey, Bethlehem and Allentown:
Follow Route 78/22 West through Allentown to Route 222 South. Follow Route
222 South beyond Reading toward Lancaster. Continue on Route 222 to the Route
272/Oregon Pike exit. Exit onto Route 272/Oregon Pike. Go to the stop sign,
turn left onto 272 South. Follow for about 1 1/2miles to the first traffic
light. The hotel is 100 feet ahead on the left.
From Wilkes-Barre, Scranton and Binghamton, NY:
Follow I-81 South to Lebanon, PA. Take Route 72 South toward Manheim and
Lancaster. Turn left onto Route 722 East. Continue on Route 722 to Route 272.
Turn right onto Route 272 South. Follow for about 4 miles to the first
traffic light. The hotel is 100 feet ahead on the left.
From Chambersburg, Hagerstown, MD and Virginia,
Follow I-81 North to Chambersburg, PA. Take Route 30 East through Gettysburg
and York toward Lancaster. Upon arrival in Lancaster, stay in the right lane
for local exits. Follow signs to Route 272 Oregon Pike. Continue straight,
through two traffic lights (Fruitville Pike and Lititz Pike). At the next
traffic light, turn left onto Route 272/Oregon Pike North. Go through 3
traffic lights. The hotel is on the right before the 4th traffic light.
- --------------------------------------------------------------------------------
SUSQUEHANNA BANCSHARES, INC.
PROXY/VOTING INSTRUCTION CARD
This proxy is solicited on behalf of the Board of Directors of Susquehanna
Bancshares, Inc. for the Annual Meeting on May 28, 1999.
I (We) hereby constitute and appoint James H. Shreiner and Kenneth E. Miller,
and each of them, proxies with full power of substitution, to vote all of the
shares of common stock of Susquehanna Bancshares, Inc. ("Susquehanna") which I
(we) may be entitled to vote at the Annual Meeting of Shareholders of
Susquehanna to be held at The Quality Inn and Suites, 2363 Oregon Pike,
Lancaster, Pennsylvania on Friday, May 28, 1999, at 10:00 a.m., prevailing time,
and at any adjournment thereof, as set forth in this Proxy.
THIS PROXY WILL BE VOTED AS SPECIFIED. IF A CHOICE IS NOT SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE NOMINEES FOR DIRECTORS.
---
For Participants in the Susquehanna Employee Stock Purchase Plan: I instruct
the Custodian to sign a proxy for me in substantially the form set forth above
and on the reverse side. The Custodian shall mark the proxy as I specify. If a
choice is not specified, my shares will be voted FOR the nominees for directors.
---
(Continued and to be dated and signed on the reverse side.)
SUSQUEHANNA BANCSHARES, INC.
P.O. BOX 11433
NEW YORK, N.Y. 10203-0433