<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the Appropriate Box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2)
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
HARLEYSVILLE NATIONAL CORPORATION
(Name of Registrant as Specified in Its Charter)
Bowne of Philadelphia
(Name of Person(s) Filing Proxy Statement)
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)
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 transactions
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):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule O-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 2
HARLEYSVILLE NATIONAL CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 11, 2000
TO THE SHAREHOLDERS OF HARLEYSVILLE NATIONAL CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Harleysville National Corporation will be held at 9:30 a.m., prevailing time, on
Tuesday, April 11, 2000, at Indian Valley Country Club, 650 Bergey Road,
Telford, PA 18969, for the following purposes:
1. Election of two Class B Directors: LeeAnn Bergey and Palmer E.
Retzlaff, each for a term of 4 years; and
2. Transaction of any other business properly brought before the
Annual Meeting and at any adjournment or postponement of the
meeting.
In accordance with the by-laws of the corporation and action of the
Board of Directors, only those shareholders of record at the close of business
on February 25, 2000, will be entitled to notice of and to vote at the Annual
Meeting and any adjournment or postponement thereof.
A copy of the corporation's Annual Report for the fiscal year ended
December 31, 1999, accompanies this Notice. Copies of the corporation's Annual
Report for the 1998 fiscal year may be obtained at no cost by contacting the
Secretary of the corporation, Harleysville National Corporation, 483 Main
Street, P.O. Box 195, Harleysville, Pennsylvania 19438-0195, telephone
215-256-8851.
The corporation urges you to mark, sign, date, and promptly return your
proxy in the enclosed envelope so that your shares may be voted in accordance
with your wishes and to assure the presence of a quorum. The prompt return of
your signed proxy, regardless of the number of shares you hold, will aid the
corporation in reducing the expense of additional proxy solicitations. Giving
your proxy does not affect your right to vote in person if you attend the
meeting and give written notice to the Secretary of the corporation.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Walter E. Daller, Jr.
-------------------------
Walter E. Daller, Jr.
Chairman, President
and Chief Executive Officer
March 13, 2000
Harleysville, Pennsylvania
<PAGE> 3
PROXY STATEMENT
Dated and to be mailed March 13, 2000
HARLEYSVILLE NATIONAL CORPORATION
483 MAIN STREET
HARLEYSVILLE, PENNSYLVANIA 19438-0195
(215) 256-8851
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 11, 2000
TABLE OF CONTENTS
QUESTIONS AND ANSWERS.................................................... 3
VOTING METHODS........................................................... 4
PROPOSAL NO. 1 - Election of Class B Directors........................... 5
PRINCIPAL OWNERS......................................................... 6
BENEFICIAL OWNERSHIP BY OFFICERS, DIRECTORS AND NOMINEES................. 6
INFORMATION CONCERNING DIRECTORS......................................... 7
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS........................ 8
COMPENSATION OF DIRECTORS................................................ 9
EXECUTIVE COMPENSATION................................................... 10
REPORT OF THE COMPENSATION COMMITTEE..................................... 16
SHAREHOLDER RETURN PERFORMANCE GRAPH..................................... 19
SECTION 16(a) REPORTING COMPLIANCE....................................... 20
INDEPENDENT AUDITORS..................................................... 20
ADDITIONAL INFORMATION................................................... 21
OTHER MATTERS............................................................ 21
2
<PAGE> 4
QUESTIONS AND ANSWERS
Q: WHAT AM I VOTING ON?
A: Election of 2 Class B Directors:
- LeeAnn Bergey
- Palmer E. Retzlaff
Q: WHO IS ENTITLED TO VOTE?
A: Shareholders on the record date, the close of business on February 25, 2000.
Q: HOW MANY VOTES DO I HAVE?
A: Each share of common stock is entitled to one vote.
Q: HOW DO I VOTE?
A: You may cast your vote by completing and mailing your proxy card or by
attending the meeting in person.
Q: HOW DOES DISCRETIONARY AUTHORITY APPLY?
A: If you sign your proxy card, and do not make any selections, you give
authority to James W. Hamilton and Vernon L. Hunsberger to vote on the
proposal and any other matter that may arise at the meeting.
Q: IS MY VOTE CONFIDENTIAL?
A: Yes. Only the inspector, American Stock Transfer and Trust
Company/Shareholder Services, and certain employees have access to your
card. All comments remain confidential, unless you ask that your name be
disclosed.
Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
A: Your shares are probably registered differently or are in more than one
account. Sign and return all proxy cards to ensure that all your shares are
voted. Please have all of your accounts registered in the same name and
address. You may do this by contacting our transfer agent, American Stock
Transfer and Trust Company/ Shareholder Services, 800-937-5449.
Q: WHAT CONSTITUTES A QUORUM?
A: The corporation is currently authorized to issue 30,000,000 shares of common
stock, par value $1.00 per share, and 3,000,000 shares of series preferred
stock, par value $1.00 per share. As of February 25, 2000, 7,915,552 shares
of Harleysville National Corporation's common stock were issued and
outstanding. No shares of preferred stock are outstanding. A majority of the
outstanding shares, present or represented by proxy, constitutes a quorum.
If you vote by proxy card, you will be considered part of the quorum. If you
are present or represented by a proxy at the Annual Meeting and you abstain,
your abstention will have the same effect as a vote against the proposals.
Q: WHEN ARE THE SHAREHOLDER PROPOSALS DUE FOR YEAR 2001 ANNUAL MEETING?
A: Shareholder proposals must be submitted in writing by Wednesday, November
15, 2000, to the Secretary of Harleysville National Corporation at 483 Main
Street, P.O. Box 195, Harleysville, PA 19438-0195.
Q: HOW DOES A SHAREHOLDER NOMINATE A DIRECTOR OF HARLEYSVILLE NATIONAL
CORPORATION?
A: Submit a written recommendation to the Chairman of the Nominating Committee,
c/o Secretary of the corporation, Harleysville National Corporation, 483
Main Street, P.O. Box 195, Harleysville, PA 19438-0195. The recommendation
must include a notarized statement from the nominee indicating willingness
to serve, if elected, and principal occupations or employment over the past
five years.
3
<PAGE> 5
QUESTIONS AND ANSWERS
Q: WHO IS RESPONSIBLE FOR THE SOLICITATION EXPENSES?
A: American Stock Transfer and Trust Company, the corporation's transfer agent
and registrar, will assist in the distribution of proxy materials and
solicitation of votes according to the terms of the corporation's present
contract with the transfer agent.
The corporation is responsible for expenses related to distribution of proxy
materials and solicitation of votes and will reimburse American Stock Transfer
and Trust Company, stockbrokers and other custodians, nominees and fiduciaries
for their reasonable out-of-pocket expenses for forwarding proxy and
solicitation material to the owners of the corporation's common stock.
VOTING METHODS
YOU HAVE THE RIGHT TO VOTE AND, IF DESIRED, TO REVOKE YOUR PROXY AT ANY TIME
BEFORE THE ANNUAL MEETING:
- BY GIVING WRITTEN NOTICE OF REVOCATION TO THE SECRETARY OF
HARLEYSVILLE NATIONAL CORPORATION AT 483 MAIN STREET, P.O. BOX 195,
HARLEYSVILLE, PA 19438-0195;
- BY EXECUTING A LATER-DATED PROXY AND GIVING WRITTEN NOTICE THEREOF
TO THE SECRETARY OF THE CORPORATION; OR
- BY VOTING IN PERSON AFTER GIVING WRITTEN NOTICE TO THE SECRETARY OF
THE CORPORATION.
SHOULD YOU HAVE ANY QUESTIONS, PLEASE CALL AMERICAN STOCK TRANSFER AND TRUST
COMPANY 800-937-5449.
[MAILBOX GRAPHIC]
- Mark your selections
- Date and sign your name exactly as it appears on your card
- Mail to American Stock Transfer and Trust Company Shareholder
Services in the return envelope
4
<PAGE> 6
PROPOSAL NO. 1
ELECTION OF CLASS B DIRECTORS
Nominees for election this year are:
- LeeAnn Bergey - director since 1999
- Palmer E. Retzlaff - director since 1996
Each nominee has consented to serve a 4 year term and until their
successors are elected and qualified.
The by-laws of Harleysville National Corporation provide that the Board
of Directors will not have less than 5 members or more than 25 members. The
Board of Directors is divided into 4 classes. Each class is elected for a 4 year
term. The Board of Directors has authority to fix the number of directors in
each class, and the authority to change that number at any time. No person may
be elected to serve as a director if they are not of legal age. No person over
72 may serve as a director. The Board of Directors has fixed the number of Board
members at 10 with 2 directors in each of Classes B and C, and 3 directors in
each of Classes A and D. Section 11.1 of the by-laws requires that a majority of
the remaining members of the Board of Directors select and appoint directors to
fill vacancies, even if the number of remaining members are less than a quorum.
Each person who is appointed in this manner serves as a director until the
expiration of the term of office of the class of directors to which he or she
was appointed.
The Board of Directors recommends a vote FOR the election of these
Class B Directors.
5
<PAGE> 7
PRINCIPAL OWNERS
The following table indicates the name and address of each person or
business group who owns more than 5% of Harleysville National Corporation's
total outstanding shares of common stock as of February 25, 2000. The
corporation also lists the number of shares and the percentage of total
outstanding shares beneficially owned by each person or business group.
<TABLE>
<CAPTION>
SHARES PERCENT OF OUTSTANDING
BENEFICIALLY COMMON STOCK
NAME AND ADDRESS OWNED (1) BENEFICIALLY OWNED
- ---------------- --------- ------------------
<S> <C> <C>
The Harleysville National Bank and Trust Company 448,765 (2) 5.61%
Trust Department
483 Main Street
P.O. Box 195
Harleysville, Pennsylvania 19438-0195
</TABLE>
- ----------------
(1) The securities "beneficially owned" by an individual are determined
according to the definitions of "beneficial ownership" found in the General
Rules and Regulations of the Securities and Exchange Commission and may
include securities owned by or for the individual's spouse and minor
children and any other relative who resides in the same home, as well as
securities that the individual has or shares the right to vote or the
authority to make investment decisions or any shares the individual has the
right to acquire beneficial ownership of within 60 days after February 25,
2000. Beneficial ownership may be disclaimed under certain circumstances.
(2) Shares held by The Harleysville National Bank and Trust Company's Trust
Department are held in its fiduciary capacity. Harleysville National Bank
and Trust Company's Trust Department has sole power to vote or to direct
the vote of 448,765 shares and sole power to make investment decisions for
448,765 shares. Harleysville National Bank and Trust Company's Trust
Department intends to vote all shares under its control FOR the election of
the nominees for Class B Directors proposed in this proxy statement.
BENEFICIAL OWNERSHIP BY OFFICERS, DIRECTORS AND NOMINEES
The following table indicates the amount and percentage of Harleysville
National Corporation's total outstanding shares of common stock beneficially
owned by each named officer, director and nominee for director and by all
officers of Harleysville National Corporation and its banking subsidiaries as a
group, as of February 25, 2000.
<TABLE>
<CAPTION>
SHARES PERCENT OF OUTSTANDING
BENEFICIALLY COMMON STOCK
NAME AND POSITION OWNED BENEFICIALLY OWNED
- ----------------- ----- ------------------
<S> <C> <C>
Walter E. Daller, Jr., Director and Officer (4) 166,028 (5) 2.07%
LeeAnn Bergey, Director (2) 4,045 (6) *
Martin E. Fossler, Director (4) 16,195 (7) *
Harold A. Herr, Director (1) 16,365 (8) *
Thomas S. McCready, Director (4) 133,046 (9) 1.66%
Henry M. Pollak, Director (1) 22,760 (10) *
Palmer E. Retzlaff, Director (2) 6,748 (11) *
Walter F. Vilsmeier, Director (1) 10,123 (12) *
William M. Yocum, Director (3) 38,821 (13) *
All Officers and Directors as a Group (24 persons) 474,201 (14) 5.92%(15)
</TABLE>
- -----------
*Less than one percent (1%) unless otherwise indicated.
(1) Class A Director whose term expires in 2003.
(2) Class B Director whose term expires in 2000 and a nominee for Class B
Director whose term will expire in 2004.
6
<PAGE> 8
(3) Class C Director whose term expires in 2001.
(4) Class D Director whose term expires in 2002.
(5) Includes: 25,308 shares solely owned by W. Daller; 125,272 shares owned
jointly with spouse; 12,955 shares owned solely by spouse; and 2,493
exercisable stock options.
(6) Includes: 107 shares owned jointly with spouse; and 3,938 exercisable stock
options.
(7) Includes: 11,687 shares solely owned by M. Fossler; 570 shares owned by
spouse; and 3,938 exercisable stock options.
(8) Includes: 12,427 shares solely owned by H. Herr; and 3,938 exercisable
stock options.
(9) Includes: 67,825 shares owned as Trustee of his personal trust; and 61,283
shares owned by his spouse as Trustee of her personal trust; and 3,938
exercisable stock options.
(10) Includes: 18,822 shares owned jointly with spouse; and 3,938 exercisable
stock options.
(11) Includes: 2,810 shares solely owned by P. Retzlaff; and 3,938 exercisable
stock options.
(12) Includes: 6,185 shares solely owned by W. Vilsmeier; and 3,938 exercisable
stock options.
(13) Includes: 34,883 shares solely owned by W. Yocum; and 3,938 exercisable
stock options.
(14) Does not include 448,765 shares held by the Trust Department of The
Harleysville National Bank and Trust Company in its fiduciary capacity.
(15) The percent of class assumes the exercise of all outstanding options issued
to directors, employee directors, and officers and, therefore, on a pro
forma basis, 8,005,366 shares of common stock outstanding.
INFORMATION CONCERNING DIRECTORS
Two Directors will be elected at the Annual Meeting to serve as Class B
Directors for a four-year term expiring in the year 2004.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR OF
FOR PAST FIVE YEARS AND CORPORATION
NAME AGE POSITION HELD WITH THE CORPORATION SINCE
- ---- --- ---------------------------------- -----
<S> <C> <C> <C>
CLASS A DIRECTORS
TO SERVE UNTIL 2003
Walter F. Vilsmeier 70 Chief Executive Officer - Vilsmeier Auction Co., 1987
Inc., auction and appraisal services
Harold A. Herr 52 Partner - Albert S. Herr & Sons, 1987
Agri-Business
Henry M. Pollak 68 President - American Machine and Tool, 1996
manufacturer of pumps and woodworking tools;
Director of Security National Bank
CURRENT CLASS B DIRECTORS AND
NOMINEES FOR CLASS B DIRECTOR
TO SERVE UNTIL 2004
Palmer E. Retzlaff 68 President - Southwest Grain Company, a grain 1996
import and export business; Director, Teleflex,
Inc.; and Paris Business Corp.
LeeAnn Bergey 46 President - Bergey's Leasing Associates, a 1999
full-service truck leasing and rental company
</TABLE>
7
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR OF
FOR PAST FIVE YEARS AND CORPORATION
NAME AGE POSITION HELD WITH THE CORPORATION SINCE
- ---- --- ---------------------------------- -----
<S> <C> <C> <C>
CLASS C DIRECTORS
TO SERVE UNTIL 2001
William M. Yocum 65 President - W. M. Yocum Machine Company 1984
CLASS D DIRECTORS
TO SERVE UNTIL 2002
Walter E. Daller, Jr. 60 Chairman of the Board, President and Chief 1977
Executive Officer of the corporation; Chairman
and Chief Executive Officer of Harleysville;
Director of Citizens National Bank since 1991;
and Director of Security National Bank since 1994
Martin E. Fossler 71 Retired - formerly President MEFCO, a 1984
manufacturer of industrial packaging
Thomas S. McCready 69 Attorney-at-law; Chairman of the Board and 1996
Director of Citizens National Bank
</TABLE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
<TABLE>
<CAPTION>
INVESTMENT PENSION RISK
BOARD MEMBER CORPORATE AUDIT COMPENSATION COMPLIANCE EXECUTIVE AND FUNDS NOMINATING & 401(K) MANAGEMENT TRUST
BOARD MANAGEMENT PLAN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
W. E. Daller, Jr. X X
L. Bergey X X
M. E. Fossler X X X X X
H. A. Herr X X X
T. S. McCready X X X
H. M. Pollak X X X
P. E. Retzlaff X X X X X
W. F. Vilsmeier X X X X X
W. M. Yocum X X X
MEETINGS HELD 9 5 2 2 2 4 1 6 3 4
IN 1999
</TABLE>
- - AUDIT:
Reviews auditing, accounting, financial reporting and internal control
functions. Recommends our independent accountant and reviews their
services. All members are non-employee directors.
- - COMPENSATION:
Administers executive compensation programs, policies, and practices. Acts
in an advisory role on employee compensation. All members are non-employee
directors.
- - COMPLIANCE:
Assures the Board of Directors that Harleysville National Corporation's
banking subsidiaries are in compliance with all applicable laws and
regulations.
- - EXECUTIVE:
Acts, with limited powers, on behalf of the Board whenever the Board is not
in session. Meets only as needed.
- - INVESTMENT AND FUNDS MANAGEMENT:
Oversees the Investment Policy, reviews liquidity, and approves the type
and maturity of investments.
8
<PAGE> 10
- - NOMINATING:
Considers and recommends nominees for election as directors and officers.
Reviews and evaluates the Board and its members. All members are
non-employee directors.
- - PENSION & 401(k) PLAN:
Ensures the retirement plans are meeting the needs of the employees at a
reasonable cost to the corporation. Evaluates the investment performance,
recommends plan revisions and reviews the performance of the plan
administrators and investment managers.
- - RISK MANAGEMENT:
Oversees the corporation's documentation, measurement and monitoring of the
major risk components of a banking company.
- - TRUST:
Administers policies and procedures for the Investment Management and Trust
Division. Reviews all exceptions to Trust accounts. Reviews financial
reporting for division.
The members of the Board of Directors of the corporation also serve as
the members of the Board of Directors of The Harleysville National Bank and
Trust Company, with the exception of Mr. McCready and Mr. Pollak. During 1999,
the corporation held 9 regular monthly board meetings, the Annual Meeting and
the annual reorganization meeting. All of the directors attended at least 75% of
the meetings of the Boards of Directors of the corporation and the bank and of
the committees of which they were members.
COMPENSATION OF DIRECTORS
Directors of Harleysville National Corporation do not receive a fee for
meetings attended, with the exception of Mr. McCready and Mr. Pollak who receive
one-half of the annual retainer fee and one-half of the meeting fee paid to
Directors of The Harleysville National Bank and Trust Company for each meeting
of the corporation attended. These reduced fees are paid to Messrs. McCready and
Pollak in recognition of the time and travel necessary to attend the meetings of
the corporation. Historically, the corporation holds fewer meetings than each of
its banking subsidiaries. Directors of The Harleysville National Bank and Trust
Company received a fee of $445 for each board meeting attended, an annual
retainer fee of $7,300, and also received a fee of $325 for each committee
meeting they attended. Directors were not compensated for committee meetings
less than 15 minutes in duration or for committee meetings held prior to a Board
meeting. Each Director of The Harleysville National Bank and Trust Company
received a bonus of $2,625. In the aggregate, the Board of Directors of
Harleysville received $126,368.
Harleysville National Corporation maintains deferred compensation plans
for its directors. In the past, certain directors elected to defer, with
interest, all or part of their compensation for future distribution. Under the
terms of the plan, benefits can be paid out to the respective directors over a
ten-year period. Should the director die before age 70 or before receiving all
of the benefits, those benefits would be paid to his or her beneficiary until
age 70 or for ten years, whichever shall be greater. This plan is considered an
unfunded plan, which is subject to substantial risk of forfeiture, and the
director is not considered to be vested according to the plan.
1998 INDEPENDENT DIRECTORS STOCK OPTION PLAN
Harleysville National Corporation maintains a stock option plan to
advance the development, growth and financial condition of the corporation and
its subsidiaries; and, to secure, retain and motivate non-employee directors.
During 1999, there were 35,442 shares granted under the plan. As of December 31,
1999, a total of 43,308 shares remain available for grant under the plan. All
totals reflect adjustment for a 5% stock dividend paid September 30, 1999. There
were no options exercised under the plan during 1999.
9
<PAGE> 11
EXECUTIVE COMPENSATION
Shown below is information concerning annual and long-term compensation
for services in all capacities to Harleysville National Corporation and its
banking subsidiaries for the fiscal years ending December 31, 1999, 1998, and
1997 for those individuals who served as Harleysville National Corporation's
Chief Executive Officer, and were executive officers (other than the Chief
Executive Officer) whose total annual salary and bonus exceeded $100,000 at
December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Restricted Options LTIP All Other
Name and Position Year Salary Bonus Other Stock (Shares)(1) Payouts Compensation(2)
----------------- ---- ------ ----- ----- ----- --------- ------- ---------------
($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Walter E. Daller, Jr. 1999 357,000 212,500 -- -- -- -- 144,244
Chairman, President and CEO; 1998 358,183 193,100 -- -- 9,975 -- 144,244
Chairman and CEO 1997 336,680 171,400 -- -- -- -- 144,194
Harleysville National Bank
Demetra M. Takes 1999 190,000 76,000 -- -- -- -- 62,011
Vice President; 1998 168,173 67,000 -- -- 5,250 -- 62,011
President and COO 1997 158,000 60,000 -- -- -- -- 61,951
Harleysville National Bank
Vernon L. Hunsberger 1999 109,725 25,000 -- -- -- -- 16,801
Treasurer; Sr. Vice President, 1998 106,510 27,500 -- -- 2,625 -- 16,704
CFO and Cashier, 1997 100,000 25,000 -- -- -- -- 16,440
Harleysville National Bank
Clay T. Henry 1999 124,800 27,500 -- -- -- -- 3,744
Sr. Vice President, 1998 94,615 14,100 -- -- 3,150 -- 1,454
Harleysville National Bank 1997 -- -- -- -- -- -- --
Fred C. Reim, Jr. 1999 128,726 30,000 -- -- -- -- 3,862
President and CEO, 1998 120,464 25,000 -- -- 5,250 -- 3,614
Security National Bank 1997 107,585 26,900 -- -- -- -- 3,228
</TABLE>
(1) Options (shares) granted in 1998 have been adjusted to reflect a 5% stock
dividend paid September 30, 1999.
(2)MAJOR COMPONENTS OF ALL OTHER COMPENSATION INCLUDE:
<TABLE>
<CAPTION>
Directors Supplemental Harleysville's
Deferred Executive Retirement Profit
Compensation Plan Plan Sharing Plan
----------------- ---- ------------
<S> <C> <C> <C>
Walter E. Daller, Jr.
1999 6,990 132,454 4,800
1998 6,990 132,454 4,800
1997 6,990 132,454 4,750
Demetra M. Takes
1999 -- 57,211 4,800
1998 -- 57,211 4,800
1997 -- 57,211 4,740
Vernon L. Hunsberger
1999 -- 13,509 3,292
1998 -- 13,509 3,195
1997 -- 13,509 2,931
Clay T. Henry
1999 -- -- 3,744
1998 -- -- 1,454
1997 -- -- --
Fred C. Reim, Jr.
1999 -- -- 3,862
1998 -- -- 3,614
1997 -- -- 3,228
</TABLE>
10
<PAGE> 12
EXECUTIVE COMPENSATION
In 1998, Harleysville National Corporation and/or The Harleysville
National Bank and Trust Company, and/or Security National Bank and/or Citizens
National Bank entered into employment agreements with certain key executives.
Harleysville National Corporation and The Harleysville National Bank
and Trust Company entered into an employment agreement with Mr. Walter E.
Daller, Jr., Chairman, President and Chief Executive Officer of the corporation
and Chairman and Chief Executive Officer of the bank. The agreement is for a
term of 5 years. The term renews automatically at the end of the five-year
period for an additional three-year term. The employment agreement renews
automatically at the end of the three-year extension for additional one-year
terms. The corporation and the bank must provide written notice to Mr. Daller of
non-renewal prior to the automatic extension dates if they do not want the
agreement to automatically renew. The agreement specifies Mr. Daller's position
and duties, compensation and benefits, and indemnification and termination
provisions. The agreement also contains a non-competition provision and a
confidentiality provision.
Under the terms of his employment agreement, Mr. Daller serves as the
Chairman, President and Chief Executive Officer of the Harleysville National
Corporation and Chairman and Chief Executive Officer of The Harleysville
National Bank and Trust Company. Mr. Daller is entitled to an annual direct
salary of $340,000 for 1998 and $357,000 in 1999. This salary may be increased
in subsequent years as the Board of Directors deems appropriate. In addition,
the Boards of Directors of the corporation and the bank may pay a periodic bonus
to Mr. Daller. Effective January 1, 1999, Mr. Daller is not entitled to receive
director's fees or other compensation for serving on the corporation's and the
bank's Boards of Directors or committees. Mr. Daller is also entitled to receive
employee benefits made available by The Harleysville National Bank and Trust
Company to its employees and to the use of an automobile.
If the corporation terminates Mr. Daller's employment for cause, then
his rights under the agreement terminate as of the effective date of his
termination. If Mr. Daller terminates his employment for good reason, then he is
entitled to an amount equal to the balance of his "Agreed Compensation" for the
then remaining employment period or 2.99 times his "Agreed Compensation,"
whichever is greater. Mr. Daller's rights under the agreement terminate
automatically upon his disability, except, however, that Mr. Daller will receive
an amount equal to and no greater than 70% of his "Agreed Compensation" until
the earliest to occur of his return to work, his attainment of age 65 or his
death. Mr. Daller's rights under the agreement terminate upon his death and
Harleysville National Corporation and The Harleysville National Bank and Trust
Company will pay 2.99 times his annual base salary to his designated
beneficiary. If Mr. Daller retires prior to the expiration of the agreement, the
corporation and the bank will pay Mr. Daller a lump sum of 1.5 times his "Agreed
Compensation." If Mr. Daller's employment is terminated as a result of a change
in control, then he is entitled to receive a lump sum payment equal to no
greater than 2.99 times his "Agreed Compensation." In addition, Mr. Daller has
certain rights to continuation of his life, disability, medical insurance, and
other normal health and welfare benefits.
In 1998, Harleysville National Corporation and its banking subsidiaries
also entered into employment agreements with:
- Demetra M. Takes, President and Chief Operating Officer, The
Harleysville National Bank and Trust Company
- Vernon L. Hunsberger, Chief Financial Officer and Cashier, The
Harleysville National Bank and Trust Company
- Fred C. Reim, Jr., President and Chief Executive Officer,
Security National Bank
- Thomas D. Oleksa, President and Chief Executive Officer, Citizens
National Bank
These employment agreements are similar to Walter E. Daller, Jr.'s
agreement, except that the term is for 3 years and renews automatically at the
end of the three-year period for additional one-year terms.
11
<PAGE> 13
OPTION GRANTS
There were no stock options granted to executive officers during the
fiscal year ended December 31, 1999.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES
The table below shows information about all exercises of stock options
by the named officers during the last fiscal year as well as the fiscal year-end
option values for each named executive officer under the 1993 Stock Incentive
Plan and held by them at December 31, 1999. The options and information shown in
the table have been adjusted to reflect a 5% stock dividend paid September 30,
1999.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-money
Acquired Options/at Options/at
Name and on Value FY-End FY-End (1)
Principal Position Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------ -------- -------- ------------------------- -------------------------
(#) ($) (#)(2) ($)
<S> <C> <C> <C> <C>
Walter E. Daller, Jr. -- -- 2,493/7,482 --/--
Chairman, President and CEO;
Chairman and CEO
Harleysville National Bank
Demetra M. Takes -- -- 2,625/2,625 --/--
Vice President;
President and COO
Harleysville National Bank
Vernon L. Hunsberger -- -- 1,312/1,313 --/--
Treasurer; Sr. Vice President,
CFO and Cashier,
Harleysville National Bank
Clay T. Henry -- -- 630/2,520 --/--
Sr. Vice President,
Harleysville National Bank
Fred C. Reim, Jr. -- -- 4,084/2,990 13,813/3,456
President and CEO,
Security National Bank
</TABLE>
(1) Market value of underlying securities based on the closing price of the
corporation's common shares on the NASDAQ Stock Exchange on December 31,
1999, minus the exercise price.
(2) Shares granted under the 1993 Stock Incentive Plan.
12
<PAGE> 14
PENSION PLAN
Harleysville National Corporation maintains a non-contributory funded
pension plan for all full-time employees of its banking subsidiaries over age 21
who have completed 1 year of service. Annual benefits to eligible retired
employees at age 65 or, if later, the 5th anniversary of the first day of the
plan year in which they began to participate in the plan, are provided according
to the following formula:
The product of (A) and (B), where
(A) is the sum of:
(i) .65% of average compensation, plus
(ii) .60%, (.56% or .52% for participants whose social security
retirement age is 66 or 67, respectively) of average
compensation above the covered compensation level of an
individual attaining the social security retirement age in
the current plan year; and
(B) is the participant's years of service as of his normal retirement
date, but not in excess of 25 years.
Average compensation is the average of the highest 5 consecutive salaries,
excluding bonuses, during the last 10 years of employment. Compensation for
pension purposes is limited to $160,000 for calendar years 1999, 1998, and 1997
(for 1996 and earlier the compensation limit was $150,000) as required under
federal pension law. The bank made no contributions to the pension plan for the
years ending December 31, 1999, December 31, 1998, and December 31, 1997.
The following table shows the estimated annual retirement benefit payable
according to the pension plan to an officer currently age 65 for his lifetime.
The table does not reflect any limitations on benefits to participants that may
apply under the Internal Revenue Code. Benefits listed in the table below are
integrated with Social Security.
<TABLE>
<CAPTION>
Average
Annual 10 Years 15 Years 20 Years 25 Years 30 Years
Earnings of Service of Service of Service of Service of Service
-------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 75,000 $ 7,391 $11,087 $14,782 $18,478 $18,478
100,000 10,516 15,774 21,032 26,291 26,291
125,000 13,641 20,464 27,282 34,103 34,103
150,000 16,766 25,149 33,532 41,916 41,916
160,000 18,016 27,024 36,032 45,041 45,041
</TABLE>
Walter E. Daller, Jr., Chairman, President and Chief Executive Officer of
Harleysville National Corporation has 25 years of credited service under the
pension plan. Average salary upon which benefits would be calculated at December
31, 1999, is $156,000.
Demetra M. Takes, President of The Harleysville National Bank and Trust
Company, has 25 years of credited service under the pension plan. Average salary
upon which benefits would be calculated at December 31, 1999, is $153,555.
Vernon L. Hunsberger, Senior Vice President of The Harleysville National
Bank and Trust Company, has 25 years of credited service under the pension plan.
Average salary upon which benefits would be calculated at December 31, 1999, is
$100,577.
Clay T. Henry, Senior Vice President of The Harleysville National Bank and
Trust Company, has 2 years of credited service under the pension plan. Average
salary upon which benefits would be calculated at December 31, 1999, is
$109,708.
Fred C. Reim, Jr., President and Chief Executive Officer of Security
National Bank, has 6 years of credited service under the pension plan. Average
salary upon which benefits would be calculated at December 31, 1999, is
$111,453.
13
<PAGE> 15
401(k) PLAN
Harleysville National Corporation maintains a 401(k) plan. It is a
tax-exempt profit-sharing plan, qualified under 401(k) of the Internal Revenue
Code. All employees are eligible to participate on the first day of the calendar
quarter following six months of service, if they are 21 years of age, and they
may contribute a maximum of 15% salary on a pre-tax basis with a 50% employer
match up to a maximum of 3% of salary. The funds in the 401(k) plan are managed
by an independent investment manager. Distributions are made upon normal
retirement at age 65, early retirement at age 55 with a minimum of 15 years of
service, or upon disability, death, termination or hardship. A participant may
elect distributions in a lump sum, in installments, or as an annuity for life.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Harleysville National Bank and Trust Company maintains a Supplemental
Executive Retirement Plan for certain officers and key employees of the banking
subsidiaries. The plan provides for payment to the covered employee of an annual
supplemental retirement benefit equal to 50% of their annual base salary upon
retirement, thereafter offset by the employer's share of social security,
defined benefit pension and available employer's 401(k) matching contribution.
There is a lifetime payout in retirement benefits with a minimum payout of 10
years. There is a pre-retirement death benefit, payable for 10 years, of 100% of
the annual base salary for the first year, and 50% of the annual base salary for
the next 9 years.
The following table shows the estimated annual retirement benefit payable
according to the Supplemental Executive Retirement Plan to an employee covered
under the Plan:
<TABLE>
<CAPTION>
Base Salary Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
----------- ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$100,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000
125,000 62,500 62,500 62,500 62,500 62,500 62,500 62,500 62,500 62,500 62,500
150,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000
175,000 87,500 87,500 87,500 87,500 87,500 87,500 87,500 87,500 87,500 87,500
200,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000
225,000 112,500 112,500 112,500 112,500 112,500 112,500 112,500 112,500 112,500 112,500
250,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000
275,000 137,500 137,500 137,500 137,500 137,500 137,500 137,500 137,500 137,500 137,500
300,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000
325,000 162,500 162,500 162,500 162,500 162,500 162,500 162,500 162,500 162,500 162,500
350,000 175,000 175,000 175,000 175,000 175,000 175,000 175,000 175,000 175,000 175,000
375,000 187,500 187,500 187,500 187,500 187,500 187,500 187,500 187,500 187,500 187,500
400,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000
</TABLE>
Salary upon which benefits would be calculated at December 31, 1999, under
the Supplemental Executive Retirement Plan is $357,000 for Walter E. Daller,
Jr., Chairman, President and Chief Executive Officer of Harleysville National
Corporation and Chairman and Chief Executive Officer of The Harleysville
National Bank and Trust Company; credited coverage under the plan is 14 years.
Salary upon which benefits would be calculated at December 31, 1999, under
the Supplemental Executive Retirement Plan is $190,000 for Demetra M. Takes,
Vice President of Harleysville National Corporation and President of The
Harleysville National Bank and Trust Company; credited coverage under the plan
is 9 years.
Salary upon which benefits would be calculated at December 31, 1999, under
the Supplemental Executive Retirement Plan is $109,725 for Vernon L. Hunsberger,
Treasurer of Harleysville National Corporation and Senior Vice President, Chief
Financial Officer, and Cashier of The Harleysville National Bank and Trust
Company; credited coverage under the plan is 4 years.
14
<PAGE> 16
Clay T. Henry, Senior Vice President of The Harleysville National Bank and
Trust Company, may become eligible to participate in the plan following 5 years
of service.
Fred C. Reim, Jr., President and Chief Executive Officer of Security
National Bank may become eligible to participate in the plan following 5 years
of service.
1998 STOCK INCENTIVE PLAN
Harleysville National Corporation maintains the 1998 Stock Incentive Plan.
The plan's purpose is to advance the development, growth and financial condition
of the corporation. The plan provides that shares of our common stock be issued
to certain employees of the corporation and banking subsidiaries.
A disinterested committee of the corporation's Board of Directors
administers the plan. Awards can be made in the form of incentive stock options,
non-qualified stock options, stock appreciation rights or restricted stock as
the disinterested committee deems appropriate. There are 603,750 stock options
available for grant under the 1998 Stock Incentive Plan. The options available
have been adjusted to reflect a 5% stock dividend paid by the corporation on
September 30, 1999. During 1999, there were no stock options granted under this
plan.
1993 STOCK INCENTIVE PLAN
Harleysville National Corporation maintains the 1993 Stock Incentive Plan.
The plan's purpose is to advance the development, growth and financial condition
of the corporation. The plan provides that shares of our common stock be issued
to certain employees of the corporation and banking subsidiaries.
A disinterested committee of the corporation's Board of Directors
administers the plan. Awards can be made in the form of incentive stock options,
non-qualified stock options, stock appreciation rights or restricted stock as
the disinterested committee deems appropriate. During 1999, the corporation
granted 2,100 incentive stock options to employees. The shares granted under
this plan have been adjusted to reflect a 5% stock dividend paid by the
corporation on September 30, 1999. During 1999, there were no options exercised
under this plan.
HARLEYSVILLE NATIONAL CORPORATION STOCK BONUS PLAN
Harleysville National Corporation maintains the Harleysville National
Corporation Stock Bonus Plan to recognize employees who have -
- a strong interest in the successful operation of the business,
- loyalty to the corporation and banking subsidiaries, and
- visible evidence of increased efficiency.
The Stock Bonus Plan is administered by the compensation committee of
Harleysville National Corporation. The committee determines, annually, in its
sole discretion, the amount of shares the corporation awards.
Harleysville National Corporation awarded 216 shares at the annual
employee awards meeting on January 12, 1999, to certain employees for
exemplary service throughout 1998.
15
<PAGE> 17
REPORT OF THE COMPENSATION COMMITTEE
The Board of Directors of Harleysville National Corporation is responsible
for governance of the corporation and its banking subsidiaries. In fulfilling
its fiduciary duties, the Board of Directors acts in the best interests of our
shareholders, customers and the communities served by the corporation and its
banking subsidiaries. To accomplish the strategic goals and objectives of
Harleysville National Corporation, the Board of Directors employs competent
persons who undertake to accomplish these objectives with integrity and in a
cost-effective manner. The compensation of these individuals is part of the
Board of Directors' fulfillment of its duties to accomplish the corporation's
strategic mission. The wholly-owned banking subsidiaries of the corporation
provide compensation to the respective employees of the corporation and its
banking subsidiaries.
The basic philosophy of Harleysville National Corporation and its banking
subsidiaries' compensation program is to offer competitive compensation
opportunities for all employees based on the individual's contribution and
personal performance. The compensation committee, comprised of 4 outside
directors whose names appear at the end of this report, administers the
compensation program. The objectives of the committee are to establish:
- a fair compensation policy to govern executive officers' base
salaries, and
- incentive plans to attract and motivate competent, dedicated and
ambitious managers whose efforts will enhance the products and
services of Harleysville National Corporation and its banking
subsidiaries.
Management believes that this will result in:
- improved profitability;
- increased dividends to our shareholders; and
- subsequent appreciation in the market value of shares of the
corporation's common stock.
Annually, the Board of Directors reviews and approves the compensation of
the corporation's and its banking subsidiaries' top executives. The top
executives, whose compensation is determined by the committee, include the chief
executive officer, the president and all senior vice presidents. As a guideline
for review in determining appropriate compensation, the committee considers:
- various resource materials, and
- the corporation's earnings and overall performance relative to various
peer groups both in the short term and long term historically.
This peer group of banks with assets over $1 Billion is different than the
peer group used for the Shareholder Return Performance Graph. The principal
resources used for peer group comparisons are:
- 1999 edition of the annual SNL Executive Compensation Review of
Commercial Banks; and
- 1999 edition of the L. R. Webber Associates Salary/Benefits Survey of
the Pennsylvania Financial Services Industry.
The peer group on the "Shareholder Return Performance Graph" includes bank
holding companies and banks listed on NASDAQ that may not be located in
Pennsylvania.
The compensation committee does not deem Section 162 (m) of the Internal
Revenue Code to be applicable to the corporation at this time. The compensation
committee intends to monitor the future application of Section 162 (m) of the
Internal Revenue Code to the compensation paid to its executives, officers and,
in the event that this section becomes applicable, the compensation committee
intends to amend the corporation's compensation plans to preserve the
deductibility of compensation payable under the plans.
16
<PAGE> 18
CHIEF EXECUTIVE OFFICER COMPENSATION
The Board of Directors has determined that the compensation of the chief
executive officer, as increased by 5% over 1999 compensation of $357,000, is
appropriate in light of the following 1999 performance accomplishments as of
September 30, 1999:
for The Harleysville National Bank and Trust Company:
- a 16.0% increase in net income
- a 24.4% return on equity
- a 23.3% increase in assets
- a 1.51% return on assets for Harleysville National Corporation:
- an 8.2% increase in shareholder dividends
There is, however, no direct correlation between the chief executive
officer's compensation, the chief executive officer's increase in compensation
and any of the above criteria, nor is there any specific weight given by the
committee to any of the above individual criteria. The increase in the chief
executive officer's compensation is based on the committee's subjective
determination after review of all information, including the above, that it
deems relevant.
EXECUTIVE OFFICERS
The Board of Directors has established that the compensation of the
executive officers of Harleysville National Corporation and its banking
subsidiaries will increase by 9.0% over 1999 compensation of $1,757,628 in the
aggregate. Compensation increases were determined by the committee based on its
subjective analysis of the individual's contribution to the corporation's
strategic goals and objectives. In determining whether strategic goals have been
achieved, the Board of Directors considers among numerous factors the
corporation's performance as measured by:
- earnings
- revenues
- return on assets
- return on equity
- market share
- total assets
- non-performing loans
Although the performance and increases in compensation were measured in
light of these factors, there is no direct correlation between any specific
criterion and the employee's compensation, nor is there any specific weight
provided to any such criteria in the committee's analysis. The determination by
the committee is subjective after review of all information, including the
above, as it deems relevant.
In addition to base salary, executive officers of Harleysville National
Corporation and its banking subsidiaries may participate currently in the
following annual and long-term incentive plans:
- Pension Plan
- 401(k) Plan
- Non-qualified Supplement Retirement Benefit Plan
- 1993 Stock Incentive Plan
- 1998 Stock Incentive Plan
17
<PAGE> 19
Total compensation opportunities available to the employees of the
corporation and its banking subsidiaries are influenced by:
- general labor market conditions
- the individual's specific responsibilities
- the individual's contributions to our success
Individuals are reviewed annually on a calendar year basis. Harleysville
National Corporation and its banking subsidiaries strive to offer compensation
that is competitive with that offered by employers of comparable size in our
industry. Through these compensation policies, Harleysville National Corporation
strives to meet its strategic goals and objectives to its constituencies and to
provide compensation that is fair and meaningful to its employees.
COMPENSATION COMMITTEE
MARTIN E. FOSSLER, CHAIRMAN
THOMAS S. McCREADY
PALMER E. RETZLAFF
WALTER F. VILSMEIER
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, no current or former officer or employee of Harleysville
National Corporation or of any of its banking subsidiaries served on the
compensation committee. In addition, none of the members of the committee had
any relationship with Harleysville National Corporation or of any of its
subsidiaries that would require disclosure under Item 404 of the Securities and
Exchange Commission's Regulation S-K, relating to insider transactions and
indebtedness of management.
18
<PAGE> 20
SHAREHOLDER RETURN PERFORMANCE GRAPH
A line graph comparing the yearly change in the cumulative total
shareholder return on the corporation's common stock against the cumulative
total return of the NASDAQ Stock Market (U.S. Companies) Index and the NASDAQ
Bank Stocks Index for the period of 5 fiscal years commencing January 1, 1995
and ending December 31, 1999, follows. The shareholder return shown on the graph
below is not necessarily indicative of future performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR HARLEYSVILLE NATIONAL CORPORATION
[LINE GRAPH]
Comparison of Five-Year Cumulative Total Returns
Performance Report for
Harleysville National Corporation
Prepared by the Center for Research in Security Prices
Produced on 02/03/2000 including data to 12/31/1999
Company Index: CUSIP Ticker Class Sic Exchange
41285010 HNBC 6020 NASDAQ
Fiscal Year-end is 12/31/1999
Market Index: Nasdaq Stock Market (US Companies)
Peer Index: Nasdaq Bank Stocks
SIC 6020-6029, 6710-6719 US & Foreign
<TABLE>
<CAPTION>
Date Company Index Market Index Peer Index
<S> <C> <C> <C>
12/30/1994 100.000 100.000 100.000
01/31/1995 95.089 100.527 103.358
02/28/1995 100.000 105.809 108.414
03/31/1995 95.286 108.951 109.484
04/28/1995 97.084 112.381 112.519
05/31/1995 89.892 115.288 115.967
06/30/1995 97.278 124.623 120.898
07/31/1995 93.206 133.775 126.593
08/31/1995 96.091 136.491 133.407
09/29/1995 99.785 139.634 136.487
10/31/1995 95.685 138.829 138.715
11/30/1995 102.064 142.086 145.849
12/29/1995 104.801 141.335 149.002
01/31/1996 104.801 142.042 149.349
02/29/1996 95.608 147.456 151.400
03/29/1996 99.551 147.952 154.871
04/30/1996 98.162 160.208 154.083
05/31/1996 97.236 167.558 156.669
06/28/1996 103.833 160.006 157.446
07/31/1996 98.446 145.762 155.486
08/30/1996 94.038 153.937 166.256
09/30/1996 93.832 165.705 174.226
10/31/1996 98.277 163.870 181.938
11/29/1996 97.783 174.037 195.534
12/31/1996 96.761 173.892 196.734
01/31/1997 98.756 186.232 207.676
02/28/1997 101.749 175.932 219.401
03/31/1997 111.585 164.463 211.497
04/30/1997 110.580 169.582 216.244
05/30/1997 121.638 188.791 229.746
06/30/1997 136.116 194.590 246.095
07/31/1997 144.623 215.098 264.981
08/29/1997 144.623 214.787 262.824
09/30/1997 165.911 227.521 290.231
10/31/1997 162.700 215.665 291.412
11/28/1997 157.883 216.809 302.765
12/31/1997 181.010 213.073 329.387
01/30/1998 170.235 219.816 314.921
02/27/1998 185.320 240.487 332.307
03/31/1998 186.366 249.365 348.173
04/30/1998 182.574 253.566 352.514
05/29/1998 176.614 239.488 340.400
06/30/1998 185.255 256.215 341.060
07/31/1998 176.537 253.220 330.858
08/31/1998 154.742 203.167 269.515
09/30/1998 164.587 231.371 287.914
10/30/1998 153.615 241.360 308.821
11/30/1998 161.296 265.775 318.567
12/31/1998 172.305 300.248 327.115
01/29/1999 155.737 343.910 319.021
02/26/1999 156.842 313.083 316.369
03/31/1999 159.111 335.857 313.989
04/30/1999 155.773 345.300 337.120
05/28/1999 155.495 337.344 331.542
06/30/1999 160.293 367.468 336.987
07/30/1999 160.293 362.118 327.189
08/31/1999 157.211 376.461 314.973
09/30/1999 163.676 375.848 306.687
10/29/1999 158.339 403.163 331.190
11/30/1999 154.187 446.173 326.603
12/31/1999 155.710 542.430 314.424
</TABLE>
The index level for all series was set to 100.0 on 12/30/1994
19
<PAGE> 21
CERTAIN TRANSACTIONS
There have been no material transactions between any director or executive
officer of Harleysville National Corporation or its banking subsidiaries or any
of their associates, and Harleysville National Corporation or its banking
subsidiaries, nor are any such material transactions proposed. The corporation
and its banking subsidiaries have had and intend to continue to have banking and
financial transactions in the ordinary course of business with directors and
executive officers of the corporation and its banking subsidiaries and their
associates on comparable terms and with similar interest rates as those
prevailing from time to time for other customers of its banking subsidiaries.
Total loans outstanding from Harleysville National Corporation and its banking
subsidiaries at December 31, 1999, to the corporation and its banking
subsidiaries' executive officers and directors as a group and members of their
immediate families and companies in which they had an ownership interest of 10%
or more was $8,941,214 or approximately 6.9% of the total equity capital of
Harleysville National Corporation. Loans to such persons were made in the
ordinary course of business and 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. Total
interest paid by the banks during 1999 on deposits held by such persons was
$259,565.
COMPLIANCE WITH SECTION 16(a) REPORTING
The rules of the Securities and Exchange Commission require that the
corporation disclose late filings of reports of stock ownership (and changes in
stock ownership) by its directors and executive officers. To the best of the
corporation's knowledge, there were no late filings during 1999.
INDEPENDENT AUDITORS
Grant Thornton LLP, Certified Public Accountants, of Philadelphia,
Pennsylvania, served as Harleysville National Corporation's independent auditors
for the 1999 fiscal year. Grant Thornton LLP assisted the corporation and its
subsidiaries with:
- preparation of federal and state tax returns; and
- assistance in connection with regulatory matters,
charging the banking subsidiaries for such services at its customary hourly
billing rates. These non-audit services were approved by the corporation's Board
of Directors after due consideration of the effect of the performance thereof on
the independence of the auditors. Grant Thornton LLP has advised the corporation
that none of its members has any financial interest in Harleysville National
Corporation. The Board of Directors of Harleysville National Corporation has
appointed Grant Thornton LLP, Certified Public Accountants, as the corporation's
auditors for the fiscal year ending December 31, 2000.
LEGAL PROCEEDINGS
In the opinion of the management of Harleysville National Corporation and
its banking subsidiaries, there are no proceedings pending to which the
corporation and its banking subsidiaries are a party or to which their property
is subject, which, if determined adversely to the corporation and its banking
subsidiaries, would be material in relation to the corporation's and its banking
subsidiaries' undivided profits or financial condition. There are no proceedings
pending other than routine litigation incident to the business of the
corporation and its banking subsidiaries. In addition, no material proceedings
are pending or are known to be threatened or contemplated against Harleysville
National Corporation and its banking subsidiaries by government authorities.
20
<PAGE> 22
ANNUAL REPORT
We enclose a copy of Harleysville National Corporation's annual report for
the fiscal year ended December 31, 1999, with this proxy statement. We furnish
the annual report to shareholders for their information. We have not
incorporated the annual report, or any part of the annual report in this proxy
statement. A representative of Grant Thornton LLP will attend the annual
meeting, and will have the opportunity to make a statement, if he desires to do
so, and will be available to respond to any appropriate questions presented by
shareholders.
SHAREHOLDER PROPOSALS
Any shareholder who, in accordance with and subject to the provisions of
the proxy rules of the Securities and Exchange Commission, wishes to submit a
proposal for inclusion in Harleysville National Corporation's proxy statement
for the year 2001 Annual Meeting of Shareholders, must deliver the proposal in
writing to the Secretary of the corporation at the principal executive offices
of Harleysville National Corporation at 483 Main Street, P.O. Box 195,
Harleysville, Pennsylvania 19438-0195, on or before Wednesday, November 15,
2000.
ADDITIONAL INFORMATION
Any shareholder may obtain a copy of Harleysville National Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999,
including the financial statements and the Schedules thereto, required to be
filed with the Securities and Exchange Commission, without charge, by submitting
a written request to the Secretary of the corporation, Harleysville National
Corporation, 483 Main Street, P.O. Box 195, Harleysville, Pennsylvania
19438-0195, telephone 215-256-8851.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented for
consideration other than the matters described in the accompanying Notice of
Annual Meeting of Shareholders, but, if any matters are properly presented,
persons named in the accompanying proxy intend to vote on such matters in
accordance with their best judgment.
By Order of the Board of Directors,
/s/ Walter E. Daller, Jr.
-------------------------
Walter E. Daller, Jr.
Chairman, President
and Chief Executive Officer
Date: March 13, 2000
21
<PAGE> 23
HARLEYSVILLE NATIONAL CORPORATION
PROXY
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 11, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints James W. Hamilton and
Vernon L. Hunsberger, and each or any of them, proxies of the undersigned, with
full power of substitution, to vote all of the shares of Harleysville National
Corporation (the "Corporation") which the undersigned may be entitled to vote at
the Annual Meeting of Shareholders of the Corporation to be held at Indian
Valley Country Club, 650 Bergey Road, Telford, Pennsylvania 18969, on Tuesday,
April 11, 2000, at 9:30 a.m., prevailing time, and at any adjournment or
postponement thereof, as follows:
1. ELECTION OF CLASS B DIRECTORS TO SERVE FOR A FOUR-YEAR TERM
/ / FOR all nominees listed below (except as marked to the contrary)
/ / WITHHOLD AUTHORITY
to vote for all nominees listed below
(To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.)
LeeAnn Bergey Palmer E. Retzlaff
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE CLASS B
DIRECTORS LISTED ABOVE.
2. In their discretion the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting and any
adjournment or postponement thereof.
THIS PROXY WHEN PROPERLY SIGNED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR ALL NOMINEES LISTED AT LEFT.
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
Signature (SEAL)
----------------------------------
Signature (SEAL)
----------------------------------
Dated: , 2000
-------------
NOTE: WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE. IF MORE THAN ONE TRUSTEE, ALL SHOULD SIGN. IF STOCK IS
HELD JOINTLY, EACH OWNER SHOULD SIGN.
<PAGE> 24
HARLEYSVILLE NATIONAL CORPORATION
ANNUAL MEETING -- 9:30 A.M.
BREAKFAST -- 8:30 A.M.
APRIL 11, 2000
FOR YOUR CONVENIENCE - RETAIN FOR YOUR REFERENCE
Harleysville National Corporation will conduct its Annual Meeting of
Shareholders on Tuesday, April 11, 2000 at 9:30 a.m. at Indian Valley Country
Club, 650 Bergey Road, Telford, Pennsylvania 18969.
Breakfast will be served prior to the Annual Meeting, beginning at 8:30 a.m. The
meeting will convene promptly at 9:30 a.m.
PLEASE RETURN YOUR PROXY VOTE IF YOU HAVE NOT ALREADY DONE SO.
IF YOU FIND THAT YOUR PLANS HAVE CHANGED AND YOU WILL BE UNABLE TO JOIN US FOR
THE ANNUAL MEETING AND BREAKFAST, KINDLY CALL HARLEYSVILLE NATIONAL
CORPORATION'S SHAREHOLDER SERVICES DEPARTMENT AT 215-256-8851 EXT. 1312, AND
HELP US ELIMINATE UNNECESSARY CHARGES. THANK YOU.
<PAGE> 25
Breakfast Invitation Response
Harleysville National Corporation will conduct its Annual Meeting of
Shareholders on Tuesday, April 11, 2000 at 9:30 a.m. at Indian Valley Country
Club, 650 Bergey Road, Telford, Pennsylvania 18969.
You are cordially invited to join us for breakfast prior to the Annual Meeting,
beginning at 8:30 a.m. The meeting will convene promptly at 9:30 a.m.
Would you be kind enough to help us make appropriate arrangements by filling out
and returning this self-addressed, stamped response card?
For your convenience, enclosed are directions to Indian Valley Country Club.
Please print
name(s)
---------------------------------------------------------
---------------------------------------------------------
( ) Yes, I will join you for breakfast and the Annual Meeting at
Indian Valley Country Club, Tuesday, April 11, 2000.
<PAGE> 26
BUSINESS REPLY MAIL
First Class Permit No. 12 Harleysville, PA 19438
POSTAGE WILL BE PAID BY ADDRESSEE
ATTN: CORPORATE SECRETARY
HARLEYSVILLE NATIONAL CORP
P.O. BOX 195
HARLEYSVILLE PA 19438-0195
<PAGE> 27
DIRECTIONS TO INDIAN VALLEY COUNTRY CLUB
650 BERGEY ROAD - TELFORD, PA 18969 - 215-723-9886
FROM PHILADELPHIA - Take Route 309 North to Souderton-Route 113 Exit. Turn Left
onto Route 113 South, follow 2.4 miles to Bergey Road (just before Getty
Station). Turn Right and follow .9 mile to Indian Valley Country Club.
FROM ALLENTOWN - Take Route 309 South to Souderton-Route 113 Exit. Turn Right
onto Route 113 South, continue 2.4 miles to Bergey Road (just before Getty
Station). Turn Right and follow .9 mile to Indian Valley Country Club.
TURNPIKE ROUTE FROM PHILADELPHIA & ALLENTOWN - Take NE Extension of PA Turnpike
(Route 476) to Lansdale Exit (Exit 31). At end of ramp, turn Right onto Route 63
West, follow 3.7 miles to Route 113. Take Route 113 North 3.2 miles to Telford
Pike (just before Getty Station). Bear Left on Telford Pike for 100 feet & turn
Left onto Bergey Road. Follow Bergey Road for .9 mile to Indian Valley Country
Club.
<PAGE> 28
* * * IMPORTANT NOTICE * * *
LOCATION CHANGE
THE ANNUAL MEETING OF SHAREHOLDERS
OF
HARLEYSVILLE NATIONAL CORPORATION
TO BE HELD
TUESDAY, APRIL 11, 2000
AT
INDIAN VALLEY COUNTRY CLUB
650 BERGEY ROAD
TELFORD, PA 18969
(215) 723-9886
PLEASE JOIN US FOR BREAKFAST PRIOR TO THE ANNUAL MEETING,
BEGINNING AT 8:30 A.M.
THE MEETING WILL CONVENE PROMPTLY AT 9:30 A.M.
