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 Commission Only (as permitted by
Rule 14a-6(e)(2))
[x]Definitive Proxy Statement
[ ]Definitive Additional Materials
[ ]soliciting Material Pursuant to 240.14a-11c or 240.14a-12
Drovers Bancshares Corporation
(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 transactions 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):
(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 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing registrant 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:
_______________________________________________________________________
(Amended by Sec Act Rel No. 7331; Exch Act Rel 37692, eff. 10/7/96.)
DROVERS BANCSHARES CORPORATION
______________________________
30 SOUTH GEORGE STREET, YORK, PENNSYLVANIA 17401
March 27, 2000
Dear Shareholder:
On behalf of our entire Board of Directors, I cordially invite
you to attend our Annual Meeting of Shareholders at 2:00 p.m. on
Thursday, May 18, 2000. The meeting will be held at The Historical
Society of York County, 250 East Market Street, York, Pennsylvania, 17401.
A notice of the meeting and Proxy Statement follow. You will also
find your proxy voting card and the 1999 Annual Report enclosed. I would like
to take this opportunity to remind you that your vote is important. Please
take a moment now to complete, sign and date the proxy voting card and return
it in the postage-paid envelope we have provided.
I look forward to seeing you on May 18 and addressing your questions
and comments.
Sincerely,
/s/ A. Richard Pugh
A. Richard Pugh
Chairman of the Board
and President
1<PAGE>
DROVERS BANCSHARES CORPORATION
______________________________
30 SOUTH GEORGE STREET, YORK, PENNSYLVANIA 17401
NOTICE OF THE 2000
ANNUAL MEETING OF SHAREHOLDERS
DATE Thursday, May 18, 2000
TIME 2:00 p.m.
PLACE The Historical Society of York County
250 East Market Street
York, Pennsylvania 17401
PURPOSE - Elect five (5) directors for a four-year term expiring
in 2004 and until their successors are elected and
qualified.
- To approve amendments to the Drovers Bancshares
Corporation 1995 Stock Option Plan.
- To transact any other business which properly comes
before the meeting.
Only stockholders owning our common stock on February 21,
2000, may vote at the meeting. Your vote is important. Whether
you plan to attend the annual meeting or not, please mark, sign,
date and return your proxy in the self-addressed envelope
provided. If you attend the meeting and prefer to vote in person,
you may do so even if you have previously voted by proxy.
By Order of the Board of Directors
/s/ John D. Blecher
John D. Blecher
March 27, 2000 Secretary
2<PAGE>
TABLE OF CONTENTS Electronic Hard
Copy Copy
Annual Meeting Information............................... 4 3
Who is entitled to vote?........................... 4 3
On what am I voting ?.............................. 4 3
How many votes do I have?.......................... 4 3
How may I vote my shares?.......................... 4 3
How do I vote by Proxy?............................ 4 3
May I revoke my Proxy?............................. 5 4
What is a quorum?.................................. 5 4
What vote is required to approve each proposal?.... 5 4
What are the costs of soliciting these proxies?.... 5 4
How does the Board of Directors recommend I vote
on the proposals?............................ 5 4
Section 16(A) Beneficial Ownership Reporting Compliance.. 5 4
Share Ownership of Certain Beneficial Owners............. 6 5
Proposal 1 - Election of Directors
Nominees........................................... 6 5
Board Committees and Meeting Attendance............ 9 8
Director Fees............................................ 11 10
Transactions with Management and Others.................. 11 10
Performance Graph........................................ 12 11
Report on Executive Compensation......................... 12 11
Chief Executive Officer Compensation............... 14 13
Executive Compensation............................. 15 14
Options/SAR Grants and Exercises and Fiscal
Year-End Values.............................. 16 15
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values................ 17 16
Pension Plan....................................... 17 16
Change in Control Agreements....................... 18 17
Proposal 2 - To Approve Amendments to Drovers 1995 Stock
Option Plan........................................ 19 17
Independent Certified Public Accountants................. 23 22
Other Matters............................................ 23 22
Shareholder Proposals for Next Annual Meeting............ 23 22
Exhibit A - Proxy Voting Card............................ A-1
3<PAGE>
DROVERS BANCSHARES CORPORATION
Proxy Statement for the Annual Meeting of Shareholders
ANNUAL MEETING INFORMATION
This proxy statement contains information related to the Annual Meeting
of Shareholders of Drovers Bancshares Corporation, a Pennsylvania business
corporation, to be held on Thursday, May 18, 2000 beginning at 2:00 p.m. The
meeting will be held at The Historical Society of York County, 250 East
Market Street, York, Pennsylvania, 17401. The proxy statement is prepared
under the direction of our Board of Directors to solicit your proxy for use at
the Annual Meeting. It is being mailed to shareholders on or about
March 27, 2000.
Who is entitled to vote?
Shareholders as of the close of business on February 21, 2000 are
entitled to vote at the Annual Meeting. On February 21, 2000, there were
4,805,977 shares of common stock outstanding.
On what am I voting?
You will be asked to elect nominees to serve on the Board of Directors
and to ratify amendments to the Drovers Bancshares Corporation 1995 Stock
Option Plan. The Board of Directors is not aware of any other matters to be
presented for action at the meeting.
How many votes do I have?
Each outstanding share that you owned at the close of business on
February 21, 2000 is entitled to one vote on each matter presented at the
Annual Meeting. You may not vote your shares cumulatively in the election of
directors.
How may I vote my shares?
You may vote by proxy or in person.
How do I vote by Proxy?
Mark, sign, date and return your proxy card in the prepaid envelope. If
you sign your proxy but do not mark your choices, your Proxies will vote FOR
the persons nominated for election as directors and FOR approval of amendments
to the Drovers Bancshares Corporation 1995 Stock Option Plan.
4<PAGE>
May I revoke my Proxy?
If you give a proxy, you may revoke it at any time before it
is exercised. You may revoke your proxy in any one of three ways:
- Give written notice of revocation to John D. Blecher,
Secretary, Drovers Bancshares Corporation, 30 South George
Street, York, Pennsylvania 17401,
- Submit a valid, later-dated proxy and give written notice to
the Secretary of Drovers, or
- Vote in person at the annual meeting after giving written
notice to the Secretary of Drovers.
What is a quorum?
A "quorum" is the presence at the meeting, in person or by
proxy, of the majority of the outstanding common shares. Abstentions
and broker non-votes are not counted for purposes of determining the
presence of a quorum and are not considered a vote.
What vote is required to approve each proposal?
Election of five directors The five directors who receive the most votes
(Proposal 1) will be elected.
Approval of Amendments The affirmative vote of a majority of the
to 1995 Stock Option Plan votes cast at the annual meeting is required
(Proposal 2) to approve the amendments to the Drovers
Bancshares Corporation 1995 Stock Option Plan.
What are the costs of soliciting these proxies?
We are paying all expenses of soliciting proxies. Certain officers and
other employees of Drovers may solicit proxies personally or by telephone
without additional compensation. We will reimburse brokerage houses and other
custodians, nominees and fiduciaries for their reasonable expenses in
forwarding proxies and proxy materials to their principals.
How does the Board of Directors recommend I vote on the proposals?
The Board recommends a vote FOR each of the nominees and FOR the approval
of amendments to the 1995 Stock Option Plan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on our records, we believe that during 1999 our directors and
officers complied with all SEC filing requirements applicable to them.
5<PAGE>
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
We are not aware of anyone who beneficially owns more than five
percent (5%) of Drovers outstanding common stock, except as disclosed in the
following table. The table shows ownership as of January 31, 2000.
Securities Ownership
Number of Shares of
Name and Address of Common Stock Percent of Total Common
Beneficial Ownership Beneficially Owned 1 Stock Outstanding
Gary A. Stewart 185,919 3.87%
910 Upland Road
York, PA 17403
Robert H. Stewart, Jr. 149,721 3.12%
RD #4
Spring Grove, PA 17362
1 Mr. Gary A. Stewart, Mr. Robert H. Stewart, Jr. and other members of the
Stewart family have filed, as a group, a Schedule 13D, as amended, with the
Securities and Exchange Commission. The Schedule 13D disclosed that, while no
member of such group beneficially owns or has power to vote more than 5% of
Drovers shares, as a group such persons may be deemed to beneficially own
approximately 15.09% of Drovers issued and outstanding shares of common stock.
PROPOSAL 1 - ELECTION OF DIRECTORS
Nominees
Five directors will be elected at the Annual Meeting. Each director
will hold office for a four-year term expiring in 2004 and until his
successor shall be elected and qualified. We believe all nominees will be
able to serve as a director. If any nominee is not available for election,
proxies will be voted for another person recommended by the management of
Drovers. The following table provides information on the nominees and
Continuing directors as of January 31, 2000.
6<PAGE>
Name and Principal Occupation for Age Director Common Shares Percent of
Past Five Year Since 1 Beneficially Total Common
Owned 2 Shares
Outstanding
NOMINEES FOR A FOUR-YEAR TERM EXPIRING IN 2004
J. Samuel Gregory
Chairman and CEO, AAA Southern
Pennsylvania (Insurance, Travel and
Member Services) 69 1978 11,223 *
Daniel E. Hess
President, Hess Management, Inc.
(Management Consultant) 68 1982 13,004 *
Herbert D. Lavetan
Retired; formerly Director, Lavetan &
Associates, Inc. (Postal, Business
and Communications Services) until
January 1999 70 1979 132,914 2.77%
L. Doyle Ankrum
Retired 71 1979 8,733 3 *
Robert H. Stewart, Jr.
President, York Building Products
Co., Inc. (Concrete Masonry Units,
Crushed Stone-Bituminous Concrete) 60 1987 149,721 4 3.12%
TERM EXPIRING IN 2001
Richard M. Linder
Retired, formerly Chairman of Drovers
and Drovers Bank until March 1996 69 1976 14,857 5 *
Frank Motter 6
Chairman of the Board & President
Motter Printing Press Co. (Web-Fed
Printing Equipment) 72 1975 50,018 1.04%
Robert L. Myers, Jr.
President, John H. Myers & Son, Inc.
(Lumber & Building Supplies) 71 1968 35,873 7 *
A. Richard Pugh
Chairman of the Board, President and
Chief Executive Officer of Drovers
and Drovers Bank 59 1990 74,881 8 1.56%
7<PAGE>
Name and Principal Occupation for Age Director Common Shares Percent of
Past Five Year Since 1 Beneficially Total Common
Owned 2 Shares
Outstanding
TERM EXPIRING IN 2002
Harlowe R. Prindle
President, York Auto Parts Co.;
Chairman & CEO, Shenk & Tittle
Management Co. (Sporting Goods) 57 1982 27,817 9 *
Basil A. Shorb, III
President, REH Holdings, Inc.
(Holding Company Providing Management
Services to Five Wholly-Owned
Subsidiaries Engaged in Steel
Fabrication, Highway Sign
Manufacturing and Specialty
Construction) 54 1993 99,575 10 2.07%
Delaine A. Toerper
Self-Employed (Consulting Services)
Retired; formerly Executive Vice
President and Chief Operating Officer
of Tighe Industries, Inc.
(Manufacturers, Designers and
Marketers of Dance Costumes, Dance
Apparel and Gymnastic Apparel) until
August 1996 56 1995 1,882 *
James S. Wisotzkey
President and Chief Operating Officer
of The Maple Press Company
(Printer/Book Manufactuer) 46 1997 3,429 11 *
TERM EXPIRING IN 2003
David C. McIntosh
Retired, formerly President, MCD
Technologies, Inc. until February
1999 71 1985 5,309 12 *
Gary A. Stewart
Partner - Stewart Associates
Formerly Chairman & CEO,
Stewart & Tate, Inc. Until January
1999 (General Contractors) 52 1996 185,919 4 3.87%
George W. Hodges
President, The Wolf Organization, Inc.
Distributors of Lumber & Building
Supplies) 49 1994 4,679 13 *
All Directors and Executive Officers
as a Group 14 889,033 18.50%
* Less than 1%
1 Includes period served as director of Drovers Bank.
8<PAGE>
2 Except as otherwise noted, the persons listed possess sole
voting and investment power or share voting and investment
power with their spouses.
3 Includes 6,540 shares held by his wife.
4 See footnote number 1 under Share Ownership of Certain Beneficial Owners.
5 Includes 406 shares owned by his wife.
6 Mr. Motter is a director of York Water Company (a company with a class of
securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934).
7 Includes 5,418 shares owned by his wife and 18,087 shares held by the
Elsbeth M. Myers Trust, of which he is a trustee sharing investment and
voting authority.
8 Includes 180 shares owned by his children for which he is custodian and
60,223 shares Mr. Pugh has the right to acquire upon exercise of stock
options granted pursuant to Drovers 1985 Incentive Stock Option Plan and
1995 Stock Option Plan.
9 Includes 576 shares Mr. Prindle has the right to acquire upon exercise of
stock options granted pursuant to Drovers 1999 Non-Employee Director Stock
Option Plan.
10 Includes 33,122 shares owned by his wife, 9,857 shares owned by his son
for which he is custodian, 9,842 shares owned by his son for which his
wife is custodian, 40,679 shares held by Triple M Associates of which his
wife is a partner sharing voting and investment authority and 576 shares
Mr. Shorb has the right to acquire upon exercise of stock options granted
pursuant to Drovers 1999 Non-Employee Director Stock Option Plan.
11 Includes 200 shares owned by his children and 576 shares Mr. Wisotzkey has
the right to acquire upon exercise of stock options granted pursuant to
Drovers 1999 Non-Employee Director Stock Option Plan.
12 Includes 170 shares owned by his wife.
13 Includes 3,389 shares owned by his wife and 288 shares Mr. Hodges has the
right to acquire upon exercise of stock options granted pursuant to
Drovers 1999 Non-Employee Director Stock Option Plan.
14 Beneficial ownership is as of January 31, 2000.
Board Committees and Meeting Attendance
During 1999 the Board of Directors of Drovers Bank met twelve times and
the Board of Directors of Drovers met eleven times. In addition to meetings
of the full Board, directors attended meetings of Board committees. Each
director attended at least 75% of the aggregate Board meetings and meetings of
committees of which they are a member with the exception of Herbert D. Lavetan.
Mr. Lavetan attended 68% of the aggregate of all meetings which he is a member.
The Board of Directors of Drovers Bank has the following four standing
committees: the Executive, Audit, Nominating and Personnel Committees. Other
committees are appointed as necessary to conduct the business of Drovers Bank.
A description of the duties of each committee follows the table below.
9<PAGE>
Committee Membership and Meetings Held
Name Executive Audit Nominating Personnel
David C. McIntosh *
L. Doyle Ankrum / / /
Daniel E. Hess / /
George W. Hodges / / *
Frank Motter / / /
Robert L. Myers, Jr. / /
Harlowe R. Prindle / /
A. Richard Pugh / / /
Gary A. Stewart /
Basil A. Shorb, III * /
Herbert D. Lavetan / /
D. John Sparler / /
Robert H. Stewart, Jr. /
Delaine A. Toerper / /
James S. Wisotzkey /
J. Samuel Gregory *
No. of Meetings in
Fiscal 1999 12 4 2 4
* Chairperson
/ Member
Executive Committee:
- - Has the full power of the Board in the management of our business to the
extent permitted by law between meetings of the Board.
Audit Committee:
- - Recommends to the Board an independent certified public accounting firm to
conduct an annual audit of Drovers and its subsidiaries.
- - Based on the adopted Audit Committee Charter, is responsible in the areas of
financial reporting, corporate governance and internal control.
Nominating Committee:
- - Recommends candidates for Board membership. Shareholder nominations will
be considered if made in writing and delivered to 30 South George Street,
York, Pennsylvania, 17401. All nominations must be received by the seventh
day after the notice of meeting was mailed. Nominations must contain the
same information about each candidate as is required to be contained in
Drovers Proxy Statement about management's candidates. Nominations must also
contain the name and address of the notifying shareholder and the number of
shares they owned.
Personnel Committee:
- - Advises and consults with management in developing, implementing and
assessing personnel policies, employee benefit issues, organizational and
succession planning and compensation and benefit programs.
- - Reviews and recommends for Board approval the election of senior vice
presidents and above. Recommends compensation for senior vice presidents and
above.
10<PAGE>
DIRECTOR FEES
Each director received $2,000 per quarter for a total retainer of $8,000
in 1999. A director who is an officer or employee of Drovers is not
compensated for service as a director. Beginning July 1, 1999, non-employee
directors could elect to receive stock options in lieu of quarterly director
fees.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Some of our directors and executive officers, members of their immediate
families, and some of their companies had ordinary banking transactions with
Drovers Bank in 1999. We expect additional transactions in the future. All
transactions were made on substantially the same terms, including interest
rates, collateral requirements and repayment terms, as we offered to all of
our customers at the time for comparable transactions. These transactions
did not involve more than the normal risk of collectability or present other
unfavorable features.
11<PAGE>
PERFORMANCE GRAPH
The following graph shows a five-year comparison of the cumulative total
shareholder return on Drovers common stock compared to the cumulative total
return on the S&P 500 Stock Index and the Nasdaq Bank Index. The graph shows
the five years ending December 31, 1999. Drovers joined Nasdaq in June, 1998.
The shareholder return shown on the graph below is not necessarily indicative
of future performance.
1994 1995 1996 1997 1998 1999
Drovers Bancshares Corp 100.00 120.40 140.09 252.34 262.47 236.93
Nasdaq Bank Index 100.00 147.71 191.04 317.99 285.33 268.87
S&P 500 Index 100.00 137.45 168.92 225.21 289.43 350.26
REPORT ON EXECUTIVE COMPENSATION
The Personnel Committee reviews the executive compensation program
annually and makes recommendations to the Board. Mr. Pugh is a member of the
Personnel Committee, but is not present when they evaluate his performance,
which is reported to the full Board. With regard to other executive officers,
the Personnel Committee considers Mr. Pugh's recommendations on other executive
officers before making final recommendations to the full Board.
Drovers executive compensation program has three main components:
Base Salary: Base salaries for executive officers are determined annually
by evaluating:
- the responsibilities of the position
- the experience of the individual
- Drovers financial results
- the competitive marketplace
The base salary increases in 1999 averaged approximately 5.0% over 1998.
The Personnel Committee considers the following three factors in arriving at
the average annual increase of base salaries:
- a survey of certain South Central Pennsylvania banks to determine the
average increase in base salaries they expect for the upcoming year
- the average annual increase of base salaries expected by banks of similar
asset size on a regional level provided by our employee benefit
consultant and
- the amount of increase feasible in terms of our budget.
In general, specific individual performance is weighted more heavily than
corporate performance to determine base salaries of senior management.
However, as responsibility increases, more emphasis is placed on corporate
performance in setting an individual's base salary. Corporate performance is
measured using:
- achievement of various budget goals,
- growth of the institution and
- peer group comparisons
12<PAGE>
Annual Incentive Bonus: The annual incentive bonus program was designed
to support and promote the pursuit of our organizational objectives and
financial goals as defined in our strategic and financial plans. The program
provides for the payment of an annual cash bonus to executive and certain key
officers. The program is based on Drovers return on equity. Bonuses are paid
only to executive officers if the targeted return on equity is achieved. The
following additional factors are considered:
- most recent CAMELS rating,
- most recent CRA rating and
- Drovers leverage ratio
Assuming the target threshold is achieved, the bonus paid is determined by
a percentage of net income and is allocated to each participant based upon a
formula which considers level of responsibility and industry practices.
Stock Options: We provide stock options under Drovers Incentive Stock
Option Plan to executives in positions with significant responsibilities and
impact on long-term performance. The Personnel Committee believes that stock
option grants are an effective way to align the interests of our executives
with our shareholders by making a portion of an optionee's compensation
dependent upon the long-term performance of our stock. Options are granted to
officers with the title vice president and above. In determining the number
of options granted in 1999, the Personnel Committee considered information
available to it regarding options granted by other public companies, and in
particular, banking institutions. The Personnel Committee has followed a
policy to date of providing that only 50% of options granted are exercisable
immediately. They use both objective and subjective methods of determining
the amount of shares subject to future grants. They may consider such
factors as:
- the potential realizable value of particular options based on an assumed
rate of appreciation in the price of Drovers stock,
- a desired level of ownership in Drovers based on assumed rate of
appreciation in the price of Drovers stock,
- a desired level of ownership in Drovers based on position,
formula grants and individual performance.
Stock option grants made to executive officers during fiscal year 1999
are included in the Option Grant Table.
13<PAGE>
Chief Executive Officer Compensation
Drovers and our Chief Executive Officer, A. Richard Pugh, have not
entered into an employment agreement. Thus, the factors involved in
establishing a compensation package for Mr. Pugh are similar to those noted
above for all executives. However, the value of Mr. Pugh's compensation is
more closely tied to corporate performance and the long-term performance of
our stock. Specifically, Mr. Pugh's compensation is determined as follows:
Base Salary: In 1999, the Personnel Committee emphasized the achievement
of our corporate performance goals and the responsibilities of Mr. Pugh as
Chairman of the Board and Chief Executive Officer. Mr. Pugh's year-end base
salary for 1999 was $235,000 which reflects an approximate 4.4% increase in
year-end base salary over 1998.
Annual Incentive Bonus: The Personnel Committee calculates Mr. Pugh's
annual incentive bonus in accordance with the formula set forth above. Thus,
Mr. Pugh receives such compensation only if our return on equity and other
criteria as set forth above are met. Mr. Pugh's annual incentive bonus earned
in 1999 was $135,711.
Stock Options: Stock options are an important portion of Mr. Pugh's
overall compensation package, particularly given the policy-making function
of such position. The Personnel Committee believes linking a portion of
Mr. Pugh's compensation to the long-term performance of our stock encourages
him to pursue policies which enhance long-term shareholder value. Mr. Pugh
received stock options to purchase 10,342 shares in 1999, 5,975 shares in 1998
and 10,750 shares in 1997. The stock options granted represented 26% of all
stock options granted in 1999, 24% in 1998 and 27% in 1997.
Personnel Committee:
George W. Hodges, Chairman
L. Doyle Ankrum
Frank Motter
Robert L. Myers, Jr.
Harlowe R. Prindle
A. Richard Pugh
14<PAGE>
Executive Compensation
The following table shows information on the annual compensation during
the last three fiscal years paid to A. Richard Pugh, Chairman, President and
Chief Executive Officer, and other executive officers who received a total
annual salary and bonus of $100,000 or more in 1999.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long-Term Compensation
Other Securities
Annual Restricted Under- All
Other
Name and Compen- Stock Lying LTIP
Compen-
Principal Fiscal Salary Bonus sation Awards Options/ Pay-
sation
Position Year ($) ($) ($)1 ($) SARs(#)2 outs
($)3
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
A. Richard Pugh, 1999 235,000 135,711 - - 10,342 -
4,800
Chairman, 1998 225,000 91,855 - - 5,975 -
4,800
President and CEO 1997 210,000 56,224 - - 10,750 -
2,375
Debra A. Goodling, 1999 117,000 47,782 - - 5,171 -
4,753
Executive Vice 1998 112,000 45,928 - - 2,988 -
4,203
President 1997 107,000 28,112 - - 4,300 -
1,409
Michael J. Groft, 1999 117,000 46,258 - - 5,171 -
3,350
Executive Vice 1998 112,000 45,928 - - 2,988 -
1,475
President 1997 107,000 28,112 - - 4,300 -
562
Shawn A. Stine 1999 100,000 30,963 - - 3,306 -
3,485
Executive Vice 1998 92,000 30,081 - - 1,944 -
3,326
President4 1997 - - - - - - -
</TABLE>
1 Excludes perquisites and other personal benefits which are less than
$50,000 or 10% of total annual salary.
2 Includes effect of a 5% stock dividend issued in 1999, a 3 for 2 stock
split issued in 1998 and a 5% stock dividend issued in 1997.
3 Amounts shown represent contributions by Drovers to the Salary
Deferral Plan.
4 No disclosure is made for this year because total annual salary plus
bonus was less than $100,000.
15<PAGE>
Options/SAR Grants and Exercises and Fiscal Year-End Values
Shown below is information with respect to options granted in 1999
pursuant to Drovers 1995 Stock Option Plan for the named executive officers.
<TABLE>
INDIVIDUAL OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Number of Percent of Total
Securities Options/SARs
Underlying Granted to Exercise or
Grant Date
Options/ Employees in Base price Expiration
Present Value
Name SARs Granted Fiscal Year ($/Share) 1 Date
($)2
<S> <C> <C> <C> <C>
<C>
A.Richard Pugh, 10,342 26% $22.74 2/12/2009
$53,468
Chairman,
President and
CEO
Debra A. Goodling, 5,171 13% $22.74 2/12/2009
$26,734
Executive Vice
President
Michael J. Groft, 5,171 13% $22.74 2/12/2009
$26,734
Executive Vice
President
Shawn A. Stine, 3,306 8% $22.74 2/12/2009
$17,092
Executive Vice
President
</TABLE>
1 Includes effect of a 5% stock dividend issued in 1999.
2 Drovers uses the Black-Scholes Option Pricing Model to determine the grant
date value. The grant date value of options granted in 1999 was $5.17 per
option, adjusted for the 5% stock dividend issued in 1999. The following
assumptions were used: risk free interest rate of 4.9%; expected life of
5.9 years; expected volatility of 19.1%; expected dividends of 2.0%.
16<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values
Shown below is information concerning the exercise of options during
1999 and unexercised options held as of the end of 1999 by the named
executive officers.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<CAPTION>
Number of Securities Value
of Unexercised
Underlying Unexercised in-
the-money
Options/SARs at
Options/SARs at
Shares Fiscal Year-end (#)
Fiscal Year-End
Acquired on Value Exercisable/ ($)
Exercisable/
Name Exercise (#) Realized ($) Unexercisable 1
Unexercisable
<S> <C> <C> <C>
<C>
A.Richard Pugh,
Chairman, 0 $0 55,052/5,171
$410,082/$0
President and CEO
Debra A. Goodling,
Executive Vice 0 $0 20,601/2,586
$131,007/$0
President
Michael J. Groft,
Executive Vice 0 $0 20,601/2,586
$131,007/$0
President
Shawn A. Stine,
Executive Vice 0 $0 11,474/1,653 $
65,866/$0
President
</TABLE>
1 Includes effect of all stock dividends and stock splits paid since
August 1993.
Pension Plan
Drovers maintains a qualified pension plan covering all full-time
employees who are at least 21 years of age and who have completed one year of
service. Participants become fully vested in the plan after 5 years of
service. Each participant in the plan is entitled to a monthly benefit
commencing at the participant's normal retirement date, assuming the
participant has attained at least age 65 and has completed five years of
participation, and continuing for life, with payments guaranteed for the first
120 months. Benefit amounts for a fully-vested participant equal 33% of the
participant's average monthly pay if the participant has 15 or more years of
service, plus 0.58% of average monthly pay in excess of the Social Security
integration level as outlined in Table I Covered Compensation multiplied by
years of service at normal retirement up to a maximum of 25 years. Average
monthly pay is based upon the five plan years preceding the normal retirement
date. Our contributions to the pension plan are determined on an actuarial
basis.
17<PAGE>
Following are estimated annual benefits payable upon retirement to
persons in specified salary and service classifications, assuming retirement
at age 65 during 2000. For this purpose, the Social Security integration
level assumed is $35,100.
FINAL AVERAGE ANNUAL RETIREMENT BENEFIT FOR YEARS OF SERVICE INDICATED
COMPENSATION
15 Years 25 Years 35 Years
$75,000 $28,211 $30,536 $30,536
$100,000 $38,646 $42,411 $42,411
$125,000 $49,071 $54,286 $54,286
$150,000 $59,496 $66,161 $66,161
$175,000 $67,836 $75,661 $75,661
$200,000 $67,836 $75,661 $75,661
$225,000 $67,836 $75,661 $75,661
The Omnibus Budget Reconciliation Act of 1993 (OBRA '93) has placed the
limit on compensation which may be taken into account under a defined benefit
plan reducing it from $235,840 in 1993 to $150,000 beginning in 1994. The new
limit increases with inflation, only when inflation permits a full $10,000
increase. As of 2000, this limit increased to $170,000. Only accruals after
1993 will be affected by the compensation limit.
As of December 31, 1999, A. Richard Pugh, Debra A. Goodling, Michael J.
Groft and Shawn A. Stine were credited with 18 years, 23 years, 22 years and
8 years of service, respectively.
Drovers adopted a Supplemental Retirement Plan for Mr. Pugh on January 1,
1995. Pursuant to this Plan, Mr. Pugh will be entitled to receive payments,
which, when added to his pension under Drovers' pension plan and primary
Social Security amount, increase his pension benefits to 65% of his highest
annual average compensation in three of his last five years as an employee of
Drovers.
Change in Control Agreements
Messrs. Pugh, Groft and Stine and Ms. Goodling each have an Agreement
with Drovers which provides certain benefits in the event of a change in
control of Drovers. A "change in control" is defined as:
- the acquisition of 25% or more of the outstanding voting securities by
any entity, person or group,
- a merger or consolidation if, as a result of the transaction, less than
75% of the voting securities of the surviving corporation are owned by
the former shareholders, other than affiliates of any party to the merger
or consolidation,
- a sale of substantially all of our assets, or
- a change in a majority of our directors during any two-year period.
18<PAGE>
Mr. Pugh's Agreement provides for:
- continued full compensation for three years (subject to reduction by one-
half of the amount of any base annual salary from any new employment),
- continuation of benefits under the Supplemental Retirement Plan described
under Pension Plan,
- an acceleration of the right to exercise his current options under our
stock option plans and
- retention of Mr. Pugh as an independent consultant for six months following
a change in control termination.
The Agreements with Messrs. Groft and Stine and Ms. Goodling provide for:
- the continued payment of their full compensation for 18 months (subject to
reduction by one-half of the amount of any Form W-2 income from any new
employment) and
- continuation of benefits for up to 18 months and an acceleration of the
right to exercise current options held by the respective executive officer
under our stock option plans.
PROPOSAL 2 - TO APPROVE AMENDMENTS TO DROVERS 1995 STOCK OPTION PLAN
On February 22, 2000, the Board of Directors of Drovers unanimously
approved and adopted, subject to shareholder approval, certain amendments to
the 1995 Stock Option Plan. The Plan originally was approved by the
shareholders at the 1995 Annual Meeting of Shareholders.
Description of Amendments: The maximum number of shares of common stock
which has been reserved for issuance under the Plan is 221,190 shares, after
adjustment for a 5% stock dividend issued in 1999, a 3 for 2 stock split
issued in 1998, a 5% stock dividend issued in 1997, a 25% stock dividend
issued in 1996 and a 7% stock dividend issued in 1995. As of March 27, 2000,
a total of 195,097 options have been granted to key employees under the Plan.
Consequently, the Board of Directors approved on February 22, 2000, subject to
approval by the shareholders, an amendment to the Plan increasing the number
of authorized shares of common stock available for issuance upon exercise of
stock options by 250,000 shares, thereby increasing the remaining number of
shares which may be issued under the Plan upon exercise of stock options from
the current 26,093 to 276,093.
The Board of Directors believes that the above described amendment to the
Plan is appropriate and consistent with Drovers' objectives of attracting and
retaining competent and dedicated employees and providing incentives for such
employees to improve the long range profitability of Drovers. Accordingly,
the Board believes that the approval of the amendment to increase the number
of shares of common stock reserved for issuance upon exercise of stock options
is in the best interests of Drovers and its shareholders.
The second amendment to the Plan, which is being submitted for
shareholder approval, is an amendment to bring the Plan into technical
compliance with Section 162(m) of the Internal Revenue Code of 1986 by
specifically limiting the number of options that may be granted to any one
participant during the term of the Plan to 200,000 shares, as adjusted in
accordance with the terms and conditions of the Plan. Stockholder approval of
this amendment is proposed in order to assure the future deductibility for
Federal income tax purposes of executive compensation under the provisions of
Section 162(m). At present, Section 162(m) limits the deductibility of
certain compensation in excess of $1,000,000 for the chief executive officer
and any other executive officer named in the Proxy Statement. No executive
19<PAGE>
officer of Drovers is compensated at that level. Nevertheless, stockholder
approval of the amendment is sought to assure that limitations such as those
in Section 162(m) will not disqualify any compensation from being deductible
in the future. In order to assure the continued deductibility of all
compensation paid to executive officers in accordance with Section 162(m),
any incentives, such as stock options, must qualify as "performance-based
compensation". In order to qualify stock option awards under the Plan for the
"performance-based compensation" exception under Section 162(m), the Plan was
amended in order to limit the maximum number of stock option awards that may
be made to any participant under the Plan to 200,000 shares over the ten year
life of the Plan, as adjusted in accordance with the terms and conditions of
the Plan. Prior to this amendment, the Plan did not contain such a
limitation.
A summary of the material provisions of the Plan, as adopted by the
shareholders in 1995, follows.
Summary: The Plan is designed to (a) provide stock option awards to key
employees who are in a position to contribute to the long-term growth and
profitability of Drovers; (b) assist Drovers and its affiliated companies to
attract, retain and motivate personnel with experience and ability; (c) make
our compensation program more competitive with those of other major employers;
and (d) link employees receiving stock options directly to shareholder
interests through increased stock ownership.
The Plan provides that the Committee which administers the Plan may
grant incentive stock options ("ISOs") as provided in Section 422(b) of the
Internal Revenue Code of 1986 or non-qualified stock options ("NQSOs") (ISOs
and NQSOs are collectively referred to as "Options").
Administration of the Plan: The Plan is administered by a Committee
consisting of two or more directors of the Board who are disinterested
directors within the meaning of Rule 16b-3 of the Securities and Exchange
Commission. (This is presently designated as the Personnel Committee of the
Board of Directors excluding those directors who are not "disinterested
persons".) Subject to the express provisions of the Plan, the Committee has
full power and authority, in its discretion, to grant Options; to determine to
whom and the time when Options will be granted; to designate the Options as
ISOs or NQSOs; to determine the purchase price of the common stock covered by
each Option and the term of each Option; to determine the terms and provisions
of the option agreements (which need not be identical) entered into with
employees; to supervise the administration of the Plan; and to prescribe,
amend and rescind rules and regulations relating to the Plan.
Eligibility: The persons who are eligible to receive Options under the
Plan are such key employees (including officers and directors who are
employees) of Drovers or its affiliates, without limitation as to length of
service, who are from time to time serving in a managerial, administrative or
professional position which is recommended to, and authorized by, the
Committee for Options under the Plan.
Term of the Plan: The Plan shall continue in effect until terminated by
the Board of Directors and until all Options either have lapsed or been
exercised, satisfied or canceled according to their terms, except no Option
may be granted more than ten years after the date the Plan was adopted by the
Board in 1995.
Awards Under the Plan: Options will give the optionee the right to
purchase a number of shares of common stock at future dates and at an
20<PAGE>
established purchase price. The option price of the common stock covered by
each Option is determined by the Committee, but in no event may the option
price be less than 100% of the "fair market value" of the common stock on the
date the Option is granted. So long as the common stock is traded over-the-
counter and is classified by Nasdaq as a national market issue, the definition
of "fair market value" under the Plan is equal to the closing price for the
stock or, in the absence of trading on that date, the mean between the lowest
bid and highest asked price for the stock as reported on Nasdaq for the date
as of which the stock is valued. In the case of ISOs, the option price must
not be less than 110% of the fair market value of the common stock at the
time of grant in the case of grantees owning more than 10% of the outstanding
common stock.
The Committee determines the number of shares to be covered by each
Option, the option price, the term of the Option, the period of time for
Options to vest after grant and other terms and limitations applicable to
the exercise of the Option; provided that the time period during which the
Option is exercisable may not end later than 10 years after the date of grant.
The Committee also may establish, in its discretion, such other terms and
conditions with respect to the Option and the common stock to be acquired
upon exercise as it deems appropriate. The terms of each Option must be set
forth in a written option agreement between Drovers and the optionee, in a
form approved by the Committee.
In the event that an optionee ceases to be an employee of Drovers or its
affiliates other than because of voluntary termination of employment,
retirement, involuntary termination due to staff reduction, death or
disability, the option may be exercised for a period of three months after
such termination to the extent that the option was exercisable at the date of
such termination of such employment. In the event that an optionee retires,
dies or becomes disabled (as determined by the Committee) prior to termination
of the option without having fully exercised such option, the option may be
exercised for a period of twelve months after the date of such termination to
the extent that it was exercisable at the date of termination.
Options may be exercised by an optionee in accordance with the terms of
the related option agreement and the option price shall be paid in full at
the time the Option is exercised. Payment may be in cash, or in stock already
owned by the optionee or to be acquired by the optionee upon exercise of the
option, and having a total fair market value, as determined by the Committee,
equal to the purchase price or in a combination of cash and stock having a
total fair market value equal to the purchase price. Prior to delivery of
the shares of common stock issuable upon the exercise of an Option, any
amount necessary to satisfy applicable federal, state, and/or local tax
withholding requirements shall be paid promptly by the optionee. The Plan
also permits payment of withholding taxes by withholding all or a portion of
any shares of common stock that otherwise would be issued to the optionee
upon exercise of an Option or by the optionee surrendering all or a portion
of any shares of common stock previously acquired by the optionee.
21<PAGE>
Acceleration Upon Change in Control: Upon a change in control of Drovers
or Drovers Bank, all Options previously granted and not exercisable shall
become fully exercisable to the same extent and in the same manner as if the
Options had become exercisable in accordance with the provisions of the Plan
and the related option agreement. For purposes of the Plan, a "Change in
Control" means:
- the acquisition of 25% or more of our outstanding voting securities by any
entity, person or group;
- a merger or consolidation if, as a result of the transaction, less than 75%
of the voting securities of the surviving corporation are owned by our
former shareholders, other than affiliates of any party to the merger or
consolidation;
- a sale of substantially all of our assets; or
- a change in a majority of our directors during any two year period.
Stock Adjustments: The Plan provides for equitable adjustment, as
appropriate, in the number of shares issuable under the Plan, the number of
shares subject to outstanding Options and the option price of outstanding
Options in the event the shares of common stock are changed or exchanged for a
different number or kind of shares of common stock of Drovers or another
corporation (e.g., by merger, reclassification or stock split) or if the
number of shares shall be increased through a stock dividend.
Federal Tax Information: ISOs issuable under the Plan are intended to
constitute "incentive stock options" within the meaning of Section 422A of the
Internal Revenue Code of 1986, while NQSOs granted under the Plan are "non-
ualified stock options." Generally, upon the exercise of an incentive stock
option, the optionee will recognize no income for federal income tax purposes.
The difference between the exercise price of the incentive stock option and
the fair market value of the shares subject to the Option at the time of
exercise is an item of tax preference which may require payment of an
alternative minimum tax. On the sale of shares acquired by exercise of an
incentive stock option (assuming that the sale does not occur within two years
of the date of grant of the Option or within one year from the date of
exercise), any gain will be taxed to the optionee as capital gain. A sale of
shares acquired by exercise of an incentive stock option within two years of
the date of grant of the Option or within one year from the date of exercise
will result in the optionee recognizing ordinary income to the extent the fair
market value of a share on the date of exercise exceeds the exercise price.
In contrast, except as noted below, upon the exercise of a non-qualified stock
option, the optionee recognizes taxable income (subject to withholding) in an
amount equal to the difference between the then fair market value of the
shares on the date of exercise and the exercise price. Upon any subsequent
sale of such shares by the optionee, any difference between the sale price and
the optionee's tax basis in the shares will be treated generally as capital
gain or loss. Special rules may apply to executive officers and directors who
are subject to the "short-swing profit" recapture provisions of the Securities
Exchange Act of 1934.
Drovers will not be entitled to a tax deduction upon the grant or
exercise of an incentive stock option, or upon the sale of any shares acquired
pursuant to such exercise, except that a tax deduction may be available to
Drovers if the employee sells the shares so acquired within two years of the
date the Option was granted or one year of the date of exercise. Upon the
exercise of a non-qualified stock option, Drovers is entitled to a deduction
for federal income tax purposes in an amount equal to the income recognized by
the optionee, provided Drovers complies with applicable tax withholding
requirements.
22<PAGE>
The federal income tax consequences to an optionee and to Drovers may
vary from those described above, depending upon individual actions and
circumstances, including restrictions and other terms and conditions
applicable to the particular Option granted under the Plan.
Vote Required: The affirmative vote of the holders of a majority of all
votes cast by all shareholders present in person or by proxy at the Annual
Meeting is required to approve the amendments to the Plan.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors appoints our independent certified public
accountant. We used Stambaugh - Ness, P.C. for the years ending
December 31, 1999 and 1998. Representatives of Stambaugh - Ness, P.C. do not
routinely attend our annual meetings and are not expected to attend the 2000
Annual Meeting.
OTHER MATTERS
The Board of Directors is not aware of any matters to be presented for
action at the Annual Meeting other than stated in the meeting notice. If
any other matter requiring a vote of the shareholders should arise, the
Proxies will use their best judgement to vote the shares.
You may request a copy of our December 31, 1999 report on Form 10-K,
including the financial statements and all schedules. You may obtain a copy
at no charge by a written request to John D. Blecher, Secretary, P.O. Box 2557,
York, Pennsylvania, 17405.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Shareholders may submit proposals on matters appropriate for shareholder
action at future annual meetings by following the rules of the Securities and
Exchange Commission. Proposals intended for inclusion in next year's proxy
statement and proxy card must be received by us at our principal office, 30
South George Street, P.O. Box 2557, York, Pennsylvania, 17405 by Monday,
November 27, 2000. Submission by certified mail-return receipt requested is
recommended.
By Order of the Board of Directors
/s/ John D. Blecher
John D. Blecher
Secretary
23<PAGE>
EXHIBIT "A"
REVOCABLE PROXY
DROVERS BANCSHARES CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints William H. Neff, Jr.,
and Timothy P. Ruth, and each or any of them, with power of substitution in
each, as proxies to represent the undersigned at the annual meeting of
Shareholders of Drovers Bancshares Corporation (the "Company") to be held
at The Historical Society of York County, 250 East Market Street, York,
Pennsylvania, 17401, on Thursday, May 18, 2000 at 2:00 P.M., and at any
adjournments or postponements thereof, and to vote the same number of shares,
and as fully as the undersigned would be entitled to vote, if then personally
present, upon any matter which may properly come before the meeting.
Please be sure to sign and date
this Proxy in the box below.
Date
_______________
______________________ _____________________________
Shareholder sign above Co-holder (if any) sign above
A-1<PAGE>
1. ELECTION OF DIRECTORS TO With- For All
SERVE FOR A FOUR (4) YEAR For hold Except
TERM:
J. Samuel Gregory L. Doyle Ankrum
Daniel E. Hess Robert H. Stewart, Jr.
Herbert D. Lavetan
INSTRUCTIONS: To withhold authority to vote for any individual
nominee, mark "For All Except" and write that nominee's name in the
space provided below.
____________________________________________________________________
For Against Abstain
2. To approve Amendments to the
Company's 1995 Stock Option Plan.
3. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting and any
adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, 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 IN PROPOSAL 1 AND FOR
PROPOSAL 2. THE UNDERSIGNED HEREBY REVOKES ANY PROXIES HERETOFORE GIVEN BY
THE UNDERSIGNED TO VOTE AT THE ANNUAL MEETING OR ANY ADJOURNMENTS THEREOF.
- ------------------------------------------------------------------------------
Detach above card, sign, date and mail in postage paid envelope provided.
DROVERS BANCSHARES CORPORATION
30 South George Street, York, Pennsylvania 17401
Please sign exactly as your name appears. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
A-2<PAGE>
