PENNS WOODS BANCORP, INC.
Corporate Headquarters
115 South Main Street
Jersey Shore, PA 17740
Theodore H. Reich
President
and
Chief Executive Officer
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 29, 1998
To Our Shareholders:
Notice is hereby given that the Annual Meeting of holders of common
stock of Penns Woods Bancorp, Inc., (the "Corporation") will be held at
the Williamsport Branch Office of Jersey Shore State Bank (the "Bank"),
300 Market Street, Williamsport, PA 17703-0967, on April 29, 1998, at 1:00
P.M. , for the following purposes:
1 To elect two (2) Class 1 Directors, to serve for a three-year term
that will expire in 2001, and until their successors are elected and
qualied.
2 To vote on a proposal to approve a Stock Option Plan that
authorizes a Committee of the Board of Directors to grant options for the
purchase of up to 100,000 shares of Penns Woods' Common Stock, within five
years, which constituties approximately 3.90% of Penns Woods' presently
outstanding shares of Common Stock.
3 To ratify the appointment by the Corporation's Board of Directors
of Parente, Randolph, Orlando, Carey & Associates of Williamsport,
Pennsylvania, Certified Public Accountants, as the independent auditors
for the Corporation for the year ending December 31, 1998; and
4 To transact such other business as may properly come before the
Annual Meeting, and any adjournment or postponement thereof.
Holders of record at the close of business on March 10, 1998, shall be
entitled to notice of and to vote at the Annual Meeting and any
adjournment or postponement thereof. At the Annual Meeting, each
shareholder is entitled to one vote for each share of common stock, $10.00
par value, of the Corporation registered in the shareholder's name on the
record date.
A shareholder who returns a Proxy may revoke the Proxy at any time
before it is voted by (1) giving written notice of revocation to Sonya E.
Hartranft, Secretary, Penns Woods Bancorp, Inc., 300 Market Street, PO Box
967, Williamsport, PA 17703-0967, (2) executing a later-dated Proxy and
giving written notice thereof to the Secretary of the Corporation or (3)
voting in person after giving written notice to the Secretary of the
Corporation.
All Proxies properly executed and not revoked will be voted as
specified.
A copy of the Corporation's Annual Report and Form 10-K for the fiscal
year ended December 31, 1997 is being mailed with this Notice. The Annual
Report should not be regarded as Proxy solicitation materials.
You are urged to mark, sign, date and promptly return your Proxy in
the enclosed postage-paid envelope so that your shares may be voted in
accordance with your wishes and in order that the presence of a quorum may
be assured. The prompt return of your Proxy, regardless of the number of
shares you hold, will aid the Corporation in reducing the expense of
additional Proxy solicitation.
You are cordially invited to attend the Annual Meeting. The giving of
such Proxy does not affect your right to vote in person at the Annual
Meeting, if you give written notice to the Secretary of the Corporation of
your intention to vote at the Annual Meeting.
By Order of the Board of Directors,
Theodore H. Reich
President and
Chief Executive Officer
Dated: March 26, 1998
PENNS WOODS BANCORP, INC.
115 South Main Street, Jersey Shore, 17740
PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 29, 1998
Introduction, Date, Time and Place of Annual Meeting
This Proxy Statement is being furnished in connection with the
solicitation by the Board of Directors of PENNS WOODS BANCORP, INC. (the
"Corporation"), a Pennsylvania business corporation, of proxies to be
voted at the Annual Meeting (the "Annual Meeting") of holders of common
stock (the "common stock") of the Corporation to be held on April 29,
1998, at 1:00 P.M., at the Williamsport Branch Office of Jersey Shore
State Bank (the "Bank"), 300 Market Street, Williamsport,17703-0967,
and any adjournment or postponement thereof.
The main office of the Corporation is located at 115 South Main Street,
Jersey Shore, PA 17740 The telephone number is (717)398-2213. All
inquiries should be directed to Theodore H. Reich, President of the
Corporation, (717)322-1111. The Bank is a wholly owned subsidiary of the
Corporation.
Voting Securities
Holders of record of the common stock, par value $10.00 per share, at
the close of business on March 10, 1998, will be entitled to notice of
and to vote at the Annual Meeting. On March 10, 1998 there were 2,565,958
shares of common stock issued and outstanding. Each share of the common
stock outstanding as of the close of business on March 10, 1998, is
entitled to one vote on each matter that comes before the meeting and
holders do not have cumulative voting rights with respect to the election
of directors.
Under Pennsylvania law and the Bylaws of the Corporation, the
presence of a quorum is required for each matter to be acted upon at the
Annual Meeting. Votes withheld and abstentions will be counted in
determining the presence of a quorum for the particular matter. Broker
non-votes will not be counted in determining the presence of a quorum for
the particular matter as to which the broker withheld authority.
Assuming the presence of a quorum, the two nominees for director
receiving the highest number of votes cast by shareholders entitled to
vote for the election of directors shall be elected. Votes withheld from
a nominee and broker non-votes will not constitute or be counted as votes
cast for such nominee.
Assuming the presence of a quorum, the affirmative vote of a majority
of all votes cast by shareholders at the Annual Meeting is required for
the approval of the Stock Option Plan and the ratification of the
independent auditors. Abstentions and broker non-votes will not
constitute or be counted as votes cast and therefore will not count either
for or against approval of the Stock Option Plan and ratification of
auditors.
All Proxies properly executed and not revoked will be voted as
specified.
Solicitation
This Proxy Statement and enclosed form of proxy (the "Proxy") are
first being sent to shareholders of the Corporation on or about March 26,
1998 Shares represented by the Proxy, if properly signed and returned,
will be voted in accordance with the specifications made thereon by the
shareholders. Any Proxy not specifying to the contrary will be voted
"FOR" the Class 1 nominees noted, "FOR" the approval of the Stock Option
Plan and "FOR" the ratification of the appointment of Parente, Randolph,
Orlando, Carey & Associates, Certified Public Accountants, as the
independent auditors of the Corporation for the year ending December 31,
1998 The execution and return of the enclosed Proxy will not affect a
shareholder's right to attend the Annual Meeting and to vote in person if
the shareholder gives written notice to the Secretary of the Corporation.
The cost of assembling, printing, mailing and soliciting Proxies, and any
additional material which the Corporation may furnish shareholders in
connection with the Annual Meeting, will be borne by the Corporation. In
addition to the solicitation of Proxies by use of the mails, directors,
officers and employees of the Corporation and\or the Bank may solicit
Proxies by telephone, telegraph or personal interview, with nominal
expense to the Corporation. The Corporation will also pay the standard
charges and expenses of brokerage houses or other nominees or fiduciaries
for forwarding Proxy soliciting material to the beneficial owners of
shares.
Right of Revocation
A shareholder who returns a Proxy may revoke the Proxy at any time
before it is voted (1) by giving written notice of revocation to Sonya E.
Hartranft, Secretary, Penns Woods Bancorp, Inc., 300 Market Street, P.O.
Box 967, Williamsport, PA17703-0967, (2) by executing a later-dated
Proxy and giving written notice thereof to the Secretary of the
Corporation or (3) by voting in person after giving written notice to the
Secretary of the Corporation.
Quorum
Pursuant to the Bylaws of the Corporation, the presence, in person or
by proxy, of shareholders entitled to cast at least a majority of the
votes which all shareholders are entitled to cast, shall constitute a
quorum for transaction of business at the Annual Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL OWNERS
As of March 10, 1998, there were no persons who owned of record or
who are known by the Board of Directors to be beneficial owners of more
than 5% of the Corporation's common stock.
BENEFICIAL OWNERSHIP AND OTHER INFORMATION REGARDING DIRECTORS AND
MANAGEMENT The following table sets forth as of March 10, 1998,
information regarding the number of shares and percentagethe
outstanding shares of Common Stock beneficially owned by each Director,
each nominee for Director and each Executive Officer named in the Summary
Compensation Table appearing herein, and all Directors and Officers as a
group.The following table also sets forth the name, address, principal
occupation and certain additional information regarding each Director.
<TABLE>
<S> <C> <C> <C> <C> <C>
Principal Number
Occupation Shares Percentage
Name and for past AffiliatBenefically of
Address (1) Five YeaAge Since (3) Owned (4) Class
Phillip H. BoOwner, 64 1989 32,746 (J) 1.48%
Turbotville, Central Equipment -1989 5,168 (BI)
Class 2 (B) (Equipment Rental)
Lynn S. BowesFarmer 60 1983 13,912 (I) 2.13%
Jersey Shore, PA -1974 37,184 (J)
Class 3 (C) 3,476 (BI)
William S. FrOwner, 66 1983 42,886 (I) 2.65%
Jersey Shore,Shore Auto Parts, I (1980) 10,924 (J)
Class 3 (C) 14,084 (BI)
James M. FurePresident & 50 1990 2,990 (I) 0.23%
Cogan StationGeneral Manager -1990 2,748 (J)
Class 2 (B) Eastern Wood Products 288 (BI)
(Hardwood Lumber Products)
Allan W. LuggPartner in 69 -1995 19,142 (I) 0.75%
Flemington, PLaw Firm of Lugg and Lugg
Class 1 (A)
Jay H. McCormPresident and Owner 1983 14,036 (I) 0.65%
Williamsport,J.H.M. Enterprises, (1974) 2,656 (BI)
Class 3 (C) (Trucking Company)
R. Edward Nestlerode, J 45 -1995 2,596 (I) 0.19%
Lock Haven, P Nestlerode Contracting 2,000 (J)
Class 1 (A) Co., Inc. 200 (BI)
James E. PlumSecretary o 55 -1995 21,888 (I) 1.27%
Lock Haven, PBank; 6,600 (J)
Class 2 (B) Retired , Former President of 1,080 (BI)
Lock Haven Savings Bank 3,000 (BI)
Theodore H. RPresident o 59 1983 35,892 (I) 2.16%
Jersey Shore,Bank & the -1973 4,962 (J)
Class 2 (B) Corporation 2,850 (BI)
12,000 (BI)
Howard M. ThoDirector an 70 1983 3,222 (I) 2.26%
Jersey Shore,Chairman of the Boa (1965) 11,800 (J)
Class 1 (D) C.D. Thompson & Sons, Inc. 42,956 (BI)
(Meat Packing)
HR&R Realty Partnership
Ronald A. WalVice Presid 51 1986 300 (I) 0.36%
MontoursvilleSenior Vice President 3,278 (J)
and Loan Officer 300 (BI)
of the Bank 5,500 (BI)
William F. Williams, Jr. 71 1983 14,140 (J) 0.55%
Jersey Shore Former Vice Preside (1962)
Class 1 (D) of the Bank
</TABLE>
All Executive Officers and Directors as a Group (E 395,574 15.24%
*(I) Individual Ownership (J) JoinOwnershi(BI) Beneficial Interest
-3
(A) A Nominee for Class 1 Director whose term, if elected at the Annual
Meeting will expire in 2001.
(B) A Director whose term expires in 2000.
(C) A Director whose term expires in 1999.
(D) A Director whose term expires in 1998
(E) Executive Officers of the Corporation included are Hubert A.
Valencik, Vice President;Chris B. Ward, Treasurer; and Sonya E.
Hartranft, Secretary.
-1 There is no family relationship, by blood, marriage or adoption
between any of the foregoing Directors and any other Executive Officer or
Director of the Corporation or its subsidiaries. None of the foregoing
Directors or Executive Officers are involved in any legal action that is
material to an evaluation of their ability or integrity to act as a
Director or Executive Officer.
-2 All Directors, nominees and Executive Officers have held the positions
indicated or another senior executive position with the same entity or one
of its affiliates or predecessors for the past five years except Mr. James
E. Plummer who was President of Lock Haven Savings Bank from September
1987 through April 7, 1995.
-3 The date appearing in parenthesis opposite each Director's name in the
"Affiliate Since" column represents the year in which each such nominee or
Director became a Director of the Bank. Each person listed presently
serves as a Director of the Corporation exMr. Walko, who joined the
Bank in 1986.
-4 The foregoing Directors and Executive Officers, as of March 10, 1998,
according to the information supplied by them, owned beneficially,
directly or indirectly, the number of shares of common stock of the
Corporation set opposite their respective names. Beneficial Ownership is
determined in accordance with the definitions of "beneficial ownership"
set forth in the General Rules and Regulations of the Securities and
Exchange Commission and may include, in addition to shares held by the
Director, securities owned by or for the benefit of the individual's
spouse and minor children and any other relative who has the same home, as
well as securities to which the individual has or shares voting or
investment power or has the right to acquire beneficial ownership within
60 days after March 10, 199Beneficial ownership may be disclaimed as
to certain of the securities.
-5 Mr. Reich also serves as: Director & Vice President - Lycoming
Foundation; Director - Norcen Industries, Inc.; Advisory Director -
Northcentral Pennsylvania Conservancy; Vice Chairman - Little League
Baseball, Inc.; General Partner - Keystone Realty Associates
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Corporation appointed the following committees for 1997:
Number of
Times Met During 1997
AUDIT: William S. Frazier, Phillip H. Bower, Ly 0
W. Lugg, William F. Williams, Jr., and James E. Plummer
BUILDING: Howard M. Thompson, James M. Furey, II, 0
Jay H. McCormick, and R. Edward Nestlerode, Jr.
The Bank appointed the following committees for 1997:
AUDIT: Lynn S. Bowes, James M. Furey, II, Allan 4
Jay H. Mc Cormick, R. Edward Nestlerode Jr., and James E.
Plummer
BUILDING: Lynn S. Bowes, Howard M. Thompson, Jay 1
William S. Frazier and R. Edward Nestlerode, Jr.
RETIREMENT: Phillip H. Bower, James E. Plummer, Ja 0
Allan W. Lugg and William F. Williams, Jr.
INSURANCE: R. Edward Nestlerode, Jr., Phillip H. 1
and James E. Plummer
SALARY: Phillip H. Bower, William S. Frazier, J 7
Jay H. McCormick, Howard M. Thompson, William F.
Williams, Jr., Lynn S. Bowes, Allan W. Lugg, R. Edward
Nestlerode, Jr. and James E. Plummer
ASSET LIABILITY: Theodore H. Reich, Jay H. McCormick, Wil 4
Hubert A Valencik, Sonya E. Hartranft, Ronald A. Walko,
R. Edward Nestlerode, Jr., Howard M. Thompson,Allan W.
Lugg and G.David Gundy.
The Board of Directors of the Corporation met seven (7) times during
1997 The Board of Directors of the Bank met twenty-five (25) times
during 1997. All of the Directors attended at least 75% of the aggregate
of all meetings of the Board of Directors and the Committees of which they
were members.
The Board of Directors of the Corporation assumes the role of the
nominating committee. In determining its nominees for election to the
Board, the Board of Directors will consider nominees recommended by
shareholders. Such shareholder recommendations for 1999 shall be made in
writing no later than January 1, 1999, addressed to the Corporate
Secretary, Penns Woods Bancorp, Inc., 300 Market Street, Williamsport,
Pennsylvania 17701. Nominations for director to be made at the Annual
Meeting by shareholders entitled to vote for the election of directors
must be submitted to the Secretary of the Corporation not later than the
close of business on the twentieth day immediately preceding the Annual
Meeting, which notice must contain certain information specified in the
Bylaws. No notice of nomination for election as a director has been
received from any shareholder as of the date of this Proxy Statement. If
a nomination is attempted at the Annual Meeting which does not comply with
the procedures required by the Bylaws or if any votes are cast at the
Annual Meeting for any candidate not duly nominated, then such nomination
and/or such votes may be disregarded.
PRINCIPAL OFFICERS OF THE CORPORATION
The following table lists the Executive Officers of the Corporation as of
March 10, 1998:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Number of
Position and/or Bank EmploShares ofYear First
Name Age With the CorporaSince CorporatiElected as Officer
Theodore H. R 59 President & Chie 1970 55,704 1983
Executive Officer
Ronald A. Wal 51 Vice President 1986 9,378 1987
Hubert A. Val 56 Vice President 1984 9,396 1985
Chris B. Ward 51 Treasurer 1973 5,150 1983
Sonya E. Hart 38 Secretary 1981 4,224 1984
</TABLE>
PRINCIPAL OFFICERS OF THE BANK
<TABLE>
The following table lists the Executive Officers of the Bank as of March 10, 1998
<S> <C> <C> <C> <C> <C> <C>
Number of
Position and/or Bank EmploShares ofYear First
Name Age With the CorporaSince CorporatiElected as Officer
Theodore H. R 59 President & Chie 1970 55,704 1970
Executive Officer
Hubert A. Val 56 Senior Vice Pres 1984 9,396 1984
and Operations Officer
Ronald A. Wal 51 Senior Vice Pres 1986 9,378 1986
and Senior Loan Officer
Chris B. Ward 51 Vice President 1973 5,150 1973
Sonya E. Hart 38 Controller 1981 4,224 1984
G. David Gund 49 Vice President 1992 3,492 1992
</TABLE>
Mr. Reich joined the Bank in 1970 as Vice President and Cashier, and
was elected President in 1973. On January 7, 1983, he became President of
Penns Woods Bancorp, Inc.
ELECTION OF DIRECTORS
The Bylaws provide that the Board of Directors shall consist of not
less than five (5) nor more than twenty-five (25) Directors who are
shareholders, the exact number to be fixed and determined from time to
time by resolution of the full Board of Directors or by resolution of the
shareholders at any annual or special meeting. The Board of Directors has
set the number of Directors to be eleven (11). The Bylaws further provide
that the Directors shall be divided into three (3) classes, as nearly
equal in number as possible, known as Class 1, Class 2 and Class The
Directors of each class serve for a term of three(3) years and until
their successors are elected and qualified. The Directors of the
Corporation serve as follows:
Nominees for election as Class 1 Directors to serve until 2001:
Allan W. Lugg
R. Edward Nestlerode, Jr.
Class 2 Directors whose term expires in 2000:
Phillip H. Bower
James M. Furey, II
James E. Plummer
Theodore H. Reich
Class 3 Directors whose term expires in 1999:
Lynn S. Bowes
William S. Frazier
Jay H. McCormick
It is intended that the Proxies solicited hereunder will be voted FOR
(unless otherwise directed) the four (4) nominees listed previously for
election as Class 1 Directors. Each nominee has agreed to serve if
elected and qualified. The Corporation does not contemplate that any
nominee will be unable to serve as a Director for any reason. However, in
the event one or more of the nominees should be unable to stand for
election, Proxies will be voted for the remaining nominees in accordance
with the best judgment of the Proxyholders.
EXECUTIVE COMPENSATION
The following table sets forth the annual compenfor services
in all capacities to the Corporation and the Bank for the three years
ended December 31, 1997 for those persons who were as of December 31,1997,
Named Executives, (i) the Chief Executive officer and (ii) the only other
Executive Officer whose total annual salary and bonus exceeded $100,000:
<TABLE>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION Long Term Compensation
AWARDS PAYOUTS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securities
Name Other RestricteUnderlying
and Annual Stock Options/LTIP All Other
Principal Salary Bonus CompensatiAward(SAR's Payouts Compensation
Position Year ($) ($) ($) ( ($) (#) ($) ($)
Theodore H. R 1997 $169,204$200,500 $0 $0 6,000 $0 $5,939 -4
Chief Executi 1996 $167,904$50,500 $0 $0 6,000 $0 $5,939
Officer (6) 1995 $168,204$25,500 $0 $0 6,000 $0 $5,854
Ronald A. Wal 1997 $100,828$25,500 $0 $0 3,000 $0 $2,604 -5
Vice Presiden 1996 $95,420 $12,500 $0 $0 1,500 $0 $2,158
1995 $90,012 $8,500 $0 $0 1,500 $0 $1,970
<FN>
-1 Total includes base salary and directors fees for Mr. Reich and base
salary for Mr. Walko. Directors fees paid to Mr. Reich were $9,200
,$7,900 and $8,200 in 1997, 1996 and 1995respectively. A retainer fee
of $2,000 is included in the directors fee totals for 1997 and $1,000 for
1996 and 1995.
-2 The cost of certain perquisites and other personal benefits are not
included because they do not exceed the lesser of $50,000 or 10% of the
total annual salary and bonus.
-3 Indicates number of shares of Common Stock of the Corporation for
which options were granted during applicable periods. Options granted
have been adjusted for the 100% stock dividend issued on January 15, 1998.
-4 Indicates contributions paid in 1997, 1996, and 1995 in the amount of
$3,167 , $3,167, and $3,082 respectively, by the Bank to the Bank's 401(k)
Plan for the benefit of Mr. Reich and life insurance premiums of $2,772
for each year indicated.
-5 Indicates contributions paid by the Bank to the Bank's 401(k) Plan for
the benefit of Mr. Walko.
-6 Mr. Reich serves as both President and Chief Executive Officer of the
Corporation and the Bank and is a member of the Board of Directors of the
Corporation and the Bank.
-7 Mr. Walko serves as Vice President of the Corporation and as Senior
Vice President and Senior Loan Officer of the Bank.
</TABLE>
OPTION/SAR GRANTS
The following table sets forth information concerning grants of stock
options to the Named Executives during the fiscal year enDecember 31,
1997
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term (2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Number of % of Total
SecuritiOptions/
Underlyi SARs
OptionsGranted Exercise Market
SARs Employeeor Base Price at
Grantein Fisca Price Grant Expiration
Name (#) Year ($/Sh) Date Date 0%($) 5%($) 10%($)
Theodore H. R 6,000 38%$28.575 $31.75 0.0045 $19,050 $71,682 $135,352
Ronald A. Wal 3,000 19%$28.575 $31.75 0.0045 $9,525 $35,840 $67,676
<FN>
(1)All amounts represent stock options. No SARs or SARs granted in tandem
with stock options were granted to the Named Executives during the three
years ended December 31, 1997.Options were granted by the Corporation
to Mr. Reich and Mr. Walko pursuant to Stock Option Agreements by and
between the Corporation, Mr. Reich and Mr. Walko.All options granted
under the agreements represent nonqualified stock options. The options
are exercisable for a period of five years from the date of the grant. The
exercise price of the options is $28.57per share. The options granted
and the prices shown have been adjusted for the 100% stock dividend issued
January 15, 1998.
-2 The dollar amounts set forth above are the result of calculations made
at the 0%, 5% and 10% appreciation rates set forth in Securities and
Exchange Commission regulations and are not intento indicate future
price appreciation, if any, of the Corporation'ss Common Stock.
</TABLE>
The following table sets forth information concerning the exercise
of options to purchase Common Stock by the Named Executives during the
fiscal year ended December 31, 1997, as well as the number of securities
underlying unexercised options and the potential value of unexercised
options (both options which are presently exercisable and options which
are not presently exercisable) as of December 31, 1997.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
<S> <C> <C> <C> <C>
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs at
Shares Value at FY-End (#) FY-End ($)
Acquired onRealized Exercisable/ Exercisable/
Name Exercise($) Unexercisable (1Unexercisable (2)
Theodore H. R 6,000 85,250 12,000/ 0 104,550/ 0
Ronald A. Wal 500 7,125 5,500/ 0 45,150 / 0
-1 All amounts represent stock options. No SARs or SARs granted in
tandem with stock options were either exercised during 1997 or
outstanding at fiscal year-end 1997. Options to acquire 6,000 shares of
the Corporations Common Stock were granted to Mr. Reich in 1996 and an
option to acquire 6,000 shares was granted in 199Options to acquire
the remaining 1,000 shares of those granted to Mr. Walko in 1995 and
options to acquire 1500 shares and 3,000 shares granted to Mr. Walko in
1996 and 1997, respectively. The exercise price of the 1995 and 1996
options is $17.50 per share, while the exercise price of the 1997 options
is $28.575. The options granted in 1995, 1996 and 1997 have been adjusted
for the 100% stock dividend issued January 15, 19In addition, the
expiration date of the options granted in 1995 has been amended from
12/19/97 to 12/19/98.
-2 "In-the-money" options are stock options with respect to which the
market value of the Corporation's Common Stock exceeded the exercise price
at December 31, 1997. The value of such options is determined by
subtracting the aggregate exercise price of such options from the
aggregate fair market value of the underlying shares of Common Stock on
December 31, 1997.
RETIREMENT PLAN
The Bank has a noncontributory defined benefit pension plan (the
"Plan") for all employees meeting certain age and length of service
requirements. Benefits are based primarily on years of service and the
average annual compensation earned by an employee, which is the employee's
annual compensation averaged over the five highest paid consecutive
calendar years within the final ten years of employment. Annual
compensation is based upon the employee's W-2 wages, which includes base
salary, bonus, personal vehicle mileage for certain executive officers and
life insurance coverage that exceeds $50,000. The Bank's funding policy
is consistent with the funding requirements of Federal law and
regulations. Plan assets are comprised of common stock and U.S.
Government and corporate debt securities.
The accrued Normal Retirement Benefit is determined by the following
formula: 1.4%of the average annual compensation up to social security
covered compensation multiplied by the credited service, plus 2% of the
average annual compensation that is in excess of the Social Security
covered compensation multiplied by the number of years of credited
service. Based on the preceding formula, projected annual retirement
benefits for a participant turning age 65 in 1997 are set forth below.
Final Five YearsTotal Projected Years of Service
Average Annual Compensat 15 20 30 35
10,000 2,100 2,800 4,200 4,900
20,000 4,200 5,600 8,400 9,800
30,000 6,369 8,492 12,738 14,861
40,000 9,369 12,492 18,738 21,861
50,000 12,369 16,492 24,738 28,861
60,000 15,369 20,492 30,738 35,861
70,000 18,369 24,492 36,738 42,861
80,000 21,369 28,492 42,738 49,861
90,000 24,369 32,492 48,738 56,861
100,000 27,369 36,492 54,738 63,861
125,000 34,869 46,492 69,738 81,361
150,000 * 42,3 56,492 84,738 98,861
175,000 42,369 56,492 84,738 98,861
200,000 42,369 56,492 84,738 98,861
225,000 42,369 56,492 84,738 98,861
250,000 42,369 56,492 84,738 98,861
Current remuneration covered by the Plan in 1997 for Mr. Reich was
$29,770 and for Mr. Walko was $2,932. The estimated annual benefits
payable upon retirement at normal retirement age to Theodore H. Reich for
the fiscal year 1997 is $95,974 and to Mr. Walko is $40,7As of
December 31, 1997, Mr. Reich was credited with twenty-five years of
service and Mr. Walko was credited with ten years of service. The number
of Plan Participants in 1997 was 123. Total Plan assets as of December
31, 1997, were $2,819,558.
COMPENSATION OF DIRECTORS
All directors of the Bank receive $300.00 for each meeting of the Board
of Directors and $150.00 for each committee meeting of the Board of
Directors of the Bank. A $2,000 retainer fee was also paid to each
Director of the Corporation during 1In addition, directors receive
compensation for accompanying an officer on property appraisals at a rate
of $20.00 for the first hour and $10.00 for each subsequent hour. The
Secretary of the Board of Directors also receives $50.00 for each Board
meeting. In the aggregate, the Board of Directors received $92,395.00
for all Board of Directors' meetings and committee meetings of the Bank
attended. This total also includes the total received for appraisals, the
secretarial function and the retainer fee. A portion of these fees were
used to fund a deferred compensation plan for Directors who participated
in the plan.
BOARD COMPENSATION REPORT ON EXECUTIVE COMPENSATION
The Board of Directors of the Corporation is responsible for the
management of the affairs of the Corporation and the supervision of its
subsidiary, Jersey Shore State Bank. The Board of Directors best serves
the interests of its shareholders, customers and the communities served by
the Corporation and its subsidiary by engaging persons who have the skills
and expertise to implement the strategic goals and objectives of the
Corporation in a cost-effective manner. The Corporation's philosophy
concerning the Bank's compensation program is to offer competitive
compensation for each employee based upon their personal performance and
contributions to the success of the Corporation.
The Salary Committee, which is comprised of the ten outside directors
listed below, administers the compensation program. The Committee's
objective is to establish a compensation policy that will enable the
Corporation to attract, retain, motivate and reward executive officers who
are critical to the success of the Corporation. The Committee believes
that the existing compensation program accomplishes these objectives. The
Committee determines annually the compensation of the executive officers,
which includes the chief executive officer (the "CEO"), the senior vice
presidents, the controller and other vice presidents. The Board of
Directors ratifies all actions taken by the Committee as they relate to
the compensation of the executive officers.
CEO and Named Executive Compensation
The Board of Directors determined that the 1997 base compensation for
the CEO, Mr. Theodore H. Reich, would be $160,004 based upon an
Executive Employment Agreement that was adopted in January 1995. The
1997 base compensation for Mr. Ronald A. Walko was determined to be
$100,828 based upon an Employment Agreemewas adopted in August
1991 The Employment Agreements are described on the following pages.
Executive Officers
Increases in the compensation of the other executive officers is
determined by the Committee based upon, among other things, the following
factors: earnings, return on assets, return on equity, total assets, and
the quality of the loan portfolio of the Corporation and the Bank.
Notwithstanding the foregoing, the Committee's determination is based upon
a review of all information that it deems relevant in determining, with
respect to each particular executive officer, the compensation to be paid
to such officer.
In addition to base salary, the executive officers of the Corporation
and the Bank may participate in the annual and long term incentive plans,
including stock options and bonuses that are granted to certain senior
executive officers and a 401(k) plan. This plan is available to all
qualified Bank employees.
The compensation opportunities that are available to the Bank's
employees are influenced by market conditions, the individual's
responsibilities, and the employee's contributions to the success of the
Corporation. Employees are reviewed annually on a calendar basis. The
Bank attempts to offer compensation that is comparable with that offered
by other employers in our industry. The Corporation strives to meet its
objectives and strategic goals by providing fair compensation to its
employees.
Members of the Salary Committee
Phillip H. Bower Jay H. McCormick
Lynn S. Bowes Howard M. Thompson
William S. Frazier William F. Williams, Jr.
James M. Furey, II Allan W. Lugg
R. Edward Nestlerode, Jr. James E. Plummer
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. William F. Williams, Jr. was a former Vice President of Jersey
Shore State Bank who retired in January 1992. Mr. James E. Plummer
retired from Jersey Shore State Bank in June 1995He was the President
of Lock Haven Savings Bank until April 1995. They are currently members
of the Salary Committee. Mr. Williams has no disclosable relationships or
related transactions with the Corporation, the Bank or any other
subsidiary. Mr. Plummer has no disclosable relationships or related
transactions with the Corporation or any other subsidiary. He is
Secretary of the Board of Directors of the Bank.
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly dollar change in
the cumulative shareholder return on the Corporation's Common Stock
against the cumulative total return of the S&P 500 Stock Index and the
Peer Group Index for the period of five fiscal years commencing January 1,
1993 and ending December 31, 1997. The shareholder return shown on the
graph below is not necessarily indicative of future performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
Penns Woods Bancorp, Inc. Common Stock, S & P 500 & Peer Group Index (1)
1992 1993 1994 1995 1996 1997
S & P 500 $100.00 $110.02 $111.51 $153.26 $188.36 $251.12
Peer Group $100.00 $139.93 $161.44 $174.21 $192.24 $270.19
Penns Woods Bancorp, Inc$100.$172.72 $206.48 $241.85 $299.63 $479.88
1 The Peer Group for which information appears above includes the
following companies: ACNB Corporation; CNB Financial Corporation;
Citizens and Northern Corporation; Drovers Bancshares Corporation; First
West Chester Corporation; Franklin Financial Services Corp.; Hanover
Bancorp Inc.; Penn Security Bank and Trust Company; Pennrock Financial
Services Corp.; and Sterling Financial Corporation. These companies were
selected based on four criteria: total assets between $350 million and
$825 million; market capitalization greater than $60 million; headquarters
located in Pennsylvania; and are quoted on the NASDAQ stock market. This
is the same Peer Group Index as used in year ending December 31, 1996.
EXECUTIVE EMPLOYMENT AGREEMENT
Mr. Theodore H. Reich
In January 1995, the Corporation and the Bank entered into an
Employment Agreement with Theodore H. Reich, Director, President and Chief
Executive Officer of the Corporation and the Bank. Under the terms of the
Employment Agreement, Mr. Reich will serve as President and Chief
Executive Officer of the Corporation. The initial term of the Employment
Agreement is three years, subject to an automatic one year extension on
each anniversary date thereof, unless either party gives notice to the
other of an intention not to renew. Under the Employment Agreement, the
Corporation or the Bank will pay an annual base salary of $160,000 to the
executive. This base salary will be reviewed annually by the Board of
Directors and will be subject to annual adjustments. In addition, the
Board of Directors of the Corporation in its sole discretion provide for
the payment of periodic bonuses to the executive. The Employment
Agreement also provides for the payment of severence benefits in the event
of termination as result of death, disability or without cause as defined
in the Employment Agreement by the Corporation or for Good Reason (as
defined in the Employment Agreement) by the executive. In the event of
the executive's termination as a result of his death, the Corporation or
the Bank will make a lump sum payment to his estate in an amount equal to
the highest of the base salaries paid to the executive over the three
calendar years preceding his termination due to his death but in any event
not less than $160,000. In the event of his termination as a result of
disability, the Corporation or the Bank will pay to the executive annually
an amount equal to his base salary in effect immediately prior
to his termination because of a disability for a period of three years
beginning on the date of such termination. However, payment of such
amount will be reduced by the sum of any benefits payable to the executive
under any disability plan of the Corporation or the Bank or under any
government regulated plan. In the event of the termination by the
executive for Good Reason (as defined in the Employment Agreement) or by
the Corporation or the Bank without cause, the executive will receive
annually for a period of three years following the date of termination an
amount equal to the highest of his base salaries over the three years
preceding the date of his termination but in any event not less than
$160,000 and an amount equal to the average of the three highest annual
base salaries paid to the executive over the five years preceding the date
of his termination. The Employment Agreement also requires the
Corporation or the Bank to provide certain medical and health benefits to
the executive and his spouse following his termination.
The Employment Agreement also contains a covenant which restricts the
ability of the executive to compete with the Corporation for a period of
three years following his termination unless such termination was by the
executive for Good Reason or by the Corporation or the Bank for other than
cause.
Mr. Ronald A. Walko
In August of 1991, Mr.Walko entered into an employment agreement
with the Bank, pursuant to which Mr. Walko agreed to serve as Senior Vice
President of Lending for the Bank. Under the terms of the Employment
Agreement, he will receive an annual base salary of $70,0The term of
the Agreement was five years, subject to automatic renewal after each
successive five year term. The Agreement was renewed in 1996.
Under the current Employment Agreement, increases in compensation
will be determined in accordance with the annual performance evaluation.
Mr. Walko has the right to terminate this agreement upon 60 days written
notice to the Bank if he does not receive an increase in compensation on
each annual anniversary date. The bank will also provide at its expense
Mr. Walko with an automobile for business purposes, annual membership at
the Ross Club or similar organization and all benefits provided to other
employees as set forth in the Employee Handbook.
The Employment Agreement may be terminated by the Bank for cause, as
defined in the agreement, whereby the Bank shall pay one-half the salary
of Mr. Walko for the period of time between the date of termination and
the end of term of the agreement, or the date Mr. Walko commences
comparable employment on a full time basielsewhere, whichever occurs
first. If the agreement is terminated by the Bank without cause the Bank
shall pay Mr. Walko his full salary for the period of time between the
date of termination and the end of the term of the agreement, or the
date Mr. Walko commences comparable employment elsewhere on a full time
basis, whichever occurs first. If during the term of the agreement
Mr.Walko dies or becomes disabled, Mr. Walko or his estate shall be paid
an amount equal to six months compensation or the balance due on this
contract, whichever is less. If Mr. Walko terminates this agreement
because he is reduced to a lessor stature and authority, the Bank shall
pay the balance of all sums due under the contract up to the date of
termination. If Mr. Walko voluntarily terminates his agreement for
reasons other than changes in stature and authority, he shall not work for
another banking institution having an office in Lycoming County,
Pennsylvania for a one- year period after the date of termination.
Severance Agreement
The Bank has entered into a severance agreement with Mr. Walko.
Under the terms of the agreement, if the executive officer's employment
is terminated within two years after a Change in Control of the
Corporation he will be entitled to receive from the Corporation (his
full compensation and benefits from the Notice of Termination (as defined)
until the Date of Termination and (ii) a lump sum severance payment equal
to two times the annual average of salary plus bonuses earned by him
during the five calendar years preceding the Date of Termination; such
amount would be prorated, however, if the termination occurs within two
years of his 65th birthday. The Agreement also provides the executive
officer with insurance coverage similar to those in effect immediately
prior to the Notice of Termination for a period otwenty-four months,
however, these will be reduced to the extent that comparable benefits are
received by him from another employer during the corresponding period. In
addition to the retirement benefits he is entitled to receive under the
Bank Pension Plan or any other pension or retirement plan in which he
participates, the Corporation will pay him a lump sum equal to the
actuarial equivalent of the excess of the accrued retirement pension up to
the Date of Termination adjusted for an additionatwenty-four months of
credited service at his compensation and the actual accruup to his
Date of Termination (in no event will months of age or service credit be
accumulated after his 65th birthday).
During any period following a Change in Control of the Corporation,
if employment is terminated by the employer for Disability, or by the
employer or the employee by reason of retirement or death, the benefits
shall be determined in accordance with the Corporation's programs then in
effect. If the employee is terminated by his employer for cause
subsequent to a Change in Control or is terminated by the employee for
other than Good Reason or retirement, he shall receive full compensation
through the date of termination and shall have no further rights under
this Agreement thereafter.
This Agreement will be in effect until Mr. Walko attains age 65 or until
the Date of Termination, whichever occurs first.
PROPOSAL TO APPROVE STOCK OPTION PLAN
Description of the 1998 Stock Option Plan
The Board of Directors believes that the Penns Woods Bancorp, Inc
stock option program constitutes an important part of the Corporation's
compensation programs and, accordingly, the Corporation has adopted the
1998 Stock Option Plan, which is subject to shareholder approval.
The 1998 Plan is designed to improve the performance of the
Corporation and its subsidiaries and, by doing so, to serve the interests
of the shareholders. By encouraging ownership of the Corporation's shares
among those who play significiant roles in the Corporation's success,
implementation of the 1998 Plan will more closely align the interests of
the Corporation's key employees and directors with those of its
shareholders by relating capital accumulation to increases in shareholder
value. Moreover, adoption of the 1998 Plan should have a positive effect
on the Corporation's ability to attract, motivate and retain employees and
directors of outstanding leadership and management ability.
The principal features of the 1998 Plan are described below. See
Exhibit A to this Proxy Statement for the full text of the 1998 Plan.
The 1998 Plan authorizes a Committee (the "Committee") of the Board
of Directors (the "Board") to grant options for the purchase of up to
100,000 shares of the Penns Woods' Common Stock, which constitutes
approximately 3.90%of the Corporation's presently outstanding shares of
Common Stock.
Under the 1998 Plan, both incentive stock options (as defined in
Section 422 of the Internal Revenue Code of 1986, as amended) and
nonqualified stock options may be granted to eligible employees of the
Corporation and its subsidiaries. In addition, non-employee directors are
eligible to receive grants of nonqualified stock options. No person who
owns immediately before the grant of an incentive stock option, directly
or indirectly, more than 10% of the total combined voting power of all
classes of the Corporation's Common Stock, is eligible for the grant of an
incentive stock option. As of March 10, 1998, the Corporation had
approximately eighteen (18) key employees who would be eligible to
participate in the 1998 Plan.
Option grants to eligible employees and/or non-employee directors are
anticipated to be made annually. Eligible employees generally include all
key employees of the Corporation and its subsidiaries. Eligible employees
will be selected to receive a grant of options based upon the
recommendation of the Corporation's chief executive officer. Options are
granted at 100% of the fair market value of one share of the Corporation's
common stock on the date the option is granted.
The Committee has the authority to grant options under the 1998 Plan.
The Committee is composed of at least three members of the Board, who
serve at the discretion of the Board. Currently, Penns Woods' Salary
Committee will serve as the Committee. The 1998 Plan authorizes the
Committee to administer and interpret the 1998 Plan. Members of the
Committee are each "disinterested persons" as such term is defined under
the rules and regulations adopted by the Securities and Exchange
Commission. Any shares as to which an option expires, lapses
unexercised, or is terminated or canceled, may be subject to a new option.
Incentive stock options granted under the 1998 Plan may be exercised
for 5 years after the date of grant. Nonqualified stock options granted
under the 1998 Plan may be exercised for 10 years after the date of grant.
The aggregate fair market value (determined at the time the option is
granted) of the shares of Common Stock with respect to which incentive
stock options are exercisable for the first time by an optionee during any
calendar year may not exceed $100,000. No employee may receive option
grants in excess of 10,000 shares under the 1998 Plan in any twelve month
period. No option may be transferred by the optionee other than by will
or by the laws of descent and distribution, and each option is exercisable
during the optionee's lifetime only by the optionee. The Plan permits, at
the discretion of the Committee, for nonqualified stock options to be
transferrable under certain circumstances.
At the election of the holder of a nonqualified option and subject to
the rules established by the Committee, any required withholding taxes may
be satisfied by the Corporation withholding shares of Common Stock issued
on the exercise of a nonqualified stock option that have a fair market
value equal to or less than any required withholding taxes, delivery by
the holder to the Corporation of sufficient Common Stock to satisfy the
withholding obligation, or delivery by the holder to Sovereign of
sufficient cash to satisfy the withholding obligations.
Under the 1998 Plan, in the event of an optionee's retirement,
incentive stock options lapse at the earlier of three months from the date
of retirement or the term of the option, while nonqualified options may
continue to be exercised during the term of the option up to 12 months, at
the discretion of the Committee, from the date of retirement. An optionee
whose employment terminates due to death or disability may exercise an
option until the earlier of the term of the option or 12 months after such
termination of employment.
If an optionee's employment is terminated for "Cause", all options
granted to such person terminate upon the date employment is terminated.
Under the 1998 Plan, termination for "Cause" is defined as termination of
employment resulting from (i) the optionee's conviction of or plea of
guilty to a felony, a crime of falsehood, or a crime involving fraud or
moral turpitude, or the actual incarceration of the optionee for a period
of 45 consecutive days, (ii) the Optionee's willful failure to follow the
lawful instructions of the Board after receipt by the optionee of written
notice of such instructions, except where such failure results from the
optionee's incapacity because of physical or mental illness, or (iii) any
government regulatory agency recommending or ordering that the optionee be
terminated or relieved of his duties. If an optionee's employment is
involuntarily terminated other than as a result of death, disability or
retirement the optionee is not terminated for "Cause," the optionee may
exercise all options granted to him under the 1998 Plan until the earlier
of the term of the option or three months after such termination of
employment.
The Board may amend, suspend or terminate the 1998 Plan at any time
without shareholder approval, subject to the requirements of applicable
securities and tax laws, provided, however, that the Board may not,
without shareholder approval, amend the 1998 Plan so as to (i) increase
the number of shares subject to the 1998 Plan,
(ii) change the class of eligible employees, or (iii) otherwise change the
1998 Plan in any manner deemed material under applicable federal
securities laws. In addition, the board may not modify or amend the 1998
Plan with respect to any outstanding option or impair or cancel any
outstanding option without the consent of the affected optionee.
Tax Consequences
The 1998 Plan permits eligible employees of the Corporation and its
subsidiaries to receive grants of incentive stock options, which qualify
for certain tax benefits. In addition, the 1998 Plan permits eligible
employees and non-employee directors of the Corporation to receive grants
of nonqualified stock options, which do not qualify for such tax benefits.
The 1998 Plan is not a qualified plan under code Section 401 (a).
the Corporation has been advised that under the Code, the following
federal income tax consequences will result when incentive stock options
or nonqualified stock options, or any combination thereof, are granted or
exercised, although the following is not intended to be a complete
statement of the applicable law.
INCENTIVE STOCK OPTIONS.An optionee generally will not be deemed
to receive any income for federal tax purposes at the time an incentive
stock option is granted, nor will the Corporation be entitled to a tax
deduction at that time. Upon the sale or exchange of the shares at least
two years after the grant of the option and one year after receipt of the
shares by the optionee upon exercise, the optionee will recognize
long-term capital gain or loss upon the sale of such shares equal to the
difference between the amount realized on such sale and the exercise price.
If the foregoing holding periods are not satisfied or the option is
exercised more than three months after the optionee's employment with the
Corporation has terminated, the optionee will recognize ordinary income
equal to the difference between the exercise price and the lower of the
fair market value of the stock at the date of the option exercise or the
sale price of the stock. If the sale price exceeds the fair market value
on the date of exercise, the gain in excess of the ordinary income portion
will be treated as either long-term or short-term capital gain, depending
on whether the stock has been held for more than 12 months on the date of
sale. Any loss on disposition is a long-term or short-term capital loss,
depending upon whether the optionee had held the stock for more than 12
months. A different rule for measuring ordinary income upon such a
premature disposition may apply if the optionee is a director or 10%
shareholder of the Corporation or an officer of the Corporation subject to
Section 16(b) of the Securities Exchange Act of 1934. If the Corporation
cancels an option, the optionee recognizes income to the extent of the
amount paid by the Corporation to cancel the option over the optionee's
basis in such option, if any.
No income tax deduction will be allowed the Corporation with respect
to shares purchased by an optionee upon the exercise of an incentive stock
option, provided that such shares are held at least two years after the
date of grant and at least one year after the date of exercise. However,
if those holding periods are not satisfied, the Corporation may deduct an
amount equal to the ordinary income recognized by the optionee upon
disposition of the shares.
The exercise of an incentive stock option and the sale of stock
acquired by such exercise could subject an optionee to alternative minimum
tax liability for federal income tax purposes.
NONQUALIFIED STOCK OPTIONS. An optionee will not be deemed to
receive any income for federal tax purposes at the time a nonqualified
stock option is granted, nor will the Corporation be entitled to a tax
deduction at that time. At the time of exercise, however, the optionee
will realize ordinary income in an amount equal to the excess of the
market value of the shares at the time of exercise of the option over the
option price of such shares. the Corporation is permitted a federal
income tax deduction in an amount equal to the ordinary income recognized
by the optionee due to the exercise of a nonqualified stock option at the
time of such recognition by the optionee.
STOCK-FOR-STOCK-EXCHANGE. An optionee who exchanges "statutory option
stock" of Penns Woods in payment of the purchase price upon the exercise
of an incentive stock option will be deemed to make a "disqualifying
disposition" of the statutory option stock so transferred unless the
applicable holding requirements (two years from the date of the grant and
one year after the exercise of an incentive option) with respect to such
statutory option stock are met after the exercise of incentive stock
options but also upon the exercise of qualified stock options and stock
acquired under certain other stock purchase plans. If an optionee
exercises nonqualified stock options by exchanging previously-owned
statutory option stock, the Internal Revenue Service has ruled that the
optionee will not recognize gain on the disposition of the statutory
option stock (assuming the holding period requirements applicable to such
statutory option stock have been satisfied) because of the non-recognition
rule of Code Section 1036.
No grant of options under the proposed 1998 Plan has been made.
As provided above, only key employees of the Corporation or its
subsidiaries and non-employee directors will be eligible to receive stock
options under the 1998 Plan at the discretion of the Board. This would
include the executive officers listed in the Summary Compensation Table
included under the section entitled "COMPENSATION OF EXECUTIVE OFFICERS"
in this Proxy Statement.
The stock options previously granted to senior officers of the
Corporation and its subsidiaries under the prior employee stock option
programs, and information on options exercised during the last fiscal
year, are reflected in tables contained in the section of this Proxy
Statement entitled "COMPENSATION OF EXECUTIVE OFFICERS".
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR ADOPTION
OF THE 1998 STOCK OPTION PLAN. The affirmative vote of a majority of all
votes cast at the Meeting is required to adopt the 1998 Stock Option Plan.
All proxies will be voted "FOR" adoption of the 1998 Stock Option Plan
unless a shareholder specifies to the contrary on such shareholder's proxy
card.
CERTAIN TRANSACTIONS
There have been no material transactions between the Corporation and
the Bank, nor any material transactions proposed, with any Director or
executive officer of the Corporation and the Bank, or any associate of the
foregoing persons. The Corporation and the Bank have had, and intend to
continue to have, banking and financial transactions in the ordinary
course of business with Directors and Officers of the Corporation and the
Bank and their associates on comparable terms and with similar interest
rates as those prevailing from time to time for other customers of the
Corporation and the Bank.
Total loans outstanding from the Bank at December 31, 1997 to the
Corporation's and the Bank's 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 $2,096,492 or approximately 6.63% of the total
equity capital of the Bank. Loans to such persons were made in the
ordinary course of business, were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons, and did not involve more
than the normal risk of collectability or present other unfavorable features.
LEGAL PROCEEDINGS
In the opinion of the management of the Corporation and the Bank,
there are no proceedings pending to which the Corporation and the Bank are
a party or to which their property is subject, which, if determined
adversely to the Corporation and the Bank, would be material in relation
to the Corporation's and the Bank's undivided profits or financial
condition. There are no proceedings pending other than ordinary, routine
litigation incident to the business of the Corporation and the Bank. In
addition, no material proceedings are pending or are known to be
threatened or contemplated against the Corporation and the Bank by the
government authorities.
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors of the Corporation has appointed the firm of
Parente, Randolph, Orlando, Carey & Associates, certified public
accountants (the "Auditors"), of Williamsport, Pennsylvania, as the
Corporation's independent auditors for its 1998 fiscal year. Such
appointment is being submitted to shareholders for ratification.
The Auditors served as the Corporation's independent public
accountants for the 1997 fiscal year, assisted the Corporation and the
Bank with the preparation of their federal and state tax returns and
provided assistance in connection with regulatory matters, charging the
Bank for such services at its customary hourly billing rates. The
non-audit services were approved by the Corporation's and the Bank's Board
of Directors after due consideration of the effect of the performance
thereof on the independence of the Auditors and after the conclusions by
the Corporation's and the Bank's Board of Directors that there was no
effect on the independence of the Auditors. The Corporation has been
advised by the Auditors that none of its members has any financial
interest in the Corporation.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
RATIFICATION FOR THE APPOINTMENT OF PARENTE, RANDOLPH, ORLANDO, CAREY &
ASSOCIATES AS THE CORPORATION'S INDEPENDENT AUDITORS FOR THE 1998 FISCAL
YEAR. The affirmative vote of a majority of all votes cast at the Annual
Meeting is required to ratify the appointment. All proxies will be voted
"FOR" ratification appointment unless a shareholder specifies to the
contrary on such shareholder's proxy card.
ADDITIONAL INFORMATION REGARDING DIRECTORS AND OFFICERS
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Corporation's Officers and directors, and
any persons owning ten percent or more of the Corporation's Common Stock,
to file in the personal capacities initial statements of ownership,
statements of changes in ownership and annual statements of ownership
with the Securities and Exchange Commission (the "SEC"). Persons filing
such ownership statements are required by SEC regulation to furnish the
Corporation with copies of all such statements filed with the SEC. The
rules of the SEC regarding the filing of such statements require that
"late filings" be disclosed in the Corporation's proxy statement. Based
solely on the Corporation's review of any copies of such statements
received by it, the Corporation believes that during 1997, Lynn S. Bowes,
Howard M. Thompson and William F. Williams Jr. each inadvertently
neglected to file on a timely basis, statements in changes of ownership.
ANNUAL REPORT
A copy of the Corporation's Annual Report and Form 10-K for its
fiscal year ended December 31, 1997 is enclosed with this Proxy Statement.
A representative of Parente, Randolph, Orlando, Carey & Associates, the
accounting firm which examined the financial statements in the Annual
Report, will attend the Annual Meeting. This representative 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 at the Annu
SHAREHOLDER PROPOSALS
Securities and Exchange Commission Regulations permit shareholders to
submit proposals for consideration at Annual Meetings of Shareholders.
Any such proposals for the Corporation's Annual Meeting of Shareholders to
be held in 1999, must be submitted in writing to the President of Penns
Woods Bancorp, Inc. at its principal executive office, 300 Market Street,
PO Box 967, Williamsport, PA 17703-0967, on or before November 25, 1998,
and must comply with applicable regulations of the SEC in order to be
included in proxy materials relating to that Meeting.
OTHER MATTERS
The Board of Directors of the Corporation is not aware that any other
matters are to be presented for action, other than the matters described
in the accompanying Notice of Annual Meeting of Shareholders, but if any
other matters properly come before the Meeting, or any adjournments
thereof, the holder(s) of any Proxy is (are) authorized to vote thereon at
their discretion.
ADDITIONAL INFORMATION
UPON WRITTEN REQUEST OF ANY SHAREHOLDER, A COPY OF THE CORPORATION'S
REPORT ON FORM 10-K FOR ITS FISCAL YEAR ENDED DECEMBER 31, 1997, INCLUDING
THE FINANCIAL STATEMENTS AND THE SCHEDULES THERETO, REQUIRED TO BE FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 13a-1 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, MAY BE OBTAINED, WITHOUT
CHARGE, FROM THEODORE H. REICH, PRESIDENT, PENNS WOODS BANCORP, INC.
By Order of the Board of Directors
Theodore H. Reich
President and
Chief Executive Officer
Dated: March 26, 1998
EXHIBIT A
PENNS WOODS BANCORP, INC.
1998 STOCK OPTION PLAN
TABLE OF CONTENTS
Article
Article 1. PURPOSE OF THE PLAN 1
Article 2 DEFINITIONS 1
Article 3 ADMINISTRATION OF THE PLAN 2
Article 4. COMMON STOCK SUBJECT TO THE PLAN 4
Article 5 STOCK OPTIONS 4
Article 6 ELIGIBILITY 6
Article 7. TERM AND EXERCISE OF OPTIONS 7
Article 8. TERMINATION OF EMPLOYMENT 8
Article 9. ADJUSTMENT PROVISIONS 10
Article 10. GENERAL PROVISIONS 11
ARTICLE 1. PURPOSE OF THE PLAN
1.1 Purposes - The Penns Woods Bancorp, Inc. 1998 Stock Option
Plan is intended to provide key employees of Penns Woods Bancorp, Inc. and
its Subsidiaries an opportunity to acquire Common Stock of the
Corporation. The Plan is designed to help the Corporation attract, retain
and motivate key employees to make substantial contributions to the
success of the business. Stock Options are granted under the Plan based
on the Participant's level of responsibility and performance within the
Corporation. The plan is also intended to further align the interests of
the Corporation'ss directors with those of its Shareholders by permitting
the grant of nonqualified Stock Options to non-employee directors.
1.2 Stock Options to be Granted - Incentive Stock Options within
the meaning of Code Section 422(b) and Nonqualified Stock Options may be
granted within the limitations of the Plan herein described. Only
Nonqualified Stock Options may be granted to non-employee directors
hereunder.
ARTICLE 2 DEFINITIONS
2.1 "Agreement" - The written instrument evidencing the grant
of an Option. A Participant may be issued one or more Agreements from
time to time, reflecting one or more Options.
2.2 "Board" - The Board of Directors of the Corporation.
2.3 "Code" - The Internal Revenue Code of 1986, as amended.
2.4 "Committee" - The Committee described in Section 3.1 hereof.
2.5 "Common Stock" - The common stock of the Corporation as
described in the Corporation'ss Articles of Incorporation,
or such other stock as shall be substituted therefore.
2.6 "Corporation" - Penns Woods Bancorp, Inc., a Pennsylvania
corporation.
2.7 "Employee" - Any key employee (including officers) of the
Corporation or a Subsidiary.
2.8 "Exchange Act" - The Securities Exchange Act of 1934, as
amended.
2.9 "Incentive Stock Option" - A stock option intended to
satisfy the requirements of Code Section 422(b).
2.1 "Nonqualified Stock Option" - A stock option other than an
incentive stock option.
2.11 "Optionee" - A Participant who is awarded a Stock Option
pursuant to the provisions of the Plan.
2.12 "Participant" - An Employee selected by the Committee to
receive a grant of an Option under the Plan.
2.13 "Plan" -Penns Woods Bancorp, Inc. 1998 Stock Option Plan.
2.14 "Retirement" - The voluntary termination of employment
following the attainment of the normal retirement age as
provided in the Penns Woods Bancorp, Inc. Pension Plan.
2.15 "Securities Act" - The Securities Act of 1933, as amended.
2.16 "Stock Option" or "Option" - An award of a right to
purchase Common Stock pursuant to the provisions of the Plan.
2.17 "Subsidiary" - A subsidiary corporation as defined in Code
Section 424(f) that is a subsidiary of the Corporation.
ARTICLE 3. ADMINISTRATION OF THE PLAN
3.1 The Committee - The Plan shall be administered by a
Committee of the Board composed of three or more members of the Board, all
of whom are (a) "disinterested persons" as such term is defined under the
rules and regulations adopted from time to time by the Securities and
Exchange Commission pursuant to Section 16(b) of the Exchange Act, and (b)
"outside directors" within the meaning of Code Section 162(m). The Board
may from time to time remove members from, or add members to, the
Committee. Vacancies on the commitee, however caused, shall be filled by
the Board. Initially the Committee shall consist of the members of the
Salary Committee.
3.2 Powers of the Committee -
(a) The Committee shall be vested with full authority to make
such rules and regulations as it deems necessary or desirable to
administer the Plan and to interpret the provisions of the Plan. Any
determination, decision or action of the Committee in connection with the
construction, interpretation, administration or application of the Plan
shall be final, conclusive and binding upon all Optionees and any person
claiming under or through an Optionee.
(b) Subject to the terms, provisions and conditions
of the Plan, the Committee shall have exclusive
jurisdiction to:
(i) determine and select, based upon the recommendation of
the Corporation'ss Chief Executive Officer, the key
Employees to be granted Options (it being understood
that more than one Option may be granted to the
same person);
(ii) determine the number of shares subject to each Option;
(iii) determine the date or dates when the Options will be
granted;
(iv) determine the purchase price of the shares subject
to each
Option in accordance with Article 5 of the Plan;
(v) determine the date or dates when each Option may be
exercised within the term of the Option specified
pursuant to Article 7 of the Plan;
(vi) determine whether or not an Option constitutes an
Incentive
Stock Option; and
(vii) prescribe the form, which shall be consistent with
the Plan, of the Agreement evidencing any Options
granted under the Plan.
3.3 Terms - The grant of an Option under the Plan shall be
evidenced by an Agreement and may include any terms and conditions
consistent with this Plan, as the Committee may determine.
3.4 Liability - No member of the Board or the Committee shall
be liable for any action or determination made in good
faith by the Committee with respect to this Plan or any
Options granted under this Plan.
3.5 Special Power of the Committee - Notwithstanding
anything herein to the contrary, if the Committee determines, in its
discretion, that (i) a significant downsizing (or other reduction in
force) of the staff of the Corporation or a Subsidiary has occurred or is
about to occur, or (ii) an event described in Code Section
280G(b)(2)(A)(i) has occurred or is likely to occur, then the Committee
may make such equitable adjustment to the terms of any outstanding Option
as is not forbidden by applicable law and which will not adversely affect
any intended financial accounting treatment of a proposed transaction.
ARTICLE 4. COMMON STOCK SUBJECT TO THE PLAN
4.1 Common Stock Authorized - The aggregate number of shares of
Common Stock for which Options may be granted under the
Plan shall not exceed 100,000 shares. The limitation
established by the preceding sentence shall be subject
to adjustment as provided in Article 9 of the Plan.
4.2 Shares Available - The Common Stock to be issued upon
exercise of Options granted under the Plan shall be the
Corporation's Common Stock which shall be made available
at the discretion of the Board, either from authorized
but unissued Common Stock or from Common Stock acquired
by the Corporation, including shares purchased in the open
market. In the event that any outstanding Option under
the Plan for any reason expires or is terminated, the
shares of Common Stock allocable to the unexercised
portion of such Option may thereafter be regranted subject
to option under the Plan.
ARTICLE 5. STOCK OPTIONS
5.1 Exercise Price - The exercise price of Common Stock shall be,
in the case of an Incentive Stock Option, 100 percent of the fair market
value of one share of Common Stock on the date the Option is granted,
except that the purchase price per share shall be 110 percent of such fair
market value in the case of an Incentive Stock Option granted to any
individual described in Section 6.2 of the Plan. The exercise price of
Common Stock shall be, in the case of a Nonqualified Stock Option, not
less than 100% of one share of Common Stock on the date the Option is
granted. The exercise price shall be subject to adjustment only as
provided in Article 9 of the Plan.
5.2 Limitation on Incentive Stock Options - The aggregate fair
market value (determined)as of the date an Option is granted) of the stock
with respect to which Incentive Stock Options are exercisable for the
first time by any individual in any calendar year (under the Plan and all
other plans maintained by the Corporation and Subsidiaries) shall not
exceed $100,000.
5.3 Determination of Fair Market Value -
(a) During such time as Common Stock is not listed on an
established stock exchange or exchanges but is listed on the NASDAQ Stock
Market, the fair market value per share shall be the closing sale price
for the Common Stock on the day the Option is granted. If no sale of
Common Stock has occurred on that day, the fair market value shall be
determined by reference to such price for the next preceding day on which
a sale occurred.
(b) During such time as the Common Stock is not listed
on an established stock exchange or on the NASDAQ Stock Market, fair
market value per share shall be the mean between the closing dealer "bid"
and "asked" prices for the Common Stock for the day of the grant, and if
no "bid" and "asked" prices are quoted for the day of the grant, the fair
market value shall be determined by reference to such prices on the next
preceding day on which such prices were quoted.
(c) If the Common Stock is listed on an established
stocl exchange or exchanges, the fair market value shall be deemed to be
the closing price of Common Stock on such stock exchange or exchanges on
the day the Option is granted or, if no sale of Common Stock has been made
on any stock exchange on that day, the fair market value shall be
determined by reference to such price for the next preceding day on which
a sale occurred.
(d) In the event that the Common Stock is not traded on an
established stock exchange or in the NASDAQ Stock Market, and no closing
dealer "bid" and "asked" prices are available on the date of a grant, then
fair market value will be the price established by the Committee in good
faith.
5.4 Limitation on Grants - Stock Option grants to any Employee
under this Plan shall not exceed in the aggregate 10,000 Options during
any period of 12 consecutive months. Such limitation shall be subject to
adjustment in the manner described in Article 9.
ARTICLE 6 ELIGIBILITY
6.1 Participation - Options shall be granted only to persons who
are Employees, as determined by the Committee, based upon the
recommendation of the Chief Executive Officer (except as to himself);
provided, however, that the Nonqualified Stock Options may be granted to
non-employee directors.
6.2 Incentive Stock Option Eligibility - Notwithstanding any
other provision of the Plan, an individual who owns more than 10 percent
of the total combined voting power of all classes of outstanding stock of
the Corporation shall not be eligible for the grant of an Incentive Stock
Option, unless the special requirements set forth in Sections 5.1 and 7.1
of the Plan are satisfied. For purposes of this Section 6.2, in
determining stock ownership, an individual shall be considered as owning
the stock owned, directly or indirectly, by or for his brothers or sisters
(whether by the whole or half blood), spouse, ancestors and lineal
descendants. Stock owned, directly or indirectly by or for a corporation,
partnership, estate or trust shall be considered as being owned
proportionately by or for its shareholders, partners or beneficiaries.
"Outstanding stock" shall include all stock actually issued and
outstanding immediately before the grant of the Option. "Outstanding
stock shall not include shares authorized for issue under outstanding
Options held by the Optionee or by any other person.
ARTICLE 7. TERM AND EXERCISE OF OPTIONS
7.1 Termination - Each Option granted under the Plan shall
terminate on the date determined by the Committee and specified in the
Agreement; provided, however, that (i) each intended Incentive Stock
Option granted to an individual described in Section 6.2 of the Plan shall
terminate not later than five years after the date of the grant, and (ii)
each other Option shall terminate not later than ten years after the date
of the grant. Each Option granted under the Plan shall be exercisable
only after the expiration of six months following the date of grant of
such Option. An Option may be exercised only during the continuance of
the Optionee's employment, except as provided in Article 8 and shall not
be assignable or transferable by theOptionee other than by will or the
laws of descent and distribution, and during the lifetime of an Optionee
shall be exercisable only by such Optionee. However, if an Option is not
intended to be treated as an Incentive Stock Option it may, in the
discretion of the Committee, during the Optionee's lifetime, also be
transferred to and may thereafter be exercised by members of the
Optionee's immediate family, or a partnership whose members include only
the Optionee and/or members of the Optionee's immediate family, or a trust
for the benefit of only the Optionee and/or members of the Optionee's
immediate family. Provided, however, that any such permitted transfer
shall not prevent termination of the Option following the optionee's
termination of employment as provided in Article 8 and this Option shall
terminate immediately if it has been transferred to a partnership or trust
as permitted above and any person who is not a member of the Optionee's
immediate family becomes a member of such partnership or a beneficiary or
trust. As used herein, the term Optionee's immediate family includes only
the Optionee's spouse, parents or other ancestors and children and other
direct lineal descendents of the Optionee or the Optionee's spouse (
including such ancestors and lineal descendants by adoption).
7.2 Exercise -
(a) A person electing to exercise an Option shall give written
notice to the Corporation of such election and of the number of shares he
has elected to purchase, in such form as the Committee shall have
prescribed or approved, and shall at the time of exercise tender the full
purchase price of the shares he has elected to purchase. The purchase
price shall be paid in full, in cash, upon the exercise of the Option,
provided, however, that in lieu of cash, with the approval of the
Committee at or prior to exercise, an Optionee may exercise his Option by
tendering to the Corporation shares of Common Stock owned by him and
having a fair market value equal to the cash exercise price applicable to
his option (with the fair market value of such stock to be determined in
the manner provided in Section 5.3 hereofor by delivering such
combination of cash and such shares as the Committee in its sole
discretion may approve. Notwithstanding the foregoing, Common Stock
acquired pursuant to the exercise of an Incentive Stock Option may not be
tendered as payment unless the holding period requirements of Code Section
422(a))1) have been satisfied, and Comon Stock not acquired pursuant to
the exercise of an Incentive Stock option may not be tendered as payment
unless it has been held, beneficially and of record, for at least six
months.
(b) A person holding more than one Option at any relevant time
may, in accordance with the provisions of the Plan, elect to exercise such
Options in any order.
(c) In addition, at the request of the Participant and
the extent permitted by applicable law, the Corporation may, in its sole
discretion, selectively approve arrangements with a brokerage firm under
which such brokerage firm, on behalf of the Participant, shall pay to the
Corporation the exercise price of the Stock Options being exercised, and
the Corporation, pursuant to an irrevocable notice from the Participant,
shall promptly deliver the shares being purchased to such firm.
ARTICLE 8. TERMINATION OF EMPLOYMENT
8.1 Retirement - In the event of Retirement, an Option shall
lapse at the earlier of the term of the Option or:
(a) In the case of an Incentive Stock Option, three months from
the date of Retirement; and
(b) in the case of Options other than Incentive Stock Options,
up to 12 months, at the discretion of the Committee, from the date of
Retirement.
8.2 Death or Total and Permanent Disability - In the event of
termination of employment due to death or "Total and Permanent
Disability," as defined in Code Section 72m(7), the Option shall lapse at
the earlier of (a) the term of the Option, or (b) 12 months after
termination due to such causes.
8.3 Other Termination - In the event of termination of employment
for any reason other than the reasons described in Sections 8.1, 8.2 and
8.4 hereof, all Options shall lapse as of the earlier of the term of the
Option or:
(a) In the case of an Incentive Stock Option, three months
from the date of termination of employment; and
(b) In the case of Options other than Incentive Stock Options,
up to six months from the date of termination of employment.
8.4 Termination For Cause - Notwithstanding any provision herein
to the contrary, in the event of termination of employment "for cause,"
all Options granted to such Employee shall lapse on the date of
termination of employment. Termination "for cause" shall mean the
Employee was terminated after:
(a) the Federal Deposit Insurance Corporation or any other
government regulatory agency recommends or orders in writing that the
Corporation or any Subsidiary terminate the employment of the Employee or
relieve him of his duties;
(b) the Employee is convicted of or enters a plea of guilty or
nolo contendere to a felony, a crime of falsehood, or a crime involving
fraud or moral turpitude, or the actual incarceration of the Employee for
a period of 45 consecutive days; or
(c) the Employee wilfully fails to follow the lawful
instructions of the Board after the Employee's receipt of written notice
of such instructions, other than a failure resulting from the Employee's
incapacity because of physical or mental illness.
ARTICLE 9. ADJUSTMENT PROVISIONS
9.1 Share Adjustments -
(a) In the event that the shares of Common Stock of the
Corporation, as presently constituted, shall be changed into or exchanged
for a different number or kind of shares of stock or other securities of
the Corporation or of another corporation (whether by reason of merger,
consolidation, recapitalization, reclassification, split-up, combination
of shares or otherwise) or if the number of such shares of stock shall be
increased through the payment of a stock dividend, then, subject to the
provisions of Subsection (c) below, there shall be substituted for or
added to each share of stock of the Corporation which was theretofore
appropriated, or which thereafter may become subject to an option under
the Plan, the number and kind of shares of stock or other securities into
which each outstanding share of the stock of the Corporation shall be so
changed or for which each such share shall be exchanged or to which each
such share shall be entitled, as the case may be. Outstanding Options
shall also be appropriately amended as to price and other terms, as may be
necessary to reflect the foregoing events.
(b) If there shall be any other change in the number or
kind of the outstanding shares of the stock of the Corporation, or of any
stock or other securities in which such stock shall have been changed, or
for which it shall have been exchanged, and if a majority of the
disinterested members of the Board shall, in its sole discretion,
determine that such change equitably requires an adjustment in any Option
which was theretofore granted or which may thereafter be granted under the
Plan, then such adjustment shall be made in accordance with such
determination.
(c) The grant of an Option pursuant to the Plan shall not affect
in any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure, to merge, to consolidate, to dissolve, to liquidate or to sell
or transfer all or any part of its business or assets.
9.2 Corporate Changes - A dissolution or liquidation of the
Corporation, or a merger or consolidation in which the Corporation is not
the surviving Corporation, shall cause each outstanding Option to
terminate, except to the extent that another corporation may and does in
the transaction assume and continue the Option or substitute its own
options.
9.3 Fractional Shares - Fractional shares resulting from any
adjustmemt in Options pursuant to this Ar 9 may be settled as a
majority of the disinterested members of the Board or the Committee (as
the case may be) shall determine.
9.4 Binding Determination - To the extent that the foregoing
adjustments relate to stock or securities of the Corporation, such
adjustments shall be made by a majority of the disinterested members of
the Board, whose determination in that respect shall be final, binding and
conclusive. Notice of any adjustment shall be given by the Corporation to
each holder of an Option which shall have been so adjusted.
ARTICLE 10. GENERAL PROVISIONS
10.1 Effective Date - The Plan shall become effective as of
February 24, 1998, provided that any grant of Options is subject to the
approval of the Plan by the shareholders of the Corporation within 12
months thereafter.
10.2 Termination of the Plan - Unless previously terminated by the
Board of Directors, the Plan shall terminate on, and no Options shall be
granted after, the fifth anniversary of its adoption by the Board.
10.3 Limitation on Termination, Amendment or Modification
(a) The Board may at any time terminate, amend, modify or
suspend the Plan, provided that without the approval of the shareholders
of the Corporation no amendment or modification shall be made by the Board
which:
(i) increases the maximum number of shares of Common Stock
as to which Options may be granted under the Plan;
(ii) changes the class of eligible Employees; or
(iii) otherwise requires the approval of shareholders
in order to maintain the exemption available
under Rule 16b-3 (or any similar rule) under
the Exchange Act.
(b) No amendment, modification, suspension or termination
of the Plan shall in any manner affect any Option theretofore granted
under the Plan without the consent of the Optionee or any person validly
claiming under or through the Optionee.
10.4 Application of Plan Document to Options for Non-Employee
Directors - Nonqualified Stock Options granted to non-employee directors
shall be subject to the same general provisions of this Plan document as
are applicable to Employees. For purposes of administering the Plan with
respect to such Options:
(a) References to an Employee shall, to the extent appropriate
under the circumstances, be deemed references to non-employee
directors;
(b) References to termination of employment shall be deemed
references to cessation of service as a director; and
(c) Nothing in the Plan document shall be construed as precluding
a grant of a Nonqualified Stock Option to a Committee member.
10.5 No Right to Employment - Neither anything contained in the
Plan or in any instrument under the Plan nor the grant of any Option
hereunder shall confer upon any Optionee any right to continue in the
employ of the Corporation or of any Subsidiary or limit in any respect the
right of the Corporation or of any Subsidiary to terminate the Optionee's
employment at any time and for any reason.
10.6 Withholding Taxes -
(a) Subject to the provisions of Subsection (b), the Corporation
will require that an Optionee as a condition of the exercise of an Option
(other than an Incentive Stock Option), or any other person or entity
receiving Common Stock upon exercise of an Option, pay or reimburse any
taxes which the Corporation is required to withhold in connection with the
exercise of the Option.
(b) An Optionee may satisfy the withholding obligation described
in Subsection (a), in whole or in part, by electing to have the Corporation
withhold shares of Common Stock (otherwise issuable upon the
exercise of an Option) having a fair market value equal to the amount
required to be withheld. An election by an Optionee to have shares
withheld for this purpose shall be subject to the following restrictions:
(i) it must be made prior to the date on which the
amount of tax to be withheld is determined
(the "Tax Date");
(ii) it shall be irrevocable;
(iii) it shall be subject to disapproval by the Committee;
(iv) if the Optionee is an officer of the Corporation
within the meaning of Section 16 of the Exchange
Act (an "Officer"), such election may not be made
within six months of the grant of the Option
(except that this restriction shall not apply
in the event of the death or disability of the
Optionee prior to the expiration of the six-month
period);
(v) if the Optionee is an Officer, such election must
be made either at least six months prior to the
Tax Date or in the ten-day "window period"
beginning on the third day following the release of
the Corporation'ss quarterly or annual
summary statement of revenues and earnings; and
(vi) where the Tax Date of an Officer is deferred up to six
months after the exercise of an Option, the full
number of Option shares will be issued or transferred
to him upon exercise, but he will be unconditionally
obligated to tender back to the Corporation the proper
number of shares of Common Stock on the Tax Date.
10.7 Listing and Registration of Shares -
(a) No Option granted pursuant to the Plan shall be exercisable
in whole or in part if at any time a majority of the disinterested members
of the Board shall determine in its discretion that the listing,
registration or qualification of the shares of Common Stock subject to
such Option on any securities exchange or under any applicable law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of such
Option or the issue of shares thereunder, unless such listing,
registration, qualification, consent or approval shall have been effected
or obtained free of any conditions not acceptable to a majority of the
disinterested members of the Board.
(b) If a registration statement under the Securities Act with
respect to the shares issuable upon exercise of any Option granted under
the Plan is not in effect at the time of exercise, as a condition of the
issuance of the shares the person exercising such Option shall give the
Committee a written statement, satisfactory in form and substance to the
Committee, that he is acquiring the shares for his own account for
investment and not with a view to their distribution. The Corporation may
place upon any stock certificate for shares issuable upon exercise of such
Option the following legend or such other legend as the Committee may
prescribe to prevent disposition of the shares in violation of the
Securities Act or other applicable law:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 ("ACT") AND MAY NOT
BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT WITH RESPECT TO THEM UNDER THE ACT OR A WRITTEN
OPINION OF COUNSEL FOR THE CORPORATION THAT REGISTRATION IS NOT
REQUIRED."
PENNS WOODS BANCORP, INC.
PROXY
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 29, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder(s) of Penns Woods Bancorp, Inc., (the
"Corporaton") hereby constitutes and appoints Ronald A. Walko, Hubert A.
Valencik and Sonya E. Hartranft and each or any of them, proxies of the
undersigned, with full power of substitution, to vote all of the shares
of common stock of the Corporation, standing in my (our) names on its
books on March 10, 1998, at the Annual Meeting of Shareholders of the
Corporation to be held at the Williamsport Branch Office, Jersey Shore
State Bank, 300 Market Street, Williamsport, Pennsylvania 17701-0967 on
April 29, 1998 at 1:00 p.m., and at any adjournment of postponement
thereof as follows:
Mark an "X" below to indicate your vote.
1 ELECTION OF DIRECTORS TO SERVE FOR A THREE-YEAR TERM
Allan W. Lugg, R. Edward Nestlerode, Jr.
________FOR all nominees listed above (except as marked to the contrary)
__________ WITHOLD AUTHORITY to vote for all Nominees listed above.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW)
2 PROPOSAL TO APPROVE A STOCK OPTION PLAN THAT AUTHORIZES A COMMITTEE OF
THE BOARD OF DIRECTORS TO GRANT STOCK OPTIONS FOR THE PURCHASE OF UP
TO 100,000 SHARES OF PENNS WOODS' COMMON STOCK WITHIN FIVE YEARS.
________FOR __________AGAINST __________ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
ADOPTION OF THE 1998 STOCK OPTION PLAN. Abstentions and broker non-votes
will not constitute or be counted as "votes" cast for purposes of the
Meeting.
3 Proposal to Ratify the selection of Parente, Randolph, Orlando, Carey
& Associates, Certified Public Accountants, of Williamsport, Pennsylvania,
as the independent auditors for the Corporation for the year ending
December 31, 1998.
________FOR _________AGAINST __________ABSTAIN
4 In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting and any adjournment
or postponement thereof.
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR ALL NOMINEES LISTED ABOVE, FOR PROPOSAL 2 AND
PROPOSAL 3, AND IN THE BEST JUDGEMENT OF THE PERSONS NAMED IN THIS PROXY
WITH RESPECT TO PROPOSAL 4.
Number of Shares Held of Record on March 10, 1998_____________
Dated:_____________________,1998
_________________________________
Signature
_________________________________
THIS PROXY MUST BE DATED, SIGNED BY THE SHAREHOLDER(S) AND
RETURNED PROMPTLY TO THE CORPORATION IN THE ENCLOSED ENVELOPE.
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 MUST SIGN.
</TABLE>
