SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. [ ])
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the Appropriate Box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or
Sec. 240.14a-12
TOWER BANCORP, INC.
-------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement if
other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No filing fee required.
<PAGE>
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule O-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 previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
TOWER BANCORP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 7, 1999
TO THE SHAREHOLDERS OF TOWER BANCORP, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of Tower
Bancorp, Inc. will be held at 1:30 p.m., prevailing time, on Wednesday April 7,
1999, at the Rescue Hose Company Special Events Center, 407 South Washington
Street, Greencastle, Pennsylvania 17225, for the following purposes:
1. To elect three (3) Class C Directors to serve for a 3-year term and until
their successors are elected;
2. To ratify the selection of Smith Elliott Kearns & Company, LLC, Certified
Public Accountants, as the independent auditors for the Corporation for the
year ending December 31, 1999; and
3. To transact any other business that may properly come before the Annual
Meeting and any adjournment or postponement thereof.
In accordance with the By-laws of the Corporation and action of the Board
of Directors, only those shareholders of record at the close of business on
February 19, 1999, will be entitled to notice of and to vote at the Annual
Meeting and any adjournment or postponement thereof.
A copy of the Corporation's Annual Report for the fiscal year ended
December 31, 1998, is enclosed with this Notice. Copies of the Corporation's
Annual Report for the 1997 fiscal year may be obtained by contacting Jeff B.
Shank, President, Tower Bancorp, Inc., P.O. Box 8, Center Square, Greencastle,
Pennsylvania 17225; (717) 597-2137.
We urge you to mark, sign, date and promptly return your proxy in the
enclosed envelope so that your shares may be voted in accordance with your
wishes and in order that we may assure the presence of a quorum. The prompt
return of your signed proxy, regardless of the number of shares you hold, will
aid the Corporation in reducing the expense of additional proxy solicitation.
Giving your proxy does not affect your right to vote in person if you attend the
meeting and give written notice to the Secretary of the Corporation.
By Order of the Board of Directors,
/s/ Jeff B. Shank
------------------------------------
Jeff B. Shank, President
March 8, 1999
<PAGE>
TOWER BANCORP, INC.
PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON APRIL 7, 1999
GENERAL
Introduction, Date, Time and Place of Annual Meeting
The Board of Directors of the corporation furnishes this proxy statement
for the solicitation of proxies to be voted at the Annual Meeting of
Shareholders of the corporation to be held on Wednesday, April 7, 1999, at 1:30
p.m., prevailing time, at the Rescue Hose Company Special Events Center, 407
South Washington Street, Greencastle, Pennsylvania 17225, and at any adjournment
or postponement of the meeting.
The corporation's main office is located at Center Square, Greencastle,
Pennsylvania 17225. The corporation's telephone number is (717) 597-2137. The
corporation has one wholly owned subsidiary, The First National Bank of
Greencastle. All inquiries should be directed to Jeff B. Shank, President of the
corporation and the bank.
Solicitation and Voting of Proxies
We are sending this proxy statement and the enclosed form of proxy to
shareholders of the corporation on or about March 8, 1999. Proxyholders will
vote shares represented by proxies on the accompanying proxy, if properly signed
and returned, in accordance with the specifications made on the proxies by the
shareholders. Any proxy not specifying to the contrary will be voted:
* for the election of the nominees for directors named below;
* for the ratification of the selection of Smith Elliott Kearns &
Company, LLC as the independent auditors for the corporation for the
year ending December 31, 1999; and
* for the transaction of any other business that may properly come
before the annual meeting and any adjournment or postponement of the
meeting. Execution and return of the enclosed proxy will not affect a
shareholder's right to attend the annual meeting and vote in person,
after giving written notice to the Secretary of the corporation. A
shareholder who returns a proxy may revoke it at any time before it is
voted by delivering written notice of revocation to John H. McDowell,
Sr., Secretary of Tower Bancorp, Inc., P.O. Box 8, Greencastle,
Pennsylvania 17225.
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The corporation will bear the cost of preparing, assembling, printing,
mailing and soliciting proxies, and any additional material that the corporation
may furnish shareholders in connection with the annual meeting. In addition to
the use of the mails, certain directors, officers and employees of the
corporation and of the bank may solicit proxies personally, by telephone,
telegraph and telecopier. The corporation will make arrangements with brokerage
houses and other custodians, nominees and fiduciaries to forward proxy
solicitation material to the beneficial owners of stock held of record by the
persons. Upon request, the corporation will reimburse them for their reasonable
forwarding expenses.
Revocability of Proxy
A shareholder who returns a proxy may revoke the proxy at any time before
it is voted only:
* by giving written notice of revocation to John McDowell, Sr.,
Secretary of Tower Bancorp, Inc., P.O. Box 8, Greencastle,
Pennsylvania 17225;
* by executing a later-dated proxy and giving written notice thereof to
the Secretary of the corporation; or
* by voting in person after giving written notice to the Secretary of
the corporation.
Record Date, Voting Securities, and Quorum
At the close of business on February 19, 1999, the corporation had
outstanding 1,780,100 shares of common stock, the only issued and outstanding
class of stock. The record date for the annual meeting is February 19, 1999.
Only holders of common stock of record at the close of business on February 19,
1999, are entitled to notice of and to vote at the annual meeting. The
corporation is also authorized to issue 500,000 shares of preferred stock, none
of which have been issued. On all matters to come before the annual meeting,
each share of common stock is entitled to one vote. Cumulative voting rights do
not exist with respect to the election of directors.
Pennsylvania law and the By-laws of the corporation require the presence of
a quorum for each matter to be acted upon at the annual meeting. The presence,
in person or by proxy, of shareholders entitled to cast at least a majority of
the votes that all shareholders are entitled to cast constitutes a quorum for
the transaction of business at the annual meeting. Votes withheld and
abstentions will be counted in determining the presence of a quorum. 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 quorum, the 3 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 be cast for such nominee.
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Assuming the presence of a quorum, the affirmative vote of a majority of
the votes cast by all shareholders entitled to vote at the meeting is required
for ratification of the selection of the independent auditors. Abstentions and
broker non-votes are not deemed to constitute "votes cast" and, therefore, do
not count either for or against such ratification. Abstentions and broker
non-votes, however, have the practical effect of reducing the number of
affirmative votes required to achieve a majority for each matter by reducing the
total number of shares voted from which the required majority is calculated.
PRINCIPAL BENEFICIAL OWNERS OF THE CORPORATION'S STOCK
Principal Owners
The following table sets forth, as of February 19, 1999, the name and
address of each person who owns of record or who is known by the Board of
Directors to be the beneficial owner of more than 5% of the corporation's
outstanding common stock. The number of shares beneficially owned by such person
and the percentage of the corporation's outstanding common stock so owned.
Shares beneficially owned reflect a 100% stock split effected in the form of a
dividend paid on May 15, 1996, a 5% stock dividend paid on July 21, 1997, and a
2 for 1 stock split paid on July 30, 1998.
Percent of Outstanding
Number of Shares Common Stock
Name and Address Beneficially Owned(1) Beneficially Owned
- ------------------- -------------------------- -----------------------
CEDE & Co. 548,133(2) 30.79
Box #20
Bowling Green Station
New York, NY 10004
First National Bank
of Greencastle 267,052(2) 15.00
Trust Department
Center Square
P.O. Box 8
Greencastle, PA 17225
- ---------------
(1) The securities "Beneficially Owned" by an individual are 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 securities owned by or for 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 February 19, 1999. Beneficial ownership
may be disclaimed as to certain of the securities.
(2) Includes 192,290 shares registered in the name of CEDE & Co. over
which the trust department exercises voting and dispositive power.
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Beneficial Ownership by Officers, Directors and Nominees
The following table sets forth, as of February 19, 1999, and from
information supplied by the respective persons, the amount and the percentage,
if over 1% of the common stock of the corporation beneficially owned (as defined
in footnote No. 1, above) by each director, each nominee for director and all
officers and directors of the corporation as a group. Unless otherwise noted
shares are held directly by the respective individual. The shares beneficially
reflect stock dividends paid by the corporation.
Name of Individual or Amount and Nature of
Identity of Group Beneficial Ownership Percent of Class(8)
-------------------- ------------------- ------------------
Class A Directors
- ---------------------
(to serve until 2000)
Harold C. Gayman 16,143(1)
James H. Craig, Jr. 5,071(2) --
Class B Directors
- -------------------
(to serve until 2001)
Betty J. Lehman 12,037(3) --
Jeff B. Shank 16,069(4) --
Nominees for Class C Directors
- ------------------------------
(to serve until 2002)
Robert L. Pensinger 6,719(5) --
Kermit G. Hicks 28,320(6) 1.59
Lois E. Easton 4,265(7) --
All Officers, Directors and 111,150 6.24
Nominees as a Group (10 persons)
- ----------------------
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<PAGE>
(1) Includes 7,654 shares held by Mr. Gayman's spouse. On January 6, 1999,
Mr. Gayman received options to purchase 680 shares under the
Directors' Plan. These options are not exercisable for one year from
the date of grant. In addition, Mr. Gayman has options to purchase 162
shares of Common Stock, which options are exercisable March 6, 1997;
340 shares which options are exercisable January 8, 1998, and 357
shares which options are exercisable January 13, 1999. The additional
859 shares were added to the shares currently held by Mr. Gayman and
to total outstanding shares, assuming all exercisable options were
exercised.
(2) Holds 162 options to purchase Common Stock, which options are
exercisable March 6, 1997; 340 shares which options are exercisable
January 8, 1998; received options to purchase 357 shares which options
are exercisable January 13, 1999. On January 6, 1999, Dr. Craig
received options to purchase 680 shares under the Directors' Plan.
These options are not exercisable for one year from the date of grant.
The additional 859 shares were added to the shares currently held by
Dr. Craig and to total outstanding shares, assuming all exercisable
options were exercised.
(3) Includes 6,606 shares held jointly with her spouse. In addition, Ms.
Lehman has options to purchase 162 shares of Common Stock, which
options are exercisable March 6, 1997; 340 shares which options are
exercisable January 8, 1998, and 357 shares which options are
exercisable January 13, 1999. On January 6, 1999, Ms. Lehman received
options to purchase 680 shares under the Directors' Plan. These
options are not exercisable for one year from the date of grant. The
additional 859 shares were added to the shares currently held by Ms.
Lehman and to total outstanding shares, assuming all exercisable
options were exercised.
(4) Includes 9,516 shares held jointly with his spouse, 91 shares held by
each of his two children and 5,771 shares purchased and held by the
ESOP that are allocated to Mr. Shank's account and over which he
exercises investment control. On January 6, 1999, Mr. Shank received
exercisable options to purchase 680 shares. An option for 80 shares
has been exercised, the remaining 600 shares were added to the shares
currently held by Mr. Shank and to total outstanding shares, assuming
all exercisable options were exercised.
(5) Includes 1,398 shares held jointly with Mr. Pensinger's spouse and 218
shares held by Mr. Pensinger's spouse. In addition, Mr. Pensinger has
options to purchase 162 shares of Common Stock, which options are
exercisable March 6, 1997; 340 shares which options are exercisable
January 8, 1998; and, 357 shares exercisable January 13, 1999. On
January 6, 1999, Mr. Pensinger received options to purchase 680 shares
which options are exercisable one year from the date of the grant. The
additional 859 shares were added to the shares partly held by Mr.
Pensinger and to total outstanding shares, assuming all exercisable
options were exercised.
(6) Includes 8,252 shares held by Mr. Hicks' spouse and 792 shares held in
the Hicks Chevrolet, Inc. Profit Sharing Plan. In addition, Mr. Hicks
has options to purchase 162 shares of Common Stock, which options are
exercisable March 6, 1997; 340 shares which options are exercisable
January 8, 1998; and, 357 shares which options are exercisable January
13, 1999. On January 6, 1999, Mr. Hicks received options to purchase
680 shares under the Directors' Plan. These options are not
exercisable for one year from the date of grant. The additional 859
shares were added to the shares partly held by Mr. Hicks and to total
outstanding shares, assuming all exercisable options were exercised.
(7) Includes 210 shares held by Ms. Easton's spouse. On January 6, 1999,
Ms. Easton received options to purchase 680 shares under the
Directors' Plan. These options are not exercisable for one year from
the date of grant. In addition, Ms. Easton has options to purchase 162
shares of Common Stock, which options are exercisable March 6, 1997;
340 shares which options are exercisable January 8, 1998, and 357
shares which options are exercisable January 13, 1999. The additional
859 shares were added to the shares
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<PAGE>
currently held by Ms. Easton and to total outstanding shares, assuming
all exercisable options were exercised.
(8) The percent of class assumes all outstanding options issued to the
directors and officers have been exercised and, therefore, on a pro
forma basis, 1,780,100 shares of Common Stock outstanding.
ELECTION OF DIRECTORS
Shareholders will elect 3 Class C Directors at the annual meeting. Each
director will serve for a 3-year term and until his or her successor is elected.
Unless otherwise instructed, the proxyholders will vote the proxies received by
them for the election of the 3 nominees named below. If any nominee should
become unavailable for any reason, proxyholders will vote proxies in favor of a
substitute nominee as the Board of Directors of the corporation shall determine.
The Board of Directors has no reason to believe the nominees named will be
unable to serve if elected. Any vacancy occurring on the Board of Directors of
the corporation for any reason may be filled by a majority of the directors then
in office until the expiration of term of the vacancy.
In addition, there is no cumulative voting for the election of directors.
Each share of common stock is entitled to cast only one vote for each nominee.
For example, if a shareholder owns ten shares of common stock, he or she may
cast up to ten votes for each of the 3 directors in the class to be elected.
INFORMATION AS TO NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS
The following table contains certain information, as of February 19, 1999,
with respect to current directors, nominees for director and certain officers of
the corporation.
<TABLE>
<CAPTION>
Principal Occupation
for Past Five Years Director
and Position Held with the Since
Name Age Corporation and the Bank Corp/Bank
----- --- --------------------------- ---------
<S> <C> <C> <C>
CLASS A DIRECTORS
TO SERVE UNTIL 2000
Harold C. Gayman 72 Retired Dairy Farmer 1983/1980
James H. Craig, Jr. 65 Dentist 1990/1990
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<PAGE>
CLASS B DIRECTORS
TO SERVE UNTIL 2001
Betty J. Lehman
73 Retired Vice President of 1985/1985
the Bank
Jeff B. Shank 43 President of the Corporation 1992/1992
and the Bank
NOMINEES FOR CLASS C DIRECTORS
TO SERVE UNTIL 2002
Robert L. Pensinger 65 Retired Insurance Agent 1987/1987
State Farm
Kermit G. Hicks(1) 63 Automobile Dealer-President, 1983/1969
Hicks Chevrolet, Inc.
Lois E. Easton 63 Retired Marketing Manager 1996/1996
of the Bank
- -----------------
(1) Mr. Hicks serves as a member of the Board of Directors of Accel
International Corp, a Company with a class of securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended.
</TABLE>
Every member of the Board of Directors is a member of each committee of the
bank. The directors of the corporation are also directors of the bank. Committee
members receive no fee for attendance at committee meetings. To date, none of
the committees have designated a Chairman.
Asset/Liability Committee of the Bank: This committee reviews the investment
portfolio of the bank and the budget, and oversees implementation of budget
guidelines and expenditures. The committee meets quarterly.
Loan Committee of the Bank: This committee reviews lines of credit and
substandard loans and makes recommendations to the Board of Directors with
respect thereto. The committee meets monthly.
Trust Committee of the Bank: This committee reviews all accounts and investments
held in the bank's Trust Department. The committee reviews Trust Department
policies and procedures and determines that the Trust Department is administered
in accordance with Federal Regulations. The committee meets quarterly.
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<PAGE>
Executive Committee of the Bank: This committee consists of the Chairman,
Vice-Chairman, President, Chief Executive Officer and Executive Vice President
of the bank. This committee meets when necessary, at the request of the
Chairman, Vice-Chairman or President of the bank to discuss and prepare
recommendations on various business matters prior to the regular Board of
Directors meeting.
Audit Committee of the Bank: This committee reviews the annual audit and reports
submitted by the independent auditors. The committee also reviews the
performance of internal auditing functions and reviews examination reports from
the various regulatory agencies. The committee meets quarterly.
Trust Audit Committee: This committee determines that the bank's fiduciary
activities comply with policies established by the Board of Directors or the
Trust Committee. This committee met once during 1998.
During 1998, the directors of the corporation held 8 meetings and the
directors of the bank held 52 meetings. Each of the directors attended at least
75% of the combined total number of meetings of the Boards of Directors and of
the committees.
The corporation does not have a standing nomination or compensation
committee. A shareholder who desires to propose an individual for consideration
by the Board of Directors as a nominee for director should submit a proposal in
writing to the President of the corporation in accordance with Section 10.1 of
the corporation's by-laws. Any shareholder who intends to nominate any candidate
for election to the Board of Directors must notify the Secretary of the
corporation in writing not less than 45 days prior to the date of any meeting of
shareholders called for the election of directors.
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EXECUTIVE COMPENSATION
The table below reflects information concerning the annual compensation for
services in all capacities to the corporation for the fiscal years ended
December 31, 1998, 1997 and 1996 of those persons who were, as of December 31,
1998 (i) the Chief Executive Officer, and (ii) the four (4) other most highly
compensated Executive Officers of the Corporation to the extent that such
persons total annual salary and bonus exceeded $100,000:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Awards Payouts
------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name Other Restricted All Other
and Annual Stock Options/ Compen-
Principal Salary Bonus Compen- Awards SARs Payouts sation
Position Year ($) ($) sation ($) (#)(1) ($) ($)(2)
-------- ---- --- --- ------ --- ------ --- ------
Jeff B. Shank 1998 86,000 20,000 9,800 -- 714 -- 22,690
President and 1997 83,400 20,000 9,800 -- 340 -- 21,105
Chief Executive 1996 81,000 20,000 9,800 -- 324 -- 18,890
Officer
- -------------------------
(1) Adjusted to reflect two for one stock split paid May 15, 1996; 5%
stock dividend paid July 21,1997; and a 2 for 1 stock split paid on
July 30, 1998.
(2) Includes ESOP, profit sharing, and pension plan contributions.
</TABLE>
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<PAGE>
Options Grants and Fiscal Year End Values
The following table shows all grants in 1998 of stock options to the
Executive Officers named in the summary compensation table above adjusted to
reflect stock dividends.
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual Grants
Number of % of
Securities Total
Underlying Options/SARs Exercise
Options/SARs Granted to or Base
Granted Employees In Price Expiration Grant Date
Name (#)(1) Fiscal Year ($/Sh) Date Present Value ($)
---- ------ ----------- ------ ---- -----------------
<S> <C> <C> <C> <C> <C>
Jeff B. Shank 714 100% $1/sh None $15,530
President and CEO
- ---------------------
(1) All options were granted on January 13, 1998, and became exercisable
on the same day with no vesting schedule or expiration date.
</TABLE>
<TABLE>
AGGREGATED OPTION/SAR EXERCISED IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<CAPTION>
Value of
Number of Unexercised
Securities Underlying In-the-Money
Unexercised Options/ Option/SARs at
SARs at FY-End(#) FY End($)
Shares Acquired Exercisable/ Exercisable/
Name On Exercise (#) Value Realized($) Unexercisable Unexercisable
---- --------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C>
Jeff B. Shank 714 $21,352 -0-/-0- -0-/-0-
President/CEO
- -------------------
</TABLE>
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<PAGE>
Profit Sharing Plan
The bank maintains a profit-sharing plan that generally covers all
employees who have completed 1 year of service and attained the age of 20.
Contributions to the plan are based on bank performance as a percentage of
assets and are computed as a percentage of the participant's total earnings. The
payment of benefits to participants is made at death, disability, termination or
retirement. Contributions to the plan for all employees charged to operations
during 1998 amounted to $74,600.
Employee Stock Option Plan
The Bank maintains an Employee Stock Option Plan that generally covers all
employees who have completed 1 year of service and attained the age of 20.
Contributions to the plan are based on bank performance as a percentage of
assets and are computed as a percentage of the participants' total earnings. The
payment of benefits to participants is made at death, disability, termination or
retirement. Contributions to the plan for all employees charged to operations
during 1998 amounted to $149,200.
Insurance
The bank also maintains a group health, accident, and life insurance plan
that is generally available to all employees. The aggregate amount of personal
benefits to any one person did not exceed $5,000.
The bank maintains an executive supplemental insurance plan for certain key
executives designated by the executive committee of the Board. This plan
provides payments after retirement, which supplement the bank's pension plan and
provides certain life insurance benefits. The deferred payments will be paid
from the general funds of the bank; however, the bank purchases and is the
beneficiary of insurance on the lives of participants, the proceeds of which are
used to help recover the net after-tax cost of the benefits and insurance
premiums paid. Premiums may also be offset by borrowing against the cash values
of the insurance policies. At December 31, 1998, these policies had a net
accumulated cash value of $984,569.
Compensation of Directors
During 1998, the bank's Board of Directors held 52 meetings. Directors
receive $150 for each meeting they attend. Each director is permitted 4 absences
each year, and will not receive the $150 meeting fee for any meeting missed in
excess of 4 meetings per year. In addition, each director receives a fee of
$2,000 per year, payable in installments of $500 each quarter. The Chairman of
the Board receives $950 per quarter. Other than the supplemental insurance plan
described below, there are no other special arrangements with any directors. In
1998, the Board
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of Directors of the bank received $51,725 in the aggregate, for all Board of
Directors meetings attended and all fees paid.
The bank maintains a supplemental insurance plan for directors pursuant to
which a director may elect to defer receipt of a portion of fees for Board
Meetings for at least 4 years or until he reaches age 65, whichever is later. An
amount equal to fees waived in addition to interest at an annual rate of 10% per
year will be paid to each participating director or his designated beneficiary
during a period of 10 years after the director reaches age 65. Fees and interest
paid by the bank will be recovered through insurance policies on the lives of
participating directors. Funds from the deferred fees of a participating
director will be used to reimburse the bank for the costs of the premium for the
insurance policies. The cost of the insurance premiums in 1998 was $31,887.
Pension Plan
The bank maintains a non-contributory target benefit pension plan with
employer contributions being based on a pension formula, which targets a certain
monthly benefit for each plan participant at retirement. This target benefit
becomes the basis for a contribution to the plan for each eligible participant.
Once determined, these contributions are placed into an individual account for
each participant and accumulated with interest earnings each year. The ultimate
benefit payable to each employee under this pension plan is the total account
balance of the employee as of their respective retirement date. The normal
retirement date for employees is the later of the participant's sixty-fifth
birthday, or the fifth anniversary of the participant joining the plan. An
employee must be at least twenty years of age and have one full year of service
to become a plan participant. Full vesting in accumulated plan benefits occurs
at the end of five years of service; there is no partial vesting.
For the 1998 plan year, the estimated employer contribution for all plan
participants was $38,685.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The Board of Directors of the corporation is responsible for the governance
of the corporation and the bank. In fulfilling its fiduciary duties, the Board
of Directors acts in the best interests of the corporation's shareholders,
customers and the communities served by the corporation and the bank. To
accomplish the strategic goals and objectives of the corporation, the Board of
Directors engages competent persons who undertake to accomplish these objectives
with integrity and in a cost-effective manner. The compensation of these
individuals is part of the Board of Directors' fulfillment of its duties to
accomplish the corporation's strategic mission. The bank provides compensation
to the employees of the corporation and the bank.
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<PAGE>
The fundamental philosophy of the corporation's and the bank's compensation
program is to offer competitive compensation opportunities for all employees
based on the individual's contribution and personal performance. The objectives
of the compensation program are to establish a fair compensation policy to
govern executive officers' base salaries and incentive plans to attract and
motivate competent, dedicated, and ambitious managers whose efforts will enhance
the products and services of the corporation, the results of which will be
improved profitability, increased dividends to our shareholders and subsequent
appreciation in the market value of our shares.
Annually, the Board of Directors reviews and approves the compensation of
the corporation's and the bank's top executives. As a guideline for review in
determining base salaries, the committee uses, among other things, information
set forth in L.R. Webber Salary Survey. The Performance Chart uses a different
Peer Group, including only Pennsylvania bank holding companies not quoted on the
NASDAQ because of common industry issues and competition for the same executive
talent group.
Chief Executive Officer
The Board of Directors has determined that the Chief Executive Officer's
1998 compensation of $106,000 and a 2.5% increase in aggregate Chief Executive
Officer compensation over the 1997 fiscal year is appropriate. There is no
direct correlation between the Chief Executive Officer's compensation, the Chief
Executive Officer's increase in compensation and any of the above criteria, nor
is there any weight given by the Board of Directors to any of the above specific
individual criterion. Such increase in the Chief Executive Officer's
compensation is based on the committee's subjective determination after review
of all information, including the above, that it deems relevant.
Executive Officers
The Board of Directors has established that the compensation of the
corporation's and the bank's executive officers increased by 2.16% over 1997
compensation of $282,300. Compensation increases were determined by the
committee based on its subjective analysis of the individual's contribution to
the corporation's strategic goals and objectives. In determining whether
strategic goals have been achieved, the Board of Directors considers among
numerous factors the corporation's performance as measured by earnings,
revenues, return on assets, return on equity, market share, total assets and
non-performing loans. Although the performance and increases in compensation
were measured in light of these factors, there is no direct correlation between
any specific criterion and the employees compensation, nor is there any specific
weight provided to any such criteria in the committee's analysis. The
determination by the committee is subjective after review of all information,
including the above, it deems relevant.
13
<PAGE>
In addition to base salary, executive officers of the corporation and the
bank may participate currently in the Profit Sharing Plan and the Employee Stock
Option Plan.
Total compensation opportunities available to the employees of the bank are
influenced by general labor market conditions, the specific responsibilities of
the individual, and the individual's contributions to the corporation's success.
The corporation reviews individuals annually on a calendar year basis. The bank
strives to offer compensation that is competitive with that offered by employers
of comparable size in our industry. Through these compensation policies, the
corporation strives to meet its strategic goals and objectives to its
constituencies and provide compensation that is fair and meaningful to its
employees.
James H. Craig, Jr.
Lois E. Easton
Harold C. Gayman
Kermit G. Hicks
Betty J. Lehman
Robert L. Pensinger
Jeff B. Shank
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Jeff B. Shank, President and Chief Executive Officer of the corporation, is
a member of the Board of Directors. Mr. Shank makes recommendations to the Board
of Directors regarding compensation for employees. Mr. Shank does not
participate in conducting his own review. The entire Board of Directors votes to
establish the corporation's compensation policies.
14
<PAGE>
SHAREHOLDER RETURN PERFORMANCE GRAPH
A line graph is set forth below. The graph compares the yearly change in
the cumulative total 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, 1994 and
ended December 31, 1998. The shareholder return shown on the graph below is not
necessarily indicative of future performance.
[Comparison of five year cumulative total return.]
[Performance Graph Omitted]
[The following is a description of the Perfomance Graph in a tabular format:]
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
Peer Group Total 900.00 1016.95 1121.23 1236.72 1785.96 2106.03
Peer Group Index 100.00 112.99 124.58 137.41 198.44 234.00
Tower Bancorp, Inc.100.00 113.94 136.62 184.08 269.10 366.93
S&P 500
Total Return 100.00 99.26 139.31 171.21 228.26 293.36
S&P 500
Total Return
Index 100.00 99.26 139.31 171.21 228.26 293.36
NOTE: The peer group for which information appears above includes the following
companies: ACNB Corporation; CNB Financial Corporation; Codorus Valley Bancorp,
Inc.; Drovers Bancshares Corporation; First West Chester Corporation; Franklin
Financial Services Corp.; Hanover Bancorp, Inc.; Penesco Financial Services
Corp.; and PennRock Financial Services Corp. These companies were selected based
on four criteria: total assets between $200 million and $700 million; market
capitalization between $15 million and $170 million; headquarters located in
Pennsylvania; and not quoted on NASDAQ.
15
<PAGE>
CERTAIN TRANSACTIONS
With the exceptions noted below, 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 or any 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 executive officers of the
corporation and the bank and their associates on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other customers. Total loans outstanding from the
bank at December 31, 1998, to the corporation's and 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 $1,257,932 or
approximately 5.57% of total equity capital. These loans do not involve more
than the normal risk of collectibility or present other unfavorable features.
Change of Control Agreement
In 1995, the corporation and the bank entered into a Change of Control
Agreement with Jeff B. Shank, President and Chief Executive Officer of the
corporation and of the bank. The agreement provides certain benefits to Mr.
Shank in the event of a change of control, as more fully described below.
In the event that the corporation and the bank undergo a change of control,
as defined, Mr. Shank's agreement provides that it shall automatically become an
employment agreement, binding on any acquirer of the corporation and the bank.
Once triggered by a change of control, the agreement has a 3-year term from the
date of the change in control and provides for an automatic renewal for an
additional 12-month period annually, unless terminated as provided in the
agreement. The agreement provides that Mr. Shank continue his duties as
President and Chief Executive Officer of the corporation and of the bank and
remain a member of the respective Boards of Directors. The agreement restricts
Mr. Shank's ability to gain other employment during the term of the agreement.
16
<PAGE>
The agreement provides that, immediately following the change of control,
Mr. Shank is entitled to an annual direct salary of at least the median salary
for peer group financial institutions, as set forth in L.R. Webber Associates,
Inc. Annual Salary Survey for the calendar year immediately preceding the change
of control. In no event, shall Mr. Shank's salary, pursuant to the agreement, be
less than his actual salary for the calendar year during which the change in
control occurred. Mr. Shank's annual direct salary after the change of control
is subject to annual review, but, in no event, may the salary be reduced below
the initial direct salary level set forth in the agreement. The agreement also
provides that Mr. Shank is eligible to receive periodic bonuses at the
discretion of the respective Boards of Directors of the corporation and of the
bank, all in accordance with the bonus programs in place immediately prior to
the change in control. The agreement also provides that Mr. Shank is entitled to
director's fees and certain fringe benefits, vacation, reimbursement of business
expenses and perquisites.
If, following a change of control, Mr. Shank is discharged or resigns for
good reason, as defined in the agreement, he is entitled to a lump sum payment
equal to 2.99 times his base amount, as defined in the agreement, plus certain
benefits.
PRINCIPAL OFFICERS OF THE CORPORATION
The following table sets forth selected information, as of February 19,
1999, about the principal officers of the corporation, each of whom is elected
by the Board of Directors and each of who holds office at the discretion of the
Board of Directors. The shares beneficially owned reflect the stock dividends
paid.
<TABLE>
<CAPTION>
Number Of
Bank Shares Bene- Age as of
Name And Held Employee ficially Feb. 19,
Office Held Since Since Owned 1999
----------- ----- ----- ----- ----
<S> <C> <C> <C> <C>
Kermit G. Hicks - Chairman 1983 (1) 28,320 63
of the Board
Jeff B. Shank - President and 1991 1976 16,069 43
Chief Executive Officer
17
<PAGE>
John H. McDowell Sr. - 1986 1977 7,464 49
Executive
Vice President/Secretary
Donald G. Kunkle - Vice 1990 1987 12,109 49
President
Donald F. Chlebowski, Jr. - 1990 1980 2,953 40
Treasurer
- ------------------------
(1) Mr. Hicks is not an employee of the bank.
</TABLE>
Each of the principal officers of the corporation has been employed as an
officer or employee of the bank for more than the past 5 years.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
corporation's officers and directors, and persons who own more than 10% of the
registered class of the corporation's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors, and greater than 10% shareholders are required by SEC
regulation to furnish the corporation with copies of all Section 16(a) forms
they file.
Based solely on its review of the copies of such forms received by it, or
written representations from reporting persons that no Forms 5 were required for
those persons, the corporation believes that during the period January 1, 1998
through December 31, 1998, its officers and directors were in compliance with
all filing requirements applicable to them.
LEGAL PROCEEDINGS
In the opinion of the corporation's management, there are no proceedings
pending to which the corporation and the bank are a party or to which its
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
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 government authorities.
18
<PAGE>
RATIFICATION OF INDEPENDENT PUBLIC AUDITORS
Unless instructed to the contrary, the proxyholders intend to vote the
proxies for the ratification of the selection of Smith Elliott Kearns & Company,
LLC as the corporation's independent auditors for its 1999 fiscal year. Smith
Elliott Kearns & Company, LLC has advised the corporation that none of its
members has any financial interest in the corporation. Ratification of Smith
Elliott Kearns & Company, LLC will require the affirmative vote of a majority of
the shares of common stock represented in person or by proxy at the meeting.
Smith Elliott Kearns & Company, LLC served as the corporation's independent
public accountants for the 1998 fiscal year. In addition to performing customary
audit services, Smith Elliott Kearns & Company, LLC 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
corporation for such services at its customary hourly billing rates. These
non-audit services were approved by the Board of Directors prior to the
rendering of such services after due consideration of the effect of the
performance thereof on the independence of the accountants. The corporation's
Board of Directors approved these services and reviewed the nature and expense
associated with the services. The Board concluded that there was no effect on
the independence of the accountants.
In the event that the shareholders do not ratify the selection of Smith
Elliott Kearns & Company, LLC as the corporation's independent auditors for the
1999 fiscal year, another accounting firm may be chosen to provide independent
audit services for the 1999 fiscal year. The Board of Directors recommends that
the shareholders vote FOR the ratification of the selection of Smith Elliott
Kearns & Company, LLC as the independent auditors for the corporation for the
year ending December 31, 1999.
ANNUAL REPORT
The corporation encloses a copy of the corporation's Annual Report for its
fiscal year ended December 31, 1998, with this proxy statement. A representative
of Smith Elliott Kearns & Company, LLC, the accounting firm that examined the
financial statements in the annual report, will attend the annual meeting. The
representative of Smith Elliott Kearns & Company, LLC 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 meeting.
19
<PAGE>
SHAREHOLDER PROPOSALS
Any shareholder who, in accordance with and subject to the provisions of
the proxy rules of the Securities and Exchange Commission, wishes to submit a
proposal for inclusion in the corporation's proxy statement for its 2000 Annual
Meeting of Shareholders must deliver the proposal in writing to the president of
Tower Bancorp, Inc. principal executive offices at Center Square, Greencastle,
Pennsylvania, not later than Tuesday, November 1, 1999.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented for
consideration other than the matters described in the accompanying Notice of
Annual Meeting of Shareholders, but if any matters are properly presented, the
proxyholders intend to vote on such matters in accordance with their best
judgment.
ADDITIONAL INFORMATION
Upon written request of any shareholder, a copy of the corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998, including the
financial statements and the schedules thereto, required to be filed with the
SEC pursuant to rule 13a-1 under the Securities Exchange Act of 1934, may be
obtained, without charge, from Jeff B. Shank, President, Tower Bancorp, Inc.,
P.O. Box 8, Center Square, Greencastle, Pennsylvania 17225.
<PAGE>
<PAGE>
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE TOWER BANCORP, INC.
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 7, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby constitutes and appoints Darlene Niswander and
Diane Cordell and each or any of them, proxies of the undersigned, with full
power of substitution, to vote all of the shares of Tower Bancorp, Inc.
(the "Corporation") that the undersigned may be entitled to vote at the
Annual Meeting of Shareholders of the Corporation to be held at the Rescue Hose
Company Special Events Center, 407 South Washington Street, Greencastle,
Pennsylvania 17225, on Wednesday, April 7, 1999 at 1:30 p.m., prevailing
time, and at any adjournment or postponement thereof as follows:
With- For All
For hold Except
1. ELECTION OF 3 CLASS C [ ] [ ] [ ]
DIRECTORS TO SERVE A
THREE-YEAR TERM (Except
as marked to the
contrary below):
Robert L. Pensinger, Kermit G. Hicks and Lois E. Easton
INSTRUCTION: 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. PROPOSAL TO RATIFY THE [ ] [ ] [ ]
SELECTION OF SMITH ELLIOT
KEARNS & COMPANY, LLC, CERTIFIED PUBLIC ACCOUNTANTS, AS THE
INDEPENDENT AUDITORS FOR THE CORPORATION FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1999.
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 SIGNED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE AFORESIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR ALL NOMINEES LISTED ABOVE AND FOR PROPOSAL 2.
Date
<PAGE>
Please be sure to sign and date this proxy in the box below._______________
[ ]
[ ]
[_______Shareholder sign above _______Co-holder (if any) sign above________]
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Detach above card, sign, date and mail in postage paid envelope provided.
TOWER BANCORP, INC.
- -------------------------------------------------------------------------------
WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE
GIVE FULL TITLE IF MORE THAN ONE TRUSTEE, ALL SHOULD SIGN. IF STOCK IS HELD
JOINTLY, EACH OWNER SHOULD SIGN.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
