SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/_/ Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
QNB CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee Required.
1) Title of each class of securities to which transaction applies:
_____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
/_/ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
1) Amount previously paid: _________________________________________________
2) Form, Schedule or Registration No. ______________________________________
3) Filing party: ___________________________________________________________
4) Date filed: _____________________________________________________________
___________
*Set forth the amount on which the filing fee is calculated and state how it was
determined.
<PAGE>
[LOGO]
Proxy Statement
April 2, 1999
<PAGE>
[LOGO] P.O. Box 9005
Quakertown, PA 18951-9005
TEL (215) 538-5600
FAX (215) 538-5765
April 2, 1999
Dear Shareholder:
The 1999 Annual Meeting of Shareholders of QNB Corp. (QNB) will be held at
the offices of The Quakertown National Bank, 320 West Broad Street,
Quakertown, Pennsylvania, on Tuesday, May 4, 1999, at 11:00 a.m. Notice of
the annual meeting, QNB's proxy statement, proxy card and 1998 annual report
are enclosed.
At this year's annual meeting, you are being asked to elect three (3) Directors.
This proposal is fully described in the accompanying proxy statement, which you
are urged to read carefully.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY ENDORSED THE CANDIDATES FOR ELECTION. WE
RECOMMEND THAT YOU VOTE "FOR" ALL THREE CANDIDATES.
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the meeting in person,
please complete, date and sign the enclosed proxy card and return it in the
envelope provided.
If you have any questions, please contact our Assistant Corporate Secretary, L.
Jane Mann, at (215) 538-5600, extension 5670.
Thank you for your cooperation and continuing support.
Sincerely,
/s/ Thomas J. Bisko
- -------------------------------
Thomas J. Bisko
President and
Chief Executive Officer
1
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF QNB CORP.
----------------------------
TO BE HELD ON MAY 4, 1999
Notice is hereby given that the 1999 Annual Meeting of Shareholders of QNB
Corp. (QNB) will be held at the offices of The Quakertown National Bank, 320
West Broad Street, Quakertown, Pennsylvania 18951, on Tuesday, May 4, 1999 at
11:00 a.m., local time, for the following purposes:
(1) To elect three (3) Directors; and
(2) To transact such other business as may properly come before the annual
meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on March 23, 1999 as
the record date for the purpose of determining those shareholders entitled to
notice of and to vote at the annual meeting and any adjournments or
postponements of the meeting.
All shareholders are cordially invited to attend the annual meeting.
Whether or not you plan to attend the annual meeting, you are requested to mark,
date, sign and mail the enclosed proxy in the envelope supplied, as soon as
possible. At any time prior to their being voted, proxies are revocable by
written notice to QNB in accordance with the instructions set forth in the
enclosed proxy statement or by voting at the meeting in person. If you attend
the annual meeting, you may withdraw your proxy before it is voted and then vote
your shares in person.
By Order of the Board of Directors,
/s/ Charles M. Meredith, III
- -------------------------------------
Charles M. Meredith, III
Secretary
2
<PAGE>
QNB Corp.
10 North Third Street
P.O. Box 9005
Quakertown, Pennsylvania 18951
(215) 538-5600
---------------------
PROXY STATEMENT
1999 ANNUAL MEETING OF SHAREHOLDERS - MAY 4, 1999
This proxy statement is being furnished to holders of the common stock, par
value $1.25 per share, of QNB Corp. (QNB) in connection with the solicitation of
proxies by the Board of Directors of QNB for use at the 1999 Annual Meeting of
Shareholders. The annual meeting will be held at the offices of The Quakertown
National Bank (the Bank), at 320 West Broad Street, Quakertown, Pennsylvania
18951, on May 4, 1999.
As of the date of this proxy statement, the Board of Directors knows of no
business that will be presented for consideration at the annual meeting other
than that referred to in the Notice of Annual Meeting attached hereto. As to
other business, if any, that may properly come before the annual meeting,
properly executed proxies in the form enclosed will be voted in accordance with
the judgment of the person or persons voting the proxy.
The cost of solicitation of proxies will be paid by QNB. QNB will reimburse
brokerage firms and other custodians, nominees, and fiduciaries for reasonable
expenses incurred by them in sending proxy materials to the beneficial owners of
QNB's common stock. In addition to solicitations by mail, directors, officers,
and employees of QNB and the Bank may solicit proxies personally or by
telephone, without additional compensation.
These proxy materials are first being mailed to shareholders on or about
April 2, 1999.
Date, Time and Place of Meeting
The annual meeting will be held on May 4, 1999 at 11:00 a.m., local time,
at the offices of the Bank at 320 West Broad Street, Quakertown, Pennsylvania
18951.
Outstanding Securities; Quorum; Voting Rights; and Record Date
The close of business on March 23, 1999 has been fixed as the record date
for the purpose of determining those shareholders entitled to notice of, and to
vote at, the annual meeting and any adjournments or postponements of the
meeting. As of the close of business on that date, QNB had issued and
outstanding 1,435,678 shares of common stock.
Holders of the common stock are entitled to one vote for each share of
common stock held of record on the record date with respect to each matter to be
voted on at the annual meeting.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of the common stock is necessary to constitute a quorum at
the annual meeting.
3
<PAGE>
Solicitation of Proxies
Proxies in the form enclosed with this proxy statement are being solicited
by the Board of Directors.
Voting and Revocability of Proxies
Shares of common stock represented by properly executed proxies will,
unless the proxies have previously been revoked, be voted in accordance with the
instructions indicated on the proxies. If no instructions are indicated on the
proxies, the shares will be voted FOR the election of the nominees of QNB's
Board of Directors. It is not anticipated that any matters will be presented at
the annual meeting other than as set forth in the accompanying Notice of Annual
Meeting. In the event that any other matters are properly presented at the
annual meeting, proxies will be voted in the discretion of the proxy holders as
to such matters.
A holder of shares of common stock who executes and returns a proxy has the
power to revoke it at any time before it is exercised by delivering to Mr.
Charles M. Meredith, III, Secretary of QNB, at the offices of QNB, at the
address indicated above, either a written instrument revoking the proxy or a
duly executed proxy bearing a later date, or by attending the annual meeting and
voting in person.
4
<PAGE>
SECURITIES OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 23, 1999, the number of shares
of common stock, par value $1.25 per share, beneficially owned by each current
Director and nominee, by each executive officer, and by all Directors, nominees
and executive officers of QNB and the Bank, as a group. Unless otherwise
indicated, shares are held individually. The address for each such person is 320
West Broad Street, Quakertown, Pennsylvania 18951.
<TABLE>
<CAPTION>
Number of Shares Percentage of
Name of Beneficial Owner Owned (1)(2) Class (3)
- ------------------------ ---------------- ------------
<S> <C> <C>
Norman L. Baringer, Director 6,000(4) *
Thomas J. Bisko, Director 15,485(5) 1.05%
President/Chief Executive Officer
Kenneth F. Brown, Jr., Director 40,952(6) 2.78%
Dennis Helf, Director 6,996(7) *
Donald T. Knauss, Director 53,236(8) 3.61%
Bret H. Krevolin, Senior Vice President 8,632(9) *
Chief Financial Officer (Bank)
Chief Accounting Officer (Corp.)
Bryan S. Lebo, Senior Vice President of 6,563(10) *
Lending (Bank)
G. Arden Link, Director (Bank) 2,500(11) *
Charles M. Meredith III, Director 41,300(12) 2.80%
Gary S. Parzych, Director 3,550(13) *
Henry L. Rosenberger, Director 13,700(14) *
Mary Ann Smith, Senior Vice President of 9,951(15) *
Operations (Bank)
Edgar L. Stauffer, Director 40,828(16) 2.77%
Robert C. Werner, Executive Vice President 10,025(17) *
Chief Operating Officer (Bank)
Vice President (Corp.)
Existing Directors, Nominees
& Executive Officers
as a Group (14 persons) 259,718 17.63%
</TABLE>
- ----------------------
* Less than 1.00%
5
<PAGE>
(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 that the individual has, or shares, voting or
investment power or has the right to acquire beneficial ownership
within 60 days after March 23, 1999. Beneficial ownership may be
disclaimed as to certain of the securities.
(2) Includes 37,200 immediately exercisable options.
(3) Numbers are rounded-off to the nearest one-hundredth percent.
(4) Includes 3,348 shares owned jointly by Mr. Baringer with his wife, Nancy,
and 950 shares held in her individual capacity.
(5) Includes 5,657 shares owned jointly by Mr. Bisko with his wife,
Barbara; 20 shares held of record by Mr. Bisko's daughter, as to which
Mr. Bisko has the sole voting and dispositive power; and 8,000
exercisable options awarded under the Stock Incentive Plan.
(6) Includes 40,152 shares owned jointly by Mr. Brown with his wife, Pamela.
(7) Includes 6,196 shares owned jointly by Mr. Helf with his wife, Mary.
(8) Includes 8,964 shares owned by Mr. Knauss's wife, Ruth.
(9) Includes 1,018 shares owned jointly by Mr. Krevolin with his wife, Susan
and 7,600 exercisable options awarded under the Stock Incentive Plan.
(10) Includes 300 shares owned jointly by Mr. Lebo with his wife, Elaine and
6,200 exercisable options awarded under the Stock Incentive Plan.
(11) Includes 167 shares owned jointly by Mr. Link with his wife, Dorothy.
(12) Includes 5,292 shares owned jointly by Mr. Meredith with his wife,
Elizabeth; 2,396 shares held in her individual capacity; and 4,200
shares held of record by Franklin & Meredith, Inc.
(13) Includes 1,000 shares owned by Mr. Parzych's wife, Karen and 1,000 shares
held of record by Eugene T. Parzych, Inc.
(14) Includes 6,300 shares held of record by Rosenberger Companies Ltd., and
3,100 shares owned by Rosenberger Cold Storage, Inc. Profit Sharing Trust.
(15) Includes 812 shares owned jointly by Ms. Smith with her husband,
Randall; 208 shares held of record by Ms. Smith's children, as to which
Ms. Smith has the sole voting and dispositive power; and 7,600
exercisable options awarded under the Stock Incentive Plan.
(16) Includes 29,296 shares owned jointly by Mr. Stauffer with his wife, Mary
Blake and 300 shares held in her individual capacity.
(17) Includes 2,148 shares owned jointly by Mr. Werner with his wife, Judith,
and 7,800 exercisable options awarded under the Stock Incentive Plan.
6
<PAGE>
BENEFICIAL OWNERSHIP OF SECURITIES
On March 23, 1999, 1,435,678 shares of common stock, par value $1.25 per
share were issued, outstanding and entitled to vote. The following table sets
forth the names of persons who, directly or indirectly, are known to the
management of QNB to be the beneficial owners (as determined in accordance with
Rule 13d-3 under the Securities Exchange Act of 1934, as amended), of at least
five percent (5%) of QNB's common stock outstanding as of March 23, 1999:
Name and Address of Number of Shares Percentage of
Beneficial Owner Owned (1) Class (2)
- ------------------- ---------------- ------------
James C. Ebbert 117,628 (3) 8.19%
303 Edgemont Avenue
Quakertown, PA 18951
- -----------------
(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
March 23, 1999. Beneficial ownership may be disclaimed as to certain of the
securities.
(2) Numbers are rounded off to the nearest one-hundredth percent.
(3) Includes 117,628 shares owned jointly by Mr. Ebbert with his wife, Martha.
7
<PAGE>
PROPOSAL I
ELECTION OF DIRECTORS
The Board of Directors
The Articles of Incorporation of QNB and QNB's By-Laws provide that the
Board of Directors shall consist of nine members and shall be divided into three
classes, Class I, Class II, and Class III, which shall be as nearly equal in
number as possible. The three Directors currently constituting Class II have
been nominated for re-election at the annual meeting. Directors in Class III and
Class I will hold office until the 2000 and 2001 annual meetings, respectively.
The Nominees
At the annual meeting, three directors are to be elected. Each director so
elected will hold office until the Annual Meeting of Shareholders is held in
2002 and until his successor in office shall be duly qualified and elected.
To the extent given discretion, the persons named in the accompanying proxy
intend to vote to elect each of the nominees listed below. In the event that any
nominee should decline to serve or be unable to serve, the persons named as
proxies may vote for the election of such person or persons as may be
recommended by the Board of Directors. The Board of Directors does not have a
Nominating Committee.
Set forth below, with respect to each nominee for Director, is his name,
age, the time period served as a Director and his principal occupation(s) or
employment and business affiliation(s) at present and during the last five
years.
Voting Requirements
The three (3) directors are required to be elected by the affirmative vote
of a majority of the outstanding shares. Votes may be cast in favor or withheld
for any or all of the nominees.
Abstentions and broker non-votes will neither be counted for nor against a
nominee, but the shares represented by such abstention or broker non-vote will
be considered present at the annual meeting for quorum purposes.
RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT EACH OF THESE NOMINEES BE
ELECTED AS A CLASS II DIRECTOR.
8
<PAGE>
NOMINEES FOR THREE YEAR TERM EXPIRING IN 2002 (Class II Directors)
Kenneth F. Brown, Jr.
Age 43; President, McAdoo & Allen, Inc. (manufacturing), Quakertown, PA
from September 1989 to present; Executive Vice President, McAdoo & Allen,
Inc. from April 1976 to August 1989; a Director of QNB since 1993.
Henry L. Rosenberger
Age 53; President of Rosenberger Companies, Ltd. from 1998 to present.
Chairman/CEO, Rosenberger's Cold Storage, Inc. (refrigerated storage),
Hatfield, PA from 1996 to 1998; President, Rosenberger's Cold Storage,
Inc. from June 1981 to 1996; Chairman/CEO, Rosenberger's Cold Transport,
Inc. (refrigerated trucks) from 1996 to 1998; President, Rosenberger's
Cold Transport, Inc. from October 1984 to 1996; President, Dock Woods
Community, Inc. (retirement community) from January 1988 to present; a
Director of QNB since 1984.
Edgar L. Stauffer
Age 61; Co-Owner, Stauffer Manufacturing Corporation (manufacturer and
importer of industrial work gloves and safety equipment), Red Hill, PA
from August 1959 to present; Co-Owner, H. Texier Glove Corporation, Inc.
from September 1983 to present; a Director of the Bank since 1983 and a
Director of QNB since 1984.
Continuing Directors Serving Until 2000 (Class III Directors)
Dennis Helf
Age 52; Private Investment Advisor from 1995 to present; Partner, Grim
Biehn Thatcher & Helf from 1980 to December 1995; a Director of the Bank
since January 1996; a Director of QNB since May 1997.
Donald T. Knauss
Age 73; Secretary of QNB from 1984 to April 1994; Secretary of the Bank
from 1968 to April 1994; Retired, E.W. Knauss & Son, Inc. (meat
processing), Quakertown, PA; Chairman of the Board, E.W. Knauss & Son,
Inc. from 1986 to 1996; a Director of the Bank since 1954 and a Director
of QNB since 1984.
Thomas J. Bisko
Age 51; Chief Executive Officer of the Bank and QNB from March 1988 to
present; President of the Bank from September 1985 to present; Treasurer
of QNB from February 1986 to present; President of QNB from May 1986 to
present; a Director of QNB since 1985.
Continuing Directors Serving Until 2001 (Class I Directors)
Gary S. Parzych
Age 43; President, Eugene T. Parzych, Inc. (construction company),
Trumbauersville, PA from 1980 to present; President, Finland Leasing
Company, Inc. from June 1986 to present; Director, Quakertown Community
School Board from January 1987 to present; a Director of QNB since 1995.
Norman L. Baringer
Age 68; Retired, Baringer Assoc. Inc. (insurance, real estate brokerage),
Quakertown, PA; President, Baringer Assoc. Inc. from 1985 to 1995; a
Director of QNB since 1992.
Charles M. Meredith, III
Age 63; Secretary of QNB and the Bank from April 1994 to present;
Co-Owner, Franklin & Meredith Inc., Quakertown, PA; a Director of the
Bank since 1968 and a Director of QNB since 1984.
9
<PAGE>
THE BOARDS OF DIRECTORS OF QNB AND THE BANK
Each current director of QNB is also a current member of the Bank's Board
of Directors. G. Arden Link is a member of the Board of Directors of the Bank
only.
The Board of Directors of QNB met 11 times in 1998. The Board of Directors
of the Bank met a total of 26 times during such period. All current Directors
attended at least 75 percent (75%) of the aggregate number of all meetings of
the Board(s) of Directors of the Bank and QNB.
Set forth below is information concerning the standing committees of the
Board of Directors of QNB.
Executive Committee. The Executive Committee is authorized to exercise all
of the authority of the Board of Directors in the management of QNB between
Board meetings, unless otherwise provided in the By-Laws of QNB. The Executive
Committee did not meet in 1998. The members of the Executive Committee are
Messrs. Bisko, Knauss, Meredith and Stauffer.
Compensation Committee. The Compensation Committee's primary function is to
review and determine the compensation of present and proposed senior members of
management of QNB. The Compensation Committee met twice in 1998. The members of
the Compensation Committee are Messrs. Knauss, Meredith, Rosenberger, and
Stauffer.
Audit Committee. The Audit Committee recommends the engagement and
discharge of the independent certified public accountants, reviews their annual
audit plan and the results of their auditing activities, and considers the range
of audit and non-audit fees. It also reviews the general audit plan, scope and
results of QNB's procedures for internal auditing. The reports of examination of
QNB and its subsidiary by state and federal bank regulatory examiners are
reviewed by the Audit Committee. The Audit Committee of QNB did not meet in
1998. The Bank also has a standing Audit Committee which performs the same
functions as QNB's Audit Committee. The members of QNB's and the Bank's Audit
Committee are Messrs. Baringer, Brown, Helf, Knauss, Link, Meredith, Parzych,
Rosenberger, and Stauffer. The Audit Committee of the Bank met three times in
1998.
Compensation of the Board of Directors. Each Director of QNB is also a
member of the Board of Directors of the Bank. During 1998 each Director received
a fee of $400 for each Board meeting attended. Directors are not reimbursed for
Board meetings of QNB. Members of the committees of the Board of Directors also
received $200 for each committee meeting attended, provided the committee
meeting was not held as part of a scheduled Board meeting. Directors who are
salaried officers of QNB or the Bank do not receive fees for their services as a
director.
10
<PAGE>
MANAGEMENT INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee makes recommendations to the Board of Directors
concerning general guidelines on compensation of employees and specific
recommendations for Mr. Bisko. The membership of the committee consists solely
of outside directors.
EXECUTIVE COMPENSATION
Summary Compensation Table
Since the formation of QNB, none of its executive officers have received
any separate compensation from QNB. Thomas J. Bisko, Robert C. Werner, and Bret
H. Krevolin are the only executive officers of QNB that are also executive
officers of the Bank. The following information is furnished concerning the
chief executive officer and the executive officers of QNB or the Bank whose
aggregate remuneration from the Bank exceeded $100,000 during the fiscal year
ended December 31, 1998:
<TABLE>
<CAPTION>
Long Term
Compensa- All Other
Salary Bonus tion/Options Compensa-
Name Year ($) ($) (#) tion ($)
- ---- ---- -------- ------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Thomas J. Bisko 1998 $180,284 $18,028 1600 Shares $20,682(1)
President and 1997 $176,576 $17,658 1600 Shares $20,868(1)
Chief Executive Officer 1996 $171,600 $ 1,716 1600 Shares $19,847(1)
Robert C. Werner 1998 $117,548 $11,755 1600 Shares $9,436(2)
Executive Vice President 1997 $113,027 $11,302 1600 Shares $9,129(2)
Chief Operating Officer 1996 $108,160 $ 1,081 1600 Shares $8,653(2)
Bryan S. Lebo 1998 $95,624 $ 9,562 1600 Shares $7,676(3)
Senior Vice President 1997 $91,936 $ 9,194 1600 Shares $7,425(3)
Senior Lending Officer 1996 $88,400 $ 884 1600 Shares $7,072(3)
Bret H. Krevolin 1998 $94,389 $ 9,439 1600 Shares $7,572(4)
Senior Vice President 1997 $90,325 $ 9,033 1600 Shares $7,293(4)
Chief Financial Officer 1996 $83,307 $ 833 1600 Shares $6,665(4)
</TABLE>
- ---------------------
(1) Includes the Bank's contributions to the 401(k) and Money Purchase Pension
Plans of $12,270, $12,800 and $12,000 for Mr. Bisko for 1998, 1997, and
1996, respectively.
(2) Includes the Bank's contributions to the 401(k) and Money Purchase Pension
Plans of $9,405, $9,129 and $8,653 for Mr. Werner for 1998, 1997, and 1996,
respectively.
(3) Includes the Bank's contributions to the 401(k) and Money Purchase Pension
Plans of $7,651, $7,425 and $7,072 for Mr. Lebo for 1998, 1997, and 1996,
respectively.
(4) Includes the Bank's contributions to the 401(k) and Money Purchase Pension
Plans of $7,553, $7,293 and $6,665 for Mr. Krevolin for 1998, 1997, and
1996, respectively.
11
<PAGE>
Stock Option Grants for 1998
The following table reflects grants of stock options to Mr. Bisko, Mr.
Werner, Mr. Lebo and Mr. Krevolin for fiscal 1998.
OPTION GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
Potential
Realizable Value
% of Total At Assumed
Options Exercise Annual Rates of
Options Granted To Or Base Stock Appreciation
Granted Employees Price Expiration For Option Term (2)
Name (#) In Fiscal Year ($/Share) Date 5% 10%
- ---- ------- -------------- --------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Thomas J. Bisko 1600 10.8% $37.00 01/12/2009 $37,232 $94,352
President
Chief Executive Officer
Robert C. Werner 1600 10.8% $37.00 01/12/2009 $37,232 $94,352
Executive Vice President
Chief Operating Officer
Bryan S. Lebo 1600 10.8% $37.00 01/12/2009 $37,232 $94,352
Senior Vice President
Of Lending
Bret H. Krevolin 1600 10.8% $37.00 01/12/2009 $37,232 $94,352
Senior Vice President
Chief Financial Officer
</TABLE>
- ------------------------
(1) All options granted were qualified stock options pursuant to the 1998
Stock Option Plan. The options granted vest and become exercisable after
the third anniversary of their grant date.
(2) In order to realize the potential value of the stock options, QNB's common
stock would be approximately $60.27 and $95.97 at a 5% and 10% appreciation
rate, respectively.
Aggregate Option Exercises and Option Values
The following table provides information as to stock options exercised by
Mr. Bisko, Mr. Werner, Mr. Lebo and Mr. Krevolin in 1998 and the value of stock
options held by each officer at year-end 1998 measured in terms of the $39.00
closing price (average of the bid and asked price) of QNB's common stock on
December 31, 1998. All stock options are immediately exercisable.
AGGREGATE STOCK OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END STOCK OPTION VALUES
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Shares Aggregate Unexercised In-the-Money
Acquired On Value Options at Options at
Name Exercise (#) Realized 12/31/98 12/31/98
- ---- ----------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Thomas J. Bisko 0 $ 0 8,000 $94,400
Robert C. Werner 700 $13,650 6,900 $74,100
Bryan S. Lebo 0 $ 0 4,600 $32,500
Bret H. Krevolin 500 $ 9,750 6,500 $67,450
</TABLE>
12
<PAGE>
Employment Agreements
On September 2, 1986, QNB and Mr. Bisko entered into an employment
agreement for a term of 27 years, commencing immediately and terminating on
December 31, 2013; provided however, that such employment agreement may be
terminated by either party upon five years' prior written notice. Under the
terms of the employment agreement, Mr. Bisko is to be employed as the President
of the Bank and to render services as may be reasonably required of him from
time to time by the Board of Directors. Mr. Bisko may be discharged at any time
for just and proper cause, except that, following a change of control of QNB
(which is defined as any one person or group obtaining voting control of 25% or
more of the outstanding common stock of QNB), Mr. Bisko's employment may only be
terminated if he materially breaches his obligations under the employment
agreement, fails or refuses to comply with the proper and reasonable written
policies of the Board of Directors, or is convicted of a felony. If Mr. Bisko's
employment is terminated for reasons other than, among others, discharge for
cause, a change in control of QNB, or death or disability, Mr. Bisko is entitled
to receive a lump sum severance payment equal to five times his then current
base salary. If Mr. Bisko were terminated at minimum base salary of $182,628 as
of January 1, 1999, he would be entitled to receive a maximum lump sum payment
equal to $913,140. Such a provision may be deemed to be "anti-takeover" in
nature inasmuch as it may discourage a potential acquiror who may desire to
replace Mr. Bisko with a new president. In the event of Mr. Bisko's death or
disability, QNB shall pay either to Mr. Bisko, his estate, or his designated
beneficiary, an amount equal to his then current base salary in equal monthly
installments, which amounts may be reduced based upon the receipt of any life or
disability insurance proceeds from policies maintained by and at the expense of
QNB.
Board Compensation Committee Report on Executive Compensation
The Board of Directors of QNB is responsible for the governance of QNB and
its subsidiary. In fulfilling its fiduciary duties, the Board of Directors acts
in the best interests of QNB's shareholders, customers and the communities
served by QNB and its subsidiary. To accomplish the strategic goals and
objectives of QNB, 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 QNB's strategic mission.
The fundamental philosophy of QNB'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 compensation program is
administered by a compensation committee comprised of four outside directors who
are listed below. The objective of the committee is to establish a fair
compensation policy to govern all employee's salaries to attract and motivate
competent, dedicated and ambitious managers whose efforts will enhance the
products and services of QNB, the results of which may include improved
profitability, increased dividends to our shareholders and subsequent
appreciation in the market value of our shares. While general guidelines are
provided for all employees, the compensation committee makes specific
recommendations for Mr. Bisko.
Mr. Bisko's compensation is reviewed and approved annually by the Board of
Directors. As a guideline for review in determining Mr. Bisko's base salary, the
committee primarily uses information provided by the Larry Webber survey of
Pennsylvania financial institutions operating within QNB's general market area.
The compensation committee focuses on the survey data for financial institutions
ranging from $300 million to $499 million operating in Southeastern
Pennsylvania. This survey includes however, banks with assets of $13 million to
$36 billion and is different than the peer group utilized for the performance
graph. The peer group on the performance graph includes 141 bank holding
companies and banks listed on NASDAQ operating in the Mid-Atlantic market.
Pennsylvania peer group banks have been utilized because of common industry
issues and competition for the same executive talent group.
13
<PAGE>
Chief Executive Officer Compensation
Mr. Bisko's base salary is $182,628 for 1999, subject to an annual review
and adjustment, based upon the Social Security cost of living increase. Mr.
Bisko's base pay is to be determined annually by the compensation committee. In
addition, Mr. Bisko has a five-year compensation agreement whereby he is
eligible to receive a cash bonus equivalent to ten percent (10%) of his salary
each year over the five-year term of the agreement provided certain financial
goals are achieved. The goals are based on QNB increasing its earnings per share
by a compounded ten percent (10%) per year. The earnings per share growth
amounts are based on levels achieved in 1996, the base year of the plan. In
addition to the annual bonus, Mr. Bisko is also eligible to receive in the fifth
year of the plan an additional ten percent (10%) bonus for every year that
corporate goals were met over the term of the agreement, provided the fifth year
target is met. Mr. Bisko shall also be reimbursed for all reasonable and
necessary expenses related to his duties.
The Bank provides Mr. Bisko, for the benefit of his named beneficiary, with
a Salary Continuation Agreement. In the event of Mr. Bisko's death, the
agreement provides his beneficiary with monthly income for 180 consecutive
months. The agreement is enforced only while Mr. Bisko remains employed by the
Bank. If Mr. Bisko's employment is terminated for any reason other than death,
all rights under the agreement will be terminated. The benefits are funded
through an insurance policy with the cost limited to the annual premium on the
policy.
The Bank provides Mr. Bisko with a membership to a country club. Mr. Bisko
is reimbursed for the cost of all business related meals at the club. Mr. Bisko
is not reimbursed for any personal meals at the country club.
This report is submitted by the Compensation Committee
Edgar L. Stauffer, Chairperson; Donald T. Knauss, Henry L. Rosenberger,
Charles M. Meredith, III
STOCK INCENTIVE PLAN
QNB maintains the 1988 Stock Incentive Plan. This plan is administered by
the compensation committee of QNB's Board of Directors, which consists of three
or more persons to be selected by the Board of Directors. The committee
determines, among other things, the employees to whom awards are granted, the
type of awards, and the amount, size, timing and terms of such awards.
Participation in the plan is limited to those full-time officers and other
key executive employees of QNB or the Bank who are in positions where their
decisions, actions, and counsel have a significant impact upon the profitability
and success of QNB. Directors of QNB who are not otherwise full-time officers or
employees of QNB are not eligible to participate in the plan. At present, an
aggregate of 15,406 shares of common stock have been issued pursuant to options
granted under the plan. The 1988 Stock Incentive Plan expired on February 23,
1998. No additional shares may be granted under this plan.
At QNB's 1998 annual meeting, the shareholders approved the 1998 Stock
Incentive Plan (the 1998 Plan). The 1998 Plan, administered by the Board of
Directors or a committee of two or more members of the Board, authorizes the
issuance of 100,000 shares. The awards may be made in the form of either (i)
qualified options or (ii) non-qualified options. The exercise price of an option
is the fair market value of QNB's common stock at the date of grant, as defined
in the 1998 Plan. The time periods by which any option is exercisable is
determined by the committee but shall not commence before the expiration of six
months or continue beyond the expiration of ten years after the date the option
is awarded. No options have been granted under the 1998 Plan as of December 31,
1998.
EMPLOYEE STOCK PURCHASE PLAN
At QNB's 1996 annual meeting, the shareholders approved the Employee Stock
Purchase Plan. This plan offers eligible employees an opportunity to purchase,
from QNB, shares of common stock at a five percent (5%) discount from fair
market value (as defined in the plan). The plan authorizes the issuance of
25,000 shares. The initial offering period of the plan commenced on December 1,
1996. As of March 23, 1999, 2,380 shares were issued under the plan.
14
<PAGE>
STOCK PERFORMANCE GRAPH
Set forth below is a performance graph comparing the yearly cumulative
total shareholder return on QNB's common stock with (a) the yearly cumulative
total shareholder return on stocks included in the NASDAQ Market Index, a broad
market index, and (b) the yearly cumulative total shareholder return on the
Media General Mid-Atlantic Bank Group, a group encompassing virtually all
publicly traded banking companies in New York, New Jersey, Pennsylvania,
Delaware, Maryland, and the District of Columbia (141 companies). All of these
cumulative total returns are computed assuming the reinvestment of dividends at
the frequency with which dividends were paid during the applicable years.
Comparison of Five Year Cumulative Total Shareholder Return
QNB Corp., Mid-Atlantic Banks & NASDAQ Market Index
In the printed version of the document, a line graph
appears which depicits the following plot points:
Period Ending
-----------------------------------------------------
Index 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----- -------- -------- -------- -------- -------- --------
QNB Corp. 100.00 109.21 152.63 176.32 178.95 205.26
NASDAQ - Total US 100.00 97.75 138.26 170.01 208.58 293.21
SNL Mid-Atlantic Bank Index 100.00 97.22 155.59 223.27 317.32 351.79
15
<PAGE>
EXECUTIVE OFFICERS OF QNB
The following list sets forth the names of the executive officers of QNB,
and other significant employees, their respective ages, positions held, recent
business experience with QNB and the Bank, and the period they have served in
their respective capacities.
Thomas J. Bisko
Age 51; Chief Executive Officer of the Bank and QNB from March 1988 to present;
President of the Bank from September 1985 to present; President of QNB from May
1986 to present; Treasurer of QNB from February 1986 to present.
Robert C. Werner
Age 41; Executive Vice President/Chief Operating Officer of the Bank from
January 1994 to present; Senior Vice President/Chief Financial Officer of the
Bank from January 1989 to December 1993; Vice President of QNB from October 1988
to present.
Bret H. Krevolin
Age 36; Senior Vice President/Chief Financial Officer of the Bank from January
1995 to present; Chief Accounting Officer of QNB from January 1992 to present;
Vice President/Controller of the Bank from August 1989 to December 1994.
Bryan S. Lebo
Age 42; Senior Vice President/Senior Lending Officer of the Bank from January
1995 to present; Executive Vice President of Lehigh Valley Bank from 1992 to
1994.
Mary Ann Smith
Age 45; Senior Vice President/Chief Information Officer of the Bank from January
1995 to present; Vice President/Operations of the Bank from January 1988 to
December 1994.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Certain of the directors and executive officers of QNB and/or their
affiliates have loans outstanding from the Bank. All such loans were made in the
ordinary course of the Bank's business; were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with unrelated persons; and, in the opinion of
management, do not involve more than the normal risk of collection or present
other unfavorable features. As of December 31, 1998, $6,552,000 in loans were
outstanding to directors, principal officers, and their affiliates.
16
<PAGE>
NOMINATIONS AND SHAREHOLDER PROPOSALS
Nominations for election to the Board of Directors may be made by any
shareholder if made in writing and delivered or mailed to the President of QNB,
not less than fourteen (14) days or more than fifty (50) days prior to any
meeting of shareholders called for the election of directors, provided however,
that if less than twenty-one (21) days notice of the meeting is given to
shareholders, such nomination shall be mailed or delivered to the President of
QNB not later than the close of business on the seventh day following the day on
which the notice of the meeting was mailed. Such notification shall contain the
following information to the extent known to the notifying shareholder: (a) the
name and address of each proposed nominee; (b) the principal occupation of each
proposed nominee; (c) the total number of shares of common stock of QNB that
will be voted for each proposed nominee; (d) the name and residence address of
the notifying shareholder; and (e) the number of shares of common stock of QNB
owned by the notifying shareholder. Nominations not made in accordance with
these provisions may be disregarded by the Chairman at the annual meeting.
Any shareholder proposal for the 2000 annual meeting must be submitted, in
writing, to the Secretary of QNB in accordance with the proxy rules of the
Securities and Exchange Commission prior to December 4, 1999. Any shareholder
proposal not submitted in accordance with the foregoing may be disregarded by
the Chairman at the annual meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires QNB's
officers and directors and persons who own more than ten percent (10%) of QNB's
common stock to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors and greater than ten
percent (10%) owners are required by Securities and Exchange Commission
regulations to furnish QNB with copies of all Section 16(a) forms they file.
To the Board of Directors' knowledge, based solely on review of the copies
of such reports furnished to QNB during fiscal year ended December 31, 1998, all
Section 16(a) filing requirements applicable to its executive officers and
directors were complied with except for Edgar L. Stauffer who filed one form
late reporting two transactions.
OTHER MATTERS
Management is not aware of any business to come before the annual meeting
other than those matters described in the proxy statement. However, if any other
matters should properly come before the annual meeting, it is intended that the
proxies hereby solicited will be voted with respect to those other matters in
accordance with the judgment of the persons voting the proxies.
If there are not sufficient votes for approval of any of the matters to be
acted upon at the annual meeting, the annual meeting may be adjourned to permit
the further solicitation of proxies.
By Order of the Board of Directors,
/s/ Charles M. Meredith, III
- -------------------------------------
Charles M. Meredith, III
Secretary
Quakertown, Pennsylvania
April 2, 1999
17
<PAGE>
REVOCABLE PROXY
QNB Corp.
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
ANNUAL MEETING OF SHAREHOLDERS
MAY 4, 1999
The undersigned hereby appoints J. Clair Hershey, Philip D. Miller, and
Daniel W. Schantz, and each of them, with full powers of substitution, to act as
attorneys and proxies for the undersigned to vote all shares of QNB Corp. common
stock that the undersigned is entitled to vote at the Annual Meeting of
Shareholders to be held at the offices of The Quakertown National Bank, 320 West
Broad Street, Quakertown, PA at 11:00 a.m. on Tuesday, May 4, 1999, and at any
and all adjournments of the meeting.
1. The election as directors of all nominees listed (except as marked to the
contrary), for three-year terms.
Kenneth F. Brown, Jr. Henry L. Rosenberger
Edgar L. Stauffer
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee or nominee's name(s) in the space provided
below.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE LISTED PROPOSAL.
In their discretion, the proxies are authorized to vote on any other
business that may properly come before the meeting or any adjournment or
postponement of the meeting.
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" ALL NOMINEES LISTED ABOVE.
Please be sure to sign and date
this Proxy in the box below.
---------------------------------
/ /
---------------------------------
Detach above card, sign, date and mail in postage paid envelope provided.
QNB Corp.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Should the above signed be present and choose to vote at the meeting or at
any adjournments or postponements of the meeting, and after notification to the
Secretary of QNB at the meeting of the shareholder's decision to terminate this
proxy, then the powers of such attorneys or proxies shall be deemed terminated
and of no further force and effect. This proxy may also be revoked by filing
written notice of revocation with the Secretary of QNB or by duly executing a
proxy bearing a later date.
The above signed acknowledges receipt from QNB, prior to the execution of
this proxy, of the Notice of Annual Meeting of Shareholders, Proxy Statement and
Annual Report.
Please sign exactly as your name(s) appear(s) above. When signing as an
attorney, executor, administrator, trustee, or guardian, please give your full
title. If signer is a corporation, please sign full corporate name by authorized
officer. If shares are held jointly, each holder should sign.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
