PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
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[ ] Preliminary Proxy Statement
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permitted by Rule 14a-6(e)(2))
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[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
PENNROCK FINANCIAL SERVICES CORP.
Name of Registrant as Specified in its Charter)
________________________________________________________________
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 25, 2000
TO THE SHAREHOLDERS OF PENNROCK FINANCIAL SERVICES CORP.:
NOTICE IS HEREBY GIVEN that, pursuant to the call of its
directors, the regular Annual Meeting of the shareholders of
PENNROCK FINANCIAL SERVICES CORP., will be held on Tuesday,
April 25, 2000 at 10:00 a.m. at Yoder's Restaurant, 14 South
Tower Road, New Holland, Pennsylvania for the purpose of
considering and voting upon the following matters:
1. ELECTION OF DIRECTORS. To elect the four nominees
listed in the accompanying Proxy Statement.
2. OTHER BUSINESS. To consider such other business as may
properly be brought before the meeting and any adjournments
thereof.
Only those shareholders of record at the close of business
on March 16, 2000, shall be entitled to notice of and to vote at
the meeting.
Please mark, date and sign the enclosed proxy and return it
in the enclosed postpaid envelope as promptly as possible. You
are cordially invited to attend the meeting. Your proxy is
revocable and may be withdrawn if you elect to attend the
meeting and wish to vote in person.
A copy of the Annual Report of PennRock Financial Services
Corp. is enclosed.
BY ORDER OF THE BOARD OF
DIRECTORS
GLENN H. WEAVER
President
Enclosures
March 31, 2000
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE
MEETING. PLEASE PROMPTLY DATE, SIGN AND RETURN YOUR PROXY IN
THE ENVELOPE WHICH ACCOMPANIES THIS PROXY STATEMENT.
PROXY STATEMENT
= = = = = = = = = = = = = = = = = = = = = = = =
Dated and to be Mailed March 31, 2000
= = = = = = = = = = = = = = = = = = = = = = = =
PENNROCK FINANCIAL SERVICES CORP.
1060 MAIN STREET
P.O. BOX 580
BLUE BALL, PENNSYLVANIA 17506
(717) 354-4541
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 25, 2000
TABLE OF CONTENTS
Page
GENERAL...................................................1
Introduction.........................................1
Date, Time and Place of Meeting......................1
Shareholders Entitled to Vote........................1
Purpose of Meeting...................................1
Solicitation of Proxies..............................1
Revocability and Voting of Proxies...................2
Voting of Shares and Principal Holders Thereof.......2
Shareholder Proposals................................3
Recommendations of the Board of Directors............3
INFORMATION CONCERNING ELECTION OF DIRECTORS..............4
General Information..................................4
Information About Nominees, Continuing Directors and
Executive Officers...................................5
Meetings and Committees of the Board of Directors....8
Compensation of Directors............................9
Executive Officers of PennRock Financial Services
Corp.................................................10
Executive Compensation and Related Matters...........11
Transactions with Directors and Executive Officers...21
Compliance with Section 16(a) of the Exchange Act....22
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS.........22
ADDITIONAL INFORMATION...................................22
OTHER MATTERS............................................23
GENERAL
Introduction
On July 31, 1986, Blue Ball National Bank became a wholly-owned
subsidiary of PennRock Financial Services Corp., a Pennsylvania business
corporation organized for the purpose of becoming a bank holding company.
As of that date, the shareholders of Blue Ball National Bank became
shareholders of PennRock Financial Services Corp. The meeting to which
this Proxy Statement relates will be the thirteenth Annual Meeting of the
shareholders of PennRock Financial Services Corp.
Date, Time and Place of Meeting
The regular Annual Meeting of the shareholders of PennRock Financial
Services Corp. will be held on Tuesday, April 25, 2000, at 10:00 a.m. at
Yoder's Restaurant, 14 South Tower Road, New Holland, Pennsylvania.
Shareholders Entitled to Vote
Shareholders of record at the close of business on March 16, 2000 shall
be entitled to vote at the meeting.
Purpose of Meeting
The shareholders will be asked to consider the following matters at the
meeting: (i) to elect four directors, and (ii) to consider and vote upon
such other business as may be properly brought before the meeting and any
adjournments thereof.
Solicitation of Proxies
This Proxy Statement is furnished in connection with the solicitation
of proxies, in the accompanying form, by the Board of Directors of PennRock
Financial Services Corp. for use at the Annual Meeting of shareholders to be
held at 10:00 a.m. on Tuesday, April 25, 2000, and any adjournments thereof.
The expense of soliciting proxies will be borne by PennRock Financial
Services Corp. In addition to the use of the mails, directors, officers and
employees of PennRock Financial Services Corp. and Blue Ball National Bank
may, without additional compensation, solicit proxies personally or by
telephone.
Revocability and Voting of Proxies
The execution and return of the enclosed proxy will not affect a
shareholder's right to attend the meeting and to vote in person. Any proxy
given pursuant to this solicitation may be revoked by delivering written
notice of revocation to Glenn H. Weaver, President of PennRock Financial
Services Corp., at any time before the proxy is voted at the meeting.
Unless revoked, any proxy given pursuant to this solicitation will be voted
at the meeting in accordance with the instructions thereon of the
shareholder giving the proxy. In the absence of instructions, all proxies
will be voted FOR the election of the four nominees identified in this Proxy
Statement. The enclosed proxy confers upon the persons named as proxies
therein discretionary authority to vote the shares represented thereby on
all matters that may come before the meeting in addition to the scheduled
items of business, including unscheduled shareholder proposals and matters
incident to the conduct of the meeting. Although the Board of Directors
knows of no other business to be presented, in the event that any other
matters are brought before the meeting, any proxy given pursuant to this
solicitation will be voted in accordance with the recommendations of the
management of PennRock Financial Services Corp.
Shares held for the account of shareholders who participate in the
Dividend Reinvestment Plan will be voted in accordance with the instructions
of each shareholder as set forth in his proxy. If a shareholder who
participates in the Dividend Reinvestment Plan does not return a proxy, the
shares held for his account by the Plan Agent will not be voted.
Voting of Shares and Principal Holders Thereof
At the close of business on February 11, 2000, PennRock Financial
Services Corp. had outstanding 5,964,015 shares of $2.50 par value common
stock. There is no other class of stock authorized or outstanding. As of
such date, 142,680 shares of PennRock Financial Services Corp. common stock
were held by the Trust Department of Blue Ball National Bank as sole
fiduciary (representing approximately 2.39 percent of such shares
outstanding) and will be voted FOR the election of the four nominees
identified in this Proxy Statement.
A majority of the outstanding common stock present in person or by
proxy constitutes a quorum for the conduct of business. Each share is
entitled to one vote on all matters submitted to a vote of the shareholders.
A majority of the votes cast at a meeting at which a quorum is present is
required in order to approve any matter submitted to a vote of the
shareholders, unless a greater vote is required by law or under the Articles
of Incorporation or Bylaws. In the case of the election of directors, the
candidates receiving the highest number of votes cast, up to the number of
directors to be elected, shall be elected to the Board of Directors.
Abstentions and broker non-votes will be treated as shares that are present
and entitled to vote for purposes of determining the presence of a quorum,
but will not be treated as votes cast.
To the knowledge of PennRock Financial Services Corp., no person owned
of record or beneficially on the record date more than five percent of the
outstanding common stock of PennRock Financial Services Corp.
Shareholder Proposals
Pursuant to Rule 14a-8 promulgated by the Securities and Exchange
Commission (the "SEC"), shareholder proposals intended to be presented at
the 2001 Annual Meeting must be received at the executive offices of
PennRock Financial Services Corp. not later than December 1, 2000 in order
to be included in the proxy statement and proxy form to be prepared by
PennRock Financial Services Corp. in connection with that meeting. A
shareholder proposal which does not satisfy the notice and other
requirements of SEC Rule 14a-8 is not required to be included in the proxy
statement and proxy form of PennRock Financial Services Corp., but may be
presented at the 2001 Annual Meeting if the proposal is received by PennRock
Financial Services Corp. not later than February 15, 2001; provided,
however, that the Chairman of the Annual Meeting may in his discretion rule
any such proposal out of order for the reason that the inability of the
shareholders to express an opinion through the proxy solicitation process
would render any vote on the matter meaningless as an expression of
shareholder sentiment. All shareholder proposals should be sent to:
PennRock Financial Services Corp., Attention: President, 1060 Main Street,
P.O. Box 580, Blue Ball, Pennsylvania 17506.
Recommendations of the Board of Directors
The Board of Directors recommends that the shareholders vote FOR the
election of the four nominees identified in this Proxy Statement.
INFORMATION CONCERNING ELECTION OF DIRECTORS
General Information
The Bylaws of PennRock Financial Services Corp. provide that the Board
of Directors shall consist of not less than two nor more than 25 persons and
that the directors shall be classified with respect to the time they shall
severally hold office by dividing them into three classes, each consisting
as nearly as possible of one-third of the number of the whole Board of
Directors. The Bylaws further provide that the directors of each class
shall be elected for a term of three years.
At each annual meeting the successors to the class of directors whose
term shall expire that year shall be elected to hold office for a term of
three years, so that the term of office of one class of directors shall
expire in each year. The number of directors shall be determined by the
Board of Directors. Any shareholder who owns not less than 100 shares of
the stock of PennRock Financial Services Corp. is eligible to be elected to
the Board of Directors.
A majority of the Board of Directors may increase the number of
directors between meetings of the shareholders. Any vacancy occurring in
the Board of Directors, whether due to an increase in the number of
directors, resignation, retirement, death or any other reason, may be filled
by appointment by the remaining directors. Any director who is appointed to
fill a vacancy shall hold office until his successor is duly elected by the
shareholders at the next Annual Meeting at which directors of his class are
to be chosen.
The Board of Directors has fixed the number of directors at 11. Of
these 11 directors, there are four directors whose terms of office will
expire at the 2000 Annual Meeting and seven continuing directors whose terms
of office will expire at the 2001 or 2002 Annual Meeting. The Board of
Directors proposes to nominate the following persons for election to the
Board of Directors at the 2000 Annual Meeting for the term specified below:
Class A
For a Term of
Three Years
Norman Hahn
Robert L. Spotts
Dale M. Weaver
Melvin Pankuch
In the event that any of the foregoing nominees is unable to accept
nomination or election, any proxy given pursuant to this solicitation will
be voted in favor of such other persons as the management of PennRock
Financial Services Corp. may recommend. However, the Board of Directors has
no reason to believe that any of its nominees will be unable to accept
nomination or to serve as a director, if elected.
Section 2.3 of Article II of the Bylaws of PennRock Financial Services
Corp. requires that nominations, other than those made by or in behalf of
the existing management of PennRock Financial Services Corp., must be made
in writing and must be delivered or mailed to the Chairman of the Board of
PennRock Financial Services Corp. not less than 14 days nor more than 50
days prior to the date of the Annual Meeting. The chairman of the meeting
is required to determine whether nominations have been made in accordance
with the requirements of the Bylaws and, if he determines that a nomination
is defective, the nomination and any votes cast for the nominee shall be
disregarded.
Information About Nominees, Continuing Directors and Executive Officers.
Information concerning the four persons to be nominated for election to
the Board of Directors of PennRock Financial Services Corp. at the 2000
Annual Meeting and concerning the seven continuing directors is set forth
below. The following table also includes information concerning shares of
PennRock Financial Services Corp. common stock owned beneficially by
executive officers who are named in the Summary Compensation Table appearing
elsewhere in this Proxy Statement and by all directors and executive
officers as a group.
<TABLE>
<CAPTION>
Shares of
PennRock Financial
Services Corp. Common Principal
Stock Beneficially Percent Occupation for the
Director Owned as of of Past 5 Years and
Name and Age Since(1) February 11, 2000(2)(3) Class Other Directorships(4)
<S> <C> <C> <C> <C>
Class A
(Term expires in 2000)
- - Nominees
Norman Hahn (63) 1976 137,505 2.31% Chairman of the Board and Chief
Executive Officer, Conestoga
Wood Specialties, Inc.
(manufacturer of wood products)
Robert L. Spotts (69) 1985 17,496 * Retired. Formerly President,
Martin Limestone, Inc. (quarry)
Dale M. Weaver (61) 1977 117,847 1.98% President, New Holland Custom
Woodwork, Ltd. (church furniture
and millwork)
Melvin Pankuch (60) 1988 8,675 * Executive Vice President and
Chief Executive Officer,
PennRock Financial Services
Corp. and President and Chief
Executive Officer, Blue Ball
National Bank
Class B
(Term expires in 2001)
- - Continuing Directors
Elton Horning (68) 1989 30,745 * Auctioneer, Owner of Elton
Horning Farm Agency and Partner
of Horning Farm Agency (real
estate agency)
Glenn H. Weaver (65) 1985 101,689 1.71% President, PennRock Financial
Services Corp.; Partner R & G
Associates (real estate
investment); formerly President,
Weaver & Witwer, Inc. (plumbing,
heating, air conditioning,
electrical contractors)
Irving E. Bressler (49) 1997 500 * President, Bressler Auto
Specialties, d/b/a Autospa of
Wyomissing Hills (car wash and
auto dealing)
Sandra J. Bricker (52) 1999 200 * President, The Bricker Group
Consultant to and owner and
operator of retirement
communities)
Class C
(Term expires in 2002)
- - Continuing Directors
Aaron S. Kurtz (61) 1980 7,709 * President, Ludwig Office
Furniture, Inc. (office
furniture)
Robert K. Weaver (51) 1975 15,512 * Area Director, Eastern
Pennsylvania, Joni and Friends
(charitable organization);
formerly Partner, Wentz, Weaver
& Kling, LLP (law firm)
Lewis M. Good (41) 1991 3,771 * Owner, Original Good's Potato
Chips (food products)
Names Executive
Officers Who Are Not
Directors
George B. Crisp 998 *
Joseph C. Spada 1,877 *
Michael H. Peuler 1,404 *
All Directors and
Executive Officers
as a group (14
persons) 445,928 7.50%
</TABLE>
[FN]
____________________________________
* Less than one percent of the total number of shares of
common stock outstanding.
</FN>
Footnotes
(1) Includes service as a director of Blue Ball National Bank,
predecessor to PennRock Financial Services Corp.
(2) Beneficial ownership of shares of the common stock of
PennRock Financial Services Corp. is determined in
accordance with Securities and Exchange Commission
Rule 13d-3(d)(1), which provides that a person shall be
deemed to own any stock with respect to which he, directly
or indirectly, through any contract, arrangement,
understanding, relationship or otherwise has or shares:
(i) voting power, which includes the power to vote or to
direct the voting of the stock, or (ii) investment power,
which includes the power to dispose or direct the
disposition of the stock.
(3) Each person named in this table has sole voting and
investment power with respect to the shares listed above,
except that voting and investment power with respect to a
total of 73,643 shares is shared with spouses, children or
other family members. The shares shown above include a
total of 105,688 shares which are held by spouses, children
or other family members or by trusts or estates with respect
to which a director or executive officer serves as trustee
or executor, beneficial ownership of which is in each case
disclaimed. Also included in the shares shown above are a
total of 3,000 shares which may be acquired pursuant to the
exercise of stock options which are currently vested or
which will vest within 60 days, which shares are treated as
issued and outstanding for purposes of determining ownership
percentage.
(4) No nominee or continuing director is a director of any other
company which has one or more classes of securities
registered with the Securities and Exchange Commission
pursuant to Section 12 or which is required to file periodic
reports with the Securities and Exchange Commission pursuant
to Section 15(d) of the Securities Exchange Act of 1934.
Meetings and Committees of the Board of Directors.
The Board of Directors of PennRock Financial Services Corp. does not
have a standing Audit Committee, Nominating Committee, or Compensation
Committee.
Blue Ball National Bank has a standing Audit Committee. Since Blue Ball
National Bank is presently the only subsidiary of PennRock Financial
Services Corp., the Audit Committee of Blue Ball National Bank has been
acting on behalf of PennRock Financial Services Corp. and will continue to
do so until PennRock Financial Services Corp. committees are appointed.
Members of the Audit Committee of Blue Ball National Bank during 1999
were Robert L. Spotts, Chairman, and Irving E. Bressler, Sandra J. Bricker,
Lewis M. Good, Norman Hahn, and Elton Horning. The principal duties of the
Audit Committee are to obtain and review such internal and external
financial information as may be necessary in order to assure that the audit
coverage is appropriate and that satisfactory internal reporting procedures
are maintained. The Audit Committee met four times during 1999.
The Board of Directors met 29 times during 1999. All directors
attended 75% or more of the aggregate number of meetings of the Board of
Directors and of the various committees of the Board of Directors on which
they served.
Compensation of Directors.
The directors of PennRock Financial Services Corp. do not receive any
additional compensation for their services as such, beyond the compensation
paid to them as directors of Blue Ball National Bank. Each member of the
Board of Directors of Blue Ball National Bank, other than the Chairman of
the Board, is paid an annual fee of $1,800 for his services as a director, a
fee of $325 for each regular meeting of the Board of Directors which he
attends, and $140 for each meeting of a committee of the Board of Directors
which he attends. In addition to the regular directors' compensation, the
Secretary of the Board of Directors also receives an additional fee of
$5,200. The Chairman of the Board of Directors receives an annual fee of
$12,600 and a fee of $140 for each committee meeting of the Board of
Directors which he attends. No directors' fees are paid to any director who
is also a full-time salaried officer of Blue Ball National Bank or PennRock
Financial Services Corp.
Executive Officers of PennRock Financial Services Corp.
The following persons are the executive officers of PennRock Financial
Services Corp.:
Name Age Office Held and Term of Office
Norman Hahn 63 Chairman of the Board of PennRock
Financial Services Corp. since
1991; Chairman of Blue Ball
National Bank since 1990.
Glenn H. Weaver 65 President of PennRock Financial
Services Corp. since 1989.
Robert K. Weaver 51 Secretary of the Board of PennRock
Financial Services Corp. since
1986; Secretary of Blue Ball
National Bank since 1977.
Melvin Pankuch 60 Executive Vice President and Chief
Executive Officer of PennRock
Financial Services Corp. since
1989; President and Chief Executive
Officer of Blue Ball National Bank
since 1988.
George B. Crisp 52 Senior Vice President and Treasurer
of PennRock Financial Services
Corp. since 1989; Senior Vice
President Operations of Blue Ball
National Bank since 1993, formerly
Vice President and Chief Financial
Officer of Blue Ball National Bank.
Joseph C. Spada 49 Senior Vice President - Sales of
Blue Ball National Bank since 1993.
Michael H. Peuler 49 Senior Vice President- Trust
Services of Blue Ball National Bank
since 1995.
Executive Compensation and Related Matters.
Summary of Cash and Certain Other Compensation
The following table provides certain summary information concerning
compensation paid or accrued by PennRock Financial Services Corp. and Blue
Ball National Bank to the chief executive officer of PennRock Financial
Services Corp. and to each of the other most highly compensated executive
officers of PennRock Financial Services Corp. whose combined salary and
bonus compensation exceeded $100,000 for the year ended December 31, 1999.
<TABLE>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name Other Securities All
And Annual Restricted Underlying Other
Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus(1) sation Awards SARs(2) Payouts sation(3)
($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Melvin Pankuch, 1999 $265,000 $30,371 None None 10,000 None $19,191
Executive Vice
President and 1998 249,000 14,651 None None 2,000 None 18,720
Chief Executive
Officer 1997 245,000 14,210 None None 2,000 None 18,933
George B. Crisp, 1999 $126,474 $14,564 None None 5,000 None $16,882
Executive Vice
President and 1998 122,790 7,061 None None 1,000 None 15,140
Chief Executive
Officer 1997 116,943 6,783 5,000 None 1,000 None 15,191
Joseph C. Spada, 1999 $128,930 $14,846 None None 5,000 None $17,120
Executive Vice
President and 1998 125,175 7,198 None None None None 15,743
Chief Executive
Officer 1997 118,089 6,850 None None 1,000 None 14,743
Michael H. Peuler, 1999 $123,600 $14,232 None None 5,000 None $16,499
Executive Vice
President and 1998 120,000 6,901 None None 1,000 None 14,750
Chief Executive
Officer 1997 109,200 6,334 None None 1,000 None 13,624
</TABLE>
[FN]
Footnotes
(1) Consists of the cash component of the bonus awarded and
paid in 1999 under the Bonus Compensation Plan, and
(ii) the bonus under the Executive Incentive Compensation
Plan paid in 1999 in respect of 1998 financial performance.
Because the necessary peer group performance data is not
yet publicly available, it is not possible to determine at
this time whether (or the extent to which) a bonus under
the Executive Incentive Compensation Plan will be payable
to the named executive officers in 2000 in respect of 1999
financial performance.
(2) Adjusted to reflect stock splits since date of grant.
(3) Consists of the non-cash component of the bonus awarded and
paid in 1999 under the Bonus Compensation Plan in the form
of a contribution to the Profit Sharing Plan maintained by
Blue Ball National Bank.
Stock Options Granted in 1999
The following table sets forth certain information relating to stock
options granted during 1999 to the executive officers named in the Summary
Compensation Table appearing above. No stock appreciation rights
("SAR's") were granted in 1999.
<TABLE>
OPTION/SAR GRANTS IN 1999
Potential
Realizable Value at
Number Percent of Assumed Annual
of Shares Total Options/ Rates of Stock
Underlying SAR's Granted Price Appreciation
Options/SAR's to Employees Exercise or Expiration for Option Term(3)
Name Granted in 1999(1) in Fiscal Year Base Price(2) Date 5% 10%
(#) ($/Share) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Melvin Pankuch 10,000 36% $22.00 2-23-09 $138,357 $350,623
Joseph C. Spada 5,000 18% 22.00 2-23-09 69,178 175,312
George B. Crisp 5,000 18% 22.00 2-23-09 69,178 175,312
Michael H. Peuler 5,000 18% 22.00 2-23-09 69,178 175,312
</TABLE>
[FN]
Footnotes
(1) Represents the grant of incentive stock options on
February 23, 1999 pursuant to the terms of the Omnibus Stock
Plan. Each option vests and becomes exercisable one-half
after the expiration of three years from the date of grant
and the balance after the expiration of five years from the
date of grant. Each option expires, to the extent not
previously exercised, upon termination of employment for
reasons other than retirement, disability or death.
(2) Exercise price in each case is equal to 100% of fair market
value on the date of grant.
(3) The dollar amounts set forth in these columns are based upon
assumed annual appreciation rates of 5% and 10% as required
under applicable Securities and Exchange Commission
regulations and are not intended to indicate the possible
future price appreciation, if any, of PennRock Financial
Services Corp. common stock. No gain will be realized by
the option holder in the absence of an increase in the
market price of PennRock Financial Services Corp. common
stock, which will benefit all shareholders.
Stock Option Exercises and 1999 Year-End Values
The following table sets forth with respect to the executive officers
named in the Summary Compensation Table certain information relating to the
exercise of stock options during 1999 and relating to the number and value
of unexercised stock options and SAR's held as of December 31, 1999. No
SAR's were either granted or exercised in 1999 and none were outstanding on
December 31, 1999.
<TABLE>
1999 OPTION EXERCISE AND YEAR-END VALUES
Value of Unexercised
Value Realized Number of In-The Money
(Market Value at Unexercised Options/SARs at
Shares Acquired Exercise, Less Options/SARs at Fiscal Year End
Name on Exercise Exercise Price) Fiscal Year-End 12-31-99
(#) ($) (#) ($)
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Melvin Pankuch 750 $4,373 500 14,500 -0- $1,880
George B. Crisp None N/A None 7,000 N/A 1,000
Joseph C. Spada None N/A None 6,000 N/A 1,000
Michael H. Peuler None N/A None 7,000 N/A 1,000
</TABLE>
Compensation Committee Interlocks and Insider Participation
The Board of Directors of PennRock Financial Services Corp. has no
standing Compensation Committee. Instead, decisions relating to the
compensation of executive officers of PennRock Financial Services Corp.
are generally made by the Board of Directors as a whole, except that
Melvin Pankuch, who is a member of the Board of Directors and Executive
Vice President and Chief Executive Officer, does not participate in
deliberations relating to his compensation. Mr. Pankuch is the only
director who is also an employee; Glenn H. Weaver, a former employee, is
not now an employee, but serves as President of PennRock Financial
Services Corp. Robert K. Weaver was a partner in the law firm of Wentz,
Weaver & Kling LLP, until December 31, 1999, when he resigned in order to
accept a position with a charitable organization. Wentz, Weaver & Kling
has for many years served as general counsel to PennRock Financial
Services Corp. and Blue Ball National Bank and is expected to continue to
do so in the future.
There were no compensation committee "interlocks" during 1999, which
in general terms means that no executive officer or director of PennRock
Financial Services Corp. served as a director or member of the Compensation
Committee of another entity, one of whose executive officers served as a
director of PennRock Financial Services Corp.
The following report is submitted by the Board of Directors (exclusive
of Mr. Pankuch) and addresses the compensation policies of PennRock
Financial Services Corp. for 1999 as applicable to executive officers
generally and to Mr. Pankuch, the chief executive officer.
Executive Employment Agreement
On December 17, 1999 PennRock Financial Services Corp. and its wholly
owned subsidiary, Blue Ball National Bank (collectively, the "Employers"),
entered into an Employment Agreement with Melvin Pankuch ( the "Employment
Agreement"), under the terms of which PennRock Financial Services Corp.
engaged Mr. Pankuch as its Executive Vice President and Chief Executive
Officer and Blue Ball National Bank engaged Mr. Pankuch as its President
and Chief Executive Officer. The Employment Agreement provides for an
initial term of two years and is subject to automatic renewal for
successive additional periods of two years each, unless either Mr. Pankuch
or the Employers elect not to renew by giving written notice to the other
180 days in advance of the expiration of the then current term.
The Employment Agreement provides that Mr. Pankuch shall receive a
salary of not less than $265,000 per year, subject to annual review and
adjustment. The Employment Agreement also entitles Mr. Pankuch to
participate in the incentive compensation and employee benefits plans
maintained by the Employers.
The Employment Agreement terminates in the event of Mr. Pankuch's
disability or death and may be terminated by the Employers at any time,
with or without cause. Mr. Pankuch has the right to terminate the
Employment Agreement, with or without cause, by resigning upon 180 days'
advance written notice and has the right to terminate his employment for
good reason (as defined in the Employment Agreement) upon 60 days' advance
written notice following the occurrence of a change in control (as defined
in the Employment Agreement).
Mr. Pankuch is entitled to receive certain severance benefits in the
event that the Employers elect not to renew the Employment Agreement or in
the event that the Employers elect to terminate the Employment Agreement
without cause. The severance benefits to which Mr. Pankuch would be
entitled include salary continuation for up to 24 months, except that the
Employers are not obligated to continue to make salary continuation
payments after the expiration of 12 months from the date of termination if
Mr. Pankuch obtains a comparable executive level position with another
employer. In addition, if Mr. Pankuch elects to purchase continuation
coverage under the Employers' medical insurance plan, the Employers are
required to reimburse him for such expense. Mr. Pankuch is, however,
obligated to mitigate the obligation of the Employers to pay the foregoing
severance benefits by using his best efforts to obtain a comparable
executive level position with another employer. Mr. Pankuch is also
entitled to receive severance benefits following the occurrence of a
change in control in the event that he elects to terminate the Employment
Agreement for good reason or if the successor to the Employers elects to
terminate the Employment Agreement prior to the end of its then current
term other than for cause. The severance benefits to which Mr. Pankuch
would be entitled under these circumstances include a severance payment in
an amount equal to three times his then current annual compensation (which
amount is subject to reduction so as to avoid the imposition of an excise
tax under Section 4999 of the Internal Revenue Code of 1986) and
reimbursement of the expense incurred by Mr. Pankuch if he elects to
purchase continuation coverage under the Employers' medical insurance
plan.
Board Report on Executive Compensation
The Board of Directors is responsible for establishing an appropriate
compensation policy applicable to the executive officers of PennRock
Financial Services Corp. and for overseeing the administration of that
policy. The overall objective of the Board's policy is to provide
competitive levels of compensation that integrate pay with annual and long
term performance goals, reward above average performance, recognize
individual initiative and achievements and assist PennRock Financial
Services Corp. in attracting, motivating and retaining capable senior
executive officers. The Board's policy provides for competitive base salary
compensation which reflects individual performance and for annual
performance incentive compensation opportunities earned through the
achievement of financial performance and other goals established by the
Board and management. In addition, the Board intends in the future to place
greater emphasis upon longer term stock-based incentive opportunities
through the implementation of the Omnibus Stock Plan, which was approved by
the shareholders at the 1992 Annual Meeting. The Board is of the view that
stock ownership by senior executive officers and stock-based incentive
compensation arrangements are beneficial in aligning the interests of
management and shareholders in the overall enhancement of profitability and
shareholder value. The Board believes for this reason that it may in the
future rely more heavily upon stock-based incentive compensation
arrangements in designing the compensation packages of the executive
officers of PennRock Financial Services Corp.
In designing and administering the individual elements of its executive
compensation policy, the Board of Directors strives to balance short term
and long term incentive objectives and to employ prudent judgment in
establishing performance criteria, evaluating performance and in determining
the amount of overall compensation. What follows is a discussion of each of
the elements of the Board's compensation policy, together with a summary of
decisions made by the Board in 1999 with respect to the compensation of
Mr. Pankuch.
The Omnibus Budget Reconciliation Act of 1993 (the "Act") imposes
certain limitations on the deductibility for federal income tax purposes of
annual compensation in excess of $1 Million payable to certain officers of
PennRock Financial Services Corp. Because the Board of Directors does not
anticipate that the annual compensation of any officer will exceed
$1 Million, it does not intend to modify the compensation policy of PennRock
Financial Services Corp. in response to the provisions of the Act.
Base Salary
The base salary component of an executive officer's compensation is
determined annually by the Board of Directors by reference to salary surveys
and other data and is adjusted as necessary to be competitive with average
salaries paid to executive officers at other banks and bank holding
companies of equivalent size and characteristics. The actual salary paid to
an executive officer is determined through an annual performance appraisal,
which evaluates performance by reference to the following factors:
supervisory and management performance, marketing and sales plan
performance, internal cooperation, reporting and communication, customer and
public relations, strategic and business plan development and achievement,
and profit planning and budgeting. The Board also considers the financial
goals that were set at the beginning of the year by the Board and management
and relates them to year-end results. Some of these goals are growth in
assets, growth in deposits, percentage increase in net income for the year,
growth in loans, return on equity and return on assets.
Bonus Compensation Plan
The Bonus Compensation Plan is an annual incentive program for all
employees, including executive officers and other key management employees.
The purpose of the Plan is to provide a direct financial incentive in the
form of an annual bonus which is related to return on equity. Bonuses under
the Bonus Compensation Plan are paid partly in cash and partly in the form
of a contribution to an employee's account under the Blue Ball National Bank
Profit Sharing Plan.
Executive Incentive Compensation Plan
The Executive Incentive Compensation Plan is a compensation plan under
which key officers (vice presidents and above) of PennRock Financial
Services Corp. and Blue Ball National Bank are eligible to receive bonuses
equal to a percentage of salary. The Plan was adopted by the Board of
Directors in 1994. The amount of bonus, if any, awarded under the Plan is
determined on the basis of an objective two-part formula. The first part of
the formula is based upon return on equity relative to peer group bank
holding company performance. (The peer group used for this purpose consists
of the approximately 211 bank holding companies comprising Peer Group No. 4
as published by the Federal Reserve Board in its annual Bank Holding Company
Performance Report.) The second part of the formula is based upon year-to-
year comparative growth in PennRock Financial Services Corp. net income. A
bonus earned under the Plan in respect of current year performance is paid
in the spring of the following year. Bonuses are payable 70% in cash and 30%
in shares of PennRock Financial Services Corp. common stock valued at fair
market value.
Omnibus Stock Plan
The Omnibus Stock Plan, which was approved by the shareholders at the
1992 Annual Meeting, is a long-term incentive plan for senior executives of
PennRock Financial Services Corp. The objectives sought to be achieved by
the grant of awards under the Omnibus Stock Plan are to align executive and
shareholder long-term interests by creating a strong and direct link between
overall executive compensation and shareholder return and to enable senior
officers to develop and maintain a significant, long-term stock ownership
position in PennRock Financial Services Corp. common stock. Awards may be
granted under the Omnibus Stock Plan in the form of non-qualified stock
options, incentive stock options, stock appreciation rights, performance
shares, performance units and restricted stock. In February of 1999,
Messrs. Pankuch, Crisp, Peuler and Spada were each granted incentive stock
options to purchase shares of PennRock Financial Services Corp. common stock
as described in the Option/SAR Grants in 1999 Table appearing above.
Compensation of Chief Executive Officer
Mr. Pankuch's compensation is determined in accordance with the
compensation policy of the Board of Directors described above and he is
eligible to participate in the compensation plans described above. The
general approach adopted by the Board of Directors in determining
Mr. Pankuch's annual compensation is to seek to be competitive with other
bank holding companies of equivalent size and characteristics, but to have a
significant percentage of his total compensation based upon the achievement
of short-term and long-term performance goals. This approach provides a
strong incentive to achieve or surpass the goals established by the Board of
Directors, while simultaneously providing an element of stability in
Mr. Pankuch's compensation.
Mr. Pankuch's base salary during 1998 was $249,900 and was set by the
Board of Directors at $265,000 for 1999 (an increase of approximately 6%),
based upon the factors discussed above and upon an evaluation conducted by
the Board of Directors.
Mr. Pankuch received in 1999 a bonus of $35,038 under the Bonus
Compensation Plan which is reflected in the Summary Compensation Table set
forth above. The amount of this bonus was determined by the Board of
Directors in accordance with the terms of the Bonus Compensation Plan.
Specifically, $15,847 was paid in cash and $19,191 was contributed to
Mr. Pankuch's account in the Blue Ball National Bank Profit Sharing Plan.
In addition, a bonus of $14,524 under the Executive Incentive Compensation
Plan was paid to Mr. Pankuch in 1999 in respect of 1998 financial
performance and is also reflected in the Summary Compensation Table set
forth above. Because the necessary peer group performance data is not yet
publicly available, it is not possible to determine at this time whether (or
the extent to which) a bonus under the Executive Incentive Compensation Plan
will be payable to Mr. Pankuch in 2000 in respect of 1999 financial
performance.
The foregoing report is furnished by Norman
Hahn, Chairman of the Board, and Irving E. Bressler,
Sandra J. Bricker, Elton Horning, Lewis M. Good,
Aaron S. Kurtz, Robert L. Spotts, Dale M. Weaver,
Glenn H. Weaver and Robert K. Weaver.
Stock Performance Graph
The Securities and Exchange Commission requires that a publicly held
company include in its proxy statement a graph comparing five year
cumulative total shareholder returns (assuming the reinvestment of
dividends) with a broad market index and with a published industry or
line-of-business index or an index of peer group companies. The graph
appearing below illustrates the five-year cumulative return to a
shareholder of PennRock Financial Services Corp. as compared to the
S&P 500 Index and to a peer group of ten other comparable banks and bank
holding companies, in each case weighted by market capitalization and
assuming an initial investment of $100.00 on December 31, 1994 and the
reinvestment of all dividends over the periods indicated.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG PENNROCK FINANCIAL SERVICES CORP.,
S & P 500 INDEX, AND PEER GROUP INDEX
<TABLE>
December 31, December 31, December 31, December 31, December 31, December 31,
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
PennRock $100.00 $ 71.34 $ 70.88 $ 88.94 $108.79 $ 84.01
S&P 500 $100.00 $137.45 $168.92 $225.21 $289.43 $350.26
Peer Group $100.00 $114.75 $129.37 $187.66 $237.93 $195.60
</TABLE>
PEER GROUP SPECIFICATIONS
1. Total assets of $369 million to $1.0 billion.
2. Market capitalization of at least $54 million.
3. Headquartered in Pennsylvania.
<TABLE>
Institution Headquarters
<S> <C>
ACNB Corporation Gettysburg
CNB Financial Corporation Clearfield
Citizens & Northern Corporation Wellsboro
Drovers Bancshares York
First West Chester Corporation West Chester
Franklin Financial Services Corporation Chambersburg
Hanover Bancorp, Inc. Hanover
Penseco Financial Services Corp. Scranton
PennRock Financial Services Corp. Blue Ball
Penns Woods Bancorp, Inc. Jersey Shore
Sterling Financial Corporation Lancaster
</TABLE>
Transactions with Directors and Executive Officers.
Some of the directors and executive officers of PennRock Financial
Services Corp. and Blue Ball National Bank and the companies with which
they are associated were customers of and had banking transactions with
Blue Ball National Bank in the ordinary course of the Bank's business
during 1999.
All loans and commitments to loan made to such persons and to the
companies with which they are associated were made on substantially the same
terms, including interest rates, collateral and repayment terms, as those
prevailing at the time for comparable transactions with other persons and
did not involve more than a normal risk of collectibility or present other
unfavorable features. It is anticipated that the Bank will enter into
similar transactions in the future.
As a matter of policy and as an employee benefit, Blue Ball National
Bank makes available home mortgage loans and other loans on a
nondiscriminatory basis to all employees at interest rates below those pre-
vailing for comparable transactions with other persons. The amount of these
loans is not considered material and it is anticipated that the Bank will
continue its present policy. Loans at preferential rates are not, however,
extended to any executive officer or director of PennRock Financial Services
Corp. or Blue Ball National Bank.
Robert K. Weaver, Secretary of PennRock Financial Services Corp., was a
partner in the law firm of Wentz, Weaver & Kling, LLP, New Holland,
Pennsylvania during 1999, although he has since resigned from that firm in
order to accept a position with a charitable organization. Wentz, Weaver &
Kling, LLP has for many years served as general counsel to PennRock
Financial Services Corp. and Blue Ball National Bank and is expected to
continue to do so in the future.
Compliance with Section 16(a) of the Exchange Act.
Section 16(a) of the Securities Exchange Act of 1934 requires that the
directors and certain officers of PennRock Financial Services Corp. file
with the Securities and Exchange Commission reports of ownership and changes
in ownership with respect to shares of PennRock Financial Services Corp.
common stock beneficially owned by them. Based solely upon its review of
copies of such reports furnished to it and written representations made by
its directors and those officers who are subject to such reporting
requirements, PennRock Financial Services Corp. believes that during the
calendar year ended December 31, 1999, all filing requirements applicable to
its directors and officers were complied with.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
For the year ended December 31, 1999, PennRock Financial Services Corp.
engaged Simon Lever and Co., independent certified public accountants, to
certify its financial statements and those of Blue Ball National Bank. It
is anticipated that Simon Lever and Co. will be similarly engaged in 2000.
Representatives of Simon Lever and Co. are expected to be present at the
shareholder meeting with the opportunity to make a statement if they desire
to do so and to be available to respond to appropriate questions.
ADDITIONAL INFORMATION
A copy of the Annual Report of PennRock Financial Services Corp. for
the year ended December 31, 1999 on Form 10-K as filed with the Securities
and Exchange Commission is available without charge to shareholders,
depositors and other interested persons upon request from Glenn H. Weaver,
President, PennRock Financial Services Corp., 1060 Main Street, P.O.
Box 580, Blue Ball, Pennsylvania 17506.
OTHER MATTERS
The Board of Directors of PennRock Financial Services Corp. knows of no
other matters other than those discussed in this Proxy Statement which will
be presented at the 2000 Annual Meeting. However, if any other matters are
properly brought before the meeting, any proxy given pursuant to this soli-
citation will be voted in accordance with the recommendations of the
management of PennRock Financial Services Corp.
BY ORDER OF THE BOARD OF
DIRECTORS
GLENN H. WEAVER
President
Blue Ball, Pennsylvania
March 31, 2000
APPENDIX
PENNROCK FINANCIAL SERVICES CORP.
PROXY ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 25, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Susan E. Ewell, Jean M. Good and
Edgar H. Martin, or any one of them, as proxies, with full power of
substitution, to vote as directed below all of the shares of PennRock
Financial Services Corp. common stock held of record on March 16, 2000, by
the undersigned and by the Plan Agent for the account of the undersigned
under the Dividend Reinvestment Plan, at the Annual Meeting of Shareholders
to be held on Tuesday, April 25, 2000, at 10:00 a.m. and at any adjournment
thereof, with all of the powers the undersigned would possess if personally
present.
1. ELECTION OF FOUR DIRECTORS FOR A TERM OF THREE YEARS
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
below (except as marked to vote for all
to the contrary below) nominees listed
below
Norman Hahn Robert L. Spotts Dale M. Weaver Melvin Pankuch
INSTRUCTION: To withhold authority to vote
for any individual nominee, strike a line
through the nominee's name.
It is important that your shares be represented at the meeting. Please
sign, date and return this proxy as promptly as possible, whether or not you
plan to attend the meeting. This proxy is revocable at any time before it
is exercised and may be withdrawn if you elect to attend the meeting and
wish to vote in person.
(To be signed on reverse side)
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR THE NOMINEES LISTED HEREIN.
This proxy also confers authority as to any other business which may be
brought before the meeting or any adjournment thereof. The Board of
Directors at present knows of no other business to be brought before the
meeting, but if any other business is presented at the meeting, the shares
represented by this proxy will be voted in accordance with the
recommendations of the management of PennRock Financial Services Corp.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement dated March 31, 2000 and hereby
revokes all proxies heretofore given.
Dated:___________________, 2000
_______________________________
Signature
_______________________________
Signature
IMPORTANT: Please sign exactly as
your name or names appear hereon.
Joint owners should each sign. If
you sign as agent or in any other
representative capacity, please
state the capacity in which you
sign.
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