<PAGE>
[LETTERHEAD]
90-92 Main Street
Wellsboro, Pennsylvania 16901
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY, APRIL 20, 1999
TO THE HOLDERS OF THE COMMON STOCK OF THE CORPORATION:
Notice is hereby given that the Annual Meeting of the holders of the common
stock of Citizens & Northern Corporation (the "Corporation") will be held at the
Wellsboro Office, located at 90-92 Main Street, Wellsboro, Pennsylvania, on
Tuesday, April 20, 1999, at 2:00 P.M., local time, for the following purposes:
1. To elect five directors to Class III to serve for a term of 3 years;
2. To approve and adopt the amendments to the Citizens & Northern
Corporation 1995 Stock Incentive Plan;
3. To ratify the action of the Board of Directors in the appointment of the
firm of Parente, Randolph, Orlando, Carey & Associates as independent
auditors of the Corporation; and
4. To transact such other business as may properly be brought before the
meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on March 8, 1999, are
entitled to notice of, and to vote at, the meeting. Such stockholders may vote
in person or by proxy.
ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED
PROXY IN THE ACCOMPANYING ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING. If you do attend the meeting, you may, if you wish, withdraw your proxy
and vote your shares in person.
By Order of the Board of Directors,
Kathleen M. Osgood
Corporate Secretary
March 22, 1999
<PAGE>
CITIZENS & NORTHERN CORPORATION
90-92 Main Street
Wellsboro, Pennsylvania 16901
PROXY STATEMENT
Annual Meeting of Stockholders -- April 20, 1999
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Citizens & Northern Corporation to be
used at the Annual Meeting of Stockholders of the Corporation to be held on
Tuesday, April 20, 1999, at 2:00 P.M. at the Wellsboro Office, located at 90-92
Main Street, Wellsboro, Pennsylvania, and at any adjournment thereof. The
approximate date upon which this Proxy Statement and proxy will first be mailed
to stockholders is March 22, 1999.
The Corporation's Board of Directors is soliciting proxies in
connection with the Meeting. Shares represented by properly completed proxies
will be voted in accordance with the instructions indicated thereon unless such
proxies have previously been revoked. If no direction is indicated, such shares
will be voted in favor of the election as directors of the nominees named below,
in favor of the approval and adoption of the amendments to the Corporation's
1995 Stock Incentive Plan, in favor of the ratification of the appointment of
the firm of Parente, Randolph, Orlando, Carey & Associates as the Corporation's
independent auditors, and in the discretion of the proxy holder as to any other
matters which may properly come before the Meeting or any adjournment thereof. A
proxy may be revoked at any time before it is voted by written notice to the
Secretary of the Corporation or by attending the Meeting and voting in person.
The Corporation will bear the entire cost of soliciting proxies for the
Meeting. In addition to the use of the mails, proxies may be solicited by
personal interview, telephone, and telegram by the Corporation's directors,
officers and employees. Arrangements may also be made with custodians, nominees
and fiduciaries for forwarding proxy material to beneficial owners of stock held
of record by such persons, and the Corporation may reimburse such custodians,
nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them
in connection therewith.
The Board of Directors has fixed the close of business on March 8,
1999, as the record date for the determination of stockholders entitled to
notice of and to vote at the Annual Meeting and at any adjournment thereof. On
the record date, there were outstanding and entitled to vote 5,153,629 shares of
Common Stock. Common stockholders will be entitled to one vote per share on all
matters to be submitted at the meeting. The Articles of Incorporation of the
Corporation do not permit cumulative voting.
No person is known by the Corporation to have beneficially owned 5% or
more of the outstanding common stock of the Corporation as of March 8, 1999.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Articles of Incorporation of the Corporation provide that the Board
of Directors shall consist of not less than five nor more than twenty-five
directors and that within these limits the numbers of directors shall be as
established by the Board of Directors. The Board of Directors has set the number
of directors at fifteen. The Articles further provide that the Board shall be
classified into three classes, as nearly equal in number as possible. One class
of directors is to be elected annually. Five directors to Class III are to be
elected at the Annual Meeting to serve for a three-year term. It is the
intention of the persons named as proxyholders on the enclosed form of proxy,
unless other directions are given, to vote all shares which they represent for
the election of management's nominees named in the tabulation below. Any
stockholder who wishes to withhold authority from the proxyholders to vote for
the election of directors, or to withhold authority to vote for any individual
nominee, may do so by marking the proxy to that effect. Each director elected
will continue in office until a successor has been elected. The Board of
Directors recommends a vote "FOR" the election of the nominees listed below,
each of which has consented to be named as a nominee and to serve if elected. If
for any reason any nominee named is not a candidate (which is not expected) when
the election occurs, proxies will be voted for a substitute nominee determined
by the Board of Directors.
1
<PAGE>
The following table sets forth certain information about the nominees,
all of whom except Mr. Beardslee, are presently members of the Board, and about
the other directors whose terms of office will continue after the Annual
Meeting. The number of shares of Corporation common stock beneficially owned,
directly or indirectly, is as of January 20, 1999.
<TABLE>
<CAPTION>
Shares Percent of
Name and Principal Occupation Age as of First Became Beneficially Common Stock
for Last Five Years Record Date Director (1) Owned (2) Outstanding
- ------------------- ----------- ------------ ---------- -----------
CLASS III - MANAGEMENT'S NOMINEES FOR A 3 YEAR TERM ENDING IN 2002:
<S> <C> <C> <C> <C>
Dennis F. Beardslee 48 1,655 .03
Owner, Terrace Lanes Bowling Center
J. Robert Bower 64 1967 34,108 (3) .66
Pharmacist
Karl W. Kroeck 59 1996 1,770 .03
Farmer
Craig G. Litchfield 51 1996 11,484 (4) .22
President & Chief Executive Officer
of Citizens & Northern Corporation
and Citizens & Northern Bank, formerly
Senior Vice President of Citizens &
Northern Corporation and Citizens &
Northern Bank
Lawrence F. Mase 64 1990 5,766 .11
Retired, formerly
President of Mase's, Inc.
CLASS I - CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2000:
R. Robert DeCamp 58 1988 1,227 .02
President of Patterson Lumber
Co., Inc.
Adelbert E. Eldridge 66 1989 5,626 (5) .11
Retired Regional Director of
Susquehanna Region of Pennsylvania
Electric Co.
Robert J. Murphy 66 1988 7,066 .14
Retired, formerly Attorney in law firm
of Davis, Murphy, Niemiec & Smith
Edward H. Owlett, III 44 1994 6,637 (6) .13
Attorney in law firm of
Owlett, Lewis & Ginn, P.C.
F. David Pennypacker 57 1993 3,698 .07
Certified Public Accountant in firm
of Pennypacker & Gooch, P.C.
CLASS II - CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2001:
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
R. Bruce Haner 51 1998 6,208 (7) .12
Inventory Control Manager,
Williams Auto Group, formerly
Owner of Haner's Auto Sales
Susan E. Hartley 41 1998 1,298 .03
Attorney at Law
Edward L. Learn 51 1989 1,660 .03
Owner, Learn Hardware & Building
Supply, formerly Manager of
Purina Mills, Inc.
Leonard Simpson 50 1989 16,631 (8) .32
Attorney at Law
Donald E. Treat 65 1966 11,764 .23
Retired, formerly Owner
of Treat Hardware
All Directors and Executive Officers
as a Group (20 persons) 149,676 2.90
</TABLE>
(1) Includes service as director of the Corporation's predecessor, Citizens
& Northern Bank.
(2) Pursuant to the General Rules and Regulations of the Securities and
Exchange Commission, an individual is considered to "beneficially own"
shares of common stock if he or she directly or indirectly has or shares
(a) the power to vote or direct the voting of the shares; or (b) investment
power with respect to the shares, which includes the power to dispose of or
direct the disposition of the shares. Unless otherwise indicated in a
footnote below, each individual holds sole voting and investment authority
with respect to the shares listed. In addition, an individual is deemed to
be the beneficial owner if he or she has the right to acquire shares within
60 days through the exercise of any option. Therefore, the following stock
options which are exercisable within 60 days after January 20, 1999 are
included: Mr. Bower, 400 shares; Mr. DeCamp, 200 shares; Mr. Eldridge, 400
shares; Mr. Haner, 200 shares; Ms. Hartley, 200 shares; Mr. Kroeck, 400
shares; Mr. Learn, 400 shares; Mr. Litchfield, 2,450 shares; Mr. Mase, 400
shares; Mr. Murphy, 400 shares; Mr. Owlett, 400 shares; Mr. Pennypacker,
400 shares; Mr. Simpson, 400 shares; and Mr. Treat, 400 shares. Each
individual has furnished this information.
(3) Mr. Bower disclaims beneficial ownership of 10,788 shares included above
that are held individually by his wife. Includes 1,040 shares held in an
IRA for the benefit of Mr. Bower.
(4) Mr. Litchfield disclaims beneficial ownership of 1,259 shares held
individually by his wife and a total of 773 shares included above that are
held with his daughters.
(5) Includes 3,151 shares held in a self-directed IRA for the benefit of Mr.
Eldridge.
(6) Mr. Owlett disclaims beneficial ownership of a total of 5,078 shares
included above that are held for his nephews and niece.
(7) Mr. Haner disclaims beneficial ownership of a total of 562 shares included
above that are held for and by his children.
(8) Mr. Simpson disclaims beneficial ownership of 101 shares included above
that are held individually by his daughter. Includes 1,612 shares held in
an SEP-IRA Plan for the benefit of Mr. Simpson's retirement plan.
3
<PAGE>
No person named above as a nominee or director has any family
relationship with any other person so named.
4
<PAGE>
BOARD OF DIRECTOR COMMITTEES,
ATTENDANCE AT MEETINGS AND COMPENSATION OF DIRECTORS
Both the Corporation's and the Bank's by-laws provide that the Board
may create any number of committees of the Board as it deems necessary or
appropriate from time to time. As of the date hereof, no Board committees of the
Corporation have been established.
The Bank has an Audit Committee consisting of nine non-employee members
of the Board of Directors. The members of the Committee are Adelbert E.
Eldridge, R. Bruce Haner, Karl W. Kroeck, Edward L. Learn, Lawrence F. Mase,
Robert J. Murphy, Edward H. Owlett, III, F. David Pennypacker and Donald E.
Treat. The primary function of the Audit Committee is to review the internal
audit program as performed by the internal auditors, recommend to the Board of
Directors the independent auditors for the year, and review the examinations and
reports from those persons. The Audit Committee held four meetings in 1998.
The Bank has an Executive Committee consisting of eight members of the
Board of Directors who are as follows: R. Robert DeCamp, Adelbert E. Eldridge,
William K. Francis, Craig G. Litchfield, Robert J. Murphy, Edward H. Owlett,
III, F. David Pennypacker and Leonard Simpson. The function of this committee is
to recommend policy procedures. During 1998, the Executive Committee held six
meetings. The Executive Committee also functions as a nominating committee and
an investment committee.
The Compensation Committee of the Bank, which held four meetings in
1998, consisted of the following six non-employee members of the Board of
Directors: R. Robert DeCamp, Adelbert E. Eldridge, Robert J. Murphy, Edward H.
Owlett, III, F. David Pennypacker and Leonard Simpson. The committee is charged
with reviewing compensation for all officers and employees of the Bank and
administering the retirement and benefit plans.
The Trust Investment Committee of the Bank, which met four times in
1998, consists of four members of the Board of Directors; namely, J. Robert
Bower, Susan E. Hartley, Edward L. Learn and Leonard Simpson. Thomas L. Briggs,
Executive Vice President and Senior Trust Officer of the Bank, is also a member
of this committee, which determines the policy and investments of the Trust
Department, the acceptance of all fiduciary relationships and relinquishments of
all fiduciary relationships. The committee keeps minutes of their quarterly
meetings, which are reviewed by the Board of Directors.
The Bank also has an Asset Liability Committee, which consisted of R.
Robert DeCamp, William K. Francis, Craig G. Litchfield, Robert J. Murphy and F.
David Pennypacker, five members of the Board of Directors, as well as James W.
Seipler, Treasurer of the Corporation. This committee met twelve times during
1998. The purpose of the committee is to stabilize and improve profitability by
balancing the relationship between risk and return over an extended period of
time.
The Board of Directors of the Corporation met twelve times and the
Board of Directors of the Bank met fourteen times in 1998. All of the directors
attended at least 75% or more of the combined number of meetings of the
Corporation, Bank and their committees of which they were members.
All directors of the Corporation are directors of the Bank. Each
director who is not an officer of the Corporation or Bank received an annual
retainer of $10,000 and an attendance fee of $100 for each meeting of the Board
attended. In addition, each such director received a fee of $100 for attendance
at each committee meeting. Members of the Trust Investment Committee also
receive an annual retainer of $800. The aggregate amount of directors' retainers
and fees paid during 1998 was $193,700.
5
<PAGE>
CORPORATION'S AND BANK'S EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
current executive officers of the Corporation and the Bank.
<TABLE>
<CAPTION>
Shares Percent of
Age as of Beneficially Common Stock
Name and Position for Last Five Years Record Date Owned (1) Outstanding
- ------------------------------------- ------------ ---------- -----------
<S> <C> <C> <C>
Craig G. Litchfield 51 11,484 (2) .22
President and C.E.O.of the Corporation and the
Bank since January, 1997; President of the
Corporation and Bank since 1996; formerly
Senior Vice President of the Corporation and the
Bank
Robert W. Anderson 60 8,849 (3) .17
Executive Vice President of Management
Information System since April, 1997; formerly
Vice President, Data Processing, of the Bank
Thomas L. Briggs 48 6,705 (4) .13
Executive Vice President and Senior Trust
Officer since April, 1997; formerly Vice President
and Trust Officer of the Bank
Brian L. Canfield 47 5,236 (5) .10
Executive Vice President and Branch System
Administrator since April, 1997; formerly Vice
President of the Bank
Matthew P. Prosseda 37 1,969 (6) .04
Executive Vice President and Commercial Loan
Coordinator since April, 1997; formerly Vice
President of the Bank
James W. Seipler 57 11,974 (7) .23
Treasurer of the Corporation since 1987;
Executive Vice President and Treasurer of the Bank
since April, 1997; formerly
Controller and Cashier of the Bank
</TABLE>
(1) Number of shares of Corporation common stock beneficially owned, directly
or indirectly, as of January 20, 1999. Unless otherwise indicated in a
footnote below, each individual holds sole voting and investment authority
with respect to the shares listed. Each individual has furnished this
information.
(2) Mr. Litchfield disclaims beneficial ownership of 1,259 shares held
individually by his wife and a total of 773 shares included above that are
held with his daughters. Includes 2,450 shares which may be acquired upon
the exercise of stock options within 60 days.
(3) Mr. Anderson disclaims beneficial ownership of a total of 90 shares
included above that are held for his children and granddaughter. Includes
2,100 shares which may be acquired upon the exercise of stock options
within 60 days.
6
<PAGE>
(4) Mr. Briggs disclaims beneficial ownership of 460 shares held individually
by his wife, 231 shares held with his mother and a total of 762 shares
included above that are held for his children. Includes 1,100 shares which
may be acquired upon the exercise of stock options within 60 days.
(5) Mr. Canfield disclaims beneficial ownership of a total of 665 shares
included above that are held for his children. Includes 1,300 shares which
may be acquired upon the exercise of stock options within 60 days.
(6) Includes 1,120 shares which may be acquired upon the exercise of stock
options within 60 days.
(7) Mr. Seipler disclaims beneficial ownership of 580 shares included above
that are held jointly with his sons. Includes 2,100 shares which may be
acquired upon the exercise of stock options within 60 days.
None of the above executive officers has any family relationship with
any other executive officer or with any director of the Corporation.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee ("Committee") of the Board of Directors
establishes compensation policies, plans and programs which are intended to
accomplish three objectives: to attract and retain highly capable and well
qualified executives; to focus executives' efforts on increasing long-term
stockholder value; and to reward executives at levels which are competitive with
the marketplace for similar positions and commensurate with the performance of
each executive and of Citizens & Northern. Each member of the Committee is an
independent non-employee director. The Committee establishes the salaries of the
other executive officers with input from the Chief Executive Officer and all
decisions relating to the compensation of the executive officers are reviewed by
the Board of Directors.
The key elements in Citizens & Northern's executive compensation
program, all determined by individual and corporate performance, are base salary
compensation, annual cash bonus incentive compensation, long-term incentive
compensation, and equitable retirement benefits.
Annual compensation for the Chief Executive Officer is determined in
essentially the same way as for other executives, recognizing that the CEO has
overall responsibility for the performance of Citizens & Northern. The Committee
believes that the CEO compensation should be heavily influenced by the
performance of the Corporation. The Committee established the CEO's base salary
by considering the salaries of CEOs of comparably-sized banks and their
performance according to salary information compiled by both regional and
national benefit and salary surveys.
In establishing his base salary, the Committee reached the following
conclusions regarding company performance: Survey comparison of Citizens &
Northern established a survey Peer Group of 36 independent banks whose 1997
average asset size equaled C&N's, and further narrowed their Peer Group to a
Core Group of 19 banks with an ROA of 1.25% or higher. Citizens & Northern's net
income was 32% higher than the average of the Peer Group. C&N's return on assets
for 1997 was 1.66%, 26% better than the Peer Group average and 9% better than a
Core Group average of high-performing banks. Mr. Litchfield's 1998 base salary
of $220,000 is 5% below CEO's who receive the same compensation package;
however, his total compensation with bonus and incentives falls to 87% of par
behind Core Group CEOs. In 1997, the Committee established the Chief Executive
Officer's 1998 base salary at $220,000, representing a 7% increase over 1997.
The annual compensation of the Chief Executive Officer and executive
officers is reviewed annually by the Committee, except for decisions about
awards under the Incentive Award Plan. These awards are made solely by the
attainment of specific measurable performance indicators, which are return on
assets, performance to budget, deposit growth and past-due reduction. If the
target is met, awards are calculated for each participant based upon the level
of corporate performance relative to the target. C&N's Incentive Award Plan caps
the award at 25% of base compensation, while the Peer Group awarded cash bonuses
to CEOs averaging 36%.
7
<PAGE>
The Corporation approved a non-qualified Supplemental Income Plan
effective January 1, 1989. It was designed for the purpose of retaining talented
executives and to promote in these executives a strong interest in the
long-term, successful operation of the Corporation. The Plan supplements the
lower retirement benefits of executives in comparison with average total
retirement benefits paid non-executives. The Plan is an unfunded plan and is
subject to the general creditors of the Corporation.
The Corporation approved a Stock Incentive Plan effective January 1,
1996. The Stock Incentive Plan is designed to advance the development, growth
and financial condition of the Corporation while attracting, retaining and
rewarding executives.
The Committee believes that the concepts discussed above further the
stockholders' interests since a significant part of executive compensation is
based on obtaining results for the stockholders. The Committee bases its review
on experience of its own members, on information requested from management and
information compiled by various independent compensation consultants. The
Committee believes that the program encourages responsible management of the
Corporation.
Members of the Compensation Committee,
R. Robert DeCamp, Chairman Robert J. Murphy F. David Pennypacker
Adelbert E. Eldridge Edward H. Owlett, III Leonard Simpson
EXECUTIVE COMPENSATION
The following table contains information with respect to annual
compensation for services in all capacities to the Corporation and Bank for the
fiscal years ending December 31, 1998, 1997 and 1996 of those persons who were,
at December 31, 1998, (i) the Chief Executive Officer and (ii) the four (4)
other most highly compensated executives to the extent such persons' total
salary and bonus exceeded $100,000:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Annual Restricted Options/ Other
Compen- Stock SARs LTIP Compen-
Name and Salary(l) Bonus sation(2) Awards Awards Payouts sation(3)
Principal Position Year ($) ($) ($) (#) (#) ($) ($)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CRAIG G. LITCHFIELD 1998 220,000 55,000 X 0 4,000 0 21,270
President and CEO 1997 205,000 51,250 X 0 3,500 0 17,670
1996 175,673 43,918 X 0 2,500 0 14,468
ROBERT W. ANDERSON 1998 132,500 33,125 X 0 2,000 0 27,742
Executive Vice President 1997 125,000 31,250 X 0 2,000 0 24,765
Management Information 1996 110,850 27,500 X 0 1,700 0 21,218
System
JAMES W. SEIPLER 1998 132,500 33,125 X 0 2,000 0 23,595
Executive Vice President 1997 125,000 31,250 X 0 2,000 0 21,640
and Treasurer 1996 110,597 27,500 X 0 1,700 0 18,886
BRIAN L. CANFIELD 1998 95,000 23,750 X 0 1,500 0
12,095
Executive Vice President 1997 90,000 22,500 X 0 1,500 0 10,733
and Branch System
Administrator
MATTHEW P. PROSSEDA 1998 95,000 23,750 X 0 1,500 0 11,100
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Executive Vice President 1997 90,000 22,500 X 0 1,500 0 10,659
and Commercial Loan
Coordinator
</TABLE>
(1) The amounts shown in this column represent annual base salary.
(2) The Bank provides automobiles and certain other benefits for certain of its
principal officers in connection with the business of the Bank. The value
of personal benefits to the officers individually is not included in the
table above because the aggregate amount of such other compensation is less
than 10% of the cash compensation paid to the individual as reported above.
(3) The amount indicated includes the Bank's contribution to the Savings &
Retirement Plan (401k) and the Non-Qualified Supplemental Executive
Retirement Plan.
STOCK INCENTIVE PLAN
In 1995, the Corporation's Board of Directors adopted and the
stockholders approved the Citizens & Northern Corporation Stock Incentive Plan.
The purpose of the Plan is to advance the development, growth and financial
condition of the Corporation by providing incentives through participation in
the appreciation of the capital stock in order to secure, retain and motivate
personnel responsible for the operation and management of the Corporation and
its subsidiaries. On December 17, 1998 ("Grant Date"), the Board of Directors
granted qualified stock options for key officers of the Bank, the right to
purchase shares of the Corporation Common Stock at a price of $36.375. The
period of the options shall be ten (10) years, commencing from the date of the
grant. Not more than twenty percent (20%) of the shares optioned may be
exercised in any one year during the term of the option, commencing with the
Grant Date. The Option shall not be exercisable until one year from the date of
the grant. Shares granted under option in 1998, 1997, and 1996 were 17,700,
15,000, and 11,000, respectively. At December 31, 1998, there were 4,900 shares
reserved for future grants.
OPTION / SAR GRANTS
The following table sets forth information concerning stock options
granted in 1998 under the Stock Incentive Plan to the Chief Executive Officer
and the four most highly compensated executives of the Corporation named in the
Summary Compensation Table:
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f)
% of Total
Number of Options/
Securities SARs Granted Exercise Grant
Underlying to Employees or Base Date
Options/SARs in Fiscal Price Expiration Present
Name Granted Year ($/Share) Date Value ($)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Craig G. Litchfield 4,000 22.60% $36.375 12/17/2008 $145,500
Robert W. Anderson 2,000 11.30% $36.375 12/17/2008 $ 72,750
James W. Seipler 2,000 11.30% $36.375 12/17/2008 $ 72,750
Brian L. Canfield 1,500 8.47% $36.375 12/17/2008 $ 54,563
Matthew P. Prosseda 1,500 8.47% $36.375 12/17/2008 $ 54,563
</TABLE>
AGGREGATED STOCK OPTION EXERCISED DURING 1998
9
<PAGE>
AND YEAR-END OPTION VALUES
The following table sets forth information concerning the exercise
during 1998 of options granted under the Stock Incentive Plan by five of the
most highly compensated executives of the Corporation named in the Summary
Compensation Table:
10
<PAGE>
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number Number of Securities
of Value Underlying Unexercised Value of Unexercised
Shares Realized Options at In-the-Money Options on
Acquired on Shares December 31, 1998 December 31, 1998 (2)
Name On Exercise Acquired (1) Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Craig G. Litchfield 250 $4,200.00 2,450 9,300 $26,875.00 $47,250.00
Robert W. Anderson 0 0 2,100 5,300 $26,660.00 $30,540.00
James W. Seipler 0 0 2,100 5,300 $26,660.00
$30,540.00
Brian L. Canfield 0 0 1,300 3,700 $15,925.00
$19,137.50
Matthew P. Prosseda 0 0 1,120 3,580 $12,865.00 $17,097.50
</TABLE>
(1) Represents the difference between the market value on the date of exercise
of the shares acquired and the option price of those shares.
(2) Represents the difference between the aggregate market value at December
31, 1998 of the shares subject to the options and the aggregate option
price of those shares.
PERFORMANCE GRAPH
Set forth below is a chart comparing the Corporation's cumulative
return to stockholders against the cumulative return of the S&P 500 Index and a
Peer Group Index of similar banking organizations selected by the Corporation
for the five year period commencing January 1, 1994 and ending December 31,
1998. The index values are market-weighted dividend-reinvestment numbers which
measure the total return for investing $100.00 five years ago. This meets SEC
requirements for showing dividend reinvestment share performance over a five
year period and measures the return to an investor for placing $100.00 into a
group of bank stocks and reinvesting any and all dividends into the purchase of
more of the same stock for which dividends were paid.
COMPARISON OF 5 YEAR CUMULATIVE RETURN
[GRAPH]
PERIOD ENDING
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1/1/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
C&N $ 100.00 $ 110.88 $ 127.52 $ 163.23 $ 228.80 $ 254.80
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Peer Group $ 100.00 $ 116.48 $ 125.76 $ 138.88 $ 198.18 $ 262.19
S&P 500 Index $ 100.00 $ 99.26 $ 139.31 $ 171.21 $ 228.26 $ 293.36
</TABLE>
All ten institutions in the peer group selected by the Corporation are
headquartered in Pennsylvania, have total assets of $300 to $900 Million, market
capitalization of at least $25 Million, and are not listed on the NASDAQ
National Market System. This peer group consists of ACNB Corporation,
Gettysburg; CNB Financial Corporation, Clearfield; Drovers Bancshares
Corporation, York; First West Chester Corporation, West Chester; Franklin
Financial Service Corporation, Chambersburg; Hanover Bancorp, Inc., Hanover;
Penseco Financial Services Corporation, Scranton; Penn Rock Financial Services
Corporation, Blue Ball; Penns Woods Bancorp, Inc., Jersey Shore; and Sterling
Financial Corporation, Lancaster. This is the same peer group that was used in
1998.
PENSION PLAN
The Citizens & Northern Bank Pension Plan (the "Plan") is intended to
provide a defined retirement benefit to participants without regard to the
profits of the Bank. Employees are neither required nor permitted to contribute
to the Plan. Annual contributions by the Bank are determined actuarially. To
participate in the Plan, an employee must be 21 years of age and have completed
one year of service. A participant's retirement benefit, which becomes fully
vested after 5 years of service, is based on compensation and credited service
with the Bank. For purposes of determining a retirement benefit, the term
"compensation" is defined to include an employee's total remuneration received
from the Bank, including base salary, bonus and overtime. Benefits are a
percentage of the average compensation for the five consecutive years of highest
compensation preceding retirement, multiplied by the number of years of
completed service, up to 25 years. The Bank's Trust and Financial Services
Department serves as Trustee under the Plan.
The following table indicates, for purposes of illustration, the
approximate amounts of annual retirement income which would be payable under the
terms of the Plan, in the form of a straight life annuity, to a participant who
retired as of December 31, 1998, at age 65, under various assumptions as to
compensation and years of credited service. For any plan year beginning after
December 31, 1993, the Pension Plan benefits are determined on only the first
$160,000, as indexed, in compensation as determined by the Commissioner of the
Internal Revenue Service and as prescribed by law.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
Years of Credited Service
Average Annual Compensation 15 20 25 (or more)
---------------------------- ---------------------------------------------------------
<S> <C> <C> <C>
$ 75,000 $14,403 $19,203 $24,004
$100,000 $20,215 $26,953 $33,692
$125,000 $26,028 $34,703 $43,379
$160,000 $34,165 $45,553 $56,942
$175,000 $34,165 $45,553 $56,942
$200,000 $34,165 $45,553 $56,942
$225,000 $34,165 $45,553 $56,942
$250,000 $34,165 $45,553 $56,942
</TABLE>
The credited years of service under the Plan as of December 31, 1998
for Litchfield, Anderson, Seipler, Canfield and Prosseda were 26, 27, 33, 21 and
5 years, respectively.
In December 1989, the Bank established a non-qualified supplemental
executive retirement plan for certain key executive employees ("Executive
Plan"). The Executive Plan provides a retirement benefit for executives who
retire after attaining age 62 and 5 years of plan service in an amount
determined annually by the Directors. The Board of Directors may terminate the
Executive Plan at any time. In 1998, the amounts accrued pursuant to the
Executive Plan for the accounts of the officers named in the Summary
Compensation Table set forth herein, is included as "All Other Compensation".
Future estimated benefits do not take compensation into consideration.
12
<PAGE>
SAVINGS PLAN
The Citizens & Northern Savings and Retirement Plan ("Savings Plan") is
qualified under Section 401(k) of the Internal Revenue Code. It allows a
participant to authorize the deposit into the Plan of before tax earnings of
from 1% to 15% of his compensation. Under the Tax Reform Act, the maximum amount
of elective contributions that could be made by a participant during 1998 was
Ten Thousand Dollars ($10,000.00), also subject to a $160,000 compensation
limit. All officers and employees of Citizens & Northern Bank, including the
officers named in the Summary Compensation Table set forth herein, are eligible
to participate in the 401(k) Plan. A participant may also make voluntary
contributions to the Plan from after tax savings of up to 10% of his
compensation. The Bank is required to contribute a basic employer contribution
equal to at least 2% of each eligible participant's compensation; in addition,
the Bank may make a discretionary basic contribution. The total actual basic
employer contribution for 1998 was equal to 4%. In addition, the Bank makes
matching contributions equal to 100% of a participant's before tax contributions
up to 3% of compensation and equal to 50% of such contributions between 3% and
5% of compensation. The Bank's basic employer contributions are invested in the
common stock of the Corporation. All participants' contributions and the Bank's
matching contributions, at the participants' election, are invested in a choice
of nine investment funds maintained by the Bank as Trustee. In 1998, the Bank's
contribution to the Savings Plan for the accounts of the officers named in the
Summary Compensation Table set forth herein is included as "All Other
Compensation". Substantially all officers and employees of the Bank are eligible
to participate in the Savings Plan.
INCENTIVE AWARD PLAN
The Board of Directors of the Bank has adopted an Incentive Award Plan
for certain members of the management group of the Bank in order to promote a
superior level of performance relating the Bank's financial goals and to attract
and retain competent management. Under the Incentive Award Plan, if
predetermined performance goals are realized by the Bank in a given fiscal year,
the participants will receive awards ranging up to a maximum of 25% of their
base salaries (i.e., salary before reduction for the Savings Plan and without
regard to incentive award payments).
Under the Incentive Award Plan, immediately before the beginning of
each year the Compensation Committee of the Board of Directors of the Bank will
designate the participants in the Plan and set a minimum and maximum level of
awards for each class of participants and the individual performance and
financial goals of the Bank or appropriate unit to be achieved. The Compensation
Committee, at its discretion, may adjust award payments under the Incentive
Award Plan based on extraordinary circumstances, conflicts with long-term
financial and development objectives, or below standard individual participant
performance. All awards under the Incentive Award Plan will be paid in cash and
are paid as soon as practical after the end of a plan year.
CERTAIN TRANSACTIONS
Certain directors and officers of the Corporation and Bank and their
associates (including corporations of which such persons are officers or 10%
beneficial owners) were customers of, and had transactions with the Bank in the
ordinary course of business during the year ended December 31, 1998. Similar
transactions may be expected to take place in the future. Such transactions
included the purchase of certificates of deposit and extensions of credit in the
ordinary course of business on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other persons and did not involve more than the normal risks
of collectibility or present other unfavorable features. The Bank expects that
any other transactions with directors and officers and their associates in the
future will be conducted on the same basis.
The law firm of Owlett, Lewis & Ginn, P.C., of which Director Owlett is
an employee and in which he has an interest, acts as legal counsel for the
Corporation and the Bank.
13
<PAGE>
PROPOSAL 2 - APPROVAL AND ADOPTION OF THE AMENDMENTS TO THE CITIZENS & NORTHERN
CORPORATION 1995 STOCK INCENTIVE PLAN
On December 17, 1998, the Board of Directors of the Corporation adopted
certain amendments to the Citizens & Northern Corporation 1995 Stock Incentive
Plan (the "Stock Incentive Plan"). The Stock Incentive Plan was originally
adopted by the Board of Directors on January 19, 1995 and approved by the
stockholders on April 18, 1995.
The purpose of the Stock Incentive Plan is to advance the development,
growth and financial condition of Citizens & Northern Corporation and each
subsidiary thereof as defined in Section 424 of the Internal Revenue Code of
1986, as amended, by providing incentives through participation in the
appreciation of the capital stock of the Corporation so as to secure, retain and
motivate personnel who may be responsible for the operation and management of
the affairs of the Corporation and any such subsidiary now or hereafter
existing.
As adopted, the Stock Incentive Plan authorized the granting of certain
options to employees of the Corporation and each subsidiary of the Corporation,
including but not limited to Citizens & Northern Bank. The maximum number of
shares of the Common Stock issuable under the Stock Incentive Plan was fixed at
Sixty Thousand (60,000) shares.
The Board of Directors directed and ordered that the amendments to the
Stock Incentive Plan be submitted to the stockholders of the Corporation for
their approval and adoption at the 1999 Annual Meeting of Stockholders to be
held on April 20, 1999. The following is a brief summary of the amendments
adopted by the Board of Directors on December 17, 1998. A copy of the full text
of the First Amendment to the Citizens & Northern Corporation 1995 Stock
Incentive Plan is attached as Exhibit A to this Proxy Statement.
a. Increase in the number of shares issuable under the Stock
Incentive Plan from Sixty Thousand (60,000) shares to One Hundred
Eighty Thousand (180,000) shares.
b. Renaming the Salary and Pension Committee to the "Compensation
Committee".
c. Inclusion of a change that a member of the Compensation Committee
shall be a "disinterested person" within the meaning of Rule 16b-3
promulgated under the Securities Exchange Act of 1934.
d. The addition of a provision that where a stock split, reverse
split, payment of stock dividend or other change in the capital
structure of the Corporation, and where such change increases the
number of issued and outstanding shares of stock by 5% or more,
the Committee shall proportionately adjust the outstanding Awards.
These amendments are being submitted to the stockholders of the
Corporation for their approval. The grant of certain options as described in
this Proxy Statement is subject to original terms and conditions of the Stock
Incentive Plan. Thus, the grant of these options is not subject to approval of
the proposed amendments to the Stock Incentive Plan by stockholders of the
Corporation.
The Board of Directors recommends a vote "FOR" the Proposal to approve
and adopt the amendments to the Citizens & Northern Corporation 1995 Stock
Incentive Plan.
PROPOSAL 3 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Parente, Randolph, Orlando, Carey & Associates has been the independent
public accounting firm appointed by the Bank since 1981, and has been selected
by the Board as the independent public accounting firm for the Corporation and
the Bank for 1999. No member of the firm or any of its associates has a
financial interest in the Corporation. Parente,
14
<PAGE>
Randolph, Orlando, Carey & Associates provides, in addition to audit services,
non-audit professional services such as preparation of income tax returns,
consultations, and various other services. Non-audit services are considered to
have no effect on the independence of accountants. A representative of Parente,
Randolph, Orlando, Carey & Associates is expected to be present at the Annual
Meeting to answer appropriate questions from stockholders and will be afforded
an opportunity to make any statement that the firm desires.
The Board of Directors recommends a vote "FOR" ratification of the
appointment of Parente, Randolph, Orlando, Carey & Associates as independent
auditors of the Corporation.
STOCKHOLDER PROPOSALS
Any proposal intended to be presented by a stockholder of the
Corporation at the Corporation's 2000 Annual Meeting must be received by the
Corporation no later than December 18, 1999 to be considered for inclusion in
the Corporation's proxy statement for such meeting. Any proposal should be
addressed to the Secretary of the Corporation, 90-92 Main Street, P.O. Box 58,
Wellsboro, Pennsylvania 16901.
OTHER MATTERS
The management of the Corporation does not intend to bring any other
matters before the Annual Meeting and is not presently informed of any other
business which others may bring before such meeting. However, if any other
matters should properly come before such meeting or any adjournment thereof, it
is the intention of the persons named in the accompanying proxy to vote on such
matters as they, in their discretion, determine.
ADDITIONAL INFORMATION
The Corporation's Annual Report for the year 1998, including financial
statements as certified by Parente, Randolph, Orlando, Carey & Associates, was
mailed with this Proxy Statement on or about March 22, 1999, to the stockholders
of record as of the close of business on March 8, 1999.
A COPY OF THE CORPORATION'S 1998 ANNUAL REPORT ON FORM 10-K FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES THERETO, WILL BE FURNISHED FREE OF CHARGE TO STOCKHOLDERS. WRITTEN
REQUEST SHOULD BE DIRECTED TO THE TREASURER, CITIZENS & NORTHERN CORPORATION,
90-92 MAIN STREET, WELLSBORO, PA, 16901, OR BY PHONE AT 570-724-3411.
By Order of the Board of Directors,
Kathleen M. Osgood
Corporate Secretary
Dated: March 22, 1999
15
<PAGE>
EXHIBIT A
FIRST AMENDMENT TO THE
CITIZENS & NORTHERN CORPORATION
1995 STOCK INCENTIVE PLAN
1. Purpose.
The purpose of this First Amendment to the Citizens & Northern
Corporation 1995 Stock Incentive Plan (the "Amendment") is to adopt certain
changes to the Plan resulting from changes recommended by the Compensation
Committee formerly known as the Salary and Pension Committee. All terms,
conditions and provisions of the Plan unless specifically modified herein are
valid and enforceable.
3. Stock.
The shares of stock that may be issued under the Plan shall
not exceed in the aggregate 180,000 shares of the Corporation's
common stock, par value $1.00 per share (the "Stock"), as may be
adjusted pursuant to paragraph 18 hereof. Such shares of Stock may
be either authorized and unissued shares of Stock, or authorized
shares of Stock issued by the Corporation and subsequently
reacquired by it as treasury stock. Under no circumstances shall
any fractional shares of Stock be issued or sold under the Plan or
any Award. Except as may be otherwise provided in the Plan, any
Stock subject to an Award that for any reason lapses or terminates
prior to its exercise as to such Stock shall become and again be
available under the Plan. The Corporation shall reserve and keep
available, and shall duly apply for any requisite governmental
authority to issue or sell the number of shares of Stock needed to
satisfy the requirements of the Plan while in effect. The
Corporation's failure to obtain any such governmental authority
deemed necessary by the Corporation's legal counsel for the lawful
issuance and sale of Stock under the Plan shall relieve the
Corporation of any duty, or liability for the failure to issue or
sell such Stock as to which such authority has not been obtained.
4. Administration.
The Plan shall be administered by the Compensation Committee
(the "Committee") consisting of not fewer than two (2)
non-employee directors from the Board serving for such terms as
determined, selected and appointed by the Board. To serve on the
Committee, a person must be a director of the Corporation and a
"disinterested person" within the meaning of Rule 16b-3
promulgated under the Securities Exchange Act of 1934 (15 USC
ss.78a et seq.). A majority of the Committee's membership shall
constitute a quorum for the transaction of all business of the
Committee, and all decisions and actions taken by the Committee
shall be determined by a majority of the members of the Committee
attending a meeting at which a quorum of the Committee is present.
The Committee shall be responsible for the management and
operation of the Plan and, subject to its provisions, shall have
full, absolute and final power and authority, exercisable in its
sole discretion: to interpret and construe the provisions of the
Plan, adopt, revise and rescind rules and regulations relating to
the Plan and its administration, and decide all questions of fact
arising in the application thereof; to determine what, to whom,
when and under what facts and circumstances Awards shall be made,
and the form, number, terms, conditions and duration thereof,
including but not limited to when exercisable, the number of
shares of Stock subject thereto, and Stock option purchase prices;
to adopt, revise and rescind procedural rules for the transaction
of the Committee's business, subject to any directives of the
Board not inconsistent with the provisions or intent of the Plan
or applicable provisions of law; and to make all other
determinations and decisions, take all actions and do all things
necessary or appropriate in and for the administration of the
Plan. The Committee's determinations, decisions and actions under
the Plan, including but not limited to those described above, need
not be uniform or consistent, but may be different and selectively
made and applied, even in similar circumstances and among
similarly situated persons. Unless contrary to the provisions of
the Plan, all decisions, determinations and actions made or taken
by the Committee shall be final and binding upon the Corporation
and all interested persons, and their heirs, personal and legal
representatives,
16
<PAGE>
successors, assigns and beneficiaries. No member of the Committee
or of the Board shall be liable for any decision, determination
or action made or taken in good faith by such person under or with
respect to the Plan or its administration.
18. Adjustments.
In the event of any change in the number of issued and outstanding
shares of Stock which results from a stock split, reverse stock split,
payment of a stock dividend or any other change in the capital
structure of the Corporation, and where such change increases the
number of issued and outstanding Stock by more than five percent (5%),
the Committee shall proportionately adjust the maximum number of shares
subject to each outstanding Award, and (where appropriate) the purchase
price per share thereof (but not the total purchase price under the
Award), so that upon exercise or realization of such Award, the
Recipient shall receive the same number of shares he or she would have
received had he or she been the holder of all shares subject to his or
her outstanding Award and immediately before the effective date of such
change in the number of issued and outstanding shares of Stock. Such
adjustments shall not, however, result in the issuance of fractional
shares. Any adjustment under this paragraph 18 shall be made by the
Committee, subject to approval by the Board. No adjustments shall be
made that would cause a Qualified Option to fail to continue to qualify
as an incentive stock option within the meaning of Section 422 of the
Code.
In the event the Corporation is the party to any merger,
consolidation or other reorganization, any and all outstanding Awards
shall apply and relate to the securities to which a holder of Stock is
entitled after such merger, consolidation or other reorganization. Upon
any liquidation or dissolution of the Corporation, any and all
outstanding Awards shall terminate upon consummation of such
liquidation or dissolution, but prior to such consummation shall be
exercisable to the extent that the same otherwise are exercisable under
the Plan.
17
<PAGE>
[LETTERHEAD]
90-92 Main Street, P. O. Box 58, Wellsboro, PA 16901
Phone: (570) 724-3411 Fax: (570) 723-8097
Stock Symbol: CZNC
E-Mail: [email protected]
Dear Stockholder:
In addition to the Notice and Proxy Statement for the Annual Meeting
and our 1998 Annual Report, enclosed is a new shareholder brochure containing
information that may be of interest to you, including a full description of our
Dividend Reinvestment Service. The brochure includes an authorization card if
you would like to take advantage of this reinvestment service. If you are
currently receiving your dividends by check, you can also use the card to elect
direct deposit of dividends to your C&N checking, money market or key savings
account.
It is not necessary for you to return the authorization card included
with the brochure if you are already taking advantage of our Dividend
Reinvestment Plan or direct deposit service.
Effective after April 20, 1999, we will once again accept optional cash
payments through the Dividend Reinvestment program. Further information
concerning these optional cash payments will be included with your first quarter
dividend.
Please feel free to contact us if you have any questions or comments.
Sincerely,
CITIZENS & NORTHERN CORPORATION
FOLD AND DETACH HERE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
CITIZENS & NORTHERN CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 20, 1999
The undersigned hereby appoints R. Robert DeCamp and Edward L. Learn, and each
or either of them, as the attorneys and proxies of the undersigned, with full
power of substitution in each, to vote all shares of the common stock of
Citizens & Northern Corporation which the undersigned would be entitled to vote
if personally present at the Annual Meeting of Shareholders to be held on
Tuesday, April 20, 1999 at 2:00 P.M. (local time), at the Wellsboro office,
90-92 Main Street, Wellsboro, Pennsylvania 16901, and at any adjournments
thereof, and to vote as follows:
1. ELECTION OF CLASS III DIRECTORS.
Nominees: Dennis F. Beardslee, J. Robert Bower, Karl W. Kroeck, Craig G.
Litchfield and Lawrence F. Mase.
/ / VOTE FOR all nominees listed above (except as marked to the contrary
below) / / VOTE WITHHELD from all nominees listed above.
-----------------------------------------------------------------------
(INSTRUCTIONS: To withhold authority to vote for any individual
nominee, write that nominee's name on the space provided above.)
2. APPROVAL AND ADOPTION OF THE AMENDMENTS TO THE CITIZENS & NORTHERN
CORPORATION 1995 STOCK INCENTIVE PLAN.
/ / VOTE FOR / / VOTE AGAINST / / ABSTAIN
3. APPROVAL OF THE APPOINTMENT OF THE FIRM OF PARENTE, RANDOLPH, ORLANDO, CAREY
& ASSOCIATES AS INDEPENDENT AUDITORS.
/ / VOTE FOR / / VOTE AGAINST / / ABSTAIN
(over)
<PAGE>
FOLD AND DETACH HERE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
4. OTHER MATTERS. In their discretion, to vote with respect to any other
matters that may properly come before the Meeting or any adjournments
thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DIRECTED HEREIN BY THE
STOCKHOLDER. UNLESS OTHERWISE INDICATED, THIS PROXY WILL BE VOTED FOR THE
ELECTION AS DIRECTORS OF THE NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2
AND 3.
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. When shares are held as joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated: , 1999
------------------------------
-------------------------------------------
Signature
-------------------------------------------
Signature
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING
THE ENCLOSED POSTAGE-PAID ENVELOPE.
