[LOGO] CITIZENS & NORTHERN CORPORATION
90-92 Main Street
Wellsboro, Pennsylvania 16901
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY, APRIL 18, 2000
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
Arcadia Theatre, located at 50 Main Street, Wellsboro, Pennsylvania, on Tuesday,
April 18, 2000, at 2:00 P.M., local time, for the following purposes:
1. To elect four directors to Class I to serve for a term of 3 years;
2. To ratify the action of the Board of Directors in the appointment of the
firm of Parente Randolph, PC as independent auditors of the Corporation;
and
3. 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 February 28, 2000
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 20, 2000
<PAGE>
CITIZENS & NORTHERN CORPORATION
90-92 Main Street
Wellsboro, Pennsylvania 16901
PROXY STATEMENT
Annual Meeting of Stockholders -- April 18, 2000
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 18, 2000, at 2:00 P.M. at the Arcadia Theatre, located at 50 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 20, 2000.
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proxies have previously been revoked.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 ratification of the appointment of the firm of Parente Randolph,
PC 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 February 28,
2000 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 5,205,267 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 February 28, 2000.
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 fourteen. 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. Four directors to Class I 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. Towner, 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, 2000.
<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 I - MANAGEMENT'S NOMINEES FOR A 3 YEAR TERM ENDING IN 2003:
<S> <C> <C> <C> <C>
R. Robert DeCamp 59 1988 1,462 .03
President of Patterson Lumber
Co., Inc.
Edward H. Owlett, III 45 1994 7,051 (3) .14
Attorney in law firm of
Owlett & Lewis, P.C.
F. David Pennypacker 58 1993 4,597 .09
Partner, Wellsboro Industrial Park,
LP, formerly Certified Public Accountant
in firm of Pennypacker & Gooch, P.C.
James E. Towner 53 1,346 .03
Publisher of The Daily / Sunday Review
CLASS II - CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2001:
R. Bruce Haner 52 1998 6,627 (4) .13
Inventory Control Manager,
Williams Auto Group, formerly
Owner of Haner's Auto Sales
Susan E. Hartley 42 1998 1,541 .03
Attorney at Law
Edward L. Learn 52 1989 1,909 .04
Owner, Learn Hardware & Building
Supply, formerly Manager of
Purina Mills, Inc.
Leonard Simpson 51 1989 17,014 (5) .33
Attorney at Law
Donald E. Treat 66 1966 12,079 .23
Retired, formerly Owner
of Treat Hardware
CLASS III - CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2002:
Dennis F. Beardslee 49 1999 2,104 .04
Owner, Terrace Lanes Bowling Center
J. Robert Bower 65 1967 34,917 (6) .67
Pharmacist
Karl W. Kroeck 60 1996 2,025 .04
Farmer
</TABLE>
2
<PAGE>
<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
- ------------------- ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Craig G. Litchfield 52 1996 14,657 (7) .28
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 65 1990 6,179 .12
Retired, formerly
President of Mase's, Inc.
All Directors and Executive Officers
as a Group (20 persons) 152,114 2.92
</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, 2000 are
included: Mr. Beardslee, 200 shares; Mr. Bower, 600 shares; Mr. DeCamp, 400
shares; Mr. Haner, 400 shares; Ms. Hartley, 400 shares; Mr. Kroeck, 600
shares; Mr. Learn, 600 shares; Mr. Litchfield, 4,950 shares; Mr. Mase, 600
shares; Mr. Owlett, 600 shares; Mr. Pennypacker, 600 shares; Mr. Simpson,
600 shares; and Mr. Treat, 600 shares. Each individual has furnished this
information.
(3) Mr. Owlett disclaims beneficial ownership of a total of 5,280 shares
included above that are held for his nephews and niece.
(4) Mr. Haner disclaims beneficial ownership of a total of 566 shares included
above that are held for and by his children.
(5) Mr. Simpson disclaims beneficial ownership of 103 shares included above
that are held individually by his daughter. Includes 1,628 shares held in
an SEP-IRA Plan for the benefit of Mr. Simpson's retirement plan.
(6) Mr. Bower disclaims beneficial ownership of 10,858 shares included above
that are held individually by his wife. Includes 1,050 shares held in an
IRA for the benefit of Mr. Bower.
(7) Mr. Litchfield disclaims beneficial ownership of 1,397 shares held
individually by his wife and a total of 813 shares included above that are
held with his daughters.
No person named above as a nominee or director has any family
relationship with any other person so named.
3
<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 1999.
The Bank has an Executive Committee consisting of seven members of the
Board of Directors who are as follows: R. Robert DeCamp, Adelbert E. Eldridge,
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 1999, the Executive Committee held nine meetings. The
Executive Committee also functions as a nominating committee and an investment
committee.
The Compensation Committee of the Bank, which held five meetings in
1999, 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 six times in
1999, consists of five members of the Board of Directors; namely, Dennis F.
Beardslee, J. Robert Bower, Susan E. Hartley, Edward L. Learn and Leonard
Simpson. Thomas L. Briggs and Deborah E. Scott, each of whom is an Executive
Vice President and Senior Trust Officer of the Bank, are also members 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 meetings, which
are reviewed by the Board of Directors.
The Bank also has an Asset Liability Committee, which consisted of R.
Robert DeCamp, Craig G. Litchfield, Robert J. Murphy and F. David Pennypacker,
four members of the Board of Directors, as well as Brian L. Canfield, Senior
Executive Vice President of the Bank, and James W. Seipler, Treasurer of the
Corporation. This committee met twelve times during 1999. 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 1999. 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 $12,000 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
received a quarterly retainer of $200 for the first three-quarters of 1999, as
their meetings were held quarterly. Effective in October, this committee resumed
monthly meetings. The aggregate amount of directors' retainers and fees paid
during 1999 was $227,900.
4
<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 52 14,657 (2) .28
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
Brian L. Canfield 48 6,133 (3) .12
Senior Executive Vice President and Branch
System Administrator since April, 1999; formerly
Executive Vice President and Branch System
Administrator since April, 1997; formerly Vice
President of the Bank
Robert W. Anderson 61 10,785 (4) .21
Executive Vice President of Management
Information System since April, 1997; formerly
Vice President, Data Processing, of the Bank
Thomas L. Briggs 49 7,924 (5) .15
Executive Vice President and Senior Trust
Officer since April, 1997; formerly Vice President
and Trust Officer of the Bank
Matthew P. Prosseda 38 3,113 (6) .06
Executive Vice President and Commercial Loan
Coordinator since April, 1997; formerly Vice
President of the Bank
Deborah E. Scott 40 293 (7) .01
Executive Vice President and Senior Trust
Officer since September, 1999; formerly Vice
President and Trust Officer of the Bank since
January, 1998; formerly Vice President and
Trust Officer of First Citizens National Bank
James W. Seipler 58 12,462 (8) .24
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, 2000. 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.
5
<PAGE>
(2) Mr. Litchfield disclaims beneficial ownership of 1,397 shares held
individually by his wife and a total of 813 shares included above that are
held with his daughters. Includes 4,950 shares which may be acquired upon
the exercise of stock options within 60 days.
(3) Mr. Canfield disclaims beneficial ownership of a total of 266 shares
included above that are held for his children. Includes 2,300 shares which
may be acquired upon the exercise of stock options within 60 days.
(4) Mr. Anderson disclaims beneficial ownership of a total of 65 shares
included above that are held for his children and granddaughter. Includes
3,580 shares which may be acquired upon the exercise of stock options
within 60 days.
(5) Mr. Briggs disclaims beneficial ownership of 478 shares held individually
by his wife, 234 shares held with his mother and a total of 628 shares
included above that are held for his children. Includes 2,100 shares which
may be acquired upon the exercise of stock options within 60 days.
(6) Includes 2,060 shares which may be acquired by Mr. Prosseda upon the
exercise of stock options within 60 days.
(7) Includes 150 shares which may be acquired by Mrs. Scott upon the exercise
of stock options within 60 days.
(8) Mr. Seipler disclaims beneficial ownership of 586 shares included above
that are held jointly with his sons. Includes 3,580 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 the
Board of Directors reviews all decisions relating to the compensation of the
executive officers.
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. Base salaries and compensation programs are set
at levels competitive with peer banking institutions and are adjusted for
individual performance. To develop peer groups for Citizens & Northern, Ben S
Cole Financial Incorporated (Cole Financial) collected market pay data from
surveys covering the banking industry. Cole Financial then analyzed the
compensation of Citizens & Northern's executive officers as compared with
compensation packages offered by U.S. financial institutes of similar asset or
revenue size, as applicable.
In establishing the CEO's base salary, the Committee reached the
following conclusions regarding company performance: Survey comparison of
Citizens & Northern established a survey Peer Group of 38 independent banks
whose 1998 average asset size equaled C&N's, and further narrowed their Peer
Group to a Core Group of 14 banks with an average ROA of 1.38%. Citizens &
Northern's net income was 52% higher than the average of the Peer Group. C&N's
return on assets for 1998 was 1.77%, 43% better than the Peer Group average and
28% better than a Core Group average of high performing banks. Mr. Litchfield's
1999 base salary of $231,000 is 7% below CEO's who receive the same compensation
package; however, his total compensation with bonus and incentives falls to 83%
of par behind Core Group CEOs. In 1998, the Committee established the Chief
Executive Officer's 1999 base salary at $231,000, representing a 5% increase
over 1998.
6
<PAGE>
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 37%.
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.
<TABLE>
<CAPTION>
Members of the Compensation Committee,
<S> <C> <C> <C>
R. Robert DeCamp, Chairman Robert J. Murphy F. David Pennypacker
Adelbert E. Eldridge Edward H. Owlett, III Leonard Simpson
</TABLE>
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, 1999, 1998 and 1997 of those persons who were,
at December 31, 1999, (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 1999 231,000 57,750 X 0 5,000 0 23,784
Chairman, President and 1998 220,000 55,000 X 0 4,000 0 21,270
CEO 1997 205,000 51,250 X 0 3,500 0 17,670
ROBERT W. ANDERSON 1999 139,125 34,781 X 0 2,000 0 32,345
Executive Vice President1998 132,500 33,125 X 0 2,000 0 27,742
Management Information 1997 125,000 31,250 X 0 2,000 0 24,765
System
</TABLE>
7
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JAMES W. SEIPLER 1999 139,125 34,781 X 0 2,000 0 26,105
Executive Vice President1998 132,500 33,125 X 0 2,000 0 23,595
and Treasurer 1997 125,000 31,250 X 0 2,000 0 21,640
BRIAN L. CANFIELD 1999 102,550 25,638 X 0 2,000 0 14,556
Senior Executive Vice 1998 95,000 23,750 X 0 1,500 0 12,095
President and Branch 1997 90,000 22,500 X 0 1,500 0 10,733
System Administrator
MATTHEW P. PROSSEDA 1999 100,700 25,175 X 0 1,750 0 11,639
Executive Vice President1998 95,000 23,750 X 0 1,500 0 11,100
and Commercial Loan 1997 90,000 22,500 X 0 1,500 0 10,659
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, 1999 ("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 $27.00. The period
of the options shall be ten (10) years, commencing from the date of the grant.
Twenty percent (20%) of options granted become exercisable at the end of each
year following the Grant Date, therefore 100% of options granted are exercisable
five (5) years from the Grant Date. Once the options are exercisable, all or a
portion of the available exercisable options may be exercised at any time within
the ten (10) year period from the Grant Date. If employment with the Bank
terminates, except in the event of death or disability, the optionee has three
(3) months from the date of termination to exercise any exercisable options
outstanding as of the date of cessation of employment. In the event of an
optionee's death or disability, the optionee or their legal representative may
exercise any options to which the optionee was entitled as of the date of
cessation of employment. Shares granted under option in 1999, 1998, and 1997
were 22,750, 17,700, and 15,000, respectively. At December 31, 1999, there were
114,300 shares reserved for future grants.
8
<PAGE>
OPTION / SAR GRANTS
The following table sets forth information concerning stock options
granted in 1999 under the Stock Incentive Plan to the Chief Executive Officer
and the four most highly compensated executives of the Corporation named in the
Summary Compensation Table:
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f)
% of Total Potential Realizable
Number of Options/ Value at Assumed
Securities SARs Granted Exercise Annual Rates of Stock
Underlying to Employees or Base Price Appreciation for
Options/SARs in Fiscal Price Expiration Option Term (1)
Name Granted Year ($/Share) Date 5% 10%
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Craig G. Litchfield 5,000 21.98% $27.00 12/23/2009 $ 84,901 $215,155
Robert W. Anderson 2,000 8.79% $27.00 12/23/2009 $ 33,960 $ 86,062
James W. Seipler 2,000 8.79% $27.00 12/23/2009 $ 33,960 $ 86,062
Brian L. Canfield 2,000 8.79% $27.00 12/23/2009 $ 33,960 $ 86,062
Matthew P. Prosseda 1,750 7.69% $27.00 12/23/2009 $ 29,715 $ 75,304
</TABLE>
(1) Represents the difference between the market value of the Common Stock for
which the option may be exercised, assuming that the market value of the
Common Stock on the date of grant appreciates in value to the end of the
ten-year option term at annualized rates of 5% and 10%, respectively, and
the exercise price of the option. The rates of appreciation used in this
table are prescribed by regulation of the SEC and are not intended to
forecast future appreciation of the market value of the Common Stock.
AGGREGATED STOCK OPTION EXERCISED DURING 1999
AND YEAR-END OPTION VALUES
The following table sets forth information concerning the exercise
during 1999 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:
<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, 1999 December 31, 1999 (2)
Name On Exercise Acquired (1) Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Craig G. Litchfield 0 0 4,950 11,800 $ 11,000.00 $ 5,000.00
Robert W. Anderson 0 0 3,580 5,820 $ 11,050.00 $ 3,400.00
James W. Seipler 0 0 3,580 5,820 $ 11,050.00 $ 3,400.00
Brian L. Canfield 0 0 2,300 4,700 $ 6,500.00 $ 2,000.00
Matthew P. Prosseda 0 0 2,060 4,390 $ 4,820.00 $ 1,580.00
</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.
9
<PAGE>
(2) Represents the difference between the aggregate market value at December
31, 1999 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, 1995 and ending December 31,
1999. 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
PERIOD ENDING
<TABLE>
1/1/95 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
<S> <C> <C> <C> <C> <C> <C>
C&N $ 100.00 $ 110.36 $ 127.67 $ 175.81 $ 225.70 $ 185.46
Peer Group $ 100.00 $ 115.19 $ 147.89 $ 207.34 $ 231.12 $ 185.49
S&P 500 Index $ 100.00 $ 137.45 $ 168.92 $ 225.21 $ 289.43 $ 350.26
</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
1999.
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.
10
<PAGE>
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, 1999, 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.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Credited Service
Average Annual Compensation 15 20 25 (or more)
---------------------------- -------------------------------------------------
<S> <C> <C> <C> <C>
$ 75,000 $14,214 $18,952 $23,690
$100,000 $20,027 $26,702 $33,378
$125,000 $25,839 $34,452 $43,065
$160,000 $33,977 $45,302 $56,628
$175,000 $33,977 $45,302 $56,628
$200,000 $33,977 $45,302 $56,628
$225,000 $33,977 $45,302 $56,628
$250,000 $33,977 $45,302 $56,628
</TABLE>
The credited years of service under the Plan as of December 31, 1999
for Litchfield, Anderson, Seipler, Canfield and Prosseda were 27, 28, 34, 22 and
6 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 1999, 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.
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 1999 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 1999 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 1999, 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.
11
<PAGE>
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, 1999. 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, 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.
PROPOSAL 2 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Parente Randolph, PC, formerly 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 2000. No member of the firm
or any of its associates has a financial interest in the Corporation. Parente
Randolph, PC 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, PC 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, PC as independent auditors of the Corporation.
STOCKHOLDER PROPOSALS
Any proposal intended to be presented by a stockholder of the
Corporation at the Corporation's 2001 Annual Meeting must be received by the
Corporation no later than December 17, 2000 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
12
<PAGE>
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.
13
<PAGE>
ADDITIONAL INFORMATION
The Corporation's Annual Report for the year 1999, including financial
statements as certified by Parente Randolph, PC, was mailed with this Proxy
Statement on or about March 20, 2000, to the stockholders of record as of the
close of business on February 28, 2000.
A COPY OF THE CORPORATION'S 1999 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 20, 2000
14
<PAGE>
[LOGO] CITIZENS & NORTHERN BANK
90-92 Main Street, P. O. Box 58, Wellsboro, PA 16901 Stock Symbol: CZNC
Phone: (570) 724-3411 Fax: (570) 723-8097 E-Mail: [email protected]
Dear Stockholder:
The following is our anticipated quarterly dividend schedule
for 2000:
Declaration Date Record Date Payable Date
---------------- ----------- ------------
March 30, 2000 April 10, 2000 April 20, 2000
June 22, 2000 July 3, 2000 July 20, 2000
September 21, 2000 October 2, 2000 October 20, 2000
November 16, 2000 November 27, 2000 January 19, 2001
You may receive your dividends by check or you may elect to
have your dividends deposited to your C&N checking, Super Money Fund or
Key Savings account. We also offer a Dividend Reinvestment Service,
which offers a convenient way to increase your ownership in C&N by
directing your dividends for the purchase of additional shares of
Citizens & Northern stock. The optional cash payment portion of the
Reinvestment Plan gives participating stockholders the ability to
purchase additional shares for their Reinvestment account. Any amount
between $50 and $3,000 may be invested quarterly when the stockholder
chooses to participate.
If you are not already taking advantage of the direct deposit
or Dividend Reinvestment service and would like more information,
please contact us at the above address or by calling 800-487-8784
(extension 251).
Please feel free to contact us at any time 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 18, 2000
The undersigned hereby appoints Edward L. Learn and Lawrence F. Mase, 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 18, 2000 at 2:00 P.M. (local time), at the Arcadia Theatre, 50
Main Street, Wellsboro, Pennsylvania 16901, and at any adjournments thereof, and
to vote as follows:
1. ELECTION OF CLASS I DIRECTORS.
Nominees: R. Robert DeCamp, Edward H. Owlett, III, F. David Pennypacker
and James F. Towner.
[ ] VOTE FOR all nominees listed [ ] VOTE WITHHELD from all
above (except as marked to nominees listed above.
the contrary below)
------------------------------------------------------------------------
(INSTRUCTIONS: To withhold authority to vote for any individual
nominee, write that nominee's name on the space provided above.)
2. APPROVAL OF THE APPOINTMENT OF THE FIRM OF PARENTE RANDOLPH, PC AS
INDEPENDENT AUDITORS.
[ ] VOTE FOR [ ] VOTE AGAINST [ ] ABSTAIN
3. OTHER MATTERS. In their discretion, to vote with respect to any othe
matters that may properly come before the Meeting or any adjournments
thereof.
(over)
<PAGE>
FOLD AND DETACH HERE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
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 PROPOSAL 2.
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:______________________________, 2000
_________________________________________
Signature
_________________________________________
Signature
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED POSTAGE-PAID ENVELOPE.
