DEF 14A
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l91763adef14a.txt
CITIZENS AND NORTHERN CORP.--DEFINITIVE PROXY
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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Check the appropriate box:
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[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11c or Section 240.14a-12
CITIZENS & NORTHERN CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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[ ] Fee paid previously with preliminary materials.
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previously. Identify the previous filing by registration statement number,
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[CITIZENS & NORTHERN CORPORATION LOGO]
90-92 Main Street
Wellsboro, Pennsylvania 16901
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY, APRIL 16, 2002
TO OUR STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of the stockholders of
Citizens & Northern Corporation (the "Corporation") will be held at the Arcadia
Theatre, located at 50 Main Street, Wellsboro, Pennsylvania, on Tuesday, April
16, 2002, at 2:00 P.M., local time, for the following purposes:
1. To elect five Class III directors 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 March 1, 2002 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, OR FOLLOW THE INSTRUCTIONS PROVIDED FOR
VOTING VIA THE INTERNET, 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 19, 2002
CITIZENS & NORTHERN CORPORATION
90-92 MAIN STREET
WELLSBORO, PENNSYLVANIA 16901
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS -- APRIL 16, 2002
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 16, 2002, 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 19, 2002 .
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 that may properly come before the Annual 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 Annual
Meeting and voting in person.
The Corporation will bear the entire cost of soliciting proxies for the
Annual Meeting. In addition to the use of the mails, proxies may be solicited by
personal interview, telephone, telegram or other electronic means by the
Corporation's directors, officers and employees. American Stock Transfer & Trust
Company, the transfer agent and registrar for the Corporation, will assist in
the distribution of proxy materials and the solicitation and tabulation of
votes. 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 1, 2002
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 5,291,140 shares of common
stock. Common stockholders will be entitled to one vote per share on all matters
to be submitted at the meeting. The presence, in person or by proxy, of
stockholders entitled to cast at least 50% of the votes that all stockholders
are entitled to cast shall constitute a quorum at the Annual Meeting. An
abstention will be considered present at the meeting for purposes of determining
a quorum, but will not be counted as voting for or against the issue to which it
relates. 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 1, 2002.
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. Five directors in 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 whom 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.
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The following table sets forth certain information about the director
nominees, all of whom except Mrs. Fisher and Ms. Tyler, are presently members of
the Board, and about the other directors whose terms of office will continue
after the Annual Meeting.
NAME, AGE AND CERTAIN BIOGRAPHICAL INFORMATION PERIOD OF SERVICE AS A DIRECTOR
---------------------------------------------- --------------------------------
(Includes service as Director of
the Corporation's predecessor,
Citizens & Northern Bank)
CLASS III - MANAGEMENT'S NOMINEES FOR A 3 YEAR TERM ENDING IN 2005:
Dennis F. Beardslee, 51 Director since 1999
Owner of Terrace Lanes Bowling Center
Jan E. Fisher, 47
Executive Director for Healthcare Services of Laurel Health System
Karl W. Kroeck, 62 Director since 1996
Farmer
Craig G. Litchfield, 54 Director since 1996
President & Chief Executive Officer of Citizens & Northern Corporation
and Citizens & Northern Bank
Ann M. Tyler, 57
Certified Public Accountant in firm of Ann M. Tyler CPA, PC
CLASS I - CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2003:
R. Robert DeCamp, 61 Director since 1988
President of Patterson Lumber Co., Inc.
Edward H. Owlett, III, 47 Director since 1994
President & CEO of Putnam Company, formerly
Attorney in law firm of Owlett & Lewis, P.C.
F. David Pennypacker, 60 Director since 1993
President of Wellsboro Industrial Park, Inc., formerly
Commercial Real Estate Sales Agent for Century 21 Wilkinson-Dunn Co.,
and Certified Public Accountant in firm of Pennypacker & Gooch, P.C.
James E. Towner, 55 Director since 2000
Publisher of The Daily / Sunday Review
CLASS II - CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2004:
R. Bruce Haner, 54 Director since 1998
Auto Buyer for New Car Dealers, formerly Inventory Control Manager of
Williams Auto Group, and Owner of Haner's Auto Sales
Susan E. Hartley, 44 Director since 1998
Attorney at Law
Leo F. Lambert, 47 Director since 2001
President and General Manager of Fitzpatrick & Lambert, Inc.
Edward L. Learn, 54 Director since 1989
Owner of Learn Hardware & Building Supply
2
Leonard Simpson, 53 Director since 1989
Attorney at Law
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SECURITY OWNERSHIP OF MANAGEMENT
The following table shows beneficial ownership of the Corporation's
common stock as of February 6, 2002 by (i) each director of the Corporation,
(ii) each executive officer named in the Summary Compensation Table on page 8
and (iii) all directors and executive officers as a group.
Amount and Nature of Percent of Class
Name Beneficial Ownership (1) (2) (3) (if 1% or Greater)
---- ----------------------------- ------------------
Dennis F. Beardslee 3,189 --
R. Robert DeCamp 2,327 --
Jan E. Fisher 155 --
R. Bruce Haner 7,766 --
Susan E. Hartley 3,030 --
Karl W. Kroeck 2,950 --
Leo F. Lambert 1,383 --
Edward L. Learn 2,822 --
Craig G. Litchfield 24,865 --
Edward H. Owlett, III 8,465 --
F. David Pennypacker 5,579 --
Leonard Simpson 18,867 (4) --
James E. Towner 3,108 --
Ann M. Tyler 15 --
Brian L. Canfield 11,296 --
Mark A. Hughes 1,691 --
Matthew P. Prosseda 7,587 --
Deborah E. Scott 3,086 --
Directors and Executive Officers as a Group 120,964 2.29%
(1) Pursuant to the 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.
(2) 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 that are exercisable within
60 days after February 6, 2002 are included in the shares above: Mr.
Beardslee, 910 shares; Mr. DeCamp, 1,110 shares; Mr. Haner, 1,110 shares;
Ms. Hartley, 1,110 shares; Mr. Kroeck, 1,310 shares; Mr. Lambert, 510
shares; Mr. Learn, 1,310 shares; Mr. Litchfield, 14,320 shares; Mr. Owlett,
1,310 shares; Mr. Pennypacker, 1,310 shares; Mr. Simpson, 1,310 shares; Mr.
Towner, 710 shares; Mr. Canfield, 5,835 shares; Mr. Hughes, 1,077 shares;
Mr. Prosseda, 5,577 shares; and Mrs. Scott, 2,127 shares.
(3) Includes the following restricted stock awards granted under the Stock
Incentive Plans of the Corporation: Mr. Beardslee, 56 shares; Mr. DeCamp, 56
shares; Mr. Haner, 56 shares; Ms. Hartley, 56 shares; Mr. Kroeck, 56 shares;
Mr. Lambert, 56 shares; Mr. Learn, 56 shares; Mr. Litchfield, 900 shares;
Mr. Owlett, 56 shares; Mr. Pennypacker, 56 shares; Mr. Simpson, 56 shares;
Mr. Towner, 56 shares; Mr. Canfield 450 shares; Mr. Hughes, 336 shares; Mr.
Prosseda, 336 shares; and Mrs. Scott, 336 shares. Restricted stock awards
granted under the Plans vest ratably over a three year period; however, the
recipients have the right to vote all awarded shares.
(4) Includes 2,068 shares held in an SEP-IRA Plan for the benefit of Mr.
Simpson's retirement plan.
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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.
EXECUTIVE COMMITTEE OF THE CORPORATION. The Corporation has an
Executive Committee that functions as a nominating committee and an investment
committee. It also recommends policies and procedures for the Corporation and
would address stockholder proposals, if any. This committee consists of the
following seven members of the Board of Directors: F. David Pennypacker, R.
Robert DeCamp, R. Bruce Haner, Craig G. Litchfield, Edward H. Owlett, III
Leonard Simpson and James E. Towner. During 2001, the Executive Committee held
eleven meetings.
EXECUTIVE COMMITTEE. The Bank has an Executive Committee consisting of
seven members of the Board of Directors who are as follows: F. David
Pennypacker, R. Robert DeCamp, R. Bruce Haner, Craig G. Litchfield, Edward H.
Owlett, III, Leonard Simpson and James E. Towner. The function of this committee
is to recommend policy procedures. During 2001, the Executive Committee held
thirteen meetings. The Executive Committee also functions as a nominating
committee for the Bank.
COMPENSATION COMMITTEE. The Compensation Committee of the Bank, which
held eight meetings in 2001, consists of the following six non-employee members
of the Board of Directors: R. Robert DeCamp, R. Bruce Haner, Edward H. Owlett,
III, F. David Pennypacker, Leonard Simpson and James E. Towner. The committee is
charged with reviewing compensation for all officers and employees of the
Corporation and the Bank and administering the retirement and benefit plans of
the Corporation and Bank.
TRUST INVESTMENT COMMITTEE. The Trust Investment Committee of the Bank,
which met eleven times in 2001, consists of five members of the Board of
Directors; namely, Leonard Simpson, Dennis F. Beardslee, J. Robert Bower, Susan
E. Hartley, and Edward L. Learn. 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.
ASSET LIABILITY COMMITTEE. The Bank also has an Asset Liability
Committee, which consists of Board members R. Robert DeCamp, Craig G.
Litchfield, Edward H. Owlett, III and F. David Pennypacker, as well as Brian L.
Canfield, Senior Executive Vice President of the Bank, and Mark A. Hughes,
Executive Vice President and Chief Financial Officer of the Bank. The Asset
Liability Committee met twelve times during 2001. 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 and function as an investment
committee.
AUDIT COMMITTEE. The Audit Committee of the Corporation, which held
four meetings in 2001, consists of eight non-employee members of the Board of
Directors. The members of the Committee are Edward H. Owlett, III, R. Bruce
Haner, Karl W. Kroeck, Leo F. Lambert, Edward L. Learn, Lawrence F. Mase, F.
David Pennypacker and James E. Towner. In addition to the four meetings of the
Audit Committee, the chairman of the committee met with representatives of
Parente Randolph, PC, the Bank's internal audit department and management to
discuss the Corporation's quarterly 10-Q filings in May, August and November,
2001. 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 Board of Directors of the Corporation has adopted a written charter
for the Audit Committee All members of the Committee are independent, as defined
by the American Stock Exchange (AMEX) and Nasdaq listing standards.
Audit Fees. Parente Randolph, PC billed the Corporation aggregate fees of
$61,400 for the audit of the Corporation's annual financial statements and
for the reviews of the financial statements included in the Corporation's
Forms 10-Q, all for the year ended December 31, 2001.
Financial Information Systems Design and Implementation Fees. Parente
Randolph, PC did not render services to the Corporation for financial
information systems design and implementation, including the
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types of services described in Paragraph (c)(4)(ii) of Rule 2-01 of
Regulation S-X for the 2001 fiscal year. Accordingly, Parente Randolph, PC
did not bill the Corporation for such services.
All Other Fees. For the 2001 fiscal year, Parente Randolph, PC billed
$28,100 in fees for all services other than those described above. These
fees were for the following services:
Audit of management's assertions regarding internal
control over financial reporting $12,900
Tax returns 5,900
Tax-related services 600
Audits of employee benefit plans 8,700
The Audit Committee has considered whether the provisions of these other
services is compatible with maintaining Parente Randolph, PC's independence.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors has reviewed and
discussed the audited financial statements dated December 31, 2001 with
management. They have also discussed with Parente Randolph, PC, the independent
auditors of the Corporation, the matters for discussion as specified by the
AICPA Statement of Auditing Standards No. 61. The Audit Committee has received
from Parente Randolph, PC the written communications required by Independence
Standards Board Standard No. 1, "Independence Discussions with Audit Committees"
and has discussed with Parente Randolph, PC, its independence. Based on their
review and discussions referred to above, the Committee has recommended to the
Board of Directors that the audited financial statements be included in the
Corporation's annual report on Form 10-K for the fiscal year ended December 31,
2001 for filing with the Securities and Exchange Commission.
Members of the Audit Committee,
Edward H. Owlett, III, Chairman Leo F. Lambert F. David Pennypacker
R. Bruce Haner Edward L. Learn James E. Towner
Karl W. Kroeck Lawrence F. Mase
DIRECTORS' ATTENDANCE AND COMPENSATION. The Board of Directors of the
Corporation met twelve times and the Board of Directors of the Bank met fourteen
times in 2001. All of the directors attended at least 75% or more of the
meetings of the Corporation and its committees of which they were members,
except Director Pennypacker, who attended 74%.
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. The aggregate amount of directors' retainers and fees
paid during 2001 was $215,800.
Effective in 2001, each member of the Corporation's Board of Directors
and Advisory Board who receives retainers and fees may elect to receive such
retainers and fees in the form of either cash or Corporation common stock, or a
combination of cash and Corporation common stock. To the extent such members
elect to receive payment of retainers and fees in the form of Corporation common
stock, such stock will be purchased through the Corporation's dividend
reinvestment plan.
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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.
NAME AND POSITION FOR LAST FIVE YEARS AGE
Craig G. Litchfield 54
President and C.E.O. of the Corporation and the Bank since January, 1997;
President of the Corporation and Bank since 1996
Brian L. Canfield 50
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
Dawn A. Besse 50
Executive Vice President and Sales & Service Coordinator since August, 2000;
formerly Business Banking Territory Sales Manager for PNC Bank
Thomas L. Briggs 51
Executive Vice President and Senior Trust Officer since April, 1997; formerly
Vice President and Trust Officer of the Bank
Mark A. Hughes 40
Treasurer of the Corporation since November, 2000; Executive Vice President
of the Bank since August, 2000; formerly Principal and Manager of Parente
Randolph, PC
Matthew P. Prosseda 40
Executive Vice President and Commercial Loan Coordinator since April, 1997;
formerly Vice President of the Bank
Deborah E. Scott 42
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
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
7
analyzed the compensation of Citizens & Northern's executive officers as
compared with compensation packages offered by U.S. financial institutions of
similar asset or revenue size, as applicable.
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 40 independent banks whose 2000
average asset size equaled C&N's, and further narrowed their Peer Group to a
Core Group of 22 banks. According to the survey, Citizens & Northern
Corporation's return on average assets (ROA) for 2000 was 1.23%, while the Core
Group's ROA was 1.18% and the Peer Group's ROA was 1.46%. Mr. Litchfield's 2000
base salary of $248,000 is 5% 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 December 2000, the Committee established the
Chief Executive Officer's 2001 base salary at $260,400, representing a 5.0%
increase over 2000.
The 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 incentive opportunities in the Plan apply to
meeting the Threshold, Target and Maximum levels of C&N Corporation's Return on
Average Assets as compared to peers. The Executive Officer Performance Criteria
Weighting for 2001 applied 60% to Corporate performance and 40% for Individual
performance. The CEO Performance Criteria Weighting for 2001 applied 80% to
Corporate performance and 20% for Individual performance. C&N's Incentive Award
Plan target award for 2001 was 35% of base compensation for the CEO. In 2000,
the CEO Incentive Award was 36% of base compensation, substantially equal to the
cash bonuses awarded to the Peer Group CEOs in 2000.
The Corporation approved a non-qualified Supplemental Executive
Retirement 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. Since the
Bank's Pension Plan provides a substantially reduced benefit as a percentage of
final compensation for the executive officers as compared to non-executives, the
Supplemental Executive Retirement Plan is intended to increment the total
retirement benefit package of the covered 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,
1995. 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 F. David Pennypacker Leonard Simpson
R. Bruce Haner Edward H. Owlett, III James E. Towner
8
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 ended December 31, 2001, 2000, and 1999 of those persons who were,
at December 31, 2001, (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 $100,000:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Awards Payouts
Restricted All Other
Stock Options Compen-
Name and Salary Bonus Awards(1) Awards(1) sation(2)
Principal Position Year ($) ($) ($) (#) ($)
-----------------------------------------------------------------------------------------------------
CRAIG G. LITCHFIELD 2001 260,400 116,378 0 0 29,382
Chairman, President and 2000 248,000 89,317 6,260 2,870 27,299
CEO 1999 231,000 57,750 0 5,000 23,784
BRIAN L. CANFIELD 2001 119,610 47,801 0 0 17,053
Senior Executive Vice 2000 113,620 35,074 3,140 1,435 14,026
President and Branch 1999 102,550 25,638 0 2,000 14,556
System Administrator
MARK A. HUGHES 2001 125,000 40,725 0 0 14,272
Executive Vice President 2000 50,769 13,962 2,390 1,077 0
And Chief Financial Officer
MATTHEW P. PROSSEDA 2001 111,020 36,615 0 0 13,181
Executive Vice President 2000 105,735 27,200 2,360 1,077 11,431
and Commercial Loan 1999 100,700 25,175 0 1,750 11,639
Coordinator
DEBORAH E. SCOTT 2001 106,964 35,458 0 0 12,743
Executive Vice President 2000 101,764 27,985 2,390 1,077 9,923
And Senior Trust Officer
(1) No restricted shares of Corporation common stock or stock options were
granted in 2001. The following awards were, however, granted on January 2,
2002 based on performance for the year ended December 31, 2001: Mr.
Litchfield, 690 restricted shares and 6,270 stock options; Mr. Canfield, 345
restricted shares and 3,135 stock options; Mr. Hughes, 258 restricted shares
and 2,352 stock options; Mr. Prosseda, 258 restricted shares and 2,352 stock
options; and Mrs. Scott, 258 restricted shares and 2,352 stock options. The
restrictions on the restricted shares lapse in three equal annual increments
on the anniversaries of the awards and dividends are payable on the awarded
shares.
(2) Includes 2001 (a) contributions to the following accounts under the Bank's
Savings & Retirement Plan (401k): Mr. Litchfield, $13,600; Mr. Canfield,
$12,404; Mr. Hughes $11,066; Mr. Prosseda, $11,075; and Mrs. Scott, $10,700,
and (b) allocations to the following Non-Qualified Supplemental Executive
Retirement Plan accounts: Mr. Litchfield, $15,782; Mr. Hughes $3,206; Mr.
Canfield $4,649; Mr. Prosseda $2,106; and Mrs. Scott, $2,043
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.
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No qualified stock options were granted by the Board of Directors for
key officers of the Bank in 2001. However, the Board of Directors granted 35,769
qualified stock options in January 2002. Shares granted under option in 2000 and
1999, were 16,015 and 22,750, respectively. The period of the options shall be
ten (10) years, commencing from the date of the grant, and are exercisable six
(6) months 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.
The Board of Directors did not grant shares of restricted stock under
the Stock Incentive Plan in 2001. However, in January 2002, the Board of
Directors granted 4,053 shares of restricted stock. Restricted stock awards
require no payment from the selected officers and vest ratably over three (3)
years.
At December 31, 2001, there were 86,509 shares reserved for future
grants. After the awards granted in January 2002, there are 66,261 shares
reserved for future grants.
OPTION GRANTS
No stock options were granted to the officers named in the Summary
Compensation Table in 2001. Options were granted in January 2002, based on 2001
performance. (See note 1 to the Summary Compensation Table on page 8.)
AGGREGATED STOCK OPTIONS EXERCISED DURING 2001
AND YEAR-END OPTION VALUES
The following table sets forth information concerning the exercise
during 2001 of options granted under the Stock Incentive Plan by the five most
highly compensated executives of the Corporation named in the Summary
Compensation Table:
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, 2001 December 31, 2001 (2)
Name On Exercise Acquired (1) Exercisable Unexercisable Exercisable Unexercisable
----------------------------------------------------------------------------------------------------------------
Craig G. Litchfield 0 0 14,320 5,300 $29,321 $ 0.00
Brian L. Canfield 0 0 6,335 2,100 $15,267 $ 0.00
Mark A. Hughes 0 0 1,077 0 $ 6,354 $ 0.00
Matthew P. Prosseda 0 0 5,577 1,950 $11,309 $ 0.00
Deborah E. Scott 0 0 2,127 1,200 $ 6,354 $ 0.00
(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,
2001 of the shares subject to the options and the aggregate option price of
those shares.
10
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 December 31, 1996 and ending December 31,
2001. The index values are market-weighted dividend-reinvestment numbers which
measure the total return for investing $100.00 five years ago. This meets
Securities & Exchange Commission 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
[PLOT POINTS FOR CUMULATIVE RETURN]
PERIOD ENDED
AS OF
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
C & N 100.00 137.99 148.70 117.68 91.97 125.99
Peer Group 100.00 142.10 179.82 153.69 117.67 161.11
S & P 500 Index 100.00 133.37 171.44 207.52 188.62 166.22
All ten institutions in the peer group selected by the Corporation are
headquartered in Pennsylvania, have total assets of $300 to $1.7 Billion and
market capitalization of at least $25 Million. This peer group consists of ACNB
Corporation, Gettysburg; CNB Financial Corporation, Clearfield; Community Banks,
Inc., Millersburg; Drovers Bancshares Corporation, York; First Chester County
Corporation, West Chester; Franklin Financial Services Corporation,
Chambersburg; Penseco Financial Services Corporation, Scranton; Penn Rock
Financial Services Corporation, Blue Ball; Penns Woods Bancorp, Inc., Jersey
Shore; and Sterling Financial Corporation, Lancaster. The same peer group was
used in 2001. The data for this graph was obtained from SNL Financial L.C.
PENSION PLAN
The Citizens & Northern Bank Pension Plan (the "Plan") is a qualified
defined benefit plan under Section 401(a) of the Internal Revenue Code. 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, 2001, at age 65, under various assumptions as to
compensation and years of credited
11
service. For any plan year beginning after December 31, 1993, the Pension Plan
benefits are determined on only the first $170,000, as indexed, in compensation
as determined by the Commissioner of the Internal Revenue Service and as
prescribed by law.
PENSION PLAN TABLE
Years of Credited Service
Average Annual Compensation 15 20 25 (or more)
---------------------------- ------------------------------------------------
$ 75,000 $13,809 $18,412 $23,016
$100,000 $19,622 $26,162 $32,703
$125,000 $25,434 $33,912 $42,391
$150,000 $31,247 $41,662 $52,078
$170,000 and over $35,897 $47,862 $59,828
The credited years of service under the Plan as of December 31, 2001
was 29 years for Mr. Litchfield, 24 years for Mr. Canfield, 1 year for Mr.
Hughes, 8 years for Mr. Prosseda, and 4 years for Mrs. Scott.
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 55 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 2001, 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 2001 was
Ten Thousand Five Hundred Dollars ($10,500.00), also subject to a $170,000
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 2% of each eligible participant's compensation; in addition, the Bank
may make a discretionary basic contribution. The total actual basic employer
contribution for 2001 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 eight investment funds maintained by the Bank as Trustee. In 2001, 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 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 regarding 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 based upon the target or maximum levels of
payout as determined by the Plan.
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
12
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, 2001. 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 was an
employee and in which he had an interest during 2001, 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 2002. 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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934 requires the
Corporation's officers and directors, and persons who own more than ten percent
of the Corporation's common stock, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than ten percent stockholders are required by Securities and Exchange
Commission regulations to furnish the Corporation with copies of all Section
16(a) forms they file.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Corporation during 2001 and Forms 5 and amendments thereto
furnished to the Corporation with respect to 2001, no director, officer or ten
percent stockholder or any other person subject to Section 16 of the Exchange
Act, failed to make on a timely basis during 2001 or prior fiscal years any
reports required to be filed by Section 16(a) of the Exchange Act.
STOCKHOLDER PROPOSALS
The Corporation's 2003 Annual Meeting of stockholders is scheduled to
be held in April 2003. Any stockholder who intends to present a proposal at the
2003 Annual Meeting and who wishes to have the proposal included in the
Corporations proxy statement and form of proxy for that meeting must deliver the
proposal to the Corporation's executive offices, 90-92 Main Street, P.O. Box 58,
Wellsboro, Pennsylvania 16901, by December 16, 2002. Citizens & Northern must
receive notice of all other stockholder proposals for the 2003 annual meeting
delivered or mailed no less than 14 days nor more than 50 days prior to the
Annual Meeting; provided, however, that if less than twenty-one days notice of
the annual meeting is given to stockholders then the Corporation must receive
notice not less than seven days following the date on which notice of the annual
meeting was mailed. If notice is not received by the Corporation within this
time frame, the Corporation will consider such notice untimely. The
13
Corporation reserves the right to vote in its discretion all of the shares of
common stock for which it has received proxies for the 2003 annual meeting with
respect to any untimely shareholder proposals.
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 on Form 10-K for the year 2001,
including financial statements as certified by Parente Randolph, PC, was mailed
with this Proxy Statement on or about March 19, 2002, to the stockholders of
record as of the close of business on March 1, 2002.
AN ADDITIONAL COPY OF THE CORPORATION'S 2001 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 19, 2002
14
CITIZENS & NORTHERN CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 16, 2002
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 Stockholders to be held on
Tuesday, April 16, 2002, 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 III DIRECTORS.
Nominees: Dennis F. Beardslee, Jan E. Fisher, Karl W. Kroeck,
Craig G. Litchfield and Ann M. Tyler.
[ ] VOTE FOR all nominees listed above [ ] VOTE WITHHELD
(except as marked to the contrary below) 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 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 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 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: , 2002
---------------------
----------------------------------
Signature
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Signature
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE-PAID ENVELOPE.