UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
(Amendment
No. )
Filed
by
the Registrant x
Filed
by
a Party other than the Registrant ¨
Check
the
appropriate box:
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¨
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Preliminary
Proxy Statement
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¨
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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x
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Definitive
Proxy Statement
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¨
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Definitive
Additional Materials
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¨
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Soliciting
Material Pursuant to §240.14a-12
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QNB
CORP.
(Name
of Registrant as Specified in its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of filing fee (Check the appropriate box):
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x
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No
fee required.
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¨
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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1)
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Title
of each class of securities to which transaction applies:
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2)
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Aggregate
number of securities to which transaction applies:
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3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was determined):
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4)
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Proposed
maximum aggregate value of transaction:
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5)
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Total
fee paid:
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¨
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Fee
paid previously with preliminary materials.
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¨
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee
was paid
previously. Identify the previous filing by registration statement
number,
or the Form or Schedule and the date of its filing.
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1)
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Amount
Previously Paid:
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2)
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Form,
Schedule or Registration Statement No.:
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3)
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Filing
Party:
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4)
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Date
Filed:
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Proxy
Statement
April
21,
2008
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P.O.
Box 9005
Quakertown,
PA 18951-9005
TEL
(215)538-5600
FAX
(215)538-5765
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April
21,
2008
Dear
Fellow Shareholder:
You
are
invited to attend QNB Corp’s 2008 Annual Meeting of Shareholders on Tuesday, May
20, 2008. The meeting will be held at the offices of QNB Bank, 320 West Broad
Street, Quakertown, Pennsylvania at 11:00 a.m., Eastern time. Enclosed are
the
notice of the annual meeting, proxy statement and proxy card for the annual
meeting. Our 2007 Annual Report on Form 10-K accompanies these
enclosures.
At
this
year's annual meeting, you are being asked to elect four Class II directors.
The
nominees are fully described in the accompanying proxy statement, which you
are
urged to read carefully.
YOUR
BOARD OF DIRECTORS HAS UNANIMOUSLY ENDORSED THE NOMINEES FOR ELECTION. WE
RECOMMEND THAT YOU VOTE "FOR" ALL FOUR NOMINEES.
YOUR
VOTE IS IMPORTANT. Whether
or not you plan to attend, you can ensure that your shares are represented
at
the meeting by promptly voting and submitting your proxy by completing, signing,
dating and returning your proxy card in the enclosed envelope.
If
you
have any questions with regard to the annual meeting, please contact Jean Scholl
at (215) 538-5600, extension 5719.
Thank
you
for your cooperation and continuing support.
Sincerely,
Thomas
J.
Bisko
President
and
Chief
Executive Officer
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
QNB
CORP.
TO
BE HELD ON MAY 20, 2008
TO
OUR
SHAREHOLDERS:
The
2008
annual meeting of the shareholders of QNB Corp. will be held at the offices
of
QNB Bank, 320 West Broad Street, Quakertown, Pennsylvania on Tuesday, May 20,
2008, beginning at 11:00 a.m., Eastern time, for the purpose of considering
and
acting upon the following matters:
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(1)
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The
election of four Class II directors; and
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(2)
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Such
other business as may properly come before the meeting or any adjournment
thereof.
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The
Board
of Directors fixed the close of business on April 7, 2008 as the record date
for
the purpose of determining those shareholders entitled to notice of, and to
vote
at, the annual meeting, either in person or by proxy.
All
shareholders are cordially invited to attend the annual meeting. Whether or
not
you plan to attend the annual meeting, you are requested to complete, date
and
sign the proxy card, and return it promptly in the enclosed envelope provided.
At any time prior to the proxy being voted, it is revocable by written notice
to
QNB in accordance with the instructions set forth in the enclosed proxy
statement, including by voting at the meeting in person. If you attend the
annual meeting, you may withdraw your proxy before it is voted and then vote
your shares in person.
By
Order of the Board of Directors,
Charles
M. Meredith, III
Secretary
Quakertown,
Pennsylvania
April
21,
2008
QNB
Corp.
15
North Third Street
P.O.
Box 9005
Quakertown,
Pennsylvania 18951
(215)
538-5600
PROXY STATEMENT
2008
ANNUAL MEETING OF SHAREHOLDERS - MAY 20, 2008
This
proxy statement is being furnished to holders of the common stock, par value
$0.625 per share, of QNB Corp. (herein referred to as QNB or the Corporation)
in
connection with the solicitation of proxies by the Board of Directors for use
at
the 2008 Annual Meeting of Shareholders.
As
of the
date of this proxy statement, the Board of Directors knows of no business that
will be presented for consideration at the annual meeting other than that
referred to in the accompanying Notice of Annual Meeting and described in this
proxy statement. As to other business, if any, properly presented at the annual
meeting, executed proxies will be voted in accordance with the judgment of
the
person or persons voting the proxy or the recommendation of the Board of
Directors.
The
cost
of solicitation of proxies will be paid by QNB. QNB will reimburse brokerage
firms and other custodians, nominees, and fiduciaries for reasonable expenses
incurred by them in sending proxy materials to the beneficial owners of QNB’s
common stock. In addition to solicitations by mail, directors, officers, and
employees of QNB and the Bank may solicit proxies personally, by telephone
or
other electronic means without additional compensation.
These
proxy materials are first being mailed to shareholders on or about April 21,
2008.
Date,
Time and Place of Meeting
QNB
Corp’s annual shareholders’ meeting will be held on Tuesday, May 20, 2008,
beginning at 11:00 a.m., Eastern time. The meeting will be held at QNB Bank’s
(the Bank) offices at 320 West Broad Street, Quakertown,
Pennsylvania.
Outstanding
Securities; Quorum; Voting Rights; and Record Date
The
close
of business on April 7, 2008 was fixed as the record date for the purpose of
determining those shareholders entitled to notice of, and to vote at, the annual
meeting and any adjournments or postponements of the meeting. As of the close
of
business on the record date, QNB had 3,134,704 shares of common stock issued
and
outstanding.
Shareholders
are entitled to one vote for each share of common stock held of record on the
record date with respect to each matter to be voted on at the annual
meeting.
The
presence, in person or by proxy, of the holders of a majority of the outstanding
shares of the common stock on the record date is necessary to constitute a
quorum at the annual meeting.
QNB’s
Bylaws and Pennsylvania law govern the vote needed to approve the proposal.
Directors are elected by a plurality of the total votes cast. Broker non-votes,
votes withheld and abstentions will be counted for purposes of determining
whether a quorum has been reached. However, abstentions and broker non-votes
will not be counted as a vote cast. A broker “non-vote” occurs when a nominee
holding shares for a beneficial owner does not vote on a particular proposal
because the nominee does not have the discretionary voting power with respect
to
that item and has not received instructions from the beneficial owner. Because
directors are elected by a plurality, abstentions and broker non-votes have
no
effect on the election of directors.
1
Solicitation
of Proxies
The
Board
of Directors is soliciting proxies for use at QNB’s 2008 Annual Meeting of
Shareholders.
Voting
and Revocability of Proxies
Shares
of
common stock represented by properly executed proxies will, unless the proxies
have previously been revoked, be voted in accordance with the instructions
indicated on the proxies. If no instructions are indicated on the proxies,
the
shares will be voted FOR
the
election of QNB’s nominees to the Board of Directors. The Board of Directors
does not anticipate that any matters will be presented at the annual meeting
other than as set forth in the accompanying Notice of Annual Meeting. In the
event that any other matters are properly presented at the annual meeting,
proxies will be voted at the discretion of the proxy holders as to such matters
upon the recommendation of the Board of Directors.
A
shareholder who executes and returns a proxy has the power to revoke it at
any
time before it is voted by delivering to Mr. Charles M. Meredith, III, Secretary
of QNB, at the offices of QNB, at 320 West Broad Street, P.O. Box 9005
Quakertown, Pennsylvania, 18951, either a written notice of the revocation
or a
duly executed later-dated proxy, or by attending the annual meeting and voting
in person after giving notice of the revocation.
Availability
of Proxy Materials
Important
Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting
to Be Held On May 20, 2008: This
Proxy Statement and the 2007 Annual Report to Shareholders are available at
http://www.qnb.com
under
the “Investor Relations” link.
2
PROPOSAL
1
ELECTION
OF DIRECTORS
The
Board of Directors
QNB’s
Articles of Incorporation and Bylaws provide that the Board of Directors
consists of ten members divided into three classes, Class I, Class II, and
Class
III, as nearly equal in number as possible. The four directors currently
constituting Class II have been nominated for re-election at the annual meeting.
Directors in Class III and Class I will hold office until the 2009 and 2010
annual meetings, respectively.
The
Nominees
At
the
annual meeting, four directors will be elected. Each director so elected will
hold office until the 2011 Annual Meeting of Shareholders and until his or
her
successor in office is duly qualified and elected.
To
the
extent given discretion, the persons named in the accompanying proxy intend
to
vote FOR each of the nominees listed below. Each nominee has consented to being
nominated as a director and, as far as the Board of Directors and management
of
QNB are aware, will serve as a director if elected. In the event that any
nominee should decline to serve or be unable to serve, the persons named as
proxies may vote for the election of such person or persons as the Board of
Directors recommends.
Set
forth
on the following page, with respect to each director and director nominee,
is
his or her name, age, the time period served as a director and his or her other
principal occupation(s) or employment and business affiliation(s) at present
and
during the last five years.
Voting
Requirements
The
four
director candidates are required to be elected by a plurality of the total
votes
cast. Thus, the four persons receiving the highest number of votes will be
elected. Votes may be cast in favor or withheld for any or all of the
nominees.
RECOMMENDATION
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT EACH OF THESE
NOMINEES
BE ELECTED AS A CLASS II DIRECTOR.
3
CURRENT
CLASS II DIRECTORS AND NOMINEES FOR THREE YEAR TERM EXPIRING IN
2011
Kenneth
F. Brown, Jr.
Age
52;
President, McAdoo & Allen, Inc. (manufacturer of pigment dispersions and
high performance coatings), Quakertown, PA from September 1989 to present;
a
Director of QNB and the Bank since 1993.
Anna
Mae Papso
Age
64;
Retired, West Pharmaceutical Services, Inc. (manufacturer of specialized
pharmaceutical packaging & medical device components), Lionville, PA,
Corporate Vice President/Chief Financial Officer from 2000 to 2001 and prior
thereto Vice President & Corporate Controller from 1989 to 2000; a Director
of QNB and the Bank since October 2004.
Henry
L. Rosenberger
Age
62;
Owns and operates Tussock Sedge Farms; Director, Wood Composite Technologies,
Inc. from 2000 to present; President, Rosenberger Companies, Ltd. from 1998
to
2006; President, Dock Woods Community, Inc. (retirement community) from 1992
to
2002; Director of Dock Woods Community, Inc. 1978 to December 2002; a Director
of QNB and the Bank since 1984.
Edgar
L. Stauffer
Age
70;
Retired, Stauffer Manufacturing Corporation (manufacturer and importer of
industrial work gloves and safety equipment), Red Hill, PA; a Director of the
Bank since 1983; a Director of QNB since 1984.
Continuing
Directors Serving Until 2009 (Class
III Directors)
Thomas
J. Bisko
Age
60;
Chief Executive Officer of the Bank and QNB from March 1988 to present;
President of the Bank from September 1985 to present; Treasurer of QNB from
February 1986 to present; President of QNB from May 1986 to present; a Director
of the Bank since 1985; a Director of QNB since 1986.
Dennis
Helf
Age
61;
Registered Investment Advisor from 1995 to present; a Director of the Bank
since
January 1996; a Director of QNB since 1997.
G.
Arden Link
Age
68;
Owner, Link Beverages, Inc.; a Director of the Bank since March 1997; a Director
of QNB since December 2001.
Continuing
Directors Serving Until 2010 (Class
I
Directors)
Charles
M. Meredith, III
Age
72;
Newspaper Columnist; Owner, Franklin & Meredith Inc. (commercial publisher),
Quakertown, PA; Secretary of QNB and the Bank from April 1994 to present; a
Director of the Bank since 1968; a Director of QNB since 1984.
Gary
S. Parzych
Age
52;
President, Eugene T. Parzych, Inc. (construction company), Trumbauersville,
PA,
from 1980 to present; President, Finland Leasing Company, Inc. (real estate
holding company), Trumbauersville, PA from June 1986 to present; Partner, G
& T Properties (real estate holding company), Trumbauersville, PA from 1999
to present; a Director of QNB and the Bank since 1995.
Bonnie
L. Rankin
Age
54;
Vice
President/Strategic Planning, Harleysville Group Inc., Harleysville, PA, from
2003 to present; prior thereto Chief Service Officer from 2000 to 2003, and
President & Chief Operating Officer of Harleysville Insurance of New York
from 1996-2000; has held officer-level responsibility with the Harleysville
organization since
1986.
4
EXECUTIVE
OFFICERS OF QNB AND/OR THE BANK
The
following list sets forth the names of the executive officers of QNB, and other
significant employees of the Bank, their respective ages, positions held, recent
business experience with QNB and the Bank, and the period they have served
in
their respective capacities.
Thomas
J. Bisko
Age
60;
Chief Executive Officer of QNB and the Bank from March 1988 to present;
President of QNB from May 1986 to present; Treasurer of QNB from February 1986
to present; President of the Bank from September 1985 to present.
Robert
C. Werner
Age
50;
Vice President of QNB from October 1988 to present; Executive Vice
President/Chief Operating Officer of the Bank from January 1994 to present;
Senior Vice President/Chief Financial Officer of the Bank from January 1989
to
December 1993.
Bret
H. Krevolin
Age
45;
Chief Financial Officer of QNB from May 2003 to present; Chief Accounting
Officer of QNB from January 1992 to present; Executive Vice President/Chief
Financial Officer of the Bank from January 2000 to present; Senior Vice
President/Chief Financial Officer of the Bank from January 1995 to December
1999; Vice President/Controller of the Bank from August 1989 to December
1994.
Scott
G. Orzehoski
Age
42;
Senior Vice President/Commercial Lending Officer of the Bank from January 2002
to present; Vice President/Commercial Lending Officer of the Bank from August
1997 to December 2001; Assistant Vice President/Commercial Lending Officer
of
the Bank from February 1996 to July 1997.
Mary
Ann Smith
Age
54;
Senior Vice President/Chief Information Officer of the Bank from January 1999
to
present; Senior Vice President/Operations of the Bank from January 1995 to
December 1998; Vice President/Operations of the Bank from January 1988 to
December 1994.
5
BENEFICIAL
OWNERSHIP OF DIRECTORS AND OFFICERS
The
following table sets forth, as of April 7, 2008, the number of shares of common
stock, par value $0.625 per share, beneficially owned by each current director
and nominee for director, by each named executive officer, and by all directors,
nominees and executive officers of QNB and the Bank, as a group. Unless
otherwise indicated, shares are held individually and not pledged as security.
The address for each person is 320 West Broad Street, P.O. Box 9005, Quakertown,
Pennsylvania 18951.
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Name
of Beneficial Owner
|
Amount
and Nature of
Beneficial
Ownership (1)
|
Percentage
of
Class
(2)
|
|||||
|
Thomas
J. Bisko
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308,174
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(3)
|
9.74
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%
|
|||
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Kenneth
F. Brown, Jr.
|
150,100
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(4)
|
4.79
|
%
|
|||
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Dennis
Helf
|
15,422
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(5)
|
*
|
||||
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Bret
H. Krevolin
|
30,746
|
(6)
|
*
|
||||
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G.
Arden Link
|
7,600
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(7)
|
*
|
||||
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Charles
M. Meredith III
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55,374
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(8)
|
1.77
|
%
|
|||
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Scott
G. Orzehoski
|
17,246
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(9)
|
*
|
||||
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Anna
Mae Papso
|
2,000
|
*
|
|||||
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Gary
S. Parzych
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8,977
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(10)
|
*
|
||||
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Bonnie
L. Rankin
|
1,000
|
*
|
|||||
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Henry
L. Rosenberger
|
33,872
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(11)
|
1.08
|
%
|
|||
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Mary
Ann Smith
|
35,568
|
(12)
|
1.13
|
%
|
|||
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Edgar
L. Stauffer
|
100,462
|
(13)
|
3.20
|
%
|
|||
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Robert
C. Werner
|
33,835
|
(14)
|
1.07
|
%
|
|||
|
Current
Directors, Nominees & Executive Officers
as
a Group (16 persons)
*
Less than 1.00%
|
800,376
|
(15)
|
24.56
|
%
|
|||
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(1)
|
The
securities "beneficially owned" by an individual are determined in
accordance with the definitions of "beneficial ownership" set forth
in the
General Rules and Regulations of the Securities and Exchange Commission
(SEC) and may include securities owned by or for the individual's
spouse
and minor children and any other relative who has the same home,
as well
as securities as to which the individual has, or shares, voting or
investment power or has the right to acquire beneficial ownership
within
60 days after April 7, 2008. Beneficial ownership may be disclaimed
as to
certain of the securities.
|
|
(2)
|
Numbers
are rounded-off to the nearest one-hundredth
percent.
|
|
(3)
|
Includes
15,582 shares owned jointly by Mr. Bisko with his wife, Barbara,
200
shares held in her individual capacity, and 28,216 options. Also
includes
259,368 shares beneficially owned as co-executor of the Estate of
James C.
Ebbert.
|
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(4)
|
Includes
148,336 shares owned jointly by Mr. Brown with his wife,
Pamela.
|
|
(5)
|
Includes
13,658 shares owned jointly by Mr. Helf with his wife,
Mary.
|
|
(6)
|
Includes
4,000 shares owned jointly by Mr. Krevolin with his wife, Susan,
and
26,666 options.
|
|
(7)
|
Includes
1,800 shares owned jointly by Mr. Link with his wife,
Dorothy.
|
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(8)
|
Includes
11,112 shares owned jointly by Mr. Meredith with his wife, Elizabeth,
5,030 shares held in her individual capacity, and 3,738 shares held
of
record by Franklin & Meredith, Inc, a commercial publishing company
owned by Mr. Meredith.
|
|
(9)
|
Includes
15,466 options.
|
|
(10)
|
Includes
2,589 shares owned by Mr. Parzych’s wife, Karen, and 2,559 shares held of
record by Eugene T. Parzych, Inc., a construction company owned by
Mr.
Parzych.
|
|
(11)
|
Includes
6,296 shares owned by Mr. Rosenberger’s wife,
Charlotte.
|
|
(12)
|
Includes
1,788 shares owned jointly by Ms. Smith with her husband, Randall,
and
26,516 options.
|
|
(13)
|
Includes
65,034 shares owned jointly by Mr. Stauffer with his wife, Mary Blake,
and
10,664 shares held in her individual
capacity.
|
|
(14)
|
Includes
6,997 shares owned jointly by Mr. Werner with his wife, Judith, and
26,666
options.
|
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(15)
|
Includes
123,530 options, in the aggregate which are exercisable within 60
days of
the record date; thus, the percentage ownership calculation is based
upon
an aggregate of 3,258,234 shares
outstanding.
|
6
BENEFICIAL
OWNERSHIP OF SECURITIES
On
April
7, 2008, 3,134,704 shares of common stock, par value $0.625 per share, were
issued, outstanding and entitled to vote. The following table sets forth the
names of persons who, directly or indirectly, are known to QNB’s management to
be the beneficial owners of at least 5% of QNB's outstanding common stock as
of
April
7,
2008.
|
Name
and Address of Beneficial
Owner
|
Number
of Shares
Owned
(1)
|
Percentage
of
Class
(2)
|
|||||
|
Estate
of James C. Ebbert (3)
C/O
Thomas J. Bisko and Phillip D. Miller
QNB
Bank
320
West Broad Street
P.O.
Box 9005
Quakertown,
PA 18951
|
259,368
|
8.27
|
%
|
||||
|
(1)
|
The
securities "beneficially owned" by an individual are determined in
accordance with the definitions of "beneficial ownership" set forth
in the
General Rules and Regulations of the SEC, including Rule 13d-3 under
the
Securities Exchange Act of 1934, and may include securities owned
by or
for the individual's spouse and minor children and any other relative
who
has the same home, as well as securities to which the individual
has, or
shares, voting or investment power or has the right to acquire beneficial
ownership within 60 days after April 7, 2008. Beneficial ownership
may be
disclaimed as to certain of the
securities.
|
| (2) |
Numbers
are rounded off to the nearest one-hundredth
percent.
|
|
(3)
|
Mr.
Thomas J. Bisko, Director, Chief Executive Officer and President
of QNB
and the Bank, is the co-executor of the estate and, as co-executor,
has
the right to vote the shares owned by the estate. Mr. Bisko has no
pecuniary interest in the estate.
|
GOVERNANCE
OF THE COMPANY
Our
Board
of Directors believes that the purpose of corporate governance is to ensure
that
we maximize shareholder value in a manner consistent with legal requirements
and
the highest standards of integrity. The Board has adopted and adheres to
corporate governance practices which the Board and senior management believe
promote this purpose, are sound and represent best practices. We continually
review these governance practices, Pennsylvania law (the state in which we
are
incorporated), the rules and listing standards of the Nasdaq Stock Market and
SEC regulations, as well as best practices suggested by recognized governance
authorities.
Currently,
our Board of Directors has 10 members. Under the rules adopted by the Securities
and Exchange Commission and Nasdaq Stock Market for independence, Kenneth F.
Brown, Jr., Dennis Helf, G. Arden Link, Charles M. Meredith, III, Anna Mae
Papso, Bonnie L. Rankin, Henry L. Rosenberger and Edgar L. Stauffer meet the
standards for independence.
These directors represent more than a majority of our Board of Directors.
Code
of Ethics
We
have
adopted a Code of Ethics for directors, officers and employees of QNB. It is
intended to promote honest and ethical conduct, full and accurate reporting
and
compliance with laws as well as other matters. A copy of the Code of Ethics
is
posted on our website at http://www.qnb.com.
7
MEETINGS
AND COMMITTEES OF THE BOARD OF DIRECTORS OF QNB AND THE
BANK
Set
forth
below is a list of each of our current board members and our current Board
committee members. The respective chairperson of each of the Board committees
is
also noted below. Each current director of QNB is also a current member of
the
Bank’s Board of Directors.
|
Board
Member
|
Board
|
Audit
|
Compensation
|
Executive
|
Nominating
|
|||||
|
Thomas
J. Bisko
|
X
|
X
|
||||||||
|
Kenneth
F. Brown, Jr.
|
X
|
X
|
C
|
|||||||
|
Dennis
Helf
|
C
|
X
|
C
|
|||||||
|
G.
Arden Link
|
X
|
X
|
||||||||
|
Charles
M. Meredith, III
|
X
|
X
|
X
|
X
|
||||||
|
Anna
Mae Papso
|
X
|
C
|
||||||||
|
Gary
S. Parzych
|
X
|
|||||||||
|
Bonnie
L. Rankin
|
X
|
X
|
||||||||
|
Henry
L. Rosenberger
|
X
|
X
|
X
|
X
|
||||||
|
Edgar
L Stauffer
|
X
|
X
|
C
|
X
|
X
|
|||||
|
Meetings
Held in 2007 C - Chairperson
|
16
|
6
|
1
|
4
|
1
|
All
current directors attended at least 75% of the aggregate of the total number
of
meetings of the Board of Directors (held for the period for which he or she
has
been a director) and the total number of meetings held by all committees of
the
Board of Directors on which he or she served (during the periods that he or
she
served).
QNB
has
no specific policy requiring directors to attend the Annual Meeting of
Shareholders; however, director attendance is strongly encouraged. All current
members of the Board of Directors as well as former director Norman L. Baringer
were present at the 2007 Annual Meeting of Shareholders. It is anticipated
that
all members of the Board of Directors will be attending the 2008 Annual Meeting
of Shareholders.
QNB’s
Board of Directors established and maintains the following committees, among
others:
Audit
Committee.
The
Audit Committee recommends the engagement and dismissal of the independent
certified public accountants, reviews their annual audit plan and the results
of
their auditing activities, and considers the range of audit and non-audit fees.
It also reviews the general audit plan, scope and results of QNB's procedures
for internal auditing. The reports of examination of QNB and its subsidiary
by
bank regulatory examiners are also reviewed by the Audit Committee. The Audit
Committee also reviews all SEC filings and earnings press releases. The Audit
Committee meets with management and the auditors prior to the filing of
officers’ certifications with the SEC to receive information concerning, among
other things, significant deficiencies in the design or operation of internal
controls.
All
members of the Audit Committee are non-executives and are independent directors
pursuant
to the rules adopted by the SEC and the corporate governance standards
promulgated by the Nasdaq Stock Market. In determining whether a director is
independent for purposes of each of the above stated guidelines, the Board
of
Directors must affirmatively determine that the directors on the Audit Committee
do not, among other things, accept any consulting, advisory, or other
compensatory fee from QNB. Applying these standards, the Board of Directors
has
determined that all of the directors on the Audit Committee are independent.
The
members of QNB’s Audit Committee are Directors Meredith, Papso, Rosenberger and
Stauffer.
The
Board
of Directors has determined that Anna Mae Papso meets the requirements adopted
by the SEC and Nasdaq Stock Market for qualification as an Audit Committee
financial expert. Ms. Papso has past employment experience as a Corporate Vice
President/Chief Financial Officer providing her with diverse and progressive
financial management experience, as well as expertise in internal controls
and
U.S. accounting rules and SEC reporting. An Audit Committee financial expert
is
defined as a person who has the following attributes: (i) an understanding
of
generally accepted accounting principles and financial statements; (ii) the
ability to assess the general application of such principles in connection
with
the accounting for estimates, accruals and reserves; (iii) experience preparing,
auditing, analyzing or evaluating financial statements that present a breadth
and level of complexity or accounting issues that are generally comparable
to
the breadth and complexity of issues that can reasonably be expected to be
raised by the registrant’s financial statements, or experience actively
supervising one or more persons engaged in such activities; (iv) an
understanding of internal controls and procedures for financial reporting;
and
(v) an understanding of Audit Committee functions.
8
The
identification of a person as an Audit Committee financial expert does not
impose on such person any duties, obligations or liability that are greater
than
those that are imposed on such person as a member of the Audit Committee and
the
Board of Directors in the absence of such identification. Moreover, the
identification of a person as an Audit Committee financial expert for purposes
of the regulations of the SEC does not affect the duties, obligations or
liability of any other member of the Audit Committee or the Board of Directors.
Additionally, a person who is determined to be an Audit Committee financial
expert will not be deemed an “expert” for purposes of Section 11 of the
Securities Act of 1933.
The
Audit
Committee operates under a formal charter that governs its duties and conduct.
The Audit Committee Charter is available on our website at
www.qnb.com.
The
Audit
Committee has also adopted a Whistleblower Policy to enable confidential and
anonymous reporting of questionable accounting or auditing matters, fraudulent
activities, or misconduct to the Audit Committee. The policy is also available
on our website at www.qnb.com.
Compensation
Committee.
The
Compensation Committee's primary functions are to review and approve key
executive salaries and salary policy, determine the salary of the Chief
Executive Officer and to administer equity compensation plans. In addition,
the
Committee reviews the general guidelines on compensation for all employees.
The
Board
of Directors has determined that all of the directors serving on the
Compensation Committee are independent for the purposes of the rules adopted
by
the SEC. The Compensation Committee does not have a formal charter. The
members of the Compensation Committee are Directors Helf, Meredith, Rankin,
Rosenberger and Stauffer.
Executive
Committee.
The
Executive Committee is authorized to exercise all of the authority of the Board
of Directors in the management of QNB between Board meetings, unless otherwise
provided in QNB’s Bylaws. The members of the Executive Committee are Directors
Bisko, Brown, Helf, Meredith and Stauffer.
Nominating
Committee. The
Board
of Directors has determined that all of the directors serving on the Nominating
Committee are independent for the purposes of the rules adopted by the SEC
and
the corporate governance standards promulgated by the Nasdaq Stock Market.
The
principal duties of the Nominating Committee include developing
and recommending to the Board criteria for selecting qualified director
candidates, identifying individuals qualified to become Board members,
evaluating and selecting, or recommending to the Board, director nominees for
each election of directors, considering committee member qualifications,
appointment and removal, recommending codes of conduct and codes of ethics
applicable to the Corporation and providing oversight in the evaluation of
the
Board and each committee. The Nominating Committee has no formal process for
considering director candidates recommended by shareholders, but the Nominating
Committee will consider such candidates and its policy is to give due
consideration to all candidates. If a shareholder wishes to recommend a director
candidate as a possible nominee for the 2009 annual meeting of shareholders,
the
shareholder should mail the name, background and contact information for the
candidate to the Nominating Committee at the Corporation's offices at P.O.
Box
9005, Quakertown, PA 18951 no later than December 19, 2008. The Nominating
Committee intends to develop a process for identifying and evaluating all
nominees for director, including any recommended by shareholders, and minimum
requirements for nomination. The Nominating Committee does not have a formal
charter. Members
of the Nominating Committee include Directors Brown, Link, Rosenberger and
Stauffer.
9
AUDIT
COMMITTEE REPORT
Pursuant
to rules adopted by the SEC designed to improve disclosures related to the
functioning of corporate audit committees and to enhance the reliability and
credibility of financial statements of public companies, QNB’s Audit Committee
submits the following report:
Audit
Committee Report to Board of Directors
The
Audit
Committee oversees QNB’s financial reporting process on behalf of the Board of
Directors. In that connection, the Committee, along with the Board of Directors,
has formally adopted an Audit Committee Charter setting forth its
responsibilities. In addition, appropriate policies have been established to
further strengthen disclosure procedures required under the Sarbanes-Oxley
Act
of 2002.
Management
has the primary responsibility for the financial statements and the reporting
process, including the systems of internal control. In fulfilling its oversight
responsibilities, the Committee reviewed the audited financial statements in
the
annual report with management, including a discussion of the quality, not just
the acceptability, of the accounting principles, the reasonableness of
significant judgments and the clarity of disclosures in the financial
statements.
In
the
discharge of its responsibilities, the Audit Committee has reviewed and
discussed the Corporation’s audited financial statements for 2007 with
management and QNB’s independent registered public accounting firm. In addition,
the Audit Committee has discussed with the independent registered public
accounting firm matters such as the quality (in addition to acceptability),
clarity, consistency, and completeness of the Corporation’s financial reporting,
as required by U.S. Auditing Standards Section AU380, Communication with Audit
Committees.
The
Audit
Committee has considered the compatibility of the provision of non-audit
services with the independent registered public accounting firm’s maintenance of
independence and has received from the independent registered public accounting
firm written disclosures and a letter concerning the independent registered
public accounting firm’s independence from the Corporation, as required by
Independence Standards Board Standard No. 1, Independence Discussions with
Audit
Committees. These disclosures have been reviewed by the Audit Committee and
discussed with the independent registered public accounting firm.
The
Committee discussed with QNB’s internal auditors and independent registered
public accounting firm the overall scope and plans for their respective audits.
The Committee meets with the internal auditors and independent registered public
accounting firm, with and without management present, to discuss the results
of
their examinations, their evaluations of QNB’s internal controls and the overall
quality of QNB’s financial reporting.
In
reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors (and the Board has approved) that the
audited financial statements be included in the Annual Report on Form 10-K
for
the year ended December 31, 2007, for filing with the SEC.
Respectfully
submitted,
THE
AUDIT
COMMITTEE
Anna
Mae
Papso, Chairperson
Charles
M. Meredith, III
Henry
L.
Rosenberger
Edgar
L.
Stauffer
10
Audit
Committee Pre-Approval of Audit and Permissible Non-Audit Services of the
Independent Registered Public Accounting Firm
The
Audit
Committee has a policy for the pre-approval of services provided by the
independent registered public accounting firm. The policy requires the Audit
Committee to pre-approve all audit and permissible non-audit services provided
by the independent registered public accounting firm. These services may include
audit services, audit related services, tax services, and other services. Under
the policy, pre-approval is generally provided for up to one year and any
pre-approval is detailed as to the particular service or category of services
and is subject to a specific budget. In addition, the Audit Committee may also
pre-approve particular services on a case by case basis. The Audit Committee
has
delegated to the Chairman of the Audit Committee the authority to pre-approve
services not prohibited by law to be performed by our independent registered
public accounting firm and associated fees up to a maximum for any one service
of $5,000. All of the services related to the Audit Related Fees, Tax Fees,
or
All Other Fees described below were approved by the Audit Committee pursuant
to
the pre-approval provisions set forth in applicable rules issued by the SEC
and
the Audit Committee’s pre-approval policy.
Appointment
of the Independent Registered Public Accounting Firm for 2008
On
April
9, 2007, QNB retained Beard Miller Company LLP as its new independent registered
public accountants to audit QNB’s financial statements for the fiscal year ended
December 31, 2007. S.R. Snodgrass, A.C. was dismissed on April 9, 2007. The
decision to change independent accountants was recommended and approved by
the
Audit Committee of QNB.
During
each of the fiscal years ended December 31, 2005 and 2006, none of S.R.
Snodgrass, A.C.’s reports on the financial statements of QNB contained an
adverse opinion or a disclaimer of opinion or was qualified or modified as
to
uncertainty, audit scope or accounting principle and there were no disagreements
between QNB and S.R. Snodgrass, A.C. on any matter of accounting principles
and
practices, financial statement disclosure, or audit scope or procedure, which
disagreement, if not resolved to the satisfaction of S.R. Snodgrass, A.C. would
have caused it to make reference to the subject matter of the disagreement
in
connection with its reports.
The
Audit
Committee has also approved the selection of Beard Miller Company LLP as QNB’s
independent registered public accounting firm for 2008.
Audit
Fees, Audit Related Fees, Tax Fees, and All Other Fees
Beard
Miller Company LLP was QNB’s independent registered public accounting firm for
2007 while S.R. Snodgrass, A.C. was QNB’s independent registered public
accounting firm for 2006. Aggregate fees billed to QNB by them for services
rendered are presented below.
|
2007
|
2006
|
||||||
|
Audit
fees
|
$
|
118,500
|
$
|
107,597
|
|||
|
Audit
related fees
|
8,400
|
6,500
|
|||||
|
Audit
and audit related fees
|
126,900
|
114,097
|
|||||
|
Tax
fees
|
-
|
-
|
|||||
|
All
other fees
|
-
|
-
|
|||||
|
Total
fees
|
$
|
126,900
|
$
|
114,097
|
|||
Audit
Fees
include
fees billed for professional services rendered for the audit of QNB’s annual
financial statements and for the review of financial statements included in
QNB’s Form
10-Qs and Section 404 of the Sarbanes-Oxley Act.
Audit
Related Fees
include
fees billed for assurance and related services that are reasonably related
to
the performance of the audit or review of the registrant’s financial statements
and are not reported under the Audit Fees section of the table above. These
services include audits of financial statements of certain employee benefit
plans.
11
Tax
Fees
would
include fees billed for tax consultation and tax compliance services.
All
Other Fees
would
include fees billed for products and services other than the services reported
under the Audit Fees, Audit Related Fees, or Tax Fees sections of the table
above.
A
representative of Beard Miller Company LLP is expected to be present at the
Annual Meeting. The representative will have an opportunity to make a statement
and be available to respond to appropriate questions.
EXECUTIVE
AND DIRECTOR COMPENSATION
Compensation
Discussion and Analysis
QNB’s
executive compensation program includes compensation and benefit components
typical of programs among comparable banking and financial service companies
in
our local and regional marketplace.
Objectives
QNB’s
success is dependent upon its ability to attract and retain highly qualified
and
motivated executives. QNB endorses the philosophy that executive compensation
should reflect the Corporation’s performance and the contribution of such
officers to that performance. Our executive compensation program is designed
to
support our Corporation’s core values, strategic objectives and financial goals
as established by the Board. Moreover, our compensation philosophy is intended
to align the interests of management with those of our shareholders through
equity based plans.
Program
Management
The
Compensation Committee of the Board of Directors has primary responsibility
for
the design and administration of the executive compensation program for
directors and executive officers of QNB, including the Chief Executive Officer.
It reviews the executive compensation program throughout the year in light
of
changing organization needs and operating conditions and changing trends in
industry practice. The
Compensation Committee has the authority to retain and compensate advisors
that
it deems necessary to fulfill its duties. In
evaluating the program, the Compensation Committee utilizes information from
management and the services of an outside consultant. Webber HR Solutions,
L.L.C., was used to assist in establishing executive and director compensation
for 2007. In
addition, the Committee, in consultation with the Chief Executive Officer,
considers and reports to the Board regarding employee or executive succession
matters.
The
Compensation Committee is responsible for recommending compensation-related
decisions to the Board of Directors for final approval. The performance of
Mr.
Bisko is reviewed semiannually by the full Board without the presence of Mr.
Bisko. The results of these appraisals are used by the Compensation Committee
in
its recommendation of annual pay adjustments and other elements of compensation
for Mr. Bisko to the Board of Directors for its consideration.
Role
of Executive Officers in Executive Compensation
In
formulating its recommendations for the other executive officers, the
Compensation Committee will consider information provided by Mr. Bisko or Mr.
Werner related to subordinate executives.
Elements
of Executive Compensation
Factors
the Compensation Committee considered in analyzing compensation
include:
|
·
|
Total
compensation;
|
|
·
|
Internal
pay equity; and
|
|
·
|
The
competitive environment for recruiting executive officers, and what
the
relevant competitors pay.
|
12
We
compensate our executive management through a mix of base salary, bonus and
equity compensation designed to be competitive with financial institutions
$500
million to $1 billion in asset size located in Pennsylvania and the Middle
Atlantic region and to align management's incentives with the long-term
interests of our shareholders. At the senior-most levels, we design the
incentive compensation to reward company-wide performance through tying awards
primarily to earnings per share growth.
The
key
components of QNB’s executive compensation consist of:
|
·
|
Base
salary;
|
|
·
|
Cash
incentive compensation; and
|
|
·
|
Equity
compensation awards under the 1998 or 2005 Stock Option
Plan
|
Base
Salary
Base
pay
is a critical element of executive compensation because it provides executives
with a base level of monthly income. We want to provide our executive management
with a level of assured cash compensation in the form of base salary that
facilitates an appropriate lifestyle given their professional status and
accomplishments. Additionally
in determining base salaries, we consider the executive's qualifications and
experience, scope of responsibilities and future potential, the goals and
objectives established for the executive, the executive's past performance,
competitive salary practices at companies in the study groups and internal
pay
equity. Individual executive salaries for those executives that report directly
to the Chief Executive Officer are subject to approval by the Chief Executive
Officer and the Committee. The Chief Executive Officer’s salary is subject to
approval by the Committee and the Board.
Annual
salary adjustments are determined by evaluating the performance of QNB and
of
each executive officer relative to both corporate and individual goals
determined during a previous review.
To
assist
in determining base salary, the Compensation Committee used an analysis prepared
by Webber HR Solutions, L.L.C., a regionally recognized executive compensation
consultant. The survey analyzed compensation paid to executives in similar
positions at financial institutions considering both asset size and geographical
location. The asset size considered financial institutions between $500 million
and $1 billion nationally, in the Mid-Atlantic Region, in Pennsylvania and
in
eastern Pennsylvania, while the geographic analysis also considered some larger
financial institutions located in the Philadelphia metropolitan area including
Bucks, Chester, Delaware, Montgomery and Philadelphia counties.
The
survey describes the compensation paid to executives at various management
levels. The base salary of all similar positions within the survey group was
used as a basis for calculating a base salary minimum, midpoint and maximum
for
each job description. The salaries of the executives were compared to the
midpoint applicable to their job description, and increases were awarded based
upon individual performance and contributions, with each salary falling within
the range for the respective position.
Cash
Incentive Compensation
There
was
no formal cash incentive compensation plan during 2007. The Board, based solely
on its discretion, approved a 0.5% cash bonus for all employees, including
executive management.
The
Compensation Committee, with Board approval, had established in 2002 an
executive cash incentive plan that was based on earnings per share growth.
The
plan provided for a cash bonus equivalent of 5% to 10% of base pay based on
QNB
increasing its earnings per share at an average annual rate of 7.5% to 10%
over
the five year period 2002 through 2006. The bonus percentage increased by 1%
for
each 0.5% increase in earnings per share above 7.5% up to a maximum bonus of
10%. The payout was calculated annually. The purpose of the plan was to motivate
executives to achieve financial goals that should have a positive impact on
QNB’s stock price and therefore increase shareholder value.
In
2006
and 2005, QNB did not meet the minimum average earnings per share growth goal
of
7.5% over the five year period so no incentive was paid out under this plan.
In
2006, at its discretion, the Board approved a 1% cash bonus for all employees,
including executive management.
13
Long-Term
Incentive Compensation
Executive
officers are eligible to participate in a long-term incentive award plan
established to focus executive efforts on the strategic directions and goals
of
QNB and to reward them for their successes in these areas. The purpose of the
Plan is also to provide ownership incentive to the executive officers and align
their interests with the interests of shareholders. In establishing award
levels, we do not consider the equity ownership levels of the recipients or
prior awards that are fully vested.
Currently
QNB has two stock option plans (the 1998 Plan and the 2005 Plan) administered
by
the Compensation Committee. The Plans provide for the granting of either (i)
Non-Qualified Stock Options or (ii) Incentive Stock Options. The exercise price
of an option, as defined by the Plans, is the fair market value of QNB’s common
stock on the date of grant.
The
Compensation Committee determines the type of grant, the number of shares of
common stock subject to a particular grant and the vesting period for such
grants. To date, options granted under these Plans have a three year vesting
feature. The Compensation Committee determines the number of options granted
in
total and to Mr. Bisko, individually. Mr. Bisko determines the allocation of
the
remaining grants among eligible employees. The fair value of the stock options
granted represents only a small portion of total compensation. The total number
of options granted by the Compensation Committee is based on a goal of keeping
earnings per share dilution to less than $0.05 per share. Options are generally
granted during the first quarter of the year.
On
January 16, 2007, the Compensation Committee, based solely on its discretion,
granted 3,000 stock options to Mr. Bisko, 2,750 stock options to Mr. Krevolin
and Mr. Werner and 2,600 stock options to Ms. Smith and Mr. Orzehoski. The
exercise price of these options is $25.15, the fair market value per share
as of
the date of the grant. On January 15, 2008, the Compensation Committee granted
3,000 stock options to Mr. Bisko, 2,750 stock options to Mr. Krevolin and Mr.
Werner and 2,600 stock options to Ms. Smith and Mr. Orzehoski. The exercise
price of these options is $21.00, the fair market value per share as of the
date
of the grant.
Health
and Welfare Benefits
Executives
participate in the Corporation’s qualified health and welfare benefits program
on the same terms and conditions as all other employees. In addition, executives
participate in the Corporation’s Retirement Savings Plan on the same terms and
conditions as other employees. The plan provides for an employer matching
contribution, up to 3 percent of base pay. In addition, the plan provides a
safe
harbor non-elective employer contribution of 5 percent of base pay.
Perquisites
and Other Benefits
Perquisites
received by the executive officers are reviewed annually. The primary
perquisite
received by Mr. Bisko, Mr. Werner and Mr. Orzehoski is the
reimbursement of country club dues. These executive officers are encouraged
to
belong to a golf or social club to provide the appropriate entertainment forum
for customers and appropriate interaction with the communities served by QNB.
Our
executive management and other employees have built QNB into the successful
enterprise that it is today, and we believe that it is important to protect
them
in the event of a change in control. Further, it is our belief that the
interests of shareholders will be best served if the interests of our executive
management are aligned with them, and providing change in control benefits
should eliminate, or at least reduce, the reluctance of executive management
to
pursue potential change in control transactions that may be in the best
interests of shareholders. Relative to the overall value of the Corporation,
these potential change in control benefits are relatively minor.
Tax
Considerations
Section 162(m)
of the Internal Revenue Code disallows, with certain exceptions, a Federal
income tax deduction for compensation over $1 million paid to each of our CEO
and the four highest-paid executive officers other than the CEO, provided that
they are serving in that capacity as of the last day of our fiscal
year. One
exception to the deduction disallowance applies to performance-based
compensation paid pursuant to shareholder-approved plans.
14
Although
the committee keeps in mind the desirability of limiting QNB’s non-deductible
compensation expense, the committee also believes that it is equally important
to maintain the flexibility and competitive effectiveness of our executive
compensation program. Therefore, the committee may, from time to time, make
grants and awards that may not be deductible for Federal income tax purposes,
including the provisions of Section 162(m).
COMPENSATION
COMMITTEE REPORTS ON EXECUTIVE COMPENSATION
The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis required by Item 402(b) of Regulation S-K with executive
management, and based on such review and discussions, the Compensation Committee
recommended to the Board of Directors that the Compensation Discussion and
Analysis be included in the Proxy Statement and the Annual Report on Form 10-K
for the fiscal year ended December 31, 2007.
Respectfully
submitted,
THE
COMPENSATION COMMITTEE
Edgar
L.
Stauffer, Chairperson
Dennis
Helf
Charles
M. Meredith, III
Bonnie
L.
Rankin
Henry
L.
Rosenberger
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The
Compensation Committee makes recommendation to the Board of Directors concerning
general guidelines on compensation of employees and specific recommendations
for
Mr. Bisko. The Compensation Committee is composed entirely of the following
four
independent outside directors: Messrs. Stauffer, Rosenberger, Meredith and
Helf.
No member of the Compensation Committee during fiscal year 2007 was an officer
or employee of the Corporation or any of its subsidiaries or was formerly an
officer of the Corporation or any of its subsidiaries. No member of the
Compensation Committee had any relationship requiring disclosure by the
Corporation under the proxy rules promulgated under the Securities and Exchange
Act of 1934.
15
The
following table is a summary of the compensation for the past three years earned
by the principal executive officer, principal financial officer and three other
named executive officers:
Summary
Compensation Table
|
Name
and Position
|
Year
|
Salary
($)(8)
|
Bonus
($)
|
Stock
Awards ($)
|
Option
Awards
($)(1)
|
Non-Equity
Incentive Plan Compensation
($)(2)
|
All
Other
Compensation
($)
|
Total
($)
|
|||||||||||||||||
|
Thomas
J. Bisko
|
2007
|
$
|
256,700
|
$
|
1,284
|
$
|
0
|
$
|
14,838
|
N/A
|
$
|
30,492
(3
|
)
|
$
|
303,314
|
||||||||||
|
President
and
|
2006
|
244,474
|
2,445
|
0
|
16,291
|
$
|
0
|
28,484
(3
|
)
|
291,694
|
|||||||||||||||
|
Principal
Executive Officer
|
2005
|
234,845
|
0
|
0
|
0
|
0
|
26,873
(3
|
)
|
261,718
|
||||||||||||||||
|
Bret
H. Krevolin
|
2007
|
162,145
|
811
|
0
|
13,562
|
N/A
|
13,274
(4
|
)
|
189,792
|
||||||||||||||||
|
Executive
Vice President
|
2006
|
154,424
|
1,544
|
0
|
14,774
|
0
|
13,053
(4
|
)
|
183,795
|
||||||||||||||||
|
Principal
Financial Officer
|
2005
|
148,129
|
7,500
|
0
|
0
|
0
|
12,935
(4
|
)
|
168,564
|
||||||||||||||||
|
Robert
C. Werner
|
2007
|
176,559
|
883
|
0
|
13,562
|
N/A
|
19,028
(5
|
)
|
210,032
|
||||||||||||||||
|
Executive
Vice President
|
2006
|
168,151
|
1,682
|
0
|
14,774
|
0
|
19,713
(5
|
)
|
204,320
|
||||||||||||||||
|
Chief
Operating Officer
|
2005
|
161,296
|
0
|
0
|
0
|
0
|
19,420
(5
|
)
|
180,716
|
||||||||||||||||
|
Mary
Ann Smith
|
2007
|
133,181
|
666
|
0
|
12,904
|
N/A
|
10,655
(6
|
)
|
157,406
|
||||||||||||||||
|
Senior
Vice President
|
2006
|
128,059
|
1,281
|
0
|
14,294
|
0
|
10,647
(6
|
)
|
154,281
|
||||||||||||||||
|
Chief
Information Officer
|
2005
|
123,134
|
0
|
0
|
0
|
0
|
10,456
(6
|
)
|
133,590
|
||||||||||||||||
|
Scott
G. Orzehoski
|
2007
|
125,000
|
625
|
0
|
12,904
|
N/A
|
10,721
(7
|
)
|
149,260
|
||||||||||||||||
|
Senior
Vice President
|
2006
|
110,000
|
1,100
|
0
|
14,294
|
0
|
9,671
(7
|
)
|
135,075
|
||||||||||||||||
|
Commercial
Lending
|
2005
|
96,288
|
0
|
0
|
0
|
0
|
8,423
(7
|
)
|
104,711
|
||||||||||||||||
|
(1)
|
The
amounts in this column are calculated based on FAS 123R and equal
the
financial statement compensation cost for stock option awards as
reported
in our consolidated statement of income for the fiscal year. Under
FAS
123R, a pro-rata portion of the total expense at time of grant is
recognized over the applicable service period generally corresponding
with
the vesting schedule of the grant. The initial expense is based on
the
fair value of the stock option grants as estimated using the Black-Scholes
option-pricing model. The assumptions used to arrive at the Black-Scholes
value are disclosed in Note 1 to our consolidated financial statements
included in our 2007 Annual Report on Form 10-K.
|
|
(2)
|
Payouts
under the Executive Incentive Compensation Plan are discussed further
in
the Compensation Discussion and Analysis section. Under the Plan
an
Executive was eligible in 2005 and 2006 to receive the equivalent
of 5% to
10% of his or her salary based on QNB increasing its earnings per
share at
an average rate of 7.5% to 10%. QNB did not meet these minimum thresholds
in 2005 or 2006; therefore no incentive was paid or earned under
the plan
in those years.
|
|
(3)
|
Includes
the Bank's contributions on behalf of Mr. Bisko to the Retirement
Savings
Plan of $18,951, $18,334 and $17,545; country club membership dues
of
$8,568, $8,004 and $7,404; and reimbursement of spousal travel expense
of
$2,973, $2,146 and $1,924 for 2007, 2006 and 2005,
respectively.
|
|
(4)
|
Includes
the Bank's contributions on behalf of Mr. Krevolin to the Retirement
Savings Plan of $12,994, $12,354 and $11,850; reimbursement of spousal
travel expense of $0, $699 and $1,085 for 2007, 2006 and 2005,
respectively, and payments of $280 for 2007 to decline coverage under
the
Bank’s health benefits plan.
|
|
(5)
|
Includes
the Bank's contributions on behalf of Mr. Werner to the Retirement
Savings
Plan of $14,125, $13,453 and $12,904; country club membership dues
of
$4,764, $4,368 and $5,826; and reimbursement of spousal travel expense
of
$139, $1,892 and $690 for 2007, 2006 and 2005, respectively.
|
|
(6)
|
Includes
the Bank's contributions on behalf of Ms. Smith to the Retirement
Savings
Plan of $10,655, $10,248 and $9,896; reimbursement of spousal travel
expense of $352 for 2006 and payments of $47 and $560 for 2006 and
2005,
respectively, to decline coverage under the Bank’s health benefits
plan.
|
|
(7)
|
Includes
the Bank's contributions on behalf of Mr. Orzehoski to the Retirement
Savings Plan of $10,001, $8,801 and $7,703; and country club membership
dues of $720, $870 and $720 for 2007, 2006 and 2005,
respectively.
|
|
(8)
|
The
annual salaries for 2008 for the named executive officers are: Mr.
Bisko
$265,685, Mr. Krevolin $170,252, Mr. Werner $188,918, Ms. Smith $137,842
and Mr. Orzehoski $130,625.
|
16
Stock
Option Grants for 2007
The
following table reflects grants of stock options to Mr. Bisko, Mr. Werner,
Mr.
Krevolin, Ms. Smith and Mr. Orzehoski in fiscal year 2007.
GRANTS
OF PLAN-BASED AWARDS
|
Estimated
Future Payouts
Under
Non-Equity
Incentive
Plan Awards
|
Estimated
Future Payouts Under Equity
Incentive
Plan Awards
|
All
Other
Stock
Awards:
Number
of
Shares
of
Stock
|
All
Other
Option
Awards:
Number
of Securities Underlying
|
Exercise
Or
Base Price of Option
|
Grant
Date
Fair
Value
Of
Stock
And
|
|||||||||||||||||||||||||||||
|
Name
|
Grant
Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
or
Units (#)
|
Options
(#)
|
Awards
($/Sh)
|
Option
Awards
|
|||||||||||||||||||||||
|
Thomas
J. Bisko
|
1/16/07
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
3,000
|
$
|
25.15
|
$
|
3.57
|
|||||||||||||||||||||
|
Bret
H. Krevolin
|
1/16/07
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
2,750
|
25.15
|
3.57
|
|||||||||||||||||||||||
|
Robert
C. Werner
|
1/16/07
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
2,750
|
25.15
|
3.57
|
|||||||||||||||||||||||
|
Mary
Ann Smith
|
1/16/07
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
2,600
|
25.15
|
3.57
|
|||||||||||||||||||||||
|
Scott
G. Orzehoski
|
1/16/07
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
2,600
|
25.15
|
3.57
|
|||||||||||||||||||||||
17
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR END
|
Option
Awards
|
||||||||||||||||
|
Name
|
Number
of Securities Underlying Unexercised Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options
(#)
|
Option
Exercise Price
($)
|
Option
Expiration Date (1)
|
|||||||||||
|
Thomas
J. Bisko
|
3,528
|
0
|
$
|
16.70
|
01/12/2009
|
|||||||||||
|
3,528
|
0
|
13.09
|
01/18/2010
|
|||||||||||||
|
3,360
|
0
|
13.30
|
01/16/2011
|
|||||||||||||
|
6,000
|
0
|
16.13
|
01/15/2012
|
|||||||||||||
|
6,000
|
0
|
20.00
|
01/21/2013
|
|||||||||||||
|
2,800
|
0
|
33.25
|
04/27/2014
|
|||||||||||||
|
3,000
|
0
|
32.35
|
01/18/2015
|
|||||||||||||
|
3,000
|
0
|
26.00
|
01/17/2011
|
|||||||||||||
|
3,000
|
0
|
25.15
|
01/16/2012
|
|||||||||||||
|
Bret
H. Krevolin
|
3,528
|
0
|
16.70
|
01/12/2009
|
||||||||||||
|
3,528
|
0
|
13.09
|
01/18/2010
|
|||||||||||||
|
3,360
|
0
|
13.30
|
01/16/2011
|
|||||||||||||
|
5,500
|
0
|
16.13
|
01/15/2012
|
|||||||||||||
|
5,500
|
0
|
20.00
|
01/21/2013
|
|||||||||||||
|
2,500
|
0
|
33.25
|
04/27/2014
|
|||||||||||||
|
2,750
|
0
|
32.35
|
01/18/2015
|
|||||||||||||
|
2,750
|
0
|
26.00
|
01/17/2011
|
|||||||||||||
|
2,750
|
0
|
25.15
|
01/16/2012
|
|||||||||||||
|
Robert
C. Werner
|
3,528
|
0
|
16.70
|
01/12/2009
|
||||||||||||
|
3,528
|
0
|
13.09
|
01/18/2010
|
|||||||||||||
|
3,360
|
0
|
13.30
|
01/16/2011
|
|||||||||||||
|
5,500
|
0
|
16.13
|
01/15/2012
|
|||||||||||||
|
5,500
|
0
|
20.00
|
01/21/2013
|
|||||||||||||
|
2,500
|
0
|
33.25
|
04/27/2014
|
|||||||||||||
|
2,750
|
0
|
32.35
|
01/18/2015
|
|||||||||||||
|
2,750
|
0
|
26.00
|
01/17/2011
|
|||||||||||||
|
2,750
|
0
|
25.15
|
01/16/2012
|
|||||||||||||
|
Mary
Ann Smith
|
3,528
|
0
|
16.70
|
01/12/2009
|
||||||||||||
|
3,528
|
0
|
13.09
|
01/18/2010
|
|||||||||||||
|
3,360
|
0
|
13.30
|
01/16/2011
|
|||||||||||||
|
5,500
|
0
|
16.13
|
01/15/2012
|
|||||||||||||
|
5,500
|
0
|
20.00
|
01/21/2013
|
|||||||||||||
|
2,500
|
0
|
33.25
|
04/27/2014
|
|||||||||||||
|
2,600
|
0
|
32.35
|
01/18/2015
|
|||||||||||||
|
2,600
|
0
|
26.00
|
01/17/2011
|
|||||||||||||
|
2,600
|
0
|
25.15
|
01/16/2012
|
|||||||||||||
|
Scott
G. Orzehoski
|
1,322
|
0
|
16.70
|
01/12/2009
|
||||||||||||
|
1,764
|
0
|
13.09
|
01/18/2010
|
|||||||||||||
|
1,680
|
0
|
13.30
|
01/16/2011
|
|||||||||||||
|
2,800
|
0
|
16.13
|
01/15/2012
|
|||||||||||||
|
2,800
|
0
|
20.00
|
01/21/2013
|
|||||||||||||
|
2,500
|
0
|
33.25
|
04/27/2014
|
|||||||||||||
|
2,600
|
0
|
32.35
|
01/18/2015
|
|||||||||||||
|
2,600
|
0
|
26.00
|
01/17/2011
|
|||||||||||||
|
2,600
|
0
|
25.15
|
01/16/2012
|
|||||||||||||
(1)
Options vest after a 3 year period, commencing upon the date of
grant.
18
Equity
Compensation Plan Information
The
following table summarizes our equity compensation plan information as of
December 31, 2007. Information is included for both equity compensation plans
approved by QNB shareholders and equity compensation plans not approved by
QNB
shareholders.
|
Plan
Category
|
Number
of shares to be issued upon exercise of outstanding options, warrants
and
rights
|
Weighted-average
exercise price of outstanding
options,
warrants and rights
|
Number
of shares
available
for future
issuance
under equity compensation plans (excluding
securities
reflected
in column (a))
|
|||||||
|
(a)
|
(b)
|
(c)
|
||||||||
|
Equity
compensation plans approved by QNB Corp. shareholders
|
||||||||||
|
1998
Stock Option Plan
|
177,623
|
$
|
19.84
|
5,436
|
||||||
|
2005
Stock Option Plan
|
26,300
|
25,44
|
173,700
|
|||||||
|
2006
Employee Stock Purchase Plan
|
-
|
-
|
15,116
|
|||||||
|
Equity
compensation plans not approved by QNB Corp. shareholders
|
||||||||||
|
None
|
-
|
-
|
-
|
|||||||
|
Totals
|
203,923
|
$
|
20.56
|
194,252
|
||||||
Employment
Agreements
On
September 2, 1986, as amended on April 3, 2002, QNB and Mr. Bisko entered into
an employment agreement for a term of 27 years, commencing immediately and
terminating on December 31, 2013; provided however, that the employment
agreement may be terminated by either party upon three years' prior written
notice. Under the terms of the employment agreement, Mr. Bisko is to be employed
as the President of the Bank and to render services as may be reasonably
required of him from time to time by the Board of Directors. Mr. Bisko may
be
discharged at any time for just and proper cause, which includes:
| (1) | his failure to properly perform his duties; |
| (2) | his violation of any covenants or commitments set forth in the Agreement; |
|
(3)
|
his
failure or refusal to comply with the proper and reasonable written
policies or directives of the Board which do not violate any of the
provisions in the Agreement;
|
| (4) | conduct on his part, which violates any applicable state or Federal law; or |
|
(5)
|
conduct
on his part, which, in the reasonable discretion of the Board, would
make
his continued employment prejudicial to the best interest of
QNB.
|
Following
a change of control of QNB (which is defined as any one person or group
obtaining voting control of 25% or more of QNB’s outstanding common stock) Mr.
Bisko's employment may only be terminated if he materially breaches his
obligations under the employment agreement, fails or refuses to comply with
the
proper and reasonable written policies of the Board of Directors, or is
convicted of a felony. If Mr. Bisko's employment is terminated for reasons
other
than, among others, discharge for cause, a change in control of QNB, or death
or
disability, Mr. Bisko is entitled to receive a lump sum severance payment equal
to 2.99 times his then current base salary. If Mr. Bisko were terminated at
the
minimum base salary of $265,685 as of January 1, 2008, he would be entitled
to
receive a maximum lump sum payment equal to $794,398. Such a provision may
be
deemed to be "anti-takeover" in nature inasmuch as it may discourage a potential
acquirer who may desire to replace Mr. Bisko with a new president. In the event
of Mr. Bisko's death or disability, QNB shall pay either to Mr. Bisko, his
estate, or his designated beneficiary, an amount equal to his then current
base
salary in twelve equal monthly installments, which amounts may be reduced based
upon the receipt of any life or disability insurance proceeds from policies
maintained by and at the expense of QNB. Under Section 280G of the Internal
Revenue Code, payments to an executive made upon a change of control (“parachute
payments”) which exceed three times the executive’s five year average annualized
compensation will be subject to the following tax consequences: (i) the paying
corporation is denied any deduction for employee compensation on the excess
payment and (ii) the recipient is subject to a nondeductible 20% excise tax
on
such excess payment (in addition to income taxes). If 280G were to be applicable
to payments made to Mr. Bisko upon a change of control, Mr. Bisko would be
responsible for any taxes on benefits in excess of amounts that are considered
parachute payments under the Internal Revenue Code, and QNB would not be
entitled to take a deduction for the amounts paid with respect to the parachute
payment.
19
The
Bank
provides Mr. Bisko, for the benefit of his named beneficiary, with a salary
continuation agreement. In the event of Mr. Bisko's death, the agreement
provides his beneficiary with monthly income for 180 consecutive months. The
agreement is enforceable only while Mr. Bisko remains employed by the Bank.
If
Mr. Bisko's employment is terminated for any reason other than death all rights
under the agreement will be terminated. The benefits are funded through an
insurance policy with the cost limited to the annual premium on the policy.
Mr.
Bisko is also reimbursed for all reasonable and necessary expenses related
to
his duties.
Change
of Control Agreements
On
July
18, 2000, QNB and the Bank entered into change of control agreements with Bret
H. Krevolin, Executive Vice President and Chief Financial Officer of the Bank,
and Robert C. Werner, Executive Vice President and Chief Operating Officer
of
the Bank. These agreements provide certain benefits to Mr. Krevolin and Mr.
Werner in the event of a change of control of QNB or the Bank. The agreements
become operative only if (i) Mr. Krevolin and Mr. Werner are employees of QNB
and the Bank upon a change in control and (ii) they are not offered
substantially equivalent positions following the change in control. Under the
Agreements, a change in control includes, among other things, a merger,
consolidation, division or disposition of substantially all of the assets of
QNB
or the Bank, or a purchase by QNB or the Bank of substantially all of the assets
of another entity, unless, in either case, the transaction is approved in
advance by seventy percent (70%) or more of the members of the Board of QNB
or
the Bank who are not interested in the transaction and a majority of the members
of the Board of the surviving entity and of the Board of Directors of such
entity’s parent corporation, if any, are former members of the Board of QNB or
Bank. A change of control also includes the acquisition by a person or group
of
beneficial ownership of 25% of more of the voting securities of QNB or the
Bank.
It also includes a situation where, during any period of two (2) consecutive
years, individuals who at the beginning of such period constitute the Board
of
QNB or the Bank cease for any reason to constitute at least a majority thereof,
unless the election of each director who was not a director at the beginning
of
such period has been approved in advance by directors representing at least
two-thirds of the directors then in office who were directors at the beginning
of the period.
The
agreements specify payments to Mr. Krevolin and Mr. Werner upon their
termination on or before the three year anniversary of the date of the change
of
control in an amount equal to the product of the average aggregate annual
compensation paid by QNB and the Bank to the respective executive which is
includable in the executive’s gross income for Federal income tax purposes
during the five calendar years preceding the taxable year in which the date
of
the termination occurs, multiplied by two.
The
agreements further provide that, if this lump sum payment, when added to all
other amounts or benefits provided to or on behalf of the Executive in
connection with his termination of employment, would result in the imposition
of
an excise tax under Section 4999 of the Internal Revenue Code of 1986, as
amended (the Code), such payment would be reduced to the extent necessary to
avoid such excise tax imposition. In addition, if any portion of the amount
payable to the Executive is determined to be non-deductible pursuant to the
regulations promulgated under Section 280G of the Code, QNB is required only
to
pay to Executive the amount determined to be deductible under Section 280G.
The
determination of any reduction in the lump sum payment pursuant to the foregoing
provisions will be made by QNB’s independent auditors.
20
Potential
Payments Upon Termination Or Change In Control
The
following table shows the potential payments and benefits payable to Mr. Bisko
upon a separation of employment under terms of his employment agreement and
the
terms of any applicable benefit plans, assuming the event giving rise to such
termination occurred on December 31, 2007.
|
REASON
FOR SEPARATION
|
|||||||||||||
|
Form
of Compensation
|
Without
Cause
|
Disability
|
Death
(1)
|
Change
in Control
|
|||||||||
|
Salary/Severance
|
|||||||||||||
|
Employment
agreement
|
$
|
794,398
|
$
|
265,685
|
$
|
265,685
|
$
|
794,398
|
|||||
|
Salary
continuation agreement
|
0
|
0
|
732,496
|
0
|
|||||||||
|
Equity
(2):
|
|||||||||||||
|
Value
of accelerated stock options(a)(b)
|
0
|
0
|
0
|
0
|
|||||||||
|
Total
|
$
|
794,398
|
$
|
265,685
|
$
|
998,181
|
$
|
794,398
|
|||||
The
following table shows the potential payments and benefits payable to Mr.
Krevolin upon a separation of employment under terms of his agreement and the
terms of any applicable benefit plans, assuming the event giving rise to such
payment occurred on December 31, 2007.
|
REASON
FOR SEPARATION
|
|||||||||||||
|
Form
of Compensation
|
Without
Cause
|
Disability
|
Death
(1)
|
Change
in Control
|
|||||||||
|
Salary/Severance
|
|||||||||||||
|
Change
in control agreement
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
313,876
|
|||||
|
Equity
(2):
|
|||||||||||||
|
Value
of accelerated stock options(a)(b)
|
0
|
0
|
0
|
0
|
|||||||||
|
Total
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
313,876
|
|||||
The
following table shows the potential payments and benefits payable to Mr. Werner
upon a separation of employment under terms of his agreement and
the
terms of any applicable benefit plans, assuming the event giving rise to such
payment occurred on December 31, 2007.
|
REASON
FOR SEPARATION
|
|||||||||||||
|
Form
of Compensation
|
Without
Cause
|
Disability
|
Death
(1)
|
Change
in Control
|
|||||||||
|
Salary/Severance
|
|||||||||||||
|
Change
in control agreement
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
338,510
|
|||||
|
Equity
(2):
|
|||||||||||||
|
Value
of accelerated stock Options(a)(b)
|
0
|
0
|
0
|
0
|
|||||||||
|
Total
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
338,510
|
|||||
21
The
following table shows the potential payments and benefits payable to Ms. Smith
upon a separation of employment under terms of her agreement and
the
terms of any applicable benefit plans, assuming the event giving rise to such
payment occurred on December 31, 2007.
|
REASON
FOR SEPARATION
|
|||||||||||||
|
Form
of Compensation
|
Without
Cause
|
Disability
|
Death
(1)
|
Change
in Control
|
|||||||||
|
Equity
(2):
|
|||||||||||||
|
Value
of accelerated stock options(a)(b)
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
|||||
The
following table shows the potential payments and benefits payable to Mr.
Orzehoski upon a separation of employment under terms of his
agreement and
the
terms of any applicable benefit plans, assuming the event giving rise to such
payment occurred on December 31, 2007.
|
REASON
FOR SEPARATION
|
|||||||||||||
|
Form
of Compensation
|
Without
Cause
|
Disability
|
Death
(1)
|
Change
in Control
|
|||||||||
|
Equity
(2):
|
|||||||||||||
|
Value
of accelerated stock options(a)(b)
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
0
|
|||||
|
(1)
|
Does
not include the proceeds from any employer-paid life insurance
policies
|
|
(2)
|
Based
on the closing price of QNB Corp. common stock as of December 31,
2007, of
$24.50.
|
|
a.
|
Vesting
of stock options does not accelerate for any reason, except change
in
control. In the case of termination, other than death or disability,
the
optionee may exercise the vested portion of any outstanding awards
for a
period of 3 months from the date of termination. In the case of disability
or death, the optionee or the optionee’s estate, as applicable, may
exercise the vested portion of any outstanding awards for a period
of
one-year from the date of disability or death, as applicable, of
the
optionee.
|
|
b.
|
Upon
change in control, vesting accelerates and all outstanding options
become
immediately exercisable. As of December 31, 2007, the intrinsic
value of all outstanding unexercisable options held by the executive
officers above was zero since the exercise price was greater than
the
market price of the Corporation’s common stock as of December 31,
2007.
|
DIRECTOR
COMPENSATION
Each
director of QNB is also a member of the Bank’s Board of Directors. During 2007,
directors, with the exception of Mr. Bisko, received an annual fee of $6,500.
The Chairman of the Board received additional compensation of $10,000 and the
Corporate Secretary received an additional $2,000. In addition, each director
received a fee of $550 for each Bank Board meeting attended. Directors are
not
reimbursed for QNB Board meetings. Members of the committees of the Board of
Directors, with the exception of the Audit Committee members, received $300
for
each committee meeting attended, provided the committee meeting was not held
as
part of a scheduled Board meeting. The Chairman of the Audit Committee received
$600 for each Audit Committee meeting attended while the other members of the
Committee received $300 per Audit Committee meeting attended. The directors
did
not receive any other compensation for 2007.
22
The
following table illustrates compensation earned by non-employee directors for
the year ended December 31, 2007:
|
Name
and Position
|
Fees
Earned or
Paid
in Cash
($)
|
|
|
Norman
L. Baringer
|
6,050
|
|
|
Kenneth
F. Brown, Jr.
|
18,600
|
|
|
Dennis
Helf
|
33,300
|
|
|
G.
Arden Link
|
16,100
|
|
|
Charles
M. Meredith, III
|
23,500
|
|
|
Anna
Mae Papso
|
18,800
|
|
|
Gary
S. Parzych
|
16,750
|
|
|
Bonnie
L. Rankin
|
10,900
|
|
|
Henry
L. Rosenberger
|
17,100
|
|
|
Edgar
L. Stauffer
|
16,750
|
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
QNB
and
the Bank have not entered into any material transactions, proposed or
consummated, with any director or executive officer, or any 5% security holder,
of QNB or the Bank, or any associate of the foregoing persons, with the
exception of that disclosed below. QNB and the Bank have engaged in and intend
to continue to engage in banking and financial transactions in the ordinary
course of business with directors and officers of QNB and the Bank and their
associates on comparable terms with similar interest rates as those prevailing
from time to time for other bank customers. The Bank makes loans to its officers
and directors, as well as their immediate families and companies, 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 these loans did not involve more than
the
normal risk of collection or present other unfavorable features. The aggregate
amount of indebtedness outstanding as of the latest practicable date, February
29, 2008, to the above described group was $4,315,000.
On
September 22, 2005, the Bank approved and entered into an agreement with Eugene
T. Parzych, Inc. to act as the general contractor for the renovation of its
property at 322 W. Broad Street, Quakertown, Pennsylvania to be used as the
loan
center. The bids for this project were submitted through a formal bidding
process and reviewed by the Board of Directors. Mr. Gary S. Parzych is the
president of Eugene T. Parzych, Inc. and is also a director of QNB Corp. and
the
Bank. Management and the Board of Directors of QNB Corp. and the Bank believe
this is an arms-length transaction. The total paid to Eugene T. Parzych Inc.,
was $5,000 and $1,032,000 during 2007 and 2006, respectively.
SHAREHOLDER
COMMUNICATIONS
The
Board
of Directors does not have a formal process for shareholders to send
communications to the Board. Due to the infrequency of shareholder
communications to the Board of Directors, the Board does not believe that a
formal process is necessary. Written communications received by QNB from
shareholders are shared with the full Board no later than the next regularly
scheduled Board meeting. Written communication should be mailed to
the
President/CEO at the Corporation's offices at P.O. Box 9005, Quakertown, PA
18951.
23
NOMINATIONS
AND SHAREHOLDER PROPOSALS
Nominations
of individuals for election to the Board of Directors may be made by any
shareholder if made in writing and delivered or mailed to the President of
QNB,
not less than 14 days or more than 50 days prior to any shareholder meeting
called for the election of directors; provided, however, that if less than
21
days notice of the meeting is given to shareholders, the nomination shall be
mailed or delivered to the President of QNB not later than the close of business
on the 7th
day
following the day on which the notice of the meeting was mailed. The
notification must contain the following information to the extent known to
the
notifying shareholder:
|
(a)
|
the
name and address of each proposed
nominee;
|
|
(b)
|
the
principal occupation of each proposed
nominee;
|
|
(c)
|
the
total number of shares of QNB common stock that will be voted for
each
proposed nominee;
|
|
(d)
|
the
name and residential address of the notifying shareholder;
and
|
|
(e)
|
the
number of shares of QNB common stock owned by the notifying
shareholder.
|
Nominations
not made in accordance with these provisions may be disregarded by the Chairman
at the annual meeting.
If
you
wish to include a proposal in the Proxy Statement for the 2009 Annual Meeting
of
Shareholders, your written proposal must be received by the Corporation no
later
than December 21, 2008. The proposal should be mailed by certified mail, return
receipt requested, and must comply in all respects with applicable rules and
regulations of the SEC, the laws of the State of Pennsylvania, and the
Corporation’s Bylaws. Shareholder proposals may be mailed to the Secretary of
QNB, QNB Corp., P.O. Box 9005, Quakertown, PA 18951-9005.
The
rules
of the SEC provide that, if the Corporation does not receive notice of a
shareholder proposal at least 45 days prior to the first anniversary of the
date
of mailing of the prior year’s proxy statement, then the Corporation will be
permitted to use its discretionary voting authority when the proposal is raised
at the annual meeting. The deadline for these proposals for the year 2009 annual
meeting is March 7, 2009. If a shareholder gives notice of such a proposal
after
this deadline, the Corporation’s proxy holders will be allowed to use their
discretionary authority to vote against the shareholder proposal when and if
the
proposal is raised at our 2009 Annual Meeting.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934 requires QNB's officers and
directors and persons who own more than 10% of QNB's common stock to file
reports of ownership and changes in ownership with the SEC. Officers, directors
and greater than 10% owners are required by SEC regulations to furnish QNB
with
copies of all Section 16(a) forms they file.
To
the
Board of Directors’ knowledge, based solely on review of the copies of such
reports furnished to QNB during fiscal year ended December 31, 2007, all Section
16(a) filing requirements applicable to its executive officers and directors
were complied with.
OTHER
MATTERS
Management
is not aware of any business to come before the annual meeting other than those
matters described in the proxy statement and the accompanying notice of annual
meeting. However, if any other matters should properly come before the annual
meeting, it is intended that the proxies hereby solicited will be voted with
respect to those other matters in accordance with the judgment of the persons
voting the proxies or the recommendation of the Board of Directors.
If
there
are not sufficient votes for approval of any of the matters to be acted upon
at
the annual meeting, the annual meeting may be adjourned to permit the further
solicitation of proxies.
24
MISCELLANEOUS
Some
banks, brokers and other nominee record holders may be participating in the
practice of “householding” proxy statements and annual reports. This means that
only one copy of the QNB’s Proxy Statement may have been sent to multiple
shareholders in your household. QNB will promptly deliver a separate copy of
the
document to you if you request one by writing or calling as follows: Jean Scholl
at QNB Corp., P.O. Box 9005, Quakertown, PA 18951-9005, telephone (215)
538-5600. If you want to receive separate copies of the proxy statement in
the
future, or if you are receiving multiple copies and would like to receive only
one copy for your household, you should contact your bank, broker or other
nominee record holder, or you may contact us at the above address and phone
number.
UPON
REQUEST OF ANY SHAREHOLDER, A COPY OF THE CORPORATION’S ANNUAL REPORT ON FORM
10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007, INCLUDING A LIST OF THE
EXHIBITS THERETO, REQUIRED TO BE FILED WITH THE SEC PURSUANT TO RULE 13a-1
UNDER
THE EXCHANGE ACT MAY BE OBTAINED, WITHOUT CHARGE, BY WRITING TO THE
CORPORATION’S ASSISTANT SECRETARY AT QNB CORP., P.O. BOX 9005, QUAKERTOWN, PA
18951-9005.
25
|
x
|
PLEASE MARK VOTES
AS IN THIS EXAMPLE
|
REVOCABLE
PROXY
QNB
Corp.
|
For
|
With
-hold
|
For
All Except
|
|||||
|
THIS
PROXYIS SOLICITED BY THE BOARD OF DIRECTORS OF QNB
CORP.
|
1.
The
election as Class II directors of all nominees listed (except as
marked to
the contrary,) for three-year terms.
|
o
|
o
|
o
|
||||||
|
FOR
THE ANNUAL MEETING OF SHAREHOLDERS MAY 20, 2008
|
Kenneth
F. Brown, Jr.
Anna
Mae Papso
|
Henry
L. Rosenberger
Edgar
L. Stauffer
|
||||||||
|
The
undersigned hereby appoints Norman L Baringer, Donald T. Knauss and
Philip
D. Miller, and each of them, with full powers of substitution, to
act as
attorneys and proxies for the undersigned to vote all shares of QNB
Corp.
common stock that the undersigned is entitled to vote at the Annual
Meeting of Shareholders to be held at the offices of QNB Bank, 320
West
Broad Street, Quakertown, PA at 11:00 a.m., eastern time on Tuesday,
May
20, 2008 and at any and all adjournments of the meeting.
|
To
withhold authority to vote for any individual Nominee,
mark “For All Except”
and write that nominee or nominee’s Name(s) in
the space provided below.
|
|||||||||
|
The
Board of Directors recommends a vote “FOR”
each of the Nominees listed.
|
||||||||||
|
2.
In their discretion, the proxies are authorized to vote
on any other business that
may properly come before the Meeting or any adjournment
or postponement of
the meeting.
|
||||||||||
|
THIS
PROXY WILL BE VOTED AS DIRECTED, BUT
IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED ABOVE. IF ANY
OTHER BUSINESS IS PROPERLY PRESENTED AT
THE MEETING, THIS PROXY WILL
BE VOTED BY THOSE NAMED IN THIS PROXY
IN THEIR BEST JUDGMENT. AT THE
PRESENT TIME, THE BOARD OF DIRECTORS KNOWS
OF NO OTHER BUSINESS TO
BE PRESENTED AT THE
MEETING.
|
||||||||||
|
Please
be sure to sign and date
this
Proxy in the box below.
|
Date
|
||
|
Shareholder
sign above
|
Co-holder
(if any) sign above
|
 |
Detach
above card, sign, date and mail
in postage paid envelope provided.
|
 |
QNB
Corp.
Please
sign exactly as name appears above. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title. If more than one
trustee, all should sign. All joint owners must sign.
PLEASE
ACT PROMPTLY
SIGN,
DATE & MAIL YOUR PROXY CARD TODAY
IF
YOUR
ADDRESS HAS CHANGED, PLEASE CORRECTTHE ADDRESS IN THE SPACE PROVIDED BELOW
AND
RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
_______________________________________________________
_______________________________________________________
_______________________________________________________