[NORWOOD FINANCIAL CORP. LETTERHEAD]
March 28, 1997
To Our Stockholders:
We are pleased to invite you to attend the Annual Meeting of Stockholders
(the "Meeting") of Norwood Financial Corp. (the "Company") to be held at the
administrative office of Wayne Bank, 717 Main Street, Honesdale, Pennsylvania
18431, on Tuesday, April 22, 1997, at 11:00 a.m.
The enclosed Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the Meeting. During the Meeting, we will
also report on the operations of the Company. Directors and officers of the
Company, as well as a representative of our independent auditors, S.R. Snodgrass
A.C., are expected to be present to respond to any questions that stockholders
may have.
Also enclosed for your reference is the Annual Report to Stockholders for
the fiscal year ending December 31, 1996, which contains detailed information
concerning the activities and operating performance of the Company.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ACCOMPANYING POSTAGE-PAID
ENVELOPE AS PROMPTLY AS POSSIBLE. This will not prevent you from attending the
meeting and voting in person but will assure that your vote is counted if you
are unable to attend the Meeting. YOUR VOTE IS VERY IMPORTANT.
Sincerely,
/s/ William W. Davis, Jr.
William W. Davis, Jr.
President and Chief Executive Officer
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NORWOOD FINANCIAL CORP.
717 MAIN STREET
P.O. BOX 269
HONESDALE, PENNSYLVANIA 18431
(717) 253-1455
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 22, 1997
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Norwood Financial Corp. (the "Company") will be held at the
administrative office of Wayne Bank, 717 Main Street, Honesdale, Pennsylvania
18431, on Tuesday, April 22, 1997, at 11:00 a.m. The Meeting is for the purpose
of considering and acting upon:
1. The election of three directors of the Company; and
2. The transaction of such other business as may properly come before the
Meeting or any adjournments thereof.
The Board of Directors is not aware of any other business to come before
the Meeting. Pursuant to the Bylaws, the Board of Directors has fixed the close
of business on March 31, 1997, as the record date for determination of the
stockholders entitled to vote at the Meeting and any adjournments thereof.
You are requested to complete and sign the enclosed form of proxy which is
solicited by the Board of Directors and to return it promptly in the enclosed
envelope. The proxy will not be used if you attend the Meeting and vote in
person.
EACH STOCKHOLDER, WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE MEETING, IS
REQUESTED TO COMPLETE, SIGN, DATE, AND PROMPTLY RETURN THE ENCLOSED PROXY CARD
IN THE ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE STOCKHOLDER MAY BE
REVOKED BY FILING WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A
DULY EXECUTED PROXY BEARING A LATER DATE. ANY STOCKHOLDER PRESENT AT THE MEETING
MAY REVOKE HIS OR HER PROXY AND VOTE IN PERSON ON EACH MATTER BROUGHT BEFORE THE
MEETING. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN
YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER TO
VOTE IN PERSON AT THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ John E. Marshall
JOHN E. MARSHALL
SECRETARY
Honesdale, Pennsylvania
March 28, 1997
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IMPORTANT: PLEASE COMPLETE, DATE, SIGN, AND RETURN PROMPTLY THE ENCLOSED PROXY.
AN ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.
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PROXY STATEMENT
OF
NORWOOD FINANCIAL CORP., INC.
717 MAIN STREET
HONESDALE, PENNSYLVANIA 18431
(717) 253-1455
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ANNUAL MEETING OF STOCKHOLDERS
APRIL 22, 1997
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GENERAL
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This Proxy Statement is furnished to holders of common stock, $0.10 par
value per share ("Common Stock"), of Norwood Financial Corp. (the "Company")
which acquired all of the outstanding common stock of Wayne Bank (the "Bank") in
connection with the Bank's holding company reorganization completed on March 29,
1996. Proxies are being solicited by the Board of Directors of the Company to be
used at the Annual Meeting of Stockholders of the Company (the "Meeting"), which
will be held at the administrative office of Wayne Bank, 717 Main Street,
Honesdale, Pennsylvania 18431, on Tuesday, April 22, 1997, at 11:00 a.m. The
accompanying Notice of Annual Meeting of Stockholders and this Proxy Statement
are being first mailed to stockholders on or about March 28, 1997.
At the Meeting, stockholders will consider and vote upon election of three
directors. The Board of Directors knows of no additional matters that will be
presented for consideration at the Meeting. Execution of a proxy, however,
confers on the designated proxyholder the discretionary authority to vote the
shares represented by such proxy in accordance with their best judgment on such
other business, if any, that may properly come before the Meeting or any
adjournment thereof.
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VOTING AND REVOCABILITY OF PROXIES
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Stockholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by signed proxies will be voted
at the Meeting and all adjournments thereof. Proxies may be revoked by written
notice delivered in person or mailed to the Secretary of the Company at the
address of the Company shown above or by the filing of a later-dated proxy prior
to a vote being taken on a particular proposal at the Meeting. A proxy will not
be voted if a stockholder attends the Meeting and votes in person. Proxies
solicited by the Board of Directors will be voted in accordance with the
directions given therein. Where no instructions are indicated, signed proxies
will be voted "FOR" the proposal set forth in this Proxy Statement for
consideration at the Meeting or any adjournment thereof.
The proxy confers discretionary authority on the persons named therein to
vote with respect to the election of any person as a director should the nominee
be unable to serve, or for good cause, will not serve, and matters incident to
the conduct of the Meeting.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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Stockholders of record as of the close of business on March 31, 1997 (the
"Voting Record Date") are entitled to one vote for each share then held. As of
the Voting Record Date, the Company had 889,104 shares of Common Stock
outstanding.
The presence in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote is necessary to constitute a
quorum at the Meeting. In the event there are not sufficient votes for a quorum
or to approve any proposals at the time of the Meeting, the Meeting may be
adjourned in order to permit further solicitation of proxies.
As to the election of directors as stated under "Proposal I -- Election of
Directors," the proxy card being provided by the Board enables a stockholder to
vote for the election of the nominees proposed by the Board, or to withhold
authority to vote for one or more of the nominees being proposed. Directors are
elected by a plurality of votes cast, without respect to either (i) broker
non-votes or (ii) proxies as to which authority to vote for one or more of the
nominees being proposed is withheld.
As to all other matters that may properly come before the Meeting, unless
otherwise required by law, the Articles, or the Bylaws, a majority of the votes
cast by stockholders shall be sufficient to pass on the matter.
Persons and groups owning in excess of 5% of the Common Stock are required
to file certain reports regarding such ownership pursuant to the Securities
Exchange Act of 1934, as amended (the "1934 Act"). Other than as noted below,
management knows of no person or entity, including any "group" as that term is
used in ss.13(d)(3) of the 1934 Act, who or which is the beneficial owner of
more than 5% of the outstanding shares of Common Stock on the Voting Record
Date. Information concerning the security ownership of management is included
under "Proposal I - Election of Directors."
Name and Address Amount and Nature of Percent of Shares of
of Beneficial Owner Beneficial Ownership Common Stock Outstanding
- ------------------- -------------------- ------------------------
Wayne Bank 59,091 (1) 6.64%
Employee Stock Ownership Plan
717 Main Street
Honesdale, Pennsylvania 18431
- -------------------------
(1) The ESOP purchased such shares for the exclusive benefit of plan
participants. These shares are held in a suspense account and will be
allocated among ESOP participants annually on the basis of compensation.
As of the Voting Record Date, 1,515 shares have been allocated under the
ESOP to participant accounts. See "Director and Executive Officer
Compensation -- Other Compensation -- Employee Stock Ownership Plan."
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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The Common Stock is registered pursuant to Section 12(g) of the 1934 Act.
The executive officers and directors of the Company and beneficial owners of
greater than 10% of the Common Stock ("10% beneficial owners") are required to
file reports on Forms 3, 4, and 5 with the Securities and Exchange Commission
("SEC") disclosing changes in beneficial ownership of the Common Stock. Based
solely on the Company's review of such ownership reports no director, executive
officer, or 10% beneficial owners failed to file such ownership reports on a
timely basis during the fiscal year ended December 31, 1996.
2
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PROPOSAL I - ELECTION OF DIRECTORS
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Directors
The Company currently has nine directors serving on its Board. The
Articles require that directors be divided into three classes, as nearly equal
in number as possible, each class to serve for a term of three years, with
approximately one-third of the directors elected annually. Three directors will
be elected at the Meeting to serve for a three-year period.
Charles E. Case, William W. Davis, Jr., and John E. Marshall, have been
nominated by the Board of Directors each to serve for a three-year term. If any
nominee is unable to serve, the shares represented by all valid proxies will be
voted for the election of such substitute as the Board of Directors may
recommend or the size of the Board may be reduced to eliminate the vacancy. At
this time, the Board knows of no reason why any nominee might be unavailable to
serve.
The following table sets forth for the nominees and the directors
continuing in office, such individual's name, age, the year the nominee first
became a director of the Company or the Bank, and the number of shares and
percentage of the Common Stock beneficially owned. Each director of the Company
is also a director of the Bank.
SHARES OF
YEAR FIRST CURRENT COMMON STOCK PERCENT
ELECTED OR TERM BENEFICIALLY OF
NAME AGE(1) APPOINTED EXPIRES OWNED(2)(3) CLASS
- ---- ------ --------- ------- ----------- -----
BOARD NOMINEES FOR TERMS TO EXPIRE IN 2000
Charles E. Case 62 1970 1997 22,828 2.6%
William W. Davis, Jr 52 1996 (4) 1,000 *
John E. Marshall 59 1983 1997 8,720(5) 1.0%
THE BOARD OF DIRECTORS RECOMMENDS THAT ITS NOMINEES BE ELECTED AS DIRECTORS
DIRECTORS CONTINUING IN OFFICE
Daniel J. O'Neil 59 1985 1999 762 *
Dr. Kenneth A. Phillips 46 1988 1999 198 *
Gary P. Rickard 55 1978 1999 2,524 *
Russell L. Ridd 67 1980 1998 25,084(5) 2.8%
Harold A. Shook 58 1988 1998 1,598(5) *
John D. Weidner 72 1962 1998 848 *
------ ---
All Executive Officers and 74,035 8.3%
====== ===
Directors as a Group
(12 persons)
(Footnotes on next page.)
3
- --------------------------------
* Less than 1.0%.
(1) As of December 31, 1996.
(2) As of the Voting Record Date.
(3) Unless otherwise noted, all shares are owned directly by the named
individual or by their spouses and minor children, over which shares the
named individuals effectively exercise sole voting and investment power.
(4) Mr. Davis was appointed to the Board on August 26, 1996 to serve until the
next annual meeting of shareholders.
(5) Excludes 59,091 unallocated shares of Common Stock held under the ESOP for
which such individual serves as one of three ESOP trustees. Beneficial
ownership is disclaimed with respect to such ESOP shares held in a
fiduciary capacity.
Executive Officers
The following individuals hold the offices in the Company set forth below
opposite their names.
Name Age(1) Positions Held With the Company
- ---- ------ --------------------------------
Russell L. Ridd 67 Chairman of the Board
William W. Davis, Jr. 52 President and Chief Executive Officer
Lewis J. Critelli 37 Senior Vice President and Chief
Financial Officer
Edward C. Kasper 49 Vice President
John E. Marshall 59 Secretary
-----------------
(1) At December 31, 1996.
The executive officers of the Company are elected annually and hold office
until their respective successors have been elected and qualified or until
death, resignation, or removal by the Board of Directors.
Biographical Information
The principal occupation during the past five years of each director,
nominee for director, and executive officer of the Company is set forth below.
All directors, nominees, and executive officers have held their present
positions for five years unless otherwise stated.
Directors
---------
Charles E. Case is Vice President at CR Case and Sons, Inc., Honesdale,
Pennsylvania, an automotive/tire services store.
William W. Davis, Jr. became President and Chief Executive Officer of the
Bank and the Company on August 26, 1996. Prior to that, Mr. Davis was senior
vice president and area executive of Corestates Bank N.A., Scranton,
Pennsylvania ("Corestates") from November 1994 to August, 1996. Prior to the
merger of Third National Bank and Trust Company, Scranton, Pennsylvania ("Third
National") with and into Corestates, Mr. Davis served as Chairman, President and
Chief Executive Officer from July 1993 through November 1994 and as President
and Chief Operating Officer from April 1985 at Third National.
4
John E. Marshall is president of Marshall Machinery Inc., Honesdale,
Pennsylvania, a farm equipment and sales company.
Daniel J. O'Neill is Superintendent of the Wayne Highlands School
District, Honesdale, Pennsylvania.
Dr. Kenneth A. Phillips is an optometrist in Waymart, Pennsylvania.
Gary P. Rickard is a partner of Clearfield Farms, Honesdale, Pennsylvania,
a dairy farm.
Russell L. Ridd is Chairman of the Board.
Harold A. Shook is president of Shooky's Distributors, Hawley,
Pennsylvania, a food and beverage distributor.
John J. Weidner is president of Weidner Companies, Honesdale,
Pennsylvania, a holding company owning real estate and technology holdings.
Executive Officers Who Are Not Directors
----------------------------------------
Lewis J. Critelli has been Senior Vice President and Chief Financial
Officer of the Bank and the Company since December 10, 1996. Mr. Critelli had
been Vice President and Chief Financial Officer of the Bank since January 1995
and of the Company since its formation in March 1996. Prior to that, Mr.
Critelli had been Vice President, Treasurer and Comptroller of First Valley Bank
from June 1991 to December 1994.
Edward C. Kasper has been Vice President of the Company since its
formation and Senior Lending Officer of the Bank since 1993 and Vice President
of the Bank since 1986.
Nominations for Directors
Nomination of candidates for election as directors at any annual meeting
of stockholders may be made (a) by, or at the direction of, a majority of the
Board of Directors or (b) by any stockholder entitled to vote at such annual
meeting. Only persons nominated in accordance with the procedures set forth in
the Articles and Bylaws may be eligible for election as directors at an annual
meeting.
Nominations, other than those made by or at the direction of the Board of
Directors, must be made pursuant to timely notice in writing to the Secretary of
the Company. To be timely, a stockholder's notice shall be delivered to, or
mailed and received at, the principal executive offices of the Company not less
than 60 days prior to the anniversary date of the immediately preceding annual
meeting of stockholders of the Company. However, with respect to the first
scheduled annual meeting, notice by the stockholder must be so delivered or
received no later than the close of business on the tenth day following the day
on which this Notice of the Annual Meeting was mailed. Such stockholder's notice
shall set forth (a) as to each person whom the stockholder proposes to nominate
for election or re-election as a director and as to the stockholder giving the
notice (i) the name, age, business address, and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
number of shares of Common Stock that are beneficially owned (as defined in the
Articles) by such person on the date of such stockholder notice, and (iv) any
other information relating to such person that is required to be disclosed in
solicitations of proxies with respect to nominees for election as directors
pursuant to the 1934 Act, including, but not limited to, information which would
be required to be filed with the
5
SEC; and (b) as to the stockholder giving the notice (i) the name and address,
as they appear on the Company's books, of such stockholder and any other
stockholders known by such stockholder to be supporting such nominees and (ii)
the number of shares of Common Stock that are beneficially owned by such
stockholder on the date of such stockholder notice and, to the extent known, by
any other stockholders known by such stockholder to be supporting such nominees
on the date of such stockholder notice. At the request of the board of
directors, any person nominated by, or at the direction of, the Board for
election as a director at an annual meeting must furnish to the Secretary of the
Company that information required to be set forth in a stockholder's notice of
nomination that pertains to the nominee.
The Board may reject any nomination by a stockholder not timely made in
accordance with the requirements of the Articles and Bylaws. A stockholder may
be given the opportunity to correct a notice not meeting the requirements of the
Articles and Bylaws as provided in the Bylaws.
Meetings and Committees of the Board of Directors
The Board of Directors of the Company conducts its business through
meetings of the Board and through activities of its committees. All committees
act for both the Company and the Bank. During the fiscal year ended December 31,
1996, the Board of Directors of the Company held four regular meetings and no
special meetings and the Board of Directors of the Bank held 12 regular meetings
and two special meetings. No director attended fewer than 75% of the total
meetings of the Boards of Directors of the Company and the Bank and committees
on which such director served during the fiscal year ended December 31, 1996.
The Audit Committee of the Company and the Bank is comprised of Directors
Case, Marshall, Phillips, Shook and Weidner. The committee reviews audit
reports, meets with external auditors, reviews and approves the audit schedule
and engagement of outside auditors. The committee also reviews Bank examination
reports. The Audit Committee met six times in 1996.
The Nominating Committee is comprised of the entire Board of Directors.
The Committee meets annually to nominate directors for the upcoming year.
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DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
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Director Compensation
The Company does not presently compensate its directors. Each director of
the Company is also a director and Executive Committee member of the Bank and
receives fees accordingly.
Each member of the Board of Directors receives a fee of $400 per month. In
addition, fees are paid for various committee meetings as follows: Executive
Committee ($400); Trust Committee ($200); Audit Committee ($200); Compensation
Committee ($200). For the fiscal year ended December 31, 1996, fees paid to all
directors totalled approximately $97,900, all of which were paid by the Bank.
6
Executive Compensation
Summary Compensation Table. The following table sets forth for the fiscal
year ended December 31, 1996, certain information as to the total remuneration
received by the chief executive officer of the Company or any subsidiary who
served in these capacities during such period and received total cash
compensation in excess of $100,000 for the year ended December 31, 1996.
Annual Compensation(1) Long Term Compensation
- ------------------------------------------------------------------- ---------------------------
Awards
Securities
Restricted Underlying
Name and Principal Other Annual Stock Options/ All Other
Position(2) Year Salary Bonus Compensation(3) Award(s) SARs(#) Compensation(4)
- ------------------- --- -------- ----- --------------- -------- ------- ---------------
William W. Davis, Jr. 1996 $ 44,135 $ -- $ -- $ -- 3,000 $ 883
President and Chief
Executive Officer (2)
H. Richard Ishler, Jr 1996 $137,504 -- -- -- -- --
President (2)
- ----------------
(1) The Company first registered its Common Stock under Section 12(g) under
the Securities Exchange Act of 1934, as amended, effective April 29, 1996,
therefore, less than three years of compensation data is presented. All
compensation was paid by the Bank. Compensation deferred at election of
executive is includable in category and year earned.
(2) Effective August 26, 1996, Mr. Davis became president and chief executive
officer, filling the vacancy created by the resignation of Mr. Ishler on
March 12, 1996. Russell L. Ridd, Chairman of the Board, acted as president
of the Company and the Bank on an interim basis until Mr. Davis was hired.
On August 26, 1996, in an effort to maintain an effective transition with
the chief executive officer, the Bank entered into a consulting agreement
with Mr. Ridd. The agreement has an initial term of six months and pays a
quarterly fee of $20,000 with interest earned on the fee at a rate equal
to the highest return paid on the Bank's one-year certificates of deposit.
(3) For the listed individual, for the year ended December 31, 1996, there
were no (a) perquisites and other benefits for which the aggregate value
exceeded the lesser of $50,000 or 10% of total salary and bonus; (b)
payments of above-market preferential earnings on deferred compensation;
(c) payments of earnings with respect to long-term incentive plans prior
to settlement or maturation; (d) tax payment reimbursements; or (e)
preferential discounts on stock.
(4) Consists of profit sharing cash bonus.
Employment Agreements. In fiscal 1996, the Company and the Bank entered
into a five-year employment agreement with William W. Davis, Jr., President of
the Company and the Bank ("Agreement"). Mr. Davis' base compensation under the
Agreement is $135,000. The Agreement provides that upon review of the Board, Mr.
Davis' base salary will increase not less than $6,000 per year for five years.
Under the Agreement, Mr. Davis' employment may be terminated by the Company or
the Bank for "just cause" as defined in the Agreement. If the Company or the
Bank terminated Mr. Davis ("Employee") without just cause, Mr. Davis would be
entitled to a continuation of his salary for the remaining term of the agreement
with a minimum of one year from the date of termination as well as the
continuation of other benefits. In the event there is an involuntary termination
of employment in connection with any change in control of the Company or the
Bank during the term of the Agreement, Mr. Davis will be paid in a lump sum an
amount equal to 2.99 times the five year average of his annual compensation. In
the event there was a change in control at December 31, 1996, Mr. Davis would
have been entitled to a lump sum payment of approximately $404,000.
7
The Company and the Bank also entered into a similar employment agreement
with Lewis J. Critelli, Senior Vice President and Chief Financial Officer of the
Company. Furthermore, the Bank entered into change-in-control severance
agreements with nine key officers of the Bank ("Severance Agreements"). The
Severance Agreements have terms of three years and severance protection upon a
termination of employment following a change in control, with such payment
equalling one or two times the current annual compensation of such individuals.
The Bank and the Company can renew the original terms of the agreements each
year. Upon a change in control, funding of the Grantor Trust as described in the
Severance Agreement and Mr. Critelli's employment agreement for all executive
officers as a group (ten persons), excluding Mr. Davis as of December 31, 1996,
would have equaled approximately $913,444.
Other Employment Agreement. On April 18, 1992 the Bank entered into an
employment agreement with H. Richard Ishler, Jr. President and Chief Executive
Officer of the Bank (the "Employment Agreement"). The Employment Agreement had a
term of five years, expiring in 1997. Effective March 12, 1996, H. Richard
Ishler, Jr. resigned from his positions as an officer and director of the Bank
and the Company. Pursuant to the terms of the Employment Agreement, Mr. Ishler
will receive salary payment for a twelve month period from his resignation date.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Directors Ridd, Marshall and Shook.
Mr. Ridd is currently the Chairman of the Company and was previously President
and Chief Executive Officer of the Company and the Bank for part of fiscal 1996.
Mr. Ridd did not participate in matters involving his compensation. The
Compensation Committee met twice during fiscal 1996.
The Company had no "interlocking" relationships existing on or after
January 1, 1996 in which (i) any executive officer is a member of the Board of
Directors/Trustees of another entity, one of whose executive officers is a
member of the Company's Board of Directors, or where (ii) any executive officer
is a member of the compensation committee of another entity, one of whose
executive officers is a member of the Company's Board of Directors.
Report of the Compensation Committee
The Compensation Committee of the Company met in December 1996 to review
compensation paid to the president and chief executive officer. The Committee
has access to various surveys of compensation packages of presidents of banks
and bank holding companies of similar size and complexity. The Committee pays
particular attention to financial institutions with total assets of between $100
million and $300 million in the state of Pennsylvania.
For the year ended December 31, 1996, the Committee did not specifically
set compensation levels for executive officers based on whether particular
financial goals had been achieved. However, the Committee does consider the
overall profitability of the Company, core growth in loans and deposits, and
loan quality issues when making compensation decisions.
Mr. William W. Davis, Jr., was hired as President and Chief Executive
Officer of the Company and the Bank effective August 26, 1996, at an annual
salary of $135,000. Per the terms of Mr. Davis's employment agreement, his base
salary will increase not less than $6,000 per year. The Committee approved the
increase of Mr. Davis's salary to $141,000 effective January 1, 1997.
8
For the year ended December 31, 1996, the Company paid cash bonus as
determined by the Compensation Committee equal to 2% of each employees 1996
salary. Mr. Davis received a distribution of $883 from this bonus pool. For
1996, Mr. Davis was not eligible to participate in the Employee Stock Ownership
Plan or the 401(K) plan. His eligibility for those plans will begin with one
full year of service.
The Compensation Committee awarded Mr. Davis 3,000 stock options pursuant
to the Incentive Stock Option Plan. The plan is discussed in detail at
"Benefits--Incentive Stock Option Plan."
The Compensation Committee:
John E. Marshall
Russell L. Ridd
Harold A. Shook
Other Compensation
Insurance. Full-time employees of the Bank are provided, at minimal
contribution or expense to them, with group plan insurance that covers
hospitalization, major medical, dental, and long-term disability, accidental
death, and life insurance. This insurance is available generally and on the same
basis to all full-time employees after six months of service. Part-time
employees become eligible for health and dental insurance (50% paid by the Bank)
after 500 hours and six months of service.
Employee Stock Ownership Plan. The Bank maintains an employee stock
ownership plan (the "ESOP") for the exclusive benefit of participating
employees, which became effective January 1, 1996. Participating employees are
employees who are at least 21 years old and who have completed one year of
service with the Company or its subsidiaries. Contributions to the ESOP and
shares released from the ESOP suspense account will be allocated among
participants on the basis of total compensation, excluding bonuses. All
participants must be employed at least 1,000 hours in a plan year in order to
receive an allocation. Participant benefits become vested 20% per year beginning
one year of service. Years of employment prior to the adoption of the ESOP are
counted toward vesting. Vesting will be accelerated upon retirement, death,
disability, or termination of the ESOP. Benefits may be payable in the form of a
lump sum upon a change-in-control, retirement, death, disability, or separation
from service.
Directors Marshall, Ridd and Shook serve as the members of the ESOP
Committee and as the ESOP Trustees. The ESOP Committee, as administrators of the
ESOP, may instruct the ESOP Trustees regarding investments of funds contributed
to the ESOP. The ESOP Trustees must vote all allocated shares held in the ESOP
in accordance with the instructions of the participating employees. Unallocated
shares and allocated shares for which no timely direction is received will be
voted by the ESOP Trustees as directed by the ESOP Committee. The ESOP Trust
purchased 60,666 shares of the Company's Common Stock with proceeds from a loan
from the Company. The Company makes cash contributions to the ESOP on an annual
basis sufficient to enable the ESOP to make the required loan payments.
Compensation expense for the ESOP was $50,758 for the year ended December 31,
1996. The loan bears interest at the prime rate, adjusted annually. Interest is
payable annually and principal is payable in equal annual installments over ten
years. The loan is secured by shares of stock purchased.
9
Benefits
Profit Sharing Plan. The Bank maintains a Profit Sharing Plan with 401(k)
features. Employees are eligible after one year of service and attainment of the
age of 21. The Bank makes discretionary contributions pursuant to the direction
of the Board of Directors. Employees are vested immediately in their deferred
portion and 100% vested in the Bank contribution after completion of five
qualifying years of uninterrupted service.
Bank contributions to the Plan for the year ended December 31, 1996, 1995
and 1994 amounted to $170,061, $139,901 and $155,887, respectively.
Incentive Stock Option Plan. Pursuant to the Incentive Stock Option Plan,
the Compensation Committee of the Board of Directors may grant Incentive stock
options to certain key employees of the Bank. The plan is intended to provide
for the grant of "Incentive Stock Options" within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended. The price per share at which each
Incentive Stock Option granted under the plan may be exercised is not less than
the fair market value of the common stock at the time the option is granted. The
plan shall continue in effect for 10 years from the effective date. No option
granted pursuant to the plan shall have a term more then 10 years from date the
option is granted. The aggregate number of shares with respect to which awards
may be made pursuant to plan will not exceed 250,000 shares. In granting options
to an employee, the Compensation Committee considers the nature of services
rendered by the employee, the employee's current and potential contribution to
the Bank and such other factors as the Committee may, in it's sole discretion
deem relevant. The purpose of the Stock Option Plan is to attract and retain the
best available personnel for positions of substantial responsibility and to
provide additional incentive to officers of the Bank to promote the success of
its business.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
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Percent of
Number of Total Options/
Securities SARs Granted
Underlying to Employees Exercise or
Options/SARs in Fiscal Base Price
Name Granted (#) Year ($/Sh) Expiration Date
- -------------------------------------------------------------------------------------------
William W. Davis, Jr. 3,000 30.38% $32.875 12/10/06
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
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Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options/SARs in-the-Money Options/SARs
Acquired on Value at Fiscal Year-End at Fiscal Year-End
Exercise Realized (#) ($)
Name (#) ($) Exercisable/Unexercisale Exercisable/Unexercisable(1)
- -------------------------------------------------------------------------------------------------------------
H. Richard Ishler, Jr. 500 $ 4,550 0/0 $0/0
- -----------------------------
(1) Based upon the most recent sales price of the Company's Common Stock
($33.50 on March 3, 1997).
10
Pension Plan. The Bank sponsors a tax-qualified defined benefit pension
plan (the "Pension Plan"). All full-time employees of the Bank are eligible to
participate after one year of service and attainment of age 21. A qualifying
employee becomes fully vested in the Pension Plan upon completion of five years
of qualifying service. The Pension Plan is intended to comply with the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
The Pension Plan provides for monthly payments to each participating
employee at normal retirement age (age 65). Upon termination at or after age 65
and completion of 25 or more years of service, the annual retirement benefit
would be determined based upon 60% times the average of the Five Year Highest
Salary. Retirement benefits may be paid after age 55, in which case such
benefits shall be reduced by an early retirement factor. Retirement benefits at
age 65 with less than 25 years of service are also reduced proportionately.
If a participant elects early retirement (age 55), the participant
receives a reduced monthly benefit. If a participant elects late retirement, the
participant receives an increased monthly benefit. Benefits are paid for the
life of the participant following retirement. The Pension Plan also provides for
payments in the event of death. Total pension expense for the fiscal years ended
December 31, 1996, 1995 and 1994 amounted to $166,442, $214,443 and $201,677,
respectively.
On February 11, 1997, the Company decided to discontinue to provide the
benefits under the Pension Plan. The Company plans to settle the obligations
under the Pension Plan during 1997. It is the Company's intent that benefits
provided under the Profit Sharing Plan and ESOP would replace the Pension Plan.
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PERFORMANCE GRAPH
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The Common Stock is inactively traded and there is no established public
trading market. Prior to the Reorganization, the Bank common stock was similarly
inactively traded with no established public trading market. Because of the
inactivity of a market in the Common Stock, the Company does not believe that a
stock performance graph is useful to stockholders at this time.
- -------------------------------------------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------------------------------
The Company had no "interlocking" relationships existing on or after
January 1, 1995 in which (i) any executive officer is a member of the Board of
Directors/Trustees of another entity, one of whose executive officers is a
member of the Board of Directors of the Company, or where (ii) any executive
officer is a member of the compensation committee of another entity, one of
whose executive officers is a member of Board of Directors of the Company.
The Bank, like many financial institutions, has followed a policy of
offering residential mortgage loans for the financing of personal residences,
consumer loans, and overdraft protection to its officers, directors, and
employees. The loans are made in the ordinary course of business and are made on
substantially the same terms and conditions, including interest rate and
collateral, as those of comparable transactions prevailing at the time with
other persons, and do not include more than the normal risk of collectibility or
present other unfavorable features. At December 31, 1996 loans to executive
officers and directors of the Company and the Bank, and their immediate family
members, amounted to $4.5 million or 20.7% of the Company's stockholders'
equity.
11
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ANNUAL REPORTS
- -------------------------------------------------------------------------------
The Company's Annual Report to Stockholders for the fiscal year ending
December 31, 1996, including financial statements, has been mailed to all
persons who were listed as stockholders of record as of the close of business on
the Voting Record Date. Any stockholder who has not received a copy of such
Annual Report may obtain a copy by writing the Company. Such Annual Report is
not to be treated as a part of the proxy solicitation material or as having been
incorporated herein by reference.
A Copy of the Form 10-K as filed with the SEC will be furnished without
charge to stockholders as of the record date upon written request to Lewis J.
Critelli, Senior Vice President and Chief Financial Officer, Norwood Financial
Corp., 717 Main Street, P.O. Box 269, Honesdale, Pennsylvania 18431. Such Form
10-K is not to be treated as a part of the proxy solicitation material or as
having been incorporated herein by reference.
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STOCKHOLDER PROPOSALS
- -------------------------------------------------------------------------------
In order to be eligible for inclusion in the Company's proxy materials for
next year's Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received at the Company's main office at 717 Main
Street, P.O. Box 269, Honesdale, Pennsylvania 18431, no later than November 28,
1997. Any such proposals shall be subject to the requirements of Rule 14a-8
under the 1934 Act.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement.
However, if any other matters should properly come before the Meeting, including
any adjournments thereof, it is intended that proxies in the accompanying form
will be voted in respect thereof in accordance with the judgment of the person
or persons voting the proxies.
12
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MISCELLANEOUS
- -------------------------------------------------------------------------------
The cost of solicitation of proxies will be borne by the Company. The
Company 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 Common Stock. In addition to solicitations by mail,
directors, officers, and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without payment of additional
compensation.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ John E. Marshall
JOHN E. MARSHALL
SECRETARY
Honesdale, Pennsylvania
March 28, 1997
13
APPENDIX A
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 (Amendment No. )
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
Norwood Financial 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):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -------------------------------------------------------------------------------
(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 filing
fee is calculated and state how it was determined.)
- -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------------------
(5) Total fee paid:
- -------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- -------------------------------------------------------------------------------
[ ] 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.
(1) Amount previously paid:
- -------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- -------------------------------------------------------------------------------
(3) Filing Party:
- -------------------------------------------------------------------------------
(4) Date Filed:
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APPENDIX B
REVOCABLE PROXY
NORWOOD FINANCIAL CORP.
- -------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
APRIL 22, 1997
- -------------------------------------------------------------------------------
The undersigned hereby appoints the official proxy committee of the Board
of Directors of the Norwood Financial Corp. (the "Company") with full powers of
substitution to act, as attorneys and proxies for the undersigned, to vote all
shares of common stock of the Company that the undersigned is entitled to vote
at the Annual Meeting of Stockholders (the "Meeting"), to be held at the
administrative office of Wayne Bank, 717 Main Street, Honesdale, Pennsylvania
18431, on Tuesday, April 22, 1997, at 11:00 a.m. and at any and all adjournments
thereof, as follows:
FOR WITHHELD
1. The election as director of all nominees
listed below: |_| |_|
Charles E. Case
William W. Davis, Jr.
John E. Marshall
INSTRUCTIONS: To withhold your vote for any individual nominee, insert the
nominee's name on the line provided below.
--------------------------
In their discretion, such attorneys and proxies are authorized to vote upon such
other business as may properly come before the Meeting or any adjournments
thereof.
The Board of Directors recommends a vote "FOR" all of the listed
propositions.
- -------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, A
SIGNED PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED. IF ANY OTHER
BUSINESS IS 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. THIS PROXY ALSO
CONFERS DISCRETIONARY AUTHORITY ON THE OFFICIAL PROXY COMMITTEE TO VOTE WITH
RESPECT TO MATTERS INCIDENT TO THE CONDUCT OF THE MEETING.
- --------------------------------------------------------------------------------
PART II - APPENDIX B
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elects to vote at the Meeting, or at
any adjournment thereof, and after notification to the Secretary of the Company
at the Meeting of the stockholder's decision to terminate this proxy, the power
of said attorneys and proxies shall be deemed terminated and of no further force
and effect. The undersigned may also revoke this proxy by filing a subsequently
dated proxy or by written notification to the Secretary of the Company of his or
her decision to terminate this proxy.
The undersigned acknowledges receipt from the Company, prior to the
execution of this proxy, of Notice of the Meeting, a proxy statement dated March
28, 1997 and an Annual Report to Stockholders.
Dated: , 1997 |_| Please check here if you plan to attend
-------------- the Meeting.
- ----------------------------- --------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
- ----------------------------- --------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
Please sign exactly as your name appears on the enclosed card. When signing as
attorney, executor, administrator, trustee, or guardian, please give your full
title. If shares are held jointly, each holder should sign.
- --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
- --------------------------------------------------------------------------------