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.
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(Name of Registrant as Specified in Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the filing
fee is calculated and state how it was determined.)
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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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.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[NORWOOD FINANCIAL CORP. LETTERHEAD]
March 30, 1998
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 28, 1998, 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, Beard &
Company, Inc., 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, 1997, 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
<PAGE>
- --------------------------------------------------------------------------------
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 28, 1998
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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 28, 1998, 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 16, 1998, 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 30, 1998
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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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<PAGE>
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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 28, 1998
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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 28, 1998, 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 30, 1998.
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 16, 1998
(the "Voting Record Date") are entitled to one vote for each share then held. As
of the Voting Record Date, the Company had 1,780,430 shares of Common Stock
outstanding.
<PAGE>
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."
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent of Shares of
of Beneficial Owner Beneficial Ownership(1) Common Stock Outstanding
- ------------------- ----------------------- ------------------------
<S> <C> <C>
Wayne Bank Trust Department 149,934(2) 8.43%
717 Main Street
Honesdale, Pennsylvania 18431
Carolyn Knox Gazlay and Gretchen 145,656(3) 8.19%
Knox Smith Trust
c/o Wayne Bank - Trust Department
717 Main Street
Honesdale, Pennsylvania 18431
Wayne Bank 106,062(4) 5.96%
Employee Stock Ownership Plan
717 Main Street
Honesdale, Pennsylvania 18431
</TABLE>
- ----------------------
(1) All amounts have been adjusted for a two-for-one stock split in the
form of a stock dividend declared December 9, 1997 to shareholders of
record January 15, 1998, and paid February 2, 1998.
(2) The Wayne Bank Trust Department ("WBTD") is trustee to and has sole
voting power for seven trust accounts that include among their
investments the Common Stock.
2
<PAGE>
(3) The WBTD serves as trustee to the Carolyn Knox Gazlay and Gretchen Knox
Smith Trust ("Trust"), an irrevocable intervivos trust established
under the laws of the Commonwealth of Pennsylvania. Voting power in the
Trust rests solely with the two beneficiaries. Investment and
dispositive power is shared equally among the two beneficiaries of the
Trust and WBTD.
(4) 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, 15,226 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, 1997.
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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.
Russell L. Ridd, Harold A. Shook, and John J. Weidner 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.
3
<PAGE>
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.
<TABLE>
<CAPTION>
SHARES OF
YEAR FIRST CURRENT COMMON STOCK PERCENT
ELECTED OR TERM BENEFICIALLY OF
NAME AGE(1) APPOINTED EXPIRES OWNED(2)(3)(4) CLASS
- ---- ------ --------- ------- -------------- -----
BOARD NOMINEES FOR TERMS TO EXPIRE IN 2001
<S> <C> <C> <C> <C> <C>
Russell L. Ridd 68 1980 1998 50,468(5) 2.8%
Harold A. Shook 59 1988 1998 3,996(5) *
John J. Weidner 73 1962 1998 1,696 *
THE BOARD OF DIRECTORS RECOMMENDS THAT ITS NOMINEES BE ELECTED AS DIRECTORS
DIRECTORS CONTINUING IN OFFICE
Daniel J. O'Neil 60 1985 1999 1,494 *
Dr. Kenneth A. Phillips 47 1988 1999 396 *
Gary P. Rickard 56 1978 1999 10,310 *
Charles E. Case 63 1970 2000 47,628 2.7%
William W. Davis, Jr. 53 1996 2000 12,688(6) *
John E. Marshall 60 1983 2000 17,440(5) 1.0%
All Executive Officers and
Directors as a Group
(11 persons) 160,404(7)(8) 9.0%
</TABLE>
- -------------------
* Less than 1.0%.
(1) As of December 31, 1997.
(2) As of the Voting Record Date.
(3) All amounts have been adjusted for a two-for-one stock split in the
form of a stock dividend declared December 9, 1997 to shareholders of
record January 15, 1998 payable February 2, 1998.
(4) 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.
(5) Excludes 106,062 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.
(6) Includes options to purchase 6,000 shares of Common Stock within 60
days of the Record Date and 688 shares allocated pursuant to the ESOP.
(7) Includes options to purchase 16,980 shares of Common Stock within 60
days of the Record Date.
(8) Includes 1,761 shares allocated to executive officer participants'
accounts under the ESOP.
4
<PAGE>
Executive Officers
The following individuals hold the offices in the Company set forth
below opposite their names.
<TABLE>
<CAPTION>
Name Age(1) Positions Held With the Company
- ---- ------ -------------------------------
<S> <C> <C>
Russell L. Ridd 68 Chairman of the Board
William W. Davis, Jr. 53 President and Chief Executive Officer
Lewis J. Critelli 38 Senior Vice President and Chief
Financial Officer
Edward C. Kasper 50 Senior Vice President
John E. Marshall 60 Secretary
</TABLE>
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(1) At December 31, 1997.
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.
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.
5
<PAGE>
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 Senior Vice President of the Bank and Company
since December 9, 1997. Mr. Kasper had 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 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.
6
<PAGE>
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,
1997, 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 no 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, 1997.
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 three times in 1997.
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. Mr. William W. Davis, Jr., President and Chief
Executive Officer of the Company and the Bank, does not receive board or
committee fees for his participation thereon.
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, 1997, fees paid to all
directors totalled approximately $88,300, all of which were paid by the Bank.
Executive Compensation
Summary Compensation Table. The following table sets forth for the
fiscal years ended December 31, 1997 and 1996, certain information as to the
total remuneration received by the chief executive officer as well as one other
executive officer whose total annual salary and bonus exceeded $100,000 for the
year ended December 31, 1997.
7
<PAGE>
<TABLE>
<CAPTION>
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
- ------------------ ---- ------ ----- --------------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
William W. Davis, Jr. 1997 $140,837 $20,000 $ -- $ -- 6,000 $16,034(4)(5)
President and Chief 1996 44,135 883 -- -- 6,000
Executive Officer (2)
Lewis J. Critelli 1997 $ 89,750 $15,000 -- -- 4,000 $14,342(4)(5)
Senior Vice President
and Chief Financial
Officer
</TABLE>
- ---------------
(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 H.
Richard Ishler, Jr. 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
had a term of six months and paid 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 individuals, for the year ended December 31, 1997, 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) Includes matching and discretionary contributions of $1,952 and $5,384
allocated to the account of Messrs. Davis and Critelli by the Bank
under its 401(k) Plan during 1997.
(5) Includes 687 and 438 shares of Common Stock allocated to Messrs. Davis
and Critelli during 1997, respectively, pursuant to the ESOP and based
upon a stock price of $20.50 on December 31, 1997.
Employment Agreements. In fiscal 1996, the Company and the Bank entered
into five-year employment agreements with Messrs. Davis and Critelli. 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. Mr. Critelli has a base salary under the
Agreement of $80,726, with increases not less than $3,000 per year for five
years upon Board review. Under the Agreements, Mr. Davis' and Mr. Critelli's
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 Messrs. Davis
and Critelli ("Employees") without just cause, Messrs. Davis and Critelli would
be entitled to a continuation of their salaries 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, Messrs. Davis and Critelli 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, 1997,
Mr. Davis would have been entitled to a lump sum payment of approximately
$413,000 and Mr. Critelli would have been entitled to a lump sum payment of
approximately $254,150.
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
8
<PAGE>
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 for all executive
officers as a group (nine persons), excluding Mr. Davis and Mr. Critelli as of
December 31, 1997, would have equaled approximately $674,000.
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 three times during fiscal 1997.
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 is responsible for the
administration of the compensation program of the President and Chief Executive
Officer, Senior Vice President and Chief Financial Officers and all other
Executive Officers. The Committee is entirely composed of Directors of the
Company. The Committee has access to various surveys of executive compensation
packages of banks of similar size and complexity. The Compensation package for
executive officers consists of base salary, annual cash bonus and incentive
stock options and is structured so as to provide a competitive package that
allows the company to retain key executives.
The Committee determines executive base salaries by level of
responsibility, individual contribution to the Company and Company performance
including overall profitability, core growth in loans and deposits and loan
quality issues. The Chief Executive Officer makes recommendations to the
Committee concerning base salary of other executive officers after reviewing
individual and company performance. Using a similar process, the Committee makes
recommendations to Board regarding the President and Chief Executive Officer
base salary.
Annual cash bonuses and incentive stock options are used to focus on
attainment of goals and to reward executive officers for individual
contributions to the performance of the Company and overall success of the
Company. The Committee makes recommendations to the Board for executive bonuses
and incentive stock options, including those for the President and Chief
Executive Officer.
The Compensation Committee:
John E. Marshall
Russell L. Ridd
Harold A. Shook
9
<PAGE>
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 121,212 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 $237,000 for the year ended December 31,
1997. 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.
Other Benefits
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 500,000 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.
10
<PAGE>
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
- ------------------------------------------------------------------------------------------------------------------------------------
Potential Realizable
Percent of Value at Assumed
Number of Total Options/ Annual Rate of Stock
Securities SARs Granted Price Appreciation for
Underlying to Employees Exercise or Option Term(1)
Name Option/SARs in Fiscal Base Price -------------------------------
Granted (#) Year ($/Sh) Expiration Date 5%($) 10%($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William W. Davis, Jr. 6,000 33.3% $17.125 12/9/07 64,618 153,128
Lewis J. Critelli 4,000 22.2% $17.125 12/9/07 43,079 102,085
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
- ------------------------------------------------------------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options/SARs in-the-Money Options/SARs
Acquired on Value at Fiscal Year-End at Fiscal Year-End
Exercise Realized (#) ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William W. Davis, Jr. -- -- 6,000/6,000 24,372/20,250(2)
Lewis J. Critelli -- -- 5,740/4,000 22,730/13,500(3)
</TABLE>
- ---------------------
(1) Based upon the hypothetical increased value of the Common Stock less the
option exercise price multiplied by the number of options granted.
(2) Based upon an exercise price per share of $16,438 for 6,000 options and
$17,125 for 6,000 options and a closing stock price of $20.50 per share as
of December 31, 1997.
(3) Based upon an exercise price per share of $16.54 for 5,740 options and
$17,125 for 4,000 options and a closing stock price of $20.50 per share as
of December 31, 1997.
Pension Plan. On February 11, 1997, the Company decided to discontinue
providing the benefits under the Pension Plan. The Company settled all
obligations under the Pension Plan during the third quarter of 1997. Benefits
provided under the Profit Sharing Plan and ESOP replace the Pension Plan.
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PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
During 1996 and 1997, the Common Stock was 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.
Effective March 2, 1998, the Company stock is listed on the Nasdaq
National Market under the symbol NWFL and should establish a public trading
market in the future.
11
<PAGE>
- --------------------------------------------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
The Company had no "interlocking" relationships existing on or after
January 1, 1997 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, 1997 loans to executive
officers and directors of the Company and the Bank, and their immediate family
members, amounted to $3.4 million or 14.0% of the Company's stockholders'
equity.
- --------------------------------------------------------------------------------
ANNUAL REPORTS
- --------------------------------------------------------------------------------
The Company's Annual Report to Stockholders for the fiscal year ending
December 31, 1997, 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.
- --------------------------------------------------------------------------------
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 30,
1998. Any such proposals shall be subject to the requirements of Rule 14a-8
under the 1934 Act.
12
<PAGE>
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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.
- --------------------------------------------------------------------------------
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 30, 1998
13
<PAGE>
APPENDIX I
NORWOOD FINANCIAL CORP.
- --------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
April 28, 1998
- --------------------------------------------------------------------------------
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 28, 1998, 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: |_| |_|
Russell L. Ridd
Dr. Kenneth A. Phillips
Gary P. Rickard
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.
- --------------------------------------------------------------------------------
<PAGE>
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
30, 1998 and an Annual Report to Stockholders.
Dated: , 1998 |_| 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.
- --------------------------------------------------------------------------------
