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 23, 1999
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 27, 1999, 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, 1998, 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,
William W. Davis, Jr.
President and Chief Executive Officer
<PAGE>
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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 27, 1999
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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 27, 1999, 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, 1999, 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
JOHN E. MARSHALL
SECRETARY
Honesdale, Pennsylvania
March 23, 1999
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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.
717 MAIN STREET
HONESDALE, PENNSYLVANIA 18431
(717) 253-1455
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ANNUAL MEETING OF STOCKHOLDERS
April 27, 1999
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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 27, 1999, 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 25, 1999.
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, 1999 (the
"Voting Record Date") are entitled to one vote for each share then held. As of
the Voting Record Date, the Company had 1,781,477 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."
Name and Address Amount and Nature of Percent of Shares of
of Beneficial Owner Beneficial Ownership(1) Common Stock Outstanding
- ------------------- ---------------------- ------------------------
Wayne Bank Trust Department 134,934(2) 7.56%
717 Main Street
Honesdale, Pennsylvania 18431
Wayne Bank Employee Stock 93,727(3) 5.26%
Ownership Plan
717 Main Street
Honesdale, Pennsylvania 18431
- --------------------------------
(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. WBTD is trustee for another 16 accounts
which hold 156,384 shares of the Common Stock among their investments
for which WBTD holds no voting power.
(3) 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. Does not include 27,365 shares have been allocated under
the ESOP to participant accounts as of the Voting Record Date. See
"Director and Executive Officer Compensation -- Other Compensation --
Employee Stock Ownership Plan."
2
<PAGE>
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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, 1998.
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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.
Daniel J. O'Neill, Dr. Kenneth A. Phillips, and Gary P. Rickard 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>
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 2002
<S> <C> <C> <C> <C> <C>
Daniel J. O'Neill 61 1985 1999 1,494 *
Dr. Kenneth A. Phillips 48 1988 1999 1,174 *
Gary P. Rickard 57 1978 1999 10,310 *
THE BOARD OF DIRECTORS RECOMMENDS THAT ITS NOMINEES BE ELECTED AS DIRECTORS
DIRECTORS CONTINUING IN OFFICE
Charles E. Case 64 1970 2000 45,960 2.6%
William W. Davis, Jr. 54 1996 2000 19,576(5) 1.1%
John E. Marshall 61 1983 2000 17,440(6) 1.0%
Russell L. Ridd 69 1980 2001 50,510(6) 2.8%
Harold A. Shook 60 1988 2001 3,996(6) *
John J. Weidner 74 1962 2001 1,696 *
All Executive Officers and
Directors as a Group
(13 persons) 183,695(7)(8) 10.3%
</TABLE>
- ------------------------------
* Less than 1.0%.
(1) As of December 31, 1998.
(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) Includes options to purchase 12,000 shares of Common Stock within 60 days
of the Record Date and 1,576 shares allocated pursuant to the ESOP.
(6) Excludes 93,721 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.
(7) Includes options to purchase 37,350 shares of Common Stock within 60 days
of the Record Date.
(8) Includes 5,079 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.
Name Age(1) Positions Held With the Company
- ---- ------ -------------------------------
Russell L. Ridd 69 Chairman of the Board
William W. Davis, Jr. 54 President and Chief Executive Officer
Lewis J. Critelli 39 Executive Vice President and Chief
Financial Officer
Edward C. Kasper 51 Senior Vice President
John H. Sanders 41 Senior Vice President
Joseph A. Kneller 52 Senior Vice President
John E. Marshall 61 Secretary
- ----------------------
(1) At December 31, 1998.
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.
5
<PAGE>
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 Executive Vice President and Chief Financial
Officer of the Bank and the Company since December 8, 1998. Mr. Critelli had
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.
John H. Sanders has been Senior Vice President of the Company and Senior
Vice President and head of Retail Banking for the Bank since December 1997. Mr.
Sanders had been Vice President of the Bank from February 1995. Prior to joining
the Bank, Mr. Sanders was Assistant Vice President of PNC Bank, N.A. from 1993
to 1995.
Joseph A. Kneller has been Senior Vice President of the Company since
December 1998 and Senior Vice President - Information Systems for the Bank since
December 1998. Mr. Kneller had been Vice President of the Bank since July 1997.
Prior to joining the Bank, Mr. Kneller was Senior Vice President of Operations
for Farmers & Merchants Bank & Trust, Hagerstown, Maryland from April 1995 to
July 1997. Mr. Kneller was President of Independence Resources, Inc., subsidiary
of Independence Bancorp from January 1990 to February 1993.
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. 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
6
<PAGE>
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.
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,
1998, the Board of Directors of the Company held eight 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, 1998.
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 four times in 1998.
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 $500 per meeting.
In addition, fees are paid for various committee meetings as follows: Executive
Committee ($500); Trust Committee ($200); Audit Committee ($200); Compensation
Committee ($200). For the fiscal year ended December 31, 1998, fees paid to all
directors totalled approximately $107,800, all of which were paid by the Bank.
7
<PAGE>
Executive Compensation
Summary Compensation Table. The following table sets forth for the fiscal
years ended December 31, 1998, 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, 1998.
<TABLE>
Long Term
Annual Compensation(1) 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. 1998 $150,000 $30,000 $ -- $ -- 4,000 $28,763(4)(5)
President and Chief 1997 140,837 $20,000 -- -- 6,000 16,034(4)(5)
Executive Officer (2) 1996 44,135 883 -- -- 6,000 --
Lewis J. Critelli 1998 $100,000 $20,000 -- -- 3,000 $19,175(4)(5)
Executive Vice President 1997 89,750 $15,000 -- -- 4,000 14,342(4)(5)
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, 1998, 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 $9,000 and $1,952
allocated to the account of Mr. Davis and $6,000 ------ and $5,384 to the
account of Mr. Critelli by the Bank under its 401(k) Plan during 1998 and
1997, respectively.
(5) Includes 888 and 687 shares of Common Stock allocated to Mr. Davis and 592
and 438 shares of Common Stock allocated to Mr. Critelli during 1998 and
1997, respectively, pursuant to the ESOP and based upon a stock price of
$22.25 and $20.50 on December 31, 1998 and 1997, respectively.
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
8
<PAGE>
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, 1998, Mr. Davis would have been entitled to a lump sum payment
of approximately $434,803 and Mr. Critelli would have been entitled to a lump
sum payment of approximately $269,348.
Furthermore, the Bank entered into change-in-control severance agreements
with ten 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
for all executive officers as a group (ten persons), excluding Mr. Davis and Mr.
Critelli as of December 31, 1998, would have equaled approximately $812,000.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Directors Ridd, Marshall and Shook.
The Compensation Committee met two times during fiscal 1998.
The Company had no "interlocking" relationships existing on or after
January 1, 1998 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, Executive Vice President and Chief Financial Officer 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.
9
<PAGE>
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 short-term, 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 $324,000 and $237,000 for the years ended
December 31, 1998 and 1997, respectively. 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
10
<PAGE>
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.
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
- -------------------------------------------------------------------------------------------------------------------------------
Percent of Potential Realizable
Number of Total Options/ Value at Assumed
Securities SARs Granted Annual Rate of Stock
Underlying to Employees Exercise or Price Appreciation for
Name Option/SARs in Fiscal Base Price Option Term(1)
Granted (#) Year ($/Sh)
-------------------------------
Expiration Date 5%($) 10%($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William W. Davis, Jr. 4,000 25.8% $24.00 12/8/08 $60,374 $152,999
Lewis J. Critelli 3,000 19.4% $24.00 12/8/08 45,280 114,749
</TABLE>
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
- ------------------------------------------------------------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options/SARs in-the-Money Options/SARs
Acquired on Value at Fiscal Year-End at Fiscal Year-End
Exercise Realized (#) ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William W. Davis, Jr. -- -- 12,000 / 4,000 $65,622 / 0(2)
Lewis J. Critelli -- -- 9,740 / 3,000 53,275 / 0(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 $22.25 per share as
of December 31, 1998.
(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
$22.25 per share as of December 31, 1998.
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.
11
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
Set forth below is a stock performance graph comparing the cumulative total
shareholder return on the Common Stock with (a) the cumulative total stockholder
return on stocks included in the Nasdaq Stock Market index and (b) the
cumulative total stockholder return on stocks included in the Nasdaq Company
index, as prepared for Nasdaq by the Center for Research in Securities Prices
("CRSP") at the University of Chicago. All three investment comparisons assume
the investment of $1,000 as of the close of June 30, 1996, (the date on which
the Company became subject to the Securities Exchange Act of 1934, as amended).
All of these cumulative total returns are computed assuming the reinvestment of
dividends. In the graph below, the periods compared were June 30, 1996 and the
Company's fiscal years ending of December 31, 1996, 1997, and 1998.
There can be no assurance that the Company's future stock performance will
be the same or similar to the historical performance shown in the graph below.
The Company neither makes nor endorses any predictions as to stock performance.
[GRAPHIC OMITTED]
- -----------------------------------------------------------------------------
6/30/96 12/31/96 12/31/97 12/31/98
- -----------------------------------------------------------------------------
CRSP Nasdaq U.S. Index $1,000 $1,086 $1,333 $1,873
- -----------------------------------------------------------------------------
CRSP Nasdaq Bank Index $1,000 $1,250 $2,092 $2,072
- -----------------------------------------------------------------------------
Norwood Financial Corp. $1,000 $990 $1,305 $1,426
- -----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
12
<PAGE>
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, 1998 loans to executive
officers and directors of the Company and the Bank, and their immediate family
members, amounted to $1,516,000 or 5.5% of the Company's stockholders' equity.
- --------------------------------------------------------------------------------
ANNUAL REPORTS
- --------------------------------------------------------------------------------
The Company's Annual Report to Stockholders for the fiscal year ending
December 31, 1998, 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, Executive 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,
1999. Any such proposals shall be subject to the requirements of Rule 14a-8
under the 1934 Act. In the event the Company receives notice of a stockholder
proposal to take action at next year's annual meeting of stockholders that is
not submitted for inclusion in the Company's proxy material, or is submitted for
inclusion but is properly excluded from the proxy material, the persons named in
the proxy sent by the Company to its stockholders intend to exercise their
discretion to vote on the stockholder proposal in accordance with their best
judgment if notice of the proposal is not received at the Company's main office
by February 26, 2000.
- --------------------------------------------------------------------------------
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. The Company did not have notice of any other
matter on or before February 28, 1999 and therefore the persons named in the
accompanying proxy will exercise discretionary authority when voting on any
other matter to come before the Meeting.
13
<PAGE>
- --------------------------------------------------------------------------------
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
JOHN E. MARSHALL
SECRETARY
Honesdale, Pennsylvania
March 23, 1999
14
<PAGE>
NORWOOD FINANCIAL CORP.
- --------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
April 27, 1999
- --------------------------------------------------------------------------------
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 27, 1999, 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: |_| |_|
Daniel J. O'Neill
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
23, 1999 and an Annual Report to Stockholders.
Dated: , 1999 |_| 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.
- --------------------------------------------------------------------------------
