SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. [ ])
[ ] Filed by the Registrant
[xx] Filed by a Party other than the Registrant
Check the Appropriate Box:
[xx] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
HARLEYSVILLE NATIONAL CORPORATION
(Name of Registrant as Specified in Its Charter)
SHUMAKER WILLIAMS, P.C. (Filing Agent)
(Name of Person(s) Filing Proxy Statement if
other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[xx] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule O-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
HARLEYSVILLE NATIONAL CORPORATION
____________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 11, 1995
____________________
To the Shareholders of
Harleysville National Corporation:
Notice is hereby given that the Annual Meeting of Shareholders of
HARLEYSVILLE NATIONAL CORPORATION ("Corporation") will be held at 9:30 a.m.,
prevailing time, on Tuesday, April 11, 1995, at Presidential Caterers, 2910
DeKalb Pike, Norristown, Pennsylvania 19401, for the following purposes:
1. To elect two Class A directors to serve until the expiration of their
four-year terms and until their successors are elected and qualified;
2. To approve and adopt an amendment to Article 7 of the Corporation's
amended Articles of Incorporation to provide that any merger,
consolidation, liquidation or similar fundamental change transaction
involving the Corporation must be approved by holders of at least eighty
percent (80%) of the outstanding shares of the Corporation's voting
stock unless such transaction has received prior approval of at least
seventy-five percent (75%) of all members of the Corporation's Board of
Directors in which case only a majority of the outstanding shares of the
Corporation's voting stock would be required to be voted in favor of
such transaction in order to approve it; and
3. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
In accordance with the By-laws of the Corporation and action of the
Board of Directors, only those shareholders of record at the close of
business on March 10, 1995 will be entitled to notice of and to vote at the
Annual Meeting and any adjournment or postponement thereof.
A copy of the Corporation's Annual Report for the fiscal year ended
December 31, 1994 is being mailed to shareholders with this Notice. Copies
of the Corporation's Annual Report for the 1993 fiscal year may be obtained
at no cost by contacting Pamela L. Hartenstine, Secretary, 483 Main Street,
P.O. Box 195, Harleysville, PA 19438, telephone (215) 256-8851.
YOU ARE URGED TO MARK, SIGN, DATE, AND PROMPTLY RETURN YOUR PROXY IN THE
ENCLOSED ENVELOPE SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR
WISHES AND TO ASSURE THE PRESENCE OF A QUORUM. The prompt return of your
signed Proxy, regardless of the number of shares you hold, will aid the
Corporation in reducing the expense of additional proxy solicitations. The
giving of such Proxy does not affect your right to vote in person if you
attend the meeting and give written notice to the Secretary of the
Corporation.
By Order of the Board of Directors,
Walter E. Daller, Jr.
President and
Chief Executive Officer
March 13, 1995
Harleysville, Pennsylvania
<PAGE>
HARLEYSVILLE NATIONAL CORPORATION
____________________
PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON APRIL 11, 1995
____________________
GENERAL
Introduction, Date, Time and Place of Annual Meeting
This Proxy Statement is being furnished in connection with the
solicitation by the Board of Directors of HARLEYSVILLE NATIONAL CORPORATION
("Corporation"), a Pennsylvania business corporation, of proxies to be voted
at the Annual Meeting of Shareholders of the Corporation to be held on
Tuesday, April 11, 1995, at 9:30 a.m., prevailing time, at Presidential
Caterers, 2910 DeKalb Pike, Norristown, PA 19401, and at any adjournment or
postponement thereof.
The principal executive office of the Corporation is located at The
Harleysville National Bank and Trust Company, 483 Main Street, P.O. Box 195,
Harleysville, Pennsylvania 19438. The telephone number for the Corporation
is (215) 256-8851. All inquiries should be directed to Walter E. Daller,
Jr., President and Chief Executive Officer of the Corporation. The
Corporation currently has three banking subsidiaries: The Harleysville
National Bank and Trust Company ("Harleysville"), The Citizens National Bank
of Lansford ("Citizens"), and Security National Bank ("Security"); or
collectively, the "Banks."
Solicitation and Voting of Proxies
This Proxy Statement and the enclosed form of proxy (the "Proxy") are
first being sent to shareholders of the Corporation on or about March 13,
1995.
Shares represented on the accompanying form of Proxy, if properly signed
and returned, will be voted in accordance with the specifications made
thereon by the shareholders. Any Proxy not specifying to the contrary will
be voted FOR the election of the nominees for Class A Director named below,
and FOR the approval of the proposal to adopt a two-tiered super-majority
provision concerning approval of mergers and other fundamental corporate
transactions. Execution and return of the enclosed Proxy will not affect a
shareholder's right to attend the Annual Meeting and vote in person, after
giving written notice to the Secretary of the Corporation. The cost of
preparing, assembling, printing, mailing and soliciting proxies, and any
additional material which the Corporation may furnish shareholders in
connection with the Annual Meeting, will be borne by the Corporation. In
addition to the use of the mails, certain directors, officers and employees
of the Corporation and the Banks may solicit proxies personally, by
telephone, by telegraph, and by telecopier. Arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries to forward
proxy solicitation material to the beneficial owners of stock held of record
by these persons, and, upon request therefor, the Corporation will reimburse
them for their reasonable forwarding expenses.
Revocability of Proxy
A shareholder who returns a Proxy may revoke the Proxy at any time
before it is voted only: (1) by giving written notice of revocation to
Pamela L. Hartenstine, Secretary of Harleysville National Corporation, at 483
Main Street, P.O. Box 195, Harleysville, Pennsylvania 19438; (2) by executing
a later-dated Proxy and giving written notice thereof to the Secretary of the
Corporation; or (3) by voting in person after giving written notice to the
Secretary of the Corporation.
Voting Securities and Record Date
The Corporation is currently authorized to issue 30,000,000 shares of
Common Stock, par value $1.00 per share and 3,000,000 shares of series
preferred stock, par value $1.00 per share.
At the close of business on March 10, 1995, the Corporation had
outstanding 5,873,688 shares of common stock, par value $1.00 per share (the
"Common Stock"). As of March 10, 1995, no series preferred stock was
outstanding.
Only holders of Common Stock of record at the close of business on March
10, 1995 will be entitled to notice of and to vote at the Annual Meeting.
Cumulative voting rights do not exist with respect to the election of
directors. On all matters to come before the Annual Meeting, each share of
Common Stock is entitled to one vote.
Under Pennsylvania law and the by-laws of the Corporation, the presence
of a quorum is required for each matter to be acted upon at the Annual
Meeting. Votes withheld and abstentions will be counted in determining the
presence of a quorum for the particular matter. Broker non-votes will not be
counted in determining the presence of a quorum for the particular matter as
to which the broker withheld authority.
Assuming the presence of a quorum, the two nominees for Class A Director
receiving the highest number of votes cast by shareholders entitled to vote
for the election of directors shall be elected. Votes withheld from a
nominee and broker non-votes will not be cast for such nominee.
Assuming the presence of a quorum, the affirmative vote of the holders
of at least eighty percent (80%) of the outstanding shares of Common Stock is
required to approve and adopt the amendment to Article 7 of the Corporation's
Articles of Incorporation to provide that any merger, consolidation,
liquidation or similar fundamental change transaction involving the
Corporation must be approved by holders of at least 80 percent of the
outstanding shares of the Corporation's voting stock unless such transaction
has received prior approval of at least 75 percent of all members of the
Corporation's Board of Directors in which case only a majority of the
outstanding shares of the Corporation's voting stock would be required to be
voted in favor of such transaction in order to approve it. Abstentions and
broker non-votes are not deemed to constitute "votes cast" under the
Pennsylvania Business Corporation Law and, therefore, do not count either for
or against the amendment.
Although abstentions and broker non-votes are not deemed to constitute
votes cast, they do have the practical effect of reducing the number of
affirmative votes required to achieve a majority for each such matter by
reducing the total number of shares voted from which the required majority is
calculated.
Quorum
Pursuant to the By-laws of the Corporation, the presence, in person or
by Proxy, of shareholders entitled to cast at least a majority of the votes
which all shareholders are entitled to cast shall constitute a quorum for the
transaction of business at the Annual Meeting.
BENEFICIAL OWNERSHIP OF COMMON STOCK
Principal Owners
The following table sets forth, as of March 10, 1995, the name and
address of each person who owns of record or who is known by the Board of
Directors to be the beneficial owner of more than five percent (5%) of the
Corporation's outstanding Common Stock, the number of shares beneficially
owned by such person and the percentage of the Corporation's Common Stock
owned.
Percent of
Shares Outstanding
Beneficially Common Stock
Name and Address Owned Beneficially Owned
The Harleysville National 297,999(1) 5.07%
Bank and Trust Company
Trust Department
483 Main Street
P. O. Box 195
Harleysville, PA 19438
_______________
(1) Shares held by Harleysville's Trust Department are held in its fiduciary
capacity. Harleysville's Trust Department has sole power to vote or to
direct the vote of 297,999 shares and sole power to dispose or to direct
the disposition of 297,999 shares. Harleysville's Trust Department
intends to vote all shares under its control FOR the election of the
nominees for director named below, and FOR the approval and adoption of
the amendment to the Articles of Incorporation as delineated below.
BENEFICIAL OWNERSHIP BY OFFICERS, DIRECTORS AND NOMINEES
The following table sets forth, as of March 10, 1995, the amount and
percentage of the Corporation's outstanding Common Stock beneficially owned
by each director and nominee for director and by all officers and directors
of the Corporation and the Banks as a group.
Shares Percent of
Name of Individual Beneficially Outstanding
or Identity of Group Owned (1)(2) Common Stock (3)
John W. Clemens (7)........... 10,940 (11) ---
Walter E. Daller, Jr. (9)..... 142,478 (4) 2.43%
Martin E. Fossler (9)......... 16,571 (12) ---
Harold A. Herr (6)............ 10,737 (13) ---
Howard E. Kalis, III (7)...... 7,866 (14) ---
Richard M. Markley (7)........ 77,849 (15) 1.33%
Bradford W. Mitchell (8)...... 1,806 (16) ---
Walter F. Vilsmeier (6)....... 5,344 (17) ---
William M. Yocum (8).......... 29,618 (18) ---
All Officers and Directors
as a Group (44 persons) 743,999 (5)(10) 12.53% (5)
_______________
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definitions of "beneficial ownership" set forth in
the General Rules and Regulations of the Securities and Exchange
Commission and may include securities owned by or for the individual's
spouse and minor children and any other relative who has the same
home, as well as securities to which the individual has or shares
voting or investment power or has the right to acquire beneficial
ownership within sixty (60) days after March 10, 1995. Beneficial
ownership may be disclaimed as to certain of the securities.
(2) Information furnished by the directors.
(3) Less than one percent (1%) unless otherwise indicated.
(4) Includes: 6,199 shares owned solely by W. Daller; 135,993 shares
owned jointly by W. Daller and spouse; and 286 shares owned solely by
his spouse.
(5) The percent of class assumes all outstanding options issued to
directors, employee directors, and officers have been exercised and,
therefore, on a pro forma basis, 5,939,585 shares of Common Stock
would be outstanding.
(6) A Nominee for Class A Director whose term expires in 1999 and a
current Class A Director whose term expires in 1995.
(7) A Class B Director whose term expires in 1996.
(8) A Class C Director whose term expires in 1997.
(9) A Class D Director whose term expires in 1998.
(10) Does not include 297,999 shares held by The Harleysville National Bank
and Trust Company in its fiduciary capacity.
(11) Includes: 8,226 shares owned solely by J. Clemens; 665 shares owned
jointly by J. Clemens and his spouse; and 2,049 shares owned by his
spouse.
(12) Includes: 16,111 shares owned solely by M. Fossler; and 460 shares
owned by his spouse.
(13) These shares are owned solely by H. Herr.
(14) Includes: 2,206 shares owned solely by H. Kalis; 2,982 shares owned
jointly by H. Kalis and his spouse; 223 shares in an estate for which
H. Kalis is co-executor; 2,007 shares representing unexercised stock
options which are currently exercisable; and 448 shares owned by his
spouse. In calculating the tabulated percent of class, the 2,007
shares were added to the shares of Common Stock currently held by Mr.
Kalis and to the total outstanding shares assuming all outstanding
options held by Mr. Kalis were exercised.
(15) Includes: 75,000 shares owned solely by R. Markley; and 2,849 shares
owned jointly by R. Markley and his spouse.
(16) These shares are owned solely by B. Mitchell.
(17) These shares are owned solely by W. Vilsmeier.
(18) These shares are owned solely by W. Yocum.
ELECTION OF DIRECTORS
The By-laws of the Corporation provide that the Corporation's business
shall be managed by its Board of Directors. The By-laws provide that the
number of directors that shall constitute the whole Board of Directors shall
not be less than five (5) nor more than twenty-five (25) and that the Board
of Directors shall be classified into four (4) classes, each class to be
elected for a term of four (4) years. Within the foregoing limits, the Board
of Directors may, from time to time, fix the number of directors and their
respective classifications. No person shall be elected as a director who has
not attained full age. No person shall serve as a director after he or she
has attained the age of seventy (70) years. The Board of Directors has fixed
the number of Board members at nine (9) with two (2) directors in each of
Classes A, C, and D and three (3) directors in Class B. Pursuant to Section
11.1 of the By-laws, vacancies on the Board of Directors, including vacancies
resulting from an increase in the number of directors, shall be filled by a
majority of the remaining members of the Board of Directors, though less than
a quorum, and each person so appointed shall be a director until the
expiration of the term of office of the class of directors to which he or she
was appointed. Therefore, the By-laws provide for a classified Board of
Directors with staggered four-year terms of office.
In accordance with Section 10.3 of the By-laws, at the 1995 Annual
Meeting of Shareholders, two (2) Class A directors shall be elected to serve
for a four-year term and until their successors are elected and qualified.
Unless otherwise instructed, the Proxyholders will vote the Proxies
received by them for the election of the two nominees named below. If any
nominee should become unavailable for any reason, Proxies will be voted in
favor of a substitute nominee as the Board of Directors of the Corporation
shall determine. The Board of Directors has no reason to believe the
nominees named will be unable to serve, if elected. Any vacancy occurring on
the Board of Directors of the Corporation for any reason may be filled by a
majority of the directors then in office until the expiration of the term of
the vacancy.
There is no cumulative voting for the election of directors. Each share
of Common Stock is entitled to cast only one vote for each nominee. For
example, if a shareholder owns ten (10) shares of Common Stock, he or she may
cast up to ten (10) votes for each of the two (2) directors in the class to
be elected.
The Board of Directors recommends that the shareholders vote FOR the election
of the Class A Directors listed below.
INFORMATION AS TO NOMINEES, DIRECTORS, AND EXECUTIVE OFFICERS
The following table contains certain information with respect to the
executive officers, nominees for Class A Director whose term expires in 1999
and the Current Class A Directors whose term expires in 1995, and the Class
B Directors, Class C Directors and Class D Directors whose terms expire in
1996, 1997, and 1998, respectively:
Principal Occupation
for Past Five Years and Director of
Position Held with the Corporation
Corporation, or HNB
Name Age HNB, CNB, and SNB (8) Since (8)
NOMINEES FOR CLASS A DIRECTOR
WHOSE TERMS EXPIRE IN 1999, AND
CURRENT CLASS A DIRECTORS
WHOSE TERMS EXPIRE IN 1995
Walter F. Vilsmeier (2)(4). ...65 Chief Executive Officer - 1987
Vilsmeier Auction Co.,
Inc., auction and appraisal
services; Chief Executive
Officer - Vilsmeier Equipment,
Inc., purchase, sale, and
rental of used equipment
and parts
Harold A. Herr (3).............47 Partner - Albert S. Herr & 1987
Sons, Agri-Business
CLASS B DIRECTORS
WHOSE TERMS EXPIRE IN 1996
John W. Clemens (1)(2)(5)(6)...68 Director, formerly Chairman 1973
and Chief Executive
Officer - Hatfield Quality
Meats, a meat packing and
processing company
Richard M. Markley (2)(7)......64 Partner - W. E. Markley, 1979
a real estate and insurance
firm
Howard E. Kalis, III...........55 Senior Partner, Law Firm of 1994
Binder, Kalis, Linderman &
Proctor; Chairman of the
Board and Director of SNB
since 1988
CLASS C DIRECTORS
WHOSE TERMS EXPIRE IN 1997
Bradford W. Mitchell (1)(4)(5).67 Chairman of the Board 1980
and Director, formerly CEO -
Harleysville Mutual
Insurance Company;
Chairman of the Board,
and Director, formerly CEO -
Harleysville Group, Inc.,
an insurance holding company
William M. Yocum (3)...........61 President - W. M. Yocum 1984
Machine Company
CLASS D DIRECTORS
WHOSE TERMS EXPIRE IN 1998
Walter E. Daller, Jr.(1)(4)(6).55 President and Chief 1977
Executive Officer and
Chairman of the Board and
Director of the Corporation
and HNB; Director of CNB
since 1991; and Director
of SNB since 1994
Martin E. Fossler (1)(3)(4)(5).66 Retired, formerly 1984
President, MEFCO, a
manufacturer of
industrial packaging
_______________
(1) Member of the Executive Committee. The Executive Committee, which is
appointed annually by the Board of Directors, has the authority to take
action between meetings of the Board of Directors with respect to
matters which a majority of the Committee considers necessary to be
addressed prior to the next meeting of the Board of Directors. During
1994, the Executive Committee held one (1) meeting.
(2) Member of the Nominating Committee. The Nominating Committee is
appointed annually by the Board of Directors to recommend nominees to
serve as officers of the Corporation, nominees for election to the
Boards of Directors of HNB, CNB and SNB, and nominees to serve as
officers of HNB, CNB and SNB. During 1994, the Nominating Committee
held one (1) meeting.
(3) Member of the Audit Committee. The Audit Committee, which is appointed
annually by the Board of Directors, recommends the selection of
independent auditors, reviews the scope and results of the audit and
reviews the adequacy of the Corporation's accounting, financial and
operating controls. During 1994, the Audit Committee held five (5)
meetings.
(4) Member of the Investment and Funds Management Committee. The Investment
and Funds Management Committee is appointed annually by the Board of
Directors to oversee the Investment Policy, review liquidity, and
approve the type and maturity of investments. During 1994, the
Investment and Funds Management Committee held four (4) meetings.
(5) Member of the Compensation Committee. The Compensation Committee is
appointed annually by the Board of Directors and consists of three non-
employee directors. The Compensation Committee recommends the
establishment of policies dealing with various compensation plans for
the Corporation and its subsidiaries. In addition, the Committee makes
recommendations to the Board with respect to the compensation of the
President and Chief Executive Officer and approves the compensation paid
to the other senior executives. The Committee also administers the
Equity Incentive Plan, the 1993 Stock Incentive Plan and, in this
capacity, it makes or recommends all option grants or awards to the
Corporation's subsidiaries, officers and executives under this Plan.
During 1994, the Compensation Committee held six (6) meetings.
(6) Member of the Pension and Profit Sharing Committee. The Pension and
Profit Sharing Committee is appointed annually by the Board of Directors
to oversee and administer the Corporation's subsidiaries' pension and
profit sharing plans. During 1994, the Pension and Profit Sharing
Committee held two (2) meetings.
(7) Member of the Compliance Committee. The Compliance Committee is
appointed annually by the Board of Directors. The committee's primary
objective is to assure the Board of Directors that the Corporation's
subsidiaries are in compliance with all applicable laws and regulations.
The Compliance Committee held four (4) meetings in 1994.
(8) "HNB", "CNB", and "SNB" make reference to The Harleysville National Bank
and Trust Company, The Citizens National Bank of Lansford, and Security
National Bank, respectively, subsidiaries of the Corporation.
During 1994, the Board of Directors of the Corporation held twelve (12)
meetings. The members of the Board of Directors of the Corporation also
serve as the members of the Board of Directors of Harleysville, with the
exception of Howard E. Kalis, III. During 1994, the Board of Directors of
Harleysville held twelve (12) meetings. All of the directors attended at
least 75% of the meetings of the Board of the Corporation and Harleysville
and committees of which they were members during the period they served as
such.
A shareholder who desires to propose an individual for consideration by
the Board of Directors as a nominee for director should submit a proposal in
writing to the Secretary of the Corporation in accordance with Section 10.1
of the By-laws of the Corporation. Any shareholder who intends to nominate
a candidate for election to the Board of Directors must notify the Secretary
of the Corporation in writing not less than forty-five (45) days prior to the
date of any meeting of shareholders called for the election of directors.
The written notification must contain certain information with regard to the
proposed nominee to the extent known by the notifying shareholder.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Corporation's officers,
directors, and persons who own more than ten percent (10%) of the registered
class of the Corporation's equity securities, to file reports of ownership
and changes in ownership with the Securities and Exchange Commission (the
"SEC"). In addition, Section 16(a) requires officers, directors and greater
than ten percent (10%) shareholders to furnish the Corporation with copies of
all Section 16(a) forms they file with the SEC. There are no ten percent
(10%) shareholders of the Corporation's equity securities.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5
were required to be filed with the SEC for those persons, the Corporation
believes that during the period of January 1, 1994 through December 31, 1994,
all filing requirements applicable to its officers and directors were
satisfied.
EXECUTIVE COMPENSATION
Compensation of Executive Officers
Shown below is information concerning annual and long-term compensation
for services in all capacities to the Corporation and its subsidiaries for
the fiscal years ending December 31, 1994, 1993, and 1992 of those persons
who were (i) the Chief Executive Officer(s) during 1994 and (ii) the other
most highly compensated executive officers of the Corporation to the extent
such persons' total annual salary and bonus exceeded $100,000 at December 31,
1994.
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-term Compensation
Awards Payouts
Restricted Securities
Annual Other Annual Stock Underlying LTIP All Other
Name and Salary Bonus Compensation Awards Options/SARs Payouts Compensation
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Walter E. Daller, Jr. (1) 1994 $264,205(4) $102,100(5) --- --- --- --- $58,474(6)(7)(8)
President and CEO 1993 243,520(4) 92,000(5) --- --- --- --- 65,974(6)(7)(8)
1992 209,450(4) 81,925(5) --- --- --- --- 65,974(6)(7)(8)
Demetra M. Takes (2) 1994 133,000 40,000 --- --- --- --- 32,271(7)(8)
Executive Vice President 1993 120,750 33,000 --- --- --- --- 30,434(7)(8)
and COO 1992 100,000 27,500 --- --- --- --- 27,321(7)(8)
Fred C. Reim (3) 1994 92,500 13,875 --- --- --- --- 13,875(8)
Senior Vice President 1993 30,000(9) 4,450(9) --- --- --- --- 4,673(8)(9)
</TABLE>
_______________
(1) Walter E. Daller, Jr. serves as President and Chief Executive Officer,
and Chairman of the Board of the Corporation and Harleysville and as a
member of the Boards of Directors of the Corporation, Harleysville,
Citizens, and Security.
(2) Demetra M. Takes serves as Vice President of the Corporation, as
Executive Vice President and Chief Operating Officer of Harleysville and
as a member of the Board of Directors of Citizens and Security.
(3) Fred C. Reim serves as Senior Vice President of Harleysville.
(4) Includes $9,205, $13,520 and $9,450 received as director's fees earned
as a director of Harleysville for 1994, 1993 and 1992, respectively.
(5) Includes $2,100, $2,000 and $1,925 received as director's bonus received
as a director of Harleysville for 1994, 1993 and 1992, respectively.
(6) Includes $6,990, $6,990 and $6,990 for 1994, 1993 and 1992,
respectively, in premiums paid for a directors' deferred compensation
plan maintained by the Corporation in which W. Daller participates and
for whom a portion of his director's compensation was deferred from 1985
through 1989. Under the terms of the plan, benefits can be paid out
over a ten-year period upon reaching age 70. Should W. Daller die
before age 70, or before receiving all of the benefits, those benefits
would be paid to W. Daller's beneficiary until age 70 or for ten years,
whichever shall be greater. This plan is considered an unfunded plan
which is subject to substantial risk of forfeiture and W. Daller is not
considered to be vested pursuant to the plan.
(7) Includes $28,984, $28,984 and $28,984 for W. Daller, and $12,321,
$12,321 and $12,321 for D. Takes for 1994, 1993 and 1992, respectively,
in premiums paid for W. Daller and D. Takes, respectively, for the
Supplemental Retirement Plan maintained for certain officers and key
employees of the Corporation and Harleysville. The Plan provides for
payment to the covered employee an annual supplemental retirement
benefit equal to 50% of the employee's annual base salary upon
retirement. Premiums are paid for a life insurance policy for which the
Bank is beneficiary; policy reimburses, upon the death of the employee,
the Bank for all amounts paid to the Plan. This plan is an unfunded
promise to pay to the named individuals which is subject to substantial
risk of forfeiture, and the individual is not considered as vested
pursuant to the plan.
(8) Includes discretionary distributions of $22,500, $30,000, and $30,000
for 1994, 1993, and 1992, respectively, for W. Daller, and $19,950,
$18,113, and $15,000 for 1994, 1993, and 1992, respectively, for D.
Takes, and $13,875 and $4,673 for 1994 and 1993, respectively, for F.
Reim pursuant to Harleysville's profit sharing plan. For fiscal years
1994, 1993, and 1992, distributions from the profit-sharing plan were
made to all employees of Harleysville equal to 15% of salary, with the
exception of W. Daller. The profit sharing contribution received by W.
Daller was limited to 15% of $150,000 of his salary, to comply with the
Internal Revenue Code Section 404(1).
(9) Amounts reflect F. Reim's four months' tenure during 1993.
Option Exercises and Fiscal Year-end Values
Shown below is information with respect to the unexercised options to
purchase the Corporation's common stock granted in prior years under the
Equity Incentive Plan to the named officers of Harleysville and held by them
at December 31, 1994.
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<TABLE>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)(1)
Name and Shares Acquired Value
Principal Position on Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Walter E. Daller, Jr. 103,918 2,124,685 146,142(2)/ --- 2,867,306/ ---
President and CEO
Demetra M. Takes 1,300 24,960 18,083 / --- 354,788/ ---
Executive Vice
President & COO
Fred C. Reim --- --- --- --- --- ---
Senior Vice President
</TABLE>
_______________
(1) Market value of underlying securities based on the closing price of the
Corporation's common shares on the NASDAQ Stock Exchange on December 30,
1994, minus the exercise price.
(2) W. Daller exercised 146,142 options on February 7, 1995, see "BENEFICIAL
OWNERSHIP BY OFFICERS, DIRECTORS AND NOMINEES" which provides ownership
information as of the record date, March 10, 1995.
Pension Plan
The Corporation does not have a retirement or pension plan.
Harleysville, however, maintains a non-contributory funded pension plan for
all full-time employees over age 20 1/2 who have completed six (6) months of
service. The pension plan provides annual benefits to eligible retired
employees at age 65 equal to one percent (1%) of covered compensation plus
three-quarters of one percent (3/4%) of average salary above the covered
compensation level multiplied by the number of years of employment. Average
salary is the highest annual salary less bonuses during the last five (5)
years of employment immediately prior to retirement. Total contributions by
Harleysville to the pension plan for the years ending December 31, 1994,
December 31, 1993 and December 31, 1992 were $420,116, $309,583, and
$215,691, respectively.
The following table shows the estimated annual retirement benefit
payable pursuant to the pension plan to an officer currently age 65 whose
highest salary, not including bonuses, remained unchanged during his last
five (5) years of employment and whose benefits will be paid for the
remainder of his life. Such table does not reflect any limitations on
benefits to participants which may apply under the Internal Revenue Code.
Benefits listed in the table below are integrated with Social Security.
Average
Annual 10 Years 15 Years 20 Years 25 Years 30 Years
Earnings of Service of Service of Service of Service of Service
$ 75,000 $ 6,185 $ 9,293 $12,390 $15,488 $18,585
100,000 8,070 12,105 16,140 20,175 24,210
125,000 9,945 14,918 19,890 24,863 29,835
150,000 11,820 17,730 23,640 29,550 35,460
175,000 13,695 20,543 27,390 34,238 41,085
200,000 15,570 23,355 31,140 38,925 46,710
225,000 17,445 26,168 34,890 43,613 52,335
250,000 19,320 28,980 38,640 48,300 57,960
275,000 21,195 31,793 42,390 52,988 63,585
300,000 23,070 34,606 46,140 57,676 69,210
325,000 24,945 37,419 49,890 62,364 74,835
350,000 26,820 40,232 53,640 67,052 80,460
Walter E. Daller, Jr., President and Chief Executive Officer of the
Corporation and Harleysville, has 32 years of credited service under the
pension plan. Average salary upon which benefits would be calculated at
December 31, 1994 is $255,000.
Demetra M. Takes, Executive Vice President of Harleysville, has 22 years
of credited service under the pension plan. Average salary upon which
benefits would be calculated at December 31, 1994 is $133,000.
Fred C. Reim, Senior Vice President of Harleysville, has 1 year of
credited service under the pension plan. Average salary upon which benefits
would be calculated at December 31, 1994 is $92,500.
Profit Sharing Plan
All full-time employees become eligible to participate in the
discretionary profit-sharing plan after the later to occur of (a) the
completion of six (6) months' continuous service or (b) the attainment of age
20 1/2. The profit-sharing plan provides for a fund to be held by
Harleysville as trustee for the benefit of the employees. Harleysville's
Board of Directors annually determines the contribution to be made to the
profit-sharing plan out of the net profits of Harleysville subject to certain
limits as set forth in the profit-sharing plan. For fiscal years 1994, 1993,
and 1992, distributions from the profit-sharing plan were made to all
employees of Harleysville equal to 15% of salary, with the exception of W.
Daller. The profit sharing contribution received by W. Daller was limited to
15% of $150,000 of his salary, to comply with the Internal Revenue Code
Section 404(1).
Supplemental Executive Retirement Plan
Harleysville maintains a Supplemental Retirement Plan for certain
officers and key employees of the Corporation and Harleysville. The Plan
provides for payment to the covered employee an annual supplemental
retirement benefit equal to 50% of their annual base salary upon retirement.
After the first 12 such payments (the first year), the amount of the base
salary shall be adjusted annually thereafter by 80% of the percentage by
which the cost of living as of the employees's retirement date, measured by
the last reported monthly Consumer Price Index for Urban Wage Earners (CPI-U)
or its most comparable successor index, is succeeded by the CPI-U as of the
end of the first or subsequent pension year, however, the annual increase in
the base salary used to calculate benefits under the plan will not be less
than $2,400.
The following table shows the estimated annual retirement benefit
payable pursuant to the Supplemental Executive Retirement Plan to an employee
covered under the Plan:
<TABLE>
Base Salary Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100,000 50,000 51,200 52,429 53,687 54,976 56,295 57,646 59,030 60,446 61,897
125,000 62,500 64,000 65,536 67,109 68,719 70,369 72,058 73,787 75,558 77,371
150,000 75,000 76,800 78,643 80,531 82,463 84,442 86,469 88,544 90,669 92,846
175,000 87,500 89,600 91,750 93,952 96,207 98,516 100,881 103,302 105,781 108,320
200,000 100,000 102,400 104,858 107,374 109,951 112,590 115,292 118,059 120,893 123,794
225,000 112,500 115,200 117,965 120,796 123,695 126,664 129,704 132,817 136,004 139,268
250,000 125,000 128,000 131,072 134,218 137,439 140,737 144,115 147,574 151,116 154,743
275,000 137,500 140,800 144,179 147,640 151,183 154,811 158,527 162,331 166,227 170,217
300,000 150,000 153,600 157,286 161,062 164,927 168,885 172,939 177,088 181,338 185,691
325,000 162,500 166,400 170,393 174,484 178,671 182,959 187,351 191,845 196,449 201,165
350,000 175,000 179,200 183,500 187,906 192,415 197,033 201,763 206,602 211,560 216,639
</TABLE>
Salary upon which benefits would be calculated at December 31, 1994
under the Supplemental Executive Retirement Plan is $255,000 for Walter E.
Daller, Jr., President and Chief Executive Officer of the Corporation and
Harleysville; credited coverage under the plan equals ten years.
Salary upon which benefits would be calculated at December 31, 1994
under the Supplement Executive Retirement Plan is $133,000 for Demetra M.
Takes, Vice President of the Corporation and Executive Vice President of
Harleysville; credited coverage under the plan equals five years.
Fred C. Reim, Senior Vice President of Harleysville, is not covered
under the Supplemental Executive Retirement Plan.
Equity Incentive Plan
On February 19, 1987, the Board of Directors adopted an equity incentive
plan (the "Equity Incentive Plan") which was approved by the Corporation's
shareholders on April 14, 1987. The stated purpose of the Equity Incentive
Plan is to advance the development, growth, and financial success of the
Corporation. The Equity Incentive Plan provides for the issuance of shares
of the Corporation's Common Stock to officers and key employees of the
Corporation and Harleysville who are in positions in which their decisions,
actions, and counsel significantly impact upon long-term profitability.
Directors may also receive awards under the Equity Incentive Plan if they are
officers or key employees at the time of the awards. The Equity Incentive
Plan's original grant of 75,000 shares have all been awarded and have been
adjusted to reflect stock dividends and stock splits to an aggregate of
333,047, of which 43,811 are unexercised, as of the record date, March 10,
1995.
The Equity Incentive Plan is administered by the Compensation Committee
of the Corporation's Board of Directors (the "Committee"). Members of the
Committee are not eligible to receive awards under the Equity Incentive Plan
or any similar plan. The Committee has full and final authority to interpret
the provisions of the Equity Incentive Plan and to decide all questions of
fact arising in its application; to prescribe and rescind rules and
regulations relating to the Equity Incentive Plan; to make awards under the
Equity Incentive Plan and to determine the types, amount, size, and terms of
each award; to determine when awards will be granted and to make all other
determinations necessary or advisable for the administration of the Equity
Incentive Plan. The Committee may grant long-term incentive awards in the
form of incentive stock options, non-qualified stock options, stock
appreciation rights or restricted stock as it deems appropriate. The Equity
Incentive Plan also contains anti-dilution provisions. All incentive stock
options and non-qualified options have been granted at 100% of the fair
market value of the Corporation's Common Stock on the date of grant. No
options were granted during 1994, or as of the record date, March 10, 1995.
1993 Stock Incentive Plan
On March 1, 1993, the Board of Directors of the Corporation adopted the
Harleysville National Corporation 1993 Stock Incentive Plan (the "Stock
Incentive Plan") which was approved by the Corporation's shareholders on
April 13, 1993. The stated purpose of the Stock Incentive Plan is to advance
the development, growth and financial condition of the Corporation. The Stock
Incentive Plan provides for the issuance of shares of the Corporation's
Common Stock to the Corporation's employees. Of the 168,000 shares of the
Corporation's Common Stock available for issuance under the Stock Incentive
Plan 168,000 shares remain available for issuance as of March 10, 1995.
The Stock Incentive Plan is administered by a disinterested committee of
the Corporation's Board of Directors in the same manner as described above
under the description of the Equity Incentive Plan. Also, like the Equity
Incentive Plan, incentive awards can be made in the form of incentive stock
options, non-qualified stock options, stock appreciation rights or restricted
stock as the disinterested committee deems appropriate. No options were
granted or exercised during 1994, or as of the record date, March 10, 1995.
Compensation of Directors
Directors of Harleysville received a fee of $385 for each meeting of
Harleysville attended, an annual retainer fee of $5,000, and also received a
fee of $200 for each meeting attended of a committee of the Board of
Directors of the Corporation or Harleysville. Each Director of Harleysville
received a bonus of $2,100. In the aggregate, the Board of Directors of
Harleysville received $106,360.
Harleysville National Corporation maintains deferred compensation plans
for its directors. In the past, certain directors elected to defer, with
interest, all or part of their compensation for future distribution. Under
the terms of the plan, benefits can be paid out to the respective directors,
over a ten-year period. Should the director die before age 70 or before
receiving all of the benefits, those benefits would be paid to his or her
beneficiary until age 70 or for ten years, whichever shall be greater. This
plan is considered an unfunded plan which is subject to substantial risk of
forfeiture and the director is not considered to be vested pursuant to the
plan.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Board of Directors of Harleysville National Corporation (the
"Corporation") is responsible for the governance of the Corporation and its
subsidiaries. In fulfilling its fiduciary duties, the Board of Directors
acts in the best interests of the Corporation's shareholders, customers and
the communities served by the Corporation and its subsidiaries. To
accomplish the strategic goals and objectives of the Corporation, the Board
of Directors engages competent persons who undertake to accomplish these
objectives with integrity and in a cost-effective manner. The compensation
of these individuals is part of the Board of Directors' fulfillment of its
duties to accomplish the Corporation's strategic mission. Harleysville
National Bank and Trust Company ("Harleysville"), The Citizens National Bank
of Lansford ("Citizens"), and Security National Bank ("Security") or
collectively, the "Banks", the wholly-owned bank subsidiaries of the
Corporation, provide compensation to the respective employees of the
Corporation and the Banks.
The fundamental philosophy of the Corporation's and the Banks'
compensation program is to offer competitive compensation opportunities for
all employees based on the individual's contribution and personal
performance. The compensation program is administered by a Compensation
Committee comprised of three outside directors who are listed below. The
objectives of the Committee are to establish a fair compensation policy to
govern executive officers' base salaries and incentive plans to attract and
motivate competent, dedicated, and ambitious managers whose efforts will
enhance the products and services of the Corporation and the Banks, the
results of which will be improved profitability, increased dividends to the
Corporation's shareholders and subsequent appreciation in the market value of
the Corporation's shares.
The compensation of the Corporation's and Banks' top executives is
reviewed and approved annually by the Board of Directors. The top executives
whose compensation is determined by the committee include the chief executive
officer, the executive vice president and all other vice presidents. As a
guideline for review in determining appropriate compensation, the committee
considers, extensively, various resource materials as well as the
Corporation's earnings and overall performance relative to various peer
groups both in the short term and long term historically. This peer group of
banks with assets of $500 Million to $1 Billion is different than the peer
group utilized for the Shareholder Return Performance Graph. The principal
resources used for peer group comparisons are the 1994 edition of the annual
SNL Executive Compensation Review of Commercial Banks, the 1994 edition of
the L. R. Webber Associates Salary/Benefits Survey of the Pennsylvania
Financial Services Industry, and the Fourth Quarter 1994 edition of "The
Community Banker" - "SuperCommunity Bank Performance Monitor"/"SuperCommunity
Bank 30 Index." The peer group on the "Shareholder Return Performance Graph"
includes bank holding companies and banks listed on NASDAQ which may not be
located in Pennsylvania.
The Compensation Committee does not deem Section 162(m) of the Internal
Revenue Code (the "IRC") to be applicable to the Corporation at this time.
The Compensation Committee intends to monitor the future application of
Section 162(m) of the IRC to the compensation paid to its executive officers
and in the event that this section becomes applicable, it is the intent of
the Compensation committee to amend the Corporation's compensation plans to
preserve the deductibility of the compensation payable under such plans.
CEO Compensation
The Board of Directors has determined that the compensation of the CEO
as increased by 11.8% over 1994 compensation of $255,000 is appropriate in
light of the following 1994 performance accomplishments as of October 31,
1994: for Harleysville (1) an 18.7% percent increase in net income; (2) a
17.8% increase in return on equity; (3) a 9.4% percent increase in assets;
and (4) a 1.43% return on assets; and for the Corporation, a 24.3% increase
in stockholder dividends. There is, however, no direct correlation between
the CEO's compensation, the CEO's increase in compensation and any of the
above criteria, nor is there any specific weight given by the committee to
any of the above individual criteria. Such increase in the CEO's compensation
is based on the committee's subjective determination after review of all
information, including the above, that it deems relevant.
Executive Officers
The Board of Directors has established that the compensation of the
Corporation's and the Bank's executive officers will increase by eight
percent (8%) over 1994 compensation of $480,500 in the aggregate.
Compensation increases were determined by the committee based on its
subjective analysis of the individual's contribution to the Corporation's
strategic goals and objectives. In determining whether strategic goals have
been achieved, the Board of Directors consider among numerous factors the
following: the Corporation's performance as measured by earnings, revenues,
return on assets, return on equity, market share, total assets and non-
performing loans. Although the performance and increases in compensation
were measured in light of these factors, there is no direct correlation
between any specific criterion and the employees compensation, nor is there
any specific weight provided to any such criteria in the committee's
analysis. The determination by the committee is subjective after review of
all information, including the above, as it deems relevant.
In addition to base salary, executive officers of the Corporation and
the Banks may participate currently in the following annual and long-term
incentive plans: pension; profit sharing; and a non-qualified supplemental
retirement benefit plan. The compensation program and committee will govern
awards made under the stock option plan.
Total compensation opportunities available to the employees of the
Corporation and the Banks are influenced by general labor market conditions,
the specific responsibilities of the individual, and the individual's
contributions to the Corporation's success. Individuals are reviewed annually
on a calendar year basis. The Corporation and the Banks strive to offer
compensation that is competitive with that offered by employers of comparable
size in our industry. Through these compensation policies, the Corporation
strives to meet its strategic goals and objectives to its constituencies and
provide compensation that is fair and meaningful to its employees.
Compensation Committee
Bradford W. Mitchell, Chairman
John W. Clemens
Martin E. Fossler
Shareholder Return Performance Graph
Set forth below is a line graph comparing the yearly change in the
cumulative total shareholder return on the Corporation's Common Stock against
the cumulative total return of the NASDAQ Stock Market (U.S. Companies) Index
and the NASDAQ Bank Stocks Index for the period of five fiscal years
commencing January 1, 1990 and ending December 31, 1994. The shareholder
return shown on the graph below is not necessarily indicative of future
performance.
Comparison of Five-year Cumulative Total Return
Harleysville National Corporation Common
[PERFORMANCE GRAPH SUBMITTED IN PAPER FORM
UNDER COVER OF SEC FORM SE. SEE ALSO APPENDIX HERETO.]
EXECUTIVE OFFICERS OF THE CORPORATION
The following table sets forth selected information about the executive
officers of the Corporation, each of whom is appointed by the Board of
Directors and each of whom holds office at the discretion of the Board of
Directors, as of the record date, March 10, 1995.
<TABLE>
Number of
Position HNB/CNB/SNB Shares
Held Employee Beneficially Age as of
Name and Position Since Since (10) Owned March 10, 1995
<S> <C> <C> <C> <C> <C> <C>
Walter E. Daller, Jr. 1981 1962 142,478 (1) 54
President and CEO and Chairman of
the Board of the Corporation and
of HNB, and Director of the
Corporation, HNB, CNB and SNB
Demetra M. Takes 1993 1972 21,260 (2) 43
Vice President of the Corporation,
Executive Vice President and COO
of HNB, and Director of CNB and SNB
James W. Hamilton 1983 1971 12,377 (3) 47
Senior Vice President
and Senior Trust Officer of HNB
Vernon L. Hunsberger 1991 1966 9,393 (4) 45
Treasurer of the Corporation, and
Senior Vice President, CFO,
and Cashier of HNB
Frank J. Lochetto 1989 1980 10,004 (5) 46
Senior Vice President of HNB,
and Director of CNB
Fred C. Reim 1993 1993 (11) 500 (6) 50
Senior Vice President of HNB
Thomas D. Oleksa 1991 1991 (12) 275 (7) 40
President and CEO of CNB,
and Director of CNB
Martha A. Rex 1992 1991 (13) 461 (8) 45
Vice President, Trust Officer,
and Cashier of CNB
Raymond H. Melcher, Jr. 1994 1994 (14) 105 (9) 43
President and CEO of SNB,
and Director of SNB
(Officers of HNB, CNB, and SNB 211,900
as a group consisting of 20 persons)
</TABLE>
_______________
(1) Includes: 6,199 shares owned solely by W. Daller; 135,993 shares owned
jointly by W. Daller and spouse; and 286 shares owned solely by his
spouse.
(2) Includes 3,177 shares owned solely by D. Takes; and 18,083 unexercised
stock options which are currently exercisable.
(3) Includes 7,289 shares owned solely by J. Hamilton; and 5,088 unexercised
stock options which are currently exercisable.
(4) Includes 1,283 shares owned solely by V. Hunsberger; 1,039 shares owned
jointly by V. Hunsberger and spouse; and 7,071 unexercised stock options
which are currently exercisable.
(5) Includes 96 shares owned jointly by F. Lochetto and spouse; 5,489 shares
owned solely by F. Lochetto's spouse; 721 shares owned by F. Lochetto's
children; and 3,698 unexercised stock options which are currently
exercisable.
(6) Includes 500 shares owned solely by F. Reim.
(7) Includes 275 shares owned solely by T. Oleksa.
(8) Includes 461 shares owned jointly by M. Rex and J. Trojan.
(9) Includes 105 shares owned solely by R. Melcher.
(10) "HNB" makes reference to The Harleysville National Bank and Trust
Company, "CNB" makes reference to The Citizens National Bank of
Lansford, "SNB" makes reference to Security National Bank.
(11) F. Reim began career with HNB in 1993; from 1990 to 1993 served as a
senior vice president of First Valley Bank; from 1986 to 1990 served as
a senior vice president of National Westminster Bank NJ.
(12) T. Oleksa began career with CNB in 1991; from 1985 to 1990 served as
vice president of Merchants Bank N.A.; from 1990 to 1991 served as vice
president of First Valley Bank.
(13) CNB was acquired by the Corporation in 1991; from 1986 to 1990 M. Rex
served as assistant cashier of CNB; from 1990 to 1991 served as vice
president of CNB; from 1991 to 1992 served as vice president and cashier
of CNB.
(14) SNB was acquired by the Corporation in 1994; from 1990 to 1994 R.
Melcher was business owner, director, executive vice president and COO
of HiTech Connections, Inc.; from 1988 to 1990 was executive vice
president of Keystone Financial; from 1986 to 1988 was president and CEO
of Pennsylvania National Bank.
CERTAIN TRANSACTIONS
There have been no material transactions between the Corporation and the
Banks, nor any material transactions proposed, with any director or executive
officer of the Corporation or the Banks or any associate of the foregoing
persons. The Corporation and the Banks have had and intend to continue to
have banking and financial transactions in the ordinary course of business
with directors and executive officers of the Corporation and the Banks and
their associates on comparable terms and with similar interest rates as those
prevailing from time to time for other customers of the Banks. Total loans
outstanding from the Corporation and the Banks at December 31, 1994 to the
Corporation's and the Banks' executive officers and directors as a group and
members of their immediate families and companies in which they had an
ownership interest of 10% or more was $11,618,389 or approximately 17.5% of
the total equity capital of the Corporation. Loans to such persons were made
in the ordinary course of business, were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons, and did not involve more
than the normal risk of collectibility or present other unfavorable features.
Total interest paid by the Banks during 1994 on deposits held by such persons
was $223,739.
PROPOSAL TO ADOPT A TWO-TIERED SUPER-MAJORITY PROVISION
CONCERNING APPROVAL OF MERGERS AND
OTHER FUNDAMENTAL CORPORATE TRANSACTIONS
On January 12, 1995, the Board of Directors of the Corporation by a
unanimous vote resolved to amend Article 7 of the Corporation's amended
Articles of Incorporation to provide for a two-tiered super-majority voting
requirement concerning mergers, consolidations, liquidations, dissolutions,
and other fundamental change transactions involving the Corporation instead
of the current eighty percent (80%) super-majority clause in all such
instances. The proposal to adopt the amendment to Article 7, including the
revised text of Article 7, reads in its entirety as follows:
WHEREAS, the Board of Directors has determined that Article 7 of the
amended Articles of Incorporation of Harleysville National Corporation should
be amended in order to provide a two-tiered super-majority clause regarding
the requisite shareholder approval required to govern certain fundamental
corporate transactions;
WHEREAS, the Board of Directors believes it is in the best interests of
the Corporation, its shareholders and the other relevant constituencies of
its banking subsidiaries, to submit to the Corporation's shareholders of
record a proposal to amend Article 7 of the Corporation's amended Articles of
Incorporation at the Corporation's 1995 Annual Meeting of Shareholders.
THEREFORE, BE IT RESOLVED, that in accordance with Sections 1911, 1912
and 1914 of the Pennsylvania Business Corporation Law of 1988, as amended,
the Board of Directors hereby approves and adopts the following proposed
amendment to the amended Articles of Incorporation of this Corporation to be
submitted to the shareholders of the Corporation for their approval and
adoption at the 1995 Annual Meeting of Shareholders of the Corporation to be
held on April 11, 1995, at 9:30 a.m., prevailing time, at Presidential
Caterers, 2910 DeKalb Pike, Norristown, Pennsylvania 19401 to wit:
Article 7 of the Corporation's amended Articles of Incorporation is
amended and restated in its entirety, as follows:
7. No merger, consolidation, liquidation or dissolution of
the Corporation, nor any action that would result in the sale or
other disposition of all or substantially all of the assets of the
Corporation shall be valid unless first approved by the affirmative
vote of:
(a) the holders of at least eighty percent (80%) of
the outstanding shares of voting stock of the
Corporation; or
(b) the holders of at least a majority of the
outstanding shares of voting stock of the Corporation,
provided that such transaction has received the prior
approval of at least seventy-five percent (75%) of all of
the members of the Board of Directors.
The affirmative vote of the holders of at least eighty (80%)
of the outstanding shares of voting stock entitled to vote shall be
required to amend or repeal this Article 7.
BE IT FURTHER RESOLVED, that the Board of Directors hereby directs and
orders that the President and Secretary of this Corporation shall cause proxy
solicitation materials to be prepared for the 1995 Annual Meeting of
Shareholders to solicit proxies for approval and adoption of the
aforementioned amendment by the shareholders of the Corporation and further
directs and orders that said proxy solicitation materials be mailed on or
about March 13, 1995, to shareholders of record as of March 10, 1995; and
BE IT FURTHER RESOLVED, that after approval and adoption of the
aforesaid amendment to the amended Articles of Incorporation of the
Corporation by the shareholders of the Corporation at the 1995 Annual Meeting
of Shareholders, the President and Secretary, or a Vice President and
Assistant Secretary, of the Corporation are hereby authorized, empowered and
directed to execute and file Articles of Amendment containing said amendment
with the Commonwealth of Pennsylvania, Department of State, Corporation
Bureau, and upon such filing said amendment shall be effective.
For the reasons described below, the Board of Directors believes that
Article 7, as it is proposed to be revised, will more clearly, succinctly and
effectively cover the voting requirements concerning approval of mergers and
other fundamental corporate transactions.
The Board of Directors believes that the proposed revision to Article 7
will result in greater flexibility in planning strategically for the
Corporation's future since fundamental change transactions supported by 75%
of the Corporation's Board of Directors will require only a simple majority
of the outstanding voting stock of the Corporation. In addition, the Board
of Directors believes that the proposed revision will promote shareholder
democracy since those fundamental change transactions not supported by the
Corporation's Board of Directors can nonetheless still be approved by the
Corporation's shareholders if such transaction receives the approval of at
least 80 percent of the outstanding voting stock of the Corporation. In its
current form, Article 7 does not include a provision which allows a
fundamental change transaction to be approved by a simple majority of the
voting stock of the Corporation in the event that the Board of Directors
overwhelmingly approves such transaction. Currently, Article 7 requires that
all mergers, consolidations, and similar transactions be approved by the
affirmative vote of the holders of at least eighty percent (80%) of the
outstanding shares of common stock whether or not such transactions have
received overwhelming support by the Board of Directors.
The affirmative vote of the holders of at least eighty percent (80%) of
the outstanding shares of Common Stock of the Corporation is required to
approve and adopt the proposed amendment to Article 7 of the Corporation's
Articles of Incorporation as set forth above.
The Board of Directors of the Corporation unanimously recommends that
shareholders vote FOR the proposal to approve and adopt an amendment to
Article 7 of the Corporation's amended Articles of Incorporation to provide
the two-tiered super-majority approval requirement for mergers and other
fundamental change transactions.
INDEPENDENT AUDITORS
KPMG Peat Marwick, Certified Public Accountants, of Philadelphia,
Pennsylvania, served as the Corporation's independent auditors for the 1994
fiscal year, assisted the Corporation and the Banks with the preparation of
their federal and state tax returns, and provided assistance in connection
with regulatory matters charging the Banks for such services at its customary
hourly billing rates. These non-audit services were approved by the
Corporation's Board of Directors after due consideration of the effect of the
performance thereof on the independence of the accountants and after the
conclusion by the Corporation's Board of Directors that there was no effect
on the independence of the accountants. The Corporation has been advised by
KPMG Peat Marwick that none of its members has any financial interest in the
Corporation.
LEGAL PROCEEDINGS
In the opinion of the management of the Corporation and the Banks, there
are no proceedings pending to which the Corporation and the Banks are a party
or to which their property is subject, which, if determined adversely to the
Corporation and the Banks, would be material in relation to the Corporation's
and the Banks' undivided profits or financial condition. There are no
proceedings pending other than ordinary routine litigation incident to the
business of the Corporation and the Banks. In addition, no material
proceedings are pending or are known to be threatened or contemplated against
the Corporation and the Banks by government authorities.
ANNUAL REPORT
A copy of the Corporation's Annual Report for the fiscal year ended
December 31, 1994 is being mailed to the Corporation's shareholders with this
Proxy Statement. A representative of KPMG Peat Marwick will attend the
Annual Meeting and will have the opportunity to make a statement, if he
desires to do so, and will be available to respond to any appropriate
questions presented by shareholders at the Annual Meeting.
SHAREHOLDER PROPOSALS
Any shareholder who, in accordance with and subject to the provisions of
the proxy rules of the Securities and Exchange Commission, wishes to submit
a proposal for inclusion in the Corporation's Proxy Statement for its 1996
Annual Meeting of Shareholders must deliver such proposal in writing to the
Secretary of the Corporation at the Corporation's principal executive offices
at 483 Main Street, P.O. Box 195, Harleysville, Pennsylvania 19438, not
later than Friday, November 17, 1995.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented for
consideration other than the matters described in the accompanying Notice of
Annual Meeting of Shareholders, but if any matters are properly presented, it
is the intention of the persons named in the accompanying Proxy to vote on
such matters in accordance with their best judgment.
ADDITIONAL INFORMATION
UPON WRITTEN REQUEST OF ANY SHAREHOLDER, A COPY OF THE CORPORATION'S
REPORT ON FORM 10-K FOR ITS FISCAL YEAR ENDED DECEMBER 31, 1994, INCLUDING
THE FINANCIAL STATEMENTS AND THE SCHEDULES THERETO, REQUIRED TO BE FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 13a-1 UNDER THE
SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED, MAY BE OBTAINED, WITHOUT
CHARGE, FROM PAMELA L. HARTENSTINE, SECRETARY, 483 MAIN STREET, P.O. BOX 195,
HARLEYSVILLE, PENNSYLVANIA 19438, TELEPHONE (215) 256-8851.
By Order of the Board of Directors,
Walter E. Daller, Jr.
President and
Chief Executive Officer
Date: March 13, 1995
<PAGE>
APPENDIX
The performance graph for the proxy statement has been submitted to
the Securities and Exchange Commission on paper, under cover of SEC
Form SE. Following is a description of the performance graph in a
tabular format.
" Date " " Company" " Market" " Market" " Peer" "Peer "
" " " Index " " Index " " Count " " Index" "Count"
"12/29/89", 100.000, 100.000, 4161, 100.000, 634
"01/31/90", 106.533, 91.346, 4143, 92.954, 633
"02/28/90", 107.538, 93.862, 4122, 93.865, 632
"03/30/90", 108.302, 96.576, 4129, 92.844, 633
"04/30/90", 117.411, 93.412, 4121, 88.380, 631
"05/31/90", 110.326, 102.214, 4111, 90.423, 626
"06/29/90", 114.160, 102.969, 4087, 88.982, 626
"07/31/90", 109.064, 97.799, 4083, 84.554, 624
"08/31/90", 108.044, 85.462, 4076, 77.209, 621
"09/28/90", 97.615, 77.365, 4049, 68.241, 614
"10/31/90", 90.422, 74.324, 4023, 65.740, 608
"11/30/90", 98.642, 81.404, 3992, 71.019, 606
"12/31/90", 95.354, 84.918, 3975, 73.232, 602
"01/31/91", 93.281, 94.316, 3943, 77.418, 596
"02/28/91", 100.536, 103.392, 3928, 86.216, 594
"03/28/91", 114.940, 110.296, 3915, 90.602, 596
"04/30/91", 117.030, 111.010, 3877, 96.197, 588
"05/31/91", 110.761, 116.092, 3877, 100.217, 582
"06/28/91", 109.501, 109.033, 3900, 99.352, 582
"07/31/91", 121.082, 115.474, 3899, 106.019, 580
"08/30/91", 117.397, 121.203, 3913, 113.165, 581
"09/30/91", 118.850, 121.646, 3917, 111.119, 577
"10/31/91", 118.850, 125.681, 3930, 114.104, 574
"11/29/91", 120.973, 121.471, 3942, 111.043, 575
"12/31/91", 119.768, 136.277, 3950, 120.168, 572
"01/31/92", 115.490, 144.280, 3960, 126.180, 570
"02/28/92", 127.788, 147.552, 3964, 132.805, 570
"03/31/92", 137.927, 140.596, 3976, 134.728, 571
"04/30/92", 155.168, 134.579, 3975, 140.923, 571
"05/29/92", 155.168, 136.341, 3963, 147.244, 570
"06/30/92", 150.737, 130.933, 3941, 146.851, 565
"07/31/92", 149.652, 135.563, 3905, 150.561, 562
"08/31/92", 163.750, 131.413, 3885, 147.817, 559
"09/30/92", 165.882, 136.286, 3883, 151.421, 556
"10/30/92", 165.882, 141.661, 3895, 154.617, 551
"11/30/92", 161.517, 152.926, 3911, 164.685, 551
"12/31/92", 175.224, 158.579, 3935, 174.869, 549
"01/29/93", 168.307, 163.096, 3923, 181.674, 538
"02/26/93", 163.696, 156.988, 3954, 185.977, 534
"03/31/93", 174.095, 161.555, 3977, 193.498, 534
"04/30/93", 172.934, 154.656, 4011, 185.602, 541
"05/28/93", 174.095, 163.866, 4039, 181.841, 541
"06/30/93", 172.354, 164.635, 4076, 186.992, 545
"07/30/93", 176.444, 164.852, 4108, 193.653, 545
"08/31/93", 186.960, 173.373, 4143, 198.815, 542
"09/30/93", 183.501, 178.493, 4179, 204.535, 545
"10/29/93", 197.617, 181.444, 4227, 201.425, 552
"11/30/93", 197.617, 176.028, 4310, 193.240, 560
"12/31/93", 210.829, 180.933, 4382, 199.334, 565
"01/31/94", 279.527, 186.419, 4406, 202.520, 564
"02/28/94", 307.953, 184.725, 4444, 199.913, 563
"03/31/94", 299.794, 173.357, 4497, 196.737, 567
"04/29/94", 285.518, 171.110, 4526, 203.154, 570
"05/31/94", 302.173, 171.547, 4566, 212.472, 572
"06/30/94", 310.811, 165.295, 4579, 212.749, 573
"07/29/94", 301.247, 168.682, 4597, 215.818, 574
"08/31/94", 289.293, 179.419, 4615, 221.212, 577
"09/30/94", 269.204, 178.963, 4616, 215.019, 578
"10/31/94", 283.625, 182.418, 4638, 208.563, 597
"11/30/94", 274.011, 176.366, 4654, 199.792, 600
"12/30/94", 284.418, 176.916, 4658, 198.692, 598
<PAGE>
HARLEYSVILLE NATIONAL CORPORATION
PROXY
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 11, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints James W. Hamilton and
Vernon L. Hunsberger, and each or any of them, proxies of the undersigned,
with full power of substitution, to vote all of the shares of Harleysville
National Corporation (the "Corporation") which the undersigned may be
entitled to vote at the Annual Meeting of Shareholders of the Corporation to
be held at Presidential Caterers, 2910 DeKalb Pike, Norristown, Pennsylvania
19401 on Tuesday, April 11, 1995, at 9:30 a.m., prevailing time, and at any
adjournment or postponement thereof, as follows:
1. ELECTION OF CLASS A DIRECTORS TO SERVE FOR A FOUR-YEAR TERM
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary) for all nominees listed
below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST
BELOW.)
Walter F. Vilsmeier Harold E. Herr
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
CLASS A DIRECTORS LISTED ABOVE.
2. PROPOSAL TO APPROVE AND ADOPT AN AMENDMENT TO ARTICLE 7
OF THE CORPORATION'S AMENDED ARTICLES OF INCORPORATION TO
PROVIDE THAT ANY MERGER, CONSOLIDATION, LIQUIDATION OR
SIMILAR FUNDAMENTAL CHANGE TRANSACTION INVOLVING THE
CORPORATION MUST BE APPROVED BY HOLDERS OF AT LEAST 80
PERCENT OF THE OUTSTANDING SHARES OF THE CORPORATION'S
VOTING STOCK UNLESS SUCH TRANSACTION HAS RECEIVED PRIOR
APPROVAL OF AT LEAST 75 PERCENT OF ALL MEMBERS OF THE
CORPORATION'S BOARD OF DIRECTORS IN WHICH CASE ONLY A
MAJORITY OF THE OUTSTANDING SHARES OF THE CORPORATION'S
VOTING STOCK WOULD BE REQUIRED TO BE VOTED IN FAVOR OF
SUCH TRANSACTION IN ORDER TO APPROVE IT.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS
PROPOSAL.
3. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Annual Meeting and
any adjournment or postponement thereof.
THIS PROXY WHEN PROPERLY SIGNED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL NOMINEES LISTED ABOVE AND FOR PROPOSAL 2.
This Proxy must be dated, signed by the shareholder and returned
promptly to the Corporation in the enclosed envelope. When signing as
attorney, executor, administrator, trustee or guardian, please give full
title. If more than one trustee, all should sign. If stock is held jointly,
each owner must sign.
________________________________________
Signature
________________________________________
Signature
Dated:_____________________________, 1995
<PAGE>
Directions To Presidential Caterers
2910 DeKalb Pike
Norristown, PA 19401
610-275-7300
NOTE TO ALL DRIVERS: There is a traffic island in the middle of the
road on Route 202 just in front of Presidential's driveway so you CANNOT make
a left turn off Route 202 into the driveway. You MUST enter the driveway with
a right turn.
* * * * * *
From King of Prussia - Take Route 202 North through Norristown to East
Norriton. After crossing the intersection at Germantown Pike (Route 422) the
driveway to Presidential will be on your right.
From Montgomeryville & Lansdale - Take Route 202 South to East Norriton.
Turn Right at Township Line Road (Mr. Ron's Restaurant on corner). Go one
block and turn Left at Swede Road. Proceed to Germantown Pike and turn Left.
Next light, Route 202 (DeKalb Pike) turn Left. Driveway to Presidential will
be on your right.
From Philadelphia - Take Schuylkill Expressway to Plymouth Meeting. Exit
Route 476 North to Germantown Pike-West Exit. Follow Germantown Pike-West to
Route 202 North (DeKalb Pike). Make a Right onto Route 202, driveway to
Presidential will be on your right.
From Main Line - Take Blue Route, 476 North, to Germantown Pike - West
Exit. Follow Germantown Pike - West to Route 202 North (DeKalb Pike). Make
a Right onto Route 202, driveway to Presidential will be on your right.
From Willow Grove - Take PA-Turnpike (Route 276) to Norristown Exit.
Follow Germantown Pike-West to Route 202 North (DeKalb Pike). Make a Right
onto Route 202, driveway to Presidential will be on your right.
<PAGE>
Breakfast Invitation Response
Harleysville National Corporation will conduct its Annual Meeting of
Shareholders on Tuesday, April 11, 1995 at 9:30 a.m. at Presidential
Caterers, 2910 DeKalb Pike, Norristown, Pennsylvania 19401.
You are cordially invited to join us for breakfast prior to the Annual
Meeting, beginning at 9:00 a.m. The meeting will convene promptly at 9:30
a.m.
Would you be kind enough to help us make appropriate arrangements by filling
out and mailing this response card, along with your proxy vote, in the
enclosed stamped, self-addressed envelope.
For your convenience, enclosed are directions to Presidential Caterers.
Name(s)______________________________________________________________
_____________________________________________________________________
( ) Yes, I will join you for breakfast and the Annual Meeting
at Presidential Caterers on Tuesday, April 11, 1995.
<PAGE>
Harleysville National Corporation
Annual Meeting - 9:30 a.m.
Breakfast - 9:00 a.m.
April 11, 1995
For your convenience - retain for your reference
Harleysville National Corporation will conduct its Annual Meeting of
Shareholders on Tuesday, April 11, 1995 at 9:30 a.m. at Presidential
Caterers, 2910 DeKalb Pike, Norristown, Pennsylvania 19401.
Breakfast will be served prior to the Annual Meeting, beginning at 9:00 a.m.
The meeting will convene promptly at 9:30 a.m.
Please return your proxy vote if you have not already done so.
Directions to Presidential Caterers were sent with your Breakfast Invitation
Response card.
If you find that your plans have changed and you will be unable to join us
for the annual meeting and breakfast, kindly call Harleysville National
Corporation's Shareholder Services Department at 215-256-8851, Extension 347,
and help us eliminate unnecessary charges. Thank you.
