<PAGE>
<PAGE>
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
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
HARLEYSVILLE NATIONAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
HARLEYSVILLE NATIONAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-5(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
[ ] 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 collecting 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:
- --------------------------------------------------------------------------------
__________________
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
<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, Pennsylvania 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,
[ SIG CUT ]
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, Pennsylvania 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.
1
<PAGE>
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 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. 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.
2
<PAGE>
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.
<TABLE>
<CAPTION>
PERCENT OF
SHARES OUTSTANDING COMMON
BENEFICIALLY STOCK BENEFICIALLY
NAME AND ADDRESS OWNED OWNED
- ------------------------------------------------------------------------------- ----------- ---------------------
<S> <C> <C>
The Harleysville National Bank and Trust Company............................... 297,999(1) 5.07%
Trust Department
483 Main Street
P. O. Box 195
Harleysville, Pennsylvania 19438
</TABLE>
- ------------------
(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.
<TABLE>
<CAPTION>
SHARES PERCENT OF
NAME OF INDIVIDUAL BENEFICIALLY OUTSTANDING COMMON
OR IDENTITY OF GROUP OWNED (1)(2) STOCK (3)
- -------------------------------------------------------------------------------- ------------ -------------------
<S> <C> <C>
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%
</TABLE>
- ------------------
(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.
3
<PAGE>
(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
4
<PAGE>
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 terms expire in 1999 and
the Current Class A Directors whose terms expire in 1995, and the Class B
Directors, Class C Directors and Class D Directors whose terms expire in 1996,
1997 and 1998, respectively:
<TABLE>
<CAPTION>
DIRECTOR OF
PRINCIPAL OCCUPATION FOR PAST FIVE YEARS AND CORPORATION
POSITION HELD WITH THE OR HNB SINCE
NAME AGE CORPORATION, HNB, CNB AND SNB (8) (8)
- ----------------------------------------------- --- ------------------------------------------------ -------------
<S> <C> <C> <C>
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 -- Vilsmeier Auction 1987
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 & Sons, Agri-Business 1987
CLASS B DIRECTORS WHOSE TERMS EXPIRE IN 1996
John W. Clemens (1)(2)(5)(6)................... 68 Director, formerly Chairman and Chief Executive 1973
Officer -- Hatfield Quality Meats, a meat
packing and processing company
Richard M. Markley (2)(7)...................... 64 Partner -- W. E. Markley, a real estate and 1979
insurance firm
Howard E. Kalis, III........................... 55 Senior Partner, Law Firm of Binder, Kalis, 1994
Linderman & Proctor; Chairman of the Board and
Director of SNB since 1988
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR OF
PRINCIPAL OCCUPATION FOR PAST FIVE YEARS AND CORPORATION
POSITION HELD WITH THE OR HNB SINCE
NAME AGE CORPORATION, HNB, CNB AND SNB (8) (8)
- ----------------------------------------------- --- ------------------------------------------------ -------------
<S> <C> <C> <C>
CLASS C DIRECTORS WHOSE TERMS EXPIRE IN 1997
Bradford W. Mitchell (1)(4)(5)................. 67 Chairman of the Board and Director, formerly CEO 1980
-- 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 Machine Company 1984
CLASS D DIRECTORS WHOSE TERMS EXPIRE IN 1998
Walter E. Daller, Jr. (1)(4)(6)................ 55 President and Chief Executive Officer and 1977
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 President, MEFCO, a 1984
manufacturer of industrial packaging
</TABLE>
- ------------------
(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 (3)
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
<PAGE>
(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 seventy-five
percent (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 $100,000 at December 31, 1994.
7
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------ ----------------------------------
AWARDS PAYOUTS
---------- -------
OTHER RESTRICTED SECURITIES
ANNUAL ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- -------------------------- ---- --------- --------- ------------ ---------- ------------ ------- ---------------
<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
Executive 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 Harleysville is beneficiary; policy
reimburses, upon the death of the employee, Harleysville 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
$150,000 of his salary, to comply with the Internal Revenue Code Section
404(1).
(9) Amounts reflect F. Reim's four months' tenure during 1993.
8
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to the unexercised options to
purchase the Corporation's common stock granted in prior years under the Equity
Incentive Plan to the named officers of Harleysville and held by them at
December 31, 1994.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
VALUE FY-END (#) FY-END ($)(1)
NAME AND SHARES ACQUIRED REALIZED
PRINCIPAL POSITION ON EXERCISE (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------ --------------- ----------- ------------------------- -------------------------
<S> <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.
9
<PAGE>
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.
<TABLE>
<CAPTION>
AVERAGE 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS
ANNUAL OF OF OF OF OF
EARNINGS SERVICE SERVICE SERVICE SERVICE SERVICE
- ----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$ 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
</TABLE>
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 fifteen percent (15%) of
salary, with the exception of W. Daller. The profit sharing contribution
received by W. Daller was limited to fifteen percent (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 Executive 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 fifty percent (50%) of their annual base salary upon
retirement. After the first twelve (12) such payments (the first year), the
amount of the base salary shall be adjusted annually thereafter by eighty
percent (80%) of the percentage by which the cost of living as of the employee'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.
10
<PAGE>
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>
<CAPTION>
BASE
SALARY YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <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 (10) years.
Salary upon which benefits would be calculated at December 31, 1994 under
the Supplemental 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 (5) 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 one hundred percent (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.
11
<PAGE>
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. The 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 (3) 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
12
<PAGE>
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% increase in net income; (2) a 17.8% increase in return
on equity; (3) a 9.4% 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 Banks' 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 considers 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
13
<PAGE>
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 STOCK
LEGEND
<TABLE>
<CAPTION>
CRSP Total Returns Index for: 12/29/89 12/31/90 12/31/91 12/31/92 12/31/93 12/30/94
- ----------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
HARLEYSVILLE NATIONAL CORPORATION 100 95.4 119.8 175.2 210.8 284.4
Nasdaq Stock Market (US Companies) 100 84.9 136.3 158.6 180.9 176.9
Nasdaq Bank Stocks 100 73.2 120.2 174.9 199.3 198.7
SIC 6020-6029, 6710-6719 US & Foreign
</TABLE>
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on
the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a
trading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 12/29/89.
14
<PAGE>
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>
<CAPTION>
NUMBER OF
HNB/CNB/SNB SHARES
POSITION EMPLOYEE SINCE BENEFICIALLY AGE AS OF MARCH 10,
NAME AND POSITION HELD SINCE (10) OWNED 1995
- ------------------------------------------------------------ ----------- ----------------- ----------- -------------------
<S> <C> <C> <C> <C>
Walter E. Daller, Jr. ...................................... 1981 1962 142,478(1) 55
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) 44
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) 48
Senior Vice President and Senior Trust Officer of HNB
Vernon L. Hunsberger........................................ 1991 1966 9,393(4) 46
Treasurer of the Corporation, and Senior Vice President,
CFO, and Cashier of HNB
Frank J. Lochetto........................................... 1989 1980 10,004(5) 47
Senior Vice President of HNB, and Director of CNB
Fred C. Reim................................................ 1993 1993(11) 500(6) 51
Senior Vice President of HNB
Thomas D. Oleksa............................................ 1991 1991(12) 275(7) 41
President and CEO of CNB, and Director of CNB
Martha A. Rex............................................... 1992 1991(13) 461(8) 46
Vice President, Trust Officer, and Cashier of CNB
Raymond H. Melcher, Jr. .................................... 1994 1994(14) 305(9) 43
President and CEO of SNB, and Director of SNB -----------
(Officers of HNB, CNB, and SNB
as a group consisting of 20 persons)........................................................ 211,900
-----------
-----------
</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.
15
<PAGE>
(9) Includes 305 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 a shareholder, director, executive vice president and COO of Hi-Tech
Connections, Inc.; from 1988 to 1990 was executive vice president of
Keystone Financial; from 1986 to 1988 was president, CEO and a director 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
16
<PAGE>
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 percent (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
seventy-five percent (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 eighty percent (80%) 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.
17
<PAGE>
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.
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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,
[ SIG CUT ]
Walter E. Daller, Jr.
President and
Chief Executive Officer
Date: March 13, 1995
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[ PROXY CARD ]
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 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 (except as marked to the
contrary)
[ ] WITHHOLD AUTHORITY to vote 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 A. 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.
<PAGE>
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.
________________________________________(SEAL)
Signature
________________________________________(SEAL)
Signature
Dated: ________________________________ , 1995
