SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
HARLEYSVILLE NATIONAL CORPORATION
------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
[INSERT NAME OF FILER WHEN APPLICABLE]
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(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 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
HARLEYSVILLE NATIONAL CORPORATION
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 9, 1996
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 9, 1996, at Presidential Caterers, 2910
DeKalb Pike, Norristown, Pennsylvania 19401, for the following purposes:
1. To elect two Class B Directors to serve until the expiration of their
four-year terms and until their successors are elected and qualified; and
2. 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
February 23, 1996 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, 1995 is being mailed to shareholders with this Notice. Copies of
the Corporation's Annual Report for the 1994 fiscal year may be obtained at no
cost by contacting Jo Ann M. Bynon, 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 11, 1996
Harleysville, Pennsylvania
<PAGE>
HARLEYSVILLE NATIONAL CORPORATION
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PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON APRIL 9, 1996
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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 9, 1996,
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 11, 1996.
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 B Director named below. 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 Jo Ann M. Bynon,
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.
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<PAGE>
VOTING SECURITIES; RECORD DATE AND QUORUM
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 February 23, 1996, the Corporation had
outstanding 5,880,828 shares of Common Stock, par value $1.00 per share (the
'Common Stock'). As of February 23, 1996, no series preferred stock was
outstanding.
Only holders of Common Stock of record at the close of business on February
23, 1996 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.
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. 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 B 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.
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<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
PRINCIPAL OWNERS
The following table sets forth, as of February 23, 1996, 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 (1) OWNED
- ------------------------------------------------------------------------------- ----------- ---------------------
<S> <C> <C>
The Harleysville National Bank and Trust Company............................... 318,549(2) 5.42%
Trust Department
483 Main Street
P. O. Box 195
Harleysville, Pennsylvania 19438
</TABLE>
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(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 February
23, 1996. Beneficial ownership may be disclaimed as to certain of the
securities.
(2) 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 318,549 shares and sole power to dispose or to direct the
disposition of 318,549 shares. Harleysville's Trust Department intends to
vote all shares under its control FOR the election of the nominees for
director named below.
BENEFICIAL OWNERSHIP BY OFFICERS, DIRECTORS AND NOMINEES
The following table sets forth, as of February 23, 1996, 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)............................................................. 11,265(12) --
Walter E. Daller, Jr. (10)...................................................... 142,153(4) 2.42%
Martin E. Fossler (10).......................................................... 13,270(13) --
Harold A. Herr (6).............................................................. 10,737(14) --
Howard E. Kalis, III (8)........................................................ 7,736(15) --
Bradford W. Mitchell (9)........................................................ 1,806(16) --
Palmer E. (Pete) Retzlaff (19).................................................. 570(20) --
Walter F. Vilsmeier (6)......................................................... 5,344(17) --
William M. Yocum (9)............................................................ 30,134(18) --
All Officers and Directors as a Group (35 persons).............................. 622,479(5)(11) 10.49%(5)
</TABLE>
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(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
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<PAGE>
ownership within sixty (60) days after February 23, 1996. 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: 21,835 shares owned solely by W. Daller; 109,123 shares owned
jointly by W. Daller and spouse; and 11,195 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, 5,936,273 shares of Common Stock would be outstanding.
(6) A Class A Director whose term expires in 1999.
(7) A Nominee for Class B Director whose term expires in 2000 and a current
Class B Director whose term expires in 1996.
(8) A Class B Director whose term expires in 1996.
(9) A Class C Director whose term expires in 1997.
(10) A Class D Director whose term expires in 1998.
(11) Does not include 318,549 shares held by The Harleysville National Bank and
Trust Company in its fiduciary capacity.
(12) Includes: 8,470 shares owned solely by J. Clemens; 685 shares owned jointly
by J. Clemens and his spouse; and 2,110 shares owned by his spouse.
(13) Includes: 12,810 shares owned solely by M. Fossler; and 460 shares owned by
his spouse.
(14) These shares are owned solely by H. Herr.
(15) Includes: 2,206 shares owned solely by H. Kalis; 3,070 shares owned jointly
by H. Kalis and his spouse; 2,007 shares representing unexercised stock
options which are currently exercisable; and 453 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.
(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.
(19) A nominee for Class B Director whose term expires in 2000.
(20) These shares are owned solely by P. Retzlaff.
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-two (72) years. The Board of Directors has fixed the
number of Board members at eight (8) with two (2) directors in each of Classes
A, B, C, and D. 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 1996 Annual Meeting
of Shareholders, two (2) Class B 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
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<PAGE>
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 B 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 B Director whose terms expire in 2000 and
the Current Class B Directors whose terms expire in 1996, and the Class C
Directors, Class D Directors and Class A Directors whose terms expire in 1997,
1998 and 1999, 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 (7) (7)
- ----------------------------------------------- --- ------------------------------------------------ -------------
<S> <C> <C> <C>
NOMINEES FOR CLASS B DIRECTOR WHOSE TERMS
EXPIRE IN 2000
John W. Clemens (1)(2)(5)(6)................... 69 Director, formerly Chairman and Chief Executive 1973
Officer -- Hatfield Quality Meats, a meat
packing and processing company
Palmer E. (Pete) Retzlaff...................... 64 President -- Southwest Grain Company, a grain
import and export business; Director, Teleflex,
Inc. and Paris Business Corp.
CURRENT CLASS B DIRECTORS
WHOSE TERMS EXPIRE IN 1996
John W. Clemens (1)(2)(5)(6)................... 69 Director, formerly Chairman and Chief Executive 1973
Officer -- Hatfield Quality Meats, a meat
packing and processing company
Howard E. Kalis, III........................... 56 Senior Partner, Law Firm of Binder, Kalis, & 1994
Proctor; Chairman of the Board and Director of
SNB since 1988
CLASS A DIRECTORS WHOSE TERMS EXPIRE IN 1999
Walter F. Vilsmeier (2)(4)..................... 66 Chief Executive Officer -- Vilsmeier Auction 1987
Co., Inc., auction and appraisal services; and
Vilsmeier Equipment, Inc., purchase, sale, and
rental of used equipment and parts
Harold A. Herr (2)(3).......................... 48 Partner -- Albert S. Herr & Sons, Agri-Business 1987
</TABLE>
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<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 (7) (7)
- ----------------------------------------------- --- ------------------------------------------------ -------------
<S> <C> <C> <C>
CLASS C DIRECTORS WHOSE TERMS EXPIRE IN 1997
Bradford W. Mitchell (1)(4)(5)................. 68 Chairman of the Board and Director, formerly CEO 1980
-- Harleysville Mutual Insurance Company; and
Harleysville Group, Inc., an insurance holding
company
William M. Yocum (3)........................... 62 President -- W. M. Yocum Machine Company 1984
CLASS D DIRECTORS WHOSE TERMS EXPIRE IN 1998
Walter E. Daller, Jr. (1)(4)(6)................ 56 Chairman of the Board, Director, President and 1977
Chief Executive Officer of the Corporation and
HNB; Director of CNB since 1991; and Director of
SNB since 1994
Martin E. Fossler (1)(3)(4)(5)................. 67 Retired, formerly President MEFCO, a 1984
manufacturer of industrial packaging
</TABLE>
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(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 1995, the Executive
Committee held four (4) meetings.
(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 1995, the Nominating Committee held two (2) meetings.
(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 1995, the Audit Committee held six (6) 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 1995, 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 1995, the
Compensation Committee held eight (8) 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 1995, the Pension and Profit Sharing Committee held two (2)
meetings.
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<PAGE>
(7) '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 1995, the Board of Directors of the Corporation held thirteen (13)
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 1995, the Board of Directors of Harleysville held
thirteen (13) 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,
with the exception of M. Fossler and W. Vilsmeier who attended fifty percent
(50%) of the meetings of the Investment and Funds Management Committee.
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, 1995 through December 31, 1995, 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, 1995, 1994, and 1993 of those persons who were
(i) the Chief Executive Officer(s) during 1995 and (ii) the other most highly
compensated executive officers of the Corporation to the extent such persons'
total annual salary and bonus exceeded $100,000 at December 31, 1995.
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS
--------------------------------- --------- PAYOUTS
OTHER RESTRICTED SECURITIES ---------
ANNUAL ANNUAL STOCK UNDERLYING LTIP
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS PAYOUTS
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($)
- --------------------------------- --------- --------- --------- ----------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Walter E. Daller, Jr. (1)........ 1995 $ 296,405(6) $ 144,700(7) -- -- -- --
President and CEO 1994 264,205(6) 102,100(7) -- -- -- --
1993 243,520(6) 92,000(7) -- -- -- --
Demetra M. Takes (2)............. 1995 $ 141,000 $ 49,500 -- -- -- --
Executive Vice President 1994 133,000 40,000 -- -- -- --
and COO 1993 120,750 33,000 -- -- -- --
Fred C. Reim, Jr. (3)............ 1995 $ 98,050 $ 16,175 -- -- 1,575 --
Senior Vice President 1994 92,500 13,875 -- -- -- --
1993 30,000(12) 4,450(12) -- -- -- --
Vernon L. Hunsberger (4)......... 1995 $ 91,300 $ 18,250 -- -- -- --
Senior Vice President, 1994 83,000 15,000 -- -- -- --
CFO and Cashier 1993 70,725 15,000 -- -- -- --
Raymond H. Melcher, Jr. (5)...... 1995 $ 117,000 $ 14,040 $14,778 (14) -- 3,000 --
President and CEO Security 1994 15,750(13) --(13) -- -- -- --
<CAPTION>
ALL OTHER
NAME AND COMPENSATION
PRINCIPAL POSITION ($)
- --------------------------------- -------------------
Walter E. Daller, Jr. (1)........ $ 58,474(8)(9)(10)
President and CEO 58,474(8)(9)(10)
65,974(8)(9)(10)
Demetra M. Takes (2)............. $ 33,471 (9)(10)
Executive Vice President 32,271 (9)(10)
and COO 30,434 (9)(10)
Fred C. Reim, Jr. (3)............ $ 14,708 (10)
Senior Vice President 13,875 (10)
4,673 (10)(12)
Vernon L. Hunsberger (4)......... $ 13,695 (10)
Senior Vice President, 12,450 (10)
CFO and Cashier 10,609 (10)
Raymond H. Melcher, Jr. (5)...... $ 17,550 (11)
President and CEO Security -- (11)(13)
<CAPTION>
</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 Boards of Directors of Citizens and Security.
(3) Fred C. Reim, Jr. serves as Senior Vice President of Harleysville.
(4) Vernon L. Hunsberger serves as Treasurer of the Corporation, and as Senior
Vice President, Chief Financial Officer, and Cashier of Harleysville.
(5) Raymond H. Melcher, Jr. serves as President and CEO of Security, and as a
member of the Board of Directors of Security.
(6) Includes $11,405, $9,205 and $11,520 received as director's fees earned as
a director of Harleysville for 1995, 1994 and 1993, respectively.
(7) Includes $2,200, $2,100 and $2,000 received as director's bonus received as
a director of Harleysville for 1995, 1994 and 1993, respectively.
(8) Includes $6,990, $6,990 and $6,990 for 1995, 1994 and 1993, 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.
(9) Includes $28,984, $28,984 and $28,984 for W. Daller, and $12,321, $12,321
and $12,321 for D. Takes for 1995, 1994 and 1993, 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.
(10) Includes discretionary contributions of $22,500, $22,500 and $30,000 for
1995, 1994 and 1993, respectively, for W. Daller; $21,150, $19,950 and
$18,113 for 1995, 1994 and 1993, respectively, for D. Takes; $14,708,
$13,875 and $4,673 for 1995, 1994 and 1993, respectively, for F. Reim; and
$13,695, $12,450, and $10,609 for 1995, 1994 and 1993, respectively, for V.
Hunsberger pursuant to Harleysville's profit sharing plan. For fiscal years
1995, 1994 and 1993, contributions to the profit sharing plan were made for
all employees of Harleysville equal to 15% of salary, with the exception of
W. Daller. The profit sharing contribution for W. Daller was limited to 15%
of $150,000 of his salary, to comply with the Internal Revenue Code Section
404(1).
(11) Represents a discretionary contribution of $17,550 for 1995 for R. Melcher
pursuant to Security's profit sharing plan. No discretionary contribution
was made in 1994 for R. Melcher pursuant to Security's profit sharing plan.
For fiscal years 1995 and 1994, contributions to the profit sharing plan
were made for all employees of Security equal to 15% of salary.
(12) Amounts reflect F. Reim's four months' tenure during 1993.
(13) Amounts reflect R. Melcher's one and one half months' tenure during 1994.
(14) Includes $3,803 for company car and $8,089 for country club membership.
8
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to options granted to purchase the
Corporation's Common Stock in the last fiscal year under the Equity Incentive
Plan and under the 1993 Stock Incentive Plan to the named officers of
Harleysville and held by them at December 31, 1995.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ---------------------------------------------------------------------------------------------- ----------------------------
(A) (B) (C) (D) (E) (F) (G)
% OF TOTAL
OPTIONS/SARS
OPTIONS/ GRANTED TO EXERCISE OR
SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ---------------------------------- ------------- --------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Walter E. Daller, Jr. ............ -- -- -- -- -- --
President and CEO
Demetra M. Takes.................. -- -- -- -- -- --
Executive Vice President & COO
Fred C. Reim, Jr. ................ 1,575(1) 34% 26.875(2) 8/05 -- --
Senior Vice President
Vernon L. Hunsberger.............. -- -- -- -- -- --
Senior Vice President
Raymond H. Melcher, Jr. .......... 3,000(1) 66% 26.875(2) 8/05 -- --
President and CEO Security
<CAPTION>
ALTERNATIVE
TO (F) AND (G):
GRANT DATE
VALUE
- -------------------------------- -----------
(A) (H)
GRANT DATE
PRESENT
VALUE
NAME $
- ---------------------------------- -----------
Walter E. Daller, Jr. ............ --
President and CEO
Demetra M. Takes.................. --
Executive Vice President & COO
Fred C. Reim, Jr. ................ 42,328(3)
Senior Vice President
Vernon L. Hunsberger.............. --
Senior Vice President
Raymond H. Melcher, Jr. .......... 80,625(3)
President and CEO Security
<CAPTION>
</TABLE>
- ------------------
(1) These options granted on August 10, 1995, and under the terms of the 1993
Stock Incentive Plan, are exercisable after expiration of six (6) months
from date of grant, in five (5) cumulative installments equalling twenty
percent (20%) of the shares covered by the option grant.
(2) The base price of the grant is adjustable in the event of any change in the
number of issued and outstanding shares of stock which results from a stock
split, reverse stock split, payment of a stock dividend or any other change
in the capital structure of the Corporation.
(3) The Grant-date value is calculated on the shares covered by the grant, at
the base price of the grant, which is the average of the dealer 'bid' and
'ask' prices thereof on the NASDAQ Stock Exchange on the date of grant.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to all exercises of stock options
awarded to the named officers during the last fiscal year as well as the fiscal
year-end option values for each named executive officer under the Equity
Incentive Plan and under the 1993 Stock Incentive Plan and held by them at
December 31, 1995.
9
<PAGE>
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
VALUE OPTIONS/SARS AT OPTIONS/SARS AT
NAME AND SHARES ACQUIRED REALIZED FY-END (#) FY-END ($)(1)
PRINCIPAL POSITION ON EXERCISE (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ----------------------------------- --------------- ----------- -------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Walter E. Daller, Jr. ............. 146,142 2,648,093 -- / -- -- / --
President and CEO
Demetra M. Takes................... 1,200 22,494 16,883(2)/ -- 339,686/ --
Executive Vice President & COO
Fred C. Reim, Jr. ................. -- -- -- / 1,575(3) -- / 2,559
Senior Vice President
Vernon L. Hunsberger............... 2,400 44,838 4,671(2)/ -- 93,981/ --
Senior Vice President
Raymond H. Melcher, Jr. ........... -- -- -- / 3,000(3) -- / 4,875
President and CEO Security
</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 29,
1995, minus the exercise price.
(2) Shares granted under the Equity Incentive Plan.
(3) Shares granted under the 1993 Stock Incentive Plan.
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, excluding 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, 1995, December 31, 1994 and
December 31, 1993 were $447,589, $420,116, and $309,583, 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.
<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
375,000 28,695 43,045 57,390 71,740 86,085
400,000 30,570 45,858 61,140 76,428 91,710
</TABLE>
10
<PAGE>
Walter E. Daller, Jr., President and Chief Executive Officer of the
Corporation and Harleysville, has 33 years of credited service under the pension
plan. Average salary upon which benefits would be calculated at December 31,
1995 is $285,000.
Demetra M. Takes, Executive Vice President of Harleysville, has 23 years of
credited service under the pension plan. Average salary upon which benefits
would be calculated at December 31, 1995 is $141,000.
Fred C. Reim, Senior Vice President of Harleysville, has 2 years of
credited service under the pension plan. Average salary upon which benefits
would be calculated at December 31, 1995 is $98,050.
Vernon L. Hunsberger, Senior Vice President of Harleysville, has 29 years
of credited service under the pension plan. Average salary upon which benefits
would be calculated at December 31, 1995 is $91,300.
Raymond H. Melcher, Jr., President and CEO of Security, has 1 year of
credited service under the pension plan. Average salary upon which benefits
would be calculated at December 31, 1995 is $117,000.
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 1995, 1994 and 1993, contributions to the
profit-sharing plan were made for 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.
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
375,000 187,500 192,000 196,607 201,328 206,159 211,107 216,175 221,359 226,671 232,113
400,000 200,000 204,800 209,714 214,750 219,903 225,181 230,587 236,116 241,782 247,587
</TABLE>
11
<PAGE>
Salary upon which benefits would be calculated at December 31, 1995 under
the Supplemental Executive Retirement Plan is $285,000 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, 1995 under
the Supplemental Executive Retirement Plan is $141,000 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, Jr., Senior Vice President of Harleysville, Vernon L.
Hunsberger, Senior Vice President of Harleysville, and Raymond H. Melcher, Jr.,
President and Chief Executive Officer of Security are 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 34,813 are unexercised, as
of the record date, February 23, 1996.
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
1995, or as of the record date, February 23, 1996.
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, 163,425
shares remain available for issuance as of February 23, 1996.
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. 4,575 options were granted during
1995; no options were exercised during 1995, or as of the record date, February
23, 1996.
12
<PAGE>
COMPENSATION OF DIRECTORS
Directors of Harleysville received a fee of $400 for each meeting of
Harleysville attended, an annual retainer fee of $6,250, and also received a fee
of $275 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 $2,200. In the aggregate, the Board of Directors of Harleysville received
$121,810.
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.
13
<PAGE>
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 on the following page. 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 1995 edition of the annual SNL Executive Compensation Review
of Commercial Banks, the 1995 edition of the L. R. Webber Associates
Salary/Benefits Survey of the Pennsylvania Financial Services Industry, and the
1995 edition of the Sheshunoff Bank Executive and Director Compensation Survey.
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 7.0% over 1995 compensation of $285,000 is appropriate in light of
the following 1995 performance accomplishments as of October 31, 1995: for
Harleysville (1) a 9.9% increase in net income; (2) an 18.0% return on equity;
(3) an 8.3% increase in assets; and (4) a 1.45% return on assets; and for the
Corporation, a 29.5% 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.
14
<PAGE>
EXECUTIVE OFFICERS
The Board of Directors has established that the compensation of the
Corporation's and the Banks' executive officers will increase by five and
six-tenths percent (5.6%) over 1995 compensation of $732,350 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
15
<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, 1991 and ending December 31, 1995. 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
In the printed document there is a performance graph plotted with the
following data:
Nasdaq Nasdaq
Harleysville Stock Market Bank Stocks
------------ ------------ -----------
1990 100.000 100.000 100.000
1991 125.603 160.564 164.092
1992 183.762 186.866 238.854
1993 221.102 214.511 272.395
1994 298.276 209.686 271.410
1995 312.596 296.304 404.353
16
<PAGE>
EXECUTIVE OFFICERS OF THE CORPORATION AND THE BANKS
The following table sets forth selected information about the executive
officers of the Corporation and the Banks, 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, February 23, 1996.
<TABLE>
<CAPTION>
NUMBER OF
HNB/CNB/SNB SHARES AGE AS OF
POSITION EMPLOYEE SINCE BENEFICIALLY FEBRUARY
NAME AND POSITION HELD SINCE (9) OWNED 23, 1996
- ------------------------------------------------------------ ----------- ----------------- ----------- -------------------
<S> <C> <C> <C> <C>
Walter E. Daller, Jr. ...................................... 1981 1962 142,153(1) 56
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) 45
Vice President of the Corporation, Executive Vice President
and COO of HNB, and Director of CNB and SNB
James W. Hamilton........................................... 1983 1971 11,951(3) 49
Senior Vice President and Senior Trust Officer of HNB
Vernon L. Hunsberger........................................ 1991 1966 7,823(4) 47
Treasurer of the Corporation, and Senior Vice President,
CFO, and Cashier of HNB
Frank J. Lochetto........................................... 1989 1980 8,867(5) 48
Senior Vice President of HNB, and Director of CNB
Fred C. Reim, Jr............................................ 1993 1993 (10 2,075(6) 52
Senior Vice President of HNB
Thomas D. Oleksa............................................ 1991 1991 (11 491(7) 42
President and CEO of CNB, and Director of CNB
Raymond H. Melcher, Jr...................................... 1994 1994 (12 3,413(8) 44
-----------
President and CEO of SNB, and Director of SNB
</TABLE>
- ------------------
(1) Includes: 21,835 shares owned solely by W. Daller; 109,123 shares owned
jointly by W. Daller and spouse; and 11,195 shares owned solely by his
spouse.
(2) Includes 4,377 shares owned solely by D. Takes; and 16,883 unexercised
stock options which are currently exercisable.
(3) Includes 8,563 shares owned solely by J. Hamilton; and 3,388 unexercised
stock options which are currently exercisable.
(4) Includes 2,113 shares owned solely by V. Hunsberger; 1,039 shares owned
jointly by V. Hunsberger and spouse; and 4,671 unexercised stock options
which are currently exercisable.
(5) Includes 8,146 shares owned jointly by F. Lochetto and spouse; 721 shares
owned by F. Lochetto's children.
(6) Includes 500 shares owned solely by F. Reim; and 1,575 stock options of
which 315 are currently exercisable.
(7) Includes 491 shares owned solely by T. Oleksa.
(8) Includes 300 shares owned by R. Melcher; 113 shares owned jointly by R.
Melcher and spouse; and 3,000 stock options of which 600 are currently
exercisable.
(9) '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.
17
<PAGE>
(10) 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.
(11) 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.
(12) 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, 1995 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 $12,585,712 or approximately 16.2% 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 1995 on deposits held by such persons was
$500,056.
INDEPENDENT AUDITORS
Grant Thornton LLP, Certified Public Accountants, of Philadelphia,
Pennsylvania, served as the Corporation's independent auditors since May 11,
1995, assisted the Corporation and its banking subsidiaries in the preparation
of their federal and state tax returns, and provided assistance in connection
with regulatory matters, charging the Corporation 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 auditors. The Corporation has
been advised by Grant Thornton LLP that none of its members has any financial
interest in the Corporation.
On May 11, 1995, the Board of Directors of the Corporation approved a
resolution, based upon the recommendations of the Audit Committee of the Board
of Directors to engage Grant Thornton LLP as the Corporation's independent
accountant, replacing KPMG Peat Marwick LLP, its prior independent accountant.
The report of KPMG Peat Marwick LLP on the Corporation's consolidated financial
statements for the fiscal years ended December 31, 1994 and 1993 and during the
period commencing January 1, 1995 through May 10, 1995 contain no adverse
opinion or disclaimer of opinion or qualification as to uncertainty, audit scope
or accounting principles. In connection with the audits of the fiscal years
ended December 31, 1994 and 1993 and subsequent interim period prior to
dismissal, there were no disagreements with KPMG Peat Marwick LLP on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which caused them to make reference in connection
with their report to the subject matter of the disagreement. The Corporation
acknowledges that disagreements required to be reported in response to the
preceding sentence include both those resolved to the former accountant's
satisfaction and those not resolved to the former accountant's satisfaction. The
Corporation further acknowledges that disagreements contemplated by this rule
are those which occurred at the decision-making level; i.e., between personnel
of the Corporation responsible for the presentation of its financial statements
and personnel of the accounting firm responsible for rendering its report.
18
<PAGE>
On May 18, 1995, the Corporation filed a Current Report on Form 8-K to
report the above information which included as an exhibit thereto a letter
furnished by KPMG Peat Marwick LLP stating that such firm agreed with the
statements made in the Current Report on Form 8-K as described above.
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, 1995 is being mailed to the Corporation's shareholders with this
Proxy Statement. A representative of Grant Thornton LLP 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 1997 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 Tuesday,
November 12, 1996.
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, 1995, 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 JO
ANN M. BYNON, 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 11, 1996
19
<PAGE>
HARLEYSVILLE NATIONAL CORPORATION
PROXY
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 9, 1996
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 9,
1996, at 9:30 a.m., prevailing time, and at any adjournment or postponement
thereof, as follows:
1. ELECTION OF CLASS B 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.)
John W. Clemens Palmer E. (Pete) Retzlaff
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE CLASS B
DIRECTORS LISTED ABOVE.
(Please see reverse)
<PAGE>
2. 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.
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 SHOULD SIGN.
___________________________________ (SEAL)
Signature
___________________________________ (SEAL)
Signature
Dated: ____________________________ , 1996
