UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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
[ ] 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 ss. 240.14a-11(c) or ss. 240.14a-12
DNB FINANCIAL CORPORATION
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
(2) Aggregate number of securities to which transaction applies:
N/A
(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):
N/A
(4) Proposed maximum aggregate value of transaction:
N/A
(5) Total fee paid:
N/A
[ ] 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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
DNB FINANCIAL CORPORATION
4 Brandywine Avenue
Downingtown, Pennsylvania 19335
(610) 269-1040
NOTICE OF ANNUAL MEETING
To Be Held on April 22, 1997
TO THE STOCKHOLDERS OF DNB FINANCIAL CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of DNB
FINANCIAL CORPORATION (the "Corporation") will be held at 10:00 a.m., prevailing
time on Tuesday, April 22, 1997 at the Central Presbyterian Church, 101 Uwchlan
Avenue, Downingtown, Pennsylvania 19335 (Route 113, approximately one half mile
south of the Route 30 bypass) for the following purposes:
(1) To elect three directors to serve for three years or until their
successors have been elected and qualified; and
(2) To ratify the appointment of KPMG Peat Marwick LLP as the independent
auditors for the fiscal year ending December 31, 1997; and
(3) To transact such other business as may properly come before the Annual
Meeting and any adjournment thereof. Except with respect to procedural
matters incident to the conduct of the meeting, the Board of Directors
is not aware of any other business which may come before the meeting.
Stockholders of record at the close of business on February 28, 1997 are
entitled to notice of and to vote at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Ronald K. Dankanich
Ronald K. Dankanich, Secretary
Downingtown, Pennsylvania
March 25, 1997
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU
PLAN TO BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THIS MEETING,
YOU MAY VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU
IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
<PAGE>
DNB FINANCIAL CORPORATION
4 Brandywine Avenue
Downingtown, Pennsylvania 19335
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 22, 1997
Solicitation and Voting of Proxies
This Proxy Statement is being furnished to stockholders of DNB Financial
Corporation (the "Corporation") in connection with the solicitation by the Board
of Directors of proxies to be used at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held at the Central Presbyterian Church, 101 Uwchlan
Avenue, Downingtown, Pennsylvania 19335, on Tuesday, April 22, 1997 at 10:00
a.m., and at any adjournments thereof. The 1996 Annual Report to Stockholders,
including financial statements for the fiscal year ended December 31, 1996,
accompanies this Proxy Statement, which is first being mailed to stockholders on
or about March 25, 1997.
Regardless of the number of shares of Common Stock owned, it is important
that stockholders be represented by proxy or present in person at the Annual
Meeting. Stockholders are requested to vote by completing the enclosed Proxy and
returning it signed and dated in the enclosed postage-paid envelope.
Stockholders are urged to indicate their vote in the spaces provided on the
Proxy. Proxies solicited by the Board of Directors of DNB Financial Corporation
will be voted in accordance with the directions given therein. Where no
instructions are indicated, proxies will be voted FOR the election of the
nominees for directors named in the Proxy Statement, and FOR the ratification of
KPMG Peat Marwick LLP as independent auditors for the fiscal year ending
December 31, 1997.
The Board of Directors knows of no additional matters that will be
presented for consideration at the Annual Meeting. Execution of a proxy,
however, confers on the designated proxy holders discretionary authority to vote
the shares in accordance with their best judgment on such other business, if
any, that may properly come before the Annual Meeting or any adjournments
thereof. Abstentions and broker non-votes are counted as present and represented
for quorum purposes, but will not be included in the total number of votes cast
for purposes of determining whether matters to be voted upon at the meeting have
been approved. Abstentions will have the effect of a negative vote.
A proxy may be revoked at any time prior to its exercise by the filing of a
written notice of revocation with the Secretary of the Corporation, by
delivering to the Corporation a duly executed proxy bearing a later date, or by
attending the Annual Meeting, filing a notice of revocation with the Secretary
and voting in person. However, if you are a stockholder whose shares are not
registered in your own name, you will need additional documentation from your
recordholder to vote personally at the Annual Meeting.
The expenses of the solicitation of proxies will be borne by the
Corporation. Certain officers, directors and employees of the Corporation and
Downingtown National Bank (the "Bank") may solicit proxies personally, by mail,
telephone or otherwise. Such persons will not receive any fees or other
compensation for such solicitation. The Corporation will reimburse brokers,
custodians, nominees and fiduciaries for all reasonable expenses which they have
incurred in sending proxy materials to the beneficial owners of the
Corporation's common stock held by them.
<PAGE>
Voting Securities and Beneficial Ownership Thereof
The securities which may be voted at the Annual Meeting consist of shares
of common stock of DNB Financial Corporation, par value $10.00 per share (the
"Common Stock"), with each share entitling its owner to one vote on all matters
to be voted on at the Annual Meeting.
The close of business on February 28, 1997 has been established by the
Board of Directors as the record date (the "Record Date") for the determination
of stockholders entitled to notice of and to vote at this Annual Meeting and any
adjournments thereof. The total number of shares of Common Stock outstanding on
the Record Date was 691,422 shares.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of February 28, 1997, with
respect to the beneficial ownership of each director, each nominee for election
as director, each beneficial owner known by the Corporation of more than five
percent (5%) of the outstanding common stock of the Corporation, certain named
executive officers and all directors and executive officers as a group.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership
Sole Shared
Total Voting and Voting and Percent
Name of Beneficial Investment Investment of
Beneficial Owner Ownership (1,2) Power (2) Power Class (3)
<S> <C> <C> <C> <C>
Richard L. Bergey.................... 3,570 3,570 -- 0.49
Robert J. Charles.................... 10,328 4,309 6,019 1.43
Paul F. DiMatteo..................... 5,937 2,582 3,355 0.82
I. Newton Evans...................... 6,746 1,908 4,838 0.93
Thomas R. Greenleaf.................. 4,662 1,353 3,309 0.65
Vernon J. Jameson.................... 9,480 5,430 4,050 1.31
Louis N. Teti........................ 1,296 1,296 -- 0.18
Henry F. Thorne...................... 6,868 6,868 -- 0.95
James H. Thornton.................... 1,186 1,186 -- 0.16
Downingtown National Bank
Trust & Investment Services
Division ........................ 45,974 10,329 35,645 6.65
Directors & Executive Officers
as group (13 Persons) ........... 66,262 43,163 23,099 9.17
<FN>
(1) Based upon information furnished by the respective individual and/or
filings made pursuant to the Exchange Act. Under applicable regulations,
shares are deemed to be beneficially owned by a person if he or she
directly or indirectly has or shares the power to vote or dispose of the
shares, whether or not he or she has any economic interest in the shares.
Unless otherwise indicated, the named beneficial owner has sole voting and
dispositive power with respect to the shares.
(2) Includes shares which may be acquired by exercise of vested options
granted under the DNB Financial 1995 Stock Option Plan amounting to 1,076
shares each for Messrs. Charles, DiMatteo, Evans, Greenleaf, Jameson, Teti
and Thornton, 5,733 shares for Mr. Thorne, 3,570 shares for Mr. Bergey and
31,117 total shares for all Directors and Executive Officers as a group.
The number of shares have been adjusted to reflect the 5% stock dividend
paid in December, 1996.
(3) Shares of the Corporation's Common Stock issuable pursuant to options are
deemed outstanding for purposes of computing the percentage of the person
or group holding such options, but are not deemed outstanding for purposes
of computing the percentage of any other person.
</FN>
</TABLE>
2
<PAGE>
PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING
PROPOSAL 1
ELECTION OF DIRECTORS
Pursuant to its By-laws, the number of directors of the Corporation is set
at eight (8). Each of the members of the Board of Directors of the Corporation
also serves as a Director of the Bank. Directors are elected for staggered terms
of three years each, with a term of office of only one class of directors
expiring in each year. Directors serve until their successors are elected and
qualified. No person being nominated as a director is being proposed for
election pursuant to any agreement or understanding between any person and DNB
Financial Corporation.
The By-laws further provide that 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
was appointed.
The nominees proposed for election to Class "B" of the Board of Directors
at the Annual Meeting are Messrs. Robert J. Charles, Vernon J. Jameson and Henry
F. Thorne who have consented to being named as nominees and agreed to serve if
elected. If any person named as nominee should become unable to serve, proxies
will be voted in favor of a substitute nominee as the Board of Directors of the
Corporation shall determine. The Board of Directors has no reason to believe
that any of the directors listed above will be unable to serve as director.
In addition, there is no cumulative voting for the election of the
directors. Each share of Common Stock is entitled to cast only one vote for each
nominee. For example, if a shareholder owns ten shares of Common Stock, he or
she may cast up to ten votes for each of the three directors in the class to be
elected, during those years when three directors have been nominated. A majority
vote of shares represented by proxy or in person is required for the election of
directors.
Unless authority to vote for the director is withheld, it is intended that the
shares represented by the enclosed Proxy will be voted FOR the election of the
three nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION
OF ALL NOMINEES NAMED IN THIS PROXY STATEMENT
3
<PAGE>
Set forth below is certain information as of February 28, 1997 concerning
the nominees for election as directors and each other member of the
Corporation's Board of Directors.
NOMINEES FOR THE THREE-YEAR TERM EXPIRING IN 2000
<TABLE>
<CAPTION>
Principal Occupation During The
Name Age Past Five Years & Service Data (1)
<S> <C> <C>
Robert J. Charles 68 Director and Chairman of the Board;
President of Charles News Agency,
Inc. Director Since 1976 Term Expires
1997
Vernon J. Jameson 67 Director; President of V.J. Jameson &
Son, Inc. Director Since 1973 Term
Expires 1997
Henry F. Thorne 53 Director; President and Chief
Executive Officer of the Corporation
and the Bank Director Since 1992 Term
Expires 1997
OTHER DIRECTORS
Paul F. DiMatteo 70 Director; Retired commercial and
residential contractor Director Since
1980 Term Expires 1998
I. Newton Evans, Jr. 74 Director; Retired dairy farmer
Director Since 1986 Term Expires 1998
Thomas R. Greenleaf 69 Director; Retired President of
Chemical Leaman Tank Lines, Inc.
Director Since 1979 Term Expires 1999
Louis N. Teti 46 Director; Attorney with the law firm
of MacElree, Harvey, Gallagher
Featherman & Sebastian, Ltd. Director
Since 1995 Term Expires 1999
James H. Thornton 51 Director; President and Chief
Executive Officer of Brandywine
Hospital Director Since 1995 Term
Expires 1999
<FN>
(1) Includes service as a director of Downingtown National Bank prior to the
formation of the Corporation in 1982. All individuals listed are directors
of both the Bank and the Corporation.
</FN>
</TABLE>
4
<PAGE>
General Information About the Board of Directors
During 1996, the Bank's Board of Directors held 15 meetings, excluding
committee meetings which are described below. Directors, with the exception of
Mr. Thorne, who receives no director or committee fees, receive a quarterly
retainer of $2,500, provided 75% of the meetings are attended. Mr. Charles, the
Corporation's and Bank's Chairman, receives a quarterly retainer of $3,350
provided 75% of the meetings are attended. Outside Directors also receive $125
for each committee meeting attended. All fees are paid by the Bank. During 1996,
the Corporation's Board of Directors held 7 meetings. Directors receive no fees
for these meetings of the Corporation, since they are usually held on the same
day as a Bank Board Meeting. Each of the directors of the Corporation is also a
director of the Bank. During their period of service during 1996, each attended
at least 75% of the combined total number of meetings of the Corporation's Board
of Directors and the committees of which he is a member. Each also attended at
least 75% of the combined total number of meetings of the Bank's Board of
Directors and committees of which he is a member. Each committee described
below, unless otherwise noted, is a committee of the Bank and the Corporation.
Neither the Bank nor the Corporation has a standing Nominating Committee.
The Executive Committee consists of Messrs. Charles, Greenleaf, Jameson and
Thorne. This Committee has the authority to exercise the powers of the Board of
Directors between regular Board meetings. The Committee did not meet during
1996.
The Benefits & Compensation Committee consists of Messrs. Charles,
Greenleaf and Thorne. This Committee oversees the Human Resource policies of the
Bank which includes approving recommendations for salary increases. The
Committee met one time during 1996.
The Board Loan Committee consists of Messrs. Charles, Greenleaf, Jameson
and Thorne. This Committee reviews and takes action on proposed and existing
loans in excess of Officers' Credit Committee authority. The Committee met 26
times during 1996.
The Audit/Compliance Committee consists of Messrs. Charles, DiMatteo,
Greenleaf and Thornton. This Committee reviews the records and affairs of the
Bank and the Trust and Investment Services Division to determine their financial
condition; reviews with management, the internal auditor and the independent
auditors the systems of internal control; and monitors the adherence in
accounting and financial reporting to generally accepted accounting principles
and compliance with banking laws and regulations.
The Committee met 5 times during 1996.
The Trust Committee consists of Messrs. Dankanich, Evans, Jameson,
Stauffer, Teti and Thorne. This Committee reviews and recommends the Trust and
Investment Services Division policies and procedures, approves estate
administration and ensures compliance to applicable Federal regulations. The
Committee met 12 times during 1996.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's executive officers and directors to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission. Executive officers and directors are required by SEC regulations to
furnish the Corporation with copies of all Section 16 (a) forms they file.
Executive Officers Who Are Not Directors
The following sets forth information with respect to executive officers of
the Corporation and the Bank who do not serve on the Board of Directors. There
are no arrangements or understanding between the Corporation or the Bank and any
person pursuant to which any such officers were selected.
Richard L. Bergey (Age 56), joined the Bank in September 1992 and
currently serves as Senior Vice President--Credit Services Division of the Bank.
Mr. Bergey is directly responsible for the Bank's lending and loan
administration functions. Prior to joining the Bank, Mr. Bergey was Vice
President of the Wholesale Banking Unit of CoreStates, Lancaster, Pennsylvania
from 1984 to 1992.
5
<PAGE>
Ronald K. Dankanich (Age 42), joined the Bank in October 1972 and currently
serves as Senior Vice President--Operations Division, Cashier of the Bank and
Secretary of the Corporation. Mr. Dankanich is directly responsible for Data
Processing, Bank Reconcilements, Operations, Bank Services and Human Resources.
Eileen M. Knott (Age 46), joined the Bank in January 1993 and currently
serves as Sr. Vice President--Auditor and Compliance Officer of the Bank. Ms.
Knott is directly responsible for the Bank's Audit and Compliance functions.
Prior to joining the Bank, Ms. Knott was employed by the Royal Bank of
Pennsylvania as its Chief Financial Officer from 1984 to 1993.
Bruce E. Moroney (Age 40), joined the Bank in May 1992 and currently
serves as Chief Financial Officer of both the Corporation and the Bank and as
Senior Vice President--Finance Division of the Bank. Mr. Moroney is directly
responsible for investments, asset/liability management and financial reporting.
Prior to joining the Bank, Mr. Moroney was employed by Brandywine Savings Bank
as its Vice President, Treasurer and Chief Financial Officer from 1987 to 1992.
Joseph M. Stauffer (Age 54), joined the Bank in March 1992 and currently serves
as Senior Vice President--Retail Banking Division of the Bank. Mr. Stauffer is
directly responsible for the Bank's community offices, marketing, and the Trust
and Investment Services Division. Prior to joining the Bank, Mr. Stauffer was
President and Chief Executive Officer of Brandywine Savings Bank from 1985 to
1991.
Management Remuneration
The following table sets forth for the fiscal year ended December 31,
1996, 1995 and 1994, certain information as to the total remuneration received
by any executive officers of the Corporation or the Bank receiving total salary
and bonus in excess of $100,000 during each period.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
Other
Annual Restricted Securities
Name and Principal Compen- Stock Underlying LTIP All Other
Position Year Salary Bonus sation Award(s) Options Payouts Compensation
$ (1) $ $ $ # $ $
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Henry F. Thorne 1996 144,200 15,000 -- -- 2,205 -- 18,363 (2)
President and Chief 1995 137,000 10,000 -- -- 3,528 -- 20,164
Executive Officer 1994 130,000 5,000 -- -- -- -- 4,964
Richard L. Bergey 1996 92,790 10,000 -- -- 1,365 -- 11,159 (2)
Senior Vice President 1995 88,480 6,500 -- -- 2,205 -- 4,817
Credit Services Division 1994 84,200 2,000 -- -- -- -- 1,957
<FN>
(1) Amounts shown include cash compensation earned and received as well as
amounts earned but deferred at the officer's election, pursuant to the
Bank's 40l(k) Plan.
(2) Consists of 25% matching contributions by the Company under the 401(k) Plan
($2,073 for Mr. Thorne and $1,392 for Mr. Bergey), life insurance annual
premiums ($594 for Mr. Thorne and $442 for Mr. Bergey), contributions to
the Bank's Pension Plan ($15,606 for Mr. Thorne and $9,235 for Mr. Bergey)
and long term disability premiums ($90 each for Mr. Thorne and Mr. Bergey).
</FN>
</TABLE>
6
<PAGE>
Stock Option Plan
On April 25, 1995, the Stockholders of the Corporation approved DNB
Financial Corporation's 1995 Stock Option Plan. Under the Plan, options (both
qualified and non-qualified) to purchase a maximum of 71,662 shares of the
Corporation's Common Stock may be issued to employees and Directors of the
Corporation. The Corporation's philosophy in granting stock options is primarily
to provide a long-term incentive through such rewards, dependent on future
increases in the value of the Corporation's Common Stock. Thus, executive
officers are encouraged to manage the Corporation with a view toward maximizing
long-term stockholder value. Directors of the Corporation are eligible to
receive a non-qualified stock option to purchase 500 shares of common stock each
year. These grants commenced on June 30, 1995 and will continue on an annual
basis until June 30, 2004. Option exercise prices must be 100% of the fair
market value of the shares on the date of option grant and the option exercise
period may not exceed ten years except that, with respect to incentive stock
options awarded to persons holding 10% or more of the combined voting power of
the Corporation, the option exercise price may not be less than 110% of the fair
market value of the shares on the date of option grant and the exercise period
may not exceed five years. Vesting of options granted under the plan is
determined by the plan committee.
Option Grants in Last Fiscal Year
The following table provides certain information relating to stock options
granted during 1996. Certain officers not appearing in the Summary Compensation
table above were also granted stock options during 1996.
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
Individual Grants
Potential Realizable
Number of Percent of Value at Assumed Annual
Shares Total Options Rates of Stock Price
Underlying Granted to Appreciation for
Options Employees in Exercise or Option Term
Granted in 1996 Fiscal Year Base Price Expiration 5% 10%
Name (#) % ($/share) (2) Date $ $
<S> <C> <C> <C> <C> <C> <C>
Henry F. Thorne 525 25 27.62 4-24-06 9,080 23,010
1,680 24 29.29 6-30-06 30,904 78,317
Richard L. Bergey 315 15 27.62 4-24-06 5,448 13,806
1,050 10 29.29 6-30-06 19,315 48,948
<FN>
(1) The options in the above table were granted on April 24, 1996 and June 30,
1996 and became exercisable on October 24, 1996 and December 31, 1996,
respectively.
(2) The exercise or base price is equal to the fair market value of the
Corporation's Common Stock on the date of grant, as adjusted, pro rata, to
reflect the 5% stock dividend paid on December 27, 1996.
</FN>
</TABLE>
7
<PAGE>
Aggregated Option Exercises and Year-End Value
The following table summarizes stock options that were exercised during
1996 and the number and value of stock options that were unexercised at December
31, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE TABLE
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised Options In-The-Money Options
Shares Acquired Value At Fiscal Year-end At Fiscal Year-end
Name On Exercise Realized Exercisable Unexercisable Exercisable(1) Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Henry F. Thorne -- -- 5,733 -- $35,231 --
Richard L. Bergey -- -- 3,570 -- 21,966 --
<FN>
(1) Represents the difference between market value per share as of December 31,
1996 ($31.67) and specific option prices per share.
</FN>
</TABLE>
Employment Agreement
Effective December 31, 1996, the Bank entered into an employment agreement
(the "Agreement") with Henry F. Thorne, President and Chief Executive Officer of
the Bank, in order to establish his duties and compensation and to provide for
his continued employment with the Bank. The Agreement provides for an initial
term of employment of two years, which will be extended automatically for two
additional years on each expiration date unless either the Bank or Mr. Thorne
gives contrary written notice of not less than ninety days prior to the
expiration date. The Agreement also provides that Mr. Thorne's base salary shall
be reviewed by the Board of Directors of the Bank at the end of each year. In
addition, the Agreement provides for participation in all employee benefit
plans, pension plans maintained by the Bank on behalf of the respective
employees, as well as fringe benefits normally associated with such officer's
position. The Agreement provides for its termination upon the disability of Mr.
Thorne or for cause, as defined in the Agreement.
The Agreement also provides for restrictions on Mr. Thorne's right to
compete with the Bank within 25 miles of any bank office or branch, directly or
indirectly, for one year following Mr. Thorne's resignation or termination,
pursuant to which he receives severance pay. Under the Agreement, if Mr. Thorne
is terminated without cause or the two year term is not extended, he will
receive severance pay equal to his base annual salary payable over the following
year. If the Bank is liquidated or sold under a regulatory order, he will
receive severance pay equal to his base annual salary for one year payable over
the following year.
The Agreement provides that if Mr. Thorne's employment is terminated at
any time after a change in control of the Bank, or he submits his resignation
within twelve months after the date of the change in control, he will receive as
a severance payment, a lump sum payment equal to two times the higher of (i) his
base salary immediately prior to the change in control or (ii) his base salary
at the time of termination.
For purposes of the Agreement, the term "Change of Control" is defined to
mean: A change in control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act"), provided that, without
limitation, such a change in control shall be deemed to have occurred if (a) any
"persons" (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act), other than the Bank, Corporation or any "person" who on the date hereof is
a director or officer of the Bank or Corporation, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of
8
<PAGE>
securities of the Bank or Corporation representing fifty percent (50%) or more
of the combined voting power of the Bank's or Corporation's then outstanding
securities, or (b) during any period of two consecutive years during the term of
the Agreement, individuals who at the beginning of such period constitute the
Board of Directors of the Bank or Corporation cease for any reason to constitute
at least a majority thereof, unless the election of each director who was not a
director at the beginning of such period has been approved in advance by
directors representing at least two-thirds of the directors then in office who
were directors at the beginning of the period.
Certain Indebtedness and Transactions with Management
The Bank makes loans to executive officers and directors of the Bank in
the ordinary course of its business. These loans are currently made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time the transaction is originated for comparable transactions
with nonaffiliated persons, and do not involve more than the normal risk of
collectability or present any other unfavorable features. Federal regulations
prohibit the Bank from making loans to executive officers and directors of the
Corporation or the Bank at terms more favorable than could be obtained by
persons not affiliated with the Corporation or the Bank. The Bank's policy
towards loans to executive officers and directors currently complies with this
limitation. The aggregate outstanding balance of the loans to all executive
officers, directors or their affiliates, whose aggregate indebtedness to the
Bank exceeded $60,000, at December 31, 1996 represented 4.6% of stockholders'
equity of the Corporation on that date.
The report of the Benefits & Compensation Committee is set forth below.
Benefits & Compensation Committee Report
Committee Interlocks and Insider Participation in Group Decisions -- The
Benefits & Compensation Committee of the Board of Directors for the Bank is
comprised of two independent Directors and the Bank's President and Chief
Executive Officer. The Committee has the responsibility for establishing an
appropriate compensation policy for employees, including executive officers of
the Bank, and for overseeing the administration of that policy. The President
and Chief Executive Officer, Mr. Thorne, does not participate in deliberations
relating to his compensation.
Committee Report on Executive Compensation -- The Committee believes that
the overall enhancement of the Bank's performance and, in turn shareholder
value, depends to a significant extent on the establishment of a close
relationship between the financial interests of shareholders and those of the
Bank's employees, especially its senior management. In addition to a desired
pay-for-performance relationship, the Committee also believes that the Bank must
maintain an attractive compensation package that will attract, motivate and
retain executive officers who are capable of making significant contributions
towards the success of the Bank.
The salary structure for executive officers is included in the salary
structure for the Bank, and it is the policy of the Bank that the performance of
senior management be evaluated using the same established criteria which are
used for other employees. The Committee evaluates the earnings performance and
other measures of progress for the Bank when establishing compensation
practices. The overall objective of the policy is to provide competitive levels
of compensation for all employees that are contingent upon individual
performance and the contribution of each individual to the success of the Bank.
Salary levels are determined at the Bank level and reviewed and ratified
by the Committee. The Committee reviews the evaluations of senior management,
the performance of the President and Chief Executive Officer, operating results
for the fiscal year and significant accomplishments during the year. It also
considers economic conditions and other external events that affect the
operations of the Bank.
9
<PAGE>
Periodically, independent compensation consultants are engaged to review
the compensation and benefits programs of the Bank in relation to similar
programs and practices of other companies who are direct competitors for
employees' services, including executive talent. Salary levels for all employees
are compared to peers who have similar job responsibilities in other companies.
Results of the study, along with recommendations for any changes, are reported
to the Benefits & Compensation Committee.
The Benefits & Compensation Committee
DOWNINGTOWN NATIONAL BANK
/s/ THOMAS R. GREENLEAF /s/ HENRY F. THORNE
Thomas R. Greenleaf Henry F. Thorne
/s/ ROBERT J. CHARLES
Robert J. Charles
Pension Plan
The Corporation does not have a retirement or pension plan. The Bank,
however, maintains a noncontributory defined benefit pension plan (the "Plan")
covering all employees of the Bank, including officers, who have been employed
by the Bank for one year and have attained 21 years of age. Prior to May 1,
1985, an individual must have attained the age of 25 and accrued one year of
service. The Plan provides pension benefits to eligible retired employees at 65
years of age equal to 1.5% of their average monthly pay multiplied by their
years of accredited service (maximum 40 years). The accrued benefit is based on
the monthly average of their highest five consecutive years of their last ten
years of service.
The following table shows the estimated annual retirement benefit payable
pursuant to the Plan of an employee currently 65 years of age, whose highest
salary remained unchanged during his last five years of employment and whose
benefit will be paid for the remainder of his life.
During 1997, the Corporation anticipates making contributions of $169,922
to the 1996 Plan Year. The benefits listed in the table are not subject to any
deduction for Social Security or other offset. Annual retirement benefits are
paid monthly to an employee during his lifetime. An employee may elect to
receive lower monthly payments, in order for his or her surviving spouse to
receive monthly payments under the Plan for the remainder of their life.
<TABLE>
<CAPTION>
Amount of Annual Retirement Benefit
Average With Credited Service Of: (1)
Annual Earnings 10 Years 20 Years 30 Years 40 Years
<S> <C> <C> <C> <C>
$ 25,000 $ 3,750 $ 7,500 $11,250 $15,000
50,000 7,500 15,000 22,500 30,000
75,000 11,250 22,500 33,750 45,000
100,000 15,000 30,000 45,000 60,000
125,000 18,750 37,500 56,250 75,000
150,000 22,500 45,000 67,500 90,000
175,000 22,500 45,000 67,500 90,000
200,000 22,500 45,000 67,500 90,000
<FN>
(1) Mr. Thorne and Mr. Bergey have 5 years and 4 years, respectively, of
credited service under the Plan. Earnings in excess of $150,000 are not
considered in determining the pension benefit.
</FN>
</TABLE>
10
<PAGE>
401(k) Retirement Savings Plan
During the fourth quarter of 1994, the Bank adopted a retirement savings
plan intended to comply with Section 40l(k) of the Internal Revenue Code of
1986. Employees become eligible to participate after one year of service, and
will thereafter participate in the 401(k) plan for any year in which they have
been employed by the Bank for at least 1,000 hours. In general, amounts held in
a participant's account are not distributable until the participant terminates
employment with the Bank, reaches age 59 1/2, dies or becomes permanently
disabled.
Participants are permitted to authorize pre-tax savings contributions to a
separate trust established under the 401(k) plan, subject to limitations on
deductibility of contributions imposed by the Internal Revenue Code. The Bank
makes matching contributions of $.25 for every dollar of deferred salary, up to
6% of each participant's annual compensation. Each participant is 100% vested at
all times in employee and employer contributions. The Corporation's matching
contributions to the 40l(k) plan for 1996 was $30,000.
Insurance
All eligible full time employees of the Bank are covered as a group by
basic hospitalization, major medical, long-term disability, term life and a
prescription drug plan. The Bank pays the total cost of the plans for employees
with the exception of medical, in which there is cost sharing by the employees
and a co-payment required by the employee for the prescription drug plan.
Corporation Performance Graph
The following graph presents the five year cumulative total return on DNB
Financial Corporation's common stock, compared to the S&P 500 Index and S&P
Financial Index for the five year period ended December 31, 1996. The comparison
assumes that $100 was invested in the Corporation's common stock and each of the
foregoing indices and that all dividends have been reinvested.
CORPORATION PERFORMANCE
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG DNB FINANCIAL CORP., S&P 500 INDEX & S&P FINANCIAL INDEX
(The Performance Graph appears here. See the table below for plot points.)
<TABLE>
<CAPTION>
December 31,
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
S&P Index 100 107.43 118.11 119.63 164.03 201.23
S&P Financial Index 100 122.90 136.52 131.86 202.17 272.25
DNB Financial Corp. 100 86.71 51.30 35.24 48.27 69.19
</TABLE>
11
<PAGE>
PROPOSAL 2
RATIFICATION OF INDEPENDENT AUDITORS
The Corporation's independent auditors for the fiscal year ended December
31, 1996 were KPMG Peat Marwick LLP. The Corporation's Board of Directors has
reappointed KPMG Peat Marwick LLP to continue as independent auditors for the
fiscal year ending December 31, 1997 subject to ratification of such appointment
by the stockholders. Representatives of KPMG Peat Marwick LLP are expected to
attend the Annual Meeting. They will be given an opportunity to make a statement
if they desire to do so and will be available to respond to appropriate
questions from stockholders present at the Annual Meeting.
Unless marked to the contrary, the shares represented by the enclosed Proxy will
be voted FOR the ratification of KPMG Peat Marwick LLP as the independent
auditors of the Corporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP
AS THE INDEPENDENT AUDITORS OF THE CORPORATION.
Stockholder Proposals
To be eligible for inclusion in the Corporation's proxy materials relating
to the Annual Meeting of Stockholders to be held in 1998, a stockholder proposal
must be received by the Secretary of the Corporation at the address set forth on
the first page of this Proxy Statement, not later than November 25, 1997. Any
such proposal will be subject to Rule 14a-8 of the rules and regulations of the
SEC.
Other Matters Which May Properly Come Before The Meeting
The Board of Directors knows of no business which will be presented for
consideration at the Annual Meeting other than as stated in the Notice of Annual
Meeting of Stockholders. If, however, other matters are properly brought before
the Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote the shares represented thereby on such matters in accordance with
their best judgment.
Whether or not you intend to be present at this Annual Meeting, you are
urged to return your proxy promptly. If you are present at this Annual Meeting
and wish to vote your shares in person, your proxy may be revoked upon request.
A COPY OF THE FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 1996 AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE FURNISHED WITHOUT CHARGE TO
STOCKHOLDERS OF THE RECORD DATE UPON WRITTEN REQUEST TO BRUCE E. MORONEY, DNB
FINANCIAL CORPORATION, 4 BRANDYWINE AVENUE, DOWNINGTOWN, PA 19335.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Ronald K. Dankanich
Ronald K. Dankanich, Secretary
Downingtown, PA
March 25, 1997
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER OR NOT
YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO SIGN AND PROMPTLY
RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
<PAGE>
DNB FINANCIAL CORPORATION
PROXY
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 22, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints George S. Dowlin, Eileen H.
Schafer and Brian R. Formica and each or any of them, proxies of the
undersigned, with full power of substitution, to vote all of the shares of DNB
Financial Corporation (the "Corporation") that the undersigned may be entitled
to vote at the Annual Meeting of Stockholders of the Corporation to be held at
the Central Presbyterian Church, 101 Uwchlan Avenue, Downingtown, Pennsylvania
19355, on Tuesday, April 22, 1997, at 10:00 a.m., prevailing time, and at any
adjournment or postponement thereof as follows:
1. ELECTION OF CLASS "B" DIRECTORS TO SERVE FOR A THREE-YEAR TERM.
FOR the nominees listed below (Except as marked to the contrary
below) ______
WITHHOLD AUTHORITY to vote for the nominee(s) listed below _____
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME LISTED BELOW.)
ROBERT J. CHARLES VERNON J. JAMESON HENRY F. THORNE
The Board of Directors recommends a vote FOR these nominees.
2. PROPOSAL TO RATIFY THE SELECTION OF KPMG PEAT MARWICK LLP, CERTIFIED PUBLIC
ACCOUNTANTS, AS THE AUDITORS FOR THE CORPORATION FOR THE YEAR ENDING
DECEMBER 31, 1997.
___ For ___ Against ___ Abstain
The Board of Directors recommends a vote FOR this proposal.
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and any adjournment or
postponement thereof.
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE NOMINEES LISTED ABOVE AND FOR PROPOSAL 2.
Number of shares held of
record as of February 28, 1997 Dated: _____________________________, 1997
__________________________________________
__________________________________________
Signature(s) (Seal)
If any other matters properly come before the meeting about which the proxy
holders were not aware prior to the time of the solicitation, including the
election of any person to any office for which a bonafide nominee is named in
the proxy statement and such nominee is unable to serve, authorization is given
the proxy holders to vote in accordance with the views of management thereon.
Management is not aware of any such matters.
THIS PROXY SHOULD BE DATED, SIGNED BY THE STOCKHOLDER AN 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.
Will you be attending the Annual Meeting of Stockholders?
___ Yes ___ Number ___ No
