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 21, 1998
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 21, 1998 at the Central Presbyterian Church, 100 W.
Uwchlan Avenue, Downingtown, Pennsylvania 19335 (Route 113, approximately one
half mile south of the Route 30 bypass) for the following purposes:
(1) To elect two directors to serve for three years or until their
successors have been elected and qualified; and
(2) To consider and act upon a proposal to amend the Articles of
Incorporation to increase the authorized shares of Common Stock from
5 million shares to 10 million shares and to decrease the par value
of the Corporation's Common Stock from $10.00 per share to $1.00 per
share; and
(3) To ratify the appointment of KPMG Peat Marwick LLP as the independent
auditors for the fiscal year ending December 31, 1998; and
(4) 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 27, 1998 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 21, 1998
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 21, 1998
____________________________
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, 100 W. Uwchlan
Avenue, Downingtown, Pennsylvania 19335, on Tuesday, April 21, 1998 at 10:00
a.m., and at any adjournments thereof. The 1997 Annual Report to Stockholders,
including financial statements for the fiscal year ended December 31, 1997,
accompanies this Proxy Statement, which is first being mailed to stockholders on
or about March 21, 1998.
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, FOR the amendment to the
Articles of Incorporation to increase the authorized shares of the Corporation's
Common Stock from 5 million shares to 10 million shares and to decrease the par
value of the Corporation's Common Stock from $10.00 to $1.00, and FOR the
ratification of KPMG Peat Marwick LLP as independent auditors for the fiscal
year ending December 31, 1998.
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 27, 1998 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 1,451,661 shares.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of February 27, 1998, 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 9,949 9,949 -- .64%
Robert J. Charles 25,012 12,373 12,639 1.62
Thomas R. Greenleaf 10,892 4,051 6,841 .71
Vernon J. Jameson 21,117 12,612 8,505 1.37
William S. Latoff 12,449 12,449 -- .81
Joseph G. Riper 105 105 -- .01
Louis N. Teti 4,837 3,932 905 .31
Henry F. Thorne 18,347 18,347 -- 1.19
James H. Thornton 3,701 3,701 -- .24
Downingtown National Bank
Investment Services and
Trust Division 89,258 32,076 57,182 6.15
Directors & Executive Officers
as group (14 Persons) 154,258 120,940 33,318 9.99
<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 3,471 shares
each for Messrs. Charles, Greenleaf, Jameson, Teti and Thornton, 15,965
shares for Mr. Thorne, 9,949 shares for Mr. Bergey and 85,363 total shares
for all Directors and Executive Officers as a group. The number of shares
have been adjusted to reflect the stock split in September 1997 and the 5%
stock dividend paid in December, 1997.
(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 "C" of the Board of Directors
at the Annual Meeting are Messrs. William S. Latoff and Joseph G. Riper 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 two directors in the class to be
elected, during those years when two 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
two 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 27, 1998 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 2001
Principal Occupation During The
Name Age Past Five Years & Service Data (1)
William S. Latoff 49 Director; Principal, Bliss & Company, Ltd.
Certified Public Accountants
Director Since 1998
Term Expires 2001
Joseph G. Riper 49 Director; Attorney with the law firm of
Riley, Riper, Hollin & Colagreco
Director Since 1997
Term Expires 2001
OTHER DIRECTORS
Robert J. Charles 69 Director and Chairman of the Board;
President of Charles News Agency, Inc.
Director Since 1976
Term Expires 2000
Thomas R. Greenleaf 70 Director; Retired President of
Chemical Leaman Tank Lines, Inc.
Director Since 1979
Term Expires 1999
Vernon J. Jameson 68 Director; President of V.J. Jameson &
Son, Inc.
Director Since 1973
Term Expires 2000
Louis N. Teti 47 Director; Attorney with the law firm
of MacElree, Harvey, Gallagher
Featherman & Sebastian, Ltd.
Director Since 1995
Term Expires 1999
Henry F. Thorne 54 Director; President and Chief Executive
Officer of the Corporation and the Bank
Director Since 1992
Term Expires 2000
James H. Thornton 52 Director; President and Chief Executive
Officer of Brandywine Hospital
Director Since 1995
Term Expires 1999
__________
(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.
4
<PAGE>
General Information About the Board of Directors
During 1997, the Bank's Board of Directors held 16 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 $2,700, provided 75% of the meetings are attended. Mr. Charles, the
Corporation's and Bank's Chairman, receives a quarterly retainer of $3,550
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 1997,
the Corporation's Board of Directors held 9 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 1997, 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
1997.
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 two times during 1997.
The Board Loan Committee consists of Messrs. Charles, Greenleaf, Jameson,
Riper and Thorne. This Committee reviews and takes action on proposed and
existing loans in excess of Officers' Credit authority. The Committee met 26
times during 1997.
The Audit/Compliance Committee consists of Messrs. Charles, Greenleaf and
Thornton. This Committee reviews the records and affairs of the Bank and the
Investment Services & Trust 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 1997.
The Trust Committee consists of Messrs. Dankanich, Jameson, Stauffer, Teti,
Thorne and Thornton. This Committee reviews and recommends the Investment
Services & Trust Division's policies and procedures, approves estate
administration and ensures compliance to applicable Federal regulations. The
Committee met 12 times during 1997.
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 57), 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 43), 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.
J. William Erb (Age 59), joined the Bank in June 1997 and currently serves
as Sr. Vice President--Investment Services and Trust Division of the Bank. Mr.
Erb is directly responsible for Personal and Corporate Investment and Trust
Services. Prior to joining the Bank, Mr. Erb was Group Vice
President--Retirement Services of PNC Bank from 1982 to 1997.
Eileen M. Knott (Age 47), 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 Chief Financial Officer of Royal Bank
of Pennsylvania from 1984 to 1993.
Bruce E. Moroney (Age 41), 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 strategic planning, investments, asset/liability management and
financial reporting. Prior to joining the Bank, Mr. Moroney was Vice President,
Treasurer and Chief Financial Officer of Brandywine Savings Bank from 1987 to
1992.
Joseph M. Stauffer (Age 55), 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 and marketing.
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, 1997,
1996, and 1995, 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
Compen- Stock Underlying LTIP All Other
Name and Principal Salary Bonus sation Award(s) Options Payouts Compensation
Position Year $ (1) $ $ $ # $ $
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Henry F. Thorne 1997 151,560 18,000 -- -- 3,925 -- 17,396 (2)
President and Chief 1996 144,200 15,000 -- -- 4,631 -- 18,363
Executive Officer 1995 137,000 10,000 -- -- 7,409 -- 20,164
Richard L. Bergey 1997 97,150 12,000 -- -- 2,450 -- 11,665 (2)
Senior Vice President 1996 92,790 10,000 -- -- 2,867 -- 11,159
Credit Services Division 1995 88,480 6,500 -- -- 4,631 -- 4,817
<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 401(k) Plan.
(2) Consists of 25% matching contributions by the Bank under the 401(k) Plan
($1,759 for Mr. Thorne and $1,457 for Mr. Bergey), life insurance annual
premiums ($594 for Mr. Thorne and $463 for Mr. Bergey), contributions to the
Bank's Pension Plan ($14,953 for Mr. Thorne and $9,655 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 150,490 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 1,158 shares of common stock
each year. These grants commenced on June 30, 1995 and are expected to continue
on an annual basis until June 30, 2004, although grants of stock options are
within the discretion of the Benefits and Compensation Committee by delegation
from the Board of Directors. 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.
Option Grants in Last Fiscal Year
The following table provides certain information relating to stock options
granted during 1997. Certain officers not appearing in the Summary Compensation
table above were also granted stock options during 1997.
OPTION GRANTS IN 1997
<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 1997 Fiscal Year Base Price Expiration 5% 10%
Name (#) % ($/share) (2) Date $ $
<S> <C> <C> <C> <C> <C> <C>
Henry F. Thorne 3,925 21 19.29 6-30-07 47,616 120,667
Richard L. Bergey 2,450 13 19.29 6-30-07 29,722 75,321
<FN>
(1) The options in the above table were granted on June 30, 1997 and became
exercisable on December 31, 1997.
(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 stock split in September 1997 and the 5% stock dividend paid in
December 1997.
</FN>
</TABLE>
7
<PAGE>
Aggregated Option Exercises and Year-End Value
The following table summarizes stock options that were exercised during
1997 and the number and value of stock options that were unexercised at December
31, 1997.
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>
Henry F. Thorne -- -- 15,965 -- $273,873 --
Richard L. Bergey -- -- 9,949 -- 170,654 --
<FN>
(1) Represents the difference between market value per share as of December 31,
1997 ($31.25) 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 Managemenom 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, 1997
represented 4.8% 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 Corporation'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.
At the Bank, salary levels are based on an evaluation of the individuals
performance and competitive pay practices. The salary levels are then reviewed
and ratified by the Committee. The Committee reviews the evaluations of senior
management and the performance of the President and Chief Executive Officer. 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,
including: the development and execution of strategies; leadership; the ability
to develop staff; and significant accomplishments which affect the performance
of the Bank. The Committee also considers the economic conditions and other
external events that affect the operations of the Bank, as well as the operating
results of the fiscal year and other measures of progress when establishing
compensation practices. The overall objective of the policy is to provide
competitive levels of compensation for d execution of strategies; leadership;
the ability to develop staff; and significant accomplishments which affect the
performance of the Bank. The Committee also considers the economic conditions
and other external events that affect the operations of the Bank, as well as the
operating results of the fiscal year and other measures of progress 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.
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 1998, the Bank anticipates making contributions of $169,922 to the
1997 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.
Amount of Annual Retirement Benefit
Average With Credited Service Of: (1)
Annual Earnings 10 Years 20 Years 30 Years 40 Years
$ 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
__________
(1) Mr. Thorne and Mr. Bergey have 6 years and 5 years, respectively, of
credited service under the Plan. Earnings in excess of $150,000 are not
considered in determining the pension benefit.
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 401(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 401(k) plan for 1997 was $29,000.
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, 1997. 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,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
S&P 500 Index 100 109.94 111.35 152.68 187.31 249.31
S&P Financial Index 100 111.08 107.29 164.50 221.51 321.69
DNB Financial Corp. 100 52.73 33.59 47.25 68.70 139.90
</TABLE>
11
<PAGE>
PROPOSAL 2
APPROVAL OF AMENDED ARTICLES OF INCORPORATION
The Board of Directors has approved an amendment to Article 5 of the
Corporation's Articles of Incorporation which, if adopted, would (a) increase
the number of authorized shares of the Corporation's Common Stock from 5,000,000
shares to 10,000,000 shares, and (b) change the par value of the Common Stock
from $10.00 to $1.00. The Board of Directors recommends that shareholders
approve this amendment ("Proposal Two").
At December 31, 1997, there were 1,451,661 shares of the Corporation's
Common Stock issued and outstanding. Of the remaining 3,548,339 shares of
authorized Common Stock on such date, approximately 150,490 shares are reserved
for issuance under the Corporation's stock option plan, leaving only 3,397,849
shares of Common Stock available for issuance.
Although currently authorized shares are sufficient to meet all presently
known needs, the Board considers it desirable that the Corporation have the
flexibility to issue an additional amount of Common Stock without further
shareholder action, unless required by law for stock exchange regulations. The
availability of these additional shares will enhance the Corporation's
flexibility in connection with possible stock splits, stock dividends,
acquisitions, financings, additional public or other issuances of shares, and
other corporate purposes.
Since the Corporation last increased the amount of its authorized Common
Stock on 1990, it was able to effect four 5% stock dividends and one stock
split. Most recently, the Corporation issued 691,422 shares of Common Stock as
the result of a two-for-one stock split effected in the form of a 100% stock
dividend in September 1997.
While the Corporation has no present plans or commitments for stock splits,
stock dividends, acquisitions, financings, or public or other issuances of its
shares, it is possible that the Corporation may consider any of the foregoing in
the future.
The amendment of the Corporation's Articles of Incorporation to increase
the number of authorized shares of Common Stock from 5,000,000 shares to
10,000,000 shares will consist of an amendment to the first paragraph of Article
5 of the Articles of Incorporation so that the first paragraph provides as
follows:
"5. The aggregate number of shares of capital stock which the Corporation
shall have authority to issue is Ten Million (10,000,000) shares of
Common Stock of the par value of One Dollar ($1.00) per share (the
"Common Stock") and One Million (1,000,000) shares of Preferred Stock of
the par value of Ten Dollars ($10.00) per share (the "Preferred Stock"),
for a total authorized capital of Twenty Million Dollars ($20,000,000)".
Proposal Two will not make any changes to the amount, par value, terms or
provisions of Preferred Stock which the Corporation is authorized to issue in
the future, nor is it intended to amend any other provisions of Article 5 of the
Articles of Incorporation.
Unless marked to the contrary, the shares represented by the enclosed Proxy
will be voted FOR Proposal 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
INCREASE OF AUTHORIZED SHARES TO 10 MILLION AND THE
APPROVAL OF A $1.00 PAR VALUE PER SHARE OF COMMON STOCK.
12
<PAGE>
PROPOSAL 3
RATIFICATION OF INDEPENDENT AUDITORS
The Corporation's independent auditors for the fiscal year ended December
31, 1997 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, 1998 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 1999, 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 24, 1998. 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, 1997 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 21, 1998
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>
REVOCABLE PROXY
DNB FINANCIAL CORPORATION
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS
APRIL 21, 1998
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 Shareholders of the Corporation to be held at
the Central Presbyterian Church, 100 W. Uwchlan Avenue, Downingtown,
Pennsylvania on Tuesday, April 21, 1998 at 10:00 a.m., prevailing time, and at
any adjournment or postponement thereof as follows with respect to the following
matters as described in the Proxy Statement:
With- For all
1. ELECTION OF DIRECTORS: for all nominees For held Except
listed below (except as marked to the
contrary below): [ ] [ ] [ ]
Joseph G. Riper and William S. Latoff
INSTRUCTION: To withhold authority to vote
for any individual nominee, mark "For All
Except" and write than nominee's name in the
space provided below.
_____________________________________________
For Against Abstain
2. Amendment of Articles of Incorporation
to increase the authorized shares of [ ] [ ] [ ]
Common Stock from 5 million shares to 10
million shares and to decrease the par
value of the Corporation's Common Stock
from $10.00 per share to $1.00 per
share.
For Against Abstain
3. To ratify the appointment of KPMG Peat
Marwick LLP as the independent auditors [ ] [ ] [ ]
for the fiscal year ending December 31,
1998.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN SPECIFIED BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS INDICATED,
THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED ABOVE AND FOR PROPOSAL 2 AND
PROPOSAL 3, AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES ON ANY OTHER
MATTERS TO COME BEFORE THE ANNUAL MEETING.
Please sign exactly as your name appears on this card, date and return this
card promptly using the enclosed envelope. Executors, administrators, guardians,
officers of corporations, and others signing in a fiduciary capacity should
state their full title as such.
Please be sure to sign and date this Proxy in the box below.
Date_______________
Shareholder sign above--------------Co-holder (if any) sign above
- --------------------------------------------------------------------------------
^Detach above card, sign, date and mail in postage paid envelope provided.^
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY USING THE ENCLOSED ENVELOPE.
