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 under 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 19335-0904
610-269-1040
-------------------------------------
NOTICE OF ANNUAL MEETING
To Be Held on April 25, 2000
-------------------------------------
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 25, 2000 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 three directors to serve for three years or until their
successors have been elected and qualified; and
(2) To ratify the appointment of KPMG LLP as the independent auditors
for the fiscal year ending December 31, 2000; 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 29, 2000 are
entitled to notice of and to vote at the Annual Meeting.
/s/ Ronald K. Dankanich
BY ORDER OF THE BOARD OF DIRECTORS
Ronald K. Dankanich, Secretary
Downingtown, Pennsylvania
March 24, 2000
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 19335-0904
-------------------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 25, 2000
-------------------------------------
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 25, 2000 at 10:00
a.m., and at any adjournments thereof. The 1999 Annual Report to Stockholders,
including financial statements for the fiscal year ended December 31, 1999,
accompanies this Proxy Statement, which is first being mailed to stockholders on
or about March 24, 2000.
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 LLP as independent auditors for the fiscal year ending December 31, 2000.
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.
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 $1.00 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 29, 2000 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 1,611,339 shares.
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of February 29, 2000, 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.......................... 16,072 16,072 -- 0.91%
Robert J. Charles.......................... 28,830 16,191 12,639 1.64
Ronald K. Dankanich........................ 15,285 15,285 -- 0.87
Thomas R. Greenleaf........................ 14,560 5,742 8,818 0.83
Vernon J. Jameson.......................... 24,829 15,453 9,376 1.41
William S. Latoff.......................... 16,696 16,696 -- 0.95
Bruce E. Moroney........................... 17,929 12,569 5,360 1.02
Joseph G. Riper............................ 2,667 2,667 -- 0.15
Louis N. Teti............................. 8,150 7,372 778 0.46
Henry F. Thorne............................ 26,913 26,913 -- 1.53
James H. Thornton......................... 6,631 6,631 -- 0.38
Downingtown National Bank
Investment Services & Trust
Division................................... 80,967 41,396 39,571 5.03
Directors & Executive Officers
as group (14 Persons).................. 218,374 176,501 41,873 12.42
- ------------
<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 1995 Stock Option Plan of DNB Financial Corporation
amounting to 6,379 shares each for Messrs. Charles, Jameson and Teti,
2,553 shares for Messrs. Latoff and Riper, 5,103 shares for Mr. Greenleaf,
6,049 shares for Mr. Thornton, 21,702 shares for Mr. Thorne, 16,072 shares
for Mr. Bergey, 14,376 shares for Mr. Dankanich, 12,005 shares for Mr.
Moroney and 134,440 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, 1999.
(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
In accordance with its By-laws, the number of directors of the Corporation
is currently 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 29, 2000 concerning the
nominees for election as directors and each other member of the Corporation's
Board of Directors
<TABLE>
<CAPTION>
NOMINEES FOR THE THREE-YEAR TERM EXPIRING IN 2003
Principal Occupation During The
Name Age Past Five Years & Service Data (1)
---- --- ----------------------------------
<S> <C> <C>
Robert J. Charles 71 Director and Chairman of the Board;
Former President of Charles News Agency, Inc.
Director Since 1976
Term Expires 2003
Vernon J. Jameson 70 Director; President of V. J. Jameson & Son, Inc.
Director Since 1973
Term Expires 2003
Henry F. Thorne 56 Director; President and Chief Executive Officer
of the Corporation and the Bank
Director Since 1992
Term Expires 2003
OTHER DIRECTORS
Thomas R. Greenleaf 72 Director; Former President of
Chemical Leaman Tank Lines
Director Since 1979
Term Expires 2002
William S. Latoff 51 Director; Principal, Bliss & Company, Ltd.
Certified Public Accountants
Director Since 1998
Term Expires 2001
Joseph G. Riper 51 Director; Attorney with the law firm
of Riley, Riper, Hollin & Colagreco
Director Since 1997
Term Expires 2001
Louis N. Teti 49 Director; Attorney with the law firm
of MacElree Harvey
Director Since 1995
Term Expires 2002
James H. Thornton 54 Director; Former President and
Chief Executive Officer of
Brandywine Hospital
Director Since 1995
Term Expires 2002
- ------------
<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 1999, the Bank's Board of Directors held 13 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 $3,045, provided 75% of the meetings are attended. Mr. Charles, the
Corporation's and Bank's Chairman, receives a quarterly retainer of $7,000
provided 75% of the meetings are attended. Outside Directors also receive $225
for each committee meeting attended. All fees are paid by the Bank. During 1999,
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 1999, 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
1999.
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 2 times during 1999.
The Board Loan Committee consists of Messrs. Charles, Latoff, Riper,
Thorne and Thornton. This Committee reviews and takes action on proposed and
existing loans in excess of Officers' Credit Committee authority. The Committee
met 22 times during 1999.
The Audit/Compliance Committee consists of Messrs. Riper, Teti 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 4 times during 1999.
The Trust Committee consists of Messrs. Dankanich, Greenleaf, Jameson,
Latoff, 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 1999.
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 59), 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.
Ronald K. Dankanich (Age 45), 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 61), 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.
5
<PAGE>
Eileen M. Knott (Age 49), 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 43), 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 57), 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,
1999, 1998 and 1997, 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.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
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 1999 167,190 25,000 -- -- 4,083 -- 13,304 (2)
President and Chief 1998 159,130 25,000 -- -- 4,084 -- 15,956
Executive Officer 1997 151,560 18,000 -- -- 4,327 -- 17,396
Richard L. Bergey 1999 106,070 13,000 -- -- 2,553 9,071 (2)
Senior Vice President 1998 101,580 13,000 -- -- 2,552 -- 10,715
Credit Services Division 1997 97,150 12,000 -- -- 2,702 -- 11,665
Ronald K. Dankanich 1999 85,320 15,000 -- -- 2,553 -- 7,488 (2)
Senior Vice President 1998 81,420 14,000 -- -- 2,552 -- 8,748
Operations Division 1997 77,570 12,000 -- -- 2,702 -- 9,300
Bruce E. Moroney 1999 87,520 14,000 -- -- 2,553 -- 7,668 (2)
Senior Vice President 1998 83,620 14,000 -- -- 2,552 -- 8,969
Chief Financial Officer 1997 79,770 12,000 -- -- 2,702 -- 9,743
- ------------
<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) Amounts shown for 1999 include: (i) matching contributions to the 401(k)
Plan accounts ($1,554, $1,591, $1,280 and $1,313, respectively for Messrs.
Thorne, Bergey, Dankanich and Moroney); (ii) Long Term Disability & Life
Insurance premiums ($901, $729, $586 and $603, respectively for Messrs.
Thorne, Bergey, Dankanich and Moroney); and (iii) Contributions to the
Bank's Pension Plan ($10,849, $6,751, $5,622 and $5,752, respectively for
Messrs. Thorne, Bergey, Dankanich and Moroney).
</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 (as amended and restated,
effective as of April 27, 1999). Under the Plan, options (both qualified and
non-qualified) to purchase a maximum of 270,916 shares of the Corporation's
Common Stock may be issued to employees and Directors of the Corporation.
Option Grants in Last Fiscal Year
The following table provides certain information relating to stock options
granted during 1999. Certain officers not appearing in the Summary Compensation
table above were also granted stock options during 1999.
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 1,276 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. 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.
<TABLE>
<CAPTION>
OPTION GRANTS IN 1999
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 1999 Fiscal Year Base Price Expiration 5% 10%
Name (#) % ($/share) (2) Date $ $
- ---- ------------------ ------------ ------------- ---------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Henry F. Thorne 4,083 14 25.71 6-30-09 66,018 167,301
Richard L. Bergey 2,553 9 25.71 6-30-09 41,279 104,609
Ronald K. Dankanich 2,553 9 25.71 6-30-09 41,279 104,609
Bruce E. Moroney 2,553 9 25.71 6-30-09 41,279 104,609
- ------------
<FN>
(1) The options in the above table were granted on June 30, 1999 and became
exercisable on December 31, 1999.
(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 in December 1999.
</FN>
</TABLE>
7
<PAGE>
Aggregated Option Exercises and Year-End Value
The following table summarizes stock options that were exercised during
1999 and the number and value of stock options that were unexercised at December
31, 1999.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE TABLE
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 3,873 $40,204 21,702 -- $59,408 $ --
Richard L. Bergey -- -- 16,072 -- 57,513 --
Ronald K. Dankanich 615 6,385 14,376 -- 43,798 --
Bruce E. Moroney 3,873 40,204 12,005 -- 24,624 --
- ------------
<FN>
(1) Represents the difference between market value per share as of December 31,
1999 ($17.00) 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 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.
8
<PAGE>
Change of Control Agreements
Effective May 5, 1998 the Bank and the Corporation entered into Change of
Control Agreements (individually referred to as an "Agreement" or collectively
referred to as the "Agreements") with Messrs. Bergey, Dankanich, Erb, Moroney,
Stauffer and Ms. Knott (individually referred to as an "Executive" or
collectively referred to as the "Executives") in order to provide the Executives
with severance payments as additional incentive to induce the Executives to
devote their time and attention to the interest and affairs of the Corporation.
The Agreements provide that if an Executive's employment is terminated
after a change in control of the Corporation or the Bank, that he or she will
receive, as a severance payment an amount equal to: (a) the annual base salary
paid to the Executive and includible in the Executive's gross income for Federal
income tax purposes during the year in which the date of termination occurs by
Corporation and any of its subsidiaries subject to United States income tax;
multiplied by (b) 1.00. Such payment shall be made in a lump sum within one (1)
calendar week following the date of termination, subject to withholding by the
Corporation as required by applicable law and regulations. Notwithstanding any
provision of the Agreement or any other agreement of the parties, if the
severance payment or payments under the Agreement, either alone or together with
other payments which the Executive has the right to receive from the
Corporation, would constitute a "parachute payment" (as defined in Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code") or any successor
provision, such lump sum severance payment shall be reduced to the largest
amount as will result in no portion of the lump sum severance payment under the
Agreement being subject to the excise tax imposed by Section 4999 of the Code.
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 securities of the Bank or Corporation representing twenty-five
percent (25%) 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 or (c) the signing of a letter of intent or a formal acquisition
or merger agreement between the Corporation or Bank, of the one part, and a
third party which contemplates a transaction which would result in a "change of
control".
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, 1999 represented 3.3% 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.
9
<PAGE>
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. The key components of the compensation program
are base salary, discretionary bonus and long-term incentives.
Base Salaries - Base salaries are determined by the assessment of each
executive's performance; current salary in relation to the salary range
designated for the job; experience; potential for advancement and by the
performance of the Corporation. In addition, the committee considers the
economic conditions and other external events that affect the operations of the
Bank and by comparing the Bank's compensation practices with those of other
banks and non-banking companies who are direct competitors for employee's
services, including executive talent. The committee utilizes independent
compensation consultants for this review. The committee is responsible for
reviewing the evaluations of Senior Management and the President and Chief
Executive Officer. Each executive is reviewed individually on their leadership
skills; their ability to develop staff; and significant department
accomplishments which affect the performance of the Bank. In addition Senior
Management is evaluated on their ability to collectively develop and evaluate
strategic plans for the future growth of the Bank.
Discretionary Bonus - Bonuses are awarded to executives for their
performance with respect to the Bank's achievements. These achievements, in the
opinion of the Committee, substantially enhanced the long-term business and
financial prospects of the Bank. The amounts awarded are based upon the
committee's subjective assessment of the contribution of each executive.
Long Term Incentives - The Compensation Committee believes that a portion
of executive compensation should be dependent on value created for the Bank's
shareholders. Through the 1995 Stock Option Plan, the committee makes annual
grants of stock options at 100% of the stock's fair market value on the date of
grant to executives. Thus, executives are encouraged to manage the Bank with a
view toward the future and maximizing shareholder value.
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 2000, the Bank does not anticipate making a contribution to the
1999 Plan Year due to the Plan's funding status. 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.
10
<PAGE>
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) Messrs. Thorne, Bergey, Dankanich and Moroney have 8 years, 7 years,
27 years and 8 years, respectively, of credited service under the
Plan. Earnings in excess of $150,000 are not considered in
determining the pension benefit.
During 1999, the Bank adopted an arrangement for supplemental compensation
(the "Supplemental Plan") for its Chief Executive Officer (the "Executive"). The
Supplemental Plan provides that the Bank and the Executive share in the rights
to the cash surrender value and death benefits of a split-dollar life insurance
policy (the "Split-dollar Policy") and provides for additional compensation to
the Executive, equal to any income tax consequences related to the Supplemental
Plan until retirement. The Split-dollar Policy is designed to provide the
Executive, upon attaining age 65, with projected annual after-tax distributions
of approximately $35,000, funded by loans against the cash surrender value of
the Split-dollar Policy. In addition, the Split-dollar Policy is intended to
provide the Executive with a projected death benefit of $750,000. Neither the
insurance company nor the Bank has guaranteed any minimum cash value under the
Supplemental Plan. To fund the annual premium on the Split-dollar Policy and
mitigate the obligations under this Plan, the Bank has purchased an additional
life insurance policy on the Executive's life (the "BOLI Policy") with an
initial deposit of $1.5 million. The amount of the BOLI Policy has been
calculated so that the projected increases in its cash surrender value will
substantially offset the Bank's expense related to the Split-dollar Policy.
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 six months 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 501 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 1999 was $35,000.
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 employees for the prescription drug plan.
11
<PAGE>
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, 1999. 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 and S&P Financial Index
[OBJECT OMITTED]
(The Performance Graph appears here. See the table below for plot points.)
<TABLE>
<CAPTION>
December 31,
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
S&P 50 Index 100 137.11 168.21 223.89 287.34 347.35
S&P 500 Financial Corp. 100 153.32 206.46 299.83 339.54 353.11
DNB Financial Corp. 100 151.17 204.45 429.34 446.65 269.09
</TABLE>
PROPOSAL 2
RATIFICATION OF INDEPENDENT AUDITORS
The Corporation's independent auditors for the fiscal year ended December
31, 1999 were KPMG LLP. The Corporation's Board of Directors has reappointed
KPMG LLP to continue as independent auditors for the fiscal year ending December
31, 2000 subject to ratification of such appointment by the stockholders.
Representatives of KPMG 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 LLP as the independent auditors of the
Corporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF KPMG 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 2001, 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 27, 2000. Any
such proposal will be subject to Rule 14a-8 of the rules and regulations of the
SEC.
In connection with the Corporation's 2001 annual meeting and pursuant to
recently amended Rule 14a-4 under the Exchange Act, if the shareholder's notice
is not received by the Corporation on or before February 8, 2001, the
Corporation (through management proxy holders) may exercise discretionary voting
authority when the proposal is raised at the annual meeting without any
reference to the matter in the proxy statement.
12
<PAGE>
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, 1999 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 19335-0904 OR BY
CONTACTING MR. MORONEY AT 610-873-5253.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Ronald K. Dankanich
Ronald K. Dankanich, Secretary
Downingtown, Pennsylvania
March 24, 2000
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.
13
<PAGE>
REVOCABLE PROXY
DNB FINANCIAL CORPORATION
PLEASE MARK VOTES
_______ AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS
APRIL 25, 2000
The undersigned hereby constitutes and appoints Richard D. Thatcher, L. Ruth
Patterson 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 Stockolders of the Corporation to be held at
the Central Presbyterian Church, 100 W. Uwchlan Avenue, Downingtown,
Pennsylvania on Tuesday, April 25, 2000 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:
Please be sure to sign and date this Proxy in the box below.
- -----------------------------------------------------------
- -----------------------------------------------------------
Stockholder sign above Co-holder (if any) sign above
Date____________
With- For All
For held Except
1. ELECTION OF DIRECTORS: for all [ ] [ ] [ ]
nominees listed below (except as
marked to the contrary below):
Robert J. Charles; Vernon J. Jameson and Henry F. Thorne
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
- ----------------------------------------------------------------
2. To ratify the appointment of For Against Abstain
KPMG LLP as the independent auditors [ ] [ ] [ ]
for the fiscal year ending December 31,
2000.
------------------------
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER 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 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.
Detach above card, sign, date and mail in postage paid envelope provided.
DNB FINANCIAL CORPORATION
- -------------------------------------------------------------------------------
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING,
PLEASE ACT PROMPTLY SIGN, DATE & MAIL YOUR PROXY CARD
TODAY, USING THE ENCLOSED ENVELOPE.
- -------------------------------------------------------------------------------
