SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
Norwood Financial Corp.
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(Name of Registrant as Specified in Its Charter)
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(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)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the filing
fee is calculated and state how it was determined.)
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[Norwood Financial Corp. Letterhead]
March 22, 2001
Dear Stockholder:
On behalf of the Board of Directors and management of Norwood Financial
Corp. (the "Corporation"), I invite you to attend the Annual Meeting of
Stockholders of the Corporation to be held at the administrative office of Wayne
Bank, 717 Main Street, Honesdale, Pennsylvania on Tuesday, April 24, 2001, at
11:00 a.m., eastern time. The attached Notice of Annual Meeting and Proxy
Statement describe the formal business to be transacted at the Annual Meeting.
During the Annual Meeting, we will also report on the operations of the
Corporation. Directors and officers of the Corporation, as well as
representatives of Beard Miller Company LLP, certified public accountants, will
be present to respond to stockholder questions.
You will be asked to elect three directors. The Board of Directors has
approved this proposal and recommends that you vote FOR it.
Your vote is important, regardless of the number of shares you own. We
encourage you to vote by proxy so that your shares will be represented and voted
at the meeting even if you cannot attend. All stockholders can vote by written
Proxy Card. All stockholders of record and many "street name" stockholders also
can vote via touchtone telephone, or via the internet using the instructions on
your proxy card. And, of course, you may vote in person at the meeting if you so
choose. If you do decide to attend the Annual Meeting and feel for whatever
reason that you want to change your vote at that time, you will be able to do
so.
Sincerely,
/s/William W. Davis, Jr.
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William W. Davis, Jr.
President and Chief Executive Officer
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NORWOOD FINANCIAL CORP.
717 MAIN STREET
HONESDALE, PENNSYLVANIA 18431
(570) 253-1455
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 24, 2001
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Norwood Financial Corp. (the "Corporation"), will be held at the
administrative office of Wayne Bank, 717 Main Street, Honesdale, Pennsylvania on
April 24, 2001, at 11:00 a.m., eastern time, for the following purposes:
I. To elect three directors of the Corporation;
all as set forth in the Proxy Statement accompanying this notice, and to
transact such other business as may properly come before the Meeting and any
adjournments. The Board of Directors is not aware of any other business to come
before the Meeting. Stockholders of record at the close of business on March 16,
2001, are the stockholders entitled to vote at the Meeting and any adjournments
thereof.
A copy of the Corporation's Annual Report for the year ended December
31, 2000 is enclosed.
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. WE
ENCOURAGE YOU TO VOTE BY PROXY SO THAT YOUR SHARES WILL BE REPRESENTED AND VOTED
AT THE MEETING EVEN IF YOU CANNOT ATTEND. ALL STOCKHOLDERS CAN VOTE BY WRITTEN
PROXY CARD. ALL STOCKHOLDERS OF RECORD AND MANY "STREET NAME" STOCKHOLDERS ALSO
CAN VOTE VIA TOUCHTONE TELEPHONE, OR VIA THE INTERNET USING THE INSTRUCTIONS ON
YOUR PROXY CARD. AND, OF COURSE, YOU MAY VOTE IN PERSON AT THE MEETING IF YOU SO
CHOOSE. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN
YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER TO
VOTE PERSONALLY AT THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
/s/John E. Marshall
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John E. Marshall
Secretary
Honesdale, Pennsylvania
March 22, 2001
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE CORPORATION THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM AT THE MEETING. IF YOU
ARE VOTING BY WRITTEN PROXY CARD, A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
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PROXY STATEMENT
OF
NORWOOD FINANCIAL CORP.
717 MAIN STREET
HONESDALE, PENNSYLVANIA 18431
(570) 253-1455
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ANNUAL MEETING OF STOCKHOLDERS
April 24, 2001
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GENERAL
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This proxy statement and the accompanying proxy card are being mailed
to stockholders of Norwood Financial Corp. (the "Corporation") commencing on or
about March 22, 2001 in connection with the solicitation by the Company's Board
of Directors of proxies to be used at the annual meeting of stockholders (the
"Meeting") to be held at the administration office of Wayne Bank, 717 Main
Street, Honesdale, Pennsylvania on Tuesday, April 24, 2001, at 11:00 a.m.,
eastern time.
All proxies properly submitted by telephone or via the Internet and all
properly executed written proxies that are delivered pursuant to this proxy
statement will be voted on all matters that properly come before the Meeting for
a vote. If your proxy specifies instructions with respect to matters being voted
upon, your shares will be voted in accordance with your instructions. If no
instructions are specified, your shares will be voted (a) FOR the election of
directors named in Proposal I, and (b) in the discretion of the proxy holders,
as to any other matters that may properly come before the Meeting. Your proxy
may be revoked at any time prior to being voted by: (i) filing with the
Secretary of the Corporation (John E. Marshall, at 717 Main Street, Honesdale,
Pennsylvania 18431) written notice of such revocation, (ii) submitting a duly
executed proxy bearing a later date, or (iii) attending the Meeting and giving
the Secretary notice of your intention to vote in person.
The telephone and Internet voting procedures are designed to
authenticate stockholders' identities, to allow stockholders to vote their
shares and to confirm that their instructions have been properly recorded.
Specific instructions to be followed by individuals holding registered shares
who are interested in voting via telephone or the Internet are set forth on the
enclosed proxy card. In many cases, "street name" stockholders may vote via
telephone or the Internet by following instructions provided by their broker.
WHETHER OR NOT YOU ATTEND THE MEETING, YOUR VOTE IS IMPORTANT.
ACCORDINGLY, REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOU ARE ASKED TO VOTE
PROMPTLY USING THE TELEPHONE VOTING SYSTEM, ACCESSING THE WORLD WIDE WEB SITE
INDICATED ON YOUR PROXY CARD TO VOTE VIA THE INTERNET, OR BY SIGNING AND
RETURNING THE ACCOMPANYING PROXY CARD.
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VOTING STOCK AND VOTE REQUIRED
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The Board of Directors has fixed the close of business on March 16,
2001 as the record date for the determination of stockholders who are entitled
to notice of, and to vote at, the Meeting. On the record date, there were
1,743,993 shares of the Corporation common stock outstanding (the "Common
Stock"). Each stockholder of record on the record date is entitled to one vote
for each share held.
The presence in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote is necessary to constitute a
quorum at the Meeting. With respect to any matter, any shares for which a broker
indicates on the proxy that it does not have discretionary authority as to such
shares to vote on such matter (the "Broker Non-Votes") will not be considered
present for purposes of determining whether a quorum is present. In the event
there are not sufficient votes for a quorum or to ratify any proposals at the
time of the Meeting, the Meeting may be adjourned in order to permit the further
solicitation of proxies.
As to the election of directors, as set forth in Proposal I, the proxy
being provided by the Board of Directors enables a stockholder to vote for the
election of the nominees proposed by the Board of Directors, or to withhold
authority to vote for the nominees being proposed. Directors are elected by a
plurality of votes of the shares present, in person or represented by proxy, at
a meeting and entitled to vote in the election of directors. Unless otherwise
required by law, all other matters shall be determined by a majority of votes
cast affirmatively or negatively without regard to (a) Broker Non-Votes or (b)
proxies marked "ABSTAIN" as to that matter.
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PRINCIPAL HOLDERS
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Persons and groups owning in excess of 5% of the Common Stock are
required to file certain reports regarding such ownership pursuant to the
Securities Exchange Act of 1934, as amended (the "1934 Act"). The following
table sets forth as of the record date, persons or groups who own more than 5%
of the Common Stock. Other than as noted below, management knows of no person or
group that owns more than 5% of the outstanding shares of Common Stock as of the
record date. The ownership of all executive officers and directors of the
Corporation as a group is presented under "Proposal I- Election of Directors."
Name and Address Amount and Nature of Percent of Shares of
of Beneficial Owner Beneficial Ownership Common Stock Outstanding
------------------- -------------------- ------------------------
Wayne Bank Trust Department 141,080(1) 8.09%
717 Main Street
Honesdale, Pennsylvania 18431
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(1) The Wayne Bank Trust Department ("WBTD") is trustee to and has sole
voting power for sixteen trust accounts that include among their
investments the Common Stock. The share amount does not include an
aggregate of 141,656 shares of the Common Stock for which WBTD holds no
voting power.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Corporation's directors and executive officers to file reports of
ownership and changes in ownership of their equity securities of the Corporation
with the Securities and Exchange Commission and to furnish the Corporation with
copies of such reports. To the best of the Corporation's knowledge, all of the
filings by the Corporation's directors and executive officers were made on a
timely basis during the 2000 fiscal year. The Corporation is not aware of any
beneficial owners of more than ten percent of its Common Stock.
2
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PROPOSAL I - ELECTION OF DIRECTORS
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Election of Directors
The Board of Directors currently consists of nine members, each of whom
also serves as a director of Wayne Bank (the "Bank"). The Corporation's Articles
of Incorporation provides that the Board of Directors must be divided into three
classes as nearly equal in number as possible. At each annual meeting of
stockholders, each of the successors of the directors whose terms expire at the
meeting will be elected to serve for a term of three years expiring at the third
annual meeting of stockholders following the annual meeting of stockholders at
which the successor director was elected.
Russell L. Ridd, Harold A. Shook, and Richard L. Snyder have been
nominated by the Board of Directors for a term of three years. Messrs. Ridd,
Shook, and Snyder currently serve as directors of the Corporation.
The persons named as proxies in the enclosed proxy card intend to vote
for the election of the person listed below, unless the proxy card is marked to
indicate that such authorization is expressly withheld. Should any of the
nominees withdraw or be unable to serve (which the Board of Directors does not
expect) or should any other vacancy occur in the Board of Directors, it is the
intention of the persons named in the enclosed proxy card to vote for the
election of such person as may be recommended to the Board of Directors by the
Nominating Committee of the Board. If there is no substitute nominee, the size
of the Board of Directors may be reduced.
The following table sets forth the names, ages, terms of, and length of
board service for the persons nominated for election as directors of the
Corporation at the Meeting and each other director of the Corporation who will
continue to serve as director after the Meeting. Beneficial ownership of named
executive officers and directors of the Corporation as a group, is also set
forth below.
COMMON STOCK
YEAR FIRST CURRENT BENEFICIALLY PERCENT
ELECTED OR TERM OWNED AS OF OF CLASS
NAME AGE(1) APPOINTED(2) EXPIRES MARCH 16, 2001(3) (%)
---- ------- --------------------- -------------- ------------------------ ---------
BOARD NOMINEES FOR TERMS TO EXPIRE IN 2004
Russell L. Ridd 71 1980 2001 52,498(4) 3.0
Harold A. Shook 62 1988 2001 4,697(4) --(6)
Richard L. Snyder 60 2000 2001 1,000 --(6)
DIRECTORS CONTINUING IN OFFICE
Daniel J. O'Neill 63 1985 2002 3,069 --(6)
Dr. Kenneth A. Phillips 50 1988 2002 1,812 --(6)
Gary P. Rickard 59 1978 2002 12,810 --(6)
Charles E. Case 66 1970 2003 46,460 2.7
William W. Davis, Jr. 56 1996 2003 29,395 1.7
John E. Marshall 63 1983 2003 17,940(4) 1.0
NAMED EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Lewis J. Critelli 41 17,246 1.0
Edward C. Kasper 53 16,506 --(6)
All Executive Officers and
Directors as a Group
(11 persons) 203,433(5) 11.3
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(footnotes on next page)
3
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(1) As of December 31, 2000.
(2) Refers to the year the individual first became a director of the
Corporation or the Bank.
(3) Unless otherwise noted, the directors, executive officers and group named
in the table have sole or shared voting power or investment power with
respect to the shares listed in the table. The share amounts include shares
of Common Stock that the following persons may acquire through the exercise
of stock options within 60 days of the record date: Russsell L. Ridd - 500,
Harold A. Shook - 500, Daniel J. O'Neill - 500, Dr. Kenneth A. Phillips -
500, Gary P. Rickard - 500, Charles E. Case - 500, William W. Davis, Jr. -
19,000, John E. Marshall - 500, Lewis J. Critelli - 14,740, and Edward C.
Kasper - 12,240.
(4) Excludes 69,606 unallocated shares of Common Stock held under the Wayne
Bank Employee Stock Ownership Plan ("ESOP") for which such individuals
serve as the ESOP trustees. Such shares are voted by the ESOP trustee in a
manner proportionate to the voting directions of the allocated shares
received by the ESOP participants, subject to the fiduciary duty of the
trustees. Beneficial ownership is disclaimed with respect to such ESOP
shares held in a fiduciary capacity.
(5) Includes options to purchase 49,480 shares of Common Stock within 60 days
of the record date.
(6) Less than 1% of the Common Stock outstanding.
Biographical Information
The principal occupation during the past five years of each director,
nominee for director, and executive officer of the Corporation is set forth
below. Unless otherwise stated, all directors, nominees, and executive officers
have held their present positions for five years.
Nominees for Director:
Russell L. Ridd is Chairman of the Board. Mr. Ridd retired as the
President and Chief Executive Officer of the Bank in May 1993.
Harold A. Shook is president of Shooky's Distributors, Hawley,
Pennsylvania, a food and beverage distributor.
Richard L. Snyder is a retired executive and certified public
accountant. He served in a number of executive positions with Pricewaterhouse
Coopers LLP, Bell Equipment/Alcom Combustion Company, and most recently with
Phillip Morris Companies, Inc.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
ABOVE NOMINEES FOR DIRECTORS.
Continuing Directors:
Daniel J. O'Neill is the retired Superintendent of the Wayne Highlands
School District, Honesdale, Pennsylvania.
Dr. Kenneth A. Phillips is an optometrist in Waymart, Pennsylvania.
Gary P. Rickard is a partner of Clearfield Farms, Honesdale,
Pennsylvania, a dairy farm.
Charles E. Case is Vice President at CR Case and Sons, Inc., Honesdale,
Pennsylvania, an automotive/tire services store.
William W. Davis, Jr. became President and Chief Executive Officer of
the Corporation and the Bank on August 26, 1996. Previous to his appointment
with the Corporation and the Bank, Mr. Davis served as senior vice president and
area executive of Corestates Bank N.A., Scranton, Pennsylvania.
4
John E. Marshall is president of Marshall Machinery Inc., Honesdale,
Pennsylvania, a farm equipment and sales company.
Named Executive Officers Who Are Not Directors:
Lewis J. Critelli, 41, has been Executive Vice President and Chief
Financial Officer of the Corporation and the Bank since December 8. 1998. Prior
to such date, Mr. Critelli has served in a variety of capacities with the
Corporation and the Bank.
Edward C. Kasper, 53, has been Senior Vice President of the Corporation
and the Bank since December 9, 1997. Prior to such date, Mr. Kasper has served
in a variety of capacities with the Corporation and the Bank.
Certain Other Executive Officers:
John H. Sanders, 43, has been Senior Vice President of the Corporation
and Senior Vice President and head of Retail Banking for the Bank since December
1997. Prior to such date, Mr. Sanders served as Vice President of the Bank.
Joseph A. Kneller, 54, has been Senior Vice President of the
Corporation and Senior Vice President - Information Systems of the Bank since
December 1998. Prior to such date, Mr. Kneller served as Vice President of the
Bank from July 1997 to his present appointment with the Corporation and Bank.
Prior to July 1997, Mr. Kneller was Senior Vice President of Operations for
Farmers & Merchants Bank & Trust, Hagerstown, Maryland.
Meetings and Committees of the Board of Directors
The Board of Directors of the Corporation conducts its business through
meetings of the Board and through activities of its committees. All committees
act for both the Corporation and the Bank. During the fiscal year ended December
31, 2000, the Board of Directors of the Corporation held six regular meetings
and no special meetings and the Board of Directors of the Bank held 12 regular
meetings and no special meetings. No director attended fewer than 75% of the
total meetings of the Boards of Directors of the Corporation and the Bank and
committees on which such director served during the fiscal year ended December
31, 2000.
The Corporation's nominating committee consists of Directors Ridd,
Marshall and Shook. The Committee presents its recommendation of nominees to the
full Board of Directors. Nomination to the Board of Directors made by
stockholders must be made in writing to the Secretary of the Corporation and
received by the Corporation not less than 60 days prior to the anniversary date
of the immediately preceding annual meeting of stockholders of the Corporation.
Notice to the Corporation of such nominations must include certain information
required pursuant to the Corporation's Articles of Incorporation. This standing
committee met twice during the 2000 fiscal year.
The Compensation Committee consists of Directors Ridd, Marshall and
Shook. This standing committee met twice during the fiscal year ended December
31, 2000 to review the compensation of the chief executive officer and other
executive officers.
The Board of Directors has determined that each of the members of the
Audit Committee satisfy the requirements of the Nasdaq as to independence,
financial literacy and experience. The responsibility
5
of the Audit Committee are set forth in the charter of the Audit Committee,
attached as an Appendix to this proxy statement. The Audit Committee is a
standing committee and, among other matters, is responsible for developing and
maintaining the Corporation's audit program. The Audit Committee also meets with
the Corporation's independent auditors, Beard Miller Company LLP, to discuss the
results of the annual audit and any related matters. At December 31, 2000, total
audit fees (which includes fees for quarterly review services) were
approximately $45,500. Additionally, fees for other services totalled $40,800.
All such services were performed by Beard Miller Company LLP.
In addition to regularly scheduled meetings, the Audit Committee is
available either as a group or individually to discuss any matters that might
affect the financial statements, internal controls or other financial aspects of
the operations of the Corporation. The Audit Committee met four times during the
fiscal year ended December 31, 2000.
Audit Committee Report
Review of Audited Financial Statements with Management.
The Audit Committee reviewed and discussed the audited financial
statement with the management of the Corporation.
Review of Financial Statements and Other Matters with Independent
Auditors.
The Audit Committee discussed with the independent auditors the matters
required to be discussed by SAS 61 (Codification of Statements on Auditing
Standards, AU Section 380), as may be modified or supplemented. The Audit
Committee has received the written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard No. 1
(Independence Standards Board No. 1, Independence Discussions with Audit
Committees), as may be modified or supplemented, and has discussed with the
independent auditors the independent auditor's independence.
Recommendation that Financial Statements be Included in Annual Report.
Based on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Corporation's Annual Report on Form 10-K for the
last fiscal year for filing with the Securities and Exchange Commission.
Audit Committee:
Richard L. Snyder - Chairman
Harold A. Shook
Dr. Kenneth A. Phillips
Charles E. Case
John E. Marshall
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DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
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Director Compensation
The Corporation does not presently compensate its directors. Each
director of the Corporation is also a director of the Bank and receives fees
accordingly. Mr. William W. Davis, Jr., President and Chief
6
Executive Officer of the Corporation and the Bank, does not receive board or
committee fees for his participation thereon. Each non-employee member of the
Board of Directors receives a retainer of $1,250 per month. In addition, fees
are paid for various committee meetings as follows: Trust Committee ($300);
Audit Committee ($300); Compensation Committee ($300). For the fiscal year ended
December 31, 2000, fees paid to all directors totaled approximately $147,000,
all of which were paid by the Bank.
Under the terms of the 1999 Directors stock compensation plan, options
to purchase 500 shares of Common Stock were granted to each non-employee
director on December 13, 2000. The options granted to the non-employee directors
are exercisable one year from the date of grant. A total of 17,600 shares of
Common Stock were reserved under the Plan with 7,500 total options granted as of
December 31, 2000.
Executive Compensation
Summary Compensation Table. The following table sets forth the cash and
non-cash compensation awarded to or earned, for services rendered by the named
executive officers of the Corporation for each of the three years ended December
31, 2000. No other executive officer of the Corporation had a combined salary
and bonus that exceeded $100,000.
Long Term
Annual Compensation
Compensation(1) Awards
------------------------ ---------------------
Name and Principal Securities Underlying All Other
Position Year Salary Bonus Options/SARs(#)(2) Compensation
------------------------ ---- -------- ------- --------------------- ------------
William W. Davis, Jr. 2000 $181,039 $45,000 3,000 $ 71,278(3)(4)(5)
President and Chief 1999 175,783 35,000 3,000 40,747
Executive Officer 1998 150,000 30,000 4,000 28,763
Lewis J. Critelli 2000 121,154 30,000 2,000 $ 28,588 (3)(4)(5)
Executive Vice President 1999 113,862 28,500 2,000 21,380
and Chief Financial 1998 100,000 20,000 3,000 19,175
Officer
Edward C. Kasper 2000 95,913 15,000 1,500 $ 31,812 (3)(4)(5)
Senior Vice President 1999 95,465 12,000 1,500 20,342
1998 90,000 6,000 2,500 17,258
--------------------
(1) All compensation was paid by the Bank. For perquisites and other personal
benefits, aggregate value does not exceed the lesser of $50,000 or 10% of
the named executive officer's total salary and bonuses for the year. For
the periods presented, there were no (a) payments of earnings with respect
to long-term incentive plans prior to settlement or maturity; (b) tax
payment reimbursements; (c) preferential discounts on stock, or (d)
earnings deferred at the election of the officer.
(2) Represents awards under Stock Option Plan. See " -- Stock Awards."
(3) Includes matching and discretionary contributions of $9,600 allocated to
the account of Mr. Davis, $8,400 allocated to the account of Mr. Critelli,
and $5,700 allocated to the account of Mr. Kasper by the Bank under its
401(k) Plan during 2000.
(4) Includes 904 shares of Common Stock allocated to Mr. Davis, 603 shares of
Common Stock allocated to Mr. Critelli, and 477 shares of Common Stock
allocated to Mr. Kasper during 2000, pursuant to the ESOP and based upon an
average cost of $16.59 on December 31, 2000. At December 31, 2000, the
market value of such shares was $17.25 a share.
(5) Includes accruals during 2000 under salary continuation plans of $46,681,
$10,184 and $18,199 for Messrs. Davis, Critelli and Kasper, respectively.
7
Other Benefits
Employment Agreements. The Corporation and the Bank entered into
five-year employment agreements with Messrs. Davis and Critelli. Under the
Agreements, Mr. Davis' and Mr. Critelli's employment may be terminated by the
Corporation or the Bank for "just cause" as defined in the Agreement. If the
Corporation or the Bank terminated Messrs. Davis and Critelli without just
cause, Messrs. Davis and Critelli would be entitled to a continuation of their
salaries for the remaining term of the Agreement with a minimum of one year from
the date of termination as well as the continuation of other benefits. In the
event there is an involuntary termination of employment in connection with any
change in control of the Corporation or the Bank during the term of the
Agreement, Messrs. Davis and Critelli will be paid in a lump sum an amount equal
to 2.99 times the five year average of his annual compensation. In the event of
a change in control of the Corporation or Bank at December 31, 2000, Messrs.
Davis and Critelli would currently be entitled to an aggregate lump-sum payment
of approximately $484,000 and $318,000, respectively.
Salary Continuation Plan. The Bank entered into salary continuation
agreements with Messrs. Davis, Critelli and Kasper (the "Executives"). The
agreements provide that upon termination of employment on or after reaching the
age of 62, the Executives will be entitled to maximum annual retirement benefits
equal to $46,000, $61,000 and $29,000, respectively, payable for 15 years. These
amounts are adjusted for early retirement. The Executives are entitled to full
payment at age 62 under a change in control of the Corporation. The Executives
are not entitled to such benefits in the event they voluntarily leave the
Corporation or are terminated for cause. The plan, which also includes two other
executive officers, is funded by the purchase of a $3.0 million life insurance
policy with the Bank as the beneficiary. For the year ended December 31, 2000,
Messrs. Davis, Critelli, and Kasper had accrued salary continuation plan
benefits of approximately $59,000, $13,000, and $23,000, respectively, and such
benefits were vested for such Executives.
Severance Agreement. The Bank entered into a change-in-control
severance agreement with Mr. Kasper. The severance agreement has a term of three
years, renewable annually, and severance protection upon a termination of
employment following a change in control of the Bank, with such payment equaling
two times the current annual compensation of Mr. Kasper. In the event of a
change of control at December 31, 2000, Mr. Kasper would have been entitled to a
lump sum payment of approximately $190,000.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consisted of Directors Ridd, Marshall and
Shook at December 31, 2000. No member of the Committee is, or was during 2000,
an executive officer of another company whose board of directors has a
comparable committee on which one of the Company's executive officers serves.
None of the executive officers of the Company is, or was during 2000, a member
of a comparable compensation committee of a company of which any of the
directors of the Company is an executive officer.
2000 Report of the Compensation Committee
The Compensation Committee of the Corporation is responsible for the
administration of the compensation program of the President and Chief Executive
Officer, Executive Vice President and Chief Financial Officer and all other
Executive Officers. The Committee is entirely composed of the Board of Directors
of the Corporation. The Committee has access to various surveys of executive
compensation
8
packages of banks of similar size and complexity. The Compensation package for
executive officers consists of base salary, annual cash bonus and incentive
stock options and is structured so as to provide a competitive package that
allows the Corporation to retain key executives.
The Committee determines executive base salaries by level of
responsibility, individual contribution to the Corporation and the Corporation
performance including overall profitability, core growth in loans and deposits
and loan quality issues. The Chief Executive Officer makes recommendations to
the Committee concerning base salary of other executive officers after reviewing
the individual's performance as well as the Corporation's performance. Using a
similar process, the Committee makes recommendations to the Board of Directors
regarding the President and Chief Executive Officer base salary.
During the year ended December 31, 2000, William W. Davis, Jr.,
President and Chief Executive Officer received an increase in his base salary
from $170,000 to $180,000 due to his continued leadership in the management of
the Corporation and the Bank. Additionally, Mr. Davis was awarded stock options
under the Stock Option Plan. In making its compensation determinations, the
Committee considers the annual compensation paid to presidents and chief
executive officers of publicly owned financial institutions nationally, in the
State of Pennsylvania and surrounding Northeastern states with assets of between
$250 million and $500 million and the job performance of such individual as
determined by the Committee or the Board of Directors.
The Compensation Committee:
John E. Marshall
Russell L. Ridd - Chairman
Harold A. Shook
Stock Awards. The following table sets forth information with respect
to previously awarded stock options to purchase the Common Stock granted in
fiscal 2000 to the named executive officers and held by them as of December 31,
2000. The Corporation has not granted to the named executive officers any stock
appreciation rights.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
--------------------------------------------------------------------------------------------------------------------------
Percent of Potential Realizable
Number of Total Options/ Value at Assumed
Securities SARs Granted Annual Rate of Stock
Underlying to Employees Exercise or Price Appreciation for
Name Option/SARs in Fiscal Base Price Option Term(1)
Granted (#) Year ($/Sh) Expiration Date 5%($) 10%($)
--------------------------------------------------------------------------------------------------------------------------
William W. Davis, Jr. 3,000 25.0% 16.3125 12/13/10 35,358 85,289
Lewis J. Critelli 2,000 16.7% 16.3125 12/13/10 23,572 56,859
Edward C. Kasper 1,500 12.5% 16.3125 12/13/10 17,679 42,644
------------------
(1) The amounts represent certain assumed rates of appreciation only over a
ten-year period. Actual gains, if any, on stock option exercises and
Common Stock holdings are dependent on the future performance of the
Common Stock and overall stock market conditions. There can be no
assurance that the amounts reflected in the table will be achieved. The
values in the table are based upon the exercise price of $16.3125 and
the closing price of $17.25 at December 31, 2000.
9
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
-------------------------------------------------------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options/SARs in-the-Money Options/SARs
Acquired on Value at Fiscal Year-End at Fiscal Year-End
Exercise Realized (#) ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
-------------------------------------------------------------------------------------------------------------------------------
William W. Davis, Jr. -- -- 19,000 / 3,000 5,622 / 2,813(1)
Lewis J. Critelli -- -- 14,740 / 2,000 4,575 / 1,875(2)
Edward C. Kasper -- -- 12,240 / 1,500 4,095 / 1,406(3)
----------------
(1) Based upon an exercise price per share of $16.438 for 6,000 options;
$17.125 for 6,000 options; $24.00 for 3,000 options; $22.25 for 3,000
options; and $16.3125 for 3,000 options. Also based on a closing stock
price of $17.25 per share as of December 31, 2000.
(2) Based upon an exercise price per share of $16.54 for 5,740 options; $17.125
for 4,000 options; $24.00 for 3,000 options; $22.25 for 2,000 options; and
$16.3125 for 2,000 options. Also based on closing stock price of $17.25 per
share as of December 31, 2000.
(3) Based upon an exercise price of $16.54 for 5,240 options; $17.125 for 3,000
options; $24.00 for 2,500 options; $22.25 for 1,500 options; and $16.3125
for 1,500 options. Also based on a closing stock price of $17.25 per shares
as of December 31, 2000.
--------------------------------------------------------------------------------
PERFORMANCE GRAPH
--------------------------------------------------------------------------------
Set forth below is a stock performance graph comparing the cumulative
total shareholder return on the Common Stock with (a) the cumulative total
stockholder return on stocks included in the Nasdaq Stock Market index and (b)
the cumulative total stockholder return on stocks included in the Nasdaq Bank
index, as prepared for Nasdaq by the Center for Research in Securities Prices
("CRSP") at the University of Chicago. All three investment comparisons assume
the investment of $1,000 as of the close of June 28, 1996, (the date on which
the Corporation became subject to the Securities Exchange Act of 1934, as
amended). All of these cumulative total returns are computed assuming the
reinvestment of dividends. The graph provides comparisons at June 28, 1996 and
each fiscal year through December 31, 2000.
[GRAPHIC OMITTED]
--------------------
(plotting points next page)
10
------------------------------ -------------- -------------- -------------- -------------- -------------- --------------
6/28/96($) 12/31/96($) 12/31/97($) 12/31/98($) 12/31/99($) 12/31/00($)
------------------------------ -------------- -------------- -------------- -------------- -------------- --------------
CRSP Nasdaq U.S. Index 1,000 1,088 1,331 1,879 3,488 2,099
------------------------------ -------------- -------------- -------------- -------------- -------------- --------------
CRSP Nasdaq Bank Index 1,000 1,250 2,092 2,079 1,998 2,282
------------------------------ -------------- -------------- -------------- -------------- -------------- --------------
Norwood Financial Corp. 1,000 990 1,305 1,426 1,365 1,177
------------------------------ -------------- -------------- -------------- -------------- -------------- --------------
There can be no assurance that the Corporation's future stock
performance will be the same or similar to the historical performance shown in
the above graph. The Corporation neither makes nor endorses any predictions as
to stock performance.
--------------------------------------------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------------------------------
Certain directors and executive officers of the Bank, their families
and their affiliates are customers of the Bank. Any transactions with such
parties including loans and commitments are made on substantially the same terms
and conditions, including interest rate and collateral, as those of comparable
transactions prevailing at the time with other persons, and do not include more
than the normal risk of collectibility or present other unfavorable features.
--------------------------------------------------------------------------------
INDEPENDENT PUBLIC ACCOUNTANTS INFORMATION
--------------------------------------------------------------------------------
Beard Miller Company LLP was the Corporation's independent public
accountants for the 2000 fiscal year. The Board of Directors has renewed the
Company's arrangement with Beard Miller Company LLP for the year ended December
31, 2001. A representative of Beard Miller Company LLP is expected to be present
at the meeting, will have the opportunity to make a statement if he or she so
desires and is expected to be available to respond to appropriate questions.
--------------------------------------------------------------------------------
2002 ANNUAL MEETING STOCKHOLDER PROPOSALS
--------------------------------------------------------------------------------
In order to be considered for inclusion in the Corporation's proxy
statement for the annual meeting of stockholders to be held in 2002, all
stockholder proposals must be submitted to the Secretary at the Corporation's
office, 717 Main Street, Honesdale, Pennsylvania 18431, on or before November
21, 2001. Under the Articles of Incorporation, in order to be considered for
possible action by stockholders at the 2002 annual meeting of stockholders,
stockholder nominations for director and stockholder proposals not included in
the Corporation's proxy statement must be submitted to the Secretary of the
Corporation, at the address set forth above, no later than February 22, 2002.
--------------------------------------------------------------------------------
OTHER MATTERS
--------------------------------------------------------------------------------
The Board of Directors does not know of any other matters that are
likely to be brought before the Meeting. If any other matters, not now known,
properly come before the Meeting or any adjournments, the persons named in the
enclosed proxy card, or their substitutes, will vote the proxy in accordance
with their judgment on such matters.
The cost of soliciting proxies will be borne by the Corporation. The
Corporation will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers, and regular employees of the Corporation may solicit
proxies personally or by telegraph or telephone without additional compensation.
11
--------------------------------------------------------------------------------
FORM 10-K
--------------------------------------------------------------------------------
A COPY OF THE CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED DECEMBER 31, 2000 WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS
OF THE RECORD DATE UPON WRITTEN REQUEST TO THE SECRETARY, NORWOOD FINANCIAL
CORP., 717 MAIN STREET, HONESDALE, PENNSYLVANIA 18431.
BY ORDER OF THE BOARD OF DIRECTORS
/s/John E. Marshall
---------------------------------------
John E. Marshall
Secretary
Honesdale, Pennsylvania
March 22, 2001
12
Appendix
NORWOOD FINANCIAL CORP.
AUDIT COMMITTEE CHARTER
The Board of Directors shall elect the Audit Committee at the annual
reorganization meeting of the Corporation. In accordance with the By-laws of the
Corporation, the Audit Committee is established as a subcommittee reporting
periodically to the Board of Directors. The Audit Committee shall be composed of
no less than three directors who are independent of management of the
Corporation as outlined by the Securities and Exchange Committee (SEC) and
NASDAQ and are free of any relationship that, in the opinion of the Board, would
interfere with their exercise of judgment as a committee member. At least one
member will have had past employment experience or other comparable experience
or background in the field of financial management.
The Audit Committee shall provide assistance to the Board in fulfilling
their responsibilities to the shareholders. Principally, these responsibilities
entail assessing the effectiveness of the internal control system over financial
reporting, reviewing adherence to policies/procedures and assuring the
safeguarding of all corporate assets. In so doing, it is the responsibility of
the Audit Committee to maintain open lines of communications between the Board
of Directors, external auditors, internal auditors and the senior management of
the Corporation. Both the internal auditors and external auditors are authorized
to communicate directly with the Committee if necessary.
In carrying out these responsibilities, the Audit Committee will:
1. Review and recommend to the Board the external auditors to be
selected to conduct the annual audit of the financial records of the
Corporation. Review audit and consulting fees of the external auditors.
2. Meet with the external auditors and financial management of the
Corporation to review the scope of the annual audit for the current year and at
the conclusion thereof, review such audit findings. This review will include
both the external auditors recommendations and the related management response.
3. Review with the external auditors and corporate management the
adequacy and effectiveness of the internal financial and accounting controls of
the Corporation and elicit any recommendations that they may have for the
improvement of such control procedures. Particular attention should be given to
the adequacy of such controls to expose any payments, transactions or other
procedures which might be deemed illegal or otherwise improper. Further, the
Audit Committee should periodically review Corporate policy statements in terms
of their adequately representing the company's Code of Conduct and Business
Ethics Policy.
4. Review and disclose the required information in the annual proxy
statement as outlined by the SEC.
5. Review and recommend to the Board the appointment of a competent
outsourcing vendor for internal audit services and/or in-house staff.
6. Review and approve the Internal Audit Department's proposed audit
schedule for the coming year and the coordination of such programs with the
external auditors' year-end requirements. Particular attention should be given
to maintaining the best effective balance between external and internal auditing
resources.
A-1
7. Monitor the activities of the Internal Audit Department and ensure
that the Internal Audit Department adequately discharges responsibilities for
the examination, review and reporting to the Audit Committee that:
a) Internal accounting and financial controls of the various areas
are adequate and efficient and can be relied upon to produce
accurate financial information.
b) Internal controls adequately safeguard the assets of the
Corporation.
c) Financial records of the operational areas are complete and
accurate and are in conformity with corporate policy, generally
accepted accounting principles and requirements of the various
regulatory bodies.
d) Operational areas are in compliance with FDIC, FRB and all other
Federal and State laws and regulations.
e) Control over the development, maintenance and operation of EDP
systems are sufficient to ensure the accuracy, security and
completeness of data processing results.
8. Prior to each periodic meeting, the Audit Committee will be provided
a report prepared by Internal Audit, which outlines the findings of all audit
engagements completed during the period.
9. Review all reports on examinations made by the various regulatory
agencies and evaluate management's responses to them.
10. Minutes of the Audit Committee meetings shall be submitted to the
Board of Directors at the next regular Board meeting.
The foregoing list of functions is not intended to limit the Committee
in fulfilling its responsibilities, but rather is intended to provide an
overview of the principal duties to be performed by the Committee.
In performance of its duties, the Committee shall meet at least 4 times
per year and have full use of the Bank's internal audit resources and engage if
necessary, at the Bank's expense, independent counsel to advise the Committee in
discharging its duties.
A-2
APPENDIX I
--------------------------------------------------------------------------------
TO VOTE BY MAIL
-------------------------------- -------------------------------
To vote by mail, complete both sides, sign and date the proxy card below. Detach
the card below and return it in the envelope provided.
TO VOTE BY TELEPHONE
----------------------------- ----------------------------
Your telephone vote is quick, confidential and immediate. Just follow these easy
steps:
1. Read the accompanying Proxy Statement.
2. Using a Touch-Tone telephone, call toll Free 1.800.565.8140 and follow the
instructions.
3. When asked for your Voter Control Number, enter the number printed just
above your name on the front of the proxy card below.
Please note that all votes cast by telephone must be submitted prior to midnight
Central Time, April 22, 2001. Your Telephone vote authorizes the named parties
to vote your shares to the same extent as if you marked, signed, dated and
returned the proxy card.
If You Vote By TELEPHONE, Please Do Not Return York Proxy Card By Mail.
TO VOTE BY INTERNET
------------------------------ -----------------------------
Your Internet vote is quick, confidential and your vote is immediately
submitted. Just follow these easy steps.
1. Read the accompanying Proxy Statement.
2. Visit our Internet voting Site at http://www.eproxyvote.com/ist-nowcm/ and
follow the instructions on the screen
3. When prompted for your Voter Control Number, enter the number printed just
above your name on the front of the proxy card.
Please note that all votes cast by Internet must be submitted prior to midnight
Central Time, April 22, 2001. Your Internet vote authorizes the named parties to
vote your shares to the same extent as if you marked, signed, dated and returned
the proxy card.
This is a "secured" web page site. Your software and/or Internet provider must
be "enabled" to access this site. Please call your software or Internet provider
for further information.
If you Vote By INTERNET, Please Do Not Return Your Proxy Card By Mail.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NORWOOD FINANCIAL CORP.
ANNUAL MEETING OF STOCKHOLDERS
April 24, 2001
--------------------------------------------------------------------------------
The undersigned hereby appoints the official proxy committee of the Board
of Directors of the Norwood Financial Corp. (the "Corporation") with full powers
of substitution to act, as attorneys and proxies for the undersigned, to vote
all shares of common stock of the Corporation that the undersigned is entitled
to vote at the Annual Meeting of Stockholders (the "Meeting"), to be held at the
administrative office of Wayne Bank, 717 Main Street, Honesdale, Pennsylvania
18431, on Tuesday, April 24, 2001, at 11:00 a.m., eastern time and at any and
all adjournments thereof, as follows:
FOR WITHHELD
----- --------
1. The election as director of all nominees
listed below: |_| |_|
Russell L. Ridd
Harold A. Shook
Richard L. Snyder
INSTRUCTIONS: To withhold your vote for any individual nominee, insert the
------------ nominee's name on the line provided below.
------------------------------------
In their discretion, such attorneys and proxies are authorized to vote upon such
other business as may properly come before the Meeting or any adjournments
thereof.
The Board of Directors recommends a vote "FOR" the above listed
proposition.
--------------------------------------------------------------------------------
THIS SIGNED PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS SIGNED PROXY WILL BE VOTED FOR THE PROPOSITION STATED. IF ANY
OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY THOSE
NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Please complete, date, sign and mail the detached
proxy card in the enclosed postage-prepaid envelope.
--------------------------------------------------------------------------------
PROXY VOTING
You can vote in one of three ways: 1) By mail, 2) By Phone, 3) By Internet.
See the reverse side of this sheet for instructions.
IF YOU ARE NOT VOTING BY TELEPHONE OR BY INTERNET, COMPLETE BOTH SIDES
---
OF THIS PROXY AND RETURN IN THE ENCLOSED ENVELOPE TO:
Illinois Stock Transfer Co.
209 West Jackson Boulevard, Suite 903
Chicago, Illinois 60605
--------------------------------------------------------------------------------
Should the undersigned be present and elects to vote at the Meeting, or
at any adjournment thereof, and after notification to the Secretary of the
Corporation at the Meeting of the stockholder's decision to terminate this
proxy, the power of said attorneys and proxies shall be deemed terminated and of
no further force and effect. The undersigned may also revoke this proxy by
filing a subsequently dated proxy or by written notification to the Secretary of
the Corporation of his or her decision to terminate this proxy.
The undersigned acknowledges receipt from the Corporation, prior to the
execution of this proxy, of Notice of the Meeting, a proxy statement dated March
22, 2001 and an Annual Report to Stockholders.
--------------------------------------
NORWOOD
---------------
Financial Corp.
If you plan to personally attend the
Signature: ___________________________ Annual Meeting of Stockholders, please
check the box below and list names of
attendees on reverse side.
Return this stub in the enclosed
envelope with your completed proxy
Signature: ___________________________ card.
I/We do plan to attend [_]
Date: ________________________________ the 2001 meeting.
--------------------------------------
Please sign exactly as your name appears on the enclosed card. When signing as
attorney, executor, administrator, trustee, or guardian, please give your full
title. If shares are held jointly, each holder should sign.