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.
[ ] 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, 2002
Dear Stockholder:
On behalf of the Board of Directors and management of Norwood Financial
Corp. (the "Company"), I invite you to attend the Annual Meeting of Stockholders
of the Company to be held at the administrative office of Wayne Bank, 717 Main
Street, Honesdale, Pennsylvania on Tuesday, April 23, 2002, at 11:00 a.m., local
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 Company. Directors and
officers of the Company, 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. Also, 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 23, 2002
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Norwood Financial Corp. (the "Company"), will be held at the
administrative office of Wayne Bank, 717 Main Street, Honesdale, Pennsylvania on
Tuesday, April 23, 2002, at 11:00 a.m., local time, for the following purposes:
I. To elect three directors of the Company;
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 15,
2002, are the stockholders entitled to vote at the Meeting and any adjournments
thereof.
A copy of the Company's Annual Report for the year ended December 31,
2001 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. ALSO, 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, 2002
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY 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
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ANNUAL MEETING OF STOCKHOLDERS
April 23, 2002
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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 "Company") commencing on or
about March 22, 2002 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 23, 2002, at 11:00 a.m., local
time.
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 Company (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.
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 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 15,
2002 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
1,753,733 shares of the Company 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 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.
Name and Address Amount and Nature of Percent of Shares of
of Beneficial Owner Beneficial Ownership Common Stock Outstanding (%)
------------------- -------------------- ----------------------------
Wayne Bank Trust Department 131,999(1) 7.5
717 Main Street
Honesdale, Pennsylvania 18431
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(1) The information is derived from Amendment No. 2 to a Form 13G dated
January 12, 2001, which states that the Wayne Bank Trust Department had
sole voting and dispositive power with respect to 131,999 shares.
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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 Company's directors and executive officers to file reports of
ownership and changes in ownership of their equity securities of the Company
with the Securities and Exchange Commission and to furnish the Company with
copies of such reports. To the best of the Company's knowledge, all of the
filings by the Company's directors and executive officers were made on a timely
basis during the 2001 fiscal year. The Company is not aware of any beneficial
owners of more than ten percent of its Common Stock.
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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 Company'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
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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.
Daniel J. O'Neill, Dr. Kenneth A. Phillips and Gary P. Rickard have
been nominated by the Board of Directors for a term of three years. Messrs.
O'Neill, Phillips and Rickard currently serve as directors of the Company.
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 Company
at the Meeting and each other director of the Company who will continue to serve
as director after the Meeting. Beneficial ownership of named executive officers
and directors of the Company 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 15, 2002(3) (%)
---- ------ ------------ ------- ----------------- --------
BOARD NOMINEES FOR TERMS TO EXPIRE IN 2005
Daniel J. O'Neill 64 1985 2002 4,257 *
Dr. Kenneth A. Phillips 51 1988 2002 1,832 *
Gary P. Rickard 60 1978 2002 12,310 *
DIRECTORS CONTINUING IN OFFICE
Charles E. Case 67 1970 2003 46,960 2.7
William W. Davis, Jr. 57 1996 2003 33,353 1.9
John E. Marshall 64 1983 2003 18,440(4) 1.1
Russell L. Ridd 72 1980 2004 54,183(4) 3.1
Harold A. Shook 63 1988 2004 5,349(4) *
Richard L. Snyder 61 2000 2004 1,500 *
NAMED EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Lewis J. Critelli 42 19,938 1.1
Edward C. Kasper 54 18,566 1.1
Joseph A. Kneller 55 7,785 *
All Executive Officers
and Directors as a Group
(13 persons) 224,473 12.3
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(footnotes on next page)
3
(1) As of December 31, 2001
(2) Refers to the year the individual first became a director of the Company 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: Daniel J. O'Neill -
1,000, Dr. Kenneth A. Phillips - 500, Charles E. Case - 1,000, William W.
Davis, Jr. - 22,000, John E. Marshall - 1,000, Russsell L. Ridd - 1,000,
Harold A. Shook - 1,000, Richard L. Snyder - 500, Lewis J. Critelli -
16,740, Edward C. Kasper - 13,740 and Joseph A. Kneller - 5,000.
(4) Excludes 58,090 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.
* 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 Company is set forth below.
Unless otherwise stated, all directors, nominees, and executive officers have
held their present positions for five years.
Nominees for Director:
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.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
ABOVE NOMINEES FOR DIRECTORS.
Continuing Directors:
Charles E. Case is Vice President at CR Case and Sons, Inc., Honesdale,
Pennsylvania, an automotive/tire services store.
William W. Davis, Jr. is President and Chief Executive Officer of the
Company and the Bank.
John E. Marshall is president of Marshall Machinery Inc., Honesdale,
Pennsylvania, a farm equipment and sales company.
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.
4
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.
Named Executive Officers Who Are Not Directors:
Lewis J. Critelli is Executive Vice President and Chief Financial
Officer of the Company and the Bank. Prior to December 1998, Mr. Critelli has
served in a variety of capacities with the Company and the Bank.
Edward C. Kasper is Senior Vice President of the Company and the Bank.
Joseph A. Kneller is Senior Vice President of the Company and Senior
Vice President - Information Systems of the Bank. Prior to December 1998, Mr.
Kneller served as Vice President of the Bank.
Certain Other Executive Officer:
John H. Sanders, 44, is Senior Vice President of the Company and Senior
Vice President and head of Retail Banking for the Bank.
Meetings and Committees of the Board of Directors
The Board of Directors of the Company conducts its business through
meetings of the Board and through activities of its committees. All committees
act for both the Company and the Bank. During the fiscal year ended December 31,
2001, the Board of Directors of the Company 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 Company and the Bank and committees
on which such director served during the fiscal year ended December 31, 2001.
The Company'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 Company and received by the
Company not less than 60 days prior to the anniversary date of the immediately
preceding annual meeting of stockholders of the Company. Notice to the Company
of such nominations must include certain information required pursuant to the
Company's Articles of Incorporation. This standing committee met twice during
the 2001 fiscal year.
The Compensation Committee consists of Directors Ridd, Marshall and
Shook. This standing committee met twice during the fiscal year ended December
31, 2001 to review the compensation of the chief executive officer and other
executive officers.
The Audit Committee is comprised of directors Snyder, Shook, Phillips,
Case and Marshall. 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 Board of Directors has
adopted a written audit charter. The Audit Committee is a standing committee
and, among other matters, is responsible for developing and maintaining the
Company's audit program. The Audit
5
Committee also meets with the Company's independent auditors to discuss the
results of the annual audit and any related matters.
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 Company. The Audit Committee met four times during the
fiscal year ended December 31, 2001.
Audit Committee Report
Review of Audited Financial Statements with Management.
The Audit Committee reviewed and discussed the audited financial
statement for the year ended December 31, 2001 with the management of the
Company.
Review of Financial Statements and Other Matters with Independent
Accountant.
The Audit Committee discussed with Beard Miller Company LLP ("Beard
Miller"), the Company's independent accountants, the matters required to be
discussed by the statement on Auditing Standards No. 61 (Communications with
Audit Committees), as may be modified or supplemented. The Audit Committee has
received the written disclosures and the letter from Beard Miller required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), as may be modified or supplemented, and has discussed with Beard
Miller its 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 Company's Annual Report on Form 10-K for the year
ended December 31, 2001, 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
Audit Fees
The aggregate fees billed by Beard Miller for professional services
rendered for the audit of the Company's consolidated annual financial statements
for the 2001 fiscal year and the reviews of the financial statements included in
the Company's Forms 10-Q were $47,800.
Financial Information Systems Design and Implementation Fees
For the 2001 fiscal year, Beard Miller did not render to the Company
and its consolidated subsidiary professional services for financial information
systems design and implementation.
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All Other Fees
The aggregate fees billed by Beard Miller to the Company and its
consolidated subsidiary for all other services other than those covered under
"Audit Fees" for the 2001 fiscal year were $35,325. These services consisted
primarily of tax services and internal audit services.
The Audit Committee considered whether the provision of the non-audit
services listed under "All Other Fees" above were compatible with maintaining
Beard Miller's independence.
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DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
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Director Compensation
The Company does not presently compensate its directors. Each director
of the Company is also a director of the Bank and receives fees accordingly. Mr.
William W. Davis, Jr., President and Chief Executive Officer of the Company 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 $1,375 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, 2001, fees paid to all
directors totaled approximately $160,500, 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 11, 2001. 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. At December 31, 2001, aggregate
options granted were 11,500, of which 7,000 were fully vested.
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 Company for each of the three years ended December 31,
2001. No other executive officer of the Company had a combined salary and bonus
that exceeded $100,000.
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Long Term
Annual Compensation
Compensation(1) Awards
-------------------- ---------------------
Name and Principal Securities Underlying All Other
Position Year Salary Bonus Options(#)(1) Compensation
-------- ---- ------ ----- ------------- ------------
William W. Davis, Jr. 2001 $190,000 $50,000 3,000 $ 72,978 (2)
President and Chief 2000 181,039 45,000 3,000 71,278
Executive Officer 1999 175,783 35,000 3,000 40,747
Lewis J. Critelli 2001 125,000 35,000 2,000 $ 27,816 (3)
Executive Vice President 2000 121,154 30,000 2,000 28,588
and Chief Financial Officer 1999 113,862 28,500 2,000 21,380
Edward C. Kasper 2001 98,750 25,000 1,500 $ 31,965 (4)
Senior Vice President 2000 95,913 15,000 1,500 31,812
1999 95,465 12,000 1,500 20,342
Joseph A. Kneller 2001 89,000 12,000 1,500 $ 22,686 (5)
Senior Vice President 2000 87,134 12,000 1,500 22,574
1999 85,269 12,000 1,500 14,860
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(1) See "-- Stock Awards."
(2) Includes $45,926 related to an accrual under the salary continuation
plan; 955 shares of Common Stock allocated under the ESOP at an average
cost of $16.39 per share (such shares had an aggregate market value at
December 31, 2001 of $24,935); and $11,400 in Bank matching funds in
the 401(k) retirement plan.
(3) Includes $10,019 related to an accrual under the salary continuation
plan; 628 shares of Common Stock allocated under the ESOP at an average
cost of $16.39 per share (such shares had an aggregate market value at
December 31, 2001 of $16,397 and $7,500 in Company matching funds in
the 401(k) retirement plan.
(4) Includes $17,905 related to an accrual under the salary continuation
plan; 496 shares of Common Stock allocated under the ESOP at an average
cost of $16.39 per share (such shares had an aggregate market value at
December 31, 2001 of $12,950); and $5,925 in Company matching funds in
the 401(k) retirement plan.
(5) Includes $10,014 related to an accrual under the salary continuation
plan; approximately 447 shares of Common Stock scheduled to be
allocated under the ESOP at an average cost basis of $16.39 per share
(such shares had an aggregate market value at December 31, 2001 of
$11,671); and $5,340 in Company matching funds in the 401(k) retirement
plan.
Other Benefits
Employment Agreements. The Company 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 Company or the
Bank for "just cause" as defined in the Agreement. If the Company 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
Company 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 Company
or Bank at December 31, 2001, Messrs. Davis and Critelli would currently be
entitled to an aggregate lump-sum payment of approximately $501,000 and
$329,000, respectively.
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Salary Continuation Plan. The Bank entered into salary continuation
agreements with Messrs. Davis, Critelli, Kasper and Kneller (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, $29,000 and $14,000, 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 Company.
The Executives are not entitled to such benefits in the event they voluntarily
leave the Company or are terminated for cause. For the year ended December 31,
2001, Messrs. Davis, Critelli, Kasper and Kneller had accrued salary
continuation plan benefits of approximately $111,000, $24,000, $43,000 and
$27,000, respectively, and such benefits were vested for such Executives.
Severance Agreement. The Bank entered into change-in-control severance
agreements with Messrs. Kasper and Kneller. The severance agreements have terms
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 Messrs. Kasper and
Kneller. In the event of a change of control at December 31, 2001, Messrs.
Kasper and Kneller would have been entitled to a lump sum payment of
approximately $198,000 and $178,000, respectively.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consisted of Directors Ridd, Marshall and
Shook at December 31, 2001. No member of the Committee is, or was during 2001,
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 2001, a member
of a comparable compensation committee of a company of which any of the
directors of the Company is an executive officer.
2001 Report of the Compensation Committee
The Compensation Committee of the Company 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 Company. The Committee has access to various surveys of executive
compensation 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 Company to retain key executives.
The Committee determines executive base salaries by level of
responsibility, individual contribution to the Company and the Company
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 Company'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, 2001, William W. Davis, Jr.,
President and Chief Executive Officer received an increase in his base salary
from $180,000 to $190,000 due to his continued leadership in the management of
the Company and the Bank. Additionally, Mr. Davis was awarded stock options
under the Stock Option Plan. In making its compensation determinations, the
Committee considers the
9
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 $500
million and the job performance of such individual as determined by the
Committee or the Board of Directors.
The Compensation Committee:
John E. Marshall
Russell L. Ridd - Chairman
Harold A. Shook
Stock Awards. The following table sets forth information with respect
to previously awarded stock options to purchase the Common Stock granted in
fiscal 2001 to the named executive officers and held by them as of December 31,
2001. The Company has not granted to the named executive officers any stock
appreciation rights.
OPTION GRANTS IN LAST FISCAL YEAR
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Potential Realizable
Value at Assumed
Number of Percent of Annual Rate of Stock
Securities Total Options Price Appreciation for
Underlying Granted to Exercise or Option Term(1)
Option Employees in Base Price -----------------------
Name Granted (#) Fiscal Year ($/Sh) Expiration Date 5%($) 10%($)
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William W. Davis, Jr. 3,000 26.1% 26.75 12/11/11 47,341 122,918
Lewis J. Critelli 2,000 17.4% 26.75 12/11/11 31,561 81,945
Edward C. Kasper 1,500 13.0% 26.75 12/11/11 23,671 61,459
Joseph A. Kneller 1,500 13.0% 26.75 12/11/11 23,671 61,459
-------------
(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 $26.75 and the
closing price of $26.11 at December 31, 2001.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION VALUES
-------------------------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Shares Underlying Unexercised in-the-Money Options
Acquired on Value Options at Fiscal Year-End at Fiscal Year-End
Exercise Realized (#) ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
-------------------------------------------------------------------------------------------------------------------------------
William W. Davis, Jr. -- -- 22,000 / 3,000 161,348 /--(1)
Lewis J. Critelli -- -- 16,740 / 2,000 124,495 /--(2)
Edward C. Kasper -- -- 13,740 / 1,500 102,789 /--(3)
Joseph A. Kneller -- -- 6,500 / 1,500 34,749 /--(4)
-----------------
(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; $16.3125 for 3,000 options; and $26.75 for 3,000 options. The
closing stock price on December 31, 2001 was $26.11.
(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;
$16.3125 for 2,000 options; and $26.75 for 2,000 options. The closing price
on December 31, 2001 was $26.11.
(footnotes continue on next page)
10
(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; $16.3125 for
1,500 options; and $26.75 for 1,500 options. The closing stock price on
December 31, 2001 was $26.11.
(4) Based upon an exercise price of $17.125 for 1,000 options; $24.00 for 2,500
options; $22.25 for 1,500 options; $16.3125 for 1,500 options; and $26.75
for 1,500 options. The closing stock price on December 31, 2001 was $26.11.
--------------------------------------------------------------------------------
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 $1,000 at the market close on December 31, 1996 and the
reinvestment of dividends paid. The graph provides comparison at December 31,
1996 and each fiscal year through December 31, 2001.
[GRAPHIC OMITTED]
12/31/96($) 12/31/97($) 12/31/98($) 12/31/99($) 12/31/00($) 12/31/01($)
--------------------------------------------------------------------------------------------------------------------------
Norwood Financial Corp. 1,000 1,319 1,441 1,335 1,189 1,866
--------------------------------------------------------------------------------------------------------------------------
CRSP Nasdaq U.S. Index 1,000 1,220 1,730 3,210 1,930 1,530
--------------------------------------------------------------------------------------------------------------------------
CRSP Nasdaq Bank Index 1,000 1,670 1,660 1,600 1,820 1,970
--------------------------------------------------------------------------------------------------------------------------
11
There can be no assurance that the Company's future stock performance
will be the same or similar to the historical performance shown in the above
graph. The Company 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 was the Company's independent public accountants for the
2001 fiscal year. The Board of Directors has renewed the Company's arrangement
with Beard Miller for the year ended December 31, 2002. A representative of
Beard Miller 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.
--------------------------------------------------------------------------------
2003 ANNUAL MEETING STOCKHOLDER PROPOSALS
--------------------------------------------------------------------------------
In order to be considered for inclusion in the Company's proxy
statement for the annual meeting of stockholders to be held in 2003, all
stockholder proposals must be submitted to the Secretary at the Company's
office, 717 Main Street, Honesdale, Pennsylvania 18431, on or before November
14, 2002. Under the Articles of Incorporation, in order to be considered for
possible action by stockholders at the 2003 annual meeting of stockholders,
stockholder nominations for director and stockholder proposals not included in
the Company's proxy statement must be submitted to the Secretary of the Company,
at the address set forth above, no later than February 20, 2003.
--------------------------------------------------------------------------------
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 Company. The
Company 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 Company may solicit proxies
personally or by telegraph or telephone without additional compensation.
12
--------------------------------------------------------------------------------
FORM 10-K
--------------------------------------------------------------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 2001 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, 2002
13
APPENDIX
NORWOOD FINANCIAL CORP.
ANNUAL MEETING OF STOCKHOLDERS
April 23, 2002
--------------------------------------------------------------------------------
The undersigned hereby appoints the official proxy committee of the
Board of Directors of the Norwood Financial Corp. (the "Company") with full
powers of substitution to act, as attorneys and proxies for the undersigned, to
vote all shares of common stock of the Company 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 23, 2002, at 11:00 a.m., local time and at any and all
adjournments thereof, as follows:
FOR WITHHELD
1. The election as director of all nominees
listed below: |_| |_|
Daniel J. O'Neill
Dr. Kenneth A. Phillips
Gary P. Rickard
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.
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
Company 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
Company of his or her decision to terminate this proxy.
The undersigned acknowledges receipt from the Company, prior to the
execution of this proxy, of Notice of the Meeting, a proxy statement dated March
22, 2002 and an Annual Report to Stockholders.
--------------------------------------
NORWOOD
---------------
Financial Corp.
Signature: If you plan to personally attend the
------------------------- Annual Meeting of Stockholders, please
check the box below and list names of
attendees on reverse side.
Signature:
------------------------- Return this stub in the enclosed
envelope with your completed proxy
card.
Date:
------------------------ I/We do plan to attend [_]
the 2002 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.