SCHEDULE 14A
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 toss.240.14a-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 24, 2004
Dear Stockholder:
On behalf of the Board of Directors and management of Norwood Financial
Corp. (the "Company"), I invite you to attend the 2004 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 27, 2004, 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, our independent auditors, will be present to respond to
stockholder questions.
You will be asked to elect two directors and to ratify the appointment
of Beard Miller Company LLP as the Company's independent accountants for the
fiscal year ending December 31, 2004. The Board of Directors has unanimously
approved each of these proposals and recommends that you vote FOR them.
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.
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 27, 2004
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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 27, 2004, at 11:00 a.m., local time, for the following purposes:
1. To elect two directors of the Company; and
2. To ratify the appointment of Beard Miller Company LLP as
independent accountants of the Company for the fiscal year
ending December 31, 2004;
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 19,
2004, 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,
2003 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
JOHN E. MARSHALL
SECRETARY
Honesdale, Pennsylvania
March 24, 2004
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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 27, 2004
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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 24, 2004 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 administrative office of Wayne Bank, 717 Main
Street, Honesdale, Pennsylvania on Tuesday, April 27, 2004, at 11:00 a.m., local
time, or at any adjournments or postponements thereof.
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 as directors of the nominees named in Proposal 1; (b) FOR
Proposal 2 (ratification of independent public accountants); and (c) 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 19,
2004 as the record date (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 2,689,377 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 or 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 1, the form
of 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.
As to the ratification of the independent accountants, which is
submitted as Proposal 2, a stockholder may either: (i) vote "FOR" the Proposal
2; (ii) vote "AGAINST" Proposal 2; or (iii) "ABSTAIN" with respect to Proposal
2. Unless otherwise required by law, Proposal 2 and 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 beneficially 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 beneficially own more than 5% of
the Common Stock. Other than as noted below, management knows of no person or
group that beneficially 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 195,071(1) 7.25%
717 Main Street
Honesdale, Pennsylvania 18431
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(1) The information is derived from Amendment No. 4 to a Schedule 13G filed
January 15, 2004, which states that the Wayne Bank Trust Department had
sole voting and dispositive power with respect to 195,071 shares. Excludes
212,484 shares held in two trusts for which the Bank acts as trustee but as
to which it does not have voting power.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers to file reports of
beneficial ownership and changes in beneficial 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 2003 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 1 - 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 provide 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.
2
Russell L. Ridd and Richard L. Snyder have been nominated by the Board
of Directors for a term of three years. Messrs. Ridd and Snyder currently serve
as directors of the Company. Director Harold A. Shook whose term is also
expiring at the Meeting has decided to retire from the Board and not to seek re-
election. Accordingly, the size of the Board will be reduced to eight members
effective as of the Meeting.
The persons named as proxies in the enclosed proxy card intend to vote
for the election of the persons 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. The Board of Directors has determined that each
director other than William W. Davis, Jr. is independent within the meaning of
the rules of The Nasdaq Stock Market. 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
ELECTED OR TERM OWNED AS OF PERCENT
NAME AGE(1) APPOINTED(2) EXPIRES RECORD DATE(3) OF CLASS
---- ------ ------------ ------- -------------- --------
BOARD NOMINEES FOR TERMS TO EXPIRE IN 2007
Russell L. Ridd 74 1980 2004 87,034 (4) 3.1%
Richard L. Snyder 63 2000 2004 3,750 *
DIRECTORS CONTINUING IN OFFICE
Daniel J. O'Neill 66 1985 2005 8,807 *
Dr. Kenneth A. Phillips 53 1988 2005 4,375 *
Gary P. Rickard 62 1978 2005 24,581 *
Charles E. Case 69 1970 2006 75,839 2.7
William W. Davis, Jr. 59 1996 2006 58,903 2.1
John E. Marshall 66 1983 2006 29,160 (4) 1.0
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Lewis J. Critelli 44 na na 38,017 1.4
Edward C. Kasper 56 na na 34,647 1.2
Joseph A. Kneller 57 na na 6,995 *
John H. Sanders 46 na na 14,286 *
All Executive Officers and
Directors as a Group
(12 persons) 386,394 13.9
(footnotes on next page)
3
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* Less than 1% of the Common Stock outstanding.
(1) As of December 31, 2003
(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: Charles E. Case - 750,
William W. Davis, Jr. - 22,493, John E. Marshall - 1,500, Russell L. Ridd -
1,500, Richard L. Snyder - 2,250, Daniel J. O'Neill - 3,000, Dr. Kenneth A.
Phillips - 2,250, Lewis J. Critelli - 28,110, Edward C. Kasper - 17,750,
Joseph A. Kneller - 1,500 and John A. Sanders - 9,000.
(4) Excludes 52,532 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.
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:
Russell L. Ridd is Chairman of the Board. Mr. Ridd retired as the
President and Chief Executive Officer of the Bank in May 1993.
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 DIRECTOR.
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 a retired former owner of 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.
4
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 Senior
Vice President and head of Corporate Banking for 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.
John H. Sanders 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,
2003, the Board of Directors of the Company held 8 regular meetings and the
Board of Directors of the Bank held 13 regular meetings. With the exception of
Richard Snyder who missed three meetings due to illness, 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, 2003.
The Compensation Committee consists of Directors Ridd, Marshall and
Shook. This standing committee met twice during the fiscal year ended December
31, 2003 to review the compensation of the chief executive officer and other
executive officers. The members of the Compensation Committee are independent in
accordance with the listing requirements of The Nasdaq Stock Market.
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 is independent in accordance with the listing
requirements for Nasdaq Stock Market. The Board of Directors has adopted a
written audit charter. The full text of the Charter of the Audit Committee is
attached as Appendix A to this proxy statement. The Audit Committee is a
standing committee and, among other matters, is responsible for developing and
maintaining the Company's audit program. The Audit 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, 2003.
The Board of Directors has determined that Richard L. Snyder, a member
of the Company's Audit Committee, is an "Audit Committee Financial Expert" as
that term is defined in the Securities Exchange Act of 1934. The Board of
Directors has also determined that Mr. Snyder is independent as that term is
used in item 7(d)(3)(iv)(A) of Schedule 14A of the Securities Exchange Act of
1934.
Report of the Audit Committee. For the fiscal year ended December 31,
2003, the Audit Committee: (i) reviewed and discussed the Company's audited
financial statements with management, (ii) discussed with the Company's
independent auditor, Beard Miller Company LLP, all matters required
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to be discussed under Statement on Auditing Standards No. 61, and (iii) received
Beard Miller Company LLP disclosures regarding Beard Miller Company LLP's
independence as required by Independence Standards Board Standard No. 1 and
discussed with Beard Miller Company LLP its independence. Based on the foregoing
review and discussions, 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 fiscal year ended December 31, 2003.
Audit Committee:
Richard L. Snyder - Chairman
Harold Shook
Dr. Kenneth A. Phillips
Charles E. Case
John E. Marshall
Director Nomination Process
The Nominating Committee consists of Directors Ridd, Marshall and
Shook, each of whom is independent within the meaning of the rules of The Nasdaq
Stock Market. The Nominating Committee met one time during the year ended
December 31, 2003. The responsibilities of the members of the Nominating
Committee are set forth in a charter, a copy of which is attached hereto as
Appendix B.
The Company does not currently pay fees to any third party to identify
or evaluate or assist in identifying or evaluating potential nominees. The
Committee's process for identifying and evaluating potential nominees includes
soliciting recommendations from directors and officers of the Company and its
wholly-owned subsidiary, Wayne Bank. Additionally, the Committee will consider
persons recommended by stockholders of the Company in selecting the Committee's
nominees for election. There is no difference in the manner in which the
Committee evaluates persons recommended by directors or officers and persons
recommended by stockholders in selecting Board nominees.
To be considered in the Committee's selection of Board nominees,
recommendations from stockholders must be received by the Company in writing by
at least 120 days prior to the date the proxy statement for the previous year's
annual meeting was first distributed to stockholders. Recommendations should
identify the submitting stockholder, the person recommended for consideration
and the reasons the submitting stockholder believes such person should be
considered. The Committee believes potential directors should be stockholders,
should have the highest personal and professional integrity and should be
knowledgeable about the business activities and market areas in which the
Company and its subsidiaries engage.
Stockholder Communications
The Board of Directors does not have a formal process for stockholders
to send communications to the Board. In view of the infrequency of stockholder
communications to the Board of Directors, the Board does not believe that a
formal process is necessary. Written communications received by the Company from
stockholders are shared with the full Board no later than the next regularly
scheduled Board meeting. In addition, Directors are accessible to stockholders
on an informal basis throughout the year and formally at the Annual Meeting. The
Board encourages, but does not require, directors to attend the annual meeting
of stockholders. All of the Board's members with the exception of Mr. Snyder
attended the 2003 annual meeting of stockholders.
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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 $1,500 per month. In addition, fees are paid for various committee meetings
as follows: Trust Committee ($300); Audit Committee ($300); Compensation
Committee ($300); and Loan Committee ($300). For the fiscal year ended December
31, 2003, fees paid to all directors totaled approximately $173,700, all of
which were paid by the Bank.
Under the terms of the 1999 Directors Stock Compensation Plan, options
to purchase 393 shares of Common Stock were granted to each non-employee
director on December 9, 2003. The options granted to the non-employee directors
are exercisable one year from the date of grant. A total of 26,400 shares of
Common Stock were reserved under the plan, all of which have now been awarded
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,
2003. No other executive officer of the Company had a combined salary and bonus
that exceeded $100,000 for the last fiscal year.
Long-Term
Annual Compensation
Compensation Awards
---------------------- ---------------
Securities
Name and Principal Underlying All Other
Position Year Salary Bonus Options(1) Compensation
-------- ---- ------ ----- ---------- ------------
William W. Davis, Jr. 2003 $202,000 $45,000 4,000 $72,944 (2)
President and Chief 2002 197,500 40,000 3,750 69,204
Executive Officer 2001 190,000 50,000 4,500 72,978
Lewis J. Critelli 2003 133,000 32,500 3,000 29,598 (3)
Executive Vice President 2002 130,000 30,000 3,000 25,605
and Chief Financial Officer 2001 125,000 35,000 3,000 27,816
Edward C. Kasper 2003 104,500 25,000 2,500 34,208 (4)
Senior Vice President 2002 102,000 25,000 2,250 30,896
2001 98,750 25,000 2,250 31,965
Joseph A. Kneller 2003 93,500 10,000 1,500 22,914 (5)
Senior Vice President 2002 91,500 12,000 1,500 19,423
2001 89,000 12,000 2,250 22,686
John H. Sanders 2003 92,000 8,000 1,500 17,366 (6)
Senior Vice President 2002 90,000 5,000 1,500 16,513
2001 88,000 5,000 1,500 16,115
(footnotes continued on next page)
7
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(1) See "-- Stock Awards."
(2) Includes $46,681 related to an accrual under the salary continuation plan;
1,294 shares of Common Stock allocated under the ESOP at an average cost of
$10.93 per share (such shares had an aggregate market value at December 31,
2003 of $33,838); and $12,119 in Bank matching funds for his account in the
401(k) retirement plan.
(3) Includes $10,184 related to an accrual under the salary continuation plan;
1,046 shares of Common Stock allocated under the ESOP at an average cost of
$10.93 per share (such shares had an aggregate market value at December 31,
2003 of $27,353) and $7,981 in Company matching funds for his account in
the 401(k) retirement plan.
(4) Includes $18,199 related to an accrual under the salary continuation plan;
827 shares allocated under the ESOP at an average cost of $10.93 per share
(such shares had an aggregate market value at December 31, 2003 of
$21,626); and $6,969 in Company matching funds for his account in the
401(k) retirement plan.
(5) Includes $10,178 related to an accrual under the salary continuation plan;
approximately 652 shares of Common Stock scheduled to be allocated under
the ESOP at an average cost basis of $10.93 per share (such shares had an
aggregate market value at December 31, 2003 of $17,050); and $5,609 in
Company matching funds for his account in the 401(k) retirement plan.
(6) Includes $4,840 related to an accrual under the salary continuation plan;
approximately 645 shares of Common Stock scheduled to be allocated under
the ESOP at an average cost basis of $10.93 per share (such shares had an
aggregate market value at December 31, 2003 of $16,866); and $5,520 in
Company matching funds for his account in the 401(k) retirement plan.
Other Benefits
Employment Agreements. The Company and the Bank entered into three-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 three times the five year average
of his annual compensation minus $1.00. In the event of a change in control of
the Company or Bank at December 31, 2003, Messrs. Davis and Critelli would
currently be entitled to an aggregate lump-sum payment of approximately $568,000
and $373,000, respectively.
Salary Continuation Plan. The Bank entered into salary continuation
agreements with Messrs. Davis, Critelli, Kasper, Kneller and Sanders (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, $14,000 and $24,000,
respectively, payable for 15 years. These amounts are adjusted for early
retirement. The Executives are not entitled to such benefits in the event they
are terminated for cause. On a change of control of the Company, the Executives
are entitled to full payment in 12 equal monthly installments payable on the
first day of each month commencing with the month following attaining age 62 and
continuing for 179 additional months. As of December 31, 2003, Messrs. Davis,
Critelli, Kasper, Kneller and Sanders had accrued salary continuation plan
benefits of approximately $225,000, $49,000, $88,000, $49,000 and $24,000,
respectively, and such benefits were vested for such Executives.
Severance Agreements. The Bank entered into change-in-control severance
agreements with Messrs. Kasper, Kneller and Sanders. The severance agreements
have terms of three years, renewable annually, and
8
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, Kneller and Sanders. In the event of a change of
control at December 31, 2003, Messrs. Kasper, Kneller and Sanders would have
been entitled to lump sum payments of approximately $209,000, $187,000 and
$184,000, respectively.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consisted of Directors Ridd, Marshall and
Shook at December 31, 2003. Director Ridd is Chairman of the Board of the
Company and the Bank, serves as Chairman of the Compensation Committee, and was
President and Chief Executive Officer of the Bank until May 1993. Members of the
Compensation Committee are non-employee directors of the Company and the Bank.
No member of the Committee is, or was during 2003, 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 2003, a member of a comparable compensation
committee of a company of which any of the directors of the Company is an
executive officer.
2003 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 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, 2003, William W. Davis, Jr.,
President and Chief Executive Officer received an increase in his base salary
from $202,000 to $209,000 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 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 $500 million and the job performance of such individual as
determined by the Committee or the Board of Directors.
Compensation Committee:
Russell L. Ridd - Chairman
John E. Marshall
Harold A. Shook
9
Stock Awards. The following table sets forth information with respect
to previously awarded stock options to purchase the Common Stock granted in
fiscal 2003 to the named executive officers and held by them as of December 31,
2003. The Company has not granted to the named executive officers any stock
appreciation rights.
OPTION GRANTS IN LAST FISCAL YEAR
---------------------------------
Potential Realizable
Value at Assumed
Annual Rate of Stock
Number of Percent of Price Appreciation
Securities Total Options for
Underlying Granted to Exercise or Option Term(1)
Option Employees in Base Price Expiration -----------------------
Name Granted (#) Fiscal Year ($/Sh) Date 5%($) 10%($)
---- ----------- ----------- ------ ---- ----- ------
William W. Davis, Jr. 4,000 22.9% $25.15 12/9/2013 69,782 170,705
Lewis J. Critelli 3,000 17.1% 25.15 12/9/2013 52,337 128,029
Edward C. Kasper 2,500 14.3% 25.15 12/9/2013 43,614 106,691
Joseph A. Kneller 1,500 8.6% 25.15 12/9/2013 26,168 64,015
John H. Sanders 1,500 8.6% 25.15 12/9/2013 26,168 64,015
----------------
(1) The amounts represent certain assumed rates of appreciation only over a
ten-year period. Actual gains, if any, on stock option exercises and Common
Stock holdings are dependent on the future performance of the Common Stock
and overall stock market conditions. There can be no assurance that the
amounts reflected in the table will be achieved.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money Options
Shares Options at Fiscal Year-End at Fiscal Year-End
Acquired on Value (#) ($)
Exercise Realized -------------------------- ------------------------
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- --- --- ------------------------- -------------------------
William W. Davis, Jr. 5,257 93,486 22,493/4,000 227,477 (1) /4,000
Lewis J. Critelli -- -- 29,610/3,000 364,653 (2) /3,000
Edward C. Kasper 7,860 116,609 17,250/2,500 196,733 (3) /2,500
Joseph A. Kneller 6,000 66,232 3,750/1,500 27,945 (4) /1,500
John H. Sanders -- -- 9,000/1,500 85,238 (5) /1,500
-------------
(1) Based upon an exercise price per share of $11.42 for 3,743 options; $16.00
for 6,000 options; $14.83 for 4,500 options; $17.83 for 4,500 options and
$20.00 for 3,750 options. The closing stock price on December 31, 2003 was
$26.15.
(2) Based upon an exercise price per share of $11.08 for 4,860 options; $10.96
for 2,250 options; $11.42 for 6,000 options; $16.00 for 4,500 options;
$14.83 for 3,000 options; $10.88 for 3,000 options; $17.83 for 3,000
options; and $20.00 for 3,000 options. The closing stock price on December
31, 2003 was $26.15.
(3) Based upon an exercise price per share of $11.42 for 4,500 options, $16.00
for 3,750 options, $14.83 for 2,250 options; $10.88 for 2,250 options;
$17.83 for 2,250 options; and $20.00 for 2,250 options. The closing stock
price on December 31, 2003 was $26.15.
(4) Based upon an exercise price of $17.83 for 2,250 options; and $20.00 for
1,500 options. The closing stock price on December 31, 2003 was $26.15.
(5) Based upon an exercise price of $16.00 for 3,750 options, $14.83 for 2,250
options, $17.83 for 1,500 options and $20.00 for 1,500 options. The closing
stock price on December 31, 2003 was $26.15.
10
--------------------------------------------------------------------------------
STOCK 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, 1998 and the
reinvestment of dividends paid. The graph provides comparison at December 31,
1998 and each fiscal year through December 31, 2003.
[LINE GRAPH SHOWING COMPARATIVE FIVE-YEAR TOTAL RETURNS ON AN INVESTMENT OF
$1,000 IN THE COMMON STOCK OF NORWOOD FINANCIAL CORP., THE NASDAQ U.S. INDEX AND
THE NASDAQ BANK INDEX, RESPECTIVELY. PLOT POINTS ARE SHOWN BELOW]
----------------------------- ------------- -------------- -------------- -------------- -------------- --------------
12/31/98($) 12/31/99($) 12/31/00($) 12/31/01($) 12/31/02($) 12/31/03($)
----------------------------- ------------- -------------- -------------- -------------- -------------- --------------
Norwood Financial Corp. 1,000 926 825 1,296 1,525 2,063
----------------------------- ------------- -------------- -------------- -------------- -------------- --------------
CRSP Nasdaq U.S. Index 1,000 1,854 1,118 887 613 917
----------------------------- ------------- -------------- -------------- -------------- -------------- --------------
CRSP Nasdaq Bank Index 1,000 962 1,098 1,189 1,217 1,566
----------------------------- ------------- -------------- -------------- -------------- -------------- --------------
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.
11
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
Beard Miller Company LLP was the Company's independent public
accountants for the 2003 fiscal year. The Board of Directors has appointed Beard
Miller Company LLP to be its accountants for the fiscal year ending December 31,
2004, subject to ratification by the Company's stockholders. The engagement of
Beard Miller Company LLP was approved in advance by the Audit Committee. A
representative of Beard Miller Company LLP is expected to be available at the
Meeting to respond to stockholders' questions and will have the opportunity to
make a statement if the representative so desires.
Audit Fees. The aggregate fees billed by Beard Miller Company LLP for
professional services rendered for the audit of the Company's annual
consolidated financial statements and for the review of the consolidated
financial statements included in the Company's Quarterly Reports on Form 10-Q
for the fiscal years ended December 31, 2003 and 2002 were $68,903 and $58,221,
respectively.
Audit Related Fees. The aggregate fees billed by Beard Miller Company
LLP for assurance and related services related to the performance of the
employee benefit plan audits for the years ended December 31, 2003 and 2002 were
$6,825 and $6,950, respectively.
Tax Fees. The aggregate fees billed by Beard Miller Company LLP for
professional services rendered for preparation of state and federal tax returns,
assistance with calculating estimated tax payments, and assistance with tax
depreciation and other tax matters for the years ended December 31, 2003 and
2002 were $7,850 and $8,386, respectively.
All Other Fees. The aggregate fees billed by Beard Miller Company LLP
for professional services rendered for services or products other than those
listed under the captions "Audit Fees," "Audit-Related Fees," and "Tax Fees" for
the years ended December 31, 2003 and 2002 were $745 and $39,241, respectively,
and consisted of evaluation of a proposed transaction in 2003 and internal audit
outsourcing provided through December 31, 2002 by Financial Outsourcing
Solutions LLP, a subsidiary of Beard Miller Company LLP.
The Audit Committee has not adopted any pre-approval policies and
procedures for audit and non- audit services to be performed by the independent
auditors. Such services are approved in advance by the Audit Committee itself.
No services were approved pursuant to the de minimus exception of the Sarbanes-
Oxley Act of 2002.
Ratification of the appointment of the independent accountants requires
the affirmative vote of a majority of the votes cast by the stockholders of the
company at the meeting. The Board of Directors recommends that stockholders vote
"for" the ratification of the appointment of Beard Miller Company LLP as the
Company's independent accountants for the 2004 fiscal year.
12
--------------------------------------------------------------------------------
2005 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 2005, all
stockholder proposals must be submitted to the Secretary at the Company's
office, 717 Main Street, Honesdale, Pennsylvania 18431, on or before November
25, 2004. Under the Articles of Incorporation, in order to be considered for
possible action by stockholders at the 2005 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 27, 2005.
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
ANNUAL REPORT ON FORM 10-K
--------------------------------------------------------------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 2003 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 24, 2004
13
APPENDIX A
NORWOOD FINANCIAL CORP.
Audit Committee Charter
Revised December 2003
MISSION STATEMENT
The Audit Committee is appointed by the Board of Directors to assist the Board
in fulfilling its oversight responsibilities. The Audit Committee's primary
duties and responsibilities are to:
o Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, risk management
and regulatory compliance.
o Monitor the independence and performance of the Company's independent
auditors.
o Provide an avenue of communication among the independent auditors,
management, and the Board of Directors.
The Audit Committee shall:
o pre-approve all audit services and permissible non-audit services to be
rendered by the independent auditors in accordance with Section 10A(i) of
the Securities Exchange Act of 1934 (the "Act");
o have sole authority to appoint and determine the funding for the
independent auditors in accordance with Section 10A(m)(2) of the Act;
o have the responsibility to establish procedures for complaints as set forth
in Section 10A(m)(4) of the Act; and
o have the authority to engage and determine funding for independent counsel
and other advisors as set forth in Section 10A(m)(5) of the Act.
The Audit Committee may establish written policies and procedures for the
pre-approval of audit and non-audit services to be performed by the independent
auditors provided that these policies and procedures are detailed as to the
particular service and do not result in the delegation of the Audit Committee's
responsibilities to management. The Audit Committee may, in its discretion,
delegate to one or more of its members the authority to pre-approve audit or
non-audit services to be performed by the independent auditors provided that any
such approvals are presented to the full Committee at its next scheduled
meeting.
COMMITTEE COMPOSITION
The membership of the Audit Committee shall be composed of at least three
directors, each of whom (i) is independent as defined under NASD Rule 4200
(a)(15); (ii) meets the criteria for independence set forth in Rule 10A-3(b)(1)
under the Act; (iii) has not participated in the preparation of the financial
statements of the Company or any current subsidiary of the Company during the
past three years; and (iv) is able to read and understand fundamental financial
statements. In addition, at least one member of the Committee shall have
accounting or related financial management expertise.
At least one member of the Audit Committee shall possess the qualifications to
serve as an "audit committee financial expert" as defined under SEC rules
pursuant to the Exchange Act. The designation of a person as an "audit committee
financial expert" does not impose any duties,
A-1
obligations or liability on the person that are greater than those imposed on
such a person as a member of the audit committee in the absence of such
designation.
MEETINGS
The committee will meet at least four times a year, with authority to convene
additional meetings, as circumstances require. The committee will invite members
of management, auditors or others to attend meetings and provide pertinent
information, as necessary. It will meet separately, periodically, with
management, and with independent auditors. It will also meet periodically in
executive session. Meeting agendas will be prepared and provided in advance to
members, along with appropriate briefing materials. Minutes will be prepared.
ROLES AND RESPONSIBILITIES
The committee will carry out the following responsibilities:
Financial Statements
--------------------
1. Review significant accounting and reporting issues, with Management and the
independent auditors, and understand their impact on the financial
statements. These issues include:
o Complex or unusual transactions and highly judgmental areas
o Major issues regarding accounting principles and financial statement
presentations, including any significant changes in the Company's selection
or application of accounting principles
o The effect of regulatory and accounting initiatives, as well as off-balance
sheet structures, on the financial statements of the Company
2. Review with management and the independent auditors the results of the
year-end audit, including any difficulties encountered. This review will
include any restrictions on the scope of the independent auditor's
activities or on access to requested information, and any significant
disagreements with management.
3. Discuss the annual audited financial statements and quarterly financial
statements with management and the independent auditors, including the
Company's disclosures under "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
4. Review disclosures made by CEO and CFO during the Forms 10-K and 10-Q
certification process about significant deficiencies and material
weaknesses in the design or operation of internal control over financial
reporting or any fraud, whether or not material, that involves management
or other employees who have a significant role in the Company's internal
controls.
A-2
Internal Control
----------------
1. Consider the effectiveness of the Company's risk management program and
internal control system, including information technology security and
control.
2. Understand the scope of the independent auditors' review of internal
control over financial reporting, and obtain reports on significant
findings and recommendations, together with management's responses.
Internal Audit
--------------
1. Review with management and internal audit, the committee charter, audit
schedule and approach, recommendation, follow-up matrix, staffing and
organizational structure of the internal audit function.
2. Ensure there are no unjustified restrictions or limitations, and review and
concur in the appointment, replacement or dismissal of the chief audit
executive.
3. Review the effectiveness of the internal audit function, including the
audit risk assessment and compliance with internal audit policy and
procedures manual.
4. On a periodic basis, meet separately with internal audit to discuss any
matters that the committee of internal audit believes should be discussed
privately.
External Audit
--------------
1. Review the external auditors' audit scope and approach, including
coordination of audit effort with internal audit.
2. Review the performance of the external auditors, and exercise final
approval on the appointment or discharge of the auditors. In performing
this review, the committee will:
o At least annually, obtain and review a report by the external auditor
describing the firm's internal quality-control procedures; any
material issues raised by the most recent internal quality-control
review, or peer review, of the firm, or by any inquiry or
investigation by governmental or professional authorities, within the
preceding five years, respecting one or more independent audits
carried out by the firm, and any steps taken to deal with any such
issues; and (to assess the auditor's independence) all relationships
between the independent auditor and the Company.
o Take into account the opinions of management and internal audit.
o Review and evaluate the lead partner of the external auditor.
A-3
3. Present its conclusions with respect to the external auditor to the full
Board.
4. On a regular basis, meet separately with the external auditors to discuss
any matters that the committee or auditors believe should be discussed
privately.
5. Prior to the filing of audited financial statements with the Securities and
Exchange Commission, obtain a report from the independent accountants of:
(1) all critical accounting policies and practices to be used; (2) all
alternative treatments of financial information within GAAP that have been
discussed with management, ramifications or the use of such alternative
disclosures and treatments, and the treatment preferred by the independent
accountant, and; (3) other material written communications between the
independent accountant and management, such as any management letter or
schedule of unadjusted differences.
Compliance
----------
1. Review the effectiveness of the system for monitoring compliance with laws
and regulations and the results of management's investigation and follow-up
(including disciplinary action) of any instances of noncompliance.
2. Establish procedures for: (1) The receipt, retention, and treatment of
complaints received by the listed issuer regarding accounting, internal
accounting controls or auditing matters; and (2) the confidential,
anonymous submission by employees of the Company of concerns regarding
questionable accounting or auditing matters.
3. Review with management and the independent auditor the basis for the
reports issued pursuant to Part 363 of the FDIC regulations.
4. Review the findings of any examinations by regulatory agencies.
5. Obtain regular updates from management and Company legal counsel regarding
compliance matters.
Reporting Responsibilities
--------------------------
1. Report as needed to the Board of Directors about issues that arise with
respect to the quality or integrity of the Company's financial statements,
the Company's compliance with legal or regulatory requirements, and the
performance and independence of the Company's independent auditors.
2. Provide an open avenue of communication between the independent auditors,
and the Board of Directors.
3. Report annually to the shareholders in the proxy statement, describing the
committee's composition, responsibilities and how they were discharged, and
any other information required by rule, including approval of non-audit
services.
A-4
Other Responsibilities
----------------------
1. Discuss with management the Company's major policies with respect to risk
assessment and risk management.
2. Perform other activities related to this charter as requested by the Board
of Directors or as required by law.
3. Institute and oversee special investigations as needed.
4. Review and assess the adequacy of the committee charter annually,
requesting Board approval for proposed changes, and ensure appropriate
disclosure as may be required by law or regulation.
Confirm annually that all responsibilities outlined in this charter have been
carried out.
A-5
APPENDIX B
NORWOOD FINANCIAL CORP.
WAYNE BANK
NOMINATING COMMITTEE CHARTER
Statement of Purpose
--------------------
The Board of Directors of Norwood Financial Corp. (the "Company") is
primarily responsible for the oversight and business plans of the Company. The
election to the Board of Directors is determined by a vote of the stockholders
of the Company. The primary function of the Nominating Committee is to evaluate
candidates and recommend to the Board of Directors for its approval nominees for
election as directors of the Company and its wholly-owned subsidiary, Wayne Bank
(the "Bank").
The Nominating Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities. The Committee has the authority
to retain, at the Company's and/or the Bank's expense, any search firm to be
used to identify director candidates. The Committee shall also have the
authority to retain outside legal counsel and any other advisors as the
Committee may deem appropriate in its discretion.
Structure
---------
Nominating Committee members shall meet the independence requirements
of The Nasdaq Stock Market ("Nasdaq@) as applicable and as may be amended from
time to time. The members of the Committee shall be elected annually by the
Board of Directors. If a Nominating Committee Chair is not designated, the
members of the Committee may designate a Chair by majority vote. The Nominating
Committee shall establish its own rules of procedure, which shall be consistent
with the Articles of Incorporation and Bylaws of the Company and the Bank and
this Charter.
The Nominating Committee shall meet as frequently as needed and not
less than annually. A meeting may be called by the chairperson of the Nominating
Committee or by majority of the members of the Committee. Notice of any meeting
shall be given by the person or persons calling the meeting given to each other
member of the Nominating Committee at least two (2) days prior to the meeting.
Notice may be given in the same fashion as permitted for notice of Board
meetings pursuant to the Company's Bylaws and applicable law. A meeting shall be
deemed properly called if each member of the Nominating Committee shall have
received notice given as aforesaid or, prior to the conclusion of the meeting,
shall have signed a written waiver of notice.
A majority of the members of the Nominating Committee present in person or proxy
or by means of a conference telephone or other communications equipment by means
of which persons participating in the meeting can hear each other shall
constitute a quorum. A majority vote of the Nominating Committee members present
at a meeting, if a quorum is present, shall constitute an act of the Nominating
Committee. Any action required or permitted to be taken at any meeting of the
Nominating Committee may be taken without a meeting if all members of the
Nominating Committee consent thereto in writing, and the writing or writings are
filed with the minutes of the proceedings of the Nominating Committee. Following
each of its meetings, the Nominating Committee shall report its action and
recommendations to the Board.
B-1
Responsibilities
----------------
The authority and responsibilities of the Committee shall include, but
not be limited to, the following:
1. The Committee shall recommend Board of Director nominations in
accordance with the listing standards of the Nasdaq, as may be supplemented or
amended from time to time.
2. The Committee shall develop criteria for the selection of new
directors and, when appropriate, conduct the search for individuals qualified to
become members of the Board. Such criteria is expected to include experience,
education, attendance, business contacts within the community and industry, past
performance and other criteria deemed relevant by the Committee.
3. The Committee may develop criteria for the evaluation of incumbent
Board members.
4. The Committee shall evaluate the performance of current Board
members eligible for re-election, and recommend to the Board whether such
members should stand for re-election. The entire Board of Directors may also
self-evaluate the performance of the Board as a whole.
5. The Committee, in accordance with the Company's Articles of
Incorporation and the Bank's Charter, shall review and evaluate nominees for
election as directors submitted by the shareholders of the Company. The
Committee shall have the authority to accept or reject any shareholder nominees
for election as director in determinating its recommended slate for submission
to the Board.
6. The Committee shall evaluate any nominees for election as director
made in opposition to the slate of candidates nominated by the Board.
7. The Committee shall have the authority to retain or terminate, in
its discretion, any search or consulting firm to be used to identify and/or
research the background and qualifications of director candidates and to approve
the firm's fees and other retention terms. The Committee shall also have
authority to retain outside legal counsel and any other advisors as the
Committee may deem appropriate in its discretion.
8. The Committee shall annually recommend to the Board of the Company
and the Bank the slate of directors for such Boards.
9. The Committee shall annually conduct and present to the Board a
performance evaluation of the Committee.
10. The Committee shall review and assess the adequacy of this Charter
at least annually and, as appropriate, adopt and recommend changes to the Board
for its approval.
11. The Committee shall have the authority to take any actions
necessary to carry out the above provisions of this Charter.
B-2
NORWOOD FINANCIAL CORP.
ANNUAL MEETING OF STOCKHOLDERS, APRIL 27, 2004
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 27, 2004, 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: |_| |_|
Russell L. Ridd
Richard L. Snyder
INSTRUCTIONS: To withhold your vote for any individual nominee, insert the
nominee's name on the line provided below.
--------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
2. To ratify the appointment of
Beard Miller Company LLP as
independent accountants
for the Company for the fiscal year
ending December 31, 2004. |_| |_| [_]
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 propositions.
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
NORWOOD FINANCIAL CORP. [LOGO]
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
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 60606
-------------------------------------------------
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
24, 2004 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 2004 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.