-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V8AIdT1RxPlZ5ufuoMpqQhY+yhDpwmwClE0r8ZGUV3Ze/GYMOQwI+J/p4duupmiu WXvqnfzpZxlM+7XHLQH//Q== 0000950159-00-000101.txt : 20000324 0000950159-00-000101.hdr.sgml : 20000324 ACCESSION NUMBER: 0000950159-00-000101 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000425 FILED AS OF DATE: 20000323 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DNB FINANCIAL CORP /PA/ CENTRAL INDEX KEY: 0000713671 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 232222567 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-16667 FILM NUMBER: 576714 BUSINESS ADDRESS: STREET 1: 4 BRANDYWINE AVE CITY: DOWNINGTOWN STATE: PA ZIP: 19335 BUSINESS PHONE: 6102691040 MAIL ADDRESS: STREET 1: 4 BRANDYWINE AVENUE CITY: DOWNINGTOWN STATE: PA ZIP: 19335 DEF 14A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14A Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant [x] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material under ss. 240.14a-12 DNB FINANCIAL CORPORATION (Name of Registrant as Specified In Its Charter) N/A (Name of Person(s) Filing Proxy Statement if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: N/A (2) Aggregate number of securities to which transaction applies: N/A (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): N/A (4) Proposed maximum aggregate value of transaction: N/A (5) Total fee paid: N/A [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: 2) Form, Schedule or Registration Statement No.: 3) Filing Party: 4) Date Filed: DNB FINANCIAL CORPORATION 4 Brandywine Avenue Downingtown, Pennsylvania 19335-0904 610-269-1040 ------------------------------------- NOTICE OF ANNUAL MEETING To Be Held on April 25, 2000 ------------------------------------- TO THE STOCKHOLDERS OF DNB FINANCIAL CORPORATION: NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of DNB FINANCIAL CORPORATION (the "Corporation") will be held at 10:00 a.m., prevailing time on Tuesday, April 25, 2000 at the Central Presbyterian Church, 100 W. Uwchlan Avenue, Downingtown, Pennsylvania 19335 (Route 113, approximately one half mile south of the Route 30 bypass) for the following purposes: (1) To elect three directors to serve for three years or until their successors have been elected and qualified; and (2) To ratify the appointment of KPMG LLP as the independent auditors for the fiscal year ending December 31, 2000; and (3) To transact such other business as may properly come before the Annual Meeting and any adjournment thereof. Except with respect to procedural matters incident to the conduct of the meeting, the Board of Directors is not aware of any other business which may come before the meeting. Stockholders of record at the close of business on February 29, 2000 are entitled to notice of and to vote at the Annual Meeting. /s/ Ronald K. Dankanich BY ORDER OF THE BOARD OF DIRECTORS Ronald K. Dankanich, Secretary Downingtown, Pennsylvania March 24, 2000 YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THIS MEETING, YOU MAY VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF. DNB FINANCIAL CORPORATION 4 Brandywine Avenue Downingtown, Pennsylvania 19335-0904 ------------------------------------- PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 25, 2000 ------------------------------------- Solicitation and Voting of Proxies This Proxy Statement is being furnished to stockholders of DNB Financial Corporation (the "Corporation") in connection with the solicitation by the Board of Directors of proxies to be used at the Annual Meeting of Stockholders (the "Annual Meeting") to be held at the Central Presbyterian Church, 100 W. Uwchlan Avenue, Downingtown, Pennsylvania 19335, on Tuesday, April 25, 2000 at 10:00 a.m., and at any adjournments thereof. The 1999 Annual Report to Stockholders, including financial statements for the fiscal year ended December 31, 1999, accompanies this Proxy Statement, which is first being mailed to stockholders on or about March 24, 2000. Regardless of the number of shares of Common Stock owned, it is important that stockholders be represented by proxy or present in person at the Annual Meeting. Stockholders are requested to vote by completing the enclosed Proxy and returning it signed and dated in the enclosed postage-paid envelope. Stockholders are urged to indicate their vote in the spaces provided on the Proxy. Proxies solicited by the Board of Directors of DNB Financial Corporation will be voted in accordance with the directions given therein. Where no instructions are indicated, proxies will be voted FOR the election of the nominees for directors named in the Proxy Statement, and FOR the ratification of KPMG LLP as independent auditors for the fiscal year ending December 31, 2000. The Board of Directors knows of no additional matters that will be presented for consideration at the Annual Meeting. Execution of a proxy, however, confers on the designated proxy holders discretionary authority to vote the shares in accordance with their best judgment on such other business, if any, that may properly come before the Annual Meeting or any adjournments thereof. Abstentions and broker non-votes are counted as present and represented for quorum purposes, but will not be included in the total number of votes cast for purposes of determining whether matters to be voted upon at the meeting have been approved. Abstentions will have the effect of a negative vote. A proxy may be revoked at any time prior to its exercise by the filing of a written notice of revocation with the Secretary of the Corporation, by delivering to the Corporation a duly executed proxy bearing a later date, or by attending the Annual Meeting, filing a notice of revocation with the Secretary and voting in person. However, if you are a stockholder whose shares are not registered in your own name, you will need additional documentation from your recordholder to vote personally at the Annual Meeting. The expenses of the solicitation of proxies will be borne by the Corporation. Certain officers, directors and employees of the Corporation and Downingtown National Bank (the "Bank") may solicit proxies personally, by mail, telephone or otherwise. Such persons will not receive any fees or other compensation for such solicitation. The Corporation will reimburse brokers, custodians, nominees and fiduciaries for all reasonable expenses which they have incurred in sending proxy materials to the beneficial owners of the Corporation's common stock held by them. Voting Securities and Beneficial Ownership Thereof The securities which may be voted at the Annual Meeting consist of shares of common stock of DNB Financial Corporation, par value $1.00 per share (the "Common Stock"), with each share entitling its owner to one vote on all matters to be voted on at the Annual Meeting. The close of business on February 29, 2000 has been established by the Board of Directors as the record date (the "Record Date") for the determination of stockholders entitled to notice of and to vote at this Annual Meeting and any adjournments thereof. The total number of shares of Common Stock outstanding on the Record Date was 1,611,339 shares. Security Ownership of Certain Beneficial Owners and Management The following table sets forth information as of February 29, 2000, with respect to the beneficial ownership of each director, each nominee for election as director, each beneficial owner known by the Corporation of more than five percent (5%) of the outstanding common stock of the Corporation, certain named executive officers and all directors and executive officers as a group.
Amount and Nature of Beneficial Ownership ---------------------------------------------------------------- Sole Shared Total Voting and Voting and Percent Name of Beneficial Investment Investment of Beneficial Owner Ownership (1,2) Power (2) Power Class (3) - ---------------- --------------- --------- ------ --------- Richard L. Bergey.......................... 16,072 16,072 -- 0.91% Robert J. Charles.......................... 28,830 16,191 12,639 1.64 Ronald K. Dankanich........................ 15,285 15,285 -- 0.87 Thomas R. Greenleaf........................ 14,560 5,742 8,818 0.83 Vernon J. Jameson.......................... 24,829 15,453 9,376 1.41 William S. Latoff.......................... 16,696 16,696 -- 0.95 Bruce E. Moroney........................... 17,929 12,569 5,360 1.02 Joseph G. Riper............................ 2,667 2,667 -- 0.15 Louis N. Teti............................. 8,150 7,372 778 0.46 Henry F. Thorne............................ 26,913 26,913 -- 1.53 James H. Thornton......................... 6,631 6,631 -- 0.38 Downingtown National Bank Investment Services & Trust Division................................... 80,967 41,396 39,571 5.03 Directors & Executive Officers as group (14 Persons).................. 218,374 176,501 41,873 12.42 - ------------ (1) Based upon information furnished by the respective individual and/or filings made pursuant to the Exchange Act. Under applicable regulations, shares are deemed to be beneficially owned by a person if he or she directly or indirectly has or shares the power to vote or dispose of the shares, whether or not he or she has any economic interest in the shares. Unless otherwise indicated, the named beneficial owner has sole voting and dispositive power with respect to the shares. (2) Includes shares which may be acquired by exercise of vested options granted under the 1995 Stock Option Plan of DNB Financial Corporation amounting to 6,379 shares each for Messrs. Charles, Jameson and Teti, 2,553 shares for Messrs. Latoff and Riper, 5,103 shares for Mr. Greenleaf, 6,049 shares for Mr. Thornton, 21,702 shares for Mr. Thorne, 16,072 shares for Mr. Bergey, 14,376 shares for Mr. Dankanich, 12,005 shares for Mr. Moroney and 134,440 total shares for all Directors and Executive Officers as a group. The number of shares have been adjusted to reflect the 5% stock dividend paid in December, 1999. (3) Shares of the Corporation's Common Stock issuable pursuant to options are deemed outstanding for purposes of computing the percentage of the person or group holding such options, but are not deemed outstanding for purposes of computing the percentage of any other person.
2 PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING PROPOSAL 1 ELECTION OF DIRECTORS In accordance with its By-laws, the number of directors of the Corporation is currently set at eight (8). Each of the members of the Board of Directors of the Corporation also serves as a Director of the Bank. Directors are elected for staggered terms of three years each, with a term of office of only one class of directors expiring in each year. Directors serve until their successors are elected and qualified. No person being nominated as a director is being proposed for election pursuant to any agreement or understanding between any person and DNB Financial Corporation. The By-laws further provide that vacancies on the Board of Directors, including vacancies resulting from an increase in the number of directors, shall be filled by a majority of the remaining members of the Board of Directors, though less than a quorum, and each person so appointed shall be a director until the expiration of the term of office of the class of directors to which he was appointed. The nominees proposed for election to Class "B" of the Board of Directors at the Annual Meeting are Messrs. Robert J. Charles, Vernon J. Jameson and Henry F. Thorne who have consented to being named as nominees and agreed to serve if elected. If any person named as nominee should become unable to serve, proxies will be voted in favor of a substitute nominee as the Board of Directors of the Corporation shall determine. The Board of Directors has no reason to believe that any of the directors listed above will be unable to serve as director. In addition, there is no cumulative voting for the election of the directors. Each share of Common Stock is entitled to cast only one vote for each nominee. For example, if a shareholder owns ten shares of Common Stock, he or she may cast up to ten votes for each of the three directors in the class to be elected, during those years when three directors have been nominated. A majority vote of shares represented by proxy or in person is required for the election of directors. Unless authority to vote for the director is withheld, it is intended that the shares represented by the enclosed Proxy will be voted FOR the election of the three nominees. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES NAMED IN THIS PROXY STATEMENT. 3 Set forth below is certain information as of February 29, 2000 concerning the nominees for election as directors and each other member of the Corporation's Board of Directors
NOMINEES FOR THE THREE-YEAR TERM EXPIRING IN 2003 Principal Occupation During The Name Age Past Five Years & Service Data (1) ---- --- ---------------------------------- Robert J. Charles 71 Director and Chairman of the Board; Former President of Charles News Agency, Inc. Director Since 1976 Term Expires 2003 Vernon J. Jameson 70 Director; President of V. J. Jameson & Son, Inc. Director Since 1973 Term Expires 2003 Henry F. Thorne 56 Director; President and Chief Executive Officer of the Corporation and the Bank Director Since 1992 Term Expires 2003 OTHER DIRECTORS Thomas R. Greenleaf 72 Director; Former President of Chemical Leaman Tank Lines Director Since 1979 Term Expires 2002 William S. Latoff 51 Director; Principal, Bliss & Company, Ltd. Certified Public Accountants Director Since 1998 Term Expires 2001 Joseph G. Riper 51 Director; Attorney with the law firm of Riley, Riper, Hollin & Colagreco Director Since 1997 Term Expires 2001 Louis N. Teti 49 Director; Attorney with the law firm of MacElree Harvey Director Since 1995 Term Expires 2002 James H. Thornton 54 Director; Former President and Chief Executive Officer of Brandywine Hospital Director Since 1995 Term Expires 2002 - ------------ (1) Includes service as a director of Downingtown National Bank prior to the formation of the Corporation in 1982. All individuals listed are directors of both the Bank and the Corporation.
4 General Information About the Board of Directors During 1999, the Bank's Board of Directors held 13 meetings, excluding committee meetings which are described below. Directors, with the exception of Mr. Thorne, who receives no director or committee fees, receive a quarterly retainer of $3,045, provided 75% of the meetings are attended. Mr. Charles, the Corporation's and Bank's Chairman, receives a quarterly retainer of $7,000 provided 75% of the meetings are attended. Outside Directors also receive $225 for each committee meeting attended. All fees are paid by the Bank. During 1999, the Corporation's Board of Directors held 7 meetings. Directors receive no fees for these meetings of the Corporation, since they are usually held on the same day as a Bank Board Meeting. Each of the directors of the Corporation is also a director of the Bank. During their period of service during 1999, each attended at least 75% of the combined total number of meetings of the Corporation's Board of Directors and the committees of which he is a member. Each also attended at least 75% of the combined total number of meetings of the Bank's Board of Directors and committees of which he is a member. Each committee described below, unless otherwise noted, is a committee of the Bank and the Corporation. Neither the Bank nor the Corporation has a standing Nominating Committee. The Executive Committee consists of Messrs. Charles, Greenleaf, Jameson and Thorne. This Committee has the authority to exercise the powers of the Board of Directors between regular Board meetings. The Committee did not meet during 1999. The Benefits & Compensation Committee consists of Messrs. Charles, Greenleaf and Thorne. This Committee oversees the Human Resource policies of the Bank which includes approving recommendations for salary increases. The Committee met 2 times during 1999. The Board Loan Committee consists of Messrs. Charles, Latoff, Riper, Thorne and Thornton. This Committee reviews and takes action on proposed and existing loans in excess of Officers' Credit Committee authority. The Committee met 22 times during 1999. The Audit/Compliance Committee consists of Messrs. Riper, Teti and Thornton. This Committee reviews the records and affairs of the Bank and the Trust and Investment Services Division to determine their financial condition; reviews with management, the internal auditor and the independent auditors the systems of internal control; and monitors the adherence in accounting and financial reporting to generally accepted accounting principles and compliance with banking laws and regulations. The Committee met 4 times during 1999. The Trust Committee consists of Messrs. Dankanich, Greenleaf, Jameson, Latoff, Stauffer, Teti and Thorne. This Committee reviews and recommends the Trust and Investment Services Division policies and procedures, approves estate administration and ensures compliance to applicable Federal regulations. The Committee met 12 times during 1999. Section 16(a) of the Securities Exchange Act of 1934 requires the Corporation's executive officers and directors to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission. Executive officers and directors are required by SEC regulations to furnish the Corporation with copies of all Section 16 (a) forms they file. Executive Officers Who Are Not Directors The following sets forth information with respect to executive officers of the Corporation and the Bank who do not serve on the Board of Directors. There are no arrangements or understanding between the Corporation or the Bank and any person pursuant to which any such officers were selected. Richard L. Bergey (Age 59), joined the Bank in September 1992 and currently serves as Senior Vice President--Credit Services Division of the Bank. Mr. Bergey is directly responsible for the Bank's lending and loan administration functions. Prior to joining the Bank, Mr. Bergey was Vice President of the Wholesale Banking Unit of CoreStates, Lancaster, Pennsylvania from 1984 to 1992. Ronald K. Dankanich (Age 45), joined the Bank in October 1972 and currently serves as Senior Vice President--Operations Division, Cashier of the Bank and Secretary of the Corporation. Mr. Dankanich is directly responsible for Data Processing, Bank Reconcilements, Operations, Bank Services and Human Resources. J. William Erb (Age 61), joined the Bank in June 1997 and currently serves as Sr. Vice President - Investment Services and Trust Division of the Bank. Mr. Erb is directly responsible for Personal and Corporate Investment and Trust Services. Prior to joining the Bank, Mr. Erb was Group Vice President - Retirement Services of PNC Bank from 1982 to 1997. 5 Eileen M. Knott (Age 49), joined the Bank in January 1993 and currently serves as Sr. Vice President--Auditor and Compliance Officer of the Bank. Ms. Knott is directly responsible for the Bank's Audit and Compliance functions. Prior to joining the Bank, Ms. Knott was employed by the Royal Bank of Pennsylvania as its Chief Financial Officer from 1984 to 1993. Bruce E. Moroney (Age 43), joined the Bank in May 1992 and currently serves as Chief Financial Officer of both the Corporation and the Bank and as Senior Vice President--Finance Division of the Bank. Mr. Moroney is directly responsible for investments, asset/liability management and financial reporting. Prior to joining the Bank, Mr. Moroney was employed by Brandywine Savings Bank as its Vice President, Treasurer and Chief Financial Officer from 1987 to 1992. Joseph M. Stauffer (Age 57), joined the Bank in March 1992 and currently serves as Senior Vice President--Retail Banking Division of the Bank. Mr. Stauffer is directly responsible for the Bank's community offices and marketing. Prior to joining the Bank, Mr. Stauffer was President and Chief Executive Officer of Brandywine Savings Bank from 1985 to 1991. Management Remuneration The following table sets forth for the fiscal year ended December 31, 1999, 1998 and 1997, certain information as to the total remuneration received by any executive officers of the Corporation or the Bank receiving total salary and bonus in excess of $100,000 during each period.
SUMMARY COMPENSATION TABLE Long Term Compensation ------------------------------------ Annual Compensation Awards Payouts ----------------------------------------- ------------------------------------ Other Annual Restricted Securities Compen- Stock Underlying LTIP All Other Name and Principal Salary Bonus sation Award(s) Options Payouts Compensation Position Year $ (1) $ $ $ # $ $ - ---------------------------------------------------------------------------------------------------------------------- Henry F. Thorne 1999 167,190 25,000 -- -- 4,083 -- 13,304 (2) President and Chief 1998 159,130 25,000 -- -- 4,084 -- 15,956 Executive Officer 1997 151,560 18,000 -- -- 4,327 -- 17,396 Richard L. Bergey 1999 106,070 13,000 -- -- 2,553 9,071 (2) Senior Vice President 1998 101,580 13,000 -- -- 2,552 -- 10,715 Credit Services Division 1997 97,150 12,000 -- -- 2,702 -- 11,665 Ronald K. Dankanich 1999 85,320 15,000 -- -- 2,553 -- 7,488 (2) Senior Vice President 1998 81,420 14,000 -- -- 2,552 -- 8,748 Operations Division 1997 77,570 12,000 -- -- 2,702 -- 9,300 Bruce E. Moroney 1999 87,520 14,000 -- -- 2,553 -- 7,668 (2) Senior Vice President 1998 83,620 14,000 -- -- 2,552 -- 8,969 Chief Financial Officer 1997 79,770 12,000 -- -- 2,702 -- 9,743 - ------------ (1) Amounts shown include cash compensation earned and received as well as amounts earned but deferred at the officer's election, pursuant to the Bank's 40l(k) Plan. (2) Amounts shown for 1999 include: (i) matching contributions to the 401(k) Plan accounts ($1,554, $1,591, $1,280 and $1,313, respectively for Messrs. Thorne, Bergey, Dankanich and Moroney); (ii) Long Term Disability & Life Insurance premiums ($901, $729, $586 and $603, respectively for Messrs. Thorne, Bergey, Dankanich and Moroney); and (iii) Contributions to the Bank's Pension Plan ($10,849, $6,751, $5,622 and $5,752, respectively for Messrs. Thorne, Bergey, Dankanich and Moroney).
6 Stock Option Plan On April 25, 1995, the Stockholders of the Corporation approved DNB Financial Corporation's 1995 Stock Option Plan (as amended and restated, effective as of April 27, 1999). Under the Plan, options (both qualified and non-qualified) to purchase a maximum of 270,916 shares of the Corporation's Common Stock may be issued to employees and Directors of the Corporation. Option Grants in Last Fiscal Year The following table provides certain information relating to stock options granted during 1999. Certain officers not appearing in the Summary Compensation table above were also granted stock options during 1999. The Corporation's philosophy in granting stock options is primarily to provide a long-term incentive through such rewards, dependent on future increases in the value of the Corporation's Common Stock. Thus, executive officers are encouraged to manage the Corporation with a view toward maximizing long-term stockholder value. Directors of the Corporation are eligible to receive a non-qualified stock option to purchase 1,276 shares of common stock each year. These grants commenced on June 30, 1995 and are expected to continue on an annual basis until June 30, 2004. Grants of stock options are within the discretion of the Benefits and Compensation Committee by delegation from the Board of Directors. Option exercise prices must be 100% of the fair market value of the shares on the date of option grant and the option exercise period may not exceed ten years except that, with respect to incentive stock options awarded to persons holding 10% or more of the combined voting power of the Corporation, the option exercise price may not be less than 110% of the fair market value of the shares on the date of option grant and the exercise period may not exceed five years.
OPTION GRANTS IN 1999 Individual Grants Potential Realizable Number of Percent of Value at Assumed Annual Shares Total Options Rates of Stock Price Underlying Granted to Appreciation for Options Employees in Exercise or Option Term Granted in 1999 Fiscal Year Base Price Expiration 5% 10% Name (#) % ($/share) (2) Date $ $ - ---- ------------------ ------------ ------------- ---------- ------- ----- Henry F. Thorne 4,083 14 25.71 6-30-09 66,018 167,301 Richard L. Bergey 2,553 9 25.71 6-30-09 41,279 104,609 Ronald K. Dankanich 2,553 9 25.71 6-30-09 41,279 104,609 Bruce E. Moroney 2,553 9 25.71 6-30-09 41,279 104,609 - ------------ (1) The options in the above table were granted on June 30, 1999 and became exercisable on December 31, 1999. (2) The exercise or base price is equal to the fair market value of the Corporation's Common Stock on the date of grant, as adjusted, pro rata, to reflect the 5% stock dividend paid in December 1999.
7 Aggregated Option Exercises and Year-End Value The following table summarizes stock options that were exercised during 1999 and the number and value of stock options that were unexercised at December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE TABLE Number of Value of Unexercised Unexercised Options In-The-Money Options Shares Acquired Value At Fiscal Year-end At Fiscal Year-end Name On Exercise Realized Exercisable Unexercisable Exercisable(1) Unexercisable Henry F. Thorne 3,873 $40,204 21,702 -- $59,408 $ -- Richard L. Bergey -- -- 16,072 -- 57,513 -- Ronald K. Dankanich 615 6,385 14,376 -- 43,798 -- Bruce E. Moroney 3,873 40,204 12,005 -- 24,624 -- - ------------ (1) Represents the difference between market value per share as of December 31, 1999 ($17.00) and specific option prices per share.
Employment Agreement Effective December 31, 1996, the Bank entered into an employment agreement (the "Agreement") with Henry F. Thorne, President and Chief Executive Officer of the Bank, in order to establish his duties and compensation and to provide for his continued employment with the Bank. The Agreement provides for an initial term of employment of two years, which will be extended automatically for two additional years on each expiration date unless either the Bank or Mr. Thorne gives contrary written notice of not less than ninety days prior to the expiration date. The Agreement also provides that Mr. Thorne's base salary shall be reviewed by the Board of Directors of the Bank at the end of each year. In addition, the Agreement provides for participation in all employee benefit plans, pension plans maintained by the Bank on behalf of the respective employees, as well as fringe benefits normally associated with such officer's position. The Agreement provides for its termination upon the disability of Mr. Thorne or for cause, as defined in the Agreement. The Agreement also provides for restrictions on Mr. Thorne's right to compete with the Bank within 25 miles of any bank office or branch, directly or indirectly, for one year following Mr. Thorne's resignation or termination, pursuant to which he receives severance pay. Under the Agreement, if Mr. Thorne is terminated without cause or the two year term is not extended, he will receive severance pay equal to his base annual salary payable over the following year. If the Bank is liquidated or sold under a regulatory order, he will receive severance pay equal to his base annual salary for one year payable over the following year. The Agreement provides that if Mr. Thorne's employment is terminated at any time after a change in control of the Bank, or he submits his resignation within twelve months after the date of the change in control, he will receive as a severance payment, a lump sum payment equal to two times the higher of (i) his base salary immediately prior to the change in control or (ii) his base salary at the time of termination. For purposes of the Agreement, the term "Change of Control" is defined to mean: A change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), provided that, without limitation, such a change in control shall be deemed to have occurred if (a) any "persons" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than the Bank, Corporation or any "person" who on the date hereof is a director or officer of the Bank or Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Bank or Corporation representing fifty percent (50%) or more of the combined voting power of the Bank's or Corporation's then outstanding securities, or (b) during any period of two consecutive years during the term of the Agreement, individuals who at the beginning of such period constitute the Board of Directors of the Bank or Corporation cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period. 8 Change of Control Agreements Effective May 5, 1998 the Bank and the Corporation entered into Change of Control Agreements (individually referred to as an "Agreement" or collectively referred to as the "Agreements") with Messrs. Bergey, Dankanich, Erb, Moroney, Stauffer and Ms. Knott (individually referred to as an "Executive" or collectively referred to as the "Executives") in order to provide the Executives with severance payments as additional incentive to induce the Executives to devote their time and attention to the interest and affairs of the Corporation. The Agreements provide that if an Executive's employment is terminated after a change in control of the Corporation or the Bank, that he or she will receive, as a severance payment an amount equal to: (a) the annual base salary paid to the Executive and includible in the Executive's gross income for Federal income tax purposes during the year in which the date of termination occurs by Corporation and any of its subsidiaries subject to United States income tax; multiplied by (b) 1.00. Such payment shall be made in a lump sum within one (1) calendar week following the date of termination, subject to withholding by the Corporation as required by applicable law and regulations. Notwithstanding any provision of the Agreement or any other agreement of the parties, if the severance payment or payments under the Agreement, either alone or together with other payments which the Executive has the right to receive from the Corporation, would constitute a "parachute payment" (as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") or any successor provision, such lump sum severance payment shall be reduced to the largest amount as will result in no portion of the lump sum severance payment under the Agreement being subject to the excise tax imposed by Section 4999 of the Code. For purposes of the Agreement, the term "Change of Control" is defined to mean: A change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), provided that, without limitation, such a change in control shall be deemed to have occurred if (a) any "persons" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than the Bank, Corporation or any "person" who on the date hereof is a director or officer of the Bank or Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Bank or Corporation representing twenty-five percent (25%) or more of the combined voting power of the Bank's or Corporation's then outstanding securities, or (b) during any period of two consecutive years during the term of the Agreement, individuals who at the beginning of such period constitute the Board of Directors of the Bank or Corporation cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the beginning of such period has been approved in advance by directors representing at least two-thirds of the directors then in office who were directors at the beginning of the period or (c) the signing of a letter of intent or a formal acquisition or merger agreement between the Corporation or Bank, of the one part, and a third party which contemplates a transaction which would result in a "change of control". Certain Indebtedness and Transactions with Management The Bank makes loans to executive officers and directors of the Bank in the ordinary course of its business. These loans are currently made on substantially the same terms, including interest rates and collateral, as those prevailing at the time the transaction is originated for comparable transactions with nonaffiliated persons, and do not involve more than the normal risk of collectability or present any other unfavorable features. Federal regulations prohibit the Bank from making loans to executive officers and directors of the Corporation or the Bank at terms more favorable than could be obtained by persons not affiliated with the Corporation or the Bank. The Bank's policy towards loans to executive officers and directors currently complies with this limitation. The aggregate outstanding balance of the loans to all executive officers, directors or their affiliates, whose aggregate indebtedness to the Bank exceeded $60,000, at December 31, 1999 represented 3.3% of stockholders' equity of the Corporation on that date. The report of the Benefits & Compensation Committee is set forth below. Benefits & Compensation Committee Report Committee Interlocks and Insider Participation in Group Decisions -- The Benefits & Compensation Committee of the Board of Directors for the Bank is comprised of two independent Directors and the Bank's President and Chief Executive Officer. The Committee has the responsibility for establishing an appropriate compensation policy for employees, including executive officers of the Bank, and for overseeing the administration of that policy. The President and Chief Executive Officer, Mr. Thorne, does not participate in deliberations relating to his compensation. 9 Committee Report on Executive Compensation -- The Committee believes that the overall enhancement of the Corporation's performance and, in turn shareholder value, depends to a significant extent on the establishment of a close relationship between the financial interests of shareholders and those of the Bank's employees, especially its senior management. In addition to a desired pay-for-performance relationship, the Committee also believes that the Bank must maintain an attractive compensation package that will attract, motivate and retain executive officers who are capable of making significant contributions towards the success of the Bank. The key components of the compensation program are base salary, discretionary bonus and long-term incentives. Base Salaries - Base salaries are determined by the assessment of each executive's performance; current salary in relation to the salary range designated for the job; experience; potential for advancement and by the performance of the Corporation. In addition, the committee considers the economic conditions and other external events that affect the operations of the Bank and by comparing the Bank's compensation practices with those of other banks and non-banking companies who are direct competitors for employee's services, including executive talent. The committee utilizes independent compensation consultants for this review. The committee is responsible for reviewing the evaluations of Senior Management and the President and Chief Executive Officer. Each executive is reviewed individually on their leadership skills; their ability to develop staff; and significant department accomplishments which affect the performance of the Bank. In addition Senior Management is evaluated on their ability to collectively develop and evaluate strategic plans for the future growth of the Bank. Discretionary Bonus - Bonuses are awarded to executives for their performance with respect to the Bank's achievements. These achievements, in the opinion of the Committee, substantially enhanced the long-term business and financial prospects of the Bank. The amounts awarded are based upon the committee's subjective assessment of the contribution of each executive. Long Term Incentives - The Compensation Committee believes that a portion of executive compensation should be dependent on value created for the Bank's shareholders. Through the 1995 Stock Option Plan, the committee makes annual grants of stock options at 100% of the stock's fair market value on the date of grant to executives. Thus, executives are encouraged to manage the Bank with a view toward the future and maximizing shareholder value. The Benefits & Compensation Committee DOWNINGTOWN NATIONAL BANK /S/ THOMAS R. GREENLEAF /S/ HENRY F. THORNE ------------------------ ------------------------ Thomas R. Greenleaf Henry F. Thorne /S/ ROBERT J. CHARLES ------------------------ Robert J. Charles Pension Plan The Corporation does not have a retirement or pension plan. The Bank, however, maintains a noncontributory defined benefit pension plan (the "Plan") covering all employees of the Bank, including officers, who have been employed by the Bank for one year and have attained 21 years of age. Prior to May 1, 1985, an individual must have attained the age of 25 and accrued one year of service. The Plan provides pension benefits to eligible retired employees at 65 years of age equal to 1.5% of their average monthly pay multiplied by their years of accredited service (maximum 40 years). The accrued benefit is based on the monthly average of their highest five consecutive years of their last ten years of service. The following table shows the estimated annual retirement benefit payable pursuant to the Plan of an employee currently 65 years of age, whose highest salary remained unchanged during his last five years of employment and whose benefit will be paid for the remainder of his life. During 2000, the Bank does not anticipate making a contribution to the 1999 Plan Year due to the Plan's funding status. The benefits listed in the table are not subject to any deduction for Social Security or other offset. Annual retirement benefits are paid monthly to an employee during his lifetime. An employee may elect to receive lower monthly payments, in order for his or her surviving spouse to receive monthly payments under the Plan for the remainder of their life. 10 Amount of Annual Retirement Benefit Average With Credited Service Of: (1) Annual Earnings 10 Years 20 Years 30 Years 40 Years --------------- -------- -------- -------- -------- $ 25,000 $ 3,750 $ 7,500 $11,250 $15,000 50,000 7,500 15,000 22,500 30,000 75,000 11,250 22,500 33,750 45,000 100,000 15,000 30,000 45,000 60,000 125,000 18,750 37,500 56,250 75,000 150,000 22,500 45,000 67,500 90,000 175,000 22,500 45,000 67,500 90,000 200,000 22,500 45,000 67,500 90,000 ------------ (1) Messrs. Thorne, Bergey, Dankanich and Moroney have 8 years, 7 years, 27 years and 8 years, respectively, of credited service under the Plan. Earnings in excess of $150,000 are not considered in determining the pension benefit. During 1999, the Bank adopted an arrangement for supplemental compensation (the "Supplemental Plan") for its Chief Executive Officer (the "Executive"). The Supplemental Plan provides that the Bank and the Executive share in the rights to the cash surrender value and death benefits of a split-dollar life insurance policy (the "Split-dollar Policy") and provides for additional compensation to the Executive, equal to any income tax consequences related to the Supplemental Plan until retirement. The Split-dollar Policy is designed to provide the Executive, upon attaining age 65, with projected annual after-tax distributions of approximately $35,000, funded by loans against the cash surrender value of the Split-dollar Policy. In addition, the Split-dollar Policy is intended to provide the Executive with a projected death benefit of $750,000. Neither the insurance company nor the Bank has guaranteed any minimum cash value under the Supplemental Plan. To fund the annual premium on the Split-dollar Policy and mitigate the obligations under this Plan, the Bank has purchased an additional life insurance policy on the Executive's life (the "BOLI Policy") with an initial deposit of $1.5 million. The amount of the BOLI Policy has been calculated so that the projected increases in its cash surrender value will substantially offset the Bank's expense related to the Split-dollar Policy. 401(k) Retirement Savings Plan During the fourth quarter of 1994, the Bank adopted a retirement savings plan intended to comply with Section 40l(k) of the Internal Revenue Code of 1986. Employees become eligible to participate after six months of service, and will thereafter participate in the 401(k) plan for any year in which they have been employed by the Bank for at least 501 hours. In general, amounts held in a participant's account are not distributable until the participant terminates employment with the Bank, reaches age 59 1/2, dies or becomes permanently disabled. Participants are permitted to authorize pre-tax savings contributions to a separate trust established under the 401(k) plan, subject to limitations on deductibility of contributions imposed by the Internal Revenue Code. The Bank makes matching contributions of $.25 for every dollar of deferred salary, up to 6% of each participant's annual compensation. Each participant is 100% vested at all times in employee and employer contributions. The Corporation's matching contributions to the 40l(k) plan for 1999 was $35,000. Insurance All eligible full time employees of the Bank are covered as a group by basic hospitalization, major medical, long-term disability, term life and a prescription drug plan. The Bank pays the total cost of the plans for employees with the exception of medical, in which there is cost sharing by the employees and a co-payment required by the employees for the prescription drug plan. 11 Corporation Performance Graph The following graph presents the five year cumulative total return on DNB Financial Corporation's common stock, compared to the S&P 500 Index and S&P Financial Index for the five year period ended December 31, 1999. The comparison assumes that $100 was invested in the Corporation's common stock and each of the foregoing indices and that all dividends have been reinvested. Corporation Performance Comparison Of Five Year Cumulative Total Return Among DNB Financial Corp., S&P 500 Index and S&P Financial Index [OBJECT OMITTED] (The Performance Graph appears here. See the table below for plot points.)
December 31, 1994 1995 1996 1997 1998 1999 S&P 50 Index 100 137.11 168.21 223.89 287.34 347.35 S&P 500 Financial Corp. 100 153.32 206.46 299.83 339.54 353.11 DNB Financial Corp. 100 151.17 204.45 429.34 446.65 269.09
PROPOSAL 2 RATIFICATION OF INDEPENDENT AUDITORS The Corporation's independent auditors for the fiscal year ended December 31, 1999 were KPMG LLP. The Corporation's Board of Directors has reappointed KPMG LLP to continue as independent auditors for the fiscal year ending December 31, 2000 subject to ratification of such appointment by the stockholders. Representatives of KPMG LLP are expected to attend the Annual Meeting. They will be given an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions from stockholders present at the Annual Meeting. Unless marked to the contrary, the shares represented by the enclosed Proxy will be voted FOR the ratification of KPMG LLP as the independent auditors of the Corporation. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE INDEPENDENT AUDITORS OF THE CORPORATION. Stockholder Proposals To be eligible for inclusion in the Corporation's proxy materials relating to the Annual Meeting of Stockholders to be held in 2001, a stockholder proposal must be received by the Secretary of the Corporation at the address set forth on the first page of this Proxy Statement, not later than November 27, 2000. Any such proposal will be subject to Rule 14a-8 of the rules and regulations of the SEC. In connection with the Corporation's 2001 annual meeting and pursuant to recently amended Rule 14a-4 under the Exchange Act, if the shareholder's notice is not received by the Corporation on or before February 8, 2001, the Corporation (through management proxy holders) may exercise discretionary voting authority when the proposal is raised at the annual meeting without any reference to the matter in the proxy statement. 12 Other Matters Which May Properly Come Before The Meeting The Board of Directors knows of no business which will be presented for consideration at the Annual Meeting other than as stated in the Notice of Annual Meeting of Stockholders. If, however, other matters are properly brought before the Annual Meeting, it is the intention of the persons named in the accompanying proxy to vote the shares represented thereby on such matters in accordance with their best judgment. Whether or not you intend to be present at this Annual Meeting, you are urged to return your proxy promptly. If you are present at this Annual Meeting and wish to vote your shares in person, your proxy may be revoked upon request. A COPY OF THE FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 1999 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS OF THE RECORD DATE UPON WRITTEN REQUEST TO BRUCE E. MORONEY, DNB FINANCIAL CORPORATION, 4 BRANDYWINE AVENUE, DOWNINGTOWN, PA 19335-0904 OR BY CONTACTING MR. MORONEY AT 610-873-5253. BY ORDER OF THE BOARD OF DIRECTORS /s/ Ronald K. Dankanich Ronald K. Dankanich, Secretary Downingtown, Pennsylvania March 24, 2000 YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO SIGN AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. 13 REVOCABLE PROXY DNB FINANCIAL CORPORATION PLEASE MARK VOTES _______ AS IN THIS EXAMPLE THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS ANNUAL MEETING OF SHAREHOLDERS APRIL 25, 2000 The undersigned hereby constitutes and appoints Richard D. Thatcher, L. Ruth Patterson and Brian R. Formica and each or any of them, proxies of the undersigned, with full power of substitution, to vote all of the shares of DNB Financial Corporation (the "Corporation") that the undersigned may be entitled to vote at the Annual Meeting of Stockolders of the Corporation to be held at the Central Presbyterian Church, 100 W. Uwchlan Avenue, Downingtown, Pennsylvania on Tuesday, April 25, 2000 at 10:00 a.m., prevailing time, and at any adjournment or postponement thereof as follows with respect to the following matters as described in the Proxy Statement: Please be sure to sign and date this Proxy in the box below. - ----------------------------------------------------------- - ----------------------------------------------------------- Stockholder sign above Co-holder (if any) sign above Date____________ With- For All For held Except 1. ELECTION OF DIRECTORS: for all [ ] [ ] [ ] nominees listed below (except as marked to the contrary below): Robert J. Charles; Vernon J. Jameson and Henry F. Thorne INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For All Except" and write that nominee's name in the space provided below. - ---------------------------------------------------------------- 2. To ratify the appointment of For Against Abstain KPMG LLP as the independent auditors [ ] [ ] [ ] for the fiscal year ending December 31, 2000. ------------------------ THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER HEREIN SPECIFIED BY THE UNDERSIGNED SHAREHOLDER, IF NO DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED ABOVE AND FOR PROPOSAL 2 AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES ON ANY OTHER MATTERS TO COME BEFORE THE ANNUAL MEETING. Please sign exactly as your name appears on this card, date and return this card promptly using the enclosed envelope. Executors, administrators, guardians, officers of corporations, and others signing in a fiduciary capacity should state their full title as such. Detach above card, sign, date and mail in postage paid envelope provided. DNB FINANCIAL CORPORATION - ------------------------------------------------------------------------------- WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE ACT PROMPTLY SIGN, DATE & MAIL YOUR PROXY CARD TODAY, USING THE ENCLOSED ENVELOPE. - ------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----