8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) May 9, 2022

NORWOOD FINANCIAL CORP

(Exact name of registrant as specified in its charter)

Pennsylvania	0-28364	23-2828306
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

717 Main Street, Honesdale, Pennsylvania	18431
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (570) 253-1455

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)).

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.10 per share	NWFL	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

NORWOOD FINANCIAL CORP

INFORMATION TO BE INCLUDED IN THE REPORT

Section 5 - Corporate Governance and Management

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(d)    On May 10, 2022, James O. Donnelly, President and Chief Executive Officer of the Company, was appointed as a director of Norwood Financial Corp (the “Company”) to fill the vacancy created by the retirement of William W. Davis, Jr. Mr. Donnelly will serve with the class of directors whose terms expire at the 2024 Annual Meeting of Stockholders, or until his successor shall have been elected and qualified. Mr. Donnelly was appointed to the Board’s Executive Committee, Loan Committee and Trust Committee.

Mr. Donnelly, like other directors and executive officers of the Company, is customer of Wayne Bank (“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 unrelated to the Bank, and do not include more than the normal risk of collectability or present other unfavorable features. The Bank has adopted written policies and procedures for the approval of loans to directors and executive officers. All loans to directors and executive officers are approved by the entire Board of Directors in advance with the director or executive officer abstaining from participating directly or indirectly in the voting.

(e)     Employment Agreement. On May 9, 2022, the Company and the Bank entered into an Employment Agreement (the “Agreement”) with Mr. Donnelly. Pursuant to the Agreement, Mr. Donnelly is employed as the President and Chief Executive Officer the Company and the Bank. Mr. Donnelly will be paid a salary at the rate of $425,000 per annum or such higher amount as may be determined from time to time (“Base Salary”). The Agreement is for the period commencing on May 9, 2022 (the “Effective Date”) and ending thirty-six (36) months thereafter, unless terminated earlier. On each annual anniversary date of the Effective Date, this Agreement shall automatically be extended for an additional 12 months unless either party has beforehand provided the other party with written notice that this Agreement shall not be extended at such time. Mr. Donnelly’s employment shall be for no definite period of time, and Mr. Donnelly, on one hand, and the Company and/or the Bank, on the other hand, may terminate such employment relationship at any time for any reason or no reason. The at-will employment relationship shall remain in full force and effect regardless of any statements to the contrary made by Company or Bank personnel or set forth in any documents other than those explicitly made to the contrary and signed by an authorized representative of the Company and the Bank.

In the event that Mr. Donnelly’s employment is involuntarily terminated during the term of the Agreement, absent termination for cause, or Mr. Donnelly terminates for “good reason” as defined in the Agreement, he will receive severance compensation in a lump-sum payment equal to his base salary for the remaining term of the Agreement, but in an amount not less than calculated for a period of 18 months or for more than a period of 24 months. In the event of Mr. Donnelly’s termination of employment following a Change in Control transaction, his severance compensation will be equal to (i) a severance benefit equal to 2.999 times his 5-year average annualized taxable compensation, plus (ii) reimbursement for the cost of COBRA continuation for the coverage for Mr. Donnelly and his dependents in effect as of the date of such termination of employment that is available to Mr. Donnelly under the provisions of COBRA for a period of eighteen (18) months following termination of employment. Payments made to Mr. Donnelly following a termination of employment associated with a Change in Control transaction in accordance with the Agreement shall be reduced as necessary such that such payments will not exceed the amounts which are tax-deductible in accordance with Section 280G of the Internal

Revenue Code (“Code”), including by allocating a portion of any payments, benefits or distributions in the nature of compensation (within the meaning of Section 280G(b)(2)) of the Code to the fair value of the non-competition and non-solicitation restrictions under the Agreement.

Mr. Donnelly is eligible to participate in the employee benefits generally applicable to employees of the Bank, including: group hospitalization, disability, health, dental, sick leave, life insurance, travel and/or accident insurance, retirement, pension, and/or other present or future tax-qualified and non-tax-qualified plans sponsored by the Bank.

Cash Bonus.    For calendar year 2022, the Bank will pay Mr. Donnelly a pro rata cash bonus under the Annual Incentive Plan calculated at not less than the target performance level of 36%. This bonus will be paid in early 2023.

Restricted Stock Awards.    The Company’s 2014 Equity Incentive Plan provides for restricted stock awards based upon Company and individual performance metrics. For the award anticipated to be granted in December 2022, the Company will calculate such award with a value of 30% of the annual base salary. For 2023, the award will be performance based.

The foregoing summary is qualified in its entirety by reference to the Agreement which is filed as herewith as Exhibit 10.1 to this Report, and incorporated herein by reference.

Stock Award Agreement.    On May 10, 2022, Mr. Donnelly received a one-time award of 3,000 shares of Company common stock (“Sign-on Equity Award”) pursuant to a Stock Award Agreement. Such Sign-on Equity Award provides for vesting of such award at the rate of 70% as of the one year anniversary of the employment date, and 10% annually thereafter for three additional years during such period of continuous employment with the Company.    The foregoing summary is qualified in its entirety by reference to the Stock Award Agreement which is filed as herewith as Exhibit 10.2 to this Report, and incorporated herein by reference.

Salary Continuation Agreement.    Effective May 10, 2022, the Bank entered into a Salary Continuation Agreement with Mr. Donnelly. The Salary Continuation Agreement is intended to provide benefits to Mr. Donnelly upon retirement, death, or disability, or in the event of a Change in Control (as defined in the Salary Continuation Agreement). Upon a separation of service from the Bank at the Normal Retirement Age (as defined in the Salary Continuation Agreement) of 65, the Bank will be obligated to pay to Mr. Donnelly the Normal Retirement Benefit (as defined in the Salary Continuation Agreement) of $125,000, as specified in the Salary Continuation Agreement, in monthly installments for a period of fifteen (15) years (the “Age 65 Benefit”). An Executive who continues working past the Normal Retirement Age will earn an increased benefit for each month worked up to age 67. If an Executive has a separation from service (other than in connection with a Change in Control or a termination for cause) or becomes disabled prior to reaching Normal Retirement Age, he will be eligible for a reduced annual benefit equal to the annual retirement benefit accrued through the date of separation or disability payable in monthly installments for a period of fifteen (15) years beginning at Normal Retirement Age or the month after disability, as the case may be.

In the event of a Change in Control occurring prior to a separation from service, disability or Normal Retirement Age, Mr. Donnelly will be entitled to receive an annual benefit equal to the Normal Retirement Benefit in equal monthly installments for 15 years commencing the month following Normal Retirement Age in lieu of any other benefit under the Salary Continuation Agreement. In the event of a Change in Control occurring after Normal Retirement Age, but prior to a separation from service or disability, the Bank will pay Mr. Donnelly an annual benefit equal to the annual retirement benefit accrued through the date of the Change in Control for 15 years commencing the month following the Change in Control.

In the event of an Executive’s death before separation from service, disability or a Change in Control, the Normal Retirement Benefit will be paid to Mr. Donnelly’s beneficiary over 15 years commencing the month following Mr. Donnelly’s death. If death occurs after Normal Retirement Age, but prior to separation from service, disability or a Change in Control, the death benefit will be increased for each month worked up to age 67. If death occurs after retirement but prior to receipt of all payments due and owing under the Salary Continuation Agreement, payments will continue to be made in the same amounts and at the same times to Mr. Donnelly’s beneficiary. In the event of Mr. Donnelly’s death after qualifying for benefits under the Salary Continuation Agreements but before Normal Retirement Age, the Bank will pay Mr. Donnelly’s beneficiary the same amount and for the same period as the Bank would have been required to pay Mr. Donnelly at Normal Retirement Age but payments will commence the month following Mr. Donnelly’s death. Mr. Donnelly will be entitled to receive any benefits under the Salary Continuation Agreement in the event of termination for cause.

The Salary Continuation Agreement requires Mr. Donnelly to comply with certain non-competition and non-solicitation restrictions following a termination of employment as a condition to the continued receipt of benefits.

Payments made to Mr. Donnelly following a termination of employment associated with a Change in Control transaction in accordance with the Salary Continuation Agreement shall be reduced as necessary such that such payments will not exceed the amounts which are tax-deductible in accordance with Section 280G of the Internal Revenue Code (“Code”), including by allocating a portion of any payments, benefits or distributions in the nature of compensation (within the meaning of Section 280G(b)(2)) of the Code to the fair value of the non-competition and non-solicitation restrictions under the Salary Continuation Agreement.

Although the Registrant will accrue the expense of the retirement benefit liability over time, the Registrant’s liability under the Salary Continuation Agreement will remain unfunded and the accrued amounts will remain subject to the rights of creditors of the Registrant.

The foregoing summary is qualified in its entirety by reference to the Salary Continuation Agreement which is filed herewith as Exhibit 10.3 to this Report, and incorporated herein by reference.

Section 9 – Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(d)    Exhibits. The following exhibits are filed herewith:

Number	Description
10.1	Employment Agreement, dated May 9, 2022, by and among Norwood Financial Corp, Wayne Bank and James O. Donnelly.
10.2	Stock Award Agreement, dated May 10, 2022, between Norwood Financial Corp and James O. Donnelly.
10.3	Salary Continuation Agreement, dated May 10, 2022, between Wayne Bank and James O. Donnelly.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	NORWOOD FINANCIAL CORP
Date: May 12, 2022	By:	/s/ William S. Lance
		William S. Lance
		Executive Vice President and Chief Financial Officer (Duly Authorized Representative)

EX-10.1

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

THIS AGREEMENT is entered into this 9th day of May, 2022 (the “Effective Date”), by and between James O. Donnelly (the “Executive”), Wayne Bank (the “Bank”), and Norwood Financial Corp (the “Company”).

WHEREAS, the Bank and the Company desire to employ the Executive as its President and Chief Executive Officer commencing on or about May 9, 2022 under the terms and conditions set forth herein; and

WHEREAS, the Executive has agreed to accept such executive position at the Bank and the Company on the terms set forth hereinafter; and

WHEREAS, the Boards of Directors of the Bank and of the Company believe it is in their mutual best interests to enter into this Agreement with the Executive in order to assure continuity of experienced management; and

WHEREAS, the parties desire by this writing to set forth the employment relationship of the Executive with the Bank and the Company.

NOW THEREFORE, in consideration of the covenants and the mutual agreements herein contained, the parties hereto, intending to be legally bound, do hereby agree as follows:

1. Defined Terms

When used anywhere in this Agreement, the following terms shall have the meaning set forth herein.

(a) “Change in Control” shall be deemed to occur on the earliest of any of the following events:

(i) Merger: The Bank or the Company merges into or consolidates with another corporation, or merges another corporation into the Company or the Bank, and as a result, less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company or the Bank or is otherwise eligible to vote for the election of directors for the Company or the Bank immediately before the merger or consolidation;

(ii) Acquisition of Significant Share Ownership: There is filed or required to be filed a report on Schedule 13D or another form or schedule (other than Schedule 13G) required under Section 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of the Bank’s or the Company’s voting securities, but this clause (ii) shall not apply to beneficial ownership of such voting securities held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns fifty percent (50%) or more of its outstanding voting securities;

(iii) Change in Board Composition: Individuals who constitute the Company’s or the Bank’s Board of Directors on the Effective Date hereof (the “Incumbent Board”) cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the Effective Date whose election was approved by a vote of at least two-thirds of the directors comprising the Incumbent Board shall be considered, for purposes of this clause (iii), as though he or she was a member of the Incumbent Board; or

(iv) Sale of Assets: The Bank and/or the Company sells to a third party all or substantially all of its, or their, assets.

The definition of Change in Control shall be construed to be consistent with the requirements of Section 409A of the Code and Treasury Regulations promulgated thereunder.    

(b) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and as interpreted through applicable rulings and regulations in effect from time to time.

(c) “Code §280G Maximum” shall mean the product of 2.999 and the Executive’s “base amount” as defined in Code §280G(b)(3).

(d) “Good Reason” with respect to the Executive’s Termination of Employment initiated by the Executive shall exist if, without Executive’s express written consent, any of the following occur:

(i) a material diminution in the Executive’s base compensation or Executive’s total compensation;

(ii) a material diminution in the Executive’s authority, duties, or responsibilities, including a requirement that Executive no longer serve as the President and Chief Executive Officer of the Bank and the Company and/or no longer continues to report directly to the Boards of Directors of the Bank and the Company; or

(iii) a material change in the geographic location of the Executive’s assigned office; or

(iv) a failure by the Bank or the Company to offer to extend the Term of the Agreement prior to one hundred and twenty (120) calendar days prior to the then current expiration date of the Term (other than as a result of the Executive’s failure to accept an extension of the Term on terms that are, in the aggregate, substantially similar to (or better than) the terms and conditions of the Agreement that are in effect immediately prior to such expiration of the Agreement; or

(v) a material breach of this Agreement by the Bank or the Company, or any successor entities.

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Notwithstanding the foregoing, a Termination of Employment shall be deemed to be for Good Reason hereunder only if (a) the Executive provides written notice to the Bank or the Company of the occurrence of one or more of the Good Reason conditions described herein within 90 days following the initial existence of such condition, (b) the Bank and/or the Company fails to cure such condition constituting Good Reason during the 30-day period immediately following its receipt of such notice (the “Cure Period”), and (c) the Executive thereafter terminates employment within 60 days following the conclusion of the Cure Period. In the event that the Bank and/or the Company shall remedy in good faith the event or condition constituting Good Reason during the Cure Period, then the Executive’s notice of termination shall be null and void, and the Bank and the Company shall not be required to pay the amount that would otherwise be due to the Executive upon Termination of Employment for Good Reason under Sections 10(d)(2) or 12(b).

(e) “Protected Period” shall mean the period that begins on the date of the Change in Control and ends on the first annual anniversary of the Change in Control.

2. Employment and Duties.

(a) As of May 9, 2022, (“Employment Date”), the Executive is employed as the President and Chief Executive Officer of the Bank and of the Company. In each capacity, the Executive shall render such administrative and management services for the Bank and the Company as are currently rendered and as are customarily performed by persons situated in a similar executive capacity. The Executive shall also promote, by entertainment or otherwise, as and to the extent permitted by law, the business of the Bank and the Company. The Executive’s other duties shall be such as the Boards of Directors of the Bank and the Company may from time to time reasonably direct, including normal duties as an officer of the Bank and the Company. The Executive’s employment shall be for no definite period of time, and the Executive, on one hand, and the Company and/or the Bank, on the other hand, may terminate such employment relationship at any time for any reason or no reason. The at-will employment relationship shall remain in full force and effect regardless of any statements to the contrary made by Company or Bank personnel or set forth in any documents other than those explicitly made to the contrary and signed by an authorized representative of the Company and the Bank.

(b) Description of Job Duties: The Executive shall serve as the President and Chief Executive Officer of the Bank and the Company, reporting only to the Board of Directors of the Bank and the Company; shall have supervision and control over, and responsibility for, the general management and operation of the Bank and the Company; and shall have such other powers and duties as may from time to time be prescribed by the Boards of Directors, provided that such duties are consistent with the Executive’s position as the President and Chief Executive Officer in charge of the general management of the Bank and the Company.

3. Base Compensation. The Bank agrees to pay the Executive during the term of this Agreement a salary at the rate of $425,000 per annum or such higher amount as may be determined from time to time (“Base Salary”), payable in cash installments not less frequently than monthly. The Board of Directors of the Bank shall review, not less often than annually, the Executive’s Base Salary and may increase it in its sole discretion. The Company hereby agrees that it shall be jointly and severally liable with the Bank for the payment of all amounts due

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under this Agreement. Nevertheless, the Board of Directors of the Company may in its discretion at any time during the term of this Agreement agree to pay the Executive a base salary for the remaining term of this Agreement; provided, however that payment of such Base Salary shall not relieve the Company of its joint and severally liability hereunder. If the Board of Directors of the Company agrees to pay such salary, the Board shall thereafter review, not less often than annually, the rate of the Executive’s salary, and in its sole discretion may decide to increase such salary.

4. Incentive Compensation. The Executive shall participate in an equitable manner with all other senior management employees of the Bank and the Company in discretionary incentive compensation that the Boards of Directors of the Bank and the Company may award from time to time to their senior management employees, including:

(i) Sign-on Equity Award. Following commencement of employment, the Executive will receive a one-time award of 3,000 shares of Company common stock (“Sign-on Equity Award”). Such Sign-on Equity Award will be detailed in a Restricted Stock Award Agreement authorized by the Company and will provide for vesting of such award at the rate of 70% as of the one year anniversary of the Employment Date, and 10% annually thereafter for three additional years during such period of continuous employment with the Company.

(ii) Bank’s Executive Annual Incentive Plan. For calendar year 2022, the Bank will pay the Executive a pro rata cash bonus under the Executive Annual Incentive Plan calculated at not less than the target performance level of 36%. This bonus will be paid in early 2023.

(iii) Annual Restricted Stock Awards. The Company’s 2014 Equity Incentive Plan provides for restricted stock awards based upon Company and individual performance metrics. For the award anticipated to be granted in December 2022, the Company will calculate such award with a value of 30% of the annual base salary. For 2023, the award will be performance based.

5. Participation in Retirement, Medical and Other Plans.

(a) During the term of this Agreement, the Executive shall be eligible to participate in the employee benefits generally applicable to employees of the Bank, including: group hospitalization, disability, health, dental, sick leave, life insurance, travel and/or accident insurance, retirement, pension, and/or other present or future tax-qualified and non-tax-qualified plans sponsored by the Bank. The Bank will implement a salary continuation agreement (“SERP”) which will provide the Executive with a supplemental retirement payment upon retirement from the Bank following continuous employment through attainment of age 65 years old or thereafter in an amount equal to $125,000 per year for 15 years thereafter. Further, such SERP will provide that the Executive will be vested in the annual financial reporting accrual amounts which will then be payable as a monthly benefit beginning at age 65 for 180 monthly payments thereafter in the event that the Executive retires earlier than age 65; provided that the Executive complies with the non-compete and non-solicitation limitations set forth in such SERP.

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(b) The Executive shall be eligible to participate in any other compensation and fringe benefits which are or may become available to the Bank’s and the Company’s senior management employees, including for example: any stock option, restricted stock and incentive compensation plans, and any other benefits which are commensurate with the responsibilities and functions to be performed by the Executive under this Agreement. The Executive shall be reimbursed for all reasonable out-of-pocket business expenses which he shall incur in connection with his services under this Agreement upon substantiation of such expenses in accordance with the policies of the Bank and the Company. Additionally, the Executive shall be entitled to:

(i) Banking Industry Functions. The Executive may devote reasonable time attending seminars and meetings sponsored by the Pennsylvania Bankers Association, the American Bankers Association and other banking or educational organizations at the expense of the Bank.

(ii) Club Membership. The Bank shall provide the Executive with application fees, bond costs and annual dues in connection with his membership at a local golfing and country club and such other private clubs, social, civic and community organizations that the Board of Directors of the Bank may reasonably determine during the term of employment hereunder.

(iii) Automobile. The Executive shall be provided with the use of an appropriate, executive quality automobile with insurance, maintenance, fuel and all fees and costs paid by the Bank. Said car to be replaced upon the sooner of three (3) years, 45,000 miles or projected excessive maintenance costs.

(iv) Other Perquisites and Benefits. The Executive shall be entitled to receive such other perquisites and fringe benefits as the Board of Directors of the Bank reasonably deems appropriate in its sole discretion, including use of a company issued personal laptop computer and cell phone.

(v) Relocation Benefits. The Bank will pay the usual and customary expenses related to relocation of your primary household for you and your spouse. Such costs or reimbursements will include packing, moving and transporting of typical household items, storage of household goods for a specific period (if necessary), two house-hunting trips for you and your spouse (which will include hotel stay, meals, mileage, etc.), temporary housing for up to three months (which may be extended if it is taking longer than anticipated to close on a new home), customary closing costs on a new home and any related usual and customary miscellaneous items associated with the relocation (to be reviewed item by item).

6. Term. The Bank and the Company hereby employ the Executive, and the Executive hereby accepts such employment under this Agreement, for the period commencing on the Effective Date and ending thirty-six (36) months thereafter (“Term”) (or such earlier date as is determined in accordance with Sections 10 or 12). On each annual anniversary date of the Effective Date, this Agreement shall automatically be extended for an additional 12 months unless either party has beforehand provided the other party with written notice that this Agreement shall not be extended at such time. The Term shall be the initial Term and as adjusted for any further extensions approved thereafter.    

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7. Loyalty; Noncompetition; Nondisclosure.

(a) Loyalty. During the period of his employment hereunder and except for periods of illnesses, reasonable vacation periods, and reasonable leaves of absence, the Executive shall devote substantially all his full business time, attention, skill, and efforts to the faithful performance of his duties hereunder; provided, however, from time to time, Executive may serve on the boards of directors of, and hold any other offices or positions in, companies or organizations, which will not present any conflict of interest with the Bank, the Company or any of their subsidiaries or affiliates or unfavorably affect the performance of Executive’s duties pursuant to this Agreement, or will not violate any applicable statute or regulation. “Full business time” is hereby defined as that amount of time usually devoted to like companies by similarly situated executive officers. Except with the prior written approval of the Board of Directors of the Bank, the Executive shall not engage in any other business or commercial activities, duties or pursuits, during the term of this Agreement. Under no circumstances may the Executive engage in any business or commercial activities, duties or pursuits which compete with the business or commercial activities of the Bank or the Company, nor may the Executive serve as a director or officer or in any other capacity in a company or financial institution which competes with the Bank or the Company. Investments and personal activities not resulting in material compensation or a conflict of interest with the Bank or the Company shall not be deemed a breach of the restrictions of this paragraph. Participation in trade associations, charitable, civil or similar not-for-profit or philanthropic organizations, including service as an officer, trustee or director, shall not be deemed a breach of this Agreement, but the total amount of time spent by the Executive in such activities during normal working hours shall be periodically reviewed by the Board of Directors of the Bank.

(b) Noncompetition and Non-Solicitation. The parties hereto agree as follows:

(i) if the Executive terminates his employment other than for Good Reason or if the Bank or the Company shall terminate the Executive’s employment for Just Cause (as hereinafter defined, then for a period of one (1) year following the Executive’s Termination of Employment (“Non-Compete Period”), the Executive shall not, without the prior written consent of the Bank, the Company or any successors thereto (collectively, the “Companies”), directly or indirectly, whether or not for compensation, engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, lend Executive’s name or any similar name to, lend Executive’s credit to, or render services or advice to, any business, including a savings bank, savings and loan association, savings and loan holding company, bank, bank holding company, mortgage company, credit union or similar type financial institution (including, without limitation, a de novo financial institution in its organizational phase), or any direct or indirect subsidiary or affiliate of such entity, whose products or activities compete or would compete in whole or in part with the products, services or activities of the Company or its subsidiaries in the market areas of the Commonwealth of Pennsylvania within the counties of

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Lackawanna, Luzerne, Monroe, Pike and Wayne, or within the State of New York within the counties of Delaware, Sullivan, Ontario, Otsego and Yates, or any future market areas of the Bank or the Company (defined as the geographic area within fifty (50) miles of any newly established branch office or loan production office opened during the period of Executive’s employment) (the “Non-Compete Area”). The Executive agrees that this covenant and restriction is reasonable with respect to its duration, geographical area, and scope.

(ii) for a period of one (1) year following the Executive’s Termination of Employment (“Non-Solicitation Period”), the Executive will not, directly or indirectly, either for himself or any other Person (as defined herein), (A) induce or attempt to induce any employee of the Company or its subsidiaries to leave the employ of the Company or its subsidiaries, (B) in any way interfere with the relationship between the Company or its subsidiaries and any employee of the Company or its subsidiaries, (C) employ, or otherwise engage as an employee, independent contractor, or otherwise, any employee of the Company or its subsidiaries, or (D) induce or attempt to induce any customer, supplier, licensee, or business relation of the Company or its subsidiaries to cease doing business with the Company or its subsidiaries, or in any way interfere with the relationship between any customer, supplier, licensee, or business relation of the Company or its subsidiaries. During the Non-Solicitation Period, the Executive will not, directly or indirectly, either for himself or any other Person, solicit the business of any Person known to the Executive to be a customer of the Company or its subsidiaries, whether or not the Executive had personal contact with such Person, with respect to products or activities which compete in whole or in part with the products or activities of the Company or its subsidiaries. For purposes of this Agreement, “Person” shall include an individual, trust, estate, corporation, limited liability company, savings bank, savings and loan association, savings and loan holding company, bank, bank holding company, mortgage company, credit union or similar type financial institution, including, without limitation, a de novo financial institution in its organizational phase.

(iii) The parties hereto, recognize that irreparable injury will result to the Companies and their business and property in the event of the Executive’s breach of this Section 7(b) of the Agreement. Therefore, in the event of any alleged breach of the provisions of this Section 7(b) asserted by the Companies, the Executive hereby consents to an injunction in favor of the Companies, in addition to any other remedies and damages available, to restrain the violation hereof by the Executive, the Executive’s partners, agents, servants, employers, employees and all persons acting for or with the Executive. The Executive represents and admits that the Executive’s experience and capabilities are such that the Executive can obtain employment in a business engaged in other industries and/or of a different nature than the Companies, and that the enforcement of a remedy by way of injunction will not prevent the Executive from earning a livelihood. Nothing herein will be construed as prohibiting the Companies from pursuing any other remedies available to the Companies for such breach or threatened breach, including the recovery of damages from the Executive.

(iv) The provisions of this Section 7(b) shall survive the expiration or termination of this Agreement.

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(c) Unauthorized Disclosure; Confidentiality. Except as required by law, at no time during the period of his employment hereunder and thereafter, shall the Executive, without the written consent of the Boards of Directors of the Bank or the Company, or a person authorized thereby, knowingly disclose to any person, other than an employee of the Bank or the Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of his duties as an executive of the Bank or the Company, any material confidential information obtained by him while in the employ of the Bank or the Company with respect to any of the Bank’s or the Company’s services, products, improvements, formulas, designs or styles, processes, customers, methods of distribution of any business practices the disclosure of which he knows will be materially damaging to the Bank or the Company; provided, however, that confidential information shall not include any information known generally to the public (other than as a result of unauthorized disclosure by the Executive) or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that conducted by the Bank and the Company. The provisions of this Section 7(c) shall survive the expiration or termination of this Agreement.

(d) Nothing contained in this Section 7 shall be deemed to prevent or limit the Executive’s right to invest in the capital stock or other securities of (i) any business dissimilar from that of the Bank or the Company; or (ii) any other business if the Executive does not acquire an ownership interest of more than 5% in such business; provided that the Executive shall make full disclosure to the Company’s Board of Directors of such ownership interests referenced at subparagraph d(ii) in advance of acquiring such interest.

8. Standards. The Executive shall perform his duties under this Agreement in accordance with such reasonable standards as the Boards of Directors of the Bank and the Company may establish from time to time. The Bank and the Company will provide Executive with the working facilities and staff customary for similar executives and necessary for him to perform his duties. Without limiting the foregoing, the Bank and the Company shall make reasonable accommodations for the Executive to perform some of his services remotely (including working from home) to the extent that remote performance does not compromise Executive’s ability to fulfill his obligations hereunder.

9. Paid Leave. The Executive shall be entitled to annual paid-time-off (PTO) leave in accordance with the policies that the Board periodically establishes for senior management employees of the Bank. In addition, the Executive shall be entitled to an annual sick leave benefit as established by the Board of Directors of the Bank.

10. Termination and Termination Pay. Subject to Section 12 hereof, the Executive’s employment hereunder may be terminated under the following circumstances:

(a) Death. The Executive’s employment under this Agreement shall terminate upon his death during the term of this Agreement, in which event the Executive’s estate shall be entitled to receive the compensation due the Executive through the last day of the calendar month in which his death occurred.

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(b) Disability. The Bank and the Company may terminate the Executive’s employment due to Disability. “Disability” shall mean termination because of any permanent and total physical or mental impairment that restricts Executive from performing all, or substantially all, of the essential functions of the Executive’s job duties and responsibilities. Such termination shall be without prejudice to any right the Executive may have to receive benefits under any long-term disability insurance plan maintained by the Bank or the Company.

(c) Just Cause. The Boards of Directors of the Bank or the Company may, acting in good faith, determine to terminate the Executive’s employment for Just Cause at any time by furnishing written notice to the Executive. The Executive shall have no right to receive compensation or other benefits for any period after termination for Just Cause other than previously vested benefits not subject to forfeiture. Termination of employment for “Just Cause” by the Board of Directors of the Bank or the Company shall include termination upon:

(1) the Executive’s conviction (including by a plea of guilty, no contest, or nolo contendere) of any felony;

(2) if the Executive shall have engaged in conduct involving fraud, deceit, personal dishonesty, breach of fiduciary duty or illegal conduct in his or her business or personal matters which, in the good faith and reasonable judgment of the Boards of Directors, has materially and adversely affected, or may materially and adversely affect, the business or reputation of the Company or the Bank;

(3) the Executive’s willful failure to adequately perform his duties and responsibilities to the Bank or the Company, including material compliance with policies and procedures of the Bank or the Company, which failure continues after the Bank or the Company has provided to the Executive written notice of the failure;

(4) if the Executive shall have violated any banking law or regulation, memorandum of understanding, cease and desist order, or other agreement with any banking agency having jurisdiction over the Bank or the Company which, in the good faith and reasonable judgment of the Boards of Directors, has materially and adversely affected, or may materially and adversely affect, the business or reputation of the Company or the Bank;

(5) any misconduct by the Executive, that constitutes fraud, embezzlement or material dishonesty with respect to the Bank or the Company;

(6) any government banking regulatory agency’s formal recommendation or order that the Bank or the Company terminate the employment of the Executive or relieve him of his duties;

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(7) the Executive’s willful failure to comply with any valid and legal directive of the Board of Directors of the Bank or the Company which (i) has a material adverse impact on the operations or causes substantial harm to the Bank or the Company, and (ii) continues thirty (30) days after the Bank or the Company has provided to the Executive written notice of the failure;

(8) any gross negligence in the performance of his duties hereunder or material breach of this Agreement by the Executive which (i) has a material adverse impact on the operations or causes substantial harm to the Bank or the Company, and (ii) continues thirty (30) days after the Bank or the Company has provided to the Executive written notice of the gross negligence or breach; or

(9) if the Executive shall have filed, or had filed against him, any petition under the federal bankruptcy laws or any state insolvency laws.

None of the above which are capable of being cured shall be grounds for termination until Bank or the Company gives notice thereof to the Executive and the Executive fails to cure such failure or violation within thirty (30) days of said notice. No act, or failure to act, on the Executive’s part shall be considered “willful” unless he has acted, or failed to act, with an absence of good faith and without a reasonable belief that his action or failure to act was in the best interest of the Bank and the Company.

The Bank or the Company may terminate the Executive’s employment for Just Cause without notice and opportunity to cure upon receipt of a final written directive or order of any governmental body or entity having jurisdiction over the Bank or the Company requiring termination or removal of the Executive from the positions referenced in Section 2 of this Agreement.

(d) Without Just Cause; Constructive Discharge. The Boards of Directors of the Bank or the Company may, by written notice to the Executive, terminate the Executive’s employment at any time. Termination of employment of the Executive by one entity, whether by the Bank or the Company, shall also constitute simultaneous termination of employment by the other entity.

(1) Except for termination of employment by the Boards of Directors of the Bank and the Company during the Protected Period or upon termination for Just Cause, in the event of the involuntary termination of employment of the Executive by the Boards of Directors of the Bank or the Company, the Executive shall be entitled to receive the following compensation and benefits: (i) a lump sum payment equal to the Base Salary then in effect, but in no event less than the amount set forth at Section 3 herein, that would have been paid to the Executive up to the date of expiration of the remaining term of this Agreement, but in no event for a period of less than eighteen (18) months or for a period greater than two years (the “Severance Period”), and (ii) reimbursement to the Executive for the expense of maintaining in effect the medical and dental insurance coverages available to the Executive and his dependents in accordance with

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Section 4980B of the Code (commonly referred to as “COBRA”) during such Severance Period, but in no event for a period exceeding eighteen months. All amounts payable to the Executive in accordance with Section 10(d)(1) shall be paid in one lump sum within ten (10) days of such termination of employment. Notwithstanding anything herein to the contrary, in the event of the involuntary termination of employment of the Executive during the Protected Period, severance benefits will be determined in accordance with Section 12 hereinafter. Notwithstanding the foregoing, in the event that the Bank or the Company shall terminate the employment of the Executive upon a determination by its Board of Directors that such termination of employment is as a result of Just Cause, then no such payments will be due and payable to the Executive in accordance with this Section 10(d)(1) or Section 12.

(2) The Executive shall be entitled to receive the compensation and benefits payable under subsection 10(d)(1) hereof (i) in the event that the Executive voluntarily terminates employment within 90 days of an event that constitutes Good Reason which remains uncured during the Cure Period by the Bank and/or the Company following such written notice furnished by the Executive (unless such voluntary termination occurs during the Protected Period, in which event the benefits and compensation provided for in Section 12 shall apply).

(e) Termination or Suspension Under Federal Law.

(1) If the Executive is removed and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act (“FDIA”) (12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Bank and the Company under this Agreement shall terminate, as of the effective date of the order, but vested rights of the parties shall not be affected.

(2) If the Bank is in default (as defined in Section 3(x)(1) of FDIA), all obligations of the Bank and the Company under this Agreement shall terminate as of the date of default; however, this paragraph shall not affect the vested rights of the parties.

(f) Voluntary Termination by Executive. Subject to Section 12(a)(ii) hereof, the Executive may voluntarily terminate employment with the Bank and the Company during the term of this Agreement, upon at least ninety (90) days’ prior written notice to the Board of Directors, in which case the Executive shall receive only his compensation, vested rights and employee benefits up to the date of his termination of employment (unless such termination occurs pursuant to Section 10(d)(2) hereof or within the Protected Period, in which event the benefits and compensation provided for in Sections 10(d) or 12, as applicable, shall apply).

10.1 Service as a Director. During the Executive’s employment, the Board of Directors of the Bank will appoint and re-appoint the Executive to serve as a member of the Board of Directors of the Bank, and the Company, as the sole stockholder of the Bank will vote in favor of the Executive as a nominee for Director of the Bank. The Executive will not receive any additional compensation for service as a director of any corporate entity during such time that the Executive is also an employee of the Bank or the Company. The Executive hereby agrees that upon his Termination of Employment with the Bank or the Company for any reason, this

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Agreement shall be deemed to constitute the Executive’s letter of resignation as of such date of Termination of Employment as a member of the Boards of Directors of the Bank, the Company, if applicable, and any other affiliated entities for which Executive is serving as a member of the board of directors effective immediately. The Company intends to appoint the Executive to serve as a member of the Board of Directors of the Company at its next meeting following the Effective Date and to support the nomination and re-nomination of the Executive for successive terms of office, subject to a vote of stockholders at future Annual Meetings of Stockholders of the Company.

11. No Mitigation. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Executive in any subsequent employment.

12. Change in Control Severance Payments.

(a) Trigger Events. In lieu of the severance benefits provided under Section 10(d), the Executive shall be entitled to collect the severance benefits set forth in Section 12(b) hereof in the event that (i) the Bank or the Company or their successor(s) in interest terminate the Executive’s employment without his written consent and for any reason other than Just Cause during the Protected Period, or (ii) the Executive voluntarily terminates employment within 90 days of an event that both occurs during the Protected Period and the reason for such termination constitutes Good Reason. Notwithstanding anything herein to the contrary, any notice of Termination of Employment for Good Reason furnished by the Executive to the Bank or the Company following a Change in Control shall not be effective prior to the date that is three (3) months following the date of the Change in Control, and the Executive shall continue to work through such period and continue to be paid for such time, unless the Bank or the Company shall agree in writing to an earlier effective date of such Termination of Employment.

(b) Amount of Severance Benefit. If the Executive becomes entitled to collect severance benefits pursuant to Section 12(a) hereof, the Bank shall pay the Executive:

(i) a severance benefit equal to the Code §280G maximum, and

(ii) reimbursement for the cost of COBRA continuation for the coverage for the Executive and his dependents in effect as of the date of such termination of employment that is available to the Executive under the provisions of COBRA for a period of eighteen (18) months following termination of employment.

Subject to Section 21 hereof, said sum shall be paid in one lump sum within ten (10) days of the later of (i) the date of the Change in Control and (ii) the Executive’s last day of employment with the Bank or the Company, or the respective successors thereto.

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13. Indemnification. Except as may be limited in accordance with Section 22(a) herein, the Bank and the Company shall provide the Executive (including his heirs, executors and administrators) with coverage under a standard directors’ and officers’ liability insurance policy at its expense and shall indemnify the Executive (and his heirs, executors and administrators) to the fullest extent permitted under applicable law against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of him having been an officer, director or employee of the Bank and/or the Company (whether or not he continues to be an officer, director or employee at the time of incurring such expenses or liabilities), such expenses and liabilities to include, but not be limited to, judgments, court costs, attorneys’ fees and the cost of reasonable settlements.

14. Additional Offices. The Executive agrees to serve without additional compensation, if elected or appointed thereto, as an officer in one or more offices or as a director of any subsidiary of the Company or the Bank; provided, however, the Executive shall not be required to serve in such additional offices or as a director of any subsidiary, if such service would expose him, as an individual, to adverse financial conditions.

15. Reimbursement of Executive for Enforcement Proceedings. In the event that any dispute arises between the Executive and the Bank or the Company as to the terms or interpretation of this Agreement, whether instituted by formal legal proceedings or otherwise, including any action that the Executive takes to defend against any action taken by the Bank or the Company, the Executive shall be reimbursed for all costs and expenses, including reasonable attorneys’ fees, arising from such dispute, proceedings or actions, provided that the Executive obtains either a written settlement or a final judgment by a court of competent jurisdiction substantially in his favor. Such reimbursement shall be paid within ten (10) days of Executive’s furnishing to the Bank written evidence, which may be in the form, among other things, of a canceled check or receipt, of any costs or expenses incurred by the Executive.

16. Federal Income Tax Withholding. The Bank and the Company may withhold all federal and state income or other taxes from any benefit payable under this Agreement as shall be required pursuant to any law or government regulation or ruling.

17. Successors and Assigns.

(a) Bank and Company. This Agreement shall not be assignable by the Bank and the Company, provided that this Agreement shall inure to the benefit of and be binding upon any corporate or other successor of the Bank and the Company which shall acquire, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Bank.

(b) Executive. Since the Bank and the Company are contracting for the unique and personal skills of the Executive, the Executive shall be precluded from assigning or delegating his rights or duties hereunder without first obtaining the written consent of the Bank and the Company; provided, however, that nothing in this paragraph shall preclude (i) the Executive from designating a beneficiary to receive any benefit payable hereunder upon his death, or (ii) the executors, administrators, or other legal representatives of the Executive or his estate from assigning any rights hereunder to the person or persons entitled thereunto.

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(c) Attachment. Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or to exclusion, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect.

18. Amendments. No amendments or additions to this Agreement shall be binding unless made in writing and signed by all of the parties, except as herein otherwise specifically provided.

19. Applicable Law. Except to the extent preempted by Federal law, the laws of the Commonwealth of Pennsylvania shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise.

20. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

21. Tax Liabilities and Code Section 409A. The Executive is solely responsible for the satisfaction of any tax liability, including any taxes and penalties that may arise under Sections 409A (“Section 409A”) or 4999 of the Code, that may result from any payments or benefits that the Executive receives pursuant to this Agreement. Any such payments or benefits shall be subject to reduction for any applicable employment or withholding taxes. Neither the Bank nor the Company shall have any obligation to pay, mitigate, or protect the Executive from any such tax liabilities. However, if the Bank or the Company determines in good faith in either of their sole discretion that the Executive is a key employee of a public company as defined in Section 416(i) of the Code (disregarding Section 416(i)(5)) at the time of his termination of employment, the Bank and the Company shall suspend paying the Executive any cash amounts that he is entitled to receive pursuant to Sections 6, 10, or 12 above during the six-month period following termination of the Executive’s employment (the “409A Suspension Period”), unless the Bank and the Company reasonably determine that paying such amounts in accordance with Sections 6, 10, or 12 will not result in the Executive’s liability for additional tax under Section 409A. As soon as reasonably practical after the end of the 409A Suspension Period, the Executive shall receive a lump sum payment in cash for an amount equal to any cash payments that the Bank and the Company do not make during the 409A Suspension Period. Thereafter, the Executive will receive any remaining payments pursuant to Sections 6, 10 or 12 in accordance with the terms of those Sections (as if there had not been any suspension of payments).

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22. Regulatory Exclusions.

(a) Notwithstanding anything herein to the contrary, any payments made or to be made to the Executive pursuant to the Agreement, or otherwise, shall be subject to and conditioned upon compliance with 12 USC Section 1828(k) and FDIC Regulation 12 CFR Part 359, Golden Parachute Indemnification Payments promulgated thereunder, to the extent such laws and regulations are applicable to the Company and the Bank.    

(b) IRC 280G Cutback. (i) Notwithstanding any provision of this Agreement to the contrary, all sums payable in accordance with Section 12(b) hereunder shall be reduced in such manner and to such extent, but not below zero dollars, so that no such payments made hereunder when aggregated with all other payments to be made to the Executive by the Bank, the Company or any successors thereto, shall be deemed an “excess parachute payment” for purposes of Section 280G of the Code, and thereby subjecting the Executive to liability for the payment of the excise tax provided at Section 4999(a) of the Code.    The Bank’s independent public accountants will confirm the calculation of any necessary reduction in any payments to be made to the Executive, and the Company or Bank will pay for the accountant’s determination.

(ii) With respect to the payments payable pursuant to Section 12(b) herein, the value of the restrictions set forth in Sections 7(b) and 7(c) herein shall be recognized in any calculation with respect to determining the affect, if any, of the parachute payment provisions of Section 280G of the Code, by allocating a portion of any payments, benefits or distributions in the nature of compensation (within the meaning of Section 280G(b)(2)) of the Code to the fair value of the non-competition and non-solicitation restrictions under Section 7 herein (the “Appraised Value”). The Bank, at the Bank’s expense, shall obtain an independent appraisal to determine the Appraised Value. The Appraised Value will be considered reasonable compensation for post change in control services within the meaning of Q&A-40 of the regulations under Section 280G of the Code; and accordingly, any aggregate parachute payments, as defined in Section 280G of the Code, will be reduced by the Appraised Value.

23. Entire Agreement. This Agreement, together with any modifications hereafter as agreed to in writing by the parties, shall constitute the entire agreement between the parties hereto with respect to the terms and conditions of employment of the Executive with the Bank and the Company.

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IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first hereinabove written.

ATTEST:

/s/ William S. Lance

Secretary

/s/ William S. Lance

Secretary

WITNESS:

/s/ Melissa Donnelly

WAYNE BANK
By:	/s/ Kevin M. Lamont
	Kevin M. Lamont
Its:	Chair of the Compensation Committee
NORWOOD FINANCIAL CORP
By:	/s/ Kevin M. Lamont
	Kevin M. Lamont
Its:	Chair of the Compensation Committee
EXECUTIVE
/s/ James O. Donnelly
James O. Donnelly

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EX-10.2

EXHIBIT 10.2

STOCK AWARD AGREEMENT

PURSUANT TO THE

NORWOOD FINANCIAL CORP.

2014 EQUITY INCENTIVE PLAN

FOR EXECUTIVE OFFICERS

Stock Award. This Stock Award Agreement (this “Agreement”) shall constitute an award (“Stock Award”) of Norwood Financial Corp (“Company”) common stock granted to James O. Donnelly (“Executive”) related to the sign-on equity award referenced in the Employment Offer Letter as an inducement for the Executive’s future employment services with the Company and Wayne Bank (the “Bank”) with such Stock Award being approved by the Company’s Compensation Committee and granted as of May 10, 2022 (“Date of Grant”) in accordance with the terms and conditions set forth herein, as follows:

1. The Executive shall be granted a Stock Award of Three Thousand (3,000) shares of Company common stock under the Company’s 2014 Equity Incentive Plan (“Plan”). The Stock Award shall be earned and non-forfeitable at the rate of 70% as of the one-year anniversary of the Date of Grant, and 10% annually thereafter until such Stock Award shares are fully earned; provided that the Executive shall continue employment service with the Company or the Bank as of the date of each vesting event. In addition, such Stock Award shall continue to vest during periods of service as a director or director emeritus of the Bank or the Company.

2. Upon the involuntary termination of the employment of the Executive by the Company or the Bank, (absent termination for “cause”), such Stock Award, or portion thereof, that has not yet been deemed earned and non-forfeitable shall be forfeited.

3. Upon the termination of the employment of the Executive upon the death or Disability of the Executive, such Stock Award, or portion thereof, that has not yet been deemed earned and non-forfeitable, as of such date of termination shall be deemed earned and non-forfeitable as if the Executive had reached the next applicable vesting event. Any portion of the Stock Award that remains unearned and unvested beyond the next immediate vesting date at the time of such termination of employment upon death or Disability shall be forfeited.

4. Upon the voluntary resignation of the Executive prior to the date at which such Stock Award, or portion thereof, is deemed earned and non-forfeitable, such unearned Stock Award, or portion thereof, shall be forfeited.

5. In the event of the Executive’s termination for “cause,” the Stock Award or portion thereof in which the Executive had not yet been delivered as of the effective date of such termination for cause shall be forfeited and any rights the Executive had to such Stock Award shall become null and void.

6. Stock Certificates with respect to shares of Company common stock underlying such Stock Award shall be delivered to the Executive upon such shares being deemed earned and non-forfeitable; provided that the Executive shall remain in the employment of the Company or the Bank as of the date of such distribution or shall be serving as a director or director emeritus of the Company or the Bank as of the date of such distribution.

7. The shares of Company common stock associated with the Stock Award shall be proportionately adjusted for any stock dividends or stock splits that may be declared with respect to the Company common stock prior to the date that such Stock Award (or portion thereof) is earned and non-forfeitable and distributed to the Executive.

8. If the record date of a cash dividend with respect to the Company common stock is after the Date of Grant of the Stock Award (or portion thereof), but prior to the date such Stock Award (or portion thereof) is earned and non-forfeitable and distributed to the Executive, then a corresponding amount of cash compensation shall be paid to the Executive within thirty days of the respective dividend payment date, subject to applicable tax withholding.

9. Such Stock Award shall be deemed immediately 100% earned and non-forfeitable if the Executive is an employee of the Company and/or the Bank as of the date of a Change in Control of the Company and/or the Bank.

Tax Withholdings and Reporting. The Company shall make such withholdings for taxes as it may be required prior to the distribution of shares of common stock underlying such Stock Award upon such shares being earned and non-forfeitable. The Executive shall be responsible for filing an SEC Form 4 report with respect to this Stock Award within two days of the Date of Grant.

Restrictions on Awards. The Stock Award may not be delivered to the Executive if the issuance of the common stock pursuant to the Stock Award would constitute a violation of any applicable federal or state securities or other law or valid regulation. As a condition to the Executive’s receipt of this Stock Award, the Company may require the Executive to make any representation and warranty to the Company as may be required by any applicable law or regulation.

Non-transferability of Award. A Stock Award, or portion thereof, may not be transferred in any manner prior to such Stock Award, or portion thereof, being deemed earned and non-forfeitable; provided, that such restrictions shall not apply to any shares of common stock of the Company withheld by the Company or surrendered by the Executive in payment of applicable income tax withholdings related to such Stock Award. Further, such restriction on transfer shall not preclude the transfer of such shares to family members, trusts for the benefit of the Executive or his or her family members or other transfers for estate planning purposes. Upon the death of the Executive, a Restricted Stock Award that may vest thereafter shall be transferred to the Beneficiary. The designation of a Beneficiary shall not constitute a transfer.

Voting of Stock Awards. Shares represented by a Stock Award that have not yet been vested, earned and distributed to the Executive shall not be voted by such Executive.

Disability of the Executive. “Disability” with respect to this Stock Award shall mean a condition of incapacity of the Executive which renders the Executive unable to engage in the performance of his or her duties by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months.

Compliance with Section 409A of the Code. Notwithstanding anything herein to the contrary, any payments or distributions to be made to the Executive in accordance with this Agreement and the related Plan as a result of the Executive’s termination of employment shall be administered in a manner consistent with the definition of “separation of service” as such term is defined at Section 409A of the Code and regulations promulgated thereunder, and such payments or distributions, if applicable, shall be made to the Executive as of the first day of the seventh calendar month following the date of such separation of service (“Payment Date”), if it is determined by the Bank or the Company in good faith that the Executive is a “specified employee” within the meaning of Section 409A of the Code, that such payments or distributions to be made to such Executive are subject to the limitations at Section 409A of the Code and regulations promulgated thereunder, and if payments or distributions made in advance of such Payment Date would result in the requirement for the Executive to pay additional interest and taxes to be imposed in accordance with Section 409A(a)(1)(B) of the Code. Notwithstanding anything herein to the contrary, any payments or distributions to be made to the Executive in accordance with this Agreement and the related Plan as a result of a Change in Control shall be administered in a manner consistent with the definition of “change in control” as such term is defined at Section 409A of the Code and regulations promulgated thereunder, and such payments or distributions, if applicable, shall not be made at such time, if such payments or distributions would result in the requirement for the Executive to pay additional interest and taxes to be imposed in accordance with Section 409A(a)(1)(B) of the Code.

Regulatory Limitations. Nothing in this Stock Award Agreement shall be deemed to constitute an obligation of the Company or the Bank to make any payments or agree to make any payments to the Executive which require prior approval in accordance with the Federal Deposit Insurance Corporation (“FDIC”) Regulations at 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

Other Restrictions on Awards. This Stock Award shall be subject to such other restrictions and limitations as are contained in the Plan or as determined by the Plan Committee administering such Plan.

This Stock Award Agreement, having been approved by the Company’s Compensation Committee, is entered into on May 10, 2022 by the undersigned parties.

		NORWOOD FINANCIAL CORP
Date of Award: May 10, 2022	By:	/s/ Kevin M. Lamont
		Kevin M. Lamont
	Its:	Chair, Compensation Committee

Attest:

/s/ William S. Lance

Secretary

[SEAL]

EXECUTIVE ACKNOWLEDGEMENT AND AGREEMENT:

/s/ James O. Donnelly

James O. Donnelly, Executive

EX-10.3

EXHIBIT 10.3

SALARY CONTINUATION AGREEMENT

This Salary Continuation Agreement (the “Agreement”), by and between Wayne Bank, located in Honesdale, Pennsylvania (the “Employer”), and James O. Donnelly (the “Executive”), this 10th day of May, 2022, formalizes the agreements and understanding between the Employer and the Executive.

WITNESSETH:

WHEREAS, the Executive is employed by the Employer;

WHEREAS, the Employer recognizes the valuable services the Executive has performed for the Employer and wishes to encourage the Executive’s continued employment and to provide the Executive with additional incentive to achieve corporate objectives;

WHEREAS, the Employer wishes to provide the terms and conditions upon which the Employer shall pay additional retirement benefits to the Executive;

WHEREAS, the Employer and the Executive intend this Agreement shall at all times be administered and interpreted in compliance with Code Section 409A; and

WHEREAS, the Employer intends this Agreement shall at all times be administered and interpreted in such a manner as to constitute an unfunded nonqualified deferred compensation arrangement, maintained primarily to provide supplemental retirement benefits for the Executive, a member of select group of management or highly compensated employee of the Employer.

NOW THEREFORE, in consideration of the premises and of the mutual promises herein contained, the Employer and the Executive agree as follows:

ARTICLE 1

DEFINITIONS

For the purpose of this Agreement, the following phrases or terms shall have the indicated meanings:

1.1 “Accrued Benefit” means the dollar value of the liability that should be accrued by the Employer, under Generally Accepted Accounting Principles, for the Employer’s obligation to the Executive under this Agreement, calculated by applying Accounting Standards Codification 710-10 and the Discount Rate.

1.2 “Administrator” means the Board or its designee.

1.3 “Affiliate” means any business entity with whom the Employer would be considered a single employer under Section 414(b) and 414(c) of the Code. Such term shall be interpreted in a manner consistent with the definition of “service recipient” contained in Code Section 409A.

1.4 “Beneficiary” means the person or persons designated in writing by the Executive to receive benefits hereunder in the event of the Executive’s death.

1.5 “Board” means the Board of Directors of the Employer.

1.6 “Cause” means any of the following acts or circumstances: gross negligence or gross neglect of duties to the Employer; conviction of a felony or of a gross misdemeanor involving moral turpitude in connection with the Executive’s employment with the Employer; or fraud, disloyalty, dishonesty or willful violation of any law or significant Employer policy committed in connection with the Executive’s employment and resulting in a material adverse effect on the Employer.

1.7 “Change in Control” means a change in the ownership or effective control of the Employer, or in the ownership of a substantial portion of the assets of the Employer, as such change is defined in Code Section 409A and regulations thereunder.

1.8 “Claimant” means a person who believes that he or she is being denied a benefit to which he or she is entitled hereunder.

1.9 “Code” means the Internal Revenue Code of 1986, as amended.

1.10 “Disability” means a condition of the Executive whereby the Executive either: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer. The Administrator will determine whether the Executive has incurred a Disability based on its own good faith determination and may require the Executive to submit to reasonable physical and mental examinations for this purpose. The Executive will also be deemed to have incurred a Disability if determined to be totally disabled by the Social Security Administration or in accordance with a disability insurance program, provided that the definition of disability applied under such disability insurance program complies with the initial sentence of this Section.

1.11 “Discount Rate” means the rate used by the Administrator for determining the Accrued Benefit. The initial Discount Rate is three per cent (3.5%). The Administrator may adjust the Discount Rate to maintain the rate within reasonable standards according to Generally Accepted Accounting Principles and applicable bank regulatory guidance.

1.12 “Early Termination” means Separation from Service before Normal Retirement Age except when such Separation from Service occurs following a Change in Control or due to termination for Cause.

1.13 “Effective Date” means June 1, 2022.

1.14 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

1.15 “Normal Retirement Age” means the date the Executive attains age sixty-five (65).

1.16 “Plan Year” means each twelve (12) month period commencing on October 1 and ending on September 30 of each year. The initial Plan Year shall commence on the Effective Date and end on the following September 30.

1.17 “Schedule A” means the schedule attached hereto and made a part hereof. Schedule A shall be updated upon a change to any of the benefits described in Article 2 hereof.

1.18 “Separation from Service” means a termination of the Executive’s employment with the Employer and its Affiliates for reasons other than death or Disability. A Separation from Service may occur as of a specified date for purposes of the Agreement even if the Executive continues to provide some services for the Employer or its Affiliates after that date, provided that the facts and circumstances indicate that the Employer and the Executive reasonably anticipated at that date that either no further services would be performed after that date, or that the level of bona fide services the Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed over the immediately preceding thirty-six (36) month period (or the full period during which the Executive performed services for the Employer, if that is less than thirty-six (36) months). A Separation from Service will not be deemed to have occurred while the Executive is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six (6) months or, if longer, the period for which a statute or contract provides the Executive with the right to reemployment with the Employer. If the Executive’s leave exceeds six (6) months but the Executive is not entitled to reemployment under a statute or contract, the Executive incurs a Separation from Service on the next day following the expiration of such six (6) month period. In determining whether a Separation from Service occurs the Administrator shall take into account, among other things, the definition of “service recipient” and “employer” set forth in Treasury regulation §1.409A-1(h)(3). The Administrator shall have full and final authority, to determine conclusively whether a Separation from Service occurs, and the date of such Separation from Service.

1.19 “Specified Employee” means an individual that satisfies the definition of a “key employee” of the Employer as such term is defined in Code §416(i) (without regard to Code §416(i)(5)), provided that the stock of the Employer is publicly traded on an established securities market or otherwise, as defined in Code §1.897-1(m). If the Executive is a key employee at any time during the twelve (12) months ending on December 31, the Executive is a Specified Employee for the twelve (12) month period commencing on the first day of the following April.

ARTICLE 2

PAYMENT OF BENEFITS

2.1 Normal Retirement Benefit. If Separation from Service occurs at Normal Retirement Age, the Employer shall pay the Executive an annual benefit in the amount of One Hundred Twenty-Five Thousand Dollars ($125,000) in lieu of any other benefit hereunder. If Separation from Service occurs after Normal Retirement Age, for each full month between Normal Retirement Age and Separation from Service, up to a maximum of twenty-four (24) months, the Employer shall increase this annual benefit by .3274%. The annual benefit will be paid for fifteen (15) years in equal monthly installments commencing the month following Separation from Service.

2.2 Early Termination Benefit. If Early Termination occurs, the Employer shall pay the Executive the annual benefit shown on Schedule A for the Plan Year ending immediately prior to Separation from Service in lieu of any other benefit hereunder. Additionally, the annual benefit shall be increased by a pro-rated amount relative to the Executive’s service during the partial Plan Year in which Separation from Service takes place. The annual benefit will be paid for fifteen (15) years in equal monthly installments commencing the month following Normal Retirement Age.

2.3 Disability Benefit. In the event the Executive suffers a Disability prior to Change in Control and Normal Retirement Age the Employer shall pay the Executive the annual benefit shown on Schedule A for the Plan Year ending immediately prior to Disability in lieu of any other benefit hereunder. Additionally, the annual benefit shall be increased by a pro-rated amount relative to the Executive’s service during the partial Plan Year in which Disability takes place. The annual benefit will be paid for fifteen (15) years in equal monthly installments commencing the month following Disability.

2.4 Change in Control Benefit. (a) If a Change in Control occurs prior to Separation from Service, Disability, Normal Retirement Age and the Executive’s death, the Employer shall pay the Executive an annual benefit in the amount of One Hundred Twenty-Five Thousand Dollars ($125,000) in lieu of any other benefit hereunder. The annual benefit will be paid for fifteen (15) years in equal monthly installments commencing the month following Normal Retirement Age. (b) If a Change in Control occurs after Normal Retirement Age, but prior to Separation from Service, Disability and the Executive’s death, the Employer shall pay the Executive an annual benefit shown on Schedule A for the Plan Year ending immediately prior to Change in Control in lieu of any other benefit hereunder. Additionally, the annual benefit shall be increased by a pro-rated amount relative to the Executive’s service during the partial Plan Year in which Change in Control takes place. If Change in Control occurs after the Executive has reached age sixty-seven (67) the annual benefit shall be One Hundred Thirty-Five Thousand Two Hundred Dollars ($135,200). The annual benefit will be paid for fifteen (15) years in equal monthly installments commencing the month following Change in Control.

2.5 Death Prior to Commencement of Benefit Payments. In the event the Executive dies prior to Separation from Service, Disability and Change in Control the Employer shall pay the Beneficiary an annual benefit in the amount of One Hundred Twenty-Five Thousand Dollars ($125,000) in lieu of any other benefit hereunder. If the Executive’s death occurs after Normal Retirement Age, for each full month between Normal Retirement Age and the Executive’s death, up to a maximum of twenty-four (24) months, the Employer shall increase

this annual benefit by .3274%. If the Executive’s death occurs after the Executive has reached age sixty-seven (67) the annual benefit shall be One Hundred Thirty-Five Thousand Two Hundred Dollars ($135,200). The annual benefit will be paid for fifteen (15) years in equal monthly installments commencing the month following the Executive’s death.

2.6 Death Subsequent to Commencement of Benefit Payments. In the event the Executive dies while receiving payments, but prior to receiving all payments due and owing hereunder, the Employer shall pay the Beneficiary the same amounts at the same times as the Employer would have paid the Executive had the Executive survived.

2.7 Death Subsequent to Separation from Service or Change in Control and Prior to Normal Retirement Age. In the event the Executive dies after becoming entitled to benefits under Section 2.2 or 2.4 and prior to Normal Retirement Age the Employer shall pay the Beneficiary the same amounts for the same period as the Employer would have paid the Executive had the Executive survived but the payments shall commence the month following the Executive’s death.

2.8 Termination for Cause. If the Employer terminates the Executive’s employment for Cause, then the Executive shall not be entitled to any benefits under the terms of this Agreement.

2.9 Restriction on Commencement of Distributions. Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee at the time of Separation from Service, the provisions of this Section shall govern all distributions hereunder. Distributions which would otherwise be made to the Executive due to Separation from Service shall not be made during the first six (6) months following Separation from Service. Rather, any distribution which would otherwise be paid to the Executive during such period shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month following Separation from Service, or if earlier, upon the Executive’s death. All subsequent distributions shall be paid as they would have had this Section not applied.

2.10 Acceleration of Payments. Except as specifically permitted herein, no acceleration of the time or schedule of any payment may be made hereunder. Notwithstanding the foregoing, payments may be accelerated, in accordance with the provisions of Treasury Regulation §1.409A-3(j)(4) in the following circumstances: (i) as a result of certain domestic relations orders; (ii) in compliance with ethics agreements with the federal government; (iii) in compliance with the ethics laws or conflicts of interest laws; (iv) in limited cashouts (but not in excess of the limit under Code §402(g)(1)(B)); (v) to pay employment-related taxes; or (vi) to pay any taxes that may become due at any time that the Agreement fails to meet the requirements of Code Section 409A.

2.11 Delays in Payment by Employer. A payment may be delayed to a date after the designated payment date under any of the circumstances described below, and the provision will not fail to meet the requirements of establishing a permissible payment event. The delay in the payment will not constitute a subsequent deferral election, so long as the Employer treats all payments to similarly situated individuals on a reasonably consistent basis.

(a) Payments that would violate Federal securities laws or other applicable law. A payment may be delayed where the Employer reasonably anticipates that the making of the payment will violate Federal securities laws or other applicable law provided that the payment is made at the earliest date at which the Employer reasonably anticipates that the making of the payment will not cause such violation. The making of a payment that would cause inclusion in gross income or the application of any penalty provision of the Internal Revenue Code is not treated as a violation of law.

(b) Solvency. Notwithstanding the above, a payment may be delayed where the payment would jeopardize the ability of the Employer to continue as a going concern.

2.12 Treatment of Payment as Made on Designated Payment Date. Solely for purposes of determining compliance with Code Section 409A, any payment under this Agreement made after the required payment date shall be deemed made on the required payment date provided that such payment is made by the latest of: (i) the end of the calendar year in which the payment is due; (ii) the 15^th day of the third calendar month following the payment due date; (iii) if Employer cannot calculate the payment amount on account of administrative impracticality which is beyond the Executive’s control, the end of the first calendar year which payment calculation is practicable; and (iv) if Employer does not have sufficient funds to make the payment without jeopardizing the Employer’s solvency, in the first calendar year in which the Employer’s funds are sufficient to make the payment.

2.13 Facility of Payment. If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Administrator may make such distribution: (i) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains his or her residence; or (ii) to the conservator or administrator or, if none, to the person having custody of an incompetent payee. Any such distribution shall fully discharge the Employer and the Administrator from further liability on account thereof.

2.14 Excise Tax Limitation. Notwithstanding any provision of this Agreement to the contrary, if any benefit payment hereunder would be treated as an “excess parachute payment” under Code Section 280G, the Employer shall reduce such benefit payment to the extent necessary to avoid treating such benefit payment as an excess parachute payment. The Executive shall be entitled to only the reduced benefit and shall forfeit any amount over and above the reduced amount.

2.15 Changes in Form or Timing of Benefit Payments. The Employer and the Executive may, subject to the terms hereof, amend this Agreement to delay the timing or change the form of payments. Any such amendment:

(a) must take effect not less than twelve (12) months after the amendment is made;

(b) must, for benefits distributable due solely to the arrival of a specified date, or on account of Separation from Service or Change in Control, delay the commencement of distributions for a minimum of five (5) years from the date the first distribution was originally scheduled to be made;

(c) must, for benefits distributable due solely to the arrival of a specified date, be made not less than twelve (12) months before distribution is scheduled to begin; and

(d) may not accelerate the time or schedule of any distribution.

ARTICLE 3

BENEFICIARIES

3.1 Designation of Beneficiaries. The Executive may designate any person to receive any benefits payable under the Agreement upon the Executive’s death, and the designation may be changed from time to time by the Executive by filing a new designation. Each designation will revoke all prior designations by the Executive, shall be in the form prescribed by the Administrator, and shall be effective only when filed in writing with the Administrator during the Executive’s lifetime. If the Executive names someone other than the Executive’s spouse as a Beneficiary, the Administrator may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Administrator, executed by the Executive’s spouse and returned to the Administrator. The Executive’s beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved.

3.2 Absence of Beneficiary Designation. In the absence of a valid Beneficiary designation, or if, at the time any benefit payment is due to a Beneficiary, there is no living Beneficiary validly named by the Executive, the Employer shall pay the benefit payment to the Executive’s spouse. If the spouse is not living then the Employer shall pay the benefit payment to the Executive’s living descendants per stirpes, and if there are no living descendants, to the Executive’s estate. In determining the existence or identity of anyone entitled to a benefit payment, the Employer may rely conclusively upon information supplied by the Executive’s personal representative, executor, or administrator.

ARTICLE 4

ADMINISTRATION

4.1 Administrator Duties. The Administrator shall be responsible for the management, operation, and administration of the Agreement. When making a determination or calculation, the Administrator shall be entitled to rely on information furnished by the Employer, Executive or Beneficiary. No provision of this Agreement shall be construed as imposing on the Administrator any fiduciary duty under ERISA or other law, or any duty similar to any fiduciary duty under ERISA or other law.

4.2 Administrator Authority. The Administrator shall enforce this Agreement in accordance with its terms, shall be charged with the general administration of this Agreement, and shall have all powers necessary to accomplish its purposes.

4.3 Binding Effect of Decision. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation or application of this Agreement and the rules and regulations promulgated hereunder shall be final, conclusive and binding upon all persons having any interest in this Agreement.

4.4 Compensation, Expenses and Indemnity. The Administrator shall serve without compensation for services rendered hereunder. The Administrator is authorized at the expense of the Employer to employ such legal counsel and/or recordkeeper as it may deem advisable to assist in the performance of its duties hereunder. Expense and fees in connection with the administration of this Agreement shall be paid by the Employer.

4.5 Employer Information. The Employer shall supply full and timely information to the Administrator on all matters relating to the Executive’s compensation, death, Disability or Separation from Service, and such other information as the Administrator reasonably requires.

4.6 Termination of Participation. If the Administrator determines in good faith that the Executive no longer qualifies as a member of a select group of management or highly compensated employees, as determined in accordance with ERISA, the Administrator shall have the right, in its sole discretion, to cease further benefit accruals hereunder.

4.7 Compliance with Code Section 409A. The Employer and the Executive intend that the Agreement comply with the provisions of Code Section 409A to prevent the inclusion in gross income of any amounts deferred hereunder in a taxable year prior to the year in which amounts are actually paid to the Executive or Beneficiary. This Agreement shall be construed, administered and governed in a manner that affects such intent, and the Administrator shall not take any action that would be inconsistent therewith.

ARTICLE 5

CLAIMS AND REVIEW PROCEDURES

5.1 Claims Procedure. A Claimant who has not received benefits under this Agreement that he or she believes should be distributed shall make a claim for such benefits as follows.

(a) Initiation – Written Claim. The Claimant initiates a claim by submitting to the Administrator a written claim for the benefits. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant.

(b) Timing of Administrator Response. The Administrator shall respond to such Claimant within forty-five (45) days after receiving the claim. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional thirty (30) days by notifying the Claimant in writing, prior to the end of the initial forty-five (45) day period, that an additional period is required. The extension notice shall specifically explain the standards on which entitlement to a disability benefit is based, the unresolved issues that prevent a decision on the claim and the additional information needed from the Claimant to resolve those issues, and the Claimant shall be afforded at least forty-five (45) days within which to provide the specified information.

(c) Notice of Decision. If the Administrator denies all or a part of the claim, the Administrator shall notify the Claimant in writing of such denial in a culturally and linguistically appropriate manner. The Administrator shall write the notification in a manner calculated to be understood by the Claimant. The notification shall set forth: (i) the specific reasons for the denial; (ii) a reference to the specific provisions of this Agreement on which the denial is based; (iii) a notice that the Claimant has a right to request a review of the claim denial and an explanation of the Agreement’s review procedures and the time limits applicable to such procedures; (iv) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review, and a description of any time limit for bringing such an action; (v) for any Disability claim, a discussion of the decision, including an explanation of the basis for disagreeing with or not following: (A) the views presented by the Claimant of health care professionals treating the Claimant and vocational professionals who evaluated the Claimant; (B) the views of medical or vocational experts whose advice was obtained on behalf of the Employer in connection with a Claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; or (C) a disability determination regarding the Claimant presented by the Claimant made by the Social Security Administration (vi) for any Disability claim, the specific internal rules, guidelines, protocols, standards or other similar criteria relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria do not exist; and (viii) for any Disability claim, a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimant’s claim for benefits. Whether a document, record, or other information is relevant to a claim for benefits shall be determined by Department of Labor Regulation Section 2560.503-1(m)(8).

5.2 Review Procedure. If the Administrator denies all or a part of the claim, the Claimant shall have the opportunity for a full and fair review by the Administrator of the denial as follows.

(a) Additional Evidence. Prior to the review of the denied claim, the Claimant shall be given, free of charge, any new or additional evidence considered, relied upon, or generated by the Administrator, or any new or additional rationale, as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided, to give the Claimant a reasonable opportunity to respond prior to that date.

(b) Initiation – Written Request. To initiate the review, the Claimant, within sixty (60) days after receiving the Administrator’s notice of denial, must file with the Administrator a written request for review.

(c) Additional Submissions – Information Access. After such request the Claimant may submit written comments, documents, records and other information relating to the claim. The Administrator shall also provide the Claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits.

(d) Considerations on Review. In considering the review, the Administrator shall consider all materials and information the Claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. Additional considerations shall be required in the case of a claim for Disability benefits. The claim shall be reviewed by an individual or committee who did not make the initial determination that is subject of the appeal and who is not a subordinate of the individual who made the determination. Additionally, the review shall be made without deference to the initial adverse benefit determination. If the initial adverse benefit determination was based in whole or in part on a medical judgment, the Administrator will consult with a health care professional with appropriate training and experience in the field of medicine involving the medical judgment. The health care professional who is consulted on appeal will not be the same individual who was consulted during the initial determination and will not be the subordinate of such individual. If the Administrator obtained the advice of medical or vocational experts in making the initial adverse benefits determination (regardless of whether the advice was relied upon), the Administrator will identify such experts.

(e) Timing of Administrator Response. The Administrator shall respond in writing to such Claimant within forty-five (45) days after receiving the request for review. If the Administrator determines that special circumstances require additional time for processing the claim, the Administrator can extend the response period by an additional forty-five (45) days by notifying the Claimant in writing, prior to the end of the initial forty-five (45) day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.

(f) Notice of Decision. The Administrator shall notify the Claimant in writing of its decision on review. The Administrator shall write the notification in a culturally and linguistically appropriate manner calculated to be understood by the Claimant. The notification shall set forth: (i) the specific reasons for the denial; (ii) a reference to the specific provisions of this Agreement on which the denial is based; (iii) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits; (iv) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a); (v) for any Disability claim, a discussion of the decision, including an explanation of the basis for disagreeing with or not following: (A) the views presented by the Claimant of health care professionals treating the Claimant and vocational professionals who evaluated the Claimant; (B) the views of medical or vocational experts whose advice was obtained on behalf of the Employer in connection with a Claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; or (C) a disability determination regarding the Claimant presented by the Claimant made by the Social Security Administration; and (vi) for any Disability claim, the specific internal rules, guidelines, protocols, standards or other similar criteria relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria do not exist.

5.3 Exhaustion of Remedies. The Claimant must follow these claims review procedures and exhaust all administrative remedies before taking any further action with respect to a claim for benefits.

5.4 Failure to Follow Procedures. In the case of a claim for Disability benefits, if the Administrator fails to strictly adhere to all the requirements of this claims procedure with respect to a Disability claim, the Claimant is deemed to have exhausted the administrative remedies available under the Agreement, and shall be entitled to pursue any available remedies under ERISA Section 502(a) on the basis that the Administrator has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim, except where the violation was: (a) de minimis; (b) non-prejudicial; (c) attributable to good cause or matters beyond the Administrator’s control; (d) in the context of an ongoing good-faith exchange of information; and (e) not reflective of a pattern or practice of noncompliance. The Claimant may request a written explanation of the violation from the Administrator, and the Administrator must provide such explanation within ten (10) days, including a specific description of its basis, if any, for asserting that the violation should not cause the administrative remedies to be deemed exhausted. If a court rejects the Claimant’s request for immediate review on the basis that the Administrator met the standards for the exception, the claim shall be considered as re-filed on appeal upon the Administrator’s receipt of the decision of the court. Within a reasonable time after the receipt of the decision, the Administrator shall provide the claimant with notice of the resubmission.

ARTICLE 6

AMENDMENT AND TERMINATION

6.1 Agreement Amendment Generally. Except as provided in Section 6.2, this Agreement may be amended only by a written agreement signed by both the Employer and the Executive.

6.2 Amendment to Ensure Proper Characterization of Agreement. Notwithstanding anything in this Agreement to the contrary, the Agreement may be amended by the Employer at any time, if found necessary in the opinion of the Employer, (i) to ensure that the Agreement is characterized as plan of deferred compensation maintained for a select group of management or highly compensated employees as described under ERISA, (ii) to conform the Agreement to the requirements of any applicable law or (iii) to comply with the written instructions of the Employer’s auditors or banking regulators.

6.3 Agreement Termination Generally. Except as provided in Section 6.4, this Agreement may be terminated only by a written agreement signed by the Employer and the Executive. Such termination shall not cause a distribution of benefits under this Agreement. Rather, upon such termination benefit distributions will be made at the earliest distribution event permitted under Article 2.

6.4 Effect of Complete Termination. Notwithstanding anything to the contrary in Section 6.3, and subject to the requirements of Code Section 409A and Treasury Regulations §1.409A-3(j)(4)(ix), at certain times the Employer may completely terminate and liquidate the Agreement. In the event of such a complete termination under subsection (a) or (c) below, or under subsection (b) after benefit payments have commenced hereunder, the Employer shall pay the Executive the Accrued Benefit. In the event of a complete termination under subsection (b) below prior to the commencement of benefit payments, the Employer shall pay the Executive one hundred fifteen percent of the present value, calculated using a four percent (4.0%) discount rate, of the benefit described in Section 2.4 hereof. In any event, such complete termination of the Agreement shall occur only under the following circumstances and conditions.

(a) Corporate Dissolution or Bankruptcy. The Employer may terminate and liquidate this Agreement within twelve (12) months of a corporate dissolution taxed under Code Section 331, or with the approval of a bankruptcy court pursuant, provided that all benefits paid under the Agreement are included in the Executive’s gross income in the latest of: (i) the calendar year which the termination occurs; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the payment is administratively practicable.

(b) Change in Control. The Employer may terminate and liquidate this Agreement by taking irrevocable action to terminate and liquidate within the thirty (30) days preceding or the twelve (12) months following a Change in Control. This Agreement will then be treated as terminated only if all substantially similar arrangements sponsored by the Employer which are treated as deferred under a single plan under Treasury Regulations §1.409A-1(c)(2) are terminated and liquidated with respect to each participant who experienced the Change in Control so that the Executive and any participants in any such similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Employer takes the irrevocable action to terminate the arrangements.

(c) Discretionary Termination. The Employer may terminate and liquidate this Agreement provided that: (i) the termination does not occur proximate to a downturn in the financial health of the Employer; (ii) all arrangements sponsored by the Employer and Affiliates that would be aggregated with any terminated arrangements under Treasury Regulations §1.409A-1(c) are terminated; (iii) no payments, other than payments that would be payable under the terms of this Agreement if the termination had not occurred, are made within twelve (12) months of the date the Employer takes the irrevocable action to terminate this Agreement; (iv) all payments are made within twenty-four (24) months following the date the Employer takes the irrevocable action to terminate and liquidate this Agreement; and (v) neither the Employer nor any of its Affiliates adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury Regulations §1.409A-1(c) if the Executive participated in both arrangements, at any time within three (3) years following the date the Employer takes the irrevocable action to terminate this Agreement.

ARTICLE 7

MISCELLANEOUS

7.1 No Effect on Other Rights. This Agreement constitutes the entire agreement between the Employer and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein. Nothing contained herein will confer upon the Executive the right to be retained in the service of the Employer nor limit the right of the Employer to discharge or otherwise deal with the Executive without regard to the existence hereof.

7.2 State Law. This Agreement and all rights hereunder shall be governed by and construed according to the laws of the Commonwealth of Pennsylvania except to the extent preempted by the laws of the United States of America.

7.3 Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.

7.4 Nonassignability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

7.5 Unsecured General Creditor Status. Payment to the Executive or any Beneficiary hereunder shall be made from assets which shall continue, for all purposes, to be part of the general, unrestricted assets of the Employer and no person shall have any interest in any such asset by virtue of any provision of this Agreement. The Employer’s obligation hereunder shall be an unfunded and unsecured promise to pay money in the future. In the event that the Employer purchases an insurance policy insuring the life of the Executive to recover the cost of providing benefits hereunder, neither the Executive nor the Beneficiary shall have any rights whatsoever in said policy or the proceeds therefrom.

7.6 Life Insurance. If the Employer chooses to obtain insurance on the life of the Executive in connection with its obligations under this Agreement, the Executive hereby agrees to take such physical examinations and to truthfully and completely supply such information as may be required by the Employer or the insurance company designated by the Employer.

7.7 Unclaimed Benefits. The Executive shall keep the Employer informed of the Executive’s current address and the current address of the Beneficiary. If the location of the Executive is not made known to the Employer within three years after the date upon which any payment of any benefits may first be made, the Employer shall delay payment of the Executive’s benefit payment(s) until the location of the Executive is made known to the Employer; however, the Employer shall only be obligated to hold such benefit payment(s) for the Executive until the expiration of three (3) years. Upon expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Beneficiary. If the location of the Beneficiary is not made known to the Employer by the end of an additional two (2) month period following expiration of the three (3) year period, the Employer may discharge its obligation by payment to the Executive’s estate. If there is no estate in existence at such time or if such fact cannot be determined by the Employer, the Executive and Beneficiary shall thereupon forfeit all rights to any benefits provided under this Agreement.

7.8 Suicide or Misstatement. No benefit shall be distributed hereunder if the Executive commits suicide within two (2) years after the Effective Date, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Employer denies coverage (i) for material misstatements of fact made by the Executive on an application for life insurance, or (ii) for any other reason.

7.9 Removal. Notwithstanding anything in this Agreement to the contrary, the Employer shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued pursuant to Section 8(e) of the Federal Deposit Insurance Act. Furthermore, any payments made to the Executive pursuant to this Agreement shall, if required, comply with 12 U.S.C. 1828, FDIC Regulation 12 CFR Part 359 and any other regulations or guidance promulgated thereunder.

7.10 Forfeiture Provision. The Executive shall forfeit, for the Executive and the Beneficiary, any unpaid benefits hereunder, if the Executive, directly or indirectly, either as an individual or as a proprietor, stockholder, partner, officer, trustee, employee, agent, consultant or independent contractor of any individual, partnership, corporation or other entity (excluding an ownership interest of three percent (3%) or less in the stock of a publicly-traded company):

(i) becomes employed by, participates in, or becomes connected in any manner with the ownership, management, operation or control of any bank, savings and loan or other similar financial institution if the Executive’s responsibilities will include providing banking or other financial services within fifty (50) miles of any office maintained by the Employer as of the date of Separation from Service;

(ii) participates in any way in hiring or otherwise engaging, or assisting any other person or entity in hiring or otherwise engaging, on a temporary, part-time or permanent basis, any individual who was employed by the Employer within the three (3) years immediately preceding Separation from Service;

(iii) assists, advises, or serves in any capacity with, representative or otherwise, any third party in any action against the Employer or in opposition to any transaction involving the Employer;

(iv) sells, offers to sell or provides banking or other financial services, assists any other person in selling or providing banking or other financial services, or solicits or otherwise competes for, either directly or indirectly, any orders, contracts, or accounts for services of a kind or nature like or substantially similar to the financial services performed or financial products sold by the Employer (the preceding hereinafter referred to as “Services”), to or from any person or entity from whom the Executive or the Employer, to the knowledge of the Executive, provided banking or other financial services, sold, offered to sell or solicited orders, contracts or accounts for Services within the three (3) years immediately preceding Separation from Service;

(v) divulges, discloses, or communicates to others in any manner whatsoever, any confidential information of the Employer, to the knowledge of the Executive, including, but not limited to, the names and addresses of customers or prospective customers of the Employer, as they may have existed from time to time, of work performed or services rendered for any customer, any method and/or

procedures relating to projects or other work developed for the Employer, earnings or other information concerning the Employer. The restrictions contained in this subparagraph (v) apply to all information regarding the Employer, regardless of the source who provided or compiled such information. Notwithstanding anything to the contrary, all information referred to herein shall not be disclosed unless and until it becomes known to the general public from sources other than the Executive.

Notwithstanding the foregoing, this Section 7.10 shall not apply following Change in Control.

7.11 Notice. Any notice, consent or demand required or permitted to be given to the Employer or Administrator under this Agreement shall be sufficient if in writing and hand-delivered or sent by registered or certified mail to the Employer’s principal business office. Any notice or filing required or permitted to be given to the Executive or Beneficiary under this Agreement shall be sufficient if in writing and hand-delivered or sent by mail to the last known address of the Executive or Beneficiary, as appropriate. Any notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or on the receipt for registration or certification.

7.12 Headings and Interpretation. Headings and sub-headings in this Agreement are inserted for reference and convenience only and shall not be deemed part of this Agreement. Wherever the fulfillment of the intent and purpose of this Agreement requires and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

7.13 Alternative Action. In the event it becomes impossible for the Employer or the Administrator to perform any act required by this Agreement due to regulatory or other constraints, the Employer or Administrator may perform such alternative act as most nearly carries out the intent and purpose of this Agreement and is in the best interests of the Employer, provided that such alternative act does not violate Code Section 409A.

7.14 Coordination with Other Benefits. The benefits provided for the Executive or the Beneficiary under this Agreement are in addition to any other benefits available to the Executive under any other plan or program for employees of the Employer. This Agreement shall supplement and shall not supersede, modify, or amend any other such plan or program except as may otherwise be expressly provided herein.

7.15 Inurement. This Agreement shall be binding upon and shall inure to the benefit of the Employer, its successor and assigns, and the Executive, the Executive’s successors, heirs, executors, administrators, and the Beneficiary.

7.16 Tax Withholding. The Employer may make such provisions and take such action as it deems necessary or appropriate for the withholding of any taxes which the Employer is required by any law or regulation to withhold in connection with any benefits under the Agreement.

7.17 Responsibility for Taxes. The Executive shall be responsible for the payment of all individual tax liabilities relating to any benefits paid hereunder. The Executive acknowledges that in no event will the Employer be liable to the Executive for any taxes resulting from the Executive’s participation in the Agreement, including any additional penalty, excise or other taxes that might be imposed as a result of Code Section 409A.

7.18 Aggregation of Agreement. If the Employer offers other non-qualified deferred compensation plans in addition to this Agreement, this Agreement and those plans shall be treated as a single plan to the extent required under Code Section 409A.

IN WITNESS WHEREOF, the Executive and a representative of the Employer have executed this Agreement document as indicated below:

Executive:	Employer:
/s/ James O. Donnelly	/s/ Lewis J. Critelli
James O. Donnelly	By:	Lewis J. Critelli
	Its:	Chairman of the Board

Salary Continuation Agreement

Schedule A

James O. Donnelly

								Early Termination		Normal Retirement Benefit		Disability		Change In Control Before Normal Retirement Age		Change In Control After Normal Retirement Age		Death
Plan Anniversary Date: 09/30/2022
Normal Retirement: XX/XX/2032, Age 65
Normal Retirement Payment: Monthly for 15 Years
								Amount Payable Monthly for 15 Years at Normal Retirement Age		Amount Payable Monthly for 15 Years at Separation from Service on or after Normal Retirement Age		Amount Payable Monthly for 15 Years Upon Disability		Amount Payable Monthly for 15 Years at Normal Retirement Age		Amount Payable Monthly for 15 Years upon a Change in Control		Amount Payable Monthly for 15 Years Upon Death
End of Month Values As Of	Age		Discount Rate Pre/Post	Benefit Level		Based On		Annual Benefit 1		Annual Benefit 1		Annual Benefit 1		Annual Benefit 1, 2		Annual Benefit 1, 2		Annual Benefit 1, 2
Jun-22		55	3.50%/3.50%		125,000		0		0				0		125,000				125,000
Sep-22		55	3.50%/3.50%		125,000		41,340		4,943				3,536		125,000				125,000
Sep-23		56	3.50%/3.50%		125,000		168,291		19,431				14,395		125,000				125,000
Sep-24		57	3.50%/3.50%		125,000		299,756		33,421				25,640		125,000				125,000
Sep-25		58	3.50%/3.50%		125,000		435,898		46,931				37,285		125,000				125,000
Sep-26		59	3.50%/3.50%		125,000		576,881		59,977				49,344		125,000				125,000
Sep-27		60	3.50%/3.50%		125,000		722,879		72,574				61,832		125,000				125,000
Sep-28		61	3.50%/3.50%		125,000		874,070		84,739				74,765		125,000				125,000
Sep-29		62	3.50%/3.50%		125,000		1,030,638		96,487				88,157		125,000				125,000
Sep-30		63	3.50%/3.50%		125,000		1,192,774		107,830				102,026		125,000				125,000
Sep-31		64	3.50%/3.50%		125,000		1,360,678		118,785				116,388		125,000				125,000
Apr-32		65	3.50%/3.50%		125,000		1,461,366		125,000		125,000		125,000		125,000		125,000		125,000
Apr-33		66	3.50%/3.50%		130,000		1,519,820				130,000						130,000		130,000
Apr-34		67	3.50%/3.50%		135,200		1,580,613				135,200						135,200		135,200

The first line represents the plan values as of June 01, 2022.

¹  The annual benefit amount will be distributed in 12 equal monthly payments for a total of 180 monthly payments.

²  Note that accounting rules may require an additional accrual at the time this benefit is triggered.

IF THERE IS A CONFLICT BETWEEN THIS SCHEDULE A AND THE AGREEMENT, THE TERMS AND PROVISIONS OF THE AGREEMENT SHALL PREVAIL. IF A TRIGGERING EVENT OCCURS, REFER TO THE AGREEMENT TO DETERMINE THE ACTUAL BENEFIT AMOUNT BASED ON THE DATE OF THE EVENT.

NFP cannot and does not engage in the practice of law or accounting. The information provided herein is based solely on our informal, general understanding of the relevant technical issues as well as the products and plans that may be involved. This information is not intended nor should it be used as an opinion on legal, tax or accounting matters. Clients are strongly urged to seek independent accounting, tax and/or legal counsel for advice in applying this information.

James O. Donnelly /s/ James O. Donnelly	By	/s/ William S. Lance
Date 5/10/2022	Title	Secretary
	Date	5/10/2022

XML

Document and Entity Information	May 09, 2022
Cover [Abstract]
Amendment Flag	false
Entity Central Index Key	0001013272
Document Type	8-K
Document Period End Date	May 09, 2022
Entity Registrant Name	NORWOOD FINANCIAL CORP
Entity Incorporation State Country Code	PA
Entity File Number	0-28364
Entity Tax Identification Number	23-2828306
Entity Address, Address Line One	717 Main Street
Entity Address, City or Town	Honesdale
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	18431
City Area Code	(570)
Local Phone Number	253-1455
Written Communications	false
Soliciting Material	false
Pre Commencement Tender Offer	false
Pre Commencement Issuer Tender Offer	false
Security 12b Title	Common Stock, par value $0.10 per share
Trading Symbol	NWFL
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false