SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ___)
Filed by the Registrantx
Filed by a Party other than the Registrant¨
Check the appropriate box:
¨ | Preliminary Proxy Statement |
¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
x | Definitive Proxy Statement |
¨ | Definitive Additional Materials |
¨ | Soliciting Material Pursuant to §240.14a-12 |
TRI-COUNTY FINANCIAL CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x | No fee required. |
¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
1. | Title of each class of securities to which transaction applies: |
2. | Aggregate number of securities to which transaction applies: |
3. | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): |
4. | Proposed maximum aggregate value of transaction: |
5. | Total fee paid: |
¨ | Fee paid previously with preliminary materials: |
¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
1. | Amount Previously Paid: |
2. | Form, Schedule or Registration Statement No.: |
3. | Filing Party: |
4. | Date Filed: |
[LETTERHEAD OF TRI-COUNTY FINANCIAL CORPORATION]
April 8, 2011
Dear Stockholder:
I am pleased to invite you to attend the annual meeting of stockholders of Tri-County Financial Corporation (the “Company”) to be held in the Board Room at the main office of Community Bank of Tri-County, 3035 Leonardtown Road, Waldorf, Maryland on Monday, May 9, 20116, 2013 at 10:00 a.m.
The attached notice and proxy statement describe the formal business to be transacted at the annual meeting. Directors and officers of the Company, as well as a representative of the Company’s independent registered public accounting firm, Stegman & Company, will be present to respond to any questions stockholders may have.
Your vote is important, regardless of the number of shares you own.On behalf of the Board of Directors, I urge you to vote via the Internet, by telephone or sign, dateby signing, dating and returnreturning the enclosed proxy card as soon as possible, even if you currently plan to attend the annual meeting. This will not prevent you from voting in person, but will ensure that your vote is counted if you are unable to attend
Sincerely,
/s/ Michael L. Middleton
Michael L. Middleton
Chairman of the annual meeting.
TRI-COUNTY FINANCIAL CORPORATION
3035 LEONARDTOWN ROAD
WALDORF, MARYLAND 20601
(301) 645-5601
NOTICE OF 20112013 ANNUAL MEETING OF STOCKHOLDERS
TIME AND DATE | 10:00 a.m. on Monday, May |
PLACE | Board Room |
Community Bank of Tri-County | |
3035 Leonardtown Road | |
Waldorf, Maryland 20601 |
ITEMS OF BUSINESS | (1) | To elect three directors to serve for a term of three |
(2) | ||
To ratify the appointment of Stegman & Company as the independent registered public accounting firm for | ||
(3) | To vote on a non-binding resolution to approve the compensation of the named executive officers; | |
(4) | To vote on the frequency of the advisory vote on the compensation of our named executive officers; and | |
(5) | To transact such other business as may properly come before the meeting or any adjournments or postponement thereof. |
RECORD DATE | To vote, you must have been a stockholder at the close of business on March | |
PROXY VOTING | It is important that your shares be represented and voted at the meeting. You can vote your shares | |
/s/ Gregory C. Cockerham | ||
Gregory C. Cockerham | ||
Secretary | ||
April |
IMPORTANT: The prompt return of proxies will save the Company the expense of further requests for proxies to ensure a quorum. A self-addressed envelope is enclosed for your convenience. No postage is required if mailed in the United States.
PROXY STATEMENT
OF
TRI-COUNTY FINANCIAL CORPORATION
3035 LEONARDTOWN ROAD
WALDORF, MARYLAND 20601
(301) 645-5601
GENERAL INFORMATION
We are providing this proxy statement to you in connection with the solicitation of proxies by the Board of Directors of Tri-County Financial Corporation for the 20112013 annual meeting of stockholders and for any adjournment or postponement of the meeting. In this proxy statement, we may also refer to Tri-County Financial Corporation as “Tri-County Financial,” the “Company,” “we,” “our” or “us.”
Tri-County Financial is the holding company for Community Bank of Tri-County. In this proxy statement, we may also refer to Community Bank of Tri-County as the “Bank.”
We are holding the 20112013 annual meeting in the Board Room at the main office of the Bank, 3035 Leonardtown Road, Waldorf, Maryland on Monday, May 9, 20116, 2013 at 10:00 a.m., local time.
We intend to mail this proxy statement and the enclosed proxy card to stockholders of record beginning on or about April 8, 2011.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE STOCKHOLDERS MEETING TO BE HELD ON MAY 9, 2011
The Proxy Statement and Annual Report to Stockholders are available at at:
www.cbtc.com/proxyandannualreport.
INFORMATION ABOUT VOTING
Who Can Vote at the Meeting.
You are entitled to vote the shares of Tri-County Financial common stock that you owned as of the close of business on MarchVoting by Proxy.
This proxy statement is being sent to you by the Board of Directors of Tri-County Financial to request that you allow your shares of Tri-County Financial common stock to be represented at the annual meeting by the persons named in the enclosed proxy card. All shares of Tri-County Financial common stock represented at the meeting by properly executed, dated proxies will be voted according to the instructions indicated on the proxy card. If you sign, date and return a proxy card without giving voting instructions, your shares will be voted as recommended by the Company’s Board of Directors.The Board of Directors recommends that you vote “FOR” each of the nominees for director, “FOR”1 |
If any matters not described in this proxy statement are properly presented at the annual meeting, the persons named in the proxy card will use their judgment to determine how to vote your shares. This includes a motion to adjourn or postpone the meeting to solicit additional proxies. If the annual meeting is postponed or adjourned, your Tri-County Financial common stock may also be voted by the persons named on the proxy card on the new meeting date, unless you have revoked your proxy. The Company does not know of any other matters to be presented at the annual meeting.
Registered stockholders can vote their shares of Tri-County Financial Corporation common stock by mailing a proxy card, via the Internet or by telephone. The Internet and telephone voting procedures are designed to authenticate stockholders’ identities, allow stockholders to provide their voting instructions and confirm that their instructions have been recorded properly. Specific instructions for Internet or telephone voting are set forth on the enclosed proxy or voting instruction card. The deadline for voting by telephone or via the Internet is 11:59 p.m., Eastern time, on May 8, 2011.
Ownership of Shares; Attending the Meeting.
You may own shares of Tri-County Financial in one of the following ways:· | Directly in your name as the stockholder of record; |
· | Indirectly through a broker, bank or other holder of record in “street name”; or |
· | Indirectly in the Community Bank of Tri-County Employee Stock Ownership Plan. |
If your shares are registered directly in your name, you are the holder of record of these shares and we are sending these proxy materials directly to you. As the holder of record, you have the right to give your proxy directly to us or to vote in person at the annual meeting.
If you hold your shares in street name, your broker, bank or other holder of record is sending these proxy materials to you. As the beneficial owner, you have the right to direct your broker, bank or other holder of record how to vote by filling out a voting instruction form that accompanies your proxy materials. Your broker, bank or other holder of record may allow you to provide voting instructions by telephone or via the Internet. Please see the voting instruction form provided by your broker, bank or other holder of record that accompanies this proxy statement. If you hold your shares in street name, you will need proof of ownership to be admitted to the annual meeting. A recent brokerage statement or letter from a bank or broker are examples of proof of ownership. If you want to vote your shares of Tri-County Financial common stock held in street name in person at the annual meeting, you must obtain a written proxy in your name from the broker, bank or other nominee who is the record holder of your shares.
Participants in the Bank’s Employee Stock Ownership Plan.
If you participate in the Community Bank of Tri-County Employee Stock Ownership Plan, you will receive a voting instruction card that reflects all shares you may direct the plan trustees to vote on your behalf under the plan. Under the terms of theQuorum.
We will have a quorum and will be able to conduct the business of the annual meeting if the holders of a majority of the outstanding shares of common stock entitled to vote are represented at the meeting. If you return valid proxy instructions or attend the meeting in person, we will count your shares to determine whether there is a quorum, even if you abstain from voting. Broker non-votes (described below) also will be counted to determine the existence of a quorum.Votes Required for Proposals.
In voting on the election of directors,For all proposals, abstentions and broker non-votes will not be counted as votes cast and will have no impacteffect on the outcome of the voting on the proposals.
Effect of Not Casting Your Vote
. If you hold your shares in street name it is critical that you cast your vote if you want it to count in the election of directors (Item 1 of this proxy statement)Revocation of Proxy.
Stockholders who execute proxies retain the right to revoke them at any time. Unless revoked, the shares represented by such proxies will be voted at the annual meeting and all adjournments thereof. Proxies may be revoked by written notice delivered in person or mailed to the Secretary of the Company, by delivering a later-dated proxy or by attending the annual meeting and voting in person. Attendance at the annual meeting will not in and of itself constitute revocation of your proxy.CORPORATE GOVERNANCE
Director Independence.
The Company’s Board of Directors currently consists of nine members, all of whom are independent under the listing requirements of The NASDAQ Stock Market, except for Michael L. MiddletonBoard Leadership Structure.
The Chief Executive Officer also serves as Chairman of the Board, due in part to his long-standing tenure with the Company, which provides unique and intimate knowledge regarding the history, strategy, business and operations of the Company and the Bank.The Board’s Role in Risk Oversight.
Risk is inherent with every business and how well a business manages risk can ultimately determine its success. We face a number of risks, including credit risk, interest rate risk, liquidity risk, operational risk, strategic risk and reputation risk. Management is responsible for the day-to-day management of risks the Company faces, while the Board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the Board of Directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed. To do this,Committees of the Board of Directors.
The following table identifies the members of the Board’s Audit, Governance andDirector | Audit Committee | Governance Committee | ||
Philip T. Goldstein | X | |||
Louis P. Jenkins, Jr. | X* | |||
Michael L. Middleton | ||||
William J. Pasenelli | ||||
Mary Todd Peterson | X* | |||
James R. Shepherd | X | |||
Austin J. Slater, Jr. | X | |||
H. Beaman Smith | X | |||
Joseph V. Stone, Jr.** | X | X | ||
Number of Meetings in 2010 | 4 | 5 |
Director | Audit Committee | Governance Committee | Compensation Committee | |||
Philip T. Goldstein | X | X | ||||
Louis P. Jenkins, Jr. | X* | X* | ||||
Michael L. Middleton | ||||||
William J. Pasenelli | ||||||
Mary Todd Peterson | X* | |||||
James R. Shepherd | X | |||||
Austin J. Slater, Jr. | X | |||||
H. Beaman Smith | X | X | ||||
Joseph V. Stone, Jr.** | X | X | X | |||
Number of Meetings in 2012 | 5 | 2 | 2 |
* Denotes Chairperson
** Lead Director
Audit Committee.
TheGovernance Committee.
TheGovernance Committee is responsible for promoting sound corporate governance policies that promote the best interests of the Company and its shareholders. TheCompensation Committee.The Compensation Committee approves the compensation objectives for the Company and the Bank and establishes the compensation for the Chief Executive Officer and other executivesexecutives. Our Chief Executive Officer and Director of Human Resources make recommendations to the Compensation Committee from time to time regarding the appropriate mix and level of compensation for other executives. The Compensation Committee reviews compensation for the directors. The role of managementCompany’s highly compensated executive officers to ensure an appropriate balance between short-term pay and long-term incentives. In addition to reviewing competitive market values, the Compensation Committee also examines the total compensation mix, pay-for-performance relationship, and how all elements, in the Company’saggregate, comprise the executive’s total compensation decisions is limited to that of an information resource.package. Decisions by the GovernanceCompensation Committee with respect to the compensation of executive officers are approved by the full Board of Directors.
Director Nomination Process.
The Governance CommitteeConsideration of Recommendations by Stockholders.
The Governance Committee will consider recommendations for directors submitted by stockholders. Stockholders who wish the Governance Committee to consider their recommendations for nominees for director should submit their recommendations in writing to the Governance Committee in care of the Secretary, Tri-County Financial Corporation, 3035 Leonardtown Road, Waldorf, Maryland 20601. Each written recommendation must set forth (1) the name of the recommended candidate, (2) the number of shares of stock of the Company that are beneficially owned by the stockholder making the recommendation and by the recommended candidate, and (3) a detailed statement explaining why the stockholder believes the recommended candidate should be nominated for election as a director. In addition, the stockholder making such recommendation must promptly provide any other information reasonably requested by the Governance Committee. To be considered by the Governance Committee for nomination for election at an annual meeting of stockholders, the recommendation must be received by the January 1Board and Committee Meetings.
DuringDirector Attendance at Annual Meeting of Stockholders.
While the Company does not have a policy regarding Board member attendance at annual meetings of stockholders it encourages directors to attend the annual meeting of stockholders. All of the Company’s directors attended the Company’sCode of Ethics.
Tri-County Financial maintains a Code of Ethics that is designed to ensure that the Company’s directors and employees meet the highest standards of ethical conduct. The Code of Ethics, which applies to all employees and directors, addresses conflicts of interest, the treatment of confidential information, general employee conduct and compliance with applicable laws, rules and regulations. In addition, the Code of Ethics is designed to deter wrongdoing and promote honest and ethical conduct, the avoidance of conflicts of interest, full and accurate disclosure and compliance with all applicable laws, rules and regulations. Under the terms of the Code of Ethics, violations of the Code of Ethics are required to be reported to the Audit Committee of the Board of Directors. A copy of the Code of Ethics was filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005.DIRECTOR COMPENSATION
The following table provides the compensation received by individuals who served asthe non-employee directors of the Company during 2010.
Name | Fees Earned or Paid in Cash ($) | Option Awards ($) (1) | Non-qualified Deferred Compensation Earnings ($) (2) | Total ($) | ||||||||||||
C. Marie Brown (3) | $ | 32,400 | $ | – | $ | 16,320 | $ | 48,720 | ||||||||
Philip T. Goldstein | 37,075 | – | – | 37,075 | ||||||||||||
Louis P. Jenkins, Jr. | 37,425 | – | – | 37,425 | ||||||||||||
Mary Todd Peterson (4) | 13,208 | – | – | 13,208 | ||||||||||||
Herbert N. Redmond, Jr. (5) | 37,125 | – | 7,926 | 45,051 | ||||||||||||
James R. Shepherd | 37,925 | – | – | 37,925 | ||||||||||||
Austin J. Slater, Jr. | 36,400 | – | – | 36,400 | ||||||||||||
H. Beaman Smith | 37,075 | – | 2,570 | 39,645 | ||||||||||||
Joseph V. Stone, Jr. | 37,150 | – | 5,500 | 42,650 |
Name | Fees Earned or Paid in Cash ($) | Option Awards ($)(1) | Non-qualified Deferred Compensation Earnings ($)(2) | Total ($) | ||||||||||||
Philip T. Goldstein | $ | 34,375 | – | $ | – | $ | 34,375 | |||||||||
Louis P. Jenkins, Jr. | $ | 38,150 | – | – | $ | 38,150 | ||||||||||
Mary Todd Peterson | $ | 36,950 | – | – | $ | 36,950 | ||||||||||
James R. Shepherd | $ | 36,425 | – | – | $ | 36,425 | ||||||||||
Austin J. Slater, Jr. | $ | 36,000 | – | – | $ | 36,000 | ||||||||||
H. Beaman Smith | $ | 33,950 | – | $ | 2,162 | $ | 36,112 | |||||||||
Joseph V. Stone, Jr. | $ | 36,450 | – | $ | 6,436 | $ | 42,886 |
______________________
(1) | As of December 31, |
Name | Stock Options Outstanding | |||
Philip T. Goldstein | 500 | |||
Louis P. Jenkins, Jr. | 18,056 | |||
Mary Todd Peterson | ||||
James R. Shepherd | 13,893 | |||
Austin J. Slater, Jr. | 15,412 | |||
H. Beaman Smith | 21,825 | |||
Joseph V. Stone, Jr. | 500 |
(2) | Represents the portion of non-qualified deferred compensation earnings under the Community Bank of Tri-County Retirement Plan for Directors that was above the IRS long-term rate. Under the plan, interest is credited quarterly at a rate equal to the Company’s annualized return on |
Cash Retainer and Meeting Fees for Directors.
The following tables set forth the applicable retainers and fees that will be paid to directors for their service on theBoard of Directors of Tri-County Financial
:Annual Retainer | $15,000 |
Fee per Board Meeting (Regular or Special) | $750 ($225 per telephone meeting) |
Fee per Committee Meeting | $500 ($225 per telephone meeting) |
Annual Retainer for Governance and Audit Committee | $ |
Board of Directors of the Bank
:Annual Retainer | $ |
Fee per Board Meeting (Regular or Special) | $650 ($225 per telephone meeting) |
Fee per Committee Meeting | $425 ($225 per telephone meeting) |
If more than one meeting of the Bank, the Company or any committee is held on any given day, the aggregate fees cannot exceed $1,400 per day. Employee directors receive only the annual retainer and Board meeting fees; they do not receive fees for committee meetings.
Directors Retirement Plan.
The Bank maintains a retirement plan for non-employee members of the Board of Directors of the Bank (the “Directors’ Plan”). Under the Directors’ Plan, each eligible director of the Bank will receive an annual retirement benefit for ten years following his or her termination of service on the Bank’s Board in an amount equal to the product of his “BenefitThe Directors’ Plan also establishes a deferred compensation program for participants, under which they may elect to defer all or any portion of the fees and/or salary otherwise payable. Deferred amounts will be credited quarterly and adjusted annually with a rate of return equal to the Company’s return on equity for the calendar year, as determined under accounting principles generally accepted accounting principles.
AUDIT RELATED MATTERS
Report of the Audit Committee.
The Company’s management is responsible for the Company’s internal controls and financial reporting process. The Company’s independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements and issuing an opinion on the conformity of those financial statements with accounting principles generally acceptedThe Audit Committee has met and held discussions with management and the independent registered public accounting firm. Management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted accounting principlesin the United States and the Audit Committee has reviewed and discussed the consolidated financial statements with management and the independent registered public accounting firm. The Audit Committee discussed with the independent registered public accounting firm matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA,Professional Standards, Vol. 1. AU Section 380) as adopted by the Public Company Accounting Oversight Board in Rule 3200T, including the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of the disclosures in the financial statements.
In addition, the Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence and has discussed with the independent registered public accounting firm the independent registered public accounting firm’s independence from the Company and its management. In concluding that the registered public accounting firm is independent, the Audit Committee considered, among other factors, whether the non-audit services provided by the firm were compatible with its independence.
The Audit Committee discussed with the Company’s independent registered public accounting firm the overall scope and plans for its audit. The Audit Committee meets with the independent registered public accounting firm, with and without management present, to discuss the results of its examination, its evaluation of the Company’s internal controls, and the overall quality of the Company’s financial reporting.
In performing all of these functions, the Audit Committee acts only in an oversight capacity. In its oversight role, the Audit Committee relies on the work and assurances of the Company’s management, which has the primary responsibility for financial statements and reports, and of the independent registered public accounting firm that, in its report, expresses an opinion on the conformity of the Company’s financial statements to accounting principles generally accepted accounting principles.in the United States. The Audit Committee’s oversight does not provide it with an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or policies, or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee’s considerations and discussions with management and the independent registered public accounting firm do not assure that the Company’s financial statements are presented in accordance with accounting principles generally accepted accounting principles,in the United States, that the audit of the Company’s financial statements has been carried out in accordance with generally accepted auditing standards or that the Company’s independent registered public accounting firm is “independent.”
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the Board has approved, that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20102012 for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF TRI-COUNTY FINANCIAL CORPORATION
Mary Todd Peterson (Chair)
James R. Shepherd
Austin J. Slater, Jr.
Joseph V. Stone, Jr.
Audit Fees.
The following table sets forth the fees billed to the Company by Stegman & Company for the fiscal years ended December 31,2010 | 2009 | |||||||
Audit Fees | $ | 81,497 | $ | 75,827 | ||||
Audit Related Fees (1) | 10,503 | – | ||||||
Tax Fees (2) | 8,000 | 7,750 | ||||||
All Other Fees (3) | 4,250 | 4,049 |
2012 | 2011 | |||||||
Audit Fees | $ | 97,114 | $ | 87,435 | ||||
Audit Related Fees(1) | 18,250 | 18,553 | ||||||
Tax Fees(2) | 8,750 | 8,500 | ||||||
All Other Fees(3) | 4,185 | 4,400 |
(1) | Represents fees for the audit of the 401(k) |
(2) | Consists of tax filing and tax-related compliance and other advisory services. |
(3) | Consists of presentation at directors’ retreat. |
Pre-Approval of Services by the Independent Registered Public Accounting Firm.
The Audit Committee’s charter provides that the Audit Committee will approve in advance any non-audit services permitted by the Securities Exchange Act, including tax services that its independent registered public accounting firm renders to the Company, unless such prior approval may be waived because of permitted exceptions under the Securities Exchange Act, including but not limited toPRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth, as of March 11, 2011,8, 2013, certain information as to those persons known by the Company to beneficially own more than 5% of the Company’s outstanding shares of common stock and the shares of common stock beneficially owned by each director, each executive officer named in the summary compensation table and by all executive officers and directors of the Company as a group. All beneficial owners listed in the table have the same address as the Company. Unless otherwise indicated, each of the named individuals has sole voting power and sole investment power with respect to the shares shown.
Name of Beneficial Owners | Number of Shares Owned (Excluding Options) (1) | Number of Shares That May be Acquired within 60 Days by Exercising Options | Percent of Shares of Common Stock Outstanding (2) | |||||||||
Directors | ||||||||||||
Philip T. Goldstein | 3,027 | 500 | * | |||||||||
Louis P. Jenkins, Jr. | 12,500 | 18,056 | 1.00% | |||||||||
Michael L. Middleton | 274,398 | (3) | 52,728 | 10.63 | ||||||||
William J. Pasenelli | 13,189 | (4) | 34,928 | 1.57 | ||||||||
Mary Todd Peterson | 1,286 | – | * | |||||||||
James R. Shepherd | 4,482 | 13,893 | * | |||||||||
Austin J. Slater, Jr. | 10,257 | 15,412 | * | |||||||||
H. Beaman Smith | 104,579 | (5) | 21,825 | 4.15 | ||||||||
Joseph V. Stone, Jr. | 22,100 | (6) | 500 | * | ||||||||
Named Executive Officer Who is Not Also a Director | ||||||||||||
Gregory C. Cockerham | 89,100 | (7) | 29,518 | 3.88 | ||||||||
All Directors, Executive Officers and Nominees as a Group (12 persons) | 546,873 | (8) | 193,340 | 23.00 | ||||||||
Community Bank of Tri-County Employee Stock Ownership Plan | 225,236 | (9) | – | 7.45 |
Name of Beneficial Owners | Number of Shares Owned (Excluding Options)(1)(2) | Number of Shares That May be Acquired within 60 Days by Exercising Options | Percent of Shares of Common Stock Outstanding(3) | |||||||||
Directors | ||||||||||||
Philip T. Goldstein | 3,027 | 500 | * | |||||||||
Louis P. Jenkins, Jr. | 12,500 | 18,056 | 1.00 | % | ||||||||
Michael L. Middleton | 268,021 | (4) | 46,317 | 10.18 | % | |||||||
William J. Pasenelli | 23,565 | 27,336 | 1.66 | % | ||||||||
Mary Todd Peterson | 4,529 | — | * | |||||||||
James R. Shepherd | 6,000 | 12,375 | * | |||||||||
Austin J. Slater, Jr. | 11,857 | 14,412 | * | |||||||||
H. Beaman Smith | 103,129 | 21,825 | 4.08 | % | ||||||||
Joseph V. Stone, Jr. | 22,300 | (5) | 500 | * | ||||||||
Named Executive Officer Who is Not Also a Director | ||||||||||||
Gregory C. Cockerham | 104,537 | 20,612 | 4.09 | % | ||||||||
All Directors, Executive Officers and Nominees as a Group (15 persons) | 583,818 | (6) | 167,913 | 23.42 | % | |||||||
Community Bank of Tri-County Employee Stock Ownership Plan | 264,141 | (7) | – | 8.68 | % |
____________________
*Less than 1% of the shares outstanding
(1) | Includes shares allocated to the account of the individuals under the Community Bank of Tri-County Employee Stock Ownership Plan, with respect to which the individual has voting but not investment power as follows: Mr. |
(2) | Includes shares of restricted stock, with respect to which the individual has voting but not investment power as follows: Mr. Cockerham – 2,273 shares and Mr. Pasenelli – 3,224 shares. |
(3) | Based upon |
(4) | Includes 69,351 shares owned by Mr. Middleton’s wife and |
(5) |
Includes 2,000 shares owned by the individual retirement account of Mr. Stone’s wife. |
Amount includes an aggregate of |
(7) | Includes |
11 |
ITEMS TO BE VOTED ON BY STOCKHOLDERS |
Item 1 – Election of Directors.
Tri-County Financial’s Board of Directors currently consists of nine members. The Board is divided into three classes, each with terms of three years, one-third of whom are elected annually. The Board of Directors has nominated Philip T. Goldstein, James R. ShepherdLouis P. Jenkins, Jr., Michael L. Middleton and H. Beaman SmithMary Todd Peterson to serve for an additional three-year term and until their successors are elected and qualified. As a result of the retirement of C. Marie Brown and Herbert N. Redmond, Jr. in 2010, Mary Todd Peterson and William J. Pasenelli were appointed to the Board of Directors. Pursuant to the Company’s Bylaws and to keep the classes of directors even, Mary Todd Peterson to serve for an additional two-year term and until her successor is elected and qualified and William J. Pasenelli to serve for an additional one-year term and until his successor is elected and qualified. All of the nominees are currently directors of the Company and the Bank.
It is intended that the persons named in the proxies solicited by the Board will vote for the election of the named nominees. If any nominee is unable to serve, the shares represented by all valid proxies will be voted for the election of such substitute nominee as the Board of Directors may recommend. At this time, the Board knows of no reason why any nominee might be unable to serve.
The Board of Directors recommends a vote “FOR” the election of all of the nominees.
Information regarding the nominees and the directors continuing in office is provided below. Unless otherwise stated, each individual has held his or her current occupation for the last five years. The age indicated in each biography is as of December 31, 2010.2012. There are no family relationships among the directors or executive officers. The indicated period for service as a director includes service as a director of Community Bank of Tri-County.
Board Nominees for Terms Ending in 2014
Louis P. Jenkins, Jr.
is the principal of Jenkins Law Firm, LLC, located in LaPlata, Maryland. Before entering private practice, Mr. Jenkins served as an Assistant State’s Attorney in Charles County, Maryland from 1997 to 1999. In addition to his private practice, Mr. Jenkins serves as Court Auditor for the Circuit Court for Charles County, Maryland and attorney for the Charles County Board of Elections. Mr. Jenkins currently servesAs an attorney, Mr. Jenkins provides the Board with substantial knowledge regarding issues facing the Company and the Bank. In addition, Mr. Jenkins brings a critical perspective to the lending and governance function of the Company and the Bank. Mr. Jenkins’ experience in the public sector adds valuable expertise regarding local issues and provides first-hand understanding of the local political and business environment in which the Bank operates.
Michael L. Middleton
is ChairmanMr. Middleton’s extensive experience in the local banking industry and involvement in the communities in which the Bank serves affords the Board valuable insight regarding the business and operation of the Bank. In addition to Mr. Middleton’s extensive background in finance and corporate management, Mr. Middleton also has significant expertise in large financial institution governance providing a unique and broad-based decision-making capability for the Company and the Bank. Mr. Middleton’s knowledge of all aspects of the Company’s and the Bank’s business and history, combined with his success and strategic vision, position him well to continue to serve as our Chairman and Chief Executive Officer.
Mary Todd Petersonis the President and Chief Executive Officer of Medmarc Insurance Group and a Director of Medmarc Casualty Insurance Company and each of its subsidiaries. Ms. Peterson has been associated with Medmarc since 2001 where she has also held the positions of Chief Financial Officer and Chief Operating Officer. From 1993 to 2001, Ms. Peterson was a Partner with Johnson Lambert & Co., a certified public accounting firm. Ms. Peterson has also held positions with Acacia Life Insurance Company, Oxford Development Corporation and Ernst & Whinney (now Ernst & Young). Ms. Peterson currently serves as a member of the Property Casualty Insurers Association of America (“PCI”) Board of Governors, Chair of PCI’s Investment Committee and a member of PCI’s Executive, Finance and Audit Committees. Ms. Peterson is a member of the American Institute of Certified Public Accountants. Age 58. Director since 2010.
Ms. Peterson has extensive management level experience in a mid-size company setting within the financial services industry. As a Virginia resident, Ms. Peterson provides valuable insight regarding local markets in Virginia.Ms. Peterson’s financial and operational expertise within the insurance industry, including her corporate governance and risk assessment skills, provide the Board with a skill set critical to operating the Company and Bank in an efficient manner.
Directors with Terms Ending in 2012
Philip T. Goldstein has owned and operated Philip T. Goldstein Real Estate Appraisals, a full-service real estate appraisal and consulting firm, located in Prince Frederick, Maryland, since 1975. He currently serves as a director of Asbury Communities, Inc., a non-profit continuing care retirement community headquartered in Gaithersburg, Maryland and Calvert County Nursing Center, Prince Frederick, Maryland. Age 64. Director since 2006.
Mr. Goldstein provides the Board with significant management, strategic and operational knowledge through his experience as owner of a real estate appraisal and consulting firm. Mr. Goldstein’s background in commercial and residential appraisal practice also provides a valuable perspective to the credit function of the Bank. Mr. Goldstein provides local community insight through his position as a director on various local non-profit organizations.
James R. Shepherd is a retired businessman and former local government executive. Mr. Shepherd holds an MS degree in Management from the University of Maryland and a BA from Roanoke College in Economics and Business Administration. Mr. Shepherd serves on numerous civic and charitable organizations. Age 67. Director since 2003.
Mr. Shepherd’s background in economic development and management adds strength to the market intelligence required to direct strategic initiatives on franchise expansion. Mr. Shepherd also brings critical insight regarding the economic development of the communities in which the Bank operates.
H. Beaman Smith is founder and President of Accoware, a computer software company established in 1986. He served as Vice President of Fry Plumbing & Heating Company in Washington, D.C. from 1988 until his retirement in October 2008. From 1974 to 1986 he served as President and Owner of Smith Family Honey, a family owned business founded by his father. Mr. Smith holds a Masters Degree and BS from the University of Maryland. Age 67. Director since 1986.
Mr. Smith brings a wealth of varied management and business experience to the Board through his experience as a vice president in a small firm setting and as founder of a software company. Mr. Smith’s background in information technology and small business operations allows a balanced approach to operational issues and corporate oversight.
Directors with Terms Ending in 2015
William J. Pasenelli is President and Chief Financial Officer of the Company and the Bank. Mr. Pasenelli joined the Bank as Chief Financial Officer in 2000 and was named President of the Bank in 2010 and President of the Company in May 2012. Before joining the Bank, Mr. Pasenelli had been Chief Financial Officer of Acacia Federal Savings Bank, Annandale, Virginia, since 1987. Mr. Pasenelli is a member of the American Institute of Certified Public Accountants, the Greater Washington Society of Certified Public Accountants and other civic groups. Age 54. Director since 2010.
Mr. Pasenelli’s extensive experience in the local banking industry affords the Board valuable insight regarding the business and operation of the Bank. Mr. Pasenelli’s financial acumen and knowledge of all aspects of the Company’s and the Bank’s business and history position him well to continue to serve as President and Chief Financial Officer and as a Director.
Austin J. Slater, Jr.
is the President and Chief Executive Officer of the Southern Maryland Electric Cooperative, which is one of the ten largest electrical distribution cooperatives in the country. Mr. Slater also serves as the immediate past Chairman of the Board of the Maryland Chamber of Commerce and numerous other industry and civic organizations. He also serves as theMr. Slater has extensive management level experience in a large company setting outside of the financial services industry. Mr. Slater’s financial acumen and operational experience allow him to understand the complexities of the Company and the Bank. His experience in a regulated industry has exposed Mr. Slater to many of the issues facing companies today, particularly regulated entities, making Mr. Slater a valued component of a well-rounded board.
Joseph V. Stone, Jr.
has owned and operated Joe Stone Insurance Agency, which provides multi-line insurance services to clients in Maryland and Virginia, since 1981. He has served as a director for the Southern Maryland Electric Cooperative since 1996 and currently serves as Chairman of the Board.Mr. Stone provides the Board with significant marketing and operational knowledge through his experience as owner of an insurance agency and various director positions with companies outside of the financial services industry. Mr. Stone also has considerable experience in the insurance industry, corporate governance and risk assessment practices necessary in banking operations.
14 |
Item 2 – Advisory Vote On Executive Compensation.
Stegman & Company, which any obligation arising fromwas the Company’s participation inindependent registered public accounting firm for 2012, has been retained by the Troubled Asset Relief Program Capital Purchase Program remains outstanding.
If the Board nor create or imply any additional fiduciary duty by the Board. However, the Governance Committee will take into account the outcomeratification of the vote when considering future executive compensation arrangements.
The Board of Directors recommends athat stockholders vote “FOR” approvalthe ratification of the compensationappointment of Stegman & Company as the named executive officers.
Item 3 – RatificationAdvisory Vote on Executive Compensation
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) requires that we provide our stockholders with the opportunity to express their views, on a non-binding basis, on the compensation of our named executive officers as disclosed in this proxy statement. This vote, which is often referred to as the “say-on-pay” vote, provides stockholders with the opportunity to endorse or not endorse the following resolution:
“Resolved, that the stockholders approve the compensation of the Independent Registered Public Accounting Firm.
Because your vote is advisory, it will not be binding upon the Board of Directors. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.
The Board of Directors unanimously recommends a vote “FOR” approval of the compensation of the named executive officers.
Item 4 — Advisory Vote on the Frequency of a Stockholder Vote to Approve Executive Compensation
The Dodd-Frank Act requires, among other things, that SEC-reporting companies obtain a non-binding stockholder vote on the frequency of the stockholder vote on executive compensation (at least once every six years).
This proposal gives the Company’s independent registered public accounting firm for 2010,stockholders the opportunity to determine whether the frequency of stockholder vote on executive compensation will be every one, two or three years. Stockholders are not being asked to approve or disapprove of the Board’s recommendation, but rather to indicate their own choice as among the frequency options. Stockholders may also abstain from voting on the frequency of stockholder vote on executive compensation.
The Board of Directors has been retained byconsidered the Audit Committeefrequency of the advisory vote on the compensation of the Company’s named executive officers. After considering the benefits and consequences of each option, the Board recommends submitting the advisory vote on the compensation of the Company’s named executive officers to stockholders annually.
The Board of Directors believes an annual advisory vote on the compensation of the Company’s named executive officers will allow the Board to obtain information on stockholders’ views of the compensation of the Company’s named executive officers on a more consistent basis. In addition, the Board believes an annual advisory vote on the compensation of the Company’s named executive officers will provide the Board of Directors to beand the Compensation Committee with frequent input from stockholders on the Company’s independent registered public accounting firmcompensation programs for 2011, subject to ratification byits named executive officers. Finally, the Board believes an annual advisory vote on the compensation of the Company’s stockholders. A representativenamed executive officers aligns more closely with the Company’s objective to engage in regular dialogue with its stockholders on corporate governance matters, including the Company’s executive compensation philosophy, policies and programs.
Because your vote is advisory, it will not be binding upon the Board of Stegman & Company is expected to be present atDirectors. However, the annual meeting andCompensation Committee will havetake into account the opportunity to make a statement if he or she desires to do so and will be available to respond to appropriate questions.
The Board of Directors unanimously recommends that stockholdersa vote “FOR”for the ratificationapproval of a stockholder vote to approve the compensation of the appointment of Stegman & Company as the Company’s independent registered public accounting firm.named executive officers being conducted “EVERY YEAR.”
16 |
EXECUTIVE COMPENSATION |
Summary Compensation Table.
The following table provides information concerning total compensation earned or paid to the Chief Executive Officer and the two most highly compensated executive officers of the Company who served in such capacity as of December 31,Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Non-qualified Deferred Compensation Earnings ($) (1) | All Other Compensation ($) (2) | Total ($) | |||||||||||||||||||
Michael L. Middleton | 2012 | $ | 454,960 | $ | – | $ | 65,508 | (3) | $ | 22,720 | $ | 65,606 | $ | 608,794 | ||||||||||||
Chief Executive Officer | 2011 | 440,000 | – | 50,007 | 4,571 | 64,090 | 558,668 | |||||||||||||||||||
William J. Pasenelli | 2012 | 341,200 | 56,298 | 79,346 | (4) | – | 44,766 | 521,610 | ||||||||||||||||||
President and Chief Financial Officer | 2011 | 330,000 | 54,450 | 64,730 | – | 45,334 | 494,514 | |||||||||||||||||||
Gregory C. Cockerham | 2012 | 263,670 | 43,506 | 53,764 | (5) | – | 22,799 | 383,739 | ||||||||||||||||||
Executive Vice President and Chief Lending Officer | 2011 | 255,000 | 42,075 | 50,330 | – | 21,973 | 369,378 |
Name and Principal Position | Year | Salary ($) | Bonus ($) (1) | Stock Awards ($) (2) | Option Awards ($) | Non-qualified Deferred Compensation Earnings ($) (3) | All Other Compensation ($) (4) | Total ($) | ||||||||||||||||||||||
Michael L. Middleton | 2010 | $ | 409,200 | $ | – | $ | 45,803 | $ | – | $ | 17,407 | $ | 56,999 | $ | 529,409 | |||||||||||||||
Chief Executive Officer | 2009 | 334,439 | – | – | – | 3,772 | 69,272 | 407,483 | ||||||||||||||||||||||
William J. Pasenelli | 2010 | 294,353 | 97,136 | – | – | – | 49,775 | 441,264 | ||||||||||||||||||||||
President and Chief | 2009 | 227,475 | 56,406 | 25,200 | – | – | 30,343 | 339,424 | ||||||||||||||||||||||
Financial Officer | ||||||||||||||||||||||||||||||
Gregory C. Cockerham | 2010 | 236,945 | 78,192 | – | – | – | 31,314 | 346,451 | ||||||||||||||||||||||
Executive Vice President | 2009 | 219,286 | 54,489 | 25,200 | – | – | 25,334 | 324,309 | ||||||||||||||||||||||
and Chief Lending Officer |
Represents the portion of non-qualified deferred compensation earnings under the Community Bank of Tri-County Retirement Plan for Directors that were above the applicable federal long-term rate. Under the plan, interest is credited quarterly at a rate equal to the Company’s annualized return on |
(2) | Details of the amounts reported in the “All Other Compensation” column for |
Item | Mr. Middleton | Mr. Pasenelli | Mr. Cockerham | |||||||||
Directors’ fees | $ | 34,150 | $ | 13,433 | $ | – | ||||||
Market value of allocations under the employee stock ownership plan | 7,540 | 4,764 | 6,437 | |||||||||
Employer contribution to 401(k) Plan | 9,800 | 9,800 | 9,800 | |||||||||
Imputed income under split-dollar life insurance arrangement | 5,430 | 21,467 | 14,861 | |||||||||
Reimbursement of payroll taxes for supplemental retirement benefits | 79 | 311 | 216 |
Item | Mr. Middleton | Mr. Pasenelli | Mr. Cockerham | |||||||||
Directors’ fees | $ | 31,375 | $ | 30,950 | $ | - | ||||||
Market value of allocations under the employee stock ownership plan | 17,253 | 2,212 | 11,275 | |||||||||
Employer contribution to 401(k) Plan | 9,800 | 9,800 | 9,800 | |||||||||
Imputed income under split-dollar life insurance arrangement | 7,075 | 1,779 | 1,700 | |||||||||
Reimbursement of payroll taxes for supplemental retirement benefits | 103 | 25 | 24 |
(3) | Represents the aggregate grant date fair value of the granting of 2,105 and 2,105 restricted stock units computed in accordance with FASB ASC Topic 718 based on a per share price of $14.25 and $16.87, respectively, on the date of grant for awards in 2012. |
(4) | Represents the aggregate grant date fair value of the granting of 2,201, 774 and 2,000 shares of restricted stock awards computed in accordance with FASB ASC Topic 718 based on a per share price of $14.25, $18.40 and $16.87, respectively, on the date of grant for awards in 2012. |
(5) | Represents the aggregate grant date fair value of the granting of 1,500, 385 and 1,500 shares of restricted stock awards computed in accordance with FASB ASC Topic 718 based on a per share price of $14.25, $18.40 and $16.87, respectively, on the date of grant for awards in 2012. |
Employment Agreements.
Tri-CountySee“Retirement Benefits” and“Other Potential Post-Termination Benefits” for a discussion of benefits and payments the named executive officers may receive under the employment agreements upon their retirement or termination of their employment.
Outstanding Equity Awards at Fiscal Year End.The following table provides information concerning unexercised options for each of the named executive officers outstanding as of December 31, 2010,2012, adjusted for the three-for-two stock split effected on November 27, 2006.
Option Awards | |||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | |||||||||
Michael L. Middleton | 5,830 | — | $ | 27.70 | 07/17/2017 | ||||||||
6,036 | — | 22.29 | 12/19/2015 | ||||||||||
20,164 | — | 15.89 | 12/27/2014 | ||||||||||
14,286 | — | 12.74 | 12/31/2013 | ||||||||||
6,412 | — | 11.56 | 12/31/2012 | ||||||||||
11,812 | — | 7.85 | 12/31/2011 | ||||||||||
William J. Pasenelli | 4,344 | — | 27.70 | 07/17/2017 | |||||||||
5,397 | — | 22.29 | 12/19/2015 | ||||||||||
10,298 | — | 15.89 | 12/27/2014 | ||||||||||
7,296 | — | 12.74 | 12/31/2013 | ||||||||||
2,868 | — | 11.56 | 12/31/2012 | ||||||||||
4,725 | — | 7.85 | 12/31/2011 | ||||||||||
Gregory C. Cockerham | 4,407 | — | 27.70 | 07/17/2017 | |||||||||
5,476 | — | 22.29 | 12/19/2015 | ||||||||||
10,728 | — | 15.89 | 12/27/2014 | ||||||||||
7,600 | — | 12.74 | 12/31/2013 | ||||||||||
3,037 | — | 11.56 | 12/31/2012 | ||||||||||
1,605 | — | 7.85 | 12/31/2011 |
Option Awards | Restricted Stock Awards | |||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) (1) | ||||||||||||||||
Michael L. Middleton | 5,830 | — | $ | 27.70 | 07/17/2017 | 7,316 | $ | 116,910 | ||||||||||||||
6,036 | — | 22.29 | 12/19/2015 | — | — | |||||||||||||||||
20,164 | — | 15.89 | 12/27/2014 | — | — | |||||||||||||||||
14,286 | — | 12.74 | 12/31/2013 | — | — | |||||||||||||||||
William J. Pasenelli | 4,344 | — | 27.70 | 07/17/2017 | 4,638 | $ | 74,115 | |||||||||||||||
5,397 | — | 22.29 | 12/19/2015 | — | — | |||||||||||||||||
10,298 | — | 15.89 | 12/27/2014 | — | — | |||||||||||||||||
7,296 | — | 12.74 | 12/31/2013 | — | — | |||||||||||||||||
Gregory C. Cockerham | 4,407 | — | 27.70 | 07/17/2017 | 3,283 | $ | 52,462 | |||||||||||||||
5,476 | — | 22.29 | 12/19/2015 | — | — | |||||||||||||||||
10,728 | — | 15.89 | 12/27/2014 | — | — |
(1) | Based upon the Company’s closing stock price of $15.98 at December 31, 2012. |
18 |
RETIREMENT BENEFITS |
The Bank maintains salary continuation agreements with each of the named executive officers to provide the executives with additional compensation at retirement or upon termination of employment due to death, disability or a change in control. Mr.Messrs. Middleton, Mr. Pasenelli and Mr. Cockerham are entitled to a total annual benefit for a period of 15 years of $128,048, $92,212 and $77,035, respectively, upon normal retirement at or after age 62 for Mr. Middleton and 65 for Mr.Messrs. Pasenelli and Mr. Cockerham. A reduced benefit is payable if the executive retires before normal retirement age. The annual benefits are payable on a monthly basis to the executives or their designated beneficiaries. Benefits payable under the salary continuation agreements are reduced by any benefits paid under the executives’ split-dollar life insurance agreements.
The Bank also maintains a supplemental executive retirement plan (“SERP”) with Mr.Messrs. Middleton, Pasenelli and Mr. PasenelliCockerham to provide the executives with additional compensation at retirement or upon termination of employment due to death, disability or a change in control. Mr.Messrs. Middleton, Pasenelli and Mr. PasenelliCockerham are entitled to a total annual benefit for a period of 15 years of $64,256$28,348, $66,373 and $66,373,$10,484, respectively, upon normal retirement at or after age 65. A65 for Messrs. Pasenelli and Cockerham and age 67 in the case of Mr. Middleton.A reduced benefit is payable if the executive retires before normal retirement age. The annual benefits are payable on an annual basis to the executives or their designated beneficiaries.
The Bank maintains an Executive Deferred Compensation Plan under which Mr.Messrs. Middleton and Mr. Pasenelli may defer all or any portion of their base salary. Deferred amounts will be credited annually with interest at a rate equal to the Company’s return on equity for the calendar year. The executive’s account balance under the plan will be distributed to the executive following the executive’s termination of service in either a lump sum or over a period of one to five years, as elected by the executive.
OTHER POTENTIAL POST-TERMINATION BENEFITS
Payments Made Upon Termination with Cause.
Each ofThe SERPs for Messrs. Middleton, Pasenelli and Mr. Pasenelli’s SERPs containsCockerham contain a definition of cause for which we may terminate the executive’s employment. If the executive’s employment is terminated for cause, they will not be entitled to any benefits under the terms of the SERPs.
Under the 1995 Stock Option and Incentive Plan, if we terminate an executive for just cause (as defined in the plan), any stock option granted under the plan and held by the terminated employee is cancelled upon the date of termination.
Pursuant to the 2005 Equity Compensation Plan, if an executive is terminated for cause, all rights to any restricted stock and long-term restricted stock units award granted under the plan and held by the terminated employee will expire as of the effective date of termination.
Payments Made Upon Termination Without Cause.
If we terminate Mr. Middleton’s employment without cause, he willUnder theirhis employment agreements, if we terminate eitherthe employment of Mr. Pasenelli orwithout cause, he would receive a lump sum payment equal to three times his base salary and three times his most recent annual incentive compensation payment. Under Mr. CockerhamCockerham’s employment agreement, if we terminate his employment without cause, he would receive a lump sum payment equal to two times his base salary and two times his most recent annual incentive compensation payment. We would also continue the executive’sboth executives’ medical, dental and life insurance benefits for 36 months.
Pursuant to the 2005 Equity Compensation Plan, if we terminate an executive without cause and unless otherwise determined by the Compensation Committee, all unvested shares of restricted stock and interests under long-term restricted stock units are forfeited as of the termination date of the executive.
Payments Made Upon Termination by Executive with Good Reason.
If Mr. Middleton voluntarily terminates his employment under circumstances that would constitute good reason (as defined in his employment agreement), he willPursuant to the 2005 Equity Compensation Plan, if an executive voluntarily terminates his or her employment and unless otherwise determined by the Compensation Committee, all unvested shares of common stock and interests under long-term restricted stock units are forfeited as of the termination date of the executive.
Payments Made Upon Disability.
Under Mr. Middleton’s employment agreement, if he becomes disabled and we terminate his employment pursuant to the terms of the agreement, he will receive his base salary or other compensation earned through the date of termination and retain the rights to any vested benefits subject to the terms of the plan or agreement under which those benefits areThe SERPs for Messrs. Middleton, Pasenelli and Mr. Pasenelli’s SERPsCockerham provide for a disability benefit equal to the executive’s accrued benefit, calculated as of the date of determination of disability. Payment of the disability benefit will commence on the first day of the month following the earlier of the executive’s 65th birthday or death and shall be paid in 15 equal annual installments.
Under the salary continuation agreements dated September 6, 2003, as amended, upon termination of employment as a result of disability, Mr.Messrs. Middleton, Mr. Pasenelli and Mr. Cockerham are entitled to an annual benefit for a period of 15 years of $128,048, $74,112 and $72,235, respectively, commencing with the month following the executive attaining age 65, or in Mr. Middleton’s case, age 62. Under62.Under the salary continuation agreements dated August 21, 2006, as amended, Mr.Messrs. Pasenelli and Mr. Cockerham are entitled to an annual disability benefit ranging from $4,595$9,569 to $18,100 and $1,418$2,952 to $4,800, respectively, depending on the date of termination, commencing with the month following the executive attaining age 65, or in Mr. Middleton’s case, age 62.
Under the 1995 Stock Option and Incentive Plan, if we terminate an executive’s employment due to a disability, outstanding stock options will vest and remain exercisable until the earlier of one year from the date of termination or the expiration date of the stock options.
Pursuant to the 2005 Equity Compensation Plan, if we terminate an executive’s employment due to a disability, outstanding restricted stock and long-term restricted stock unit awards will immediately vest as of the date of termination.
Payments Made Upon Death.
Under Mr. Middleton’s employment agreement, upon Mr. Middleton’s death, Mr. Middleton’s beneficiary will receive any base salary compensation earned through the date of death, plus any other compensation or benefits to be provided in accordance with the terms and provisions of the Company’s benefit plans and programs.Under Mr. Pasenelli’s and Mr. Cockerham’s employment agreements, upon the executive’s death, the Company will pay his or her beneficiary or estate any compensation due to the executive through the end of the month in which death occurred, plus any other compensation or benefits to be provided in accordance with the terms and provisions of the Company’s benefit plans and programs.
Mr. Middleton’s, Mr. Pasenelli’s and Mr. Pasenelli’sCockerham’s SERPs provide for a death benefit equal to the executive’s accrued benefit, payable to the executive’s beneficiary in 15 equal annual installments beginning the second month following the death of the executive if the executive dies before reaching normal retirement age. If the executive dies after the commencement of the SERP benefit payments, the executive’s beneficiary is entitled to the unpaid balance of the executive’s 15 annual benefit payments.
Under their salary continuation agreements, if the executive dies while in active service with the Bank, Mr. Middleton’s, Mr. Pasenelli’s and Mr. Cockerham’s designated beneficiaries will receive an annual benefit, for a period of 15 years, of $128,048, $92,212 and $77,035, respectively, commencing with the month following the executive’s death. Ifdeath.If the executive dies after his employment has terminated but before payments under the agreement have commenced, their designated beneficiary will be entitled to the same payments beginning on the first day of the month after the executive’s death.
Under the 1995 Stock Option and Incentive Plan, if an executive dies, outstanding stock options will vest and remain exercisable until the earlier of two years from the date of death or the expiration date of the stock options.
Pursuant to the 2005 Equity Compensation Plan, if an executive dies, outstanding awards vest immediately.
Payments Made Upon a Change in Control.
Mr. Middleton’s employment agreement provides that if during the two-year period following a change in control (as defined in the agreement), Mr. Middleton terminates employment for any reason, he will be entitledMr. Pasenelli’s and Mr. Cockerham’s employment agreements provide that if (1) the executive’s employment is terminated without cause or without the executive’s consent and for a reason other than cause in connection with or within 12 months after a change in control (as defined in the agreement); or (2) the executive voluntary terminates employment within 12 months following a change in control upon the occurrence of events described in the agreement, he will receive a lump sum payment equal to two times his annual base salary and most recent annual incentive compensation payment, plus continued health and welfare benefits for 36 months following termination. Mr. Pasenelli’s and Mr. Cockerham’s employment agreements provide that if the value of the benefits provided under the agreements in connection with a change in control exceed his 280G Limit, his payment will be reduced or revised so that the aggregate payments do not exceed his 280G Limit.
Mr. Middleton’s, Mr. Pasenelli’s and Mr. Pasenelli’sCockerham’s SERPs provide that if the executives experience a separation from service within 24 months following a change in control, the executives are entitled to an annual benefit for a period of 15 years of $64,256$28,348, $66,373 and $66,373,$10,484, respectively. The executives may elect towill receive the benefit payment in the form of (1) a lump sum, (2) equal annual installments over two years, or (3) equal annual installments over five years.
Under the salary continuation agreements dated September 6, 2003, as amended, upon the termination of employment within 12 months (24 months in the case of Mr. Middleton) subsequent to a change in control and before age 65 (62 in the case of Mr. Middleton), Mr. Middleton, Mr. Pasenelli and Mr. Cockerham are entitled to an annual benefit for a period of 15 years of $128,048, $74,112 and $72,235, respectively, commencing with the month following the executive attaining age 65 (62 in the case of Mr. Middleton). As with his employment agreement, Mr. Middleton’s salary continuation agreement provides for an additional tax indemnification payment if payments under the agreement exceed his 280G Limit. Each of Mr. Pasenelli’s and Mr. Cockerham’s salary continuation agreements dated September 6, 2003, as amended, provide that if the value of the benefits provided in connection with a change in control exceed his 280G Limit, his payment will be reduced or revised so that the aggregate payments do not exceed his 280G Limit. Under the salary continuation agreement dated August 21, 2006, as amended, Mr. Pasenelli is entitled to an additional annual benefit ranging from $8,816$10,764 to $18,100 (based on the date of termination) if his employment is terminated within 12 months subsequent to a change in control and before age 65. Under the salary continuation agreement dated August 21, 2006, as amended, Mr. Cockerham is entitled to an additional annual benefit equal to the present value of $4,800 using an interest factor of 5% upon the termination of employment within 12 months subsequent to a change in control and before age 65.
In the event of a change in control of Tri-County Financial or Community Bank of Tri-County, outstanding stock options granted pursuant to our 1995 Stock Option and Incentive Plan automatically vest and, unless otherwise provided for by the committee administering the plan, the option holder will receive in cash an amount equal to the difference between the fair market price of the securities and the exercise price of the option for each option held. Under the Company’s 2005 Equity Compensation Plan, a change in control accelerates the vesting of all outstanding stock options, restricted stock awards and long-term restricted stock units. The value of the accelerated options count toward the executive’s 280G Limit.
OTHER INFORMATION RELATING TO
Section 16(a) Beneficial Ownership Reporting Compliance.
Pursuant to federal securities laws, the Company’s officers, directors and persons who own more than 10% of the outstanding common stock are required to file reports detailing their ownership and changes of ownership in such common stock, and to furnish the Company with copies of all such reports. Based solely on its review of the copies of such reports received during the past fiscal year and written representations from such persons that no additional reports of changes in beneficial ownership were required, the Company believes that duringPolicies and Procedures for Approval of Related Persons Transactions.
We maintain a Policy and Procedures Governing Related Person Transactions, which is a written policy and set of procedures for the review and approval or ratification of transactions involving related persons. Under the policy, related persons consist of directors, director nominees, executive officers, persons or entities known to us to be the beneficial owner of more than five percent of any outstanding class of the voting securities of the Company, or immediate family members or certain affiliated entities of any of the foregoing persons.Transactions covered by the policy consist of any financial transaction, arrangement or relationship or series of similar transactions, arrangements or relationships, in which:
· | the aggregate amount involved will or may be expected to exceed $50,000 in any calendar year; |
· | the Company is, will or may be expected to be a participant; and |
· | any related person has or will have a direct or indirect material interest. |
The policy excludes certain transactions, including:
· | any compensation paid to an executive officer of the Company if the Governance Committee of the Board approved (or recommended that the Board approve) such compensation; |
· | any compensation paid to a director of the Company if the Board or an authorized committee of the Board approved such compensation; and |
· | any transaction with a related person involving consumer and investor financial products and services provided in the ordinary course of the Company’s business and on substantially the same terms as those prevailing at the time for comparable services provided to unrelated third parties or to the Company’s employees on a broad basis (and, in the case of loans, in compliance with the Sarbanes-Oxley Act of 2002). |
Related person transactions will be approved or ratified by the Audit Committee. In determining whether to approve or ratify a related person transaction, the Audit Committee will consider all relevant factors, including:
· | whether the terms of the proposed transaction are at least as favorable to the Company as those that might be achieved with an unaffiliated third party; |
· | the size of the transaction and the amount of consideration payable to the related person; |
· | the nature of the interest of the related person; |
· | whether the transaction may involve a conflict of interest; and |
· | whether the transaction involves the provision of goods and services to the Company that are available from unaffiliated third parties. |
A member of the Audit Committee who has an interest in the transaction will abstain from voting on approval of the transaction, but may, if so requested by the chair of the Audit Committee, participate in some or all of the discussion.
Relationships and Transactions with the Company and the Bank.
The Sarbanes-Oxley Act of 2002 generally prohibits loans by the Company to its executive officers and directors. However, the Sarbanes-Oxley Act contains a specific exemption from such prohibition for loans by the Bank to its executive officers and directors in compliance with federal banking regulations. Federal regulations require that all loans or extensions of credit to executive officers and directors of insured financial institutions must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and must not involve more than the normal risk of repayment or present other unfavorable features. The Bank is therefore prohibited from making any new loans or extensions of credit to executive officers and directors at different rates or terms than those offered to the general public. Notwithstanding this rule, federal regulations permit the Bank to make loans to executive officers and directors at reduced interest rates if the loan is made under a benefit program generally available to all other employees and does not give preference to any executive officer or director over any other employee, although the Bank does not currently have such a program in place. From time to time, the Bank makes loans and extensions of credit to its executive officers and directors, and members of their immediate families. The outstanding loans made to our directors and executive officers, and members of their immediate families, were made in the ordinary course of business, were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the Bank, and did not involve more than the normal risk of collectibility or present other unfavorable features. As of December 31,In accordance with banking regulations, the Board of Directors reviews all loans made to a director or executive officer in an amount that, when aggregated with the amount of all other loans to such person and his or her related interests, exceed the greater of $25,000 or 5% of the Company’s capital and surplus (up to a maximum of $500,000), and such loan must be approved in advance by a majority of the disinterested members of the Board of Directors.
STOCKHOLDER PROPOSALS AND NOMINATIONS
To be eligible for inclusion in the Company’s proxy materials for next year’s annual meeting of stockholders, any stockholder proposal to take action at such meeting must be received at the Company’s main office at 3035 Leonardtown Road, Waldorf, Maryland 20601 no later than December 10, 2011.5, 2013. If next year’s annual meeting is held on a date more than 30 calendar days from May 9, 2012,6, 2014, a stockholder proposal must be received by a reasonable time before the Company begins to print and mail its proxy solicitation materials. Any stockholder proposals will be subject to the requirements of the proxy rules adopted by the Securities and Exchange Commission.
Stockholder proposals, other than those submitted above, and nominations must be submitted in writing, delivered or mailed by first class United States mail, postage pre-paid, to the Secretary of the Company not fewer than 30 days nor more than 60 days before any such meeting; provided, however, that if notice or public disclosure of the meeting is given fewer than 40 days before the meeting, such written notice shall be delivered or mailed to the Secretary of the Company not later than the close of the 10th day following the day on which notice of the meeting was mailed to stockholders.
BOARD POLICIES REGARDING COMMUNICATIONS
The Board of Directors maintains a process for stockholders to communicate with the Board of Directors. Stockholders wishing to communicate with the Board of Directors should send any communication to the Secretary, Tri-County Financial Corporation, 3035 Leonardtown Road, Waldorf, Maryland 20601. Any communication must state the number of shares beneficially owned by the stockholder making the communication. The Secretary will forward such communication to the full Board of Directors or to any individual director or directors to whom the communication is addressed unless the communication is unduly hostile, threatening, illegal or similarly inappropriate, in which case the Secretary has the authority to discard the communication or take appropriate legal action regarding the communication.
MISCELLANEOUS
The Company will pay the cost of this proxy solicitation. The Company will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of the common stock. In addition to conducting solicitations by mail, directors, officers and regular employees of the Company may solicit proxies personally or by telephone without additional compensation.
The Company’s 20102012 Annual Report to Stockholders, including financial statements, accompanies this proxy statement. Such Annual Report is not to be treated as a part of the proxy solicitation material nor as having been incorporated herein by reference.A copy of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 20102012, as filed with the Securities and Exchange Commission, will be furnished without charge to stockholders as of March 11, 2011,8, 2013, upon written request to the Secretary, Tri-County Financial Corporation, 3035 Leonardtown Road, Waldorf, Maryland 20601.
REVOCABLE PROXY
TRI-COUNTY FINANCIAL CORPORATION
ANNUAL MEETING OF STOCKHOLDERS MAY 9, 2011
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders:
The Annual Report, Notice and Proxy Statement are available at www.cbtc.com/proxyandannualreport
The undersigned hereby appoints AustinJames R. Shepherd and William J. Slater, Jr. and Joseph V. Stone, Jr.Pasenelli with full powers of substitution in each, to act as attorneys and proxies for the undersigned to vote all shares of common stock of Tri-County Financial Corporation (the “Company”) that the undersigned is entitled to vote at the 20112013 annual meeting of stockholders to be held in the Board Room at the main office of Community Bank of Tri-County, 3035 Leonardtown Road, Waldorf, Maryland on Monday, May 9, 20116, 2013 at 10:00 a.m. (the “Annual Meeting”) and at any and all adjournments thereof, as follows:
Should the undersigned be present and elect to vote at the Annual Meeting or at any adjournment thereof and after notification to the Secretary of the Company at the Annual Meeting of the stockholder’s decision to terminate this proxy, then the power of said attorneys and proxies shall be deemed terminated and of no further force and effect.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED “FOR” EACH NOMINEE, “FOR” PROPOSALS 2 AND 3 AND FOR THE NOMINEES AND THE PROPOSALS LISTED.VOTE TO APPROVE EXECUTIVE COMPENSATION EVERY YEAR. IF ANY OTHER BUSINESS IS PRESENTED AT SUCH ANNUAL MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY AS DIRECTED BY THE BOARD OF DIRECTORS. AT THE PRESENT TIME THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING. THIS PROXY ALSO CONFERS DISCRETIONARY AUTHORITY ON THE PROXY HOLDERS TO VOTE WITH RESPECT TO APPROVAL OF THE MINUTES OF THE PRIOR ANNUAL MEETING OF STOCKHOLDERS, THE ELECTION OF ANY PERSON AS DIRECTOR WHERE THE NOMINEE IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE, AND MATTERS INCIDENT TO THE CONDUCT OF THE 2011 ANNUAL MEETING.
Continued and to be signed on reverse side
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VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on May 8, 2011.5, 2013. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on May 8, 2011.5, 2013. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
The Board of Directors recommends ayou vote “FOR” each ofFOR the nominees and the listed proposals:
1. | ELECTION OF DIRECTORS |
FOR | AGAINST | ABSTAIN | ||||||
Nominees | ||||||||
(1) Louis P. Jenkins, Jr. | ¨ | ¨ | ¨ | |||||
(2) Michael L. Middleton | ¨ | ¨ | ¨ | |||||
(3) Mary Todd Peterson | ¨ | ¨ | ¨ |
The Board of Directors recommends you vote FOR proposals 2 and 3.
2. | THE RATIFICATION OF THE APPOINTMENT OF STEGMAN & COMPANY AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2013 |
FOR | AGAINST | ABSTAIN | ||||||
¨ | ¨ | ¨ |
3. | The approval of a non-binding resolution on the compensation of the named executive officers. |
FOR | AGAINST | ABSTAIN | ||||||
¨ | ¨ | ¨ |
The Board of Directors recommends you vote FOR the vote to approve executive compensation every year.
ONE YEAR | TWO YEARS | THREE YEARS | ABSTAIN | |||||
¨ | ¨ | ¨ |
¨ |
NOTE:
The undersigned acknowledges receipt from the Company prior to the execution of this proxy of Notice of the Annual Meeting, a Proxy Statement for the Annual Meeting and the Company’sSignature _______________ | Signature_______________ | Date | _______________ |
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer.
[Tri-County Financial Corporation Letterhead]
Dear ESOP Participant:
On behalf of the Board of Directors, I am forwarding to you the attached vote authorization form to convey your voting instructions to Louis P. Jenkins, Jr. and Herbert N. Redmond, Jr., Trustees for the Community Bank of Tri-County Employee Stock Ownership Plan and Trust (the “ESOP”), on the proposals presented at the Annual Meeting of Stockholders of Tri-County Financial Corporation (the “Company”) on May 9, 2011.6, 2013. Also enclosed is a Notice of Annual Meeting and Proxy Statement for the Company’s Annual Meeting of Stockholders and a Tri-County Financial Corporation 20102012 Annual Report to Stockholders.
As an ESOP participant, you are entitled to instruct the ESOP Trustees how to vote the shares of Company common stock allocated to your ESOP account as of March 11, 2011,8, 2013, the record date for the Annual Meeting. The Trustees will vote all allocated shares of Company common stock as directed by ESOP participants. The Trustees will vote unallocated shares of common stock held in the ESOP Trust and the shares for which timely instructions are not received in a manner calculated to most accurately reflect the instructions received from ESOP participants.
To direct the ESOP Trustees how to vote the shares of common stock allocated to your ESOP account, please complete and sign the enclosed vote authorization form and return it to the attention of Laura HewittMarlene Smith at the address indicated on the vote authorization form no later thanApril 29, 20112013.
Sincerely,
/s/ Michael L. Middleton
Michael L. Middleton
Chairman of the Board and Chief Executive Officer
VOTE AUTHORIZATION FORM
COMMUNITY BANK OF TRI-COUNTY
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
TRI-COUNTY FINANCIAL CORPORATION
Annual Meeting of Stockholders – May 9, 2011
With respect to all shares of common stock of Tri-County Financial Corporation (the “Company”) that are allocated to the account of the undersigned pursuant to the Community Bank of Tri-County Employee Stock Ownership Plan and Trust (the “ESOP”), the undersigned hereby directs Louis P. Jenkins, Jr. and Herbert N. Redmond, Jr., as Trustees of the Trust established under the ESOP, to vote such shares at the Annual Meeting of Stockholders (the “Meeting”) to be held at the Community Bank of Tri-County, Waldorf, Maryland, on Monday, May 9, 20116, 2013 at 10:00 a.m., local time, and at any and all adjournments thereof as follows:
The Board of Directors recommends a vote “FOR” each nominee, “FOR” Proposals 2 and 3 and FOR the each of the nominees and the listed proposals.
You are to vote my shares as follows:
xT PLEASE MARK VOTES AS IN THIS EXAMPLE
1. | ELECTION OF DIRECTORS |
FOR all nominees ¨ | WITHHOLD AUTHORITY to vote ¨ | *EXCEPTIONS¨ | ||
listed below | for all nominees listed below |
Louis P. Jenkins, Jr., Michael L. Middleton and Mary Todd Peterson James R. Shepherd, and H. Beaman Smith
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the “Exceptions” box and write that nominee’s name in the space provided below).
*Exceptions: ____________________________________________
THE RATIFICATION OF THE APPOINTMENT OF STEGMAN & COMPANY AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, |
FOR | AGAINST | ABSTAIN | ||||||
¨ | ¨ | ¨ |
3. | THE APPROVAL OF A NON-BINDING RESOLUTION ON THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS. |
FOR | AGAINST | ABSTAIN | ||||||
¨ | ¨ | ¨ |
The Board of Directors recommends you vote FOR the vote to approve executive compensation every year.
4. | THE APPROVAL OF THE FREQUENCY OF THE ADVISORY VOTE ON THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS. |
FOR | AGAINST | ABSTAIN | ||||||
¨ | ¨ | ¨ |
The undersigned acknowledges receipt from the Company prior to the execution of this vote authorization form of the Notice of Annual Meeting, a Proxy Statement for the Annual Meeting and the Company’s 20102012 Annual Report.
PARTICIPANT’S NAME | |||
Dated: ____________________, | |||
SIGNATURE OF PARTICIPANT |
Please complete this direction form, sign, date and return it to the Company, Attn: Laura Hewitt, atMarlene Smith, Tri-County Financial Corporation, 3035 Leonardtown Road, Waldorf, Maryland 20601 by April 29, 2011.