SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Under Rule
[_] Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
FIRST LITCHFIELD 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)(4) 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:
FIRST LITCHFIELD FINANCIAL CORPORATION
________________________________________________________________________________
4) Date Filed:
April 22, 2002
________________________________________________________________________________
April 22, 2002
Dear Shareholder:
On behalf of the Board of Directors of FIRST LITCHFIELD FINANCIAL
CORPORATION (the "Company") you are cordially invited to attend the Annual
Meeting of Shareholders of the Company to be held on Wednesday, May 22, 2002 at
3:00 p.m. at the Litchfield Inn, Route 202, Litchfield, Connecticut.
The Notice of the Annual Meeting and the Proxy Statement which are
enclosed, describe the matters to be voted upon at the meeting. In addition to
the specific items on our agenda, we will discuss generally the operations of
the Company and its subsidiary, The First National Bank of Litchfield (the
"Bank"). We welcome any appropriate questions you may have concerning the
Company and the Bank, and we will provide time during the meeting for questions
from shareholders.
The enclosed proxy is solicited on behalf of the Board of Directors of
the Company, and the expense of the solicitation will be borne by the Company.
Any person giving a proxy pursuant to this solicitation may revoke it at any
time by written notice given prior to the Annual Meeting of Shareholders or the
proxy may be withdrawn and you may vote in person should you attend the meeting.
The enclosed proxy will be voted "FOR" the proposed slate of three (3) directors
unless marked to the contrary. The Board of Directors of the Company currently
consists of thirteen (13) directors, three (3) of whom have been nominated for
re-election at the 2002 Annual Meeting for a term of three (3) years. The
nominees for re-election are: Clayton L. Blick, Bernice D. Fuessenich and H. Ray
Underwood. In addition, the enclosed proxy will be vote "FOR" ratification of
the appointment of McGladrey& Pullen, LLP, as the Company's independent auditors
for the year ending December 31, 2002 and "FOR" the proposal to amend the 1994
Stock Option Plan for Officers and Outside Directors to amend the definition of
retirement to include early retirement upon attaining an age of no less than 59
1/2 years with the approval of the Board of Directors and thereby enable such
individuals to have twelve (12) months rather than sixty (60) days in which to
exercise their options in the event of such early retirement.
We hope you will be able to attend the meeting, but if you cannot do
so, it is still important that your shares be represented at the Annual Meeting.
Please execute and date the enclosed proxy and return it as soon as possible in
the envelope provided.
Sincerely,
/s/Jerome J. Whalen
-------------------
Jerome J. Whalen
President and
Chief Executive Officer
A copy of the Company's Annual Report to Shareholders, including financial
statements of the Company for the fiscal year ended December 31, 2001, is
enclosed.
FIRST LITCHFIELD FINANCIAL CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 22, 2002
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 22, 2002
To the Shareholders of First Litchfield Financial Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of First
Litchfield Financial Corporation (the "Company") will be held at 3:00 p.m. on
Wednesday, May 22, 2002 at the Litchfield Inn, Route 202, Litchfield,
Connecticut, for the following purposes:
1. To elect three (3) shareholders to the Board of Directors, each to
serve for a term of three (3) years and until their successors are
elected and qualified, as described in the Proxy Statement.
2. To ratify the appointment of McGladrey & Pullen, LLP as the Company's
independent auditors for the year ending December 31, 2002.
3. To amend the 1994 Stock Option Plan for Officers and Outside Directors
to revise the definition of retirement to include early retirement upon
attaining an age of no less than 59 1/2 years with approval of the
Board of Directors and thereby enable such option holders to have
twelve (12) months rather than sixty (60) days in which to exercise
their options in the event of such early retirement.
4. To transact such other business as may properly come before the
meeting, or any adjournments thereof.
Only those Shareholders of record at the close of business on the 9th
day of April, 2002 are entitled to notice of, and to vote at this Annual
Meeting. A list of those shareholders will be available for inspection by
shareholders for ten (10) days preceding the meeting at the office of the
Secretary of the Company at the Company's main office, 13 North Street,
Litchfield, Connecticut, and will also be available for inspection by
shareholders at the meeting itself.
BY ORDER OF THE BOARD OF DIRECTORS OF
FIRST LITCHFIELD FINANCIAL CORPORATION
/s/Philip G. Samponaro,
-----------------------
Philip G. Samponaro,
Secretary
April 22, 2002
SHAREHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS
SOON AS POSSIBLE REGARDLESS OF WHETHER THEY PLAN TO ATTEND THE MEETING. ANY
PROXY GIVEN BY A SHAREHOLDER MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED,
AND ANY SHAREHOLDER WHO EXECUTES AND RETURNS A PROXY AND WHO ATTENDS THE ANNUAL
MEETING MAY WITHDRAW THE PROXY AT ANY TIME BEFORE IT IS VOTED AND VOTE HIS OR
HER SHARES IN PERSON. A PROXY MAY BE REVOKED BY GIVING NOTICE TO PHILIP G.
SAMPONARO, SECRETARY OF FIRST LITCHFIELD FINANCIAL CORPORATION, IN WRITING PRIOR
TO THE TAKING OF A VOTE.
Proxy Statement of First Litchfield Financial Corporation
ANNUAL MEETING OF SHAREHOLDERS OF
FIRST LITCHFIELD FINANCIAL CORPORATION
May 22, 2002
SOLICITATION OF PROXIES
The enclosed proxy (the "Proxy") is solicited by the Board of Directors
of FIRST LITCHFIELD FINANCIAL CORPORATION (the "Company"), 13 North Street,
Litchfield, Connecticut, 06759, for use at the Annual Meeting of Shareholders,
to be held on Wednesday, May 22, 2002, and at any and all adjournments thereof.
Any Proxy given may be revoked at any time before it is actually voted on any
matter in accordance with the procedures set forth in the Notice of Annual
Meeting. This Proxy Statement and the enclosed form of Proxy are being mailed to
shareholders (the "Shareholders") on or about April 22, 2002. The cost of
preparing, assembling and mailing this Proxy Statement and the material enclosed
herewith is being borne by the Company. In addition to this solicitation by
mail, directors, officers and employees of the Company, and its subsidiary The
First National Bank of Litchfield (the "Bank"), without additional compensation,
may make solicitations personally or by telephone or telegraph. The Company will
reimburse banks, brokerage firms and others holding shares in their names or in
the names of nominees for their reasonable out-of-pocket expenses in forwarding
proxies and proxy materials to the beneficial owners of such shares.
OUTSTANDING STOCK AND VOTING RIGHTS
The Board of Directors of the Company has fixed the close of business
on April 9, 2002 as the Record Date (the "Record Date") for the determination of
Shareholders entitled to notice of and to vote at the Annual Meeting. As of the
Record Date, 1,669,759 shares of the common stock of the Company (par value $.01
per share) were issued and outstanding and held of record by approximately 431
shareholders (the "Common Stock"), each of which shares is entitled to one vote
on all matters to be presented at the Annual Meeting. The holders of one-third
of the Company's Common Stock must be present, in person or by proxy, at the
Annual Meeting to constitute a quorum. Abstentions and broker non-votes are not
treated as having voted in favor of any proposal and are counted as present for
establishing a quorum. No other class of the Company's capital stock is
outstanding or entitled to vote at the Annual Meeting. Assuming the presence of
a quorum at the Annual Meeting, directors will be elected by a plurality of the
votes of the shares of Common Stock present in person or represented by proxy
and entitled to vote. The affirmative vote of the majority of the votes cast is
required to ratify the appointment of the Company's independent auditors. The
affirmative vote of a majority of the outstanding common stock is required to
approve the amendment to the 1994 Stock Option Plan. Shareholders' votes will be
tabulated by the persons appointed by the Board of Directors to act as
inspectors of election for the Annual Meeting.
3
If the enclosed form of Proxy is properly executed and returned to the
Company in time to be voted at the Annual Meeting, the shares represented
thereby will be voted in accordance with the instructions marked thereon.
Executed but unmarked proxies will be voted "FOR" the election of the three (3)
nominees for election to the Board of Directors; "FOR" Amendment of the 1994
Stock Option Plan for Officers and Outside Directors to amend the definition of
retirement to provide for early retirement upon attaining an age of no less than
59 1/2; and "FOR" ratification of appointment of McGladrey & Pullen, LLP as the
Company's independent auditors for the year ending December 31, 2002. The Board
of Directors does not know of any matters other than those described in the
Notice of Annual Meeting that are to come before the Annual Meeting. If any
other matters are properly brought before the Annual Meeting, the persons named
in the Proxy will vote the shares represented by such Proxy upon such matters as
determined by a majority of the Board of Directors. The proxies confer
discretionary authority to vote on any matter of which the Company did not have
notice at least 45 days prior to the date of the Annual Meeting.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS
The following table includes certain information as of April 1, 2002
regarding the principal shareholders (the "Principal Shareholders") of the
Company. With the exception of the Principal Shareholders listed below, the
Company is not aware of any beneficial owner of five percent (5%) or more of the
Company's Common Stock.
Percent of
Name and Address Number of Shares Outstanding
of Beneficial Owner Beneficially Owned (1) Common Stock
- ------------------- ---------------------- ------------
Donald K. Peck 122,534 (2) 7.34%
Litchfield, CT
William J. Sweetman 93,366 (3), (4) 5.59%
Litchfield, CT
- ---------------------
1. The definition of beneficial owner includes any person who,
directly or indirectly, through any contract, agreement or
understanding, relationship or otherwise has or shares voting
power or investment power with respect to such security.
2. Includes shares owned by, or as to which voting power is
shared with spouse.
3. Includes options to purchase 4,662 additional shares of the
Company Common Stock.
4. Includes 12,987 shares owned by an estate as to which
individual has voting power as fiduciary of said estate.
PROPOSAL (1)
ELECTION OF DIRECTORS
The Board of Directors of the Company is divided into three (3)
classes, each class being approximately equal in size. Each class of directors
will stand for re-election once every three (3) years. Directors are elected by
a plurality of the votes of shares present in person or represented by proxy at
the meeting and entitled to vote.
4
Pursuant to the Company's Certificate of Incorporation and Bylaws, the
Board has fixed the number of directorships at twelve (12). At this Annual
Meeting, three (3) directors are to be elected, each for a term of three (3)
years and until their successors are elected and qualified. The terms of
directors Clayton L. Blick, Bernice D. Fuessenich, H. Ray Underwood, and Jerome
J. Whalen expire at the 2002 Annual Meeting. All nominees are now serving as
directors. Mr. Whalen has indicated that he will retire from the Company and the
Bank during the second calendar quarter of 2002 and will not seek re-election to
the Board of Directors. Each of the other three (3) directors whose terms expire
at this meeting, are nominated for re-election and each has indicated a
willingness to serve as a director. If any of them become unavailable, the Proxy
may be voted for a nominee or nominees who would be designated by the Board of
Directors.
There are no arrangements or understandings between any of the
directors or any other persons pursuant to which any of the above directors have
been selected as directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE ELECTION OF ITS NOMINEES FOR
DIRECTOR
The following sets forth the name and age of each nominee (the first
three (3) directors listed), and each director who will continue his or her term
of office, the year in which each was first elected a director of the Company,
and the principal occupation and business experience of each during the past
five (5) years:
NOMINEES FOR ELECTION
Position Held with Expiration Date
Name & Age the Company of Current Term
- ---------- ----------- ---------------
Clayton L. Director of the Company 2002
Blick since 1988 and of the
(84) Bank since 1953 (1)
Bernice D. Director of the Company 2002
Fuessenich since 1988 and of the
(83) Bank since 1978 (2)
H. Ray Director of the Company 2002
Underwood and of the
(48) Bank since 1998 (3)
5
CONTINUING DIRECTORS
Position held with Expiration Date
Name & Age the Company of Current Term
- ---------- ----------- ---------------
Ernest W. Chairman of the Board of 2004
Clock Directors; Director of the
(77) Company since 1988 and of
the Bank since 1973 (4)
John H. Director of the Company 2003
Field and the Bank since 1990 (5)
(76)
Perley H. Director of the Company 2003
Grimes, Jr. since 1988 and of the
(57) Bank since 1984 (6)
Thomas A. Director of the Company 2003
Kendall and of the Bank since 1999 (7)
(46)
George M. Director of the Company 2004
Madsen and the Bank since 1988 (8)
(68)
Alan B. Director of the Company 2004
Magary and the Bank since 2002 (9)
(59)
Charles E. Director of the Company 2003
Orr since 1988 and of the
(66) Bank since 1981 (10)
William J. Director of the Company 2004
Sweetman and the Bank since 1990 (11)
(55)
Patricia D. Director of the Company 2004
Werner and the Bank since 1996 (12)
(55)
-------------------
1. Mr. Blick is a Partner in the Law Firm of Cramer & Anderson.
2. Ms. Fuessenich is a realtor and an owner of the Fuessenich
Agency.
3. Mr. Underwood is President of Underwood Services, Inc.
6
Footnotes from previous page
- ------------------
4. Mr. Clock is Chairman of the Board of F. North Clark Insurance
Agency.
5. Mr. Field is retired. He served as Executive Vice President of
Union Carbide Corporation until December 1986.
6. Mr. Grimes is a Partner in the Law Firm of Cramer & Anderson.
7. Mr. Kendall is a self employed investor.
8. Mr. Madsen is retired. He formerly served as President of
Roxbury Associates, Inc.
9. Mr. Magary is retired. He served as principal of Magary
Consulting Services through December 1999.
10. Mr. Orr is President of New Milford Volkswagen, Inc.
11. Mr. Sweetman is the President and owner of Dwan & Co., Inc.
12. Ms. Werner is the head of the Washington Montessori
Association, Inc.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of the Company met twelve (12) times in 2001.
All directors, while holding such position, attended at least 75% of the
aggregate of the total number of meetings of the board of directors and the
total number of meetings held by all committees of the board on which such
director served during 2001.
In 2001, each director of the Company who was not an employee of the
Bank, received $300 for each Board meeting attended and $275 for each committee
meeting attended. The Chairman of the Board of Directors also receives an annual
retainer of $6,000 and each non-officer director of the Company also receives an
annual retainer of $5,000 for serving as a director. Directors who are employees
of the Bank receive no additional compensation for their services as members of
the Board or any board committee.
The Board of Directors has established several standing committees to
assist in the discharge of their responsibilities. All members are appointed
annually and serve until their successors are named. All committees report their
deliberations and recommendations to the Board. The principal responsibilities,
membership and number of meetings of each committee are described below.
Nominating Committee
The Nominating Committee met one (1) time in 2001. The Committee
members are: Ernest W. Clock, John H. Field, Bernice D. Fuessenich, Perley H.
Grimes, Jr., George M. Madsen and Jerome J. Whalen. This Committee reviews and
evaluates potential candidates for nomination to the Boards of Directors of the
Company and the Bank, respectively, and recommends proposed nominees for
election as members of the Boards of Directors and committees. The Nominating
7
Committee will consider recommendations by shareholders for nomination as
director, provided such recommendations are submitted in accordance with certain
procedures set forth in the Company's Bylaws and applicable regulations. A copy
of the Bylaws will be sent to any shareholder upon request.
Planning Committee
The Planning Committee met four (4) times in 2001. The Committee
members are: Ernest W. Clock, John H. Field, Perley H. Grimes, Jr., Thomas A.
Kendall, George M. Madsen, William J. Sweetman and Jerome J. Whalen.
Additionally, Senior Vice President and Senior Loan Officer Revere H. Ferris,
Senior Vice President and Senior Trust Officer John S. Newton, Senior Vice
President and Chief Financial Officer of the Bank and Treasurer of the Company
Carroll A. Pereira, and Senior Vice President, Chief Administrative Officer,
Cashier and Secretary of the Bank and Secretary of the Company Philip G.
Samponaro generally attend these meetings. This Committee is responsible for
oversight of the strategic planning function, including development and
implementation of the strategic plan's short and long term components.
Compensation Committee
The Company does not have a Compensation Committee. Rather, the Bank
has a Compensation Committee. The Compensation Committee met three (3) times in
2001. The Committee members are: Ernest W. Clock, George M. Madsen, Charles E.
Orr and Patricia D. Werner. The Compensation Committee is responsible for
developing policies relating to employee compensation, benefits and incentives,
annually evaluating the president and chief executive officer, and making
recommendations concerning salaries and other types of compensation to the full
Board of Directors of the Bank.
Audit/Compliance and Security Committee
The Audit/Compliance and Security Committee (the "Audit Committee") met
five (5) times in 2001. The Committee members are: Bernice D. Fuessenich,
Charles E. Orr, H. Ray Underwood and Patricia D. Werner. In addition, the Bank's
Compliance Officer, Stephen M. Riley, II, attends the Audit Committee Meetings.
This Committee is responsible for oversight of the internal audit function,
internal accounting controls, security programs and recommendations regarding
the selection of independent accountants. The Audit Committee's responsibilities
are described in a written charter, adopted by the Company's Board of Directors.
As of the date of this Proxy
8
Statement, each of the Audit Committee Members is an "independent director"
under the American Stock Exchange ("AMEX") Listing Standards.
Audit Committee Report
The following Report of the Company's Audit Committee is provided in
accordance with the rules and regulations of the Securities and Exchange
Commission (the "SEC"). Pursuant to such rules and regulations, this report
shall not be deemed "soliciting material," filed with the SEC, subject to
Regulation 14A and 14C of the SEC or subject to the liabilities of Section 18 of
the Securities Exchange Act of 1934 (the "Exchange Act").
FIRST LITCHFIELD FINANCIAL CORPORATION
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed the Company's audited
financial statements for the fiscal year ended December 31, 2001 with
management. The Audit Committee has also reviewed and discussed with McGladrey &
Pullen, LLP ("McGladrey"), the Company's independent auditors, certain matters
specified in Statement on Auditing Standards No. 90, communication with Audit
Committees, as may be modified or supplemented.
The Audit Committee has received the written disclosures and the letter
from McGladrey required by Independence Standards Board Standard No. 1, as may
be modified or supplemented, and has discussed McGladrey's independence with
respect to the Company with McGladrey.
Based on the review and discussions referred to in this audit committee
report, the Audit Committee recommended to the Board of Directors that the
Company's audited financial statements be included in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 2001 for filing with the
SEC.
First Litchfield Financial Corporation
Audit Committee
Charles E. Orr, Chairman
Bernice D. Fuessenich
H. Ray Underwood
Patricia D. Werner
9
COMMON STOCK OWNED BY DIRECTORS AND
EXECUTIVE OFFICERS
The following table sets forth the number and percentage of Common
Stock beneficially owned by each current Director, each of the Executive
Officers named in the Summary Compensation Table, and the Directors and
Executive Officers as a group at April 1, 2002.
Common Shares
Name Of Beneficially Owned
Beneficial Owner At April 1, 2002 (1) Percent of Class
- ---------------------- --------------------- ----------------
Clayton L. Blick 12,723 (2), (3) 0.76%
Ernest W. Clock 24,891 (2), (3) 1.49%
John H. Field 7,723 (2) 0.46%
Bernice D. Fuessenich 9,984 (2) 0.60%
Perley H. Grimes, Jr. 14,927 (2) 0.89%
Thomas A. Kendall 607 0.036%
George M. Madsen 15,190 (2) 0.91%
Alan B. Magary 200 (3) 0.01%
Charles E. Orr 13,283 (2), (3) 0.80%
William J. Sweetman 93,366 (2), (4) 5.59%
H. Ray Underwood 120 0.07%
Patricia D. Werner 3,634 (5) 0.22%
Jerome J. Whalen 45,914 (3), (6) 2.75%
Carroll A. Pereira 15,682 (3), (7) 0.94%
Philip G. Samponaro 20,855 (8) 1.25%
Revere H. Ferris 37,947 (9) 2.27%
All Directors and Executive 317,046 18.99%
Officers as a group (16 persons)
10
- -----------------------
1. The definition of beneficial owner includes any person who,
directly or indirectly, through any contract, agreement or
understanding, relationship or otherwise has or shares voting
power or investment power with respect to such security.
2. Includes options to purchase 4,662 shares of Common Stock.
3. Includes shares owned by, or as to which voting power is
shared with, spouse, children or controlled business.
4. Includes 12,987 shares owned by an estate as to which
individual has voting power as fiduciary of said estate.
5. Includes options to purchase 3,249 shares of Common Stock.
6. Includes options to purchase 29,303 shares of Common Stock.
7. Includes options to purchase 15,480 shares of Common Stock.
8. Includes options to purchase 19,002 shares of Common Stock.
Includes 1,034 shares of Common Stock held in a trust for
which Mr. Samponaro is a beneficiary.
9. Includes options to purchase 8,108 shares of Common Stock. In
addition, the total for Mr. Ferris includes 15,402 shares of
Common Stock held in trusts for which Mr. Ferris serves as
trustee.
EXECUTIVE OFFICERS
The following table sets forth information concerning Executive
Officers of the Company and/or the Bank. Unless otherwise indicated, each person
has held the same or a comparable position for the last five years.
Name and Age Position Held with the Company and/or Bank
------------ ------------------------------------------
Jerome J. Whalen (60) President, Chief Executive Officer
and Director of the Company and of the Bank since 1990
Carroll A. Pereira (46) Treasurer of the Company, Senior Vice President and Chief
Financial Officer of the Bank since 1984
Philip G. Samponaro (60) Secretary of the Company, Senior Vice President, Chief
Administrative Officer, Cashier and Secretary of the Bank
since 1976
Revere H. Ferris (61) Senior Vice President and Senior Loan Officer
of the Bank since 1997 (1)
John S. Newton (63) Senior Vice President and Trust Officer of the
Bank since 1999 (2)
----------------
1. Mr. Ferris has served as Senior Vice President and Senior Loan
Officer of the Bank since 1997. Mr. Ferris served as Vice
President from January, 1997 through December, 1997 and served
as Assistant Vice President from January, 1996 through
December, 1996.
2. Mr. Newton has served as Senior Vice President and Trust
Officer of the Bank since April, 1999. Prior to joining the
Bank, Mr. Newton served as Vice President and Senior Trust
Officer of The Bank of Western Massachusetts from October,
1995 to April, 1999.
11
EXECUTIVE COMPENSATION
The following table provides certain information regarding the
compensation paid by the Company and the Bank to certain Executive Officers of
the Company and the Bank for services rendered in all capacities during the
fiscal years ended December 31, 2001, 2000 and 1999. Other than the Named
Executive Officers set forth below (the "Named Executive Officers"), no other
individual employed by the Company and/or the Bank received aggregate
compensation of $100,000 or more during the fiscal year ended December 31, 2001.
Summary Compensation Table
- -------------------------------------------------------------------------- ------------------------------ --------------------
Long Term Compensation
- -------------------------------------------------------------------------- ------------------------------ --------------------
Annual Compensation Awards Payouts
Restricted
Other Annual Stock Options/
Name and Principal Compensation Awards SARs LTIP All Other
Position Year Salary($)(1)(2) Bonus($) ($) ($) (#) Payout($) Compensation ($)
- -------------------------------------------------------------------------- ------------------------------ --------------------
Jerome J. Whalen 2001 $194,683 $ 16,744 (3)
President and Chief 2000 $195,331 $ 270,308 (4)
Executive Officer of the Bank 1999 $186,454 5,855 (5) $ 6,061 (6)
and Company
Revere H. Ferris 2001 $106,716 $ 8,679 (7)
Senior Vice President and 2000 $107,056 $ 3,205 (8)
Senior Loan Officer of the 1999 $102,316 3,861 (5) $ 3,064 (8)
Bank
John S. Newton 2001 $119,700 $ 8,883 (9)
Senior Vice President and 2000 $119,700 $ 2,018 (8)
Trust Officer of the Bank 1999 $ 90,200
Carroll A. Pereira 2001 $100,787 $ 8,403 (10)
Treasurer of the Company, 2000 $101,127 $ 3,028 (8)
Senior Vice President and 1999 $ 96,472 3,861 (5) $ 2,888 (8)
Chief Financial Officer of
the Bank
Philip G. Samponaro 2001 $ 106,196 $ 8,679 (11)
Secretary, Senior Vice 2000 $ 106,536 $ 3,190 (8)
President, Chief 1999 $ 101,796 3,861 (5) $ 3,048 (8)
Administrative Officer and
Cashier of the Bank and
Secretary of the Company
- -------------------------------
1. The Company furnishes the Named Executive Officers with
certain non-cash compensation and other personal benefits
aggregating less than 10% of their cash compensation.
2. All employees of the Bank, including above officers, are
eligible after 1 year of service to participate in the Bank's
401(k) deferred compensation plan. The Bank's contribution of
up to 75% of the first 4% of each employee's voluntary salary
reduction contributed to the 401(k) plan becomes immediately
vested. The Officer's compensation above is without deduction
for their 401(k) contribution.
12
Footnotes from previous page
---------------------
3. Amount includes the Named Executive Officer's taxable benefit
portion of the Split Dollar Life Insurance policy, for the
benefit of the Named Executive Officer pursuant to the 1994
Supplemental Employee Retirement Plan Agreement, $500. (See
"1994 Supplemental Employee Retirement Plan for Mr. Whalen.")
Additionally, the amount includes $5,733 which is the Bank's
matching contribution to the Bank's 401(k) plan for the
benefit of the Named Executive Officer. Additionally, amount
includes $10,511 awarded to Mr. Whalen pursuant to the Bank's
Long Term Incentive and Deferred Compensation Plan. (See "Long
Term Incentive and Deferred Compensation Plans.")
4. Amount includes the Named Executive Officer's taxable benefit
portion of the Split Dollar Life Insurance policy for the
benefit of the Named Executive Officer pursuant to the 1994
Supplemental Employee Retirement Plan Agreement, $478.
Additionally, the amount includes $263,974, which can be
attributed to the exercise of stock options by the Named
Executive Officer and $5,856 which is the Bank's matching
contribution to the Bank's 401(k) plan for the benefit of the
Named Executive Officer.
5. Options granted pursuant to the 1994 Stock Option Plan for
officers and outside directors. The numbers of options have
been adjusted to reflect stock splits and dividends. (See
"1994 Stock Option Plan for Officers and Outside Directors.")
6. Amount includes the Named Executive Officer's taxable benefit
portion of the Split Dollar Life Insurance policy for the
benefit of the Named Executive Officer pursuant to the 1994
Supplemental Employee Retirement Plan Agreement, $460. (See
"1994 Supplemental Employee Retirement Plan Agreement.")
Additionally, the amount includes $5,601 which is the Bank's
matching contribution to the Bank's 401(k) plan for the
benefit of the Named Executive Officer.
7. Amount includes the Bank's matching contribution to the Bank's
401(k) plan for the benefit of the Named Executive Officer,
$3,063 . Additionally, amount includes $5,616 awarded to Mr.
Ferris pursuant to the Bank's Long Term Incentive and Deferred
Compensation Plan. (See "Long Term Incentive and Deferred
Compensation Plans.")
8. Amount includes the Bank's matching contribution to the Bank's
401(k) plan for the benefit of the Named Executive Officer.
9. Amount includes the Bank's matching contribution to the Bank's
401(k) plan for the benefit of the Named Executive Officer,
$3,135. Additionally, amount includes $5,748 awarded to Mr.
Newton pursuant to the Bank's Long Term Incentive and Deferred
Compensation Plan. (See "Long Term Incentive and Deferred
Compensation Plans.")
10. Amount includes the Bank's matching contribution to the Bank's
401(k) plan for the benefit of the Named Executive Officer,
$2,985. Additionally, amount includes $5,418 awarded to Ms.
Pereira pursuant to the Bank's Long Term Incentive and
Deferred Compensation Plan. (See "Long Term Incentive and
Deferred Compensation Plans.")
11. Amount includes the Bank's matching contribution to the Bank's
401(k) plan for the benefit of the Named Executive Officer,
$3,063. Additionally, amount includes $5,616 awarded to Mr.
Samponaro pursuant to the Bank's Long Term Incentive and
Deferred Compensation Plan. (See "Long Term Incentive and
Deferred Compensation Plans.")
13
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
The following table sets forth information regarding stock options that
were exercised, if any, during the last fiscal year, and unexercised stock
options held by the Named Executive Officers. The number of options and the per
share exercise prices have been adjusted to reflect stock splits and dividends.
Unexercisable Value of Unexercised
Securities Underlying In-the-Money
Unexercised Options/SARs
Shares Acquired Value Realized Options/SARs at FY-End At FY-End ($)(1)
Name on Exercise (#) ($) (#) Exercisable/Unexercisable
Exercisable/Unexercisable (2)
(2)
- -------------------------- ----------------- ----------------- -------------------------- ---------------------------
Jerome J. Whalen 0 0 29,303 $ 98,461
Revere H. Ferris 0 0 8,108 $ 6,689
Carroll A. Pereira 0 0 15,480 $38,905
Philip G. Samponaro 0 0 19,002 $63,629
- --------------------------
1. Represents the difference between the fair market value price
of the Company's Common Stock at December 31, 2001, $13.75,
and the exercise price of options, multiplied by the number of
options. No SARs have been granted by the Company. Options are
in the money if the fair market value of the underlying
securities exceeds the exercise or base price of the option.
2. All options are exercisable.
Agreements with Management
- --------------------------
While there are no employment contracts between the Company and any of
its Executive Officers, there are change of control agreements between the Bank
and its Executive Officers. These agreements provide that in certain instances
if the Executive Officer is terminated or reassigned within twenty-four (24)
months following the occurrence of a change of control (as such term is defined
in the Change of Control Agreements), then such individual shall be entitled to
receive an amount as provided by such agreement equal to twenty-four (24) months
salary, reasonable legal fees and expenses incurred by the Executive Officer as
a result of such termination or reassignment, and continued participation in
certain benefit plans.
Agreements with Employees
- -------------------------
While there are no employment contracts between the Company and any of
its employees, there are change of control agreements between the Bank and
twenty-eight (28) employees who have been employed by the Bank for more than ten
years. These agreements provide that in certain instances if the employee is
terminated or reassigned within six (6) months following the occurrence of a
change of control (as such term is defined in the Change of Control Agreements),
then such individual shall be entitled to receive an amount as provided by such
agreement equal to six (6) months salary, reasonable legal fees and expenses
incurred by the employee as a result of such termination or reassignment, and
continued participation in certain benefit plans.
14
Long Term Incentive and Deferred Compensation Agreements
- --------------------------------------------------------
During November and December 2000, the Bank entered into Long Term
Incentive Retirement Agreements (the "Executive Incentive Agreements") with the
Named Executive Officers to encourage the Executives to remain employees of the
Bank. The Executive Incentive Agreements will trigger the award of deferred
bonuses to the Named Executive Officers if specified Bank performance objectives
are achieved, based upon a formula approved by the Board of Directors and upon
which tax deferred earnings will accrue at rates which will generally range
between 4% and 15%. Amounts are awarded after the end of each fiscal year. Such
awards will immediately vest 20% per additional year of service subsequent to
the year with respect to which the award is granted with 100% vesting upon a
change in control, termination without cause, or, at normal retirement or at age
55 with 20 years of service. If the Named Executive Officer dies while serving
as an executive officer of the Bank, the amount payable to the participant's
beneficiary is projected to be equivalent to the participant's projected
retirement benefit (as defined in the Executive Incentive Agreements) if the
Bank acquires and maintains a corporate life insurance policy on the life of the
participant at the time of death (see below). Upon retirement, the Named
Executive Officers' total deferred compensation, including earnings thereon, may
be paid out in one lump sum, or paid in equal annual installments over fifteen
(15) years.
During November and December 2000, the Bank entered into Long Term
Incentive Retirement Agreements with each of its Directors (the "Director
Incentive Agreements") to reward past service and encourage continued service of
each Director. The Director Incentive Agreements will award a director with a
right to earn and defer the receipt of a bonus in an amount or percentage of
director and retainer fees, and have earnings accrue on such amounts at a rate
anticipated to be between 4% and 15% and generally equivalent to the
appreciation in the Company's stock price over the period of time for which the
fees are deferred pursuant to the Director Incentive Agreements if specified
Bank performance objectives are achieved. All amounts in the Director Incentive
Agreements will immediately vest 20% per additional year of service with 100%
vesting upon a change in control, at normal retirement or full term years of
service. If a participant dies while serving as an outside director of the Bank,
the amount payable to the participant's beneficiary is projected to be
equivalent to the participant's projected retirement benefit (as defined in the
Director Incentive Agreements) if the Bank has acquired and maintains a
corporate life insurance policy on the life of the participant at the time of
death (see below). Upon retirement, the Directors' total deferred compensation,
including earnings thereon, may be paid out in one lump sum, or paid in equal
annual installments over ten (10) years.
In concert with the Executive and Director Incentive Agreements, the
Bank has invested $5.5 million in universal cash surrender value life insurance.
Insurance policies were acquired on the lives of each of the Bank's Named
Executive Officers, five (5) non-senior officers and all but three (3) of the
Bank's directors which are designed to recover the costs of the Bank's Executive
and Director Incentive Agreements. The policy death benefit has been structured
to indemnify the Bank against the death benefit provision of these benefit
agreements. The policies were paid with a single premium. Policy cash values
will earn interest at a current rate of approximately 4.9% and policy mortality
costs will be charged against the cash value monthly. There are no load or
surrender charges associated with the policies.
15
Executive Supplemental Compensation Agreement for President Whalen
- ------------------------------------------------------------------
Effective November 21, 2000, the Bank entered into an Executive
Supplemental Compensation Agreement (the "Executive Agreement") with Jerome J.
Whalen, President and CEO. The purpose of the Executive Agreement is to induce
President Whalen to continue in the employ of the Bank and to recognize his past
service by providing him with increased retirement benefits through a trust
arrangement, such that his total retirement payments from all sources will
approximate 60% of the average of the five (5) consecutive calendar years during
Mr. Whalen's period of employment by the Bank in which his compensation,
including any bonus, is the highest. The premium paid by the Bank on the policy
to fund the Executive Agreement during 2001 was $37,250. Upon the death of Mr.
Whalen, the Bank expects to recover its costs from the face amount of the
policy.
Early Retirement Agreement with President Whalen
- ------------------------------------------------
The terms of the Early Retirement Agreement with Jerome J. Whalen
signed on April 2, 2002 supersede certain aspects of the previously referenced
agreement and amend the scope of the non-compete provisions set forth in the
Executive Agreement, but would continue to preclude Mr. Whalen from working for
a competing institution following his retirement in the proximity of the Bank.
The Early Retirement Agreement provides for the payment of severance benefits
equal to $195,138 and provides for one year of Company paid group health and
dental insurance for Mr. Whalen and his spouse and the continuation of such
coverage thereafter at Mr. Whalen's expense until Mr. Whalen reaches 65. The
Early Retirement Agreement also provides for a lump sum payment of Mr. Whalen's
Supplemental Retirement Benefits in the amount of $210,000 in 2003 and transfers
to Mr. Whalen upon his retirement the Company owned 1999 Buick automobile which
has previously been available for his use. Mr. Whalen is also entitled to his
vested benefits pursuant to the Bank's Long Term Incentive Plan which currently
amount to $23,612 and protection pursuant to the previously referenced Change In
Control Agreement through the expiration of such Agreement on June 1, 2002.
Consistent with the Early Retirement Agreement, the Board of Directors
has recommended to the Company's shareholders to amend the 1994 Stock Option
Plan for officers and outside directors to revise the definition of "retirement"
to include early retirement upon attaining an age of no less than 59 1/2 years
with approval of the Board of Directors and, thereby, enable option holders to
have twelve (12) months rather than sixty (60) days in which to exercise their
options in the event of early retirement.
16
1990 Stock Option Agreement with President Whalen
- -------------------------------------------------
The Board of Directors, with shareholder approval on April 11, 1990,
granted the Company's President, Jerome J. Whalen, stock options to purchase a
maximum of 3,000 shares of the Company's Common Stock (the "1990 Plan"). The
options had a term of ten (10) years from the 1990 date of grant. The original
exercise price was $55.00 per share which was the fair market value of the
Common Stock on March 1, 1990, the date Mr. Whalen joined the Company as
President and Chief Executive Officer. On May 4, 1994, an amendment to the 1990
Plan was approved by shareholders thereby increasing the number of stock options
available to President Whalen on December 31, 1994 to 3,829 at an adjusted price
of $43.08 per share. As a result of stock splits and dividends, as of December
31, 1999, President Whalen had options to purchase 29,997 shares at a price of
$5.41 per share pursuant to the 1990 Plan. In accordance with the Plan, Mr.
Whalen exercised his options to purchase 29,997 shares of Common Stock in
February, 2000.
1994 Stock Option Plan For Officers and Outside Directors
- ---------------------------------------------------------
On May 4, 1994, Shareholders approved a stock option plan for officers
and outside directors of the Company and the Bank, respectively (the "1994 Stock
Option Plan"). The Plan expired on May 4, 1999. Pursuant to the 1994 Stock
Option Plan, in 1995, the Board of Directors granted options to President
Whalen, which as a result of stock splits, stock dividends and exercises allows
Mr. Whalen to purchase 5,279 shares of the Company's Common Stock at $6.73 per
share, 5,865 shares of Common Stock at $8.58 per share, 5,865 shares of Common
Stock of $10.18 per share, 6,147 shares at an exercise price of $12.10 per share
and 6,147 shares at an exercise price of $15.98 per share.
Pursuant to the 1994 Stock Option Plan, in January 1995, the Board of
Directors granted stock options to Mr. Samponaro which as a result of stock
splits and dividends allows him to purchase 3,522 shares of the Company's Common
Stock at $6.73 per share. In January 1996, the Board granted stock options to
Ms. Pereira and Mr. Samponaro which as a result of stock splits and dividends
allow each such individual to purchase 3,686 shares of the Company's Common
Stock at $8.58 per share. In January 1997, the Board granted stock options to
Ms. Pereira and Mr. Samponaro which as a result of stock splits and dividends
allows such individuals to purchase 3,686 shares of Common Stock at an exercise
price of $10.18 per share. In January 1998, the Board granted stock options to
Ms. Pereira and Messrs. Ferris and Samponaro which as a result of stock splits
and dividends allow such individuals to each purchase 4,054 shares of Common
Stock at an exercise price of $12.10 per share. In January, 1999, the Board
granted options to each of these individuals, which as a result of a stock
dividend, allows each individual to purchase 4,054 shares at an exercise price
of $15.98 per share.
Pursuant to the 1994 Stock Option Plan, with the exceptions of Patricia
D. Werner who became a director in 1996, H. Ray Underwood who became a Director
in 1998 and Thomas A. Kendall who became a Director in 1999, each outside
director who is not an officer of the Company or the Bank ("Outside Director")
has received stock options, which are presently exercisable, to purchase a total
of 4,662 shares of the Company's Common Stock. More specifically, in May 1994,
17
each Outside Director was granted options, which as a result of stock splits and
dividends allows such individuals to purchase 2,778 shares of Common Stock at
$5.83 per share. Moreover, in June, 1995, each Outside Director was granted
options, which as a result of stock splits and dividends allows such individuals
to purchase 471 shares of Common Stock at $6.78 per share. In June 1996, each
Outside Director was granted options, which as a result of stock splits and
dividends, allows such individuals to purchase 471 shares of Common Stock at
$9.29 per share. In June, 1997, each Outside Director was granted options which
as a result of stock splits and dividends allows such individuals to purchase
471 shares of Common Stock at an exercise price of $10.30 per share. In June
1998, each Outside Director was granted options, which as a result of a stock
dividend, allows each individual to purchase 471 shares of Common Stock at an
exercise price of $14.48. Moreover, Patricia D. Werner has options to purchase
3,249 shares of Common Stock consisting of options to acquire 2,778 shares at
$10.33 per share and options to acquire 471 shares at $14.48 per share.
The 1994 Stock Option Plan currently provides that an option holder who
retires upon attaining age sixty-five (65) has twelve (12) months in which to
exercise options. However, because the Plan does not address early retirement,
an option holder who terminated service as an officer for any reason other than
death or disability would only have sixty (60) days in which to exercise their
options. The Board has proposed to amend the 1994 Stock Option Plan to allow
individuals who retire at age of not less than fifty-nine and one-half (59 1/2)
with the approval of the Board of Directors to have twelve (12) months rather
than sixty (60) days in which to exercise their options. While each of the
executive officers who hold options pursuant to the 1994 Stock Option Plan could
potentially benefit from this proposal, currently, Mr. Whalen is the only
executive officer option holder who has expressed a desire to retire at an age
of not less than fifty-nine and one-half (59 1/2) with the approval of the Board
and will benefit from such proposed amendment.
401(k) Plan
- -----------
The Bank offers an employee savings plan under Section 401(k) of the
Internal Revenue Code. Currently, the Bank makes matching contributions equal to
75% of participant contributions up to the first 4% of pre-tax compensation of a
contributing participant. Participants vest immediately in both their own
contributions and the Bank's contributions. Employee savings plan expense was
$78,737 for 2001 and $75,250 for 2000.
Noncontributory Defined Benefit Pension Plan
- --------------------------------------------
The Bank has a noncontributory defined benefit pension plan that covers
substantially all employees who have completed one year of service and have
attained age 21. The benefits are based on years of service and the employee's
compensation during the last five (5) years of employment. The Bank's funding
policy is to contribute amounts to the Plan sufficient to meet the minimum
funding requirements set forth in ERISA, plus such additional amounts as the
Bank may determine to be appropriate from time to time.
18
Directors' Fees Plan
- --------------------
The Company offers Directors the option to defer their Directors' fees.
If deferred, the fees are held in a trust account with the Bank. The Bank has no
control over the trust. The cost of the related trust assets and corresponding
liability was $300,391 and $252,821 at December 31, 2001, and 2000,
respectively.
CERTAIN TRANSACTIONS WITH DIRECTORS AND MANAGEMENT
The Bank has had and expects to have in the future, transactions in the
ordinary course of its business with Directors, Officers, principal shareholders
and their associates, on substantially the same terms, including interest rates
and collateral on loans, as those prevailing at the same time for comparable
transactions with others, on terms that do not involve more than the normal risk
of collectibility or present other unfavorable features. The aggregate dollar
amount of these loans was $3,213,055 and $2,961,677 at December 31, 2001 and
2000, respectively. During 2001, $9,004,240 of new loans were made, and
repayments totaled $8,602,206. At December 31, 2001, all loans to Officers,
Directors, principal shareholders and their associates were performing in
accordance with the contractual terms of the loans.
Clayton L. Blick and Perley H. Grimes, Jr., both of whom are Directors
of the Company and the Bank, are partners in Cramer & Anderson, a law firm which
renders certain legal services to the Bank in connection with various matters.
During 2001 and 2000, the Bank paid Cramer & Anderson $94,052 and $83,073,
respectively for legal services rendered, a portion of which was reimbursed to
the Bank by third parties.
Ernest W. Clock, Director of the Company and the Bank, is the Chairman
of F. North Clark Insurance Agency, Inc., which serves as insurance agent for
many of the Bank's insurance needs. In 2001, and 2000, the Bank paid insurance
premiums to F. North Clark Insurance Agency, Inc. in the aggregate amount of
$134,262 and $74,040, respectively.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Section 16(a) of the Exchange Act requires that the Company's
directors, executive officers, and any person holding more than ten percent
(10%) of the Company's Common Stock file with the SEC reports of ownership and
changes in ownership of the Company's Common Stock and that such individuals
furnish the Company with copies of the reports.
Based solely on its review of the copies of such forms received by it,
or written representations form certain reporting persons, the Company believes
that all of its executive officers and directors complied with all Section 16(a)
filing requirements applicable to them.
19
PROPOSAL (2)
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
Shareholders are asked to consider and ratify the appointment by the
Board of Directors of McGladrey & Pullen LLP as independent auditors to audit
the consolidated financial statements of the Company for the fiscal year ending
December 31, 2002. McGladrey & Pullen LLP has served as the accountants for the
Company for the fiscal year ended December 31, 2001. McGladrey & Pullen LLP's
opinion on the Consolidated Financial Statements of First Litchfield Financial
Corporation and subsidiary for the year ended December 31, 2001 is included in
the First Litchfield Financial Corporation 2001 Annual Report.
1. Audit Fees
----------
The aggregate fees billed or expected to be billed for professional
services rendered for the audit of the Company's annual financial statements for
the most recent fiscal year and the reviews of the financial statements included
in the Company's Forms 10-QSB during the year ended December 31, 2001 were
$83,326.
2. Financial Information Systems Design and Implementation Fees
------------------------------------------------------------
For the fiscal year ended December 31, 2001, there were no fees billed
or expected to be billed by McGladrey & Pullen LLP for the professional services
described in Paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X.
3. All Other Fees
--------------
The aggregate fees billed or expected to be billed for services
rendered by McGladrey & Pullen LLP, other than the services covered above, for
the fiscal year ended December 31, 2001 were $40,153.
Independence
- ------------
The Audit Committee of the Board of Directors of the Company has
considered and determined that the provision of services rendered by McGladrey &
Pullen LLP relating to matters 2 and 3 above, is compatible with maintaining the
independence of such accountants.
A representative of McGladrey & Pullen, LLP will be available at the
Annual Meeting to answer questions and will be afforded the opportunity to make
a statement if he or she desires to do so.
20
Required Vote For Ratification of the Independent Auditors
- ----------------------------------------------------------
The affirmative vote of a majority of the shares represented at the
meeting is required to ratify the appointment of the independent auditors for
the year ending December 31, 2002.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" RATIFICATION OF THE INDEPENDENT AUDITORS
PROPOSAL (3)
AMENDMENT TO THE 1994 STOCK OPTION PLAN
FOR OFFICERS AND OUTSIDE DIRECTORS
The Board of Directors has voted to amend the 1994 Stock Option Plan
for Officers and Outside Directors (the "1994 Stock Option Plan"), subject to
shareholder approval at the Annual Meeting, to amend the definition of
retirement as set forth in Section 12(b) of the 1994 Stock Option Plan to
provide for early retirement with approval of the Board of Directors at an age
of not less than 59 1/2.
The 1994 Stock Option Plan was established by the Board of Directors of
the Company in 1994, and approved by the shareholders of the Company at the 1994
annual meeting. As of April 1, 2002, there were four (4) officers of the
Company and its subsidiary and nine (9) non-employee directors of the Company
who have received options pursuant to the 1994 Stock Option Plan.
The Board of Directors of the Company believes that the amendment is in
the best interests of the Company. The 1994 Stock Option Plan currently provides
that an option holder who retires upon attaining age sixty-five (65) has twelve
(12) months in which to exercise options. However, because the Plan does not
address early retirement, an option holder whose service is terminated as an
officer for any reason other than death or disability would only have sixty (60)
days in which to exercise their options. The Board has proposed to amend the
1994 Stock Option Plan to allow individuals who retire at age of not less than
fifty-nine and one-half (59 1/2) with the approval of the Board of Directors to
have twelve (12) months rather than sixty (60) days in which to exercise their
options.
While each of the executive officers who hold options pursuant to the
1994 Stock Option Plan could potentially benefit from this proposal, currently,
Mr. Whalen is the only executive officer option holder who has expressed a
desire to retire at an age of not less than fifty-nine and one-half (59 1/2)
with the approval of the Board and will benefit from such proposed amendment.
Required Vote for Amendment of the 1994 Stock Option Plan
Approval by a majority of the votes of the Company's outstanding common
stock is required to approve the amendment to the 1994 Stock Option Plan.
21
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" APPROVAL OF THE AMENDMENT OF THE 1994 STOCK OPTION PLAN
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of the
Company does not know of any other matters to be presented for action by the
shareholders at the 2002 Annual Meeting. If, however, any other matters not now
known are properly brought before the meeting, the persons named in the
accompanying Proxy will vote such Proxy in accordance with the determination of
a majority of the Board of Directors.
PROPOSALS OF SHAREHOLDERS
Under the Company's Bylaws, for business proposed by a shareholder
(other than director nomination) to be a proper subject for action at an Annual
Meeting of Shareholders, in addition to any requirement of law, the shareholder
must timely request that the proposal be included in the Company's proxy
statement for the meeting. The Company received no such request from any
shareholder with respect to the 2002 Annual Meeting.
In order to be included in the Company's proxy statement and form of
proxy for 2003 Annual Meeting of Shareholders and in order to be a proper
subject for action at that meeting, proposals of shareholders intended to be
presented to that meeting must be received at the Company's principal executive
offices by December 26, 2002, pursuant to proxy soliciting regulations of the
SEC. The SEC's rules contain standards as to what shareholder proposals are
required to be in the proxy statement. Any such proposal will be subject to 17
C.F.R. ss.240.14a-8 of the rules and regulations promulgated by the SEC. Nothing
in this paragraph shall be deemed to require the Company to include in its proxy
statement and form of proxy for such meeting any shareholder proposal which does
not meet the requirements of the SEC in effect at the time. In addition, under
the Company's Bylaws, shareholders who wish to nominate a director or bring
other business before an annual meeting must comply with the following:
o You must be a shareholder of record and must have given timely
notice in writing to the Secretary of the Company.
o Your notice must contain specific information required in the
Company's Bylaws.
Any other proposal for consideration by shareholders at the Company's
2003 annual meeting of shareholders must be delivered to, or mailed to and
received by, the Secretary of the Company not less than 45 days nor more than 90
days prior to the date of the meeting if the Company gives at least 30 days
notice or prior public disclosure of the meeting date to shareholders.
Shareholder proposals should be mailed to: Philip G. Samponaro,
Secretary, First Litchfield Financial Corporation, P.O. Box 578, 13 North
Street, Litchfield, Connecticut 06759.
22
ANNUAL REPORT TO SHAREHOLDERS
The Company files with the Securities and Exchange Commission Annual
Reports on Form 10-KSB. A copy of the Company's Annual Report on Form 10-KSB,
without exhibits and Annual Report to Shareholders, including consolidated
financial statements, may be obtained without charge upon written request to:
Philip G. Samponaro, Secretary, First Litchfield Financial Corporation, P.O. Box
578, 13 North Street, Litchfield, Connecticut 06759.
By Order of the Board of Directors
April 22, 2002 Philip G. Samponaro, Secretary
23
PROXY FOR 2002 ANNUAL MEETING OF FIRST LITCHFIELD FINANCIAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
FIRST LITCHFIELD FINANCIAL CORPORATION
The undersigned holder(s) of the Common Stock of First Litchfield
Financial Corporation (the "Company") do hereby nominate, constitute and appoint
Herbert L. Curtiss, Jr. and Arthur B. Webster of Litchfield County, Connecticut,
jointly and severally, as our proxies with full power of substitution, for us
and in our name, place and stead to vote all the Common Stock of said Company,
standing in our name on its books on April 9, 2002 at the Annual Meeting of its
shareholders to be held at the Litchfield Inn, Route 202, Litchfield,
Connecticut on Wednesday, May 22, 2002 at 3:00 p.m. or at any adjournment
thereof with all the powers the undersigned would possess if personally present,
as follows:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS (1), (2) & (3)
(1) ELECTION OF DIRECTORS: To re-elect the following three (3) Directors to
the Board of Directors each to serve for a term of three (3) years and
until their successors are elected and qualified, as described in the
Proxy Statement (Nominees: Clayton L. Blick, Bernice D. Fuessenich and
H. Ray Underwood).
[ _ ] FOR ALL NOMINEES [ _ ] WITHHOLD AUTHORITY [ _ ] FOR ALL NOMINEES
TO VOTE FOR ALL NOMINEES EXCEPT AS WRITTEN BELOW:
-----------------------------
----------------------------
(2) APPOINTMENT OF AUDITORS: To ratify the appointment of McGladrey &
Pullen, LLP as the Company's independent auditors for the year ending
December 31, 2002.
[ _ ] FOR [ _ ] AGAINST [ _ ] ABSTAIN
(3) TO AMEND THE 1994 STOCK OPTION PLAN FOR OFFICERS AND OUTSIDE DIRECTORS:
To amend the 1994 Stock Option Plan for Officers and Outside Directors
to amend the definition of retirement to include early retirement upon
attaining an age of no less than 59 1/2 years with the approval of the
Board of Directors and thereby enable such option holder to have twelve
(12) months rather than sixty (60) days in which to exercise their
options in the event of such early retirement.
[ _ ] FOR [ _ ] AGAINST [ _ ] ABSTAIN
(4) OTHER BUSINESS: To transact such other business as may properly come
before the meeting, or any adjournments thereof. Management knows of no
other business to be presented by or on behalf of the Company or its
management at the meeting. However, if any other matters are properly
brought before the meeting, the persons named in this Proxy or their
substitutes will vote in accordance with the determination of a
majority of the Board of Directors.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATION INDICATED. IF NO
SPECIFICATION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES LISTED IN PROPOSAL 1; "FOR" THE RATIFICATION OF THE COMPANY'S
APPOINTMENT OF INDEPENDENT AUDITORS (PROPOSAL 2); "FOR" THE AMENDMENT TO THE
1994 STOCK OPTION PLAN FOR OFFICERS AND OUTSIDE DIRECTORS (PROPOSAL 3); AND IN
ACCORDANCE WITH THE DETERMINATION OF A MAJORITY OF THE BOARD OF DIRECTORS AS TO
ANY OTHER MATTERS.
DATE:
--------------------- PLEASE SIGN, DATE AND RETURN
-------------------------------(L.S.)
-------------------------------(L.S.)
Please sign exactly as name appears. When
shares are held in more than one name,
including joint tenants, each party should
sign. When signing as attorney, executor,
administrator, trustee or guardian, give
full title as such.
THIS PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE MEETING BY WRITTEN NOTICE
TO THE COMPANY OR MAY BE WITHDRAWN AND YOU MAY VOTE IN PERSON
SHOULD YOU ATTEND THE ANNUAL MEETING
PLEASE SIGN AND RETURN