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:
________________________________________________________________________________
4) Date Filed:
________________________________________________________________________________
FIRST LITCHFIELD FINANCIAL CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 17, 2006
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 17, 2006
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 17, 2006 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, 2006.
3. 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 4th
day of April, 2006 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
Assistant 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 Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS OF
FIRST LITCHFIELD FINANCIAL CORPORATION
/s/ George M. Madsen
George M. Madsen
Secretary
April 17, 2006
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 MICHELLE
QUIGLEY, ASSISTANT 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 17, 2006
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 17, 2006, 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 17, 2006. 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. Upon request, 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 4, 2006 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, 2,136,370 shares of the common stock of the Company (par value $.01
per share) were issued and outstanding and held of record by approximately 442
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.
Shareholders' votes will be tabulated by the persons appointed by the Board of
Directors to act as inspectors of election for the Annual Meeting.
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; and FOR ratification of
appointment of McGladrey & Pullen, LLP as the Company's independent auditors for
the year ending December 31, 2006. 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 4, 2006
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. Percentages are based on 2,136,370 shares of the
Company's Common Stock issued and outstanding as of April 4, 2006.
Percent of
Name and Address Number of Shares Outstanding
of Beneficial Owner Beneficially Owned (1) Common Stock
- ------------------- ---------------------- ------------
William J. Sweetman 110,269(2), (3) 5.16%
101 Talmadge Lane
Litchfield, CT 06759
Helen W. Buzaid 136,655 6.40%
68 Deer Hill Ave.
Danbury, CT 06810
- ---------------------
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 1,719 additional shares of the
Company's Common Stock.
3. Includes 14,634 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.
2
Pursuant to the Company's Certificate of Incorporation and Bylaws, the
Board has fixed the number of directorships at ten (10). 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 Joseph
J. Greco, Perley H. Grimes, Jr. and Charles E. Orr expire at the 2006 Annual
Meeting. Each nominee is now serving as a director. Each of the 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. Thomas A. Kendall, whose term also would
have expired at this meeting resigned from the Board as of March 30, 2006, and
will not seek re-election.
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 Bank, 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
- ---------- ----------------------------- ---------------
Joseph J. President and Chief Executive 2006
Greco Officer and Director of the
(55) Company and of the Bank
since 2002 (1)
Perley H. Director of the Company 2006
Grimes, Jr. since 1988 and of the
(61) Bank since 1984 (2)
Charles E. Director of the Company 2006
Orr since 1988 and of the
(70) Bank since 1981 (3)
CONTINUING DIRECTORS
George M. Director of the Company 2007
Madsen and of the Bank since 1988 (4)
(72)
Alan B. Director of the Company 2007
Magary and of the Bank since 2002 (5)
(63)
3
Position held with Expiration Date
Name & Age the Company of Current Term
- ---------- ----------------------------- ---------------
Gregory S. Director of the Company 2007
Oneglia and of the Bank since 2002 (6)
(58)
William J. Director of the Company 2007
Sweetman Sweetman and of the Bank since 1990 (7)
(59)
Patricia D. Director of the Company 2007
Werner and of the Bank since 1996 (8)
(59)
Kathleen A. Director of the Company 2008
Kelley and of the Bank since 2004 (9)
(53)
H. Ray Director of the Company 2008
Underwood and of the Bank since 1998 (10)
(52)
- -----------------
1. Mr. Greco has served as the President and Chief Executive
Officer of the Company and the Bank since June 2002. Mr. Greco
served as President and Chief Executive Officer of Marketing
Solutions from 1998 to 2002, and served as Senior Vice
President of Hudson United Bancorp from 1993 to 1997.
2. Mr. Grimes is a Partner in the Law Firm of Cramer & Anderson.
3. Mr. Orr is retired. He served as President of New Milford
Volkswagen, Inc. until April 2002.
4. Mr. Madsen is retired. He formerly served as President of
Roxbury Associates, Inc.
5. Mr. Magary is retired. He served as principal of Magary
Consulting Services through December 1999.
6. Mr. Oneglia is Vice-Chairman of O&G Industries, Inc. since
2000. Mr. Oneglia served as President of O&G Industries, Inc.
from 1997 to 2000.
7. Mr. Sweetman is the President and Owner of Dwan & Co., Inc.
8. Ms. Werner is the head of the Washington Montessori
Association, Inc.
9. Ms. Kelley is the principal in the firm Kelley & Company,
CPA's.
10. Mr. Underwood is Secretary and Treasurer of Underwood
Services, Inc.
4
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of the Company met twelve (12) times in 2005.
With the exception of Thomas A. Kendall, all directors 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 2005. The Company does not maintain an attendance policy
for directors at the Company's Annual Meetings. Nine of the eleven directors of
the Company attended the Company's Annual Meeting on May 18, 2005.
In 2005, each director of the Company who was not an employee of the
Bank, received $330 for each Board meeting attended and $300 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.
Board of Directors' Communications with Shareholders
While the Company's Board of Directors does not have a formal process
for shareholders to send communications to the Board, the volume of such
communications has historically been de minimus. Accordingly, the Board
considers the Company's informal process to be adequate to address the Company's
needs. Historically, such informal process has functioned as follows: A Board
recipient of a shareholder communication would forward same to the Chairman and
Chief Executive Officer for appropriate discussion by the Board and the
formulation of an appropriate response. Shareholders may forward written
communications to the Board by addressing such comments to the Board of
Directors of First Litchfield Financial Corporation, 13 North Street,
Litchfield, Connecticut 06759.
The Board of Directors has established several standing committees to
assist in the discharge of its 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 three (3) times in 2005. The current
Committee members, all of whom are "independent" in accordance with the
independence standards of the American Stock Exchange ("AMEX"), are: Perley H.
Grimes, Jr., George M. Madsen, Charles E. Orr and H. Ray Underwood. 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.
While the Nominating Committee does not have a formal charter or
written policy, the Company has procedures and guidelines for the selection and
election of directors.
The procedure for nomination of directors by the Nominating Committee
is as follows:
1. The Nominating Committee, selected by the Board from among its
members, identifies potential candidates with input from
management and other directors and obtains background
information on candidates.
2. The Nominating Committee presents proposed candidates to the
Board before contacting such candidates.
5
3. The Nominating Committee approaches the candidate and if such
candidate is interested, he or she fills out the
questionnaire.
4. After review of the questionnaire, the Board or Nominating
Committee decides whether to nominate the candidate.
In addition, the Company's Bylaws include procedures for nominations by
shareholders. A copy of the Company's Bylaws is available by sending a written
request to or by calling George M. Madsen, Secretary, 13 North Street,
Litchfield, Connecticut 06759; (860) 567-8752. The Nominating Committee's
process for identifying and evaluating nominees for director, including nominees
recommended by shareholders, has historically operated informally and without
any differences in the manner in which nominees recommended by shareholders are
evaluated.
The Nominating Committee considers factors such as those summarized
below in evaluating Director candidates and believes that the Company's Bylaws
and the qualifications and considerations such as those enumerated below provide
adequate guidance and flexibility in evaluating candidates.
o Experience in business or a profession, either active currently
or recently retired, and ability to contribute sound judgment to
Bank matters.
o Participation in community affairs.
o Residency, whether home or business in the Company's primary
marketing area. o Ability to refer desirable business to the
Bank.
o Having integrity, ethical character and good reputation.
o Candidates must be less than 65 years of age when first elected.
o Candidates should be willing and able to attend Board meetings
and Board committee Meetings (each director must participate on
at least one committee) on a regular basis.
o Candidates should not be employed by, or a partner, in any
corporation or business firm which already has an employee or
partner on the Board.
o Candidates should not be close relatives of any member of the
board.
o Candidates must not be a director of any other bank.
o Candidates should not have any significant conflict of interest
with the Company or the Bank which cannot be satisfactorily
handled by full disclosure and abstention of voting when
appropriate.
The Company has not paid a fee to any third party or parties to
identify or assist in identifying or evaluating potential nominees. The
Nominating Committee does not discriminate on the basis of sex, race, color,
gender, national origin, religion or disability in the evaluation of candidates.
All nominees for election as directors at the 2006 Annual Meeting were nominated
by the Nominating Committee and Board of Directors.
Compensation Committee
- ----------------------
The Company does not have a Compensation Committee. Rather, the Bank
has a Compensation Committee. The Compensation Committee met six (6) times in
2005. The Compensation Committee consists solely of independent directors, in
accordance with the AMEX Independence Standards. The current Committee members
are: Alan B. Magary, Gregory S. Oneglia, Charles E. Orr and Patricia D. Werner.
The Compensation Committee is responsible for developing policies relating to
employee compensation, benefits and incentives, annually evaluating
6
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. The full Board of Directors of the Company reviews and approves this
Committee's recommendations.
The philosophy of the Committee is based on the belief that executive
compensation should closely reflect the achievements as measured by the key
performance indicators of the Company. These indicators include short-term and
long term measures as well as the development and execution of effective
strategic business plans. The Company has a Management Incentive plan for senior
management and officers in key positions of the Bank. This plan recognizes that
both salary and incentive compensation play important roles in attracting,
retaining and motivating that talent which is critical to the success of the
Company. The Management Incentive Plan includes components that ties both
Company-wide and individual goals to incentive compensation. Company-wide goals
include achieving net income levels in accordance with the Company's annual
budget. Individual goals are determined based on strategic and annual business
objectives for each member's area of responsibility.
The Company utilized the services of a compensation consulting firm to
assist the Committee in the development of this plan. The Company continues to
utilize the service of a compensation consulting firm to perform peer group
analysis on different forms of compensation to ensure that the Bank's
compensation levels remain competitive as well as to keep the Committee current
of various incentive and benefit plans available in the Bank's peer group market
place.
The Compensation Committee has established base salary levels for each
position and additionally takes into consideration an individual's performance,
level of expertise, responsibilities, length of service to the Company and
comparable levels of remuneration paid to executives of other companies of
comparable size and development within the industry. The individual does not
participate in the review, discussion or decisions of the Compensation Committee
regarding this remuneration.
The Committee reviews the Chief Executive Officer's performance
annually and adjusts his compensation based on the previously mentioned factors,
the Bank's performance, and a comparison of the Chief Executive Officer's salary
and the salaries paid to chief executive officers of peer companies in the
banking industry. The annual review is based on an assessment of the Chief
Executive Officer's performance as measured by such factors as the Company's
financial performance, attainment of objectives, development and execution of
strategic initiatives. The Chief Executive Officer does not participate in the
review, discussion or decision of the Committee regarding his remuneration.
The First National Bank of Litchfield
Compensation Committee:
Alan B. Magary
Gregory S. Oneglia
Charles E. Orr
Patricia D. Werner
7
Audit/Compliance and Security Committee
- ---------------------------------------
The Audit/Compliance and Security Committee (the Audit Committee) met
four (4) times in 2005. The current Committee members are: Alan B. Magary,
Kathleen A. Kelley and H. Ray Underwood. In addition, the Bank's Audit Liaison,
Judith Leger, attends the Audit Committee Meetings. Subject to the more detailed
descriptions set forth in its written Charter, this Committee is responsible for
oversight of the internal audit function, internal accounting controls, security
programs and selection of independent accountants. As of the date of this Proxy
Statement, each of the Audit Committee Members is an "independent director"
under the AMEX Listing Standards. The members of the Audit Committee bring a
range of education, business and professional experience that is beneficial to
the Audit Committee's function of the Company and the Bank and is sufficient to
enable the Audit Committee to fulfill its responsibility. The Board has
determined that Kathleen A. Kelley is an "audit committee financial expert."
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, 2005 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. 61, 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-K for the year ended December 31, 2005 for filing with the
SEC.
First Litchfield Financial Corporation
Audit Committee:
Kathleen A. Kelley, Chairman
Alan B. Magary
H. Ray Underwood
8
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 4, 2006. Percentages are based on
2,136,370 shares of the Company's Common Stock issued and outstanding as of
April 4, 2006.
Common Shares
Name Of Beneficially Owned
Beneficial Owner At April 4, 2006 (1) Percent of Class
- ----------------- -------------------- ----------------
Joseph J. Greco 1,140 .05%
Perley H. Grimes, Jr. 14,306(2) .67%
Kathleen A. Kelley 1,060 .05%
George M. Madsen 16,569 .78%
Alan B. Magary 242(3) .01%
Gregory S. Oneglia 15,138(3) .71%
Charles E. Orr 16,144(3) .76%
William J. Sweetman 110,269(4) 5.16%
H. Ray Underwood 3,562 .17%
Patricia D. Werner 4,416(5) .21%
Carroll A. Pereira 12,192(3),(6) .57%
Joelene E. Smith 257 .01%
Robert E. Teittinen 10(3) .00%
All Directors and Executives 195,305 9.14%
Officers as a group (14 persons)
- --------------------------------
-----------------------
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 1,719 shares of Common Stock.
3. Includes shares owned by, or as to which voting power is shared
with, spouse or children.
4. Includes 14,634 shares owned by an estate as to which individual has
voting power as fiduciary of said estate. In addition, the total for
Mr. Sweetman includes options to purchase 1,719 shares of Common
Stock.
5. Includes options to purchase 3,949 shares of Common Stock.
6.Includes options to purchase 11,718 shares of Common Stock.
9
EXECUTIVE OFFICERS
The following table sets forth information concerning the current
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
------------ ------------------------------------------
Joseph J. Greco (55) President, Chief Executive Officer
and Director of the Company and of the Bank
since 2002 (1)
Carroll A. Pereira (50) Treasurer of the Company, Senior Vice President
and Chief Financial Officer of the Bank since
1984
Joelene E. Smith (47) Senior Vice President and Operations Officer of
the Bank since 2003 (2)
Robert E. Teittinen (58) Senior Vice President and Senior Loan Officer
of the Bank since 2005 (3)
John S. Newton (67) Senior Vice President and Trust Officer of the
Bank since 1999
1. Mr. Greco has served as President and Chief Executive of the Company
and Bank since June 17, 2002. Prior to joining the Bank and Company,
Mr. Greco served as President and CEO of Marketing Solutions from
1998 to 2002, and served as Senior Vice President of Hudson United
Bancorp from 1993 to 1997.
2. Ms. Smith has served as Senior Vice President and Operations Officer
of the Bank since 2003. Prior to that, Ms. Smith served as Vice
President of Operations and Information Systems and in similar
capacities since her employment with the Bank in 1977.
3. Mr. Teittinen has served as Senior Vice President and Senior Loan
Officer of the Bank since 2005. Prior to joining the Company, Mr.
Teittinen was a Senior Vice President with TD Banknorth and headed
up their Waterbury Commercial Lending Unit from 2002 to 2005. He
served as Vice President of Webster Bank from 1995 to 2002 and Vice
President of Shawmut National Bank from 1989 to 1995.
10
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, 2005, 2004 and 2003. Other than the Named
Executive Officers set forth below (the "Named Executive Officers"), only one
other individual employed by the Company and/or the Bank received aggregate
compensation of $100,000 or more during the fiscal year ended December 31, 2005.
------------------------------
Long Term Compensation
- -----------------------------------------------------------------------------------------------------------------------------
Annual Compensation Awards Payouts
Securities
Restricted Underlying
Other Annual Stock Options/
Name and Principal Compensation Awards SARs LTIP All Other
Position Year Salary($)(1)(2) Bonus($) ($) ($) (#) Payout($) Compensation ($)
- -----------------------------------------------------------------------------------------------------------------------------
Joseph J. Greco 2005 $260,785 $ 43,198 (3)
President & Chief 2004 $208,247 $ 28,869 (4)
Executive Officer of 2003 $177,985 $ 23,580 (5)
The Bank and Company
Revere H. Ferris 2005 $115,258 $57,314 $ 3,382 (6)
Senior Vice President and 2004 $119,170 $ 17,651 (7)
Senior Loan Officer of the 2003 $113,786 $ 14,837 (8)
Bank
John S. Newton 2005 $129,115 $ 22,443 (9)
Senior Vice President and 2004 $134,809 $ 18,372 (10)
Trust Officer of the Bank 2003 $129,115 $ 16,090 (11)
Carroll A. Pereira 2005 $138,384 $145,366 (12)
Treasurer of the Company, 2004 $120,947 $ 22,507 (13)
Senior Vice President and 2003 $111,327 $ 15,544 (14)
Chief Financial Officer
of the Bank
Joelene E. Smith
Senior Vice 2005 $102,631 $ 17,320 (15)
President, Operations of 2004 $ 86,048 $ 12,903 (16)
the Bank 2003 $ 73,842 $ 10,309 (17)
- -------------------
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 the above Named Executive
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 50% 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.
3. Amount includes the Bank's matching contribution to the Bank's 401(k)
plan for the benefit of the Named Executive Officer, $9,538.
Additionally, the amount includes $33,660 awarded to Mr. Greco pursuant
to the Bank's Long Term Incentive and Deferred Compensation Plan. (See
"Long Term Incentive and Deferred Compensation Plans.")
4. Amount includes the Bank's matching contribution to the Bank's 401(k)
plan for the benefit of the Named Executive Officer, $3,489.
Additionally, the amount includes $25,380 awarded to Mr. Greco pursuant
to the Bank's Long Term Incentive and Deferred Compensation Plan. (See
"Long Term Incentive and Deferred Compensation Plans.")
11
5. Amount includes the Bank's matching contribution to the Bank's 401(k)
plan for the benefit of the Named Executive Officer, $1,800.
Additionally, the amount includes $21,780 awarded to Mr. Greco pursuant
to the Bank's Long Term Incentive and Deferred Compensation Plan. (See
"Long Term Incentive and Deferred Compensation Plans.")
6. Amount includes the Bank's matching contribution to the Bank's 401(k)
plan for the benefit of the Named Executive Officer, $3,382.
7. Amount includes the Bank's matching contribution to the Bank's 401(k)
plan for the benefit of the Named Executive Officer, $2,230.
Additionally, amount includes $15,421 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, $1,604.
Additionally, amount includes $13,233 awarded to Mr. Ferris pursuant to
the Bank's Long Term Incentive and Deferred Compensation Plan. (See
"Long Term Incentive and Deferred Compensation Plans.")
9. Amount includes the Bank's matching contribution to the Bank's 401(k)
plan for the benefit of the Named Executive Officer, $4,984.
Additionally, amount includes $17,459 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, $2,282.
Additionally, amount includes $16,090 awarded to Mr. Newton 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, $2,282.
Additionally, amount includes $13,808 awarded to Mr. Newton pursuant to
the Bank's Long Term Incentive and Deferred Compensation Plan. (See
"Long Term Incentive and Deferred Compensation Plans.")
12. Amount includes the Bank's matching contribution to the Bank's 401(k)
plan for the benefit of the Named Executive Officer, $5,338.
Additionally, amount includes $18,397 awarded to Ms. Pereira pursuant
to the Bank's Long Term Incentive and Deferred Compensation Plan. (See
"Long Term Incentive and Deferred Compensation Plans.") Additionally,
the amount includes $121,631 which can be attributed to the exercise of
stock options by the Named Executive Officer.
13. Amount includes the Bank's matching contribution to the Bank's 401(k)
plan for the benefit of the Named Executive Officer, $2,247.
Additionally, amount includes $15,544 awarded to Ms. Pereira pursuant
to the Bank's Long Term Incentive and Deferred Compensation Plan. (See
"Long Term Incentive and Deferred Compensation Plans.") Additionally,
the amount includes $4,716 which can be attributed to the exercise of
stock options by the Named Executive Officer.
14. Amount includes the Bank's matching contribution to the Bank's 401(k)
plan for the benefit of the Named Executive Officer, $2,205.
Additionally, amount includes $13,339 awarded to Ms. Pereira pursuant
to the Bank's Long Term Incentive and Deferred Compensation Plan. (See
"Long Term Incentive and Deferred Compensation Plans.")
15. Amount includes the Bank's matching contribution to the Bank's 401(k)
plan for the benefit of the Named Executive Officer, $3,856.
Additionally, amount includes $13,464 awarded to Ms. Smith pursuant to
the Bank's Long Term Incentive and Deferred Compensation Plan. (See
"Long Term Incentive and Deferred Compensation Plans.")
16. Amount includes the Bank's matching contribution to the Bank's 401(k)
plan for the benefit of the Named Executive Officer, $1,623.
Additionally, amount includes $11,280 awarded to Ms. Smith pursuant to
the Bank's Long Term Incentive and Deferred Compensation Plan. (See
"Long Term Incentive and Deferred Compensation Plans.")
17. Amount includes the Bank's matching contribution to the Bank's 401(k)
plan for the benefit of the Named Executive Officer, $1,477.
Additionally, amount includes $8,832 awarded to Ms. Smith pursuant to
the Bank's Long Term Incentive and Deferred Compensation Plan. (See
"Long Term Incentive and Deferred Compensation Plans.")
12
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
The following table sets forth information regarding stock options that
were exercised, if any, during the last fiscal year, and unexercised stock
options held by the Named Executive Officers. The number of options and the per
share exercise prices have been adjusted to reflect stock splits and dividends.
Number of Value of Unexercised
Securities Underlying In-the-Money
Unexercised Options/SARs
Name Shares Acquired Value Realized Options/SARs at FY-End (#) At FY-End ($)(1)
on Exercise (#) ($)(2) Exercisable/Unexercisable(3) Exercisable/Unexercisable(3)
- ------------------------------------------------------------------------------------------------------------------
Revere H. Ferris 0 0 9,860 $ 154,802
Carroll A. Pereira 6,778 121,631 11,718 $ 189,862
- --------------------------
1. Represents the difference between the fair market value price of the
Company's Common Stock at December 31, 2005, $27.25, 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 options.
2. Represents the difference between the closing bid price of the
Company's common stock on the date the options are exercised and the
exercise price of options, multiplied by the number of options.
3. 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 (20) 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.
13
Long Term Incentive and Deferred Compensation Plans
- ---------------------------------------------------
During November and December 2000, the Bank entered into Long Term
Incentive Retirement Agreements (the "Executive Incentive Agreements") with its
Executive Officers to encourage the Executives to remain employees of the Bank.
In November, 2005, the Bank entered into a Long Term Incentive Retirement
Agreement with Robert Teittinen, the Bank's Senior Vice-President and Senior
Loan Officer. The Executive Incentive Agreements will trigger the award of
deferred bonuses to the 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 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 Executive
Officer's 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. In December 2002, the Bank entered into Long Term Incentive
Retirement Agreements with two newly appointed directors, Gregory S. Oneglia and
Alan B. Magary. In September 2004, the Bank entered into a Long Term Incentive
Retirement Agreement with director, Kathleen A. Kelley.
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 Director's 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 in universal cash surrender value life insurance with a cash
surrender value of $9.3 million as of December 31, 2005. Insurance policies were
acquired on the lives of all but one (1) of the Bank's Executive Officers, four
(4) non-senior officers and all but one (1) 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 4.0% and
14
policy mortality costs will be charged against the cash value monthly. There are
no load or surrender charges associated with the policies.
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 January 1996, the Board
granted stock options to Ms. Pereira which as a result of stock splits and
dividends allows Ms. Pereira to purchase 4,483 shares of the Company's Common
Stock at $7.06 per share. In September 2004, Ms. Pereira exercised options for
330 shares in accordance with the plan. In August and September 2005, Ms.
Pereira exercised options for the remaining 4,153 shares in accordance with the
plan. In January 1997, the Board granted stock options to Ms. Pereira which as a
result of stock splits and dividends allows Ms. Pereira to purchase 4,483 shares
of Common Stock at an exercise price of $8.38 per share. In November 2005, Ms.
Pereira exercised options for 2,625 shares of Common Stock in accordance with
the plan. In January 1998, the Board granted stock options to Ms. Pereira and
Mr. Ferris which as a result of stock splits and dividends allow such
individuals to each purchase 4,930 shares of Common Stock at an exercise price
of $9.95 per share. In January, 1999, the Board granted options to each of these
individuals, which as a result of stock dividends, allows each individual to
purchase 4,930 shares at an exercise price of $13.15 per share. Mr. Ferris
retired on September 15,, 2005. Accordingly, Mr. Ferris holds 4,930 options
which were granted in January 1998 with an exercise price of $9.95per share and
4,930 options granted in January 1999 with an exercise price of $13.15 per
share.
Pursuant to the 1994 Stock Option Plan, with the exception of Patricia
D. Werner who became a director in 1996, H. Ray Underwood who became a Director
in 1998, Thomas A. Kendall who became a Director in 1999, Gregory S. Oneglia and
Alan B. Magary, who both became directors in 2002, and Kathleen A. Kelley who
became a director in 2004, each outside director who is not an officer of the
Company or the Bank ("Outside Director") as well as retired Directors Blick,
Clock and Field, received stock options, which are presently exercisable, to
purchase shares of the Company's Common Stock. More specifically, in May 1994,
each Outside Director was granted options, which as a result of stock splits and
dividends, allow such individuals to purchase 3,376 shares of Common Stock at
$4.80 per share. Directors Blick, Madsen and Orr exercised these options during
2003. Directors Fuessenich, Grimes and Sweetman exercised these options in 2004.
Moreover, in June 1995, each Outside Director was granted options, which as a
result of stock splits and dividends, allow such individuals to purchase 573
shares of Common Stock at $5.57 per share. Director Orr exercised those options
during 2003. Directors Blick and Madsen exercised those options during 2004.
Directors Grimes and Sweetman exercised those options during 2005. In June 1996,
each Outside Director was granted options, which as a result of stock splits and
dividends, allow such individuals to purchase 573 shares of Common Stock at
$7.63 per share. Director Orr exercised those options during 2003. Director
Blick exercised those options during 2004. Director Madsen exercised those
options during 2005. In June 1997, each Outside Director was granted options,
which as a result of stock splits and dividends, allow such individuals to
purchase 573 shares of Common Stock at an exercise price of $8.47 per share.
Director Orr exercised those options during 2003.
15
Director Blick exercised those options during 2004. Director Madsen exercised
those options during 2005. In June 1998, each Outside Director was granted
options, which as a result of a stock dividend, allow each individual to
purchase 573 shares of Common Stock at an exercise price of $11.91. Director Orr
exercised those options during 2003. Directors Blick exercised those options
during 2004. Director Madsen exercised those options during 2005. Patricia D.
Werner has options to purchase 3,949 shares of Common Stock consisting of
options to acquire 3,376 shares at $8.50 per share and options to acquire 573
shares at $11.91 per share. In May of 2003, retired Directors Clock and Field
exercised all remaining options in accordance with the plan. In April of 2004,
retired Director Fuessenich exercised all remaining options in accordance with
the plan.
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 50% of
participant contributions up to the first 6% of pre-tax compensation of a
contributing participant. For the year ended December 31, 2005, the Bank made
matching contributions equal to 50% of participant contributions up to the first
6% of pre-tax compensation of a contributing participant. Additionally, the Bank
also made a contribution of 3% of pre-tax compensation for all eligible
participants regardless of whether the participant made voluntary contributions
to the 401(k) plan. For the year ended December 31, 2004, the Bank made matching
contributions equal to 50% 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 $178,279 for 2005 and $57,432 for 2004.
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. During the first quarter
of 2005, the Bank's pension plan was curtailed.
PENSION PLAN TABLE
=============================================================================
ESTIMATED ANNUAL RETIREMENT BENEFIT WITH YEARS OF SERVICE AT RETIREMENT
=============================================================================
Average Base
Salary at
Retirement 15 20 25 30 35
- -----------------------------------------------------------------------------
$ 75,000 $17,438 $23,250 $29,063 $ 29,063 $ 29,063
- -----------------------------------------------------------------------------
$100,000 $23,250 $31,000 $38,750 $ 38,750 $ 38,750
- -----------------------------------------------------------------------------
$125,000 $29,063 $38,750 $48,438 $ 48,438 $ 48,438
- -----------------------------------------------------------------------------
$150,000 $34,875 $46,500 $58,125 $ 58,125 $ 58,125
- -----------------------------------------------------------------------------
$175,000 $40,688 $54,250 $67,813 $ 67,813 $ 67,813
- -----------------------------------------------------------------------------
$200,000 $46,500 $62,000 $77,500 $ 77,500 $ 77,500
- -----------------------------------------------------------------------------
$225,000 $47,663 $63,550 $79,438 $ 79,438 $ 79,438
- -----------------------------------------------------------------------------
$250,000 $47,663 $63,550 $79,438 $ 79,438 $ 79,438
- -----------------------------------------------------------------------------
16
The plan was frozen effective May 1, 2005. No new employees will be eligible for
the Plan and no further benefits will be earned. Benefits payable at normal
retirement age (generally age 65) to an existing participant will be based on
service and participation credit and earnings history through May 1, 2005.
Pension benefits are based upon average salary (determined as of each November
15th) during the highest five (5) consecutive plan years of services prior to
the date the plan was frozen. The amount of the annual benefit is 1.55% of
average salary per year of service (to a maximum of 25 years). This benefit
formula may be modified to conform with changes in the pension laws. Internal
Revenue Code Section 401 (a)(17) limits earnings used to calculate qualified
plan benefits to $210,000 for 2005. This limit was used in the preparation of
the above table.
Directors' Fees Plan
- --------------------
The Bank 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 value (on a market basis for 2005 and a cost basis
for 2004) of the related trust assets and corresponding liability was $313,579
and $367,738 at December 31, 2005, and 2004, respectively. During 2005, the plan
was amended to cease the deferral of any future fees.
STOCK PRICE PERFORMANCE GRAPH
-----------------------------
Set forth below is a line graph with an explanatory table comparing
the yearly percentage change in the cumulative total shareholder return on the
Company's Common Stock, based on the market price of the Company's Common Stock
and assuming reinvestment of dividends, with the total return of the AMEX Major
Market Index and the SNL Bank Index for Banks with total assets more than $250
million and less than $500 million. The calculation of total cumulative return
assumes a $100 investment in the Company's Common Stock and each of the other
indices on December 31, 2000.
17
[GRAPH OMITTED]
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG FIRST LITCHFIELD FINANCIAL CORP., THE AMEX MAJOR MARKET INDEX
AND THE SNL $250M-$500M BANK INDEX
Period Ending 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05
-------- -------- -------- -------- -------- --------
Index
- -----
First Litchfield Financial Corp. 100.00 126.44 148.49 212.84 321.91 313.57
AMEX Major Market Index 100.00 90.57 88.21 128.71 153.57 189.12
SNL $250M-$500M Bank Index 100.00 141.62 182.14 262.88 297.37 316.27
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 $2,874,780 and $2,800,077 at December 31, 2005 and
2004, respectively. During 2005, $881,589 of new loans were made, and repayments
totaled $426,773. At December 31, 2005, all loans to Officers, Directors,
principal shareholders and their associates were performing in accordance with
the contractual terms of the loans.
During 2004, the Bank paid The Business Center a total of $52,794 for
purchases of office supplies, equipment and courier services. The owner of The
Business Center is the spouse of Clayton L. Blick, who is a former Director of
the Company.
18
Perley H. Grimes, Jr., Director of the Company and the Bank and Clayton
L. Blick, a former Director 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 2005 and 2004, the Bank paid Cramer &
Anderson $66,180 and $105,831, respectively for legal services rendered, a
portion of which was reimbursed to the Bank by third parties.
Gregory Oneglia, Director of the Company and the Bank, is a one-sixth
owner of property that is leased by the Bank for a branch. During 2005 and 2004,
the Bank paid rent expense for that property in the amount of $42,300 and
$42,300.
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 from certain reporting persons, with the exception of
Robert E. Teittinen, who filed a Form 3 late, the Company believes that all of
its executive officers and directors complied with all Section 16(a) filing
requirements applicable to them.
PROPOSAL (2)
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee, in its capacity as a committee of the Board of
Directors has selected McGladrey & Pullen, LLP as independent auditors to audit
the consolidated financial statements of the Company for the fiscal year ending
December 31, 2006. McGladrey & Pullen, LLP has served as the accountants for the
Company for the fiscal year ended December 31, 2005. McGladrey & Pullen, LLP's
opinion on the Consolidated Financial Statements of First Litchfield Financial
Corporation and subsidiary for the year ended December 31, 2005 is included in
the First Litchfield Financial Corporation 2005 Annual Report on Form 10-K.
During the period covering the fiscal years ended December 31, 2005 and
2004, McGladrey & Pullen, LLP and RSM McGladrey, Inc. performed the following
professional services:
19
First Litchfield Financial Corporation
Principal Accountant Fees and Services
Years Ended December 31, 2005 and 2004
Description 2005 2004
- --------------------------------------------------------------- --------- ---------
Audit Fees, consist of fees for professional services
rendered for the audit of the consolidated financial
statements and review of financial statements included in
quarterly reports on Form 10-Q and services connected with
statutory and regulatory filings or engagements. $ 141,227 $ 129,446
Audit-related Fees are fees principally for professional
services rendered for the audits of the FHLB Qualified
Collateral Report and the financial statements of Common
Trust Fund A, and consultations on various accounting
matters. $ 9,500 $ 8,800
Tax Fees consist of fees for tax return preparation, planning
and tax advice for the Company and Common Trust Fund
A. $ 11,500 $ 11,300
All Other Fees $ 0 $ 0
20
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 audit related and tax service matters 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.
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of
Independent Auditor
The Audit Committee's policy is to require pre-approval of all audit
and non-audit services provided by the independent auditors, other than those
listed under the de minimus exception. These services may include audit
services, audit-related services, tax services and other services. Pre-approval
is detailed as to a particular service or category of services, and is generally
subject to a specific budget. The Audit Committee has delegated pre-approval
authority to its Chairman when expeditious delivery of services is necessary.
The independent auditors and management are required to report to the full Audit
Committee regarding the extent of services provided by independent auditors in
accordance with this pre-approval, and the fees for the services performed to
date. None of the audited-related fees, or tax fees or other fees paid in 2005
and 2004 were approved per the Audit Committee's pre-approval policies.
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, 2006.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE FOR RATIFICATION OF THE INDEPENDENT AUDITORS
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 2006 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 2006 Annual Meeting.
21
In order to be included in the Company's proxy statement and form of
proxy for the 2007 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 17, 2006, 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:
You must be a shareholder of record and must have given timely notice
in writing to the Secretary of the Company.
Your notice must contain specific information required in the Company's
Bylaws.
Any other proposal for consideration by shareholders at the Company's
2007 annual meeting of shareholders must be delivered to, or mailed to and
received by, the Company's Assistant 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: Secretary, George M. Madsen,
First Litchfield Financial Corporation, P.O. Box 578, 13 North Street,
Litchfield, Connecticut 06759.
ANNUAL REPORT TO SHAREHOLDERS
The Company files with the Securities and Exchange Commission Annual
Reports on Form 10-K. A copy of the Company's Annual Report on Form 10-K,
without exhibits and Annual Report to Shareholders, including consolidated
financial statements, may be obtained without charge upon written request to:
Carroll A. Pereira, Treasurer, First Litchfield Financial Corporation, P.O. Box
578, 13 North Street, Litchfield, Connecticut 06759.
By Order of the Board of Directors
/s/ George M. Madsen
April 17, 2006 George M. Madsen
Secretary
22
PROXY FOR 2006 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 4, 2006 at the Annual Meeting of its
shareholders to be held at the Litchfield Inn, Route 202, Litchfield,
Connecticut on Wednesday, May 17, 2006 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)
(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: Joseph J. Greco, Perley H. Grimes, Jr. and Charles E. Orr).
[_] 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, 2006.
[_] FOR [_] AGAINST [_] ABSTAIN
(3) 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); 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