SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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First Litchfield Financial Corporation
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FIRST LITCHFIELD FINANCIAL CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 21, 2008
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 21, 2008
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 21, 2008 at the Torrington Country Club, Route 4, Goshen,
Connecticut, for the following purposes:
1. To elect five (5) nominees to the Board of Directors, who will 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, 2008.
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, 2008 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 25, 2008
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
TABLE OF CONTENTS
Page No.
--------
Information Regarding The Annual Meeting 2
Security Ownership Of Principal Shareholders
3
Proposal 1 - Election Of Directors 3
Information About The Directors 4
Corporate Governance 5
Audit Committee Report 8
Security Ownership Of Directors, Nominees And Executive Officers
9
Information About The Executive Officers 10
Executive Compensation 11
Post Employment Compensation 14
Board Of Directors Compensation 18
Transactions With Related Persons, Etc 19
Proposal 2 - Ratification Of The Appointment Of Independent Auditors 20
Audit And Non-Audit Fees 21
Other Matters 22
Shareholder Proposals For 2009 22
Annual Report To Shareholders 23
1
Proxy Statement of First Litchfield Financial Corporation
ANNUAL MEETING OF SHAREHOLDERS OF
FIRST LITCHFIELD FINANCIAL CORPORATION
May 21, 2008
SOLICITATION OF PROXIES
The enclosed form of 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 21, 2008, 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 25,
2008. 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, 2008 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, 2,371,700 shares of the common stock of the Company (par value $.01
per share) were issued and outstanding and held of record by approximately 419
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 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 five (5) 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, 2008. The
2
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 SHAREHOLDER
The following table includes certain information as of April 4, 2008
regarding the only shareholders (the "Principal Shareholder") of the Company
known to be a beneficial owner of five percent (5%) or more of the Company's
Common Stock. Percentages are based on 2,371,700 shares of the Company's Common
Stock issued and outstanding as of April 4, 2008.
Percent of
Name and Address Number of Shares and Nature Outstanding
of Beneficial Owner of Beneficial Ownership (1) Common Stock
- ------------------- --------------------------- ------------
William J. Sweetman 121,568 (2), (3) 5.13%
101 Talmadge Lane
Litchfield, CT 06759
- ---------------------
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 or has the right to acquire such voting or investment power within 60
days.
2. Includes options to purchase 631 shares of Common Stock.
3. Includes 15,347 shares owned by an estate as to which Mr. Sweetman 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 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.
Pursuant to the Company's Certificate of Incorporation and Bylaws, the
Board has fixed the number of directorships at thirteen (13). At this Annual
Meeting, five (5) directors are to be elected. The following five (5) directors,
whose terms expire at the 2008 Annual Meeting, are to be elected each for a term
of three (3) years and until their successors are elected and qualified: Patrick
J. Boland, John A. Brighenti, Kathleen A. Kelley, Richard E. Pugh and H. Ray
Underwood. Each nominee is now serving as a director. Each of the five (5)
directors whose terms expire at this meeting is 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 has
been selected as nominee.
3
THE BOARD OF DIRECTORS 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
five (5) 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
- ---------- ------------------------------ ---------------
Patrick J. Director of the Company 2008
Boland and of the
(60) Bank since 2006 (1)
John A. Director of the Company 2008
Brighenti and of the
(53) Bank since 2006 (2)
Kathleen A. Director of the Company 2008
Kelley and of the
(55) Bank since 2004 (3)
Richard E. Director of the Company 2008
Pugh and of the
(64) Bank since 2006 (4)
H. Ray Director of the Company 2008
Underwood and of the Bank since 1998 (5)
(54)
CONTINUING DIRECTORS
Position held with Expiration Date
Name & Age the Company of Current Term
- ---------- ------------------------------ ---------------
Joseph J. President and Chief Executive 2009
Greco Officer and Director of the Company
(57) and of the Bank since 2002 (6)
Perley H. Director of the Company 2009
Grimes, Jr. since 1988 and of the
(63) Bank since 1984 (7)
Gregory S. Director of the Company 2009
Oneglia and of the Bank since 2002 (8)
(60)
4
Charles E. Director of the Company 2009
Orr since 1988 and of the
(72) Bank since 1981 (9),
Chairman of the Board of Directors
of the Company and the Bank
George M. Director of the Company 2010
Madsen and of the Bank since 1988 (10)
(74)
Alan B. Director of the Company 2010
Magary and of the Bank since 2002 (11)
(65)
William J. Director of the Company 2010
Sweetman and of the Bank since 1990 (12)
(61)
Patricia D. Director of the Company 2010
Werner and of the Bank since 1996 (13)
(61)
- -----------------
1. Mr. Boland is retired. He formerly served as Chief Operating Officer of
Credit Suisse Inc.
2. Mr. Brighenti is Vice President of Avon Plumbing & Heating.
3. Ms. Kelley is the principal in the firm Kelley & Company, CPAs.
4. Mr. Pugh is retired. He formerly served as President and Chief Executive
Officer of New Milford Hospital.
5. Mr. Underwood is Secretary and Treasurer of Underwood Services, Inc.
6. 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.
7. Mr. Grimes is a Partner in the law firm of Cramer & Anderson.
8. 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.
9. Mr. Orr is retired. He served as President of New Milford Volkswagen, Inc.
until April 2002.
10. Mr. Madsen is retired. He formerly served as President of Roxbury
Associates, Inc.
11. Mr. Magary is retired. He served as principal of Magary Consulting Services
through December 1999.
12. Mr. Sweetman is the President and Owner of Dwan & Co., Inc.
13. Ms. Werner is the head of the Washington Montessori Association, Inc.
CORPORATE GOVERNANCE
--------------------
The Board of Directors and Its Committees
The Board of Directors of the Company met thirteen (13) times in 2007.
With the exception of William J. Sweetman and Patricia D. Werner, 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 2007. The Company does not
maintain an attendance policy for directors at the Company's Annual Meetings.
Ten of the then thirteen directors of the Company attended the Company's Annual
Meeting on May 16, 2007.
5
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 2007. 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 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 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.
3. The Nominating Committee approaches the candidate and if such
candidate is interested, he or she fills out a questionnaire.
4. After review of the questionnaire, the Nominating Committee
decides whether to recommend to the Board that the candidate
should be nominated to the Board.
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
6
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 be 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 2008 Annual Meeting were nominated
by the Nominating Committee and Board of Directors.
Compensation Committee
The Company and the Bank have a Compensation Committee consisting of
the same members. All compensation is paid by the Bank. The Compensation
Committee met five (5) times in 2007. 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, Richard E. Pugh 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. The full Board of Directors of the
Company reviews and approves this Committee's recommendations. The Compensation
Committee has a charter, a copy of which is available on the Company's website
at www.fnbl.com. During 2007, the Company utilized the services of Clark
Consulting for compensation advice.
7
Audit/Compliance and Security Committee
The Audit/Compliance and Security Committee (the "Audit Committee") met
six (6) times in 2007. The current Committee members are: Patrick J. Boland,
John A. Brighenti, Alan B. Magary, Kathleen A. Kelley and H. Ray Underwood. In
addition, the Bank's Audit Liaison, Judith Leger, attends Audit Committee
meetings. Subject to the more detailed descriptions set forth in its written
Charter, a copy of which is available on the Company's website at www.fnbl.com
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, 2007 with
management. The Audit Committee has also reviewed and discussed with McGladrey &
Pullen, LLP ("McGladrey"), the Company's independent auditors, the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees.
The Audit Committee has received the written disclosures and the letter
from McGladrey required by Independence Standards Board Standard No. 1, and has
discussed McGladrey's independence with respect to the Company with McGladrey.
Based on the review and discussions referred to above, 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, 2007 for filing with the SEC.
First Litchfield Financial Corporation
Audit Committee:
Kathleen A. Kelley, Chairman
Patrick J. Boland
John A. Brighenti
Alan B. Magary
H. Ray Underwood
8
SECURITY OWNERSHIP OF DIRECTORS, NOMINEES
AND EXECUTIVE OFFICERS
The following table sets forth the number of shares and percentage of
Common Stock beneficially owned by each current Director, each of the Executive
Officers, and the Directors and Executive Officers as a group at April 4, 2008.
Percentages are based on 2,371,700 shares of the Company's Common Stock issued
and outstanding as of April 4, 2008.
Common Shares
Name Of Beneficially Owned
Beneficial Owner At April 4, 2008 (1) Percent of Class
- ----------------- -------------------- ----------------
Joseph J. Greco 3,804 (2) .16%
Patrick J. Boland 2,021 .09%
John A. Brighenti 220 .01%
Perley H. Grimes, Jr. 15,559 (3) .66%
Kathleen A. Kelley 2,218 .09%
George M. Madsen 15,993 .67%
Alan B. Magary 266 (4) .01%
Gregory S. Oneglia 20,140 (4) .85%
Charles E. Orr 17,796 (4) .75%
Richard E. Pugh 54 .00%
Matthew R. Robison 0 .00%
William J. Sweetman 121,568 (5) 5.13%
H. Ray Underwood 5,000 .21%
Patricia D. Werner 4,866 (3) .21%
Frederick R. Judd, III 762 (6) .03%
Carroll A. Pereira 6,984 (4), (6), (7) .29%
Joelene E. Smith 782 (6) .03%
Robert E. Teittinen 510 (6) .02%
All Directors and Executives 218,543 9.21%
9
Officers as a group (18 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 or has the right to acquire such voting or investment power within 60
days.
2. Includes 1,500 shares of restricted Common Stock.
3. Includes options to purchase 631 shares of Common Stock.
4. Includes shares owned by, or as to which voting power is shared with, spouse
or children.
5. Includes 15,347 shares owned by an estate as to which Mr. Sweetman has voting
power as fiduciary of said estate. In addition, the total for Mr. Sweetman
includes options to purchase 631 shares of Common Stock.
6. Includes 500 shares of restricted Common Stock.
7. Includes options to purchase 5,434 shares of Common Stock.
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 (57) President, Chief Executive Officer
and Director of the Company and of the Bank
since 2002 (1)
Carroll A. Pereira (52) Treasurer of the Company, Senior Vice President
and Chief Financial Officer of the Bank since
1984
Joelene E. Smith (49) Senior Vice President and Operations Officer of
the Bank since 2003 (2)
Robert E. Teittinen (57) Senior Vice President and Senior Loan Officer
of the Bank since 2005 (3)
Frederick F. Judd III (43) Senior Vice President and Senior Trust and
Wealth Management Officer of the Bank since
2006 (4)
Matthew Robison (51) Senior Vice President, Retail Banking of the
Bank since 2008 (5)
1. Prior to joining the Bank and Company, 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. Prior to joining the Bank, Ms. Smith served as Vice President of Operations
and Information Systems and in similar capacities since her employment with the
Bank in 1977.
3. Prior to joining the Bank, 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.
4. Prior to joining the Bank, Mr. Judd was a Senior Vice President and Regional
Manager with Webster Financial Advisors from 2003 to 2006. He served as Vice
President of Business Development of Webster Financial Advisors from 1999 to
2003. Prior to that, he served as Vice President and Managing Partner of
Bookwalter & Associates from 1993 to 1999.
10
5. Prior to joining the Bank, from 2000 to 2007 Mr. Robison was an Executive
Vice President and Regional Executive at Sovereign Bank with responsibilities
for retail administration in the Connecticut and Western Massachusetts markets.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain information regarding the
compensation paid to the Named Executive Officers of the Company for services
rendered in all capacities during the fiscal year ended December 31, 2007 and
December 31, 2006. All compensation expense was paid by the Bank.
- -------------------------------------------------------------------------------------------------------------------------
Non-Equity Non-Qualified
Incentive Deferred
Name and Principal Stock Option Plan Compensation All Other
Position Year Salary Bonus Awards Award Compensation Earnings Compensation Total
($) ($) ($) ($) ($) ($)(1) ($) ($)
- -------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
- -------------------------------------------------------------------------------------------------------------------------
Joseph J. Greco - 2007 245,000 19,600 (9) 87,391 42,405 (2) 394,396
President and Chief 2006 236,032 17,600 (3) 82,830 50,303 (4) 386,765
Executive Officer of
the Bank and
Company
- -------------------------------------------------------------------------------------------------------------------------
Frederick F. Judd III 2007 175,000 10,500 (9) 24,378 (5) 209,878
- - Senior Vice 2006 144,996 7,581 (6) 152,577
President and Senior
Trust and Wealth
Management Officer
of the Bank
- -------------------------------------------------------------------------------------------------------------------------
Carroll A. Pereira - 2007 125,240 7,514 (9) 13,628 55,237 (7) 201,619
Treasurer of the 2006 125,850 7,216 (3) 12,918 54,386 (8) 200,370
Company, Senior
Vice President and
Chief Financial
Officer of the Bank
- -------------------------------------------------------------------------------------------------------------------------
1. Amount represents an accrued expense associated with the supplemental
employee retirement plan for the benefit of the Named Executive Officers.
2. Amount includes the Bank's payment of matching contribution to the Bank's
401(k) plan for the benefit of the Named Executive Officer of $14,017. Amount
also includes fees paid to country clubs of $6,038, vehicle allowance of $2,091,
medical insurance of $3,507, health savings account of $5,000, dental insurance
of $719, life insurance of $1,050, long-term disability insurance of $558,
executive life insurance of $5,435, and executive disability insurance of
$3,990.
3. Cash incentive bonus earned in 2005 but was paid in 2006.
4. Amount includes the Bank's payment of matching contribution to the Bank's
401(k) plan for the benefit of the Named Executive Officer of $13,692. Amount
also includes fees paid to country clubs of $10,150, vehicle allowance of
$2,568, medical insurance of $3,860, health savings account of $5,000, dental
insurance of $699, life insurance of $1,050, long-term disability insurance of
$396, executive life insurance of $4,918, executive disability insurance of
$3,770, and contributions to the ESOP for the Named Executive Officer of $4,200.
5. Amount includes the Bank's payment of matching contribution to the Bank's
401(k) plan for the benefit of the Named Executive Officer of $8,279. Amount
represents payments for medical insurance of $3,507, health savings account of
$5,000, dental insurance of $719, life insurance of $1,050, long-term disability
insurance of $542, executive life insurance of $2,448, executive disability
insurance of $433, and mileage allowance of $2,400.
6. Amount represents payments for medical insurance $4,729, dental insurance
$412, life insurance $525, long-term disability insurance $271, and executive
life insurance $1,644.
7. Amount includes the Bank's payment of matching contribution to the Bank's
401(k) plan for the benefit of the Named Executive Officer of $7,514.
Additionally, the amount includes $32,009 which can be attributed to the
exercise of stock options by the Named Executive Officer. This amount also
includes medical insurance of $9,484, dental insurance of $719, life insurance
of $1,050, long-term disability insurance of $388, executive life insurance of
$2,993, and executive disability insurance of $1,080.
11
8. Amount includes the Bank's payment of matching contribution to the Bank's
401(k) plan for the benefit of the Named Executive Officer of $7,514.
Additionally, the amount includes $30,508 which can be attributed to the
exercise of stock options by the Named Executive Officer. This amount also
includes medical insurance of $9,553, dental insurance of $699, life insurance
of $1,050, long-term disability insurance of $311, executive life insurance of
$1,087, executive disability insurance of $896, and contributions to the ESOP
for the Named Executive Officer of $2,768.
9. Cash Incentive Bonus earned in 2007 but was paid in 2008.
Agreements with Named Executive Officers
There are no employment contracts between the Company and any of its
Named Executive Officers. There are Change in Control Agreements between the
Bank and its Named Executive Officers. These Change in Control Agreements
provide that in certain instances, if the Named 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 in Control Agreements),
then such Named Executive Officer 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 Named Executive Officer as a result of
such termination or reassignment, and continued participation in certain benefit
plans.
More information regarding such Change in Control Agreements is
provided below under "Potential Payments Upon Termination or Change in Control".
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
eighteen (18) 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.
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 ability to grant options under the 1994 Stock Option Plan
expired on May 4, 1999. Certain Executive Officers and directors hold
outstanding options granted under the 1994 Stock Option Plan.
2007 Restricted Stock Plan
On May 17, 2007, shareholders approved the 2007 Restricted Stock Plan (the
"Restricted Stock Plan"). The Restricted Stock Plan provides that up to 25,000
shares of Common Stock may be issued to the Company's Executive Officers and
other key employees. Shares vest in five (5) equal installments beginning on the
first anniversary date of the grant, and annually thereafter. Unvested shares
will also immediately vest upon a change in control, death, or retirement. No
shares were issued in 2007.
12
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth outstanding option awards and unvested
stock awards held by certain of the Bank's Named Executive Officers as of
December 31, 2007. No other Named Executive Officer held any such awards at
December 31, 2007.
- -----------------------------------------------------------------------------------------------------------------------
Option Awards Stock Awards
- -----------------------------------------------------------------------------------------------------------------------
Equity
Equity Incentive
Incentive Plan
Market Plan Awards:
Value Awards: Market
Equity of Number or
Incentive Number Shares of Payout
Number of Plan of or Unearned Value of
Securities Awards: Shares Units Shares, Un-
Number of Underlying Number of or Units of Units or earned
Securities Un- Securities of Stock Stock Other Shares,
Underlying exercised Underlying That That Rights Units or
Unexercised Options Unexercised Option Have Have That Other
Options (#) Unearned Exercise Option Not Not Have Not Rights
(#) Un- Options Price Expiration Vested Vested Vested That
Name Exercisable exercisable (#) ($) Date (#) ($) ($) Have
Not
Vested
($)
- -----------------------------------------------------------------------------------------------------------------------
Carroll A. Pereira 5,434 0 0 11.93 1/29/09 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------
Option Exercises and Stock Vested
The following table sets forth information with respect to each of the
Named Executive Officers concerning the exercise of stock options and the
vesting of stock during the fiscal year ended December 31, 2007.
- ---------------------------------------------------------------------------------------------------------------
Option Awards Stock Awards
- ---------------------------------------------------------------------------------------------------------------
Number of Shares Number of Shares
Acquired on Value Realized on Acquired on Value Realized on
Exercise Exercise Vesting Vesting
Name (#) ($)(1) (#) ($)
- ---------------------------------------------------------------------------------------------------------------
Carroll A. Pereira 5,434 32,009 0 0
- ---------------------------------------------------------------------------------------------------------------
- ---------------------
1. Value realized calculated based on the difference between the market price of
the Company's Common Stock on the date of exercise and the exercise price.
401(k) Plan
The Bank offers an employee savings plan under Section 401(k) of the
Internal Revenue Code. Under the terms of the Plan, employees may contribute up
to 10% of their pre-tax compensation. For the years ended December 31, 2007 and
2006, the Bank made matching contributions equal to 50% of participant
contributions up to the first 6% of pre-tax compensation of
13
a contributing participant. 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. Participants vest immediately
in both their own contributions and the Bank's contributions. Employee savings
plan expense was $237,461 and $202,563 for 2007 and 2006, respectively.
Employee Stock Ownership Plan
In 2005, the Bank established an Employee Stock Ownership Plan (the
"ESOP"), for the benefit of its eligible employees. The ESOP invests in the
Common Stock of the Company, providing participants with the opportunity to
participate in any increases in the value of Common Stock. Under the ESOP,
eligible employees, who are substantially all full-time employees, are awarded
shares of the Common Stock which are allocated among participants in the ESOP in
proportion to their compensation. The Board determines the total amount of
compensation to be awarded under the ESOP. That amount of compensation divided
by the fair value of the Common Stock at the date the shares are transferred to
the ESOP determines the number of shares contributed to the ESOP. Dividends are
allocated to participant accounts in proportion to their respective shares.
There were no amounts charged to operations during 2007 or 2006 under the ESOP.
The Company did not contribute any shares to the ESOP during 2007. During 2006,
the Company contributed 2,414 shares to the ESOP. Under the terms of the ESOP,
the Company is required to repurchase shares from participants upon their death
or termination of employment. The fair value of the shares of Common Stock
subject to repurchase at December 31, 2007 is approximately $15,000.
POST EMPLOYMENT COMPENSATION
Noncontributory Defined Benefit Pension Plan
The Bank has a noncontributory defined benefit pension plan (the
"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. Prior to the Pension Plan's curtailment described below, the Bank's
funding policy was to contribute amounts to the Pension Plan sufficient to meet
the minimum funding requirements set forth in ERISA, plus such additional
amounts as the Bank determined to be appropriate from time to time.
The Pension Plan was frozen effective May 1, 2005. No new employees
will be eligible for the Pension 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 Pension 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 to changes in the pension laws.
Internal Revenue Code Section 401 (a)(17) limited earnings used to calculate
qualified plan benefits to $210,000 for 2005. This limit was used in the
preparation of the following table.
14
- --------------------------------------------------------------------------------
Present
Number of Value of Payments
Years Credited Accumulated During Last
Service Benefit Fiscal Year
Name Plan Name (#) ($) ($)
- --------------------------------------------------------------------------------
(a) (b) (c) (d)(1) (e)
- --------------------------------------------------------------------------------
Joseph J. Greco First National 2 12,923 0
Bank of
Litchfield
Pension Plan
- --------------------------------------------------------------------------------
Carroll A. Pereira First National 19 87,586 0
Bank of
Litchfield
Pension Plan
- --------------------------------------------------------------------------------
1. Column (d) - assumptions for calculating the Present Value of
Accumulated Benefit:
Discount rate: 6.00%
Mortality table: 194 Group Mortality Table RP2000 Healthy Annuitant
Table projected to 2015 - used for postretirement
only; no pre-retirement mortality assumption was
included.
Long Term Incentive and Deferred Compensation Plans
The Bank has entered into Long Term Incentive Retirement Agreements
(the "Executive Incentive Agreements") with its Named Executive Officers to
encourage the Named Executive Officers to remain employees of the Bank. The
Executive Incentive Agreements provide for the award of deferred bonuses of from
4.6% to 16.1% of the Named Executive Officer's base salary if the Bank's
earnings growth is at least 5% and its return on equity is at least 11%; the
formula for such awards may be revised by the Board of Directors. Amounts are
awarded after the end of each fiscal year. No awards were earned with respect to
the Company's 2007 performance. Tax-deferred earnings on such awards accrue
annually at a rate equivalent to the rate of appreciation in the Company's stock
price in the preceding year, with a guaranteed minimum of 4% and a maximum of
15%. Such awards are immediately vested with respect to 20% of the award and an
additional 20% vests for each additional year of service and the award is 100%
vested upon a change in control, upon termination due to disability, at normal
retirement of 65 or retirement 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 equivalent to the
participant's projected retirement benefit (as defined in the Executive
Incentive Agreements). Upon retirement, the Named 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 which
payout period earnings continue to accrue at the rate in effect at the date of
retirement; in the case of early retirement, the Named Executive Officer may
elect to defer commencement of the payment of benefits, during which period
earnings continue to accrue at the rate in effect at the date of early
retirement.
In concert with the Executive Incentive Agreements and the Director
Incentive Agreements described below, the Bank has invested in universal cash
surrender value life insurance with a cash surrender value of $10.0 million as
of December 31, 2007. The insurance policies, which were acquired on the lives
of all but two (2) of the Bank's Executive Officers, four (4) non-senior
officers and all but one (1) of the Bank's directors, are designed to recover
the costs of the Bank's Executive and Director Incentive Agreements. The death
benefits of the policies have been structured to indemnify the Bank against the
death benefit provision of the Executive and Director Incentive Agreements. The
policies were paid with a single premium. Policy cash values will earn interest
at a current rate of approximately 4.0% and policy mortality costs will be
charged against the cash value monthly. There are no load or surrender charges
associated with the policies.
15
Supplemental Retirement Plan
Effective January 1, 2006, the Bank entered into Supplemental
Retirement Agreements with Joseph J. Greco and Carroll A. Pereira. At December
31, 2007, accrued supplemental retirement benefits of $197,000 are recognized in
the Company's balance sheet related to the Supplement Retirement Agreement for
these Executive Officers. Upon retirement, the Supplemental Retirement
Agreements provide for payments to these individuals ranging from 10% to 25% of
the three-year average of the Executive Officer's compensation prior to
retirement for the life expectancy of the Executive Officer at the retirement
date.
Change in Control Agreements
Pursuant to the Change in Control Agreements between the Company and
each of the Named Executive Officers, each Named Executive Officer is eligible
to receive payments and other benefits, subject to certain conditions described
below, in the event the Executive Officer is terminated, involuntarily
reassigned more that fifty (50) miles from Litchfield, Connecticut, or has an
involuntary reduction in compensation, duties or responsibilities during the
twenty-four (24) month period following a change in control.
For purposes of the Change in Control Agreements, a "Change in Control"
means the occurrence of one or more of the following events:
(a) The acquisition of fifty percent (50%) or more of any class of
equity securities of the Company by any person (or persons
working in concert) or entity after the date hereof;
(b) The acquisition of fifty percent (50%) or more of any class of
equity securities of the Bank by any person or entity other
than the Company;
(c) A merger, consolidation or reorganization to which the Bank or
the Company is a party, if, as a result thereof, individuals
who were directors of the Bank or Holding Company, immediately
before such transaction shall cease to constitute a majority
of the Board of Directors of the surviving entity;
(d) A sale of all or substantially all of the assets of the Bank
or the Company to another party;
(e) The assumption of all or substantially all of the deposits of
the Bank by another party other than the Federal Deposit
Insurance Corporation; or
(f) During any twenty-four (24) month period, individuals who at
the beginning of such period constitute the Board of Directors
of the Bank and the Company, cease for any reason (other than
death or disability) to constitute at least a majority thereof
unless the election or the nomination for election by the
stockholders of the Bank and the stockholders of Company,
respectively, of each new director was approved by a vote of
at least a majority of the directors of the Bank or of Company
as applicable, then still in office who were directors of the
Bank or the Company, as applicable, at the beginning of the
period.
The circumstances in which and the estimated amounts to be paid to the
Named Executive Officers under the Change in Control Agreements are as follows:
16
(a) If, within twenty-four (24) months after a Change in Control
as defined above, shall have occurred, the Named Executive
Officer's employment with the Bank terminates or is reassigned
(except by an agency acting with proper jurisdiction, or by a
board of directors for cause or as a result of death,
retirement or disability), then the Bank and/or its successor
shall pay the Named Executive Officer within five (5) days
after the date of termination an amount equal to the sum of:
(i) Two (2) years of the Named Executive Officer's annual
compensation based upon the most recent aggregate
base salary paid to the Named Executive Officer in
the twelve (12) month period immediately preceding
his/her termination or reassignment less amounts
previously paid to the Named Executive Officer from
the date of the Change in Control; plus
(ii) Reasonable legal fees and expenses incurred by the
Named Executive Officer as a result of such
termination or reassignment (including all such fees
and expenses, if any, incurred in contesting or
disputing any such termination or reassignment or in
seeking to obtain or enforce any right or benefit
provided for by the Change in Control Agreement).
(b) The Bank and/or its successors shall maintain in full force
and effect for the Named Executive Officer's continued
benefit, for the two (2) year period beginning upon a Change
in Control, all life insurance, medical, health and accident
and disability policies, plans, programs or arrangements which
were in effect immediately prior to the Change in Control.
(c) In the event the Named Executive Officer should obtain other
employment or be compensated for services rendered to any
depository or lending institution, then any payments provided
for in the Change in Control Agreement shall be reduced by any
compensation earned by the Named Executive Officer as the
result of employment or consulting after the date of
termination or reassignment.
(d) It is the intention of the parties to the Change in Control
Agreements that no payments by the Bank to or for the Named
Executive Officer's benefit under the Agreements shall be
non-deductible to the Bank by reason of the operation of
Section 280G of the Internal Revenue Code. Accordingly, if by
reason of the operation of said Section 280G of the Internal
Revenue Code, any such payments exceed the amount that can be
deducted by the Bank, the amount of such payments shall be
reduced to the maximum that can be deducted by the Bank. To
the extent that payments in excess of the amount that can be
deducted by the Bank have been made to and for the Named
Executive Officer's benefit, they shall be refunded with
interest at the applicable rate provided under Section 1274(d)
of the Internal Revenue Code, or at such other rate as may be
required in order that no such payment to or for the Named
Executive Officer's benefit shall be non-deductible pursuant
to Section 280G of the Internal Revenue Code. Any payments
made under the Change in Control Agreements that are not
deductible by the Bank as result of losses that have been
carried forward by the Bank for Federal tax purposes shall not
be deemed a non-deductible amount.
17
BOARD OF DIRECTORS COMPENSATION
In 2007, each director of the Company who was not an employee of the
Bank, received $400 for each Board meeting attended and $350 for each committee
meeting attended. The Chairman of the Board of Directors also received an annual
retainer of $7,500 and each other non-officer director of the Company also
received an annual retainer of $6,000 for serving as a director. Directors who
are employees of the Bank receive no additional compensation for their services
as members of the Board or any Board committee.
Director Compensation Table
- -----------------------------------------------------------------------------------------------------------------------------
Change in
Pension Value
and Nonqualified
Non-Equity Deferred
Fees Earned or Stock Option Incentive Plan Compensation All Other
Name Paid in Cash Awards Awards(4) Compensation Earnings Compensation Total
-----------------------------------------------------------------------------------------------------------------------------
($)(1) ($) ($) ($) ($) ($) ($)
-----------------------------------------------------------------------------------------------------------------------------
Patrick J. Boland 18,400 0 0 0 0 0 18,400
-----------------------------------------------------------------------------------------------------------------------------
John A. Brighenti 15,700 0 0 0 0 0 15,700
-----------------------------------------------------------------------------------------------------------------------------
Joseph J. Greco 0(2) 0 0 0 0 0 0
-----------------------------------------------------------------------------------------------------------------------------
Perley H. Grimes, Jr. 19,200 0 0 0 0 6,863 (3) 26,063
-----------------------------------------------------------------------------------------------------------------------------
Kathleen A. Kelley 16,000 0 0 0 0 0 16,000
-----------------------------------------------------------------------------------------------------------------------------
George M. Madsen 18,550 0 0 0 0 0 18,550
-----------------------------------------------------------------------------------------------------------------------------
Alan B. Magary 16,400 0 0 0 0 0 16,400
-----------------------------------------------------------------------------------------------------------------------------
Gregory S. Oneglia 17,750 0 0 0 0 0 17,750
-----------------------------------------------------------------------------------------------------------------------------
Charles E. Orr 20,650 0 0 0 0 0 20,650
-----------------------------------------------------------------------------------------------------------------------------
Richard E. Pugh 18,150 0 0 0 0 0 18,150
-----------------------------------------------------------------------------------------------------------------------------
William Sweetman 12,000 0 0 0 0 7,164(3) 19,164
-----------------------------------------------------------------------------------------------------------------------------
H. Ray Underwood 16,650 0 0 0 0 0 16,650
-----------------------------------------------------------------------------------------------------------------------------
Patricia D. Werner 13,900 0 0 0 0 42,351(3) 56,251
-----------------------------------------------------------------------------------------------------------------------------
- ---------------
1. All directors' fees are paid in cash.
2. As an officer of the Company and Bank, Director Greco received no
compensation for his services as a Director.
3. Amount represents the value of stock options that were previously issued and
vested, that were exercised in 2007. The value is based on the difference
between the option price and market price on the date of exercise.
4. No options were awarded in 2007. Pursuant to the 1994 Stock Option Plan for
Officers and outside Directors, the aggregate number of options outstanding at
December 31, 2007 for each director who held options was as follows: Perley H.
Grimes, Jr. - 631, William J. Sweetman - 631, and Patricia D. Werner - 631. All
options are exercisable.
Long Term Incentive and Deferred Compensation Plans
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 Director Incentive
Agreements with two newly appointed directors, Gregory S. Oneglia and Alan B.
Magary. In September 2004, the Bank entered into a Director Incentive Agreement
with director, Kathleen A. Kelley.
18
The Director Incentive Agreements award a director with the right to
earn and defer the receipt of a bonus in an amount or percentage ranging from
14.5% to 50% of the director's retainer, meeting fees and committee fees,
depending on the return on equity and earnings growth in the preceding year,
provided that there is no award if the return on equity in the preceding year is
less than 11% and earnings growth in the preceding year is less than 5%.
Earnings accrue annually on such amounts at a rate equivalent to the
appreciation in the Company's stock price in the preceding year, with a
guaranteed minimum of 4% and a maximum of 15%. No awards were earned with
respect to the Company's 2007 performance. All amounts in the Director Incentive
Agreements are immediately vested with respect to 20% of the award and an
additional 20% is vested for each additional year of service, with 100% vesting
upon a change in control, at normal retirement at age 72, regardless of years of
service, or retirement prior to age 72 with at least ten years of service. If
the director becomes disabled prior to retirement, the director will receive the
entire balance in their deferral account at termination of employment. 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, during which payout period earnings continue to accrue as
stated above.
Directors' Fees Plan
The Bank previously offered 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 market value of the related
trust assets and corresponding liability was $180,951 and $198,960 at December
31, 2007, and 2006, respectively. During 2005, the plan was amended to cease the
deferral of any future fees. Amounts previously deferred remain in the trust.
Policies and Procedures for the Review, Approval or Ratification of Transactions
with Related Persons
Pursuant to the Company's written Code of Ethics and Conflicts of
Interest Policy, all business dealings and transactions between the Company and
its officers, directors, principal shareholders and employees or their related
interests, must be conducted in an arm's-length fashion. Any consideration paid
or received by the Company in such a transaction must be on terms and under
circumstances that are substantially the same or as favorable as those
prevailing at the time for comparable business dealings with unaffiliated third
parties. Related parties of the Company must fully disclose to the Board of
Directors any personal interest they have in matters affecting the Company.
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS,
AND CERTAIN CONTROL PERSONS
The Bank has had, and expects to have in the future, transactions in
the ordinary course of its business with directors, Executive 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 $2,219,055 and
$2,471,904 at December 31, 2007 and 2006, respectively. During 2007, $596,691 of
new loans were made and repayments totaled $792,962. At December 31, 2007, all
loans to Executive Officers, directors, principal shareholders and their
associates were performing in accordance with the contractual terms of the
loans.
19
Perley H. Grimes, Jr., a director of the Company and the Bank, is a
partner in Cramer & Anderson, a law firm which renders certain legal services to
the Bank in connection with various matters. During 2007 and 2006, the Bank paid
Cramer & Anderson $25,300 and $30,700, respectively, for legal services
rendered, a portion of which was reimbursed to the Bank by third parties.
Gregory Oneglia, a director of the Company and the Bank, was a
one-sixth owner of property that was leased by the Bank for its North Main
Street, Torrington branch. During the year ended December 31, 2007, the Company
paid approximately $14,100 for rent and $407,000 for the purchase of the branch
property. During 2006, the Bank paid rent expense for that property in the
amount of $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, 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 has selected McGladrey & Pullen, LLP as independent
auditors to audit the consolidated financial statements of the Company for the
fiscal year ending December 31, 2008. McGladrey & Pullen, LLP served as the
auditors for the Company for the fiscal year ended December 31, 2007. McGladrey
& Pullen, LLP's opinion on the Consolidated Financial Statements of First
Litchfield Financial Corporation and subsidiary for the year ended December 31,
2007 is included in the First Litchfield Financial Corporation 2007 Annual
Report on Form 10-K.
During the period covering the fiscal years ended December 31, 2007 and
2006, McGladrey & Pullen, LLP and RSM McGladrey, Inc., (a separate entity which
performs non-audit services,) performed the following professional services:
20
- ---------------------------------------------------------------------------------------------------------------
First Litchfield Financial Corporation
Principal Accountant Fees and Services
Years Ended December 31, 2007 and 2006
Description
2007 2006
- ---------------------------------------------------------------------------------------------------------------
Audit Fees, consist of fees for professional services rendered for the audit of $183,957 $161,165
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.
- ---------------------------------------------------------------------------------------------------------------
Audit Related Fees are fees principally for professional services rendered $ 18,400 $ 10,200
for the audits of the FHLB Qualified Collateral Report and the financial
statements of Common Trust Fund A.
- ---------------------------------------------------------------------------------------------------------------
Tax Fees consist of fees for tax return preparation, planning and tax advice $ 19,545 $ 14,800
for the Company and Common Trust Fund A.
- ---------------------------------------------------------------------------------------------------------------
All Other Fees consist of fees for consultations on the Company's $ 6,000 $ 0
Sarbanes-Oxley Section 404 implementation during (2007.)
- ---------------------------------------------------------------------------------------------------------------
Independence
The Audit Committee of the Board of Directors of the Company has
considered and determined that the provision of services by McGladrey & Pullen,
LLP relating to audit related services, tax services and other services reported
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 Auditors
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 the extent of services provided by independent auditors in accordance
with this pre-approval and the fees for the services performed to date. All of
the audited-related fees, tax fees, or other fees paid in 2007 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
21
the appointment of McGladrey & Pullen, LLP as the independent auditors for the
year ending December 31, 2008.
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 2008 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 2008 Annual Meeting.
In order to be included in the Company's proxy statement and form of
proxy for the 2009 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, 2008, 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 Rule
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
2009 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: George M. Madsen, Secretary,
First Litchfield Financial Corporation, P.O. Box 578, 13 North Street,
Litchfield, Connecticut 06759.
22
ANNUAL REPORT TO SHAREHOLDERS
The Company files Annual Reports on Form 10-K with the Securities and
Exchange Commission. 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 25, 2008 George M. Madsen
Secretary
23
PROXY FOR 2008 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, 2008 at the Annual Meeting of its
shareholders to be held at the Torrington Country Club, 250 Torrington Road,
(Route 4), Goshen, Connecticut, on Wednesday, May 21, 2008 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) and (2)
(1) ELECTION OF DIRECTORS:
To re-elect the following five (5) 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: Patrick J. Boland, John A. Brighenti, Kathleen A. Kelley,
Richard E. Pugh, 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, 2008.
[ ] 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