Securities and Exchange Commission
Washington, D.C. 20549
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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
NEW ENGLAND COMMUNITY BANCORP, INC.
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
NEW ENGLAND COMMUNITY BANCORP, INC.
OLD WINDSOR MALL
WINDSOR, CONNECTICUT 06095
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, APRIL 21, 1998, 10:00 A.M.
HARTFORD GOLF CLUB
134 NORWOOD DRIVE
WEST HARTFORD, CONNECTICUT
March 20, 1998
Fellow shareholder:
You are cordially invited to attend the 1998 New England Community
Bancorp ("NECB" or the "Company") Annual Meeting of Shareholders to:
o Elect the board of directors.
o Approve a stock option plan of the Company for non-officer
directors.
o Approve the Amendment and Restatement of the Corporate Certificate
of Incorporation of NECB to (i) increase the number of shares of
Common Stock it is authorized to issue, (ii) eliminate the present
Article XI, relating to business combinations, and (iii) incorporate
prior amendments and make minor changes in wording.
o Approve the appointment of Shatswell, MacLeod & Company, P.C. as
independent auditors for 1998.
o Conduct other business properly brought before the meeting.
Shareholders of record at the close of business on February 27, 1998
may vote at the meeting.
Your vote is important. Whether you plan to attend or not, please sign,
date, and return the enclosed proxy card in the envelope provided. If you attend
the meeting and prefer to vote in person, you may do so.
I look forward to seeing you at the meeting.
By the Order of the Board of Directors,
s/s Angelina J. McGillivray
---------------------------
Angelina J. McGillivray
Secretary
<PAGE>
PROXY STATEMENT
THIS PROXY SOLICITATION IS BEING MADE BY THE BOARD OF DIRECTORS OF NECB
(the "NECB BOARD"). This proxy statement and form of proxy are first being sent
to security holders on March 20, 1998.
ATTENDANCE AND VOTING MATTERS
-----------------------------
VOTING METHODS
You can vote on matters to come before the meeting in three ways:
o You can come to the Annual Meeting and cast your vote, or
o You can vote by signing and returning the enclosed proxy card. If
you do so, the individuals named on the card will vote your shares
in the manner you indicate. If you do not indicate, your shares
will be voted FOR the directors, FOR the stock option plan for
non-officer directors, FOR the amendment and restatement of the
Certificate of Incorporation and FOR the appointment of auditors.
o If you want to give your proxy to someone other than the
individuals noted on the proxy card, you may do so by crossing out
the name of those individuals and inserting the name of the
individuals you are authorizing to vote.
If you send in a proxy, and wish to change your vote, you can do so by
voting at the meeting, by sending in another proxy card with a later date, or by
giving written notice to the Secretary of NECB. Each share of Common Stock you
own entitles you to one vote. As of February 27, 1998, there were 5,160,626
shares of Common Stock outstanding.
THE QUORUM REQUIREMENT
A quorum of shareholders is necessary to hold a valid meeting. If at
least one-third of shareholders are present in person or by proxy, a quorum will
exist. Abstentions and broker non-votes are counted as present for establishing
a quorum. A broker non-vote occurs when a broker votes on some matters on the
proxy card but not on others because he does not have the authority to do so.
VOTE NECESSARY FOR ACTION
Directors are elected by a plurality vote of shares present at the
meeting, meaning that the director nominee with the most affirmative votes for a
particular slot is elected for that slot. In an uncontested election for
directors, the plurality requirement is not a factor. The proposal to amend and
restate the Certificate of Incorporation must receive the affirmative vote of a
majority of the outstanding shares and a majority of the shares beneficially
held by shareholders, other than a company which holds more than 5% of the
shares of Common Stock outstanding. Abstentions and non-votes have the effect of
a no vote on such matter. All other action is by an affirmative vote of the
majority of the shares present at the meeting.
- 1 -
<PAGE>
RECORD DATE
The NECB Board has set a record date to determine the date shareholders must own
their stock in order to be able to vote at the meeting. The date is February 27,
1998. Each share entitles its owner to one vote.
MATTERS RAISED AT THE MEETING NOT INCLUDED IN THIS STATEMENT
We do not know of any matters to be acted upon at the meeting other
than those discussed in this statement. If any other matter is presented, proxy
holders will vote on the matter in their discretion.
To present other matters to the meeting you must provide advance
written notice to NECB. For purposes of the 1999 Annual Meeting, that notice
must be received by November 20, 1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
-----------------------------------------------
The following table lists all shareholders known by NECB to own
beneficially more than 5% of the 5,160,626 shares of Common Stock outstanding as
of February 27, 1998.
Amount of Shares Percentage
Name and Address of Beneficial Owners Beneficially Owned of Class
- ------------------------------------- ------------------ --------
Wellington Management Co................ 415,514 8.05
75 State Street, 19th Floor
Boston, MA 02119
- 2 -
<PAGE>
ELECTION OF DIRECTORS
A Board of eight Directors is to be elected at this Annual Meeting to hold
office until the next Annual Meeting and the election and qualification of their
successors. The Governance Committee of the NECB Board has nominated the
following persons (the "Nominees"), and it is intended that proxies will be
voted in favor of all these persons. If, for any reason, any of the Nominees is
not able or willing to serve as a Director when the election occurs (a situation
which is not presently contemplated), it is intended that the proxy will be
voted for the election of a substitute nominee in accordance with the judgment
of the proxy holder.
THE NECB BOARD RECOMMENDS A VOTE "FOR" ALL NOMINEES
FOR ELECTION AS DIRECTORS
NOMINEES FOR DIRECTOR
<TABLE>
<CAPTION>
Director of
Name Age Positions and Principal Occupation Committee Membership NECB Since
- ----------------------------- --- ---------------------------------- -------------------- ----------
<S> <C> <C> <C> <C>
John C. Carmon............... 50 President, Carmon Funeral Executive and Loan 1985
Homes, Inc.
Gary J. DeNino............... 43 President, IMSCO, Inc. (IMSCO, Compensation and 1995
Inc., is a domestic market Governance
representative of international
products.)
Frank A. Falvo............... 55 Executive Vice President of NECB Executive 1995
since December, 1995 and President
and CEO of The Equity Bank
Dominic J. Ferraina.......... 65 Chairman of the Board of New Executive, Governance 1986
England Bank & Trust Company, and Compensation
Practicing Attorney
John R. Harvey............... 50 Partner, Harvey & Horowitz, P.C. Audit 1995
(certified public accountants)
David A. Lentini............. 51 Chairman, President and CEO Executive 1993
of NECB and New England Bank
and Trust Company
Angelina J. McGillivray...... 48 Manager, Coccomo Associates Executive, Compensation, 1993
Realtors, LLC Governance and Audit
Michael P. Solimene........... 52 President, Semac Electric Co. Inc Loan 1997
</TABLE>
- 3 -
<PAGE>
CERTAIN INFORMATION REGARDING THE NECB BOARD
--------------------------------------------
AND ITS COMMITTEES
------------------
MEETINGS AND COMMITTEES
During 1997, the NECB Board met fourteen times. Committees of the NECB
Board met as follows: Community Reinvestment Act ("CRA") Committee met once, the
Audit Committee met three times, the Compensation and the Governance Committees
each met four times. In 1997, all NECB Board members attended more than 75% of
the meetings of the NECB Board and its committees on which they serve.
The Executive Committee consists of five members. It meets only when
there is not time to submit urgent matters to the full NECB Board. During 1997,
the Committee did not met because all matters otherwise reviewable by it were
reviewed by the entire NECB Board.
The CRA Committee consists of two members and reviews matters and
suggests initiatives which may affect NECB's CRA compliance.
The Audit Committee assists the Boards of Directors of New England Bank
and Trust Company, The Equity Bank and Community Bank (collectively the
"Subsidiaries") in fulfilling their fiduciary responsibilities relating to their
corporate accounting and reporting practices respectively. Additionally, the
Audit Committee reviews the records and affairs of NECB to determine its
financial condition, reviews with management and the independent auditors NECB's
internal control systems, and monitors NECB's adherence in accounting and
financial reporting to generally accepted accounting principles.
The Compensation Committee, composed of three independent non-employee
members of the NECB Board, determines issues related to compensation programs
and policies including compensation actions for the Chief Executive Officer and
other executive officers (see Compensation Committee Report on Executive
Compensation).
The Governance Committee consists of three members. The Governance
Committee was formed to assist the NECB Board with issues related to its
membership as well as issues related to the Articles of Incorporation and Bylaws
of the Company. Issues related to membership include, but are not limited to,
issues such as the size and membership of the NECB Board and its standing
committees. The Committee, acting as the nominating committee, met on March 19,
1998 and recommended the proposed slate of Nominees, as presented in this proxy
statement, to seek election at the 1998 Annual Meeting to serve as directors of
NECB.
The Governance Committee will consider additional nominees during the
year as corporate needs dictate, and will advise the NECB Board as to its
recommendations. The Governance Committee will consider recommendations by
shareholders for nomination as directors, provided such recommendations are
submitted in accordance with certain procedures set forth in NECB's Bylaws. A
copy of the Bylaws will be sent to any shareholder upon written request.
- 4 -
<PAGE>
COMPENSATION OF DIRECTORS
For their service on the NECB Board during 1997, directors (other than
executive officers of NECB who are Board members) received an annual retainer of
$3,000, plus $300 for each Board meeting attended and $150 for each committee
meeting attended. Each Committee Chairman received an additional annual
compensation of $1,000.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
------------------------------------------------------
The following table shows, as of February 27, 1998, the number of shares of
Common Stock and the percent of outstanding Common Stock beneficially owned by
(i) each of the current directors, (ii) each of the executive officers named in
the Summary Compensation Table (on page 11), and (iii) all directors and
executive officers as a group.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent
Name Ownership (1) of Class (2)
- ----------------- ------------- ------------
<S> <C> <C>
John C. Carmon........................................................ 20,196 (3) 0.4%
Gary J. DeNino........................................................ 28,146 0.5%
Frank A. Falvo........................................................ 27,537 (3) 0.5%
Dominic J. Ferraina................................................... 16,500 (3) 0.3%
Donat A. Fournier..................................................... 22,547 (3) 0.4%
Anson C. Hall......................................................... 18,137 (3) 0.4%
John R. Harvey........................................................ 15,165 (3) 0.3%
David A. Lentini...................................................... 45,870 (3) 0.9%
Angelina J. McGillivray............................................... 255,176 (4)(5) 4.9%
Michael P. Solimene................................................... 92,009 (3) 1.8%
All Directors and Executive Officers as a Group (10 persons).......... 541,283 10.4%
</TABLE>
- ----------------
(1) Amounts shown include 13,200 shares that may be acquired by each of Messrs.
Falvo, Fournier, Hall and 17,600 by Mr. Lentini.
(2) For purposes of this calculation, the number of shares of Common Stock used
includes shares outstanding as of February 27, 1998 of 5,160,626 plus any
shares subject to options granted to that individual and exercisable within
sixty (60) days of February 27, 1998.
(3) Includes shares owned by, or as to which voting power is shared with,
spouse, children, or affiliates.
(4) Includes 93,683 shares owned by John A. Coccomo Sr. Amended and Restated
Trust, of which Mrs. McGillivray is a beneficiary.
(5) Includes 37,413 shares owned by John A. Coccomo Sr., Foundation for the
Blind, Inc., a charitable trust of which Mrs. McGillivray is a trustee and
for which ownership has been disclaimed by Mrs. McGillivray.
- 5 -
<PAGE>
APPROVAL OF STOCK OPTION PLAN FOR NON-OFFICER DIRECTORS
On August 28, 1997, the NECB Board adopted a Stock Option Plan (the
"Plan") for directors who are not otherwise employees of the Company or any of
its subsidiaries. Each non-officer director was granted an option to purchase
10,000 shares of NECB's Common Stock at the fair market value of a share on such
date, determined pursuant to the Plan to be $17.33 per share, the last sales
price of a share of Common Stock on the Nasdaq Stock Market as reported for that
date.
The Plan is subject to the approval of the shareholders, and the Plan
and all options granted to date will be null and void if the majority of the
shareholders present at the meeting do not vote in favor of the adoption of the
Plan. If adopted by the shareholders, the Plan will terminate on August 28,
2007.
The Plan was adopted to attract and retain the continued services of
qualified non-officer directors of NECB and to encourage them to secure or
increase their stock ownership. The NECB Board believes that the Plan will
promote continuity of management and increased personal interest in the welfare
of the Company by those directors.
Options to purchase a total of 66,000 shares are presently held by
NECB's six non-officer directors. A total of 330,000 shares of the authorized
but unissued shares of the Common Stock have been reserved for issuance upon the
exercise of options granted pursuant to the Plan. However, future grants of
options will be made only upon approval of NECB's shareholders.
The Plan is administered by a Committee consisting of a minimum of
three members of the NECB Board, which can prescribe rules and regulations
relating to it and make other determinations necessary for the administration of
the Plan. It will also make adjustments to the option price and number of shares
subject to an option in the case of stock dividends or a recapitalization, or
arrangements in the case of a merger, consolidation, reorganization or
liquidation.
Each option may be exercised in five equal installments, commencing
from the date it is granted. No option may be exercised, however, until the Plan
is approved by the shareholders of NECB. If an option holder dies or is
disabled, or if a director's service as a director is terminated following a
"Change in Control", all options held by such person will become exercisable
immediately. A "Change in Control" is defined as ownership of 35% or more of the
voting power of the Common Stock, a merger for cash or securities or one in
which NECB is not the surviving entity, unless the NECB shareholders'
proportionate interest in the surviving Company is unchanged, a sale, lease or
other transfer of all or substantially all the assets of NECB, or if continuing
directors do not constitute at least 70% majority of the NECB Board in any
24-month period. The ownership of 35% or more of the voting power can be
determined not to be a Change of Control by a 70% vote of the continuing
directors.
THE NECB BOARD RECOMMENDS A VOTE
"FOR" THE APPROVAL OF THE STOCK OPTION PLAN
- 6 -
<PAGE>
AMENDMENT AND RESTATEMENT OF THE CERTIFICATE OF INCORPORATION
The Certificate of Incorporation of NECB was last restated on June 25,
1984. Since that time, it has been amended on July 14, 1987, September 28, 1994
and May 16, 1995. The document presently consists of 49 pages. The number of
amendments, some of which are inconsistent in form, makes it cumbersome.
In addition, the NECB Board has recommended that certain specific
changes be made in the NECB Certificate of Incorporation. They are:
1. To eliminate the Class A designation and increase the number of
shares of Common Stock authorized to be issued to 20,000,000,
from the present 10,000,000.
2. To eliminate the present Article XI, relating to business
combinations.
3. To reflect certain revisions to the General Corporation Law of
Delaware.
THE NECB BOARD RECOMMENDS A VOTE
"FOR" THE AMENDMENT AND RESTATEMENT OF THE
CERTIFICATE OF INCORPORATION
INCREASE IN THE AMOUNT OF COMMON STOCK THE NECB BOARD CAN ISSUE.
The NECB Board is presently authorized to issue 10,000,000 shares of
Common Stock. Of this amount, 6,051,626 are presently issued, or reserved for
issuance upon the exercise of options.
The NECB Board believes that to maintain its competitive edge, NECB
must be able to continue its strategy for growing the Company through a
combination of internal growth and acquisitions. The later effort is the result
of the trend in the industry toward fewer, but larger, banks which will be
capable of utilizing the new powers Congress has provided banks and bank holding
companies. Since 1995, NECB has acquired four banking entities and issued more
than 2.5 million shares of its Common Stock. Recently, NECB announced an
agreement to acquire Olde Port Bank and Trust, in Portsmouth, New Hampshire.
NECB can expand either by selling its stock to raise the capital to
purchase other banks and related entities, or by giving its stock in exchange
for the stock of others. In either case, if it is to expand in a prudent manner,
it must be able to issue the stock required for the expansion. And, as NECB
becomes larger, it may acquire larger companies. It has therefore decided to
increase the amount of Common Stock the Company is authorized to issue to
20,000,000 shares..
ELIMINATION OF THE "ANTI-TAKEOVER" PROVISIONS OF ARTICLE XI.
The present Article XI was enacted to prevent a takeover of the
Company, or certain undesirable business dealings, with persons or groups of
persons who owned 5% or more of the Common Stock of NECB. It is complicated, and
becomes more difficult to administer as the Company gets larger. The NECB Board
does not feel that the Company needs the protection now, and believes that some
of the provisions of Article XI may make it difficult to complete transactions
which may be beneficial for NECB. The General Corporation Law of Delaware
contains protective provisions which
- 7 -
<PAGE>
the NECB Board deems adequate, relating to business dealings with persons or
groups of persons owning 15% or more of the Common Stock.
REFLECTING REVISIONS IN CORPORATION LAW.
Article VII, regarding indemnification of directors, officers,
employees and agents of the Company, has been revised to conform to the current
General Corporation Law of the State of Delaware.
COPY OF PROPOSED AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.
A copy of the proposed Amended and Restated Certificate of
Incorporation is attached to this Proxy Statement as Exhibit A. Shareholders are
encouraged to review it carefully.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
-------------------------------------------------------
The Compensation Committee is composed of three independent
non-employee members of the NECB Board who initiate all compensation actions for
the Chief Executive Officer ("CEO") and recommend the compensation for all
executive officers.
NECB's executive compensation programs are designed to be market
competitive in order to attract and retain highly qualified and experienced
executives who are motivated to enhance shareholder value. In 1997, the
Committee's compensation recommendations with respect to the CEO and other
executive officers as defined in the Summary Compensation Table (the "Named
Executive Officers") continued to be driven by NECB's strategy to place emphasis
on variable compensation. In order to link the Named Executive Officers' pay
closely with the interests of NECB's shareholders, this variable compensation
takes the form of performance-based awards and equity awards. NECB's goal is to
ensure that the total pay for each of the Named Executive Officers reflects the
executive's position, duties and level of responsibility and is comparable to
the compensation paid to executives in similar positions at financial
institutions of NECB's size (measured by total assets). This group is not the
same as the index used for the purposes of comparing total shareholder return
under the Stock Performance Graph below.
The amounts paid to each of the Named Executive Officers in the form of
base salary and short and long-term incentive awards are discretionary based
upon the Committee's assessment of certain quantitative and qualitative factors.
For 1997 compensation purposes, the Committee considered: (1) NECB's performance
in 1996, as measured by the growth in net assets and net income; (2) reduced
percentage of problem loans (before the effect of acquisitions); (3) the
announced and completed acquisitions; and (4) the increased market value of the
Company.
Long-term incentive awards, consisting of incentive and nonqualified
stock options, act as a retention tool and serve to link the executive officers'
opportunity for financial reward with that of the shareholders. They ensure that
short-term performance is adequately balanced with the achievement of
longer-range objectives which are in the best interests of the shareholders. The
purpose is to stimulate key managerial employees, who are in a position to
materially contribute to the long-term success of
- 8 -
<PAGE>
NECB, by allowing such individuals to acquire or increase their proprietary
interest in NECB and also to enable NECB to attract and retain such key
employees. In August 1997, the Committee awarded options on 255,750 shares of
stock to Named Executive Officers and other key employees.
CEO COMPENSATION
In 1997, NECB's most highly-compensated Named Executive Officer was
David A. Lentini, President and Chief Executive Officer. The Committee reviewed
Mr. Lentini's performance and determined that he met or exceeded all objectives
in 1997. The Committee also discussed 1998 business objectives for Mr. Lentini.
Mr. Lentini's cash compensation for 1997 included a base salary of $192,500 and
a bonus of $61,500. The Committee exercised its judgment in determining the
amount of Mr. Lentini's award and took into account certain quantitative and
qualitative factors described above. Mr. Lentini was not present during the
Committee's discussion concerning his compensation. The Committee's decision was
unanimously accepted by the NECB Board.
This report is furnished by members of the Compensation Committee.
Gary J. DeNino
Dominic J. Ferraina
Angelina J. McGillivray
- 9 -
<PAGE>
STOCK PERFORMANCE GRAPH
-----------------------
The Stock Performance Graph compares the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock against
both a broad-market index (the Nasdaq National Market) and an industry index
[SNL Securities' New England Bank Index], for the five-year period from December
31, 1992 through December 31, 1997. The graph assumes that on December 31, 1992
$100 was invested in Common Stock of NECB and the indices and that dividends
were reinvested.
[The following table represents a chart in the printed report]
<TABLE>
<CAPTION>
PERIOD ENDING
------------------------------------------------------------------------------
INDEX 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
New England Community Bancorp ... 100.00 93.76 207.65 264.07 405.00 747.65
NASDAQ - Total US ............... 100.00 114.80 112.21 158.70 195.19 239.53
SNL New England Bank Index ...... 100.00 102.57 98.57 161.62 220.39 350.81
</TABLE>
- 10 -
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows, for the years ended December 31, 1997, 1996
and 1995, the compensation of the Chief Executive Officer and the three other
most highly compensated executive officers of NECB who were serving as executive
officers at year-end 1997. The persons named in the table are referred to in
this proxy statement as the "Named Executive Officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
------------------- ------
Options/ All Other
Name and Principal Position Year Salary ($) Bonus ($) SARs (#) Compensation ($)
- --------------------------- ---- ---------- --------- -------- ----------------
<S> <C> <C> <C> <C> <C>
David A. Lentini............ 1997 $192,500 $61,500 66,000 $23,927 (1)
Chairman, President and Chief 1996 175,000 30,800 44,000 19,345
Executive Officer 1995 140,000 13,500 15,000 20,837
Frank A. Falvo.............. 1997 $165,000 $47,833 33,000 $15,048 (2)
Executive Vice President 1996 150,000 26,400 33,000 4,167
1995(3) 125,000 12,325
Donat A. Fournier........... 1997 $137,500 $47,833 33,000 $20,866 (4)
Vice President and Senior 1996 125,000 $26,400 33,000 14,549
Loan Officer 1995 95,000 10,500 10,000 17,138
Anson C. Hall............... 1997 $132,116 $47,833 33,000 $23,300 (5)
Vice President, Chief 1996 100,000 17,600 33,000 11,472
Financial Officer and 1995 80,000 6,500 5,000
Treasurer
</TABLE>
- ----------------
(1) During 1997, NECB contributed $7,700 into the Company's 401(k) Plan.
Additionally, NECB paid life and disability insurance premiums in the
amount of $1,211 and $6,682, respectively, for the benefit of Mr. Lentini.
(2) During 1997, NECB contributed $6,483 pursuant to the Company's 401(k) Plan
and $3,818 for automobile expenses.
(3) Amounts shown in the table for 1995 include amounts paid by The Equity Bank
to Mr. Falvo prior to its acquisition by NECB.
(4) During 1997, NECB contributed $6,567 into the Company's 401(k) Plan and
$6,303 for automobile expenses.
(5) During 1997, NECB contributed $7,198 into the Company's 401(k) Plan.
- 11 -
<PAGE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock
options made during the year ended December 31, 1997 to the Named Executive
Officers.
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------
Number of Percent of
Securities Total Options/
Underlying SARs Granted Exercise or Grant Date
Options/SARs to Employees Base Price Expiration Present Value
Name Granted (#)(1) in Fiscal Year (2) ($/sh) Date ($) (3)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
David A. Lentini 66,000 25.8% $17.27 8/28/2007 $376,860
Frank A. Falvo 33,000 12.9% $17.27 8/28/2007 $188,430
Donat A. Fournier 33,000 12.9% $17.27 8/28/2007 $188,430
Anson C. Hall 33,000 12.9% $17.27 8/28/2007 $188,430
</TABLE>
- ----------------
(1) Under the 1996 Incentive and Nonqualified Compensatory Stock Option Plan
(the "1996 Plan"), the Committee may grant either Incentive Stock Options
or Non-Statutory Stock Options to key managerial employees to purchase
shares of Common Stock of the Company. The option price is fixed by the
Committee at the time of the grant and may not be less than 100 percent of
the fair market value of the stock, as determined by the Committee, in good
faith as of the grant date. Each option may be exercised in five equal
annual installments commencing from the date set forth in the Stock Option
Agreement for such options; provided, however, that no option be exercised
beyond ten years after the date of the grant.
(2) The percentages in the table are based upon a total of 255,750 options
granted to NECB employees in 1997, all of which were granted under the 1996
Plan described in Footnote 1.
(3) The grant date present values shown in the table are determined using the
Black-Scholes option pricing model. The assumptions used in calculating the
Black-Scholes present value of approximately $5.71 per option for new
option grants were as follows: (a) a dividend yield of 2.1 percent; (b)
expected volatility of 25 percent; (c) a risk-free interest rate of 5.89
percent; and (d) expected lives of eight years.
The Black-Scholes option pricing model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are
fully transferable. In addition, option pricing models require the use of
highly subjective assumptions, including the expected stock price
volatility. Because NECB's employee options have characteristics
significantly different from those of traded options, and because changes
in subjective assumptions can materially affect the fair value estimates,
the Black-Scholes model does not necessarily provide a reliable single
measure of the fair value of NECB's employee options. The amount realized
from an employee option ultimately depends on the market of the Common
Stock on the date of the exercise.
- 12 -
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($) (2)
Shares Acquired Value Realized -------------------------- -----------------------
Name on Exercise (#) ($) (1) Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David A. Lentini 15,000 $225,000 8,800 101,200 $141,284 $1,100,066
Frank A. Falvo 6,600 59,400 $105,963 $691,317
Donat A. Fournier 10,000 $163,125 6,600 59,400 $105,963 $691,317
Anson C. Hall 5,000 $80,625 6,600 59,400 $105,963 $691,317
</TABLE>
- ----------------
(1) Value realized is the difference between the fair market value of the
Common Stock at the date of exercise and the exercise price of the option
exercised.
(2) Value is the difference between the fair market value of the Common Stock
at year end and the exercise price of the option.
PENSION PLAN
During 1996, the Company converted its defined contribution plan into a
401(k) Plan (the "Plan"). Employees over the age of 21 and with one year of
service are eligible to participate in the Plan. The Company matches employee
contributions to the Plan on the following basis: 100% of the first 3% of
employee contributions and 50% of the next 2%. Both employee and Company matches
immediately vest in the Plan. Additionally, funds which were previously not
vested in the defined contribution plan vested upon transfer into the Plan.
EMPLOYMENT AGREEMENTS
NECB entered into employment agreements with Messrs. Lentini, Fournier
and Hall in August 1994 and with Mr. Falvo in August 1996.
Except for the name, salary and anniversary date, each agreement is
substantially identical. Each provides that beginning on the first anniversary
of its execution, and annually thereafter, the agreement automatically extends
for one additional year unless canceled by either party. Each agreement will
terminate two years from the date of the last extension. Under each agreement,
the named executive receives an annual base salary which is fixed by the NECB
Board each year. Each agreement also provides that the NECB Board of NECB may
pay an incentive bonus to the named executive at its option, and the amount of
such bonus is discretionary and will be determined by the NECB Board.
EXECUTIVE RETENTION AGREEMENTS
NECB entered into Executive Retention Agreements with each Named
Executive Officer on October 16, 1997. The agreements are substantially
identical. Each agreement provides that if there is a "Change in Control", and
the Company terminates the executive's employment without "Cause" or the
Executive terminates his employment for "Good Reason", NECB shall pay the
Executive a lump sum equal to the sum of (i) three times the annual compensation
in the case of Mr. Lentini, and two times for all other executive officers, (ii)
the pro rata share of the Executive's incentive bonus for the year in which the
termination occurs, and (iii) the amount he would have received as a matching
contribution under the Company's 401(k) Plan if he had received the amounts set
forth in (i) and (ii) over the respective years and had made contributions to
the Company's 401(k) Plan based on those amounts at the contribution rate in
effect at the time of the Change in Control.
In addition, NECB will transfer clear title to the automobile it is
providing to the Executive; all stock options and restricted stock of the
Executive will immediately vest; the Company will pay the Executive any
difference between federal and Connecticut income and capital gains tax on any
income realized on options which are not eligible to be Incentive Stock Options;
will provide the Executive with outplacement assistance for a year, but not in
excess of 15% of his base salary; and for three years following termination,
provide the Executive with a country club membership and continue all benefits
and service credit for benefits for any plans maintained by the Company prior to
the Change in Control that are "welfare plans" or "pension plans" as defined in
ERISA.
Further, the Company will pay an amount equal to any tax the Executive
is subject to by reason of such payments under Section 4999 of the Internal
Revenue Code, plus an amount equal to the federal and state tax which will be
imposed on the Executive as a result of the receipt of such payment.
"Change in Control" is defined in the last paragraph of "APPROVAL OF
STOCK OPTION PLAN FOR NON-OFFICER DIRECTORS"). "Cause" is defined as an
intentional act of harm against the Company. "Good Reason" is defined as a
reduction in the Executive's position, responsibilities, authority, salary,
other compensation, employee benefit plan or a change in place of employment, a
transfer of the Company's business or assets to an entity which does not assume
the agreement, or the breach of the Agreement by the Company.
- 13 -
<PAGE>
OTHER INFORMATION RELATING TO DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
------------------------------------------------------------------------
Some of the directors and executive officers of NECB and its
subsidiaries and companies or organizations with which they are associated, have
had, and may have in the future, banking transactions with the subsidiaries in
the ordinary course of their business. All such loans are currently performing
in accordance with their terms. Total loans to directors and executive officers
of NECB, and the subsidiaries and associates of such executive officers and
directors outstanding during the past three years were as follows:
December 31, Total Indebtedness Outstanding
- ----------- ------------------------------
1997........................................ $2,746,000
1996........................................ $2,596,000
1995........................................ $6,971,000
Federal banking laws and regulations limit the aggregate amount of
indebtedness which banks may extend to bank insiders. Pursuant to such laws and
regulations, the subsidiaries' may extend credit to executive officers,
directors, principal shareholders or any related interest of such persons, if
the extension of credit to such persons is in an amount that, when aggregated
with the amount of all outstanding extensions of credit to such individuals,
does not exceed the Subsidiaries' unimpaired capital and unimpaired surplus. As
of December 31, 1997, 1996 and 1995 the aggregate amounts of extensions of
credit to insiders were well below this limit.
All such banking transactions are on the same terms, including interest
rates and collateral on loans, as those prevailing at the same time for
comparable transactions with others and, on terms that do not involve more than
the normal risk of collectibility or present other unfavorable features.
During 1997, the Company retained Dominic J. Ferraina, Director of NECB
and Chairman of New England Band and Trust Company, to perform certain legal
services.
COMPLIANCE WITH 16(A) FILINGS
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires NECB's directors, executive officers, and persons who own more than 10%
of NECB's Common Stock, to file with the Securities and Exchange Commission (the
"SEC") reports of beneficial ownership and changes in beneficial ownership of
NECB Common Stock. Executive officers, directors and greater than 10%
shareholders are required by regulations of the SEC to furnish NECB with copies
of all Section 16(a) forms they file. In 1997, all required reports of
beneficial ownership were timely filed, based upon a review of the copies of
such reports furnished to NECB and representations that no other reports were
required to be filed.
APPOINTMENT OF INDEPENDENT AUDITORS
Shatswell, MacLeod & Company, P.C. ("Shatswell, MacLeod & Company")
independent accountants, has been selected by the NECB Board to serve as
independent accountants for NECB for the fiscal year ending December 31, 1998.
Although shareholders will vote upon the ratification of the selection of
Shatswell, MacLeod & Company, and the Audit Committee will review the selection
if it
- 14 -
<PAGE>
is not ratified, the NECB Board will have the right to continue to retain
Shatswell, MacLeod & Company as independent accountants in any event if it
desires to do so.
A representative of Shatswell, MacLeod & Company will be present at the
Annual Meeting to respond to appropriate questions and may make a statement if
he or she desires to do so.
OTHER MATTERS
The NECB Board does not know of any other matters which might come
before the Annual Meeting of Shareholders; however, if any other matters should
properly come before the meeting or any adjournment(s) thereof, it is the
intention of the persons named in the accompanying form of proxy to vote thereon
in accordance with their judgment.
SHAREHOLDER PROPOSALS FOR THE 1999 MEETING
------------------------------------------
Under NECB'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 (by Certified Mail--Return Receipt Requested) that the proposal be
included in the Company's proxy statement for the meeting, and such request must
satisfy all of the provisions of Rule 14a-8 under the Securities Exchange Act of
1934, as amended. NECB received no such request from any shareholder with
respect to the 1998 Annual Meeting.
In order to be included in NECB's proxy statement and form of proxy for
the 1999 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 NECB's principal executive offices by November
20, 1998. Shareholder proposals should be mailed to the NECB Corporate
Secretary, P.O. Box 130, Windsor, Connecticut 06095.
GENERAL
-------
The cost of solicitation of proxies, including the cost of reimbursing
brokerage houses and other custodians, nominees or fiduciaries for forwarding
proxies and proxy statements to their principals, will be borne by NECB. NECB
files with the Securities and Exchange Commission Annual Reports on Form 10-K. A
copy of the report for 1997 will be furnished, without exhibits and without
charge, to any shareholder sending a written request to Anson C. Hall, Vice
President, Chief Financial Officer and Treasurer, New England Community Bancorp,
Inc., P.O. Box 130, Windsor, CT, 06095.
Submitted by order of the Board of Directors,
Angelina J. McGillivray
Secretary
- 15 -
<PAGE>
EXHIBIT A
PROPOSED
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NEW ENGLAND COMMUNITY BANCORP, INC.
ARTICLE I
The name of the corporation is New England Community Bancorp, Inc. (the
"Corporation").
ARTICLE II
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at the address is The Corporation Trust
Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
ARTICLE IV
A. Authorized Capital Stock. The total number of shares of Capital
Stock the Corporation has authority to issue is 20,200,000 shares, consisting
of:
1. 200,000 shares of Serial Preferred Stock; and
2. 20,000,000 shares of Common Stock, par value $.10 per share.
B. Serial Preferred Stock. The Board of Directors is authorized at any
time, and from time to time, to provide for the issuance of shares of Serial
Preferred Stock in one or more series, and to determine the designations,
preferences, limitations and relative or other rights of the Serial Preferred
Stock or any series thereof. For each series, the Board of Directors shall
determine, by resolution or resolutions adopted prior to the issuance of any
shares thereof, the designations, preferences, limitations and relative or other
rights thereof, including but not
Page - 1-
<PAGE>
limited to the following relative rights and preferences, as to which there may
be variations among different series:
1. The rate and manner of payment of dividends, if any;
2. The par value thereof, if any;
3. Whether shares may be redeemed and, if so, the redemption price and
the terms and conditions of redemption;
4. The amount payable for shares in the event of liquidation,
dissolution or other winding up of the Corporation;
5. Sinking fund provisions, if any, for the redemption or purchase of
shares;
6. The terms and conditions, if any, on which shares may be converted
or exchanged;
7. Voting rights, if any; and
8. Any other rights and preferences of such shares, to the full extent
now or hereafter permitted by the laws of the State of Delaware.
The Board of Directors shall have the authority to determine the number
of shares that will comprise each series.
Prior to the issuance of any shares of a series, but after adoption by
the Board of Directors of the resolution establishing such series, the
appropriate officers of the Corporation shall file such documents with the State
of Delaware as may be required by law.
C. Common Stock. The shares of Common Stock may be issued by the
Corporation from time to time by a resolution approved by its Board of Directors
without requiring the approval of its shareholders. The consideration for the
issuance of the shares shall be paid in full before their issuance and shall not
be less than the par value per share. Neither promissory notes nor future
services shall constitute payment or part payment for the issuance of the shares
of the Corporation. The consideration for the shares shall be cash, services
actually performed for the Corporation, personal property, real property, leases
of real property or any combination of the foregoing. In the absence of actual
fraud in the transaction, the value of such property, labor or services, as
determined by the Board of Directors of the Corporation, shall be conclusive.
Upon payment of such consideration such shares shall be deemed to be fully paid
and nonassessable.
Each holder of shares of Common Stock shall be entitled to one vote for
each share held by such holder, including the election of directors. There shall
be no cumulative voting rights in the election of directors.
Page - 2 -
<PAGE>
Dividends may be paid on the Common Stock out of any assets legally
available for the payment of dividends; but only when and as declared by the
Board of Directors.
In the event of any liquidation, dissolution or winding up of the
Corporation the holders of the Common Stock shall be entitled, after payment or
provision for payment of all debts and liabilities of the Corporation, to
receive the remaining assets of the Corporation available for distribution, in
cash or in kind.
Each share of Common Stock shall have the same relative rights as and
be identical in all respects with all the other shares of common stock.
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
The Board of Directors of the Corporation is expressly authorized to
make, alter, amend or repeal the Bylaws of the Corporation.
ARTICLE VII
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise to the full extent permitted or allowed by
Section 1435 of the General Corporation Law of Delaware, as it may be amended.
Notwithstanding any other provision of this Article VII, to the full
extent permitted by law, no director of the Corporation shall have any personal
liability to the Corporation or its shareholders for monetary damages for breach
of his fiduciary duty as a director, provided that this provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its shareholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under section 174 of the General Corporation Law
of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.
Page - 3 -
<PAGE>
ARTICLE VIII
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
To authorize and cause to be executed mortgages, security
agreements and other liens upon the real and personal property of the
Corporation.
To set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper purpose
and to abolish any such reserve in the manner in which it was created.
By a majority of the whole Board, to designate one or more
directors as alternate members of any committee and may replace any
absent or disqualified member at any meeting of the committee. Any such
committee, to the extent provided in the resolutions or in the Bylaws
of the Corporation, shall have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; provided, however, the
Bylaws may provide that in the absence or disqualification of any
member of a committee or committees, the member or members thereof
present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of any
such absent or disqualified member.
When and as authorized by the affirmative vote of the holders
of a majority of the stock issued and outstanding having voting power
given at a shareholders' meeting duly called upon such notice as is
required by statute, or when authorized by the written consent of the
holders of a majority of the voting stock issued and outstanding, to
sell, lease or exchange all or substantially all of the property and
assets of the Corporation, including its good will and its corporate
franchises upon such terms and conditions and for such consideration,
which may consist in whole or in part of money or property including
shares of stock, in and/or other securities of, any other corporation
or corporations, as its Board of Directors shall deem expedient and for
the best interests of the Corporation.
ARTICLE IX
Meetings of shareholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provisions contained in the statutes) outside of the State of
Delaware at such place or places as may be
Page - 4 -
<PAGE>
designated from time to time by the Board of Directors or in the Bylaws of the
Corporation. Elections of Directors need not be by written ballot unless the
Bylaws of the Corporation shall so provide.
ARTICLE X
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation in the manner now
or hereafter prescribed by law, and all rights and powers conferred herein on
shareholders and directors are subject to this reserved power.
Page - 5 -
<PAGE>
REVOCABLE PROXY
NEW ENGLAND COMMUNITY BANCORP, INC.
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF NEW ENGLAND COMMUNITY BANCORP, INC.
The undersigned hereby appoints Dominic J. Ferraina and Gary J. DeNino,
or either of them, proxies with full power of substitution to each, to represent
and vote all stock that the undersigned is entitled to vote at the Annual
Meeting of Stockholders of New England Community Bancorp, Inc., to be held on
April 21, 1998 at 10:00 a.m. at Hartford Golf Club, 134 Norwood Drive, West
Hartford, Connecticut or at any adjournments thereof, for the purposes set forth
below:
PROPOSITION 1 - ELECTION OF DIRECTORS
To serve until the 1998 Meeting:
For For All
Except
/ / / /
John C. Carmon, Gary J. DeNino, Frank A. Falvo, Dominic J. Ferraina, John R.
Harvey, David A. Lentini, Angelina J. McGillivray and Michael P. Solimene
INSTRUCTIONS: To withhold your vote for any nominee(s), mark "For All Except"
and write that nominee's name on the line below
- --------------------------------------------------------------------------------
Please be sure to sign and date this Proxy in the box below.
=============
Date
=============
================================================================================
Stockholder sign above Co-holder (if any) sign above
================================================================================
PROPOSITION 2 - To approve a stock option plan of the Company for non-officer
directors.
For Against Abstain
/ / / / / /
PROPOSITION 3 - To approve the Amended and Restated Certificate of Incorporation
of NECB.
For Against Abstain
/ / / / / /
PROPOSITION 4 - To approve the appointment of Shatswell, MacLeod & Company, P.C.
as independent auditors for 1998.
For Against Abstain
/ / / / / /
PROPOSITION 5 - Conduct other business properly brought before the meeting.
For Against Abstain
/ / / / / /
Please sign your name exactly as it appears on this Proxy. All joint owners
should sign. Persons signing as executors, administrators, trustees, etc. should
so indicate.
IF NO BOX IS MARKED, THIS PROXY WILL BE VOTED
"FOR" EACH OF THE PROPOSITIONS
