NEWMIL BANCORP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of NewMil Bancorp, Inc.:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Shareholders of
NEWMIL BANCORP, INC. will be held at the Candlewood Valley Country Club,
New Milford, Connecticut on Friday, October 24, 1997 at 9:30 a.m., for the
purpose of considering and voting on the following matters:
1. To elect three Directors to serve until the Annual Meeting of
Shareholders in 2000 and one Director to serve until the Annual Meeting
of Shareholders in 1999 who with the five Directors whose terms
of office do not expire at this meeting, will constitute the full Board.
2. To approve an Amendment to the Corporation's 1986 Stock Option Incentive
Plan for Key Officers and Employees.
3. To ratify the appointment of Coopers & Lybrand as independent auditors
for the fiscal year ending June 30, 1998.
4. To transact such other business as may properly be brought before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on September 4,
1997, are entitled to notice of and to vote at this meeting or any
adjournment thereof.
By order of the Board of Directors,
Betty F. Pacocha
Secretary
New Milford, Connecticut
September 22, 1997
YOUR VOTE IS IMPORTANT. WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY
IN THE ENCLOSED POSTAGE PREPAID ENVELOPE AS PROMPTLY AS POSSIBLE WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING IN PERSON. IF YOU DO ATTEND THE MEETING, YOU MAY
THEN REVOKE YOUR PROXY AND VOTE IN PERSON.
NEWMIL BANCORP, INC.
19 Main Street
New Milford, Connecticut 06776
ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 24, 1997
PROXY STATEMENT
INFORMATION CONCERNING THE SOLICITATION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of NewMil Bancorp, Inc. (the
"Corporation"), a Delaware corporation, for the Annual Meeting of
Shareholders of the Corporation to be held at the Candlewood Valley Country
Club, New Milford, Connecticut on Friday, October 24, 1997 at 9:30 a.m.
(the "Meeting"), and any adjournments thereof. This Proxy Statement and
the enclosed proxy card are first being given or sent to shareholders on or
about September 22, 1997.
The Corporation will bear the costs of soliciting proxies from its
shareholders. In addition to this solicitation by mail, proxies may be
solicited by Directors, officers and employees of the Corporation and the
Bank by personal interview, telephone or telegram. Arrangements will also be
made with brokerage houses and other custodians, nominees and fiduciaries
for the forwarding of solicitation material to the beneficial owners of the
Corporation's Common Stock (as hereinafter defined) held of record by such
persons, and the Corporation may reimburse such custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses incurred in connection
therewith.
Only holders of Common Stock of record at the close of business on
September 4, 1997 (the "Record Date") are entitled to vote at the Meeting.
On that date, there were 3,835,090 shares of the Corporation's $.50 par value
common stock outstanding (the "Common Stock"). All shares of Common Stock
outstanding carry voting rights and all shareholders are entitled to one
vote per share of Common Stock held by such shareholder on each matter
submitted to vote. Pursuant to the Corporation's Bylaws, a majority of the
outstanding shares entitled to vote, present either in person or by proxy,
will constitute a quorum for transacting business at the Meeting.
Shares represented by properly executed proxies in the enclosed form will
be voted in accordance with any specifications made therein. Proxies that
contain no directions to the contrary will be voted FOR the election of all
nominees for Director, FOR the Amendment to the Corporation's 1986 Stock
Option and Incentive Plan for key officers and employees and FOR the
ratification of the appointment of Coopers & Lybrand as the Corporation's
independent auditors for the fiscal year ending June 30, 1998. If any other
business is properly presented at this Meeting, the Proxy shall be voted in
accordance with the recommendations of management.
A shareholder who executes and returns a proxy on the enclosed form has
the power to revoke it at any time before it is voted at the Meeting by
filing with the Secretary of the Corporation an instrument revoking it, or
a duly executed proxy bearing a later date, or by attending the Meeting and
voting in person. Attendance at the Meeting will not in and of itself
constitute the revocation of a proxy. Voting by those present during the
conduct of the Meeting will be by ballot.
PRINCIPAL SHAREHOLDERS
The following table shows those persons known to the Corporation
(including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934) to be the beneficial owners of more than
five percent of the Common Stock as of the Record Date. In preparing the
following table, the Corporation has relied on information supplied in
public filings filed by such persons with the Securities and Exchange
Commission and other information available to it. According to this
information, each person listed below is believed to have sole voting and
investment powers with respect to shares beneficially owned except as noted.
<TABLE>
<CAPTION>
Shares
Name and Address Beneficially Percent
of Beneficial Owner Owned of Class
<S> <C> <C>
Dimensional Fund Advisor Inc. 297,000(1) 7.74%
1299 Ocean Avenue, 11th Floor,
Santa Monica, CA 90401
First Manhattan Company 265,600(2) 6.93%
437 Madison Ave
New York, NY 10022
James R. Williams 245,978(3) 6.41%
RFD #2, Box 281
Millerton, NY 12522
</TABLE>
(1) Dimensional Fund Advisors, Inc.'s beneficially owned shares are based on a
Securities and Exchange Commission 13F filing for the quarter ended
June 30, 1997. Dimensional Fund Advisors, Inc. ("Dimensional"), a
registered investment advisor, is deemed to have beneficial ownership
of 297,000 shares of NewMil Bancorp, Inc. common stock as of June 30,
1997, all of which shares are held in portfolios of DFA Investment
Dimensions Group, Inc., a registered open-end investment company, or in
series of the DFA Investment Trust Company, a Delaware business trust,
or the DFA Group Trust and DFA Participation Group Trust, investment
vehicles for qualified employee benefit plans, for each of which
Dimensional serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares.
(2) First Manhattan Company's beneficially owned shares are based on a
Securities and Exchange Commission 13F filing for the quarter ended
June 30, 1997. First Manhattan Company ("First Manhattan"), a registered
investment advisor, is deemed to have beneficial ownership of 265,600
shares of NewMil Bancorp, Inc. common stock as of June 30, 1997, all of
which shares are held in investment portfolios of First Manhattan clients.
(3) Mr. Williams' beneficially owned shares are based on information
available to the Bank.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
In accordance with the Corporation's Bylaws and the applicable laws of
Delaware, responsibility for the management of the Corporation is vested in
the Board of Directors. During the year ended June 30, 1997, the Board
of Directors of the Corporation held thirteen (13) regular and special
meetings. The Board of Directors of the Corporation is comprised of the
same individuals who serve on the Board of Directors of the Corporation's
wholly-owned subsidiary, New Milford Savings Bank (the "Bank"). Each
Director attended at least 75 percent of the meetings of the Board of
Directors of the Corporation and any committee(s) of which he or she was a
member.
During fiscal 1997 many matters ordinarily dealt with by subcommittees of
each Board of Directors were dealt with by the appropriate Board of Directors
as a committee of the whole. The committees of the Corporation's Board of
Directors are the Audit Committee, the Investment Committee, the Nominating
Committee, and the Salary and Benefits Committee. The committees of the
Bank's Board of Directors are the Audit Committee, the Community Reinvestment
Act Committee, the Investment Committee, the Loan Committee, the Nominating
Committee, the Salary and Benefits Committee, and the Trust Committee.
The Corporation's Audit Committee met two (2) times during fiscal 1997.
The Corporation's Audit Committee is responsible, amongst other things, for
oversight of: internal accounting controls; the internal audit function; the
selection of independent accountants; the results of the annual audit
examination; and, relationships with state and federal regulatory agencies.
The members of the Corporation's Audit Committee are Willis H. Barton, Jr.,
Herbert E. Bullock, Laurie G. Gonthier and Mary C. Williams.
The Corporation's Nominating Committee met two (2) times during fiscal
1997. The Corporation's Nominating Committee recommends to the Corporation's
Board of Directors candidates for director either to be elected at annual
meetings of shareholders or to be appointed by the Board of Directors from
time to time for the purpose of filling any vacancy on the Board of
Directors. Vacancies in directorships may be filled, until the expiration
of the term of the vacated directorship, by a vote of a majority of the
directors then in office. The members of the Corporation's Nominating
Committee are Herbert E. Bullock, John V. Haxo, Suzanne L. Powers and Mary C.
Williams.
The Corporation's Salary and Benefits Committee met one (1) time during
fiscal 1997. The Corporation's and the Bank's Salary and Benefits Committees
make recommendations to their respective Boards of Directors on compensation
for officers and employees, and on benefit plans for employees of the
Corporation and the Bank. The Bank's Salary and Benefits Committee
administers the 1986 Stock Option Plan for officers and key employees of the
Bank, which includes recommendations for the granting of stock options. The
members of the Salary and Benefits Committee are Willis H. Barton, Jr.,
John V. Haxo, Suzanne L. Powers and Mary C. Williams.
The Corporation's Investment Committee met ten (10) times during fiscal
year 1997. The Corporation's and the Bank's Investment Committees approve
investment policies and monitor the performance of the Corporation's and
the Bank's investment portfolios. The members of the Corporation's and the
Bank's Investment Committees are Herbert E. Bullock, Laurie G. Gonthier,
John V. Haxo and Francis J. Wiatr.
Matters ordinarily dealt with by the Bank's Loan Committee were dealt
with during fiscal year 1997 by the Bank's Board of Directors as a committee
of the whole. The Bank's Loan Committee approves the loan policies of
the Bank, approves certain loans and reviews all reports on the loan
portfolio.
Matters ordinarily dealt with by the Bank's Trust Committee were dealt
with during fiscal year 1997 by the Bank's Board of Directors as a committee
of the whole. The Trust Committee approves the trust policies of the Bank
and reviews all trust accounts. The Bank's Trust Committee no longer
administers trust accounts for unrelated third parties. The Bank remains as
Trustee for only one account, New Milford Savings Bank Pension Plan, and
serves as custodian for the New Milford Savings Bank Foundation. The Bank's
Trust Committee, therefore, continues to administer these accounts. The
members of the Bank's Trust Committee are Herbert E. Bullock, John V. Haxo,
and Suzanne L. Powers.
The Bank's Community Reinvestment Act Committee ("CRA") met two (2) times
during fiscal year 1997. The committee was formed as a means of assuring
compliance with the requirements of the Community Reinvestment Act. The
members of the Bank's CRA Committee are Herbert E. Bullock, Willis H. Barton,
Jr., and Francis J. Wiatr.
Directors Compensation
Officers of the Corporation who are also directors receive no compensation
as directors. Each non-employee director received an annual stipend of
$7,500 for the fiscal year ended June 30, 1997. Directors also receive $250
for each Board meeting attended and $150 for each additional committee
meeting attended.
On October 23, 1992, at the 1992 Annual Meeting, the Shareholders approved
the 1992 Stock Option Plan for Outside Directors (the "1992 Plan"). Each
non-employee director was granted options to purchase 10,000 shares of Common
Stock of the Corporation pursuant to such 1992 Plan, at an exercise price of
$3.00, the fair market value of the Corporation's Common Stock on the date
of grant. On October 20, 1995, at the 1995 Annual Meeting, the Shareholders
approved certain amendments to the 1992 Plan. The 1992 Plan, as amended,
provides that on June 30 of each year each non-employee director shall
receive a grant of additional options of 2,000 shares. In addition, any
newly elected non-employee directors shall receive an initial option grant of
3,000 shares. Directors who are also employees of the Corporation or the
Bank are not eligible to participate in this 1992 Plan.
PROPOSAL 1
ELECTION OF DIRECTORS
The Certificate of Incorporation and the Bylaws of the Corporation provide
for the election of directors by the shareholders. For this purpose, the
Board of Directors is divided into three classes, as nearly equal in size as
possible, with one class elected each year for a three-year term, to hold
office until the end of such term and until successors have been elected and
qualified. The terms of office of the members of one class expire and a
successor class is elected at each annual meeting of the shareholders. The
Corporation's Bylaws contain a special provision applicable only to
a director who is also an officer of the Corporation; in such case, the
officer/director shall be deemed to have resigned as a director should he or
she, for any reason, no longer be an officer of the Corporation.
At the Meeting, the terms of three directors, Willis H. Barton, Jr.,
Herbert E. Bullock and Francis J. Wiatr expire. They have been nominated to
be elected each for a three-year term, expiring at the annual meeting in 2000.
In addition, Betty F. Pacocha has been nominated to be elected to a two-year
term, expiring at the annual meeting in 1999. In the event that any nominee
for director is unable or declines to serve, which the Board of Directors has no
reason to expect, the attorneys named in the proxy will vote for a substitute
designated by the present Board of Directors.
Nominations of persons for election to the Board of Directors may be made
at a meeting of shareholders by or at the direction of the Board of Directors
or by any shareholder of the Corporation entitled to vote for the election
of directors at the meeting who complies with certain notice procedures set
forth in the Bylaws. Such nominations, other than those made by or at the
direction of the Board of Directors, must be made pursuant to timely notice
in writing to the Secretary of the Corporation. To be timely, a
shareholder's notice must be delivered to or mailed and received at the
Corporation's principal executive offices not fewer than 60 days nor more than
90 days prior to the annual meeting; provided, however, that if fewer than
50 days' notice or prior public disclosure of the date of the annual
meeting is given or made to shareholders, notice by the shareholder to be
timely must be received not later than the close of business on the 10th day
following the day on which such notice of the date of the Meeting was mailed
or such public disclosure was made. A shareholder's notice must set forth
(a) as to each person whom the shareholder proposes to nominate for election
or re-election as a Director, (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of capital stock of the
Corporation which are beneficially owned by such person, (iv) the total number
of shares of capital stock of the Corporation that will be voted for each
proposed nominee; and (v) any other information relating to such person that
is required to be disclosed in solicitation of proxies for election of
Directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (including without
limitation such person's written consent to being named in the proxy
statement as a nominee and to serving as a Director if elected) and (b) as
to the shareholder giving the notice (i) the name and address of such
shareholder, as they appear on the Corporation's books, and (ii) the class
and number of shares of capital stock of the Corporation which are
beneficially owned by such shareholder.
On August 21, 1997, the Board of Directors elected Joseph Carlson II to
fill the remaining term of Anthony J. Nania, who retired from the
Corporation. Mr. Carlson has over thirty years of banking experience and a
strong financial background, which will complement the Board. In addition,
Mr. Carlson sits on the boards of several local community organizations.
On August 21, 1997, the Board of Directors elected Betty F. Pacocha to be
nominated to a two-year term expiring in 1999. Ms. Pacocha has been an
employee of the Bank since 1961 where she has served in a number of
management positions. Ms. Pacocha is currently the Executive Vice President
and Secretary of the Bank and Secretary of the Corporation.
The following tables set forth information as of the Record Date based
upon the Corporation's and the Bank's books and records and upon
Questionnaires executed by the Corporation's and the Bank's directors and
executive officers, regarding the nominees for election as directors at the
Meeting and each director continuing in office. The tables include the
total number and percentage of shares of Common Stock beneficially owned by
each nominee and by all directors and executive officers as a group. Each
person has sole voting and investment powers with respect to shares listed
as being beneficially owned by them, except as indicated in the notes
following the tables.
<TABLE>
<CAPTION>
NOMINEES FOR ELECTION FOR A THREE YEAR TERM
Positions Held Common
With the Term Stock Percent
Corporation and Will Bene- of
the Bank; Prin- Has Expire ficially Common
cipal Occupation Served at the Owned Stock
During the Past as a Annual as of Bene-
Five Years and Director Meeting September 4, ficially
Name Directorships Age Since in 1997 Owned
<S> <C> <C> <C> <C> <C> <C>
Willis H.
Barton, Jr. Director;
Retired Partner 75 1987(1) 2000 24,250(2) 0.63%
in W.G. Barton
& Son;
Director of
New Milford
Center Cemetery
Association
and New Milford
Hospital,
New Milford, CT
Herbert E.
Bullock Director;
Employee, Echo 62 1987(3) 2000 16,400(4) 0.43%
Bay Marina,
New Milford, CT
Betty F.
Pacocha Director;
Secretary of 63 1997(5) 1999 31,126(6) 0.81%
the Corporation
and Executive
Vice President
and Secretary of
the Bank
Francis J.
Wiatr Director;
Chairman,
President, 47 1994(7) 2000 130,581(8) 3.30%
and CEO of
the Corporation
and Bank;
Former President
and CEO, Bank of
Waterbury,
Waterbury, CT;
Former Senior
Executive Vice
President,
Citytrust,
Bridgeport, CT
</TABLE>
(1) Mr. Barton has been a director of the Corporation since its formation
in 1987. Mr. Barton has been a director of the Bank since 1970.
(2) Includes 5,000 shares held jointly with spouse, 1,250 shares held by
spouse and daughter, 2,000 shares held directly and options to purchase
16,000 shares of Common Stock exercisable within 60 days of the Record
Date.
(3) Mr. Bullock has been a director of the Corporation since its formation
in 1987. Mr. Bullock has been a director of the Bank since 1972.
(4) Includes 400 shares held jointly with spouse and options to purchase
16,000 shares of Common Stock exercisable within 60 days of the Record
Date.
(5) Ms. Pacocha was elected a Director of the Corporation and the Bank by
the Board of Directors on August 21, 1997. Ms. Pacocha has been an
employee of the Bank since 1961 and she has served as Secretary of the
Corporation since 1992.
(6) Includes 3,626 shares held directly by Ms. Pacocha and options to
purchase 27,500 shares of Common Stock exercisable within 60 days of
the Record Date.
(7) Mr. Wiatr was appointed President of the Corporation and President and
Chief Executive Officer ("CEO") of the Bank on March 21, 1994. He was
appointed Chairman and CEO of the Corporation and Chairman of the
Bank on August 5, 1997, to replace the retiring Anthony J. Nania as
Chairman and CEO of the Corporation and Chairman of the Bank.
(8) Includes 5,581 shares held directly by Mr. Wiatr and options to
purchase 125,000 shares of common stock exercisable within 60 days of
the Record Date.
<TABLE>
<CAPTION>
DIRECTORS CONTINUING IN OFFICE
Positions
Held With the Shares
Corporation Term of
and the Bank; Will Common Percent
Principal Expire Stock of
Occupation Has At Bene- Common
During the Served the ficially Stock
Past Five as a Annual Owned as of Bene-
Years and Director Meeting September 4, ficially
Directorships Age Since in 1997 Owned
<S> <C> <C> <C> <C> <C>
Joseph
Carlson II Director;
Former Vice
Chairman 58 1997(1) 1999 13,000(2) 0.34%
and CFO of
Centerbank
and Center
Financial
Laurie G.
Gonthier Director;
Vice President- 47 1990 1998 21,000(3) 0.55%
Investments
for Paine
Webber,
Middlebury, CT
Dr. John V.
Haxo Director;
Retired Surgeon 73 1987(4) 1998 17,000(5) 0.44%
Suzanne L.
Powers Director;
Attorney; 59 1988 1998 26,000(6) 0.68%
Judge of
Probate
Mary C.
Williams Director;
Former Vice 58 1990 1999 76,000(7) 1.97%
President of
J & J Log and
Lumber Corp.
All Directors and 417,299(8) 10.04%(9)
Executive Officers as
a Group (16 Persons)
(1) Mr. Carlson was elected a Director of the Corporation and the Bank by
the Board of Directors on August 21, 1997 to fill the vacancy created
by Mr. Nania upon his retirement from the Corporation and the Bank.
(2) Includes 10,000 shares held directly by Mr. Carlson and options to
purchase 3,000 shares of Common Stock exercisable within 60 days of the
Record Date.
(3) Includes 2,500 shares held jointly by Mr. Gonthier with his spouse,
2,500 shares in Mr. Gonthier's Individual Retirement Account and
options to purchase 16,000 shares of Common Stock exercisable within
60 days of the Record Date.
(4) Dr. Haxo has been a director of the Corporation since its formation in
1987. Dr. Haxo has been a director of the Bank since 1973.
(5) Includes 1,000 shares held directly by Dr. Haxo and options to purchase
16,000 shares of Common Stock exercisable within 60 days of the Record
Date.
(6) Includes 1,000 shares held directly by Ms. Powers, 4,000 shares held
jointly by Ms. Powers with her spouse, 5,000 shares held by Ms. Powers'
spouse and options to purchase 16,000 shares of Common Stock exercisable
within 60 days of the Record Date.
(7) Includes 60,000 shares held directly by Ms. Williams and options to
purchase 16,000 shares of Common Stock exercisable within 60 days of
the Record Date.
(8) Includes 320,500 shares issuable upon the exercise of options
exercisable by such persons within 60 days of the Record Date.
(9) For the purpose of calculating the percentage of Common Stock
beneficially owned by the persons listed in the table, including the
directors and executive officers as a group, the total number of
shares outstanding includes the 320,500 shares issuable upon the
exercise of options which may be exercised by such persons within
60 days of the Record Date (the "Option Shares").
THE NOMINEES FOR DIRECTOR MUST BE ELECTED BY A MAJORITY OF THE SHARES
PRESENT IN PERSON OR BY PROXY AT THE ANNUAL MEETING.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
PROPOSED NOMINEES.
Section 16 Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Corporation's directors and executive officers,
and persons who own more than ten percent of a registered class of the
Corporation's equity securities (collectively referred to as the "Insiders"),
to file with the Securities and Exchange Commission and NASD initial reports
of ownership and reports of changes in ownership of any securities of the
Corporation. Insiders are required by the Exchange Act to furnish the
Corporation with copies of all Section 16(a) reports they file. Based
solely on a review of the copies of such reports furnished to the Corporation
and written representations that no other reports were required, the
Corporation believes that during the fiscal year ended June 30, 1997, all
Section 16(a) required filings applicable to the Corporation's Insiders were
made.
EXECUTIVE COMPENSATION
The following Cash Compensation Table sets forth cash compensation and
certain other compensation paid or accrued by the Corporation or the Bank
for services in all capacities rendered during fiscal years ended June 30,
1997, 1996 and 1995 to the Corporation's CEO and the three most highly
compensated executive officers of the Corporation and the Bank, other than
the CEO, whose cash compensation for the fiscal year ended June 30, 1997
exceeded $100,000 (together, the "Named Executives").
</TABLE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Compensation
Annual Compensation Awards
(a) (b) (c) (d) (e) (g) (i)
All
Other
Name and Other Annual Compen-
Principal Compensation Options/ sation
Position Year Salary($) Bonus($) ($) SARs(#) ($)(12)
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Nania(1) 1997 $ 69,538 $ - $ - - $4,261
Past Chairman/ 1996 150,000 20,000(2) - 60,000 4,573
CEO of the 1995 150,000 37,570(3) - 20,000 6,300
Corporation and
Past Chairman
of the Bank
Francis J. Wiatr(1) 1997 $170,000 $75,000(4) $ - - $6,103
Chairman, President 1996 168,462 65,000(5) - 50,000 4,676
and CEO of the 1995 160,000 57,570(6) - - 959
CEO of the
Corporation
and the Bank
Thomas W. Grant 1997 $95,000 $25,000(7) $ - - $3,622
Senior Vice 1996 93,847 7,500(8) - 15,000 2,942
President of the 1995 80,000 42,759(9) - - 518
Bank
B. Ian McMahon 1997 $94,423 $ 7,500(10) $ - - $3,693
Senior Vice 1996 89,419 15,000(11) - 8,000 2,882
President & CFO 1995 81,681 - - - 2,857
of the Bank
</TABLE>
(1) On August 5, 1997, Mr. Wiatr was appointed Chairman and CEO of the
Corporation and Chairman of the Bank to replace Mr. Nania who retired
as Chairman and CEO of the Corporation and Chairman of the Bank.
(2) Mr. Nania received a performance bonus of $20,000 for the 1996 fiscal
year.
(3) Mr. Nania received a performance bonus valued at $37,570. The amount
shown reflects the total amount of cash bonus and the dollar value of
stock option bonus (measured as the market value of the underlying stock
on the date of grant minus the exercise price) paid or earned during
the 1995 fiscal year.
(4) Mr. Wiatr will receive a performance bonus of $75,000 for the 1997
fiscal year, the payment of which is deferred until October 31, 2001
and which is conditioned upon the stock performance of the Corporation.
(5) Mr. Wiatr will receive a performance bonus of $65,000 for the 1996
fiscal year, the payment of which is deferred until October 31, 2000
and which is conditioned upon the stock performance of the Corporation.
(6) Mr. Wiatr received a performance bonus totaling $57,570 for the 1995
fiscal year.
(7) Mr. Grant received a performance bonus totaling $25,000 for the 1997
fiscal year.
(8) Mr. Grant received a performance bonus totaling $7,500 for the 1996
fiscal year.
(9) Mr. Grant received bonuses totaling $42,759 for the 1995 fiscal year.
Mr. Grant received $15,000 as a stipulation to his being hired by the
Bank on June 20, 1994 and an additional performance bonus of $27,759
for the 1995 fiscal year.
(10) Mr. McMahon received a performance bonus totaling $7,500 for the 1997
fiscal year.
(11) Mr. McMahon received a performance bonus totaling $15,000 for the 1996
fiscal year.
(12) The amounts reported for All Other Compensation include the following:
(i) Term life insurance premiums paid by the Corporation or the Bank in
fiscal year 1997, 1996 and 1995 on behalf of each of the named
executives: Mr. Nania, $2,098, $1,573 and $1,573, respectively; Mr.
Wiatr, $1,475, $1,100 and $959, respectively; Mr. Grant, $547, $547
and $518, respectively; and Mr. McMahon, $410, $407 and $407,
respectively; and (ii) Contribution match paid by the Bank under the
Bank's 401K Plan in fiscal year 1997, 1996 and 1995 on behalf
of Mr. Nania of $2,163, $3,000 and $4,727 respectively; Mr. Wiatr,
$4,628 and $3,576 for 1997 and 1996 respectively; Mr. Grant $3,075 and
$2,395 for 1997 and 1996 respectively and Mr. McMahon, $3,283, $2,475
and $2,450 for 1997, 1996 and 1995, respectively.
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Fiscal Year Ended June 30, 1997
and June 30, 1997 Option/SAR Value Table
(a) (b) (c) (d) (e)
Number of Value of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
Shares Acquired Value(a) at June 30, 1997 at June 30, 1997
Name on Exercise(#) Realized($) Exercisable/
Exercisable/ Unexercisable
Unexercisable(1)
<S> <C> <C> <C> <C>
Anthony J. Nania - $ - 115,000 / 0 $697,995 /$ -
Francis J. Wiatr - - 125,000 / 0 $770,313 /$ -
Thomas W. Grant - - 15,000 / 0 $ 77,813 /$ -
B. Ian McMahon - - 20,000 / 0 $124,500 /$ -
</TABLE>
(1) Based on the average of the bid and asked price of the Corporation's
common stock as reported on The Nasdaq Stock Market on June 30, 1997.
Employment Agreements
The Bank currently has an Employment Agreement with Mr. Wiatr. Mr.
Wiatr's agreement provides for an annual base compensation of $170,000. Mr.
Wiatr also agrees to serve as director of the Corporation and the Bank
(for so long as he continues as an officer of the Corporation and Bank) for
which he will receive no additional compensation. The Agreement also
provides for certain customary benefits, including an automobile allowance and
country club membership.
Mr. Wiatr's agreement provides that if the Corporation or the Bank
experiences a change in control, Mr. Wiatr will be entitled to receive a
lump sum cash payment equal to three times the greater of his compensation
for the last full fiscal year preceding the change in control or the average
of such compensation for the last three full fiscal years. In no event shall
such payments be made in an amount which would cause them to be deemed
"excess parachute payments" under Section 280G of the Internal Revenue Code
of 1986, as amended. If Mr. Wiatr is terminated before a change in control
occurs, no severance would be due other than a continuation of benefits for
three months and payment for unused vacation time.
The agreement provides that for a period of two (2) years following
Mr. Wiatr's employment with the Bank, he shall not engage in, render advice
or assistance to or be employed on a compensation basis by any person, firm
or entity which is in competition (as defined in the agreement) with the
Bank. In addition, Mr. Wiatr agrees in the agreement not to use or reveal,
at any time during or after the term of the agreement, any confidential
information that he has received during the course of his employment at the
Bank.
The Bank has entered into one-year change of control agreements with
Messrs. Grant and McMahon and two other executive officers of the Bank. The
agreements provide that, in the event of a change in control of the
Corporation or Bank, the executive will be entitled to a lump sum cash
payment equal to the greater of his or her compensation for the last full
fiscal year preceding the change in control or the average of such
compensation for the last three full fiscal years. In no event shall such
payments be made in an amount which would cause them to be deemed "excess
parachute payments" under Section 280G of the Internal Revenue Code, as
amended.
The Corporation and Bank entered into a Consulting Agreement with Mr.
Nania upon his retirement from the Corporation and Bank. In return for
consulting services and a covenant not to compete, Mr. Nania will be paid
$75,000 for each of the two years of the Consulting Agreement.
EMPLOYEE BENEFIT PLANS
Pension Plan
The Bank maintains a non-contributory defined benefit pension plan (the
"Pension Plan") that is qualified under the Internal Revenue Code and
complies with the requirements of the Employee Retirement Income Security Act of
1984 ("ERISA").
Effective September 1, 1993 the Pension Plan was curtailed and the
crediting of additional benefits to participants under the Pension Plan
discontinued. Distributions of vested benefits will be made after the
retirement of vested participants. If a participant terminates employment
before attaining the normal retirement date as set forth in the Pension
Plan, the Pension Plan's vesting provisions will govern whether such
participant is entitled to any benefits pursuant to such Pension Plan.
The Pension Plan covers full-time employees, as of September 1, 1993,
who had attained the age of 21 years and had completed at least six months
service with the Bank at September 1, 1993. The Pension Plan provides in
general for monthly payments to or on behalf of each covered employee upon such
employee's retirement at age 62 or 65, depending upon whether their
employment began before April 1, 1976, or after that date. Annual payments are
based upon the employee's basic annual compensation for the highest paid three
years of employment through September 1, 1993 and such employee's covered
months of service to a maximum of 60 percent.
The Pension Plan provides for optional early retirement benefits provided
a participant has attained age 58 and completed at least 25 years of service
with the Bank or attained the age of 62 depending on whether their employment
began before April 1, 1976 or after that date. The Pension Plan also provides
death benefits comparable to the benefits offered in the case of early
retirement. To fund the benefits provided by the Pension Plan, the Bank
makes an annual contribution, if required, for the benefit of eligible
employees computed on an actuarial basis. No contribution was required or
made during the last fiscal year. Contributions to the Pension Plan fund are
paid entirely by the Bank and expenses of administering the Pension Plan are
paid from the fund.
The Bank also maintains a supplemental pension plan to provide retirement
benefits for key employees who are not covered under the Pension Plan.
The following table illustrates annual pension benefits for retirement in
fiscal 1997 at age 65 under the most advantageous Pension Plan provisions
available for various levels of compensation and years of service. The Bank's
Pension Plan does not provide for Social Security integration.
<TABLE>
<CAPTION>
Pension Plan Table
Average Final Years of Service(b)
Earnings(a) 15 Years 20 Years 25 Years 30 Years 35 Years
<S> <C> <C> <C> <C> <C>
$ 25,000 $ 7,500 $10,000 $12,500 $15,000 $15,000
50,000 15,000 20,000 25,000 30,000 30,000
75,000 22,500 30,000 37,500 45,000 45,000
100,000 30,000 40,000 50,000 60,000 60,000
125,000 37,500 50,000 62,500 75,000 75,000
150,000 45,000 60,000 75,000 90,000 90,000
</TABLE>
(a) Average of highest three years of annual compensation.
(b) Benefits are computed based on the participant's average of highest
three years of annual compensation and the number of months of service,
up to a maximum of 60%. The Pension Plan does not provide for Social
Security integration.
As of June 30, 1997, Mr. Nania's salary for pension benefit purposes was
$146,957, he had one year of service accrued, and his estimated accrued
annual pension benefit payable upon retirement assuming full vesting (which
amount was frozen effective September 1, 1993) was $2,939. No amounts would
be payable to Messrs. Wiatr, Grant or McMahon pursuant to the Pension Plan.
Savings and Protection Plan
Effective April 1, 1994 the Bank amended its Profit-Sharing Plan to add a
401K provision. This part of the Plan allows for a defined contribution by
employees with a match by the Bank of 50% on the first 6% of an employee's
salary. If an employee elects to contribute greater than 6% of his or her
salary, the Bank's match is capped at 50% of 6% of the employee's salary.
The Bank's matching contribution for the 1997 fiscal year, covering the
period from July 1, 1996 to June 30, 1997, was $61,972. All contributions
under the 401K are vested when made, except to the extent adjustment may be
necessary to comply with applicable allocation restrictions which apply to
401K plans generally.
The Bank maintains a non-contributory profit-sharing feature to the Profit
Sharing Plan which benefits all full-time employees and follows the same
eligibility requirements contained in the Bank's Pension Plan. The amounts
contributed to the Profit-Sharing Plan are determined annually by the Board of
Directors of the Bank on a discretionary basis. No contributions were made
to the profit-sharing feature of the Profit Sharing Plan in the fiscal year
ended June 30, 1997.
The Board of Directors of the Bank reviews the structure of the Profit-
Sharing Plan annually, and makes whatever adjustments it deems appropriate.
The Bank has no long-term agreement or commitment to maintain the Profit-
Sharing Plan.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Board of Directors as a whole makes decisions on compensation for
executive officers (with Mr. Wiatr and Ms. Pacocha not participating in
decisions concerning their compensation). The Board is currently comprised of
nine members. Because the business of the Corporation currently consists of
the business of the Bank, no separate cash compensation is paid to the
executive officers of the Corporation. Except for Mr. Wiatr, who participated
in discussions concerning Ms. Pacocha's compensation, no other members of
the Board who participated in these decisions are employed by the Corporation
or the Bank, neither do any of these members have an interlocking
relationship with a compensation committee of another entity, nor do they
participate in any of the Corporation's or Bank's executive compensation plans.
In addition, the Salary and Benefits Committee, none of whose members are
employees of the Corporation or the Bank, makes recommendations to the Board
of Directors concerning the grant of stock options pursuant to the 1986 Plan
to employees, including director and non-director executive employees. Based
on these recommendations, the Board of Directors makes decisions regarding
the grant of any such options (with Mr. Wiatr and Ms. Pacocha not
participating in decisions concerning themselves). This Committee also makes
recommendations to the Board of Directors on compensation for other officers
and employees and on other benefit plans for employees of the Corporation
and the Bank.
The Board of Directors does not have formal compensation policies. The
Board does, however, consider the Corporation's and the Bank's performance,
the accomplishment of business objectives, and the individual's contribution
to earnings and shareholder value in setting senior officer compensation
levels. The Board also considers the compensation paid by peer group
institutions with the goal of being competitive in the attraction and
retention of qualified executives. The two principal components of
executive officers' compensation are salary and stock options granted under
the Corporation's 1986 Plan. The Board considers granting bonuses only when
it determines that performance is meritorious and exceptional, and only
after consideration of such factors as the Bank's performance for such year
compared to prior years, and the time and effort exerted by management.
These decisions are made on a judgmental basis, and not according to a
specific formula. The Board chose to recognize meritorious performance by
Messrs. Wiatr, Grant and McMahon in the fiscal year ended June 30, 1997 by
the payment of a cash bonus as reflected in the Summary Compensation Table.
Board of Directors of the Corporation and the Bank
Willis H. Barton, Jr. Suzanne L. Powers
Herbert E. Bullock Francis J. Wiatr (not as to himself)
Laurie G. Gonthier Mary C. Williams
John V. Haxo
Please note that Mr. Carlson and Ms. Pacocha, appointed to the Board of
Directors, August 21, 1997, did not participate in compensation discussions
for the fiscal year ended June 30, 1997. Mr. Nania, who retired August 5,
1997, did participate as described above.
PERFORMANCE GRAPH
The following graph compares over the last five years the cumulative total
shareholder return on the Corporation's Common Stock, based on the market
price of the Corporation's Common Stock, with the cumulative total return
of companies on the S&P 500 Index and the reported total return of companies
on the KBW New England Savings Bank Index. Total return values were
calculated based on cumulative total return values assuming reinvestment
of dividends. The graph assumes a $100 investment on June 30, 1992.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During the fiscal year ended June 30, 1997, certain directors and officers
of the Corporation and the Bank and associates of such directors and
officers have been and currently are customers of the Bank and the
Corporation and have had banking and other transactions with the Bank and
the Corporation. All transactions, including loans, if any, made to such
persons and their associates (a) were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time
for comparable transactions with other customers of the Bank, (b) were made
in the ordinary course of business, and (c) did not involve more than the
normal risk of collectability or present other unfavorable features.
During the fiscal year ended June 30, 1997 the Bank and the Bank's Pension
Plan and Profit-Sharing Plan paid PaineWebber fees or commissions totaling
$71,542, of which approximately $14,670 was earned by Director Laurie G.
Gonthier a Vice President of Marketing for PaineWebber, in Middlebury,
Connecticut. During the fiscal year ended June 30, 1997 the Bank paid legal
fees totaling $6,496 to the law firm of Powers & Powers of which director
Suzanne L. Powers is a partner. During the fiscal year ended June 30, 1997
the Bank paid legal fees totaling $918 to the law firm of Nania & Drury of
which Anthony J. Nania, past Chairman and CEO of the Corporation and past
Chairman of the Bank, is a partner.
PROPOSAL 2
AMENDMENT OF THE 1986 STOCK OPTION AND INCENTIVE PLAN
The Board of Directors has adopted an amendment to the Corporation's 1986
Stock Option and Incentive Plan (the "Plan") subject to approval by
shareholders, pursuant to which the aggregate number of shares of stock
subject to options which may be granted under the Plan will increase from
its present 446,000 shares to 525,000 shares (an increase of 79,000 shares).
Set forth below is a description of the Plan substantially in the form
presented in the Bank's 1986 proxy statement pursuant to which the
shareholders originally approved the Plan. The Plan was amended by the
shareholders in October 1994 to extend the term of the Plan until 2005, to
increase the number of option shares from 296,000 to 446,000 and to make
other technical changes. The Plan is designed to allow the Corporation and
the Bank to attract and to retain key personnel through the use of an
executive stock incentive plan. The Plan provides for incentive stock
options and nonqualified stock options ("Stock Options"), stock appreciation
rights ("SAR"), and performance awards. The maximum number of shares
reserved for the Plan is presently 446,000 and, if the amendment is approved,
will increase to 525,000.
The Amendment is subject to approval by the shareholders. Options
already granted pursuant to the Plan are not affected by the proposed
Amendment. Although utilizing the language of the Plan as amended in 1994,
the Amendment will be deemed to be a new plan for the purposes of Internal
Revenue Code of 1986, as amended, Section 422(b)(3) with respect to all
options not previously granted.
The Plan is administered by the Salary and Benefits Committee of the Board
of Directors. The Committee will select full-time key employees eligible
to participate, determine the terms of the awards, interpret the Plan and
make all other determinations for administering the Plan. No person who may
be in a position to receive a Plan option may be a member of the Salary and
Benefits Committee; therefore, Mr. Wiatr and Ms. Pacocha are not and may not
be (as long as they are full-time employees) members of that Committee.
The Plan provides that certain of the Stock Options are intended to
qualify as "Incentive Stock Options" within the meaning of Section 422A of
the Code. Incentive Stock Options may entitle the optionees to favorable
federal income tax treatment if certain required holding periods are met.
Other Stock Options will be granted as nonqualifying Stock Options.
Incentive Stock Options will be issued at an option price based upon the fair
market value of the shares of Common Stock on the date of grant.
Nonqualifying Stock Options will be issued at an option price determined by
the Board, but may not be less than 85 percent of the market value of the
Corporation's stock at the time the option is issued. Exercise of a Stock
Option will be subject to terms and conditions set by the Board and set forth
in the instrument evidencing the Stock Option. Stock Options may be
exercised with either cash or shares of Common Stock. The date of
expiration of a Stock Option will be fixed by the Board, but may not be longer
than ten years from the date of grant.
For an option to qualify as an incentive option, the optionee generally
must be an employee of the Corporation or a subsidiary from the date the
option is granted through a date within three months before the date of
exercise.
As to incentive options, the Corporation will not be entitled to any
deduction for tax purposes upon grant or exercise of an incentive option if
the optionee holds the shares for at least two years after the date of grant
or one year from the date of option exercise, whichever is later. If all of
the requirements for incentive stock options are met, except for the special
holding period rules set forth in the preceding sentence, the Corporation
will be allowed a deduction when the optionee disposes of the stock,
generally in an amount equal to the excess of the fair market vale
of the stock at the time the option was exercised over the option exercise
price (but not in excess of the gain realized on the sale). When the
optionee exercises a nonqualifying option, the Corporation will be entitled to
a tax deduction in an amount equal to the difference between the exercise
price and the fair market value of the stock on the date of exercise (or, if
the optionee is subject to certain restrictions imposed by the securities laws,
upon lapse of those restrictions, unless the optionee makes a special tax
election within 30 days after exercise to have income determined without
regard to restrictions). An optionee of nonqualified options will not
recognize income for federal income tax purposes on the grant of options,
but will recognize ordinary income on the date of exercise equal to the
difference between the exercise price and the fair market value of the
stock acquired through exercise of the option.
SARs may be granted in conjunction with all or any part of any Stock
Option. SARs entitle the holder of a Stock Option with respect to which
SARs are granted to surrender the Stock Option, or any applicable unexercised
portion thereof, and to receive the difference (the "SAR Difference") between
(i) fair market value of the shares of Common Stock subject to the
surrendered option at the time the SARs are exercised and (ii) the option
price of such shares. The Bank, at the sole discretion of the Board, will
pay such difference either by delivery of shares of Common Stock or cash or
some combination of Common Stock and cash. SARs may be exercised at such
time or times and to the extent, but only to the extent, that the related
Stock Options may be exercised, and only after the holder has held the SAR
and related Stock option for a period of at least six months. The SAR holder
will recognize income for federal income tax purposes, and the Corporation
will be entitled to a deduction for federal income tax purposes, upon
receipt of and in the amount of the SAR Difference.
Performance awards may be granted by the Board from time to time as an
additional incentive to management accountability and as a means of
performance measurement. Awards may be measured against individual
achievements, those of the Corporation or both. Upon making an award, the
Board will determine the stated value of such award (the "Stated Value").
The Stated Value will be a function of the fair market value of a share of
Common Stock. The earnings of an award (the "Performance Shares") by the
key employee will be calculated by reference to a performance target for
such shares for a prescribed period of time. The performance target will be
based on a specific dollar amount of growth or on a percentage rate of
improvement in such elements as the Corporation's earnings per share, net
income before securities transactions, return on equity or other such
measures related to growth or improvement of the Corporation as the Board
shall determine. To the extent that a performance target is either not
achieved or is exceeded, the Board shall determine the value deemed to have
been earned. Performance Share payments will be made in cash or Common
Stock or some combination of cash and Common Stock, at the discretion of the
Board. The recipient will recognize income for federal income tax purposes,
and the Corporation will be entitled to a deduction for federal income tax
purposes, in the amount of and at the time of earning Performance Shares.
Stock Options and SARs will expire based upon a schedule following
termination of employment due to retirement, disability or death. All
Performance Shares covered by a performance award agreement at the time of
termination of employment due to retirement, disability or death will be
subject to payment at the end of their term, in the determination of the
Board. Upon their termination of employment for any reason other than
retirement, disability or death, all Stock Options and SARs will terminate
on the earlier of their expiration date or thirty days following termination.
In no event may a Stock Option or SAR be exercised after the expiration of
its term.
At the present time, the Salary and Benefits Committee has not identified
any potential recipients of Stock Options, SARs or Performance Shares which
may be granted in the future under the proposed amendment to the Plan.
Currently, 21,464 option shares are available for grant under the Plan; there
are no SARs or Performance Shares outstanding. Future awards may be granted
to any full-time employee of the Bank or Corporation, of which there were
approximately 124 as of June 30, 1997. The 79,000 additional option shares
would have a market value of $1,051,688 in the aggregate based upon a fair
market value of $13.3125 per share on September 4, 1997.
THE ADOPTION OF THE AMENDMENT TO THE 1986 STOCK OPTION AND INCENTIVE PLAN
MUST BE RATIFIED BY THE AFFIRMATIVE VOTE OF AT LEAST A MAJORITY OF THE VOTES
PRESENT IN PERSON OR BY PROXY, AT THE ANNUAL MEETING.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" THE ADOPTION OF THE AMENDMENT TO THE 1986 STOCK OPTION AND INCENTIVE
PLAN.
PROPOSAL 3
RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND AS INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 1998
The Board of Directors of the Corporation has made arrangements with
Coopers & Lybrand, independent certified public accountants, to be its
independent auditors for the fiscal year ending June 30, 1998 subject to
ratification by the Corporation's shareholders. Neither the firm nor any of
its partners has any direct or indirect financial interest in, or any
connection (other than as independent auditors) with the Corporation or the
Bank. A representative of Coopers & Lybrand is expected to be present at
the Meeting and will be provided with an opportunity to make a statement if
he or she desires to do so and to respond to shareholders' questions.
THE INDEPENDENT AUDITORS MUST BE RATIFIED BY A MAJORITY OF THE VOTES
PRESENT IN PERSON OR BY PROXY AT THE ANNUAL MEETING.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
RATIFICATION.
SHAREHOLDER PROPOSALS
Proposals of the Corporation's shareholders intended to be presented at
the 1998 annual meeting of the Corporation must be received by the
Corporation not later than May 26, 1998, to be included in the Corporation's
proxy statement and form of proxy relating to that meeting. Any such
proposal must comply with Rule 14a-8 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended.
OTHER MATTERS
At the time of preparation of this Proxy Statement, the Board of Directors
of the Corporation knew of no other matters to be presented for action at
the Meeting other than as set forth in the Notice of Annual Meeting of
Shareholders and described in this Proxy Statement. If any other matters
properly come before the Meeting or any adjournment(s) thereof, the proxies
will be voted in accordance with the determination of a majority of the Board of
Directors.
By order of the Board of Directors,
BETTY F. PACOCHA
Secretary
September 22, 1997
