SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities and Exchange Act
of 1934
[Amendment No. ]
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
NORWICH FINANCIAL CORP.
(Name of Registrant as Specified in Its Charter)
Daphne P. Cannata
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fees (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule O-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF NORWICH FINANCIAL CORP.:
Notice is hereby given that the 1997 Annual Meeting of the Stockholders of
Norwich Financial Corp. will be held at the Ramada Hotel, 10 Laura Boulevard,
Norwich, Connecticut, at 10:00 a.m. on May 16, 1997, for the purpose of
considering and voting upon the following matters:
1. Election of three directors who, with the five directors whose terms of
office do not expire at this meeting, will constitute the full Board of
Directors.
2. Ratification of the appointment of KPMG Peat Marwick LLP as independent
public accountants for the fiscal year ending December 31, 1997.
3. Such other business as may properly be brought before the meeting.
Only stockholders of record at the close of business on March 25, 1997,
are entitled to notice of and to vote at the meeting.
By the order of the Board of Directors
Daphne P. Cannata
Secretary
April 9, 1997
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY 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.
NORWICH FINANCIAL CORP.
4 Broadway
Norwich, Connecticut 06360
(860) 889-2621
PROXY STATEMENT
1997 ANNUAL MEETING OF STOCKHOLDERS - MAY 16, 1997
INFORMATION CONCERNING THE SOLICITATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Norwich Financial Corp. (the "Company")
for the 1997 Annual Meeting of Stockholders of the Company to be held at the
Ramada Hotel, 10 Laura Boulevard, Norwich, Connecticut, on May 16, 1997 (the
"Meeting"), and any adjournments thereof. This Proxy Statement and the
enclosed proxy card are first being given or sent to stockholders on or
about April 9, 1997.
The Company will bear the costs of soliciting proxies from its
stockholders. In addition to this solicitation by mail, proxies may be
solicited by the directors, officers and employees of the Company by personal
interview, telephone, telegraph or facsimile. Arrangements will also be made
with brokerage houses and other custodians, nominees and fiduciaries for
payment of reasonable out-of-pocket expenses incurred in connection therewith.
The Company also has engaged Morrow & Co., Inc. ("Morrow") to assist in the
solicitation of proxies. The estimated cost of such solicitation services
to be provided by Morrow is $4,000, plus expenses.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only holders of common stock of the Company ("Common Stock") of record at
the close of business on March 25, 1997 (the "Record Date") will be entitled
to vote at the Meeting. On the Record Date, there were 5,400,041 shares
of Common Stock issued and outstanding. All shares of Common Stock carry
equal voting rights and all stockholders are entitled to cast one vote for
each share they hold. Shares represented by properly executed proxies will
be voted in accordance with any specification made therein. Proxies that
contain no directions to the contrary will be voted FOR the election of
nominees for director named in Proposal 1, and FOR the ratification of the
appointment of KPMG Peat Marwick LLP as independent public accountants for
the fiscal year ending December 31, 1997 as described in Proposal 2, and in
the discretion of the proxy holders as to any other matter that may properly
come before the Meeting or any adjournments thereof. If a proxy indicates
that a stockholder abstains from voting or that shares are not to be voted on
a particular proposal, the shares will not be counted as having been voted on
that proposal, and those shares will not be reflected in the final tally of
votes cast with respect to that proposal. Those shares will be counted as in
attendance at the Meeting for purposes of determining a quorum. Pursuant to
the Company's Bylaws, a majority of the outstanding shares present in person
or by proxy will constitute a quorum for transacting business at the Meeting.
As of March 1, 1997, no person (including any "group" as that term is used
in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"1934 Act")) was known to the Company to be the beneficial owner of more than
five percent (5%) of the Common Stock.
REVOCABILITY OF PROXY
A stockholder who executes and returns a proxy in the enclosed form may
revoke it at any time before it is voted at the meeting by filing with
Daphne P. Cannata, the Secretary of the Company, at the above address, 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.
PROPOSAL 1
ELECTION OF DIRECTORS
The Certificate of Incorporation and the Bylaws of the Company provide for
the election of directors by the stockholders. For this purpose, the Board of
Directors is divided into three classes as nearly equal in number as possible.
The terms of office of the members of one class expire, and a successor class
is to be elected, at each annual meeting of the stockholders. Vacancies in
directorships may be filled, until the expiration of the term of the vacated
directorship, by the vote of a majority of the directors then in office.
The terms of three directors expire at the Meeting. Each of the three
incumbent directors, Daniel R. Dennis, Jr., Anthony P. Halsey and Jeremiah
J. Lowney, Jr., is nominated to be re-elected at the Meeting for a three-year
term, expiring at the annual meeting in 2000. 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 persons named in the proxy will vote for a substitute
designated by the Board of Directors. The terms of the remaining two classes
of directors expire at the annual meetings in 1998 and 1999, respectively, or
when their successors are elected and qualified.
Nominations of persons for election to the Board of Directors may be made
at a meeting of stockholders by or at the direction of the Board of Directors
or by any stockholder of the Company 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 Company. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Company not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 50 days notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be mailed or given to the
Secretary of the Company not later than the close of business on the seventh
day following the day on which such notice of the date of the meeting was
mailed or such public disclosure was made. A stockholder's notice must set
forth (a) as to each person whom the stockholder 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 the Company
which are beneficially owned by such person and (iv) 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 1934 Act (including without limitation
such person's written consent to being named in the proxy statement as nominee
and to serving as a director if elected); and (b) as to the stockholder giving
the notice (i) the name and address, as they appear on the Company's books, of
such stockholder, and (ii) the class and number of shares of the Company that
are beneficially owned by such stockholder.
The following tables set forth certain information regarding the nominees
for re-election as directors at the Meeting, directors whose terms of office do
not expire at the Meeting and certain executive officers of the Company and
the Bank. The nominees, the directors continuing in office and the executive
officers have sole voting and investment powers with respect to the shares
listed as being beneficially owned by them. Each nominee and director
continuing in office also serves as a director of the Bank and has served as
a director of the Company since its incorporation in December 1987, with the
exception of Mr. Halsey, who has served as a director of the Company and the
Bank since 1995.
NOMINEES FOR ELECTION AT THIS MEETING FOR A THREE-YEAR TERM
<TABLE>
<CAPTION>
Common Stock Shares Beneficially
Positions Held With the Company Owned on March 25, 1997
and the Bank; Principal Common
Occupation During the Past Stock Vested Percent
Name Five Years and Directorships Age Owned Options Total of Class
Class II
Terms Expiring in 1997 (or, if re-elected, in 2000)
<S> <S> <C> <C> <C> <C> <C>
Daniel R. Dennis, Jr. Director; Chairman, President and 52 29,140(a) 53,700(b) 82,840 1.52%
Chief Executive Officer of the
Company and the Bank.
Anthony P. Halsey Director; Past Chairman, President 66 41,195 7,000(c) 48,195 .89%
and Chief Executive Officer of The
Bank of Mystic, Inc.
Jeremiah J. Lowney, Director; Orthodontist. 60 11,628 14,000(d) 25,628 .47%
Jr., D.D.S.
DIRECTORS CONTINUING IN OFFICE
Class I
Terms Expiring in 1998
Michael J. Hartl Director; Executive Vice President, 55 16,750(a) 36,900(b) 53,650 .99%
Treasurer, and Chief Financial
Officer of the Company and the Bank.
Martin C. Shapiro Director; Private Investor, Corporate 57 34,770 19,000(d) 53,770 .99%
Consultant; Retired President and
Chief Executive Officer, M.S. Chambers
& Son, Inc., a rotogravure engraving
and other graphic arts tooling company.
Class III
Terms Expiring in 1999
Paul R. Duevel Director; Retired Senior Vice President 62 4,095 19,000(d) 23,095 .43%
for Corporate Affairs, Backus
Corporation, a hospital holding company.
Robert T. Ramsdell Director; Chairman, President and Chief 61 2,500 14,000(d) 16,500 .30%
Executive Officer, New London County
Mutual Insurance Company and Thames
Insurance Company.
Richard P. Reed Director; President, WICH, Inc., a 69 2,891 19,000(d) 21,891 .40%
radio station; Executive Vice President,
Hall Communications, Inc.
EXECUTIVE OFFICERS
James R. Brown Senior Vice President, Lending 61 137(a) 25,600(b) 25,737 .47%
of the Bank
James F. Dewey Senior Vice President, Marketing 55 5,386 22,600(b) 27,986 .52%
and Branch Administration
of the Bank
Daphne P. Cannata Vice President and Corporate 42 14,808(a) 26,600(b) 41,408 .76%
Secretary of the Company,
Senior Vice President, General
Administration and Corporate
Secretary of the Bank
Richard W. Dennison Senior Vice President, Systems 52 249(a) 12,000(b) 12,249 .23%
and Operations of the Bank
All directors and executive officers as a group (13 persons) 163,549 270,400 433,949 7.65%
</TABLE>
(a) Includes 23,798, 16,750, 137, 9,551 and 249 shares held by the Bank's
Thrift Plan for the benefit of Mr. Dennis, Mr. Hartl, Mr. Brown,
Ms. Cannata and Mr. Dennsion, respectively.
(b) Shares subject to options granted pursuant to the 1986 Stock Option and
Incentive Plan and the 1994 Stock Option and Incentive Plan.
(c) Shares subject to options granted pursuant to the 1994 Stock Option Plan
for Outside Directors.
(d) Shares subject to options granted pursuant to the 1986 Stock Option Plan
for Outside Directors and the 1994 Stock Option Plan for Outside Directors.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During 1996, each director of the Company attended at least 75 percent of
the combined total of the meetings of the Board of Directors and any
committee(s) of which he was a member.
The Board of Directors of the Company held 15 regular meetings and 10
special meetings during the year ended December 31, 1996. Committees of the
Board of Directors are the Audit Committee and the Stock Option and Incentive
Compensation Committee. The Board of Directors does not have a Nominating
Committee; nominations are made by the entire Board of Directors. The Bank has
a Loan Committee that monitors the Bank's loan portfolio, an Investment
Committee that is responsible for the Bank's investment activities, and a
Compensation Committee that recommends the compensation level of the Bank's
officers and employees.
The Audit Committee causes suitable examinations to be made at least
annually of the affairs of the Company in the manner recommended by State and
Federal bank regulatory authorities. The Audit Committee also reviews the
examination reports of the State and Federal regulatory authorities, the
quarterly reports of the Company's internal auditor and the annual reports of
the independent public accountants, and reviews the adequacy of the Bank's
accounting, financial and operating controls. The Audit Committee met 4 times
during 1996. The members of the Audit Committee are Directors Halsey, Lowney,
Ramsdell and Reed.
The Stock Option and Incentive Compensation Committee is responsible for
administering the Stock Option Plan for Outside Directors, the Stock Option
and Incentive Plan and other forms of incentive compensation. The Stock
Option and Incentive Compensation Committee met 3 times during 1996. The
members of the Stock Option and Incentive Compensation Committee are
Directors Duevel, Lowney, Reed and Shapiro.
COMPENSATION AND RELATED MATTERS
Director Fees. With the exception of directors who are also officers
of the Company or the Bank, directors were compensated $400 for each meeting
of the Board of Directors they attended, and $400 for each committee meeting
they attended, in addition to an annual retainer fee of $6,000. Non-employee
directors of the Company who are directors of the Bank did not receive
additional compensation for any Bank Board of Directors meeting they attended,
unless such meeting occurred on a date other than the date of a meeting of the
Company Board of Directors. Each director of the Company is also a director of
the Bank.
Director Deferred Compensation Plan. Directors may defer their fees
pursuant to a deferred compensation plan for directors and certain key
employees of the Company and the Bank. Under this plan, known as the
Non-Qualified Deferred Compensation Plan (the "Deferred Compensation Plan"),
deferred amounts are invested, at the participant's direction, in investment
funds held by a grantor trust which the Bank has established to satisfy its
obligation with respect to benefits promised under the terms of the Deferred
Compensation Plan. Each participant's contribution is credited with investment
income equal to the earnings or losses attributable to the applicable
investment funds held by the grantor trust. The accumulated deferred amounts
are payable to the participant in ten (10) annual installments. A participant
may designate an irrevocable payment commencement date at the time he or she
elects to participate in the Deferred Compensation Plan. If the participant
does not indicate a payment commencement date, payment begins at age 65 or,
in the case of an employee, such earlier date as the participant terminates
employment. A participant may petition to receive a single lump sum
distribution. The decision to grant such request will be made by the Board of
Directors or its delegate. Benefits also are payable to a participant's
beneficiaries or estate if a participant dies prior to receiving his entire
Deferred Compensation Plan interests.
Employment Agreements. Messrs. Dennis, Hartl, Brown and Dewey entered into
employment agreements with the Bank in October of 1986 and Ms. Cannata
(together with Messrs. Dennis, Hartl, Brown, and Dewey, the "Executive" or
"Executives") entered into an employment agreement with the Bank in 1989
(together with the employment agreements of Messrs. Dennis, Hartl, Brown,
and Dewey, the "Agreement" or the "Agreements"). The Agreements were amended
and restated in 1995 at which time the Company also became a party to the
Agreements of Mr. Dennis, Mr. Hartl and Ms. Cannata. Under the Agreements, the
term of employment for Mr. Dennis is 3 years, the terms of employment for
Mr. Hartl and Ms. Cannata are each 2 years, and the terms of employment for
both Mr. Brown and Mr. Dewey are 1 year (all such terms of employment
collectively referenced as the "Term" or "Terms"). A Term automatically ends
if the Executive is terminated for Cause, as defined in the Agreement;
voluntarily resigns other than for Good Reason, as defined in the Agreement;
suffers a Disability, also as defined in the Agreement; retires in accordance
with the retirement policy of the Bank; dies; or attains age 65.
At any time during the Term, the Company and/or the Bank, depending on the
Executive affected, may give written notice to the Executive of the desire to
modify or amend the Agreement. If the Agreement has not been modified or
amended within 60 days of such written notice, the Term of the Agreement will
automatically be converted to a fixed period commencing after the expiration
of the 60 days. The fixed period for Mr. Dennis is 3 years. The fixed periods
for Mr. Hartl and Ms. Cannata are each 2 years, and the fixed periods for
Mr. Brown and Mr. Dewey are both 1 year. In addition, the Terms of Messrs.
Hartl, Brown and Dewey automatically extend for 1 additional year on the date
of a Change-in-Control of the Bank as defined in the Agreements. Such
automatic extensions, however, would not be effective for any subsequent or
successive Change-in-Control.
The Agreements provide that if the Executive's employment is terminated
other than for Cause or Disability, or if the Executive voluntarily resigns for
Good Reason, the Executive would receive, in addition to certain other
benefits, severance pay equal to his or her then base salary to the remainder
of the Term. From the Executive's severance pay would be subtracted amounts
payable to the Executive under any Bank severance pay plan, if there is such a
plan in effect at that time. Amounts due to the Executive under the Agreement
are payable, at the Bank's option, either in installments in accordance with
the normal payroll practices of the Bank or in a lump sum equal to the commuted
value of such salary determined by discounting all payments at a rate equal to
the bond equivalent yield of the latest 2-year Treasury Bill auction. If the
Executive's termination were to occur after a Change-in-Control, the severance
payment would be a lump sum calculated without the previously described
discount. The Agreements also contain confidentiality provisions effective
following termination of employment, as well as non-competition provisions
prohibiting each of the Executives from obtaining employment in a competing
business in the Bank's market area for a period of 2 years for Messrs. Dennis
and Hartl and 1 year for Messrs. Brown and Dewey and Ms. Cannata.
The Executives are obligated under the Agreements to perform the duties of
their offices and to serve the Bank, and also the Company in the cases of
Mr. Dennis, Mr. Hartl and Ms. Cannata, faithfully, diligently and competently.
The Agreements provide for periodic salary increases over base salaries
established in the Agreements based on performance reviews pursuant to the
Bank's policies and practices, and further provide that the Executive may be
entitled to an annual bonus which may be conditional upon the achievement of
stated individual or corporate goals.
Summary Compensation Table. The following Summary Compensation Table
shows the compensation for the past three years of the executive officers of
the Company and of the Bank receiving annual compensation of $100,000 or more
in 1996.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
Securities
Underlying All Other
Name and Salary Bonus Options Compensation
Principal Position Year ($) ($) (#) ($)
Daniel R. Dennis, Jr. 1996 215,385 40,000(1) 12,500 3,168(2)
Chairman,
President and 1995 196,538 32,000(1) 15,000 3,082(2)
Chief Executive
Officer 1994 182,519 27,500(1) 6,000 2,847(2)
Michael J. Hartl 1996 161,731 18,000(1) 6,500 3,807(2)
Executive Vice
President, Treasurer 1995 156,092 16,000(1) 8,000 2,402(2)
and Chief Financial
Officer 1994 149,739 13,500(1) 4,000 2,290(2)
James R. Brown 1996 103,177 9,000(1) 4,000 3,524(2)
Senior Vice President,
Lending of the Bank 1995 99,315 7,000(1) 5,000 3,477(2)
1994 95,846 6,000(1) 3,000 2,133(2)
James F. Dewey 1996 98,123 5,000(1) 4,000 2,214(2)
Senior Vice President,
Marketing and Branch 1995 93,669 4,000(1) 3,000 1,325(2)
Administration of the
Bank 1994 92,369 0 3,000 1,304(2)
Long Term
Compensation
Annual Compensation Awards
Securities
Underlying All Other
Name and Salary Bonus Options Compensation
Principal Position Year ($) ($) (#) ($)
Daphne P. Cannata 1996 93,215 9,000(1) 4,000 451(2)
Vice President and
Corporate Secretary 1995 89,108 7,000(1) 6,000 442(2)
of the Company and
Senior Vice President, 1994 85,038 9,000(1) 3,000 418(2)
General Administration
and Corporate Secretary
of the Bank
Richard W. Dennison 1996 92,815 7,500(1) 4,000 1,267(2)
Senior Vice President,
Systems and 1995 88,800 6,000(1) 5,000 1,244(2)
Operations of the Bank
1994 85,038 5,000(1) 3,000 712(2)
(1) The 1996 bonus was received in 1997 for services performed in 1996, the
1995 bonus was received in 1996 for services performed in 1995, and the
1994 bonus was received in 1995 for services performed in 1994.
(2) Other Compensation consists of group term life insurance contributions.
Options Exercises and Year-End Option Table. The following table shows
the number and value of unexercised options held by Mr. Dennis, Mr. Hartl,
Mr. Brown, Mr. Dewey, Ms. Cannata and Mr. Dennison at December 31, 1996 to
acquire shares of the Common Stock of the Company. All options held by each
of them are currently exercisable.
AGGREGATED OPTION EXERCISES IN 1996
AND 12/31/96 OPTION VALUE
<TABLE>
<CAPTION>
Number of Value of
Number of Securities Underlining Unexercised
Shares Acquired Value Unexercised In-the-Money
Name On Exercise in 1996 Realized Options at 12/31/96 Options at 12/31/96(1)
<S> <C> <C> <C> <C>
Daniel R. Dennis, Jr. 6,000 $47,250 53,700 $558,681
Michael J. Hartl 12,523 $60,086 36,900 $410,956
James R. Brown 11,000 $42,625 25,600 $285,137
James F. Dewey 9,600 $37,200 22,600 $248,887
Daphne P. Cannata 6,300 $22,838 26,600 $294,637
Richard W. Dennison 0 0 12,000 $98,125
</TABLE>
(1)Market value of underlying securities at year-end, minus the exercise price.
Options Granted in 1996. The following table shows the number and value
of options granted to Mr. Dennis, Mr. Hartl, Mr. Brown, Mr. Dewey, Ms. Cannata
and Mr. Dennison in 1996.
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
Individual Grants Potential Realizable Value
Number of % of Total at Assumed Annual
Securities Options Rates of Stock Price
Underlying Granted to Exercise or Appreciation For Option Term
Options Employees Base Price Expiration
Name Granted in 1996 ($/Share) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Daniel R. Dennis, Jr.12,500 20.90% 13.8125 03/12/06 108,581 275,169
Michael J. Hartl 6,500 10.87% 13.8125 03/12/06 56,462 143,087
James R. Brown 4,000 6.69% 13.8125 03/12/06 34,746 88,054
James F. Dewey 4,000 6.69% 13.8125 03/12/06 34,746 88,054
Daphne P. Cannata 4,000 6.69% 13.8125 03/12/06 34,746 88,054
Richard W. Dennison 4,000 6.69% 13.8125 03/12/06 34,746 88,054
</TABLE>
On November 22, 1993, certain options held by officers of the Company were
canceled and new options were issued as described below. The exchange was
offered in order to provide the officers a more favorable market position.
The executive officers of the Company and the Bank who held affected options
are listed below:
TEN YEAR OPTIONS REPRICINGS
<TABLE>
<CAPTION>
Number of Length of
Securities Market Price Exercise Original
Underlying of Stock at Price at Option Term
Options/ Time of Time of Remaining at
SARs Repricing or Repricing or New Date of
Repriced or Amendment Amendment Exercise Repricing or
Name Date Amended (#)(a) ($) ($) Price ($) Amendment
<S> <C> <C> <C> <C> <C> <C>
Daniel R. 11/22/93 2,400 8.5625 10.75 8.5625 4.167 years
Dennis, Jr. 11/22/93 2,800 8.5625 13.00 8.5625 6.25 years
Michael J. 11/22/93 2,000 8.5625 10.75 8.5625 4.167 years
Hartl 11/22/93 2,400 8.5625 13.00 8.5625 6.25 years
James R. 11/22/93 1,200 8.5625 10.75 8.5625 4.167 years
Brown 11/22/93 1,400 8.5625 13.00 8.5625 6.25 years
James F. 11/22/93 1,200 8.5625 10.75 8.5625 4.167 years
Dewey 11/22/93 1,400 8.5625 13.00 8.5625 6.25 years
Daphne P. 11/22/93 1,200 8.5625 10.75 8.5625 4.167 years
Cannata 11/22/93 1,400 8.5625 13.00 8.5625 6.25 years
</TABLE>
(a) Outstanding options were canceled and new options were issued. In each
case, the number of shares covered by the new options issued was 80% of
the number of shares covered by the canceled options.
COMPENSATION COMMITTEE REPORT
Overview. The Compensation Committee of the Bank recommends the
compensation levels of the Company's executive officers, which are then finally
voted upon by the Board of Directors of the Bank. The Compensation Committee
also recommends overall compensation and incentive and benefit programs for the
employees of the Bank. As a member of the Compensation Committee, Mr. Dennis
does not participate in recommendations as to his own compensation as Chairman,
President and Chief Executive Officer. The Compensation Committee met 4 times
in 1996, and the following summarizes its report on executive compensation.
The objectives of the Compensation Committee regarding executive
compensation are to 1) attract and retain highly-qualified executives critical
to the Company's long term success, 2) sponsor a competitive executive
compensation program, 3) reward its executives for enhancement of stockholder
value as reflected in the Company's annual earnings performance and the market
price of the Common Stock, and 4) encourage ownership in the Company through
grants under the stock option and incentive plan.
The Committee considers several factors when determining executive
compensation. The first factor is the financial performance of the Company and
the Bank. The Committee evaluates the performance of the Company and the Bank
relative to other financial institutions and to their own history. The
Committee reviews several standard factors such as capital position, return on
average equity, and return on assets. The second factor is the individual job
performance of the executive and achievement of specific objectives as
evaluated by the Board of Directors. The third factor the Committee considers
is competitiveness with industry peer group. The Committee examines various
reports and statistical surveys to determine compensation paid to executives
of companies similar in size and located in the northeastern section of the
United States.
In addition to recommending the salary of the executive officers, the
Committee also recommends the bonuses to be paid to them. The Committee relies
heavily on the same criteria used to recommend salary levels to recommend
bonuses. The Committee also reviews the operating expenses of the Company to
determine the funds available to support bonuses.
CEO Compensation. Compensation paid to the Chief Executive Officer,
Daniel R. Dennis, Jr. in 1996 was determined after the factors discussed
above were considered. During 1996 the Company reported record earnings and
net income of $1.17 per share, an increase of over 21% from 1995. The
Company's net interest margin improved throughout 1996 and ended at the highest
recorded level in the Company's ten year history as a public company.
Nonperforming assets inclusive of "loans and foreclosed properties held for
sale" represented 1.02% of total assets at the end of 1996 compared to 2.00% of
total assets at the end of 1995. Over the course of the last two years,
Mr. Dennis completed an aggressive expansion which included enlarging the
Bank's market area in Mystic through the acquisition of The Bank of Mystic in
1995, extending boundaries into Waterford and East Lyme through the acquisition
of The Bank of Southeastern Connecticut on January 2, 1996, and adding de novo
branches in Waterford and in New London in 1995 and 1996, respectively. During
1996 an agreement was signed to acquire two branch offices of First Union Bank
of Connecticut. The transaction was closed in the first quarter of 1997, and
added a total of approximately $25 million in deposits and $1 million in loans
to the existing Bank offices in Groton and New London. Additionally, the
Company's regular quarterly dividend of $.10 per share was increased to
$.12 per share in July, 1996, and due to the continued improvement in earnings
The Board of Directors in January, 1997, declared a special cash dividend of
$.10 per share to its stockholders. The market price of the Company's Common
Stock has increased from a price range in the last quarter of 1994 between
$8 1/2 and $11 1/2 to a price range in the last quarter of 1996 between
$17 1/4 and $20 3/4. Based upon the Company's performance and the Committee's
recommendation, which focused heavily on this performance, Mr. Dennis was
compensated as indicated in the Summary Compensation Table on page 7.
COMPENSATION COMMITTEE MEMBERS
Daniel. R. Dennis, Jr.
Paul R. Duevel
Jeremiah J. Lowney, Jr.
Richard P. Reed
Martin C. Shapiro
EMPLOYEE BENEFIT PLANS
Pension Plan. The Bank maintains a noncontributory defined benefit pension
plan that is qualified under the Employee Retirement Income Security Act of
1974, as amended (the "Pension Plan"). The Pension Plan covers employees who
have attained the age of 21 years (or 24 1/2 years for employees who became
participants of the Pension Plan prior to July 1, 1985) and have completed
one year of service. Participants in the plan receive credit for benefit
purposes for each year in which they complete at least 1,000 hours of service
with the Bank. The Pension Plan provides in general for monthly payments to or
on behalf of each covered employee upon such employee's retirement at age 65.
Annual payments are based upon the employee's average annual compensation for
the five highest-salary consecutive years of employment. The Pension Plan
provides for optional early retirement benefits provided a participant has
attained age 55 and completed at least 10 years of service with the Bank. It
also provides for Social Security integration. Officers are entitled to
benefits on the same basis as other employees. Contributions to the fund and
expenses of administering the Pension Plan are paid by the Bank.
Pension Restoration Plan. Effective July 1, 1995, the Bank adopted a
pension restoration plan entitled the Executive Non-Qualified Pension
Restoration Plan (the "Pension Restoration Plan") for highly compensated
employees of the Bank affected by legal restrictions on Pension Plan
payments. The present participants are Mr. Dennis and Mr. Hartl. Under the
Pension Restoration Plan, the Bank contributes, for the benefit of
participants, an amount equal to the prorated portion of any pension or
pension-related benefit which cannot be provided through the Pension Plan
because of limitations imposed by federal law on the benefits that may be
accrued under the terms of a tax-qualified defined benefit retirement plan.
The Bank's contributions under the Pension Restoration Plan are invested, at
the participant's directions, in investment funds held by a trust which the
Bank has established to satisfy its obligation with respect to the Pension
Restoration Plan. A participant's interests are accounted for separately by
investment fund and are equal to the total of contributions on behalf of that
participant adjusted for earnings and losses based on the performance of the
applicable investment funds. Benefits under the Pension Restoration Plan are
payable in ten (10) annual installments commencing, in the case of retirement,
at age 65 or such earlier date as the participant might early retire under the
terms of the Bank's retirement program. If a participant's employment
terminates prior to retirement, benefits begin at age 65, or earlier if the
participant is eligible for and elects to receive early retirement benefits.
In the event of a participant's death, benefits are payable to the
participant's beneficiaries and commence when the participant would have
attained the age of 65. A participant may petition the plan administrator to
receive his entire plan interest in a lump sum. The decision to grant such
request will be made by the Board of Directors or its delegate.
The following table illustrates annual pension benefits under the Pension
Plan and Pension Restoration Plan for retirement in 1996 at age 65 under the
most advantageous provisions available for various levels of compensation and
years of service:
ANNUAL PENSION BENEFIT BASED ON YEARS OF SERVICE
Average Years of Service(a)
Final Earnings 15 20 25 30(b)
$ 15,000 2,200 3,000 3,700 4,500
25,000 5,300 7,100 8,900 10,700
35,000 8,500 11,400 14,200 17,100
50,000 13,400 17,900 22,400 26,900
75,000 21,800 29,100 36,400 43,700
100,000 30,300 40,400 50,500 60,600
125,000 38,700 51,600 64,500 77,400
150,000 47,200 62,900 78,600 94,300
175,000 55,600 74,100 92,700 111,200
200,000 64,000 85,400 106,700 128,100
225,000 72,500 96,600 120,800 144,900
250,000 80,900 107,900 134,800 161,800
275,000 89,300 119,100 148,900 178,700
300,000 97,800 130,400 163,000 195,600
(a) As of December 31, 1996, Mr. Dennis had 15 years of credited service,
Mr. Hartl had 17 years of credited service, Mr. Brown had 11 years of
credited service, Mr. Dewey had 11 years of credited service, Ms. Cannata
had 18 years of credited service and Mr. Dennison had 7 years of credited
service. If they remain in the employ of the Bank through age 65, they
will have 29, 27, 15, 21, 30 and 21 years of credited service,
respectively, under the Plan. The compensation of Mr. Dennis, Mr. Hartl,
Mr. Brown, Mr. Dewey, Ms. Cannata and Mr. Dennison listed as "Salary" and
"Bonus" in the Summary Compensation Table above, including amounts
contributed to the 401(k) plan, count as annual compensation for purposes
of the Plan.
(b) The maximum number of years of credited service under the Pension Plan
is 30.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return on the Company's Common Stock based on the market price of the Common
Stock and assuming the reinvestment of dividends, with the cumulative total
return of companies on the NASDAQ Market Index and the reported total return
of companies on the KBW New England Savings Bank Index.
FIVE YEAR TOTAL RETURN COMPARISON*
AMONG NORWICH FINANCIAL CORP., NASDAQ
AND KBW NEW ENGLAND SAVINGS BANK INDEX
The graph assumes a $100 investment on January 1, 1992 in the Company's
Common Stock, the NASDAQ Market Index and the KBW New England Savings Bank
Index.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
<S> <C> <C> <C> <C> <C> <C>
Norwich Financial Corp. 100 116 197 227 298 471
KBW New England Savings 100 176 234 236 368 509
Bank Index
NASDAQ Market Index 100 116 134 131 185 227
</TABLE>
*Total return assumes reinvestment of all dividends.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Some of the directors and officers of the Company and the Bank, and
associates of such directors and officers, are and have been customers of the
Bank and have had banking transactions with the Bank both before and since
January 1, 1996. Loans made to such persons and their associates (a) were made
in the ordinary course of the Bank's business, (b) were made on substantially
the same terms, including interest rates and collateral, as those prevailing
at the time for comparable transactions with other persons, and (c) did not
involve more than the normal risk of collectibility or present other
unfavorable features.
As a matter of policy, loans are made to directors, officers and employees
of the Company and the Bank in compliance with Regulation O of the Federal
Reserve Board regulations and Section 36a-263 of the Connecticut General
Statutes on substantially the same terms, including interest rates, as those
of comparable transactions prevailing at the time and do not involve more than
the normal risk of collectibility or present other unfavorable features. The
Company and the Bank had no loans outstanding as of December 31, 1996 to any
person known by the Company to be a beneficial owner of more than five percent
(5%) of the Common Stock.
Any business transactions of the Company or the Bank with officers,
directors, employees, principal stockholders or affiliates of the Company or
the Bank have been and will be on terms no less favorable to the Company or
the Bank than could have been or could be obtained from third parties. If a
director of the Company also was an executive officer or 10% stockholder of
another entity during 1996, then the Company neither paid to nor received from
such entity for property or services an amount in excess of 5% of either
(1) the Company's gross consolidated revenues or (2) the entity's gross
consolidated revenues, unless the amounts paid for such property or services
were determined by competitive bids. Furthermore, neither the Company, nor its
subsidiaries were indebted to any such entity in an aggregate amount exceeding
5% of the Company's total consolidated assets.
COMPLIANCE WITH SECTION 16(a) OF THE 1934 ACT
Section 16(a) of the 1934 Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class
of the Company's equity securities, to file reports of ownership and changes
in ownership with the Securities and Exchange Commission (the "SEC") and the
NASD. Officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1996, all
Section 16(a) filing requirements were complied with applicable to its
officers, directors and greater than ten percent (10%) beneficial owners.
THE NOMINEES FOR DIRECTOR MUST BE ELECTED BY THE AFFIRMATIVE VOTE OF A MAJORITY
OF THE VOTES CAST BY THE STOCKHOLDERS OF THE COMPANY AT THE ANNUAL MEETING. THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
ELECTION OF THE NOMINEES FOR DIRECTOR.
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF
KPMG PEAT MARWICK LLP
AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1997
The Board of Directors of the Company has renewed the Company's
arrangements with KPMG Peat Marwick LLP, Independent Certified Public
Accountants, to be the Company's independent public accountants for the
fiscal year ending December 31, 1997, subject to ratification by the
Company's stockholders. Representatives of KPMG Peat Marwick LLP will be
present at the Annual Meeting where they will be available to make a
statement if they desire to do so and will be available to respond to
stockholders' questions.
THE APPOINTMENT OF KPMG PEAT MARWICK LLP MUST BE RATIFIED BY A MAJORITY OF THE
VOTES CAST BY THE STOCKHOLDERS OF THE COMPANY AT THE ANNUAL MEETING. THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS.
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company intended to be presented at the
1998 annual meeting of the Company must be received by the Company not later
than December 10, 1997 to be included in the Company'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
1934 Act.
OTHER MATTERS
At the time of preparation of this Proxy Statement, the Board of Directors
of the Company knows of no matter to be presented for action at the meeting
other than as set forth in the Notice of Annual Meeting of Stockholders and
described in this Proxy Statement. If any other matters properly come before
the meeting, proxies have discretionary authority to vote their shares
according to their best judgment.
By order of the Board of Directors
Daphne P. Cannata
Secretary
April 9, 1997
APPENDIX
PROXY NORWICH FINANCIAL CORP.
1997 ANNUAL MEETING OF STOCKHOLDERS - MAY 16, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of NORWICH FINANCIAL CORP. hereby appoints
Daniel R. Dennis, Jr. and Daphne P. Cannata and each of them the proxies of the
undersigned with full power of substitution to vote at the Annual Meeting of
Stockholders of the Company to be held at the Ramada Hotel, 10 Laura Boulevard,
Norwich, Connecticut, at 10:00 a.m. on Friday, May 16, 1997, and at any
adjourment or adjournments thereof, with all the power which the undersigned
would have if personally present, hereby revoking any proxy heretofore given.
A majority of said proxies or their substitutes who attend the meeting (or if
only one shall be present, then that one) may exercise all of the powers
hereby granted. The undersigned hereby acknowledges receipt of the proxy
statement for the meeting and instructs the proxies to vote.
(Continued and to be signed on other side)
THIS PROXY WHEN PROPERLY SIGNED WILL BE VOTED IN THE MANNER DIRECTED. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSALS SET FORTH
BELOW AND FOR THE ELECTION OF ALL NOMINEES LISTED BELOW.
Please mark your votes as indicated in this example [X]
The Board of Directors recommends a vote "FOR" Proposals 1 and 2.
1. To elect the nominees for director: Daniel R. Dennis, Jr., Anthony P. Halsey
and Jeremiah J. Lowney, Jr.
FOR all nominees for WITHHOLD AUTHORITY
Director (except as to vote for all nominees
marked to the contrary) for Director
[_] [_]
Withhold for the following only:
(INSTRUCTION: To withhold authority to vote for any individual, write that
nominees' name on the space provided below.)
________________________________________________________________
2. To ratify the appointment of KPMG Peat Marwick LLP as independent public
accountants for the fiscal year ending December 31, 1997.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. With discretionary authority upon such other matters as may properly
come before the meeting.
I plan to attend the Annual Meeting: [_]
Signature _____________________ Signature ______________________ Date ______
NOTE: Please sign exactly as your name appears on this proxy card. When
signing as attorney, executor, trustee or guardian, please give your title.
