SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
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 Rule 14a-11(c) or Rule 14a-12
Northway Financial, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0- 11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
[NORTHWAY FINANCIAL LOGO] NORTHWAY FINANCIAL, INC.
April 8, 2002
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Northway Financial, Inc., to be held on Tuesday, May 21, 2002 at 2:00 p.m. at
The Town and Country Motor Inn, Route 2, Shelburne, New Hampshire 03581.
At the annual meeting you will be asked to consider and act upon the
following:
(1) to elect three (3) class II directors to serve until the 2005
Annual Meeting of Stockholders or until their successors are duly
elected and qualified; and
(2) to transact such other business as may come properly before the
meeting and any adjournments or postponements thereof.
I, along with the other members of the Board of Directors, look forward
to greeting you personally at the Annual Meeting. However, whether or not you
plan to attend personally and regardless of the number of shares you own, it is
important that your shares be represented. YOU ARE URGED TO PROMPTLY SIGN, DATE
AND MAIL THE ENCLOSED PROXY IN THE POSTAGE-PAID ENVELOPE PROVIDED FOR YOUR
CONVENIENCE.
This will not prevent you from voting in person but will assure that
your vote is counted if you are unable to attend.
Very truly yours,
William J. Woodward
Chairman of the Board
9 Main Street, Berlin, New Hampshire 03570/Telephone 603-752-1171
[NORTHWAY FINANCIAL LOGO]
NORTHWAY FINANCIAL, INC.
9 MAIN STREET
BERLIN, NEW HAMPSHIRE 03570
TELEPHONE 603-752-1171
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, MAY 21, 2002
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Stockholders of
Northway Financial, Inc. will be held on Tuesday, May 21, 2002 at 2:00 p.m. at
The Town and Country Motor Inn, Route 2, Shelburne, New Hampshire 03581 for the
following purposes:
(1) To elect three (3) class II directors to serve until the 2005
Annual Meeting of Stockholders or until their successors are duly
elected and qualified; and
(2) To transact such other business as may come properly before the
meeting and any adjournments or postponements thereof.
The foregoing items are more fully described in the Proxy Statement
accompanying this Notice.
The Board of Directors has fixed the close of business on March 22, 2002
as the record date for determining stockholders entitled to notice of and to
vote at the Annual Meeting and any adjournments or postponements thereof. Only
holders of common stock of record at the close of business on that date will be
entitled to notice of and to vote at the Annual Meeting and any adjournments or
postponements thereof.
By Order of the Board of Directors
Joseph N. Rozek
Secretary
Berlin, New Hampshire
April 8, 2002
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF
YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU
HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
NORTHWAY FINANCIAL, INC.
9 MAIN STREET
BERLIN, NEW HAMPSHIRE 03570
TELEPHONE 603-752-1171
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, MAY 21, 2002
This Proxy Statement and accompanying form of proxy are furnished in
connection with the solicitation of proxies on behalf of the Board of Directors
of Northway Financial, Inc., a New Hampshire corporation (the "Company"), for
use in voting at the Annual Meeting of Stockholders (the "Meeting") to be held
at 2:00 p.m. on May 21, 2002, at The Town and County Motor Inn, Route 2,
Shelburne, New Hampshire 03581 and at any postponements or adjournments thereof.
This proxy statement and accompanying form of proxy were mailed on or about
April 8, 2002 to stockholders of record at the close of business on March 22,
2002 in connection with the solicitation.
At the close of business on March 22, 2002, there were outstanding and
entitled to vote 1,511,324 shares of the Company's common stock, par value of
$1.00 per share.
Each stockholder is entitled to one vote per share upon each matter
submitted at the Meeting. Only stockholders of record at the close of business
on March 22, 2002 shall be entitled to vote at the Meeting.
The proxies of holders of common stock are being solicited by the Board
of Directors. Stockholders are requested to complete, date, sign and promptly
return the accompanying proxy card in the enclosed envelope. Shares represented
by a properly executed proxy received prior to the vote at the Meeting and not
revoked will be voted at the Meeting as directed in the proxy. IF A PROXY IS
SUBMITTED AND NO DIRECTIONS ARE GIVEN, THE PROXY WILL BE VOTED "FOR" THE
APPROVAL OF THE PROPOSALS TO BE CONSIDERED AT THE MEETING.
A person giving the enclosed proxy may revoke it by filing an
instrument of revocation with Joseph N. Rozek, Secretary, Northway Financial,
Inc., 9 Main Street, Berlin, New Hampshire 03570. Any such person may also
revoke a proxy by filing a duly executed proxy bearing a later date, or by
appearing at the Meeting in person, notifying the Secretary, and voting by
ballot at the Meeting. Any stockholder of record attending the Meeting may vote
in person whether or not a proxy has been previously given, but the mere
presence (without notifying the Secretary) of a stockholder at the Meeting will
not constitute revocation of a previously given proxy.
The Company will bear the cost of soliciting proxies from the
stockholders, including mailing costs, and will pay all printing costs in
connection with this Proxy Statement. In addition to the use of the mails,
proxies may be solicited by the directors, officers, and certain employees of
the Company, and by personal interviews, telephone and facsimile. Such
directors, officers and employees will not receive additional compensation for
such solicitation but may be reimbursed for reasonable out-of-pocket expenses
incurred in connection therewith. The Company may also make arrangements with
brokerage houses and other custodians, nominees, and fiduciaries for the
forwarding of solicitation material to the beneficial owners of its common
stock. The Company may reimburse such custodians, nominees, and fiduciaries for
reasonable out-of-pocket expenses incurred in connection therewith.
The presence in person or by proxy of the holders of a majority of the
issued and outstanding shares entitled to vote at the Meeting is required to
constitute a quorum. Abstentions and "broker non-votes" (as defined below) will
be counted as present for purposes of determining the presence or absence of a
quorum for the transaction of business at the Meeting, but as unvoted for
purposes of determining the approval of any matter submitted to the stockholders
for a vote. A "broker non-vote" is a proxy from a broker or other nominee
indicating that such person has not received instructions from the beneficial
owner or other person entitled to vote the shares which are the subject of the
proxy on a particular matter and with respect to which the broker or other
nominee does not have discretionary voting power.
The Company is a New Hampshire corporation and the parent of The Berlin
City Bank, a New Hampshire-chartered bank based in Berlin, New Hampshire
("BCB"), and Pemigewasset National Bank, a national bank based in Plymouth, New
Hampshire ("PNB").
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES AND DIRECTORS CONTINUING IN OFFICE
The Company's Board of Directors is currently composed of ten members.
The Company's Amended and Restated Articles of Incorporation provide that
directors are to be divided into three classes, with all classes as nearly equal
as possible in size. Each director is elected for a three-year term and the
terms are staggered so that only one class is elected by the stockholders
annually.
At the Meeting, three directors will be elected to serve for a
three-year term until the 2005 Annual Meeting, and until their successors are
duly elected and qualified. The Board of Directors has nominated for election
Stephen G. Boucher, Barry J. Kelley and Randall G. Labnon, all of whom are
current members of the Board of Directors. It is the intention of the persons
named in the accompanying form of proxy, or their substitutes, to vote for the
election of the foregoing nominees unless instructed to the contrary. The Board
of Directors believes that all of the nominees will be available and able to
serve as directors, but if for any reason any of the nominees named above should
not be available or able to serve, the proxies may exercise discretionary
authority to vote for one or more substitutes as the Board of Directors may
recommend. In the alternative, the Board of Directors may, if permitted by law
and the Amended and Restated Articles of Incorporation and Bylaws, amend the
Bylaws if necessary and reduce the size of the Board to eliminate the resulting
vacancy. The affirmative vote of a plurality of the votes cast is required for
the election of directors. Abstentions and broker non-votes will not be counted
as "votes cast" for purposes of electing directors and, therefore, will not
affect the election of the directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ALL OF THE
NOMINEES FOR DIRECTOR OF THE COMPANY.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
The following table sets forth the name and age, other positions held
with the Company, term of office and period served, business experience, and
certain other information, as of March 22, 2002, with respect to each nominee
and each director continuing in office. The information was provided by the
persons named.
Shares of
Common Stock Percent
Term Beneficially of Common
Director To Owned at Stock
Name Age Since Expire Mar. 22, 2002(1) Ownership(1)
- --------------------------------------------------------------------------------------------------------------
NOMINEES OF THE BOARD
Boucher, Stephen G. 55 1999 2005 250 ****
President, Airmar
Technology Corp.
Kelley, Barry J. 52 1997 2005 40,984 (2) 2.71 %
President, White
Mountain Lumber, Co.
Labnon, Randall, G. 48 1997 2005 3,072 ****
General Manager,
Town & Country Motor Inn
DIRECTORS CONTINUING IN OFFICE
Bornstein, Peter H. 47 1997 2003 4,240 (3) ****
Attorney and Partner, Bergeron
Hanson, Bornstein & Carlson
Clifford, Jr., Charles H. 66 1997 2003 2,500 ****
Retired Businessman
Morris, John D. 71 1997 2003 7,036 ****
Retired Businessman
Adams, Fletcher W. 65 1997 2004 54,500 (4) 3.61%
Vice-Chairman of the Board,
Northway Financial, Inc.;
Chairman of the Board, President,
Pemigewasset National Bank
Hanson, Jr., Arnold P. 52 1997 2004 19,312 (5) 1.28%
President, Isaacson Structural
Steel, Inc.
Noyes, John H. 55 1997 2004 12,185 ****
President, Noyes Insurance
Agency, Inc.; President,
Central Square Insurance, Inc.
Woodward, William J. 56 1997 2004 84,838 5.61%
Chairman of the Board,
President, Chief Executive
Officer, Northway Financial,
Inc. and The Berlin City Bank
**** Owns less than 1% of the Company's outstanding common stock.
(1) Included in the shares listed as "beneficially owned" and in the calculation of common stock ownership are
the following shares which the persons listed have the right to acquire prior to the expiration date shown
pursuant to vested stock options granted under the 1999 stock option and grant plan - Mr. Woodward (7,500
prior to June 15, 2009 and 4,250 prior to October 17, 2010) and Mr. Adams (3,500 prior to June 15, 2009).
(2) Includes 32,516 shares owned jointly with spouse and 2,900 shares owned by spouse for which Mr. Kelley may
be deemed the beneficial owner.
(3) Includes 2,480 shares owned jointly with spouse, 320 shares owned by spouse for which Mr. Bornstein may be
deemed the beneficial owner,12 shares owned jointly with son and 1,056 shares held in an account for which
Mr. Bornstein is the conservator.
(4) Includes 23,000 shares held in a trust for which Mr. Adams serves as trustee.
(5) Includes 19,000 shares held in a trust for which Mr. Hanson serves as trustee and 312 shares owned jointly
with spouse.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held thirteen (13) meetings during
the calendar year ended December 31, 2001.
Directors of the Company are paid an annual fee of $10,000 and directors
who also serve on the Executive Committee receive an additional annual fee of
$12,000. Directors who are officers of the Company do not receive any of these
fees with the exception of Mr. Adams, who receives an annual fee in lieu of
salary of $32,000.
The following sets forth the members of each of the standing committees of
the Board of Directors together with a brief description of the function of each
such committee.
EXECUTIVE COMMITTEE
MEMBERS: William J. Woodward, Chairman; Fletcher W. Adams, John D.
Morris; and John H. Noyes
FUNCTION: The Executive Committee generally has the authority to
exercise the power of the full Board during intervals between
meetings of the Board.
NUMBER OF
MEETINGS: This Committee meets on a weekly basis.
AUDIT AND COMPLIANCE COMMITTEE
MEMBERS: Arnold P. Hanson, Jr., Chairman; Stephen G. Boucher; Barry J.
Kelley; and John H. Noyes.
FUNCTION: This Committee oversees the activities of the Company's
Internal Auditor, its independent certified public accounting
firm, and activities of other accounting firms used on a
project basis. This Committee also reviews the results of
each regulatory examination. The Committee also provides
oversight for all compliance activities of the Company,
including those of the Corporate Compliance Officer. The
Audit and Compliance Committee operates under a written
charter adopted by the Board of Directors of the Company.
NUMBER OF
MEETINGS: This Committee met five (5) times during the 2001 fiscal
year.
HUMAN RESOURCES AND COMPENSATION COMMITTEE
MEMBERS: Stephen G. Boucher, Chairman; Arnold P. Hanson, Jr.; Randall
G. Labnon; and John H. Noyes.
FUNCTION: This Committee conducts annual and periodic reviews of
director, officer, and employee compensation in order to
ensure that the Company has the programs necessary to attract
and retain competent professionals at all levels.
NUMBER OF
MEETINGS: This Committee met twice (2) during the 2001 fiscal year.
NOMINATING COMMITTEE
MEMBERS: The full Board of Directors serves as the Nominating
Committee of the Company.
FUNCTION: This Committee selects nominees for election as directors of
the Company. This Committee nominated the persons standing
for election at the 2002 Annual Meeting. The Committee will
consider director nominees recommended by Stockholders. See
Stockholder Proposals on page 14 for more information.
NUMBER OF
MEETINGS: The Board of Directors meets monthly and, as appropriate,
discusses nominations.
EXECUTIVE OFFICERS
The following sets forth information regarding the executive and key
officers of the Company and/or its subsidiaries, the position or office held by
each of them, and the date from which they have continually served as executive
officers.
Executive
Officer
Name Age Since
- -----------------------------------------------------------------------------
William J. Woodward 56 1989
Chairman, President, and Chief Executive
Officer Northway Financial, Inc. and The
Berlin City Bank
Fletcher W. Adams 65 1990
Vice Chairman, Northway Financial, Inc.;
Chairman of the Board and President,
Pemigewasset National Bank
Lawrence J. Bessinger 57 1999
Senior Vice President, Northway Financial,
Inc.
James R. Brannen 41 1999
Senior Vice President, Northway Financial,
Inc.
Richard T. Brunelle 60 1996
Senior Vice President, The Berlin City Bank
and Pemigewasset National Bank
John H. Stratton, Jr. 56 1990
Senior Vice President, The Berlin City Bank
Robert I. Walker 63 1999
Senior Vice President, Pemigewasset National
Bank
Richard P. Orsillo 52 2001
Vice President and Corporate Controller,
Northway Financial, Inc., The Berlin City
Bank and Pemigewasset National Bank
William J. Woodward has served as Chairman of the Board of Directors,
President and Chief Executive Officer of the Company since 1997. In addition, he
has served as President and Chief Executive Officer of BCB since 1994 and has
served as Chairman of the Board of Directors of BCB since 1989. He became a
Director of BCB in 1975. He has served as a director of PNB since 1997.
Fletcher W. Adams has served as Vice Chairman of the Board of Directors of
the Company since 1997. He has also served as Chairman of the Board of PNB since
February 1999. In addition, he served as President and Chief Executive Officer
of PNB from January 1990 until February 1999. In July 2000, he resumed the
position of President of PNB.
Lawrence J. Bessinger has served as Senior Vice President of the Company
since July 1999 and is responsible for the technology and deposit services
banking divisions. Prior to this promotion, Mr. Bessinger had served as Vice
President-Chief Information Officer for BCB since 1990.
James R. Brannen has served as Senior Vice President of the Company since
July 1999 and is responsible for retail lending and the loan operations
division. From November 1993 until July 1999, Mr. Brannen served as Vice
President of Retail Loan Operations for BCB.
Richard T. Brunelle has served as Senior Vice President of BCB since April
1996 and PNB since 2001 and is responsible for the commercial lending division.
From 1991 until his promotion, Mr. Brunelle served BCB as Vice President and
Senior Commercial Lender.
John H. Stratton, Jr. has served as Senior Vice President of BCB since 1990
and is responsible for the retail banking division.
Robert I. Walker has served as Senior Vice President of PNB since June 1999
and is responsible for the retail and marketing divisions. Prior to joining PNB,
Mr. Walker served as Senior Vice President of Vermont National Bank from 1998 to
1999. From 1996 to 1998 Mr. Walker served as Director of Marketing and Retail
Banking for Community Bankshares, Inc. From 1992 to 1996 he served as Regional
Manager and Branch Administrator for First New Hampshire Bank.
Richard P. Orsillo has served as Vice President and Corporate Controller of
the Company, BCB and PNB since December 1998. Prior to joining the Company he
served as Senior Vice President and Chief Financial Officer of Elmira Savings
Bank, FSB from March 1996 through December 1998.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 22, 2002, the beneficial
ownership of common stock by (i) each of the executive officers named under
"Executive Compensation" below (other than Mr. Woodward), and (ii) all directors
and executive officers as a group. See "Information Concerning Directors and
Nominees" above for the beneficial ownership of common stock by Messrs. Woodward
and Adams and other directors of the Company. As of March 22, 2002, no person
owned beneficially more than 5% of the Company's outstanding common stock except
for Mr. Woodward.
Shares of Common Percent of Shares of
Name Stock Beneficially Owned(1) Common Stock Ownership(1)
- --------------------------------------------------------------------------------
Lawrence J. Bessinger 2,750 ****
James R. Brannen 2,930 ****
Richard T. Brunelle 3,550 ****
John H. Stratton, Jr. 4,932 ****
Directors and executive 244,456 16.17%
officers as a group
(16 persons)
**** Owns less than 1% of the Company's common stock.
(1) Included in the shares listed as "beneficially owned" and in the
calculation of common stock ownership are the following shares which the
persons listed have the right to acquire prior to the expiration date shown
pursuant to vested stock options granted under the 1999 stock option and
grant plan - Mr. Bessinger (1,500 prior to June 15, 2009 and 1,250 prior to
October 17, 2010), Mr. Brannen (1,500 prior to June 15, 2009 and 1,250
prior to October 17, 2010), Mr. Brunelle (2,000 prior to June 15, 2009 and
1,500 prior to October 17, 2010) and Mr. Stratton (2,000 prior to June 15,
2009 and 1,500 prior to October 17, 2010).
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation for services rendered in all capacities to the Company
during the fiscal years ended December 31, 2001, 2000, and 1999, of those
persons who were, at December 31, 2001: (i) the chief executive officer of the
Company and (ii) the other executive officers of the Company whose total annual
salary and bonus exceeded $100,000 (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
--------------------------------------------- ------------------
Other Annual(1) Securities Underlying Other(2)
Name and Principal Position Year Salary Bonus Compensation Options/SARs (#) Compensation
- -----------------------------------------------------------------------------------------------------------------------------------
William J. Woodward 2001 $250,000 $ 28,210 $ 2,855 2,125 $9,840
Chairman, President and 2000 240,000 41,500 2,750 2,125 5,536
Chief Executive Officer 1999 225,000 39,921 2,461 7,500 3,375
George L. Fredette 2001 122,000 2,440 1,220 875 2,346
Senior Vice President and 2000 120,923 2,365 1,182 875 2,344
Chief Financial Officer 1999 95,830 16,381 24,390 3,000 863
Lawrence J. Bessinger 2001 98,923 5,935 989 625 1,978
Senior Vice President 2000 91,166 6,382 912 625 1,823
1999 76,957 4,617 769 1,500 1,145
James R. Brannen 2001 101,539 6,092 1,015 625 2,031
Senior Vice President 2000 90,000 6,300 900 625 1,800
1999 78,505 4,710 785 1,500 1,215
Richard T. Brunelle 2001 112,923 6,775 1,129 750 2,122
Senior Vice President 2000 107,250 7,507 1,073 750 2,063
Berlin City Bank 1999 101,255 6,249 1,041 2,000 1,515
John H. Stratton, Jr 2001 113,558 6,813 1,136 750 2,271
Senior Vice President 2000 111,616 7,813 1,116 750 2,232
Berlin City Bank 1999 104,330 6,020 1,003 2,000 1,504
(1) The compensation reported in this column for 2001 is comprised of amounts allocated to the accounts of the Named Executive
Officers in connection with the Company's Profit Sharing Plan.
(2) The compensation reported in this column for 2001 is composed of: (a) the following employer matching contributions allocated
to the accounts of the Named Executive Officers in connection with the Company's 401(k) Plan: Mr. Woodward - $3,400; Mr.
Fredette - $2,346; Mr. Bessinger - $1,978; Mr. Brannen - $2,031; Mr. Brunelle - $2,122; and Mr. Stratton - $2,271; and (b)
with respect to Mr. Woodward, $6,440 which represents imputed income to Mr. Woodward associated with the term portion of a
split dollar life insurance arrangement.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table shows stock option exercises by the Named Executive
Officers during the fiscal year ended December 31, 2001. In addition, this table
includes the number of shares covered by both exercisable and unexercisable
options as of December 31, 2001. Also reported are the values for "in-the money"
options, which represent the positive spread between the exercise price of any
such existing options and the year-end closing price of the Company's common
stock.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/
Options/SARs at FY- SARs at FY-End ($)
Shares Acquired Value Realized(1) End(#) Exercisable/ Exercisable/
Name On Exercise (#) ($) Unexercisable Unexercisable(1)
- -------------------------------------------------------------------------------------------------------------
William J. Woodward 0 0 11,750/4,250 22,844/22,844
George L. Fredette 0 0 4,750/1,750 9,406/ 9,406
Richard T. Brunelle 0 0 3,500/1,500 8,063/ 8,063
John H. Stratton, Jr. 0 0 3,500/1,500 8,063/ 8,063
(1) Calculated using a market price of $28.00 per share.
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's common stock (assuming $100 was invested on September 30, 1997, the
date when the Company's common stock became publicly traded, and all dividends
were reinvested) against (i) the cumulative total return of the S&P Composite
500 Stock Index, and (ii) the NASDAQ Bank Stock Index.
9/30/97 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
NWFI $100.00 $103.33 $ 90.83 $ 86.67 $ 78.33 $ 93.33
S&P 500 100.00 102.44 129.76 155.10 139.38 121.20
NASDAQ Bank Stocks 100.00 109.97 97.03 89.28 102.38 112.70
EMPLOYMENT CONTRACTS
Mr. Woodward has entered into an employment agreement with the Company.
Pursuant to the employment agreement, he provides ongoing services to the
Company on a full-time basis for a period of three years. This term is
automatically renewed for a one year period commencing on each anniversary of
the agreement unless either he or the Company gives written notice to the other
electing not to extend the term. The employment agreement provides for annual
base salaries that are subject to increase from time to time in the discretion
of the Board of Directors. The employment agreement also provides that he is
entitled to participate in any incentive or bonus program established by the
Board of Directors, as well as other employee benefit plans which the Company
may from time to time have in effect for all or most of its senior executives.
In addition to certain confidentiality and non-compete provisions, the
agreement provides that if an executive is terminated from full-time employment
with the Company without cause prior to the end of the respective term, then he
will be entitled to receive his base salary at the rate then in effect and
certain group health benefits for the remainder of such term (the "Termination
Benefits Period"); provided, that in the event such executive commences any
employment or self-employment during the Termination Benefits Period, the
remaining amount of base salary due, for the period from the commencement of
such employment or self-employment to the end of the Termination Benefit Period,
will be reduced by one-half of the salary such executive receives from such
employment or self-employment. In addition, if such executive receives benefits
from such employment or self-employment comparable to those benefits provided by
the Company, the continuation of group health benefits shall cease effective as
of the date of commencement of such employment or self-employment.
The employment agreement also provides for termination benefits if the
executives' employment with the Company is terminated under certain
circumstances following a "change of control." If within 18 months following a
change of control, such executive's employment is terminated by the Company or
its successor or by such executive following the occurrence of certain adverse
actions taken with respect to such executive's employment, or if such
executive's employment is terminated without cause, the Company must, in lieu of
any other termination benefits described above, pay to such executive (or such
executive's estate, if applicable) a lump-sum payment equal to 2.99 times such
executive's "base amount" (within the meaning of section 280G of the Internal
Revenue Code of 1986, as amended).
KEY EMPLOYEE AGREEMENTS
The Company and its subsidiaries have entered into Key Employee
agreements with certain officers. These agreements provide for payments, under
certain circumstances, to the officer upon the officer's termination after a
change in control. The amount of such payments is set forth in their individual
key employee agreements.
PENSION PLANS
The Company maintains a noncontributory defined benefit pension plan
covering all full-time and part-time employees who work at least 1,000 hours,
have completed one year of service and have attained the age of 21. Vesting will
occur after 5 years, and age 65 will be the normal retirement age. Early
retirement may be taken, however, after age 55.
The following table illustrates estimated annual pension benefits for
retirement at age 65 under the most advantageous plan provisions available for
the various levels of compensation and years of service, limited to 30. The
figures in this table are calculated based on (1) 1.00% of the final 5 years
average total W-2 earnings plus (2) 0.65% of compensation in excess of covered
compensation times (3) the number of years of service. Covered compensation for
the purpose of this calculation is currently $39,444.
AVERAGE
COMPENSATION YEARS OF SERVICE
- --------------------------------------------------------------------------------
15 20 25 30 35
- --------------------------------------------------------------------------------
$125,000 27,092 36,122 45,153 54,183 54,183
$150,000 33,279 44,372 55,465 66,558 66,558
$170,000 38,229 50,972 63,715 76,458 76,458
$175,000 39,467 52,622 65,778 78,933 78,933
$200,000 45,654 60,872 76,090 91,308 91,308
$225,000 45,654 60,872 76,090 91,308 91,308
$250,000 45,654 60,872 76,090 91,308 91,308
The compensation used to determine retirement benefits under the pension
plan is calculated on the same basis as compensation set forth in the Summary
Compensation Table. Benefits payable under the plan are not offset by social
security benefits. The officers named in the Summary Compensation Table have
been credited with the following years of service for the purpose of determining
their retirement benefits: Mr. Woodward, four years; Mr. Bessinger, twenty-five
years; Mr. Brannen, eighteen years; Mr. Brunelle, eleven years; and Mr.
Stratton, twelve years.
REPORT OF THE AUDIT AND COMPLIANCE COMMITTEE
The Board of Directors has established an Audit and Compliance Committee,
whose members during 2001 were Arnold P. Hanson, Jr., Chairman; Stephen G.
Boucher; Barry J. Kelly; and John H. Noyes. The Board of Directors has
determined that the members of the Audit and Compliance Committee are
"independent" under the rules of the Nasdaq Stock Market.
During 2001, the Audit and Compliance Committee reviewed and discussed the
audited financial statements with the Company's management and discussed with
Shatswell, MacLeod & Company, P.C., the Company's independent auditors, the
matters required to be discussed by SAS No. 61 (Communication with Audit
Committees) as amended by SAS No. 90 (Audit Committee Communications).
In addition, the Audit and Compliance Committee has also received from the
independent auditors the written disclosures and the letter required by the
Independence Standards Board Standards No. 1 (Independence Discussions with the
Audit Committee) and has discussed with the auditors their independence and
received from the auditors disclosures regarding their independence.
The Audit and Compliance Committee has recommended to the Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2001, based on its
review and the discussions described above.
During the year ended December 31, 2001, the Company paid the following
fees to Shatswell, MacLeod & Company, P.C., the Company's principal accountants:
FEES PAID TO INDEPENDENT AUDITORS
Audit Fees $92,000
Financial Information Systems Design and Implementation Fees None
All Other Fees ($12,500 for tax preparation; $5,000 for
certification of the retirement plan; and $8,500 for assistance
in the preparation of a disaster recovery plan) $26,000
When considering the auditors' independence, the Company's Audit and
Compliance Committee considered and concluded that the provision of the
non-audit services above is compatible with maintaining the auditor's
independence.
Submitted by the members of the Audit and Compliance Committee.
Arnold P. Hanson, Jr., Chairman
Stephen G. Boucher
Barry J. Kelley
John H. Noyes
REPORT OF THE HUMAN RESOURCES AND COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION
GENERAL POLICIES
The Human Resources and Compensation Committee is comprised of four outside
Directors. The Human Resources and Compensation Committee's responsibility is to
set policy and oversee the administration of the Company's compensation and
benefits. Working with an outside bank compensation consultant, the committee
recommends the approval of the salary program for the entire organization. It
also oversees the compensation of the Chief Executive Officer ("CEO") and
certain other senior officers.
The base salary of these senior executive officers is set at an amount
within an established salary range that reflects the executive's position,
duties and level of responsibility. The salary range consists of minimum and
maximum levels distributed around an average of base salaries paid to executives
who hold substantially similar positions within a selected peer group. Any
bonuses are designed to reward executives for performance and are based
primarily on the Company's financial results.
CEO COMPENSATION
In connection with Mr. Woodward's employment agreement described above, the
Company engaged a bank compensation consultant to act as its advisor in the
matter of executive compensation. This consultant specializes in compensation
matters for New England financial institutions and maintains an extensive data
base for banks in various asset size groups.
Using a variety of established surveys concerning bank salaries, the
Company's consultant recommended a competitive salary range for Mr. Woodward. In
connection with Mr. Woodward's employment agreement, the consultant's
recommendation was subsequently approved by the Board.
Submitted by the members of the Human Resources and Compensation Committee.
Stephen G. Boucher, Chairman
Arnold P. Hanson, Jr.
Randall G. Labnon
John H. Noyes
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has, during its ordinary course of business, made loans to
directors and executive officers. Loans are made on substantially the same
terms, including rates and collateral, as those prevailing at the time for
comparable transactions with other persons and do not involve more than the
normal risk of collectibility or present other unfavorable features. The Company
has had (and expects to have in the future) banking transactions with directors,
executive officers, principal stockholders, and their associates on the same
terms (including interest rates and collateral on loans) as those prevailing at
the same time for comparable transactions with others, and do not involve more
than the normal risk of collectibility or present other unfavorable features.
The largest aggregate amount of such extensions of credit to directors,
executive officers, principal stockholders, and their associates during the
period of January 1, 2001 through December 31, 2001 was $1,085,028. The
aggregate amount owing to the Company from such individuals on December 31, 2001
was $822,251, or 1.90% of stockholders' equity. As mentioned above, these loans
were made on the same terms for comparable transactions with others.
There were no executive officers or directors whose direct or indirect
liability to the Company exceeded 10% of stockholders' equity at any time during
the year.
During 2001 the Company received no services from directors and their
affiliated business or professional entities, which either totaled $60,000 or
represented more than 5% of gross revenue of the Company or such affiliated
entity.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Shatswell, MacLeod & Company, P.C. was the Company's independent auditing
firm for 2001. Representatives of Shatswell, MacLeod & Company, P.C. are
expected to be present at the meeting to respond to stockholders' questions and
will have the opportunity to make a statement if they so desire. The firm of
Shatswell, MacLeod & Company, P.C. has served as the Company's independent
auditing firm since September 30, 1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and
Regulations of the Securities and Exchange Commissions (the "SEC"), the
Company's executive officers and directors must file reports of ownership and
changes in ownership with the SEC and the Nasdaq Stock Market, Inc. and furnish
the Company with copies of all Section 16(a) reports they file. Each of the
following individuals failed to file Form 4s with respect to transactions in
Northway's common stock on a timely basis: Barry J. Kelley, Director, one
occasion representing one transaction and John D. Morris, Director, three
occasions representing three transactions. Form 4s relating to each of the
foregoing transactions were subsequently filed.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement.
However, if any other matters should properly come before the Meeting, it is
intended that proxies in the accompanying form will be voted in respect thereof
in accordance with the judgment of the person or persons voting the proxies.
MISCELLANEOUS
A copy of the Company's Annual Report to Stockholders, including financial
statements has been mailed to all stockholders of record as of the close of
business on March 22, 2002. Any stockholder who has not received a copy of such
Annual Report or would like to obtain a copy of the Company's Annual Report on
Form 10-K may do so by writing Richard P. Orsillo, Vice President & Corporate
Controller, c/o Northway Financial, Inc., 9 Main Street, Berlin, NH 03570. Such
Annual Report is not to be treated as a part of the proxy solicitation material
or as having been incorporated herein by reference.
STOCKHOLDER PROPOSALS
The Company's By-Laws provide that any director nominations and new
business proposals intended to be submitted by stockholders in connection with
an Annual Meeting of Stockholders must be filed, delivered to, or mailed to and
received by, the Company at its principal executive office not less than 75 days
nor more than 120 days prior to the anniversary date of the immediately
preceding Annual Meeting (the "Anniversary Date") or, in other words, no later
than March 7, 2003 and no earlier than January 21, 2003; provided, however, that
in the event the Annual Meeting is scheduled to be held on a date more than 30
days before the Anniversary Date or more than 60 days after the Anniversary
Date, a stockholder's notice shall be timely if delivered to, or mailed to and
received by, the Company at its principal executive office not later than the
close of business on the later of (1) the 75th day prior to the scheduled date
of such Annual Meeting and (2) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made by the Company.
Any proposal should be sent to, and a copy of the applicable Bylaw provisions
may be obtained, without charge, upon written request to, Joseph N. Rozek,
Secretary, of the Company at its principal executive office in Berlin, New
Hampshire. The proposal must also comply with the other requirements of the
Company's Bylaws. Proxies solicited by the Board of Directors will confer
discretionary voting authority with respect to these proposals, subject to SEC
rules governing the exercise of this authority.
In addition to the foregoing, in accordance with the rules of the SEC, any
proposal that a stockholder intends to present at the annual meeting of
stockholders in 2003 must be received by the Company not less than 120 days
prior to the anniversary date of the immediately preceding proxy statement, or
December 9, 2002, to be eligible for inclusion in the proxy statement and form
of proxy relating to such meeting. These proposals must also comply with the
rules of the SEC governing the form and content of proposals in order to be
included in the Company's proxy statement and form of proxy.
By Order of the Board of Directors
Joseph N. Rozek
Secretary
Berlin, New Hampshire
April 8, 2002
DETACH HERE ZNWF12
PROXY
NORTHWAY FINANCIAL, INC.
9 MAIN STREET, BERLIN, NEW HAMPSHIRE 03570
PROXY FOR COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William J. Woodward and Fletcher W. Adams, and
each of them, proxies with full power of substitution to vote for and on behalf
of the undersigned at the Annual Meeting of Stockholders of Northway Financial,
Inc. ("Northway"), to be held at the Town & Country Motor Inn, Route 2,
Shelburne, New Hampshire, on May 21, 2002 at 2:00 p.m., and at any adjournment
or postponements thereof, hereby granting full power and authority to act on
behalf of the undersigned at said meeting or any adjournment or postponement
thereof. The undersigned revokes any proxy previously given in connection with
such meeting and acknowledges receipt of Notice of the Annual Meeting of
Stockholders and Northway's 2001 Annual Report to Stockholders.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SEE REVERSE SIDE SIDE
- ----------- -----------
NORTHWAY FINANCIAL, INC.
C/O EQUISERVE
P.O. BOX 43068
PROVIDENCE, RI 02940
DETACH HERE ZNWF11
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO
INSTRUCTIONS ARE INDICATED, THE UNDERSIGNED'S VOTES WILL BE CAST "FOR" EACH OF SUCH MATTERS. PLEASE SIGN AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE.
1. Proposal to elect (01) Stephen G. Boucher, (02) Such other business as may properly come before
Barry J. Kelley and (03) Randall G. Labnon for the meeting or any adjournments or postponements
a three year term to continue until the 2005 thereof.
Annual Meeting of Stockholders, and until the
successor of each is duly elected and
qualified.
FOR WITHHELD
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
[ ] ----------------------------------
For all nominees except as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT. [ ]
For joint accounts, each owner should sign.
Executors, administrators, trustees, corporate
officers and others acting in a representative
capacity should give full title or authority.
Signature: Date: Signature: Date:
-------------------------- ------------ -------------------------- -----------