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.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0- 11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total Fee Paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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NORTHWAY
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FINANCIAL
NORTHWAY FINANCIAL, INC.
April 14, 2003
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Northway Financial, Inc., to be held on Tuesday, May 27, 2003 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 four (4) class III directors to serve until the 2006
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
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NORTHWAY
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FINANCIAL
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 27, 2003
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Stockholders of
Northway Financial, Inc. will be held on Tuesday, May 27, 2003 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 four (4) class III directors to serve until the 2006
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 28, 2003
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 14, 2003
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 27, 2003
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 27, 2003, 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 14, 2003 to stockholders of record at the close of business on March 28,
2003 in connection with the solicitation.
At the close of business on March 28, 2003, there were outstanding and
entitled to vote 1,506,574 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 28, 2003 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"), Pemigewasset National Bank, a national bank based in Plymouth, New
Hampshire ("PNB"), Northway Capital Trust I ("NCT I"), a Delaware statutory
business trust, and Northway Capital Trust II ("NCT II"), a Delaware statutory
business trust.
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES AND DIRECTORS CONTINUING IN OFFICE
The Company's Board of Directors is currently composed of eleven
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, four directors will be elected to serve for a
three-year term until the 2006 Annual Meeting, and until their successors are
duly elected and qualified. The Board of Directors has nominated for election
Frederick C. Anderson, Charles H. Clifford, Jr., John D. Morris, and Brien L.
Ward, 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 28, 2003, 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
Name and Business Experience Director To Owned at Stock
for Past Five Years Age Since Expire Mar. 28, 2003(1) Ownership(1)
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NOMINEES OF THE BOARD
Anderson, Frederick C. 51 2002 2006 1,145 (2) ****
President, NH Electric
Cooperative, Inc.
Clifford, Jr., Charles H. 67 1997 2006 2,500 ****
Retired Businessman
Morris, John D. 72 1997 2006 6,536 ****
Retired Businessman
Ward, Brien L. 50 2002 2006 167 ****
Attorney
DIRECTORS CONTINUING IN OFFICE
Adams, Fletcher W. 66 1997 2004 54,500 (3) 3.62%
Vice-Chairman of the Board,
Northway Financial, Inc.;
Chairman of the Board and
President Pemigewasset
National Bank
Hanson, Jr., Arnold P. 53 1997 2004 19,312 (4) 1.28%
President, Isaacson
Structural Steel, Inc.
Noyes, John H. 56 1997 2004 12,185 (5) ****
President, Noyes Insurance
Agency, Inc.; President,
Central Square Insurance, Inc.
Woodward, William J. 57 1997 2004 86,963 5.77%
Chairman of the Board,
President, Chief Executive
Officer, Northway Financial,
Inc. and The Berlin City Bank;
Chief Executive Officer,
Pemigewasset National Bank
Boucher, Stephen G. 56 1999 2005 250 ****
Chief Executive Officer and
Chairman of the Board, Airmar
Technology Corp.;
Kelley, Barry J. 53 1997 2005 42,039 (6) 2.79%
President, White
Mountain Lumber, Co.
Labnon, Randall, G. 49 1997 2005 3,072 ****
General Manager, Town &
Country Motor Inn
**** 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 6,375 prior to October 17, 2010) and Mr. Adams (3,500 prior
to June 15, 2009).
(2) Includes 104 shares owned jointly with son.
(3) Includes 23,000 shares held in a trust for which Mr. Adams serves as trustee.
(4) Includes 19,000 shares held in a trust for which Mr. Hanson serves as trustee and 312 shares owned
jointly with spouse.
(5) Includes 12,185 shares held in a trust for which Mr. Noyes serves as trustee.
(6) Includes 32,846 shares owned jointly with spouse and 3,135 shares owned by spouse for which Mr. Kelley
may be deemed the beneficial owner.
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, 2002.
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 current 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 Frederick C. Anderson and Brien L. Ward.
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, a copy of which is included as Appendix A to this proxy
statement.
NUMBER OF
MEETINGS: This Committee met five (5) times during the 2002 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 2002 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 2003 Annual Meeting. The Committee will consider
director nominees recommended by Stockholders. See Stockholder
Proposals on page 15 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
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William J. Woodward 57 1989
Chairman, President, and Chief Executive Officer
Northway Financial, Inc. and The Berlin City Bank; and
Chief Executive Officer, Pemigewasset National Bank
Fletcher W. Adams 66 1990
Vice Chairman, Northway Financial, Inc.; Chairman
of the Board and President, Pemigewasset National Bank
Lawrence J. Bessinger 58 1999
Senior Vice President, Northway Financial, Inc.
James R. Brannen 42 1999
Senior Vice President, Northway Financial, Inc.
Richard T. Brunelle 61 1996
Senior Vice President, The Berlin City Bank and
Pemigewasset National Bank
John H. Stratton, Jr. 57 1990
Senior Vice President, Northway Financial, Inc.
Robert I. Walker 64 1999
Senior Vice President, Northway Financial, Inc.
Richard P. Orsillo 53 2001
Senior Vice President and Chief Financial Officer,
Northway Financial, Inc., The Berlin City Bank and
Pemigewasset National Bank
Ronald P. Goudreau 49 2003
Senior Vice President, Northway Financial, Inc.
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 Chief Executive Officer of PNB since
2002 and 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 and as Chairman of the Board of PNB since February 1999.
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 the Company
since 2003 and is responsible for the retail banking division of both subsidiary
banks. Prior to assuming this position he served as Senior Vice President of BCB
since 1990 where he was responsible for the BCB retail banking division.
Robert I. Walker has served as Senior Vice President of the Company since
2003 and is responsible for retail product development and sales. From June 1999
until his promotion in January 2003, he served as Senior Vice President of PNB
where he was responsible for the PNB 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.
Richard P. Orsillo has served as Senior Vice President and Chief Financial
Officer of the Company, BCB and PNB since 2002. From December 1998 until his
promotion he served as Vice President and Corporate Controller of the Company,
BCB and PNB. 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.
Ronald P. Goudreau has served as Senior Vice President and Operations
Officer of the Company since 2003. He is responsible for both deposit and loan
operations. Prior to joining the Company, he served as Senior Compliance
Examiner of the Federal Deposit Insurance Corporation since 1992.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth, as of March 28, 2003, the beneficial
ownership of common stock by (i) each of the executive officers named under
"Executive Compensation" below and (ii) all directors and executive officers as
a group; and (iii) each person, including any group of persons, known by the
Company to beneficially own five percent (5%) or more of the outstanding common
stock. See "Information Concerning Directors and Nominees" above for the
beneficial ownership of common stock by Mr. Adams and other directors of the
Company.
Shares of Common Percent of Shares of
Name Stock Beneficially Owned(1) Common Stock Ownership(1)
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EXECUTIVE OFFICERS
William J. Woodward(2) 86,963 5.77%
James R. Brannen 3,555 ****
Richard T. Brunelle 4,300 ****
Richard P. Orsillo 1,252 ****
John H. Stratton, Jr. 5,682 ****
DIRECTORS AND EXECUTIVE OFFICERS 247,583 16.43%
AS A GROUP (18 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. Brannen (1,500 prior to June
15, 2009 and 1,875 prior to October 17, 2010), Mr. Brunelle (2,000 prior to June 15,
2009 and 2,250 prior to October 17, 2010), Mr. Orsillo (1,125 prior to October 17,
2010), and Mr. Stratton (2,000 prior to June 15, 2009 and 2,250 prior to October 17,
2010).
(2) Included in the shares listed as "beneficially owned" and in the calculation of
common stock ownership are 13,875 shares which Mr. Woodward has the right to acquire
prior to the expiration date shown pursuant to vested stock options granted under the
1999 stock option and grant plan as follows: 7,500 prior to June 15, 2009 and 6,375
prior to October 17, 2010.
5% HOLDER
Shares of Common Percent of Shares of
Name and Address Stock Beneficially Owned Common Stock Ownership
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1. Jeffrey L. Gendell(1) 108,833 7.22%
237 Park Avenue, 9th Floor
New York, NY 10017
(1) Shares voting power through Tontine Financial Partners, L.P.; Tontine Management,
L.L.C.; and Tontine Overseas Associates, L.L.C.
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, 2002, 2001, and 2000, of those
persons who were, at December 31, 2001: (i) the chief executive officer of the
Company and (ii) the other four most highly compensated executive officers
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation (2)
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Securities Underlying Other(3)
Name and Principal Position Year Salary Bonus(1) Options/SARs(#) Compensation
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William J. Woodward 2002 $262,500 $ 5,700 0 $ 25,735
Chairman, President and 2001 250,000 31,065 0 21,413
Chief Executive Officer 2000 240,000 44,250 8,500 10,339
James R. Brannen 2002 108,077 2,162 0 2,161
Senior Vice President 2001 101,539 7,107 0 2,031
2000 90,000 7,200 2,500 1,800
Richard T. Brunelle 2002 120,289 2,406 0 2,221
Senior Vice President 2001 112,923 7,904 0 2,122
Berlin City Bank and 2000 107,250 8,580 3,000 2,063
Pemigewasset National Bank
Richard P. Orsillo 2002 115,000 2,300 0 1,990
Senior Vice President 2001 90,500 6,335 0 1,810
and Chief Financial Officer 2000 87,321 6,959 1,500 1,740
John H. Stratton, Jr 2002 117,423 2,348 0 2,348
Senior Vice President 2001 113,558 7,949 0 2,271
2000 111,616 8,929 3,000 2,232
(1) The compensation reported in this column is comprised of cash bonuses and amounts allocated to the
accounts of the Named Executive Officers in connection with the Company's Profit Sharing Plan. During
2001 and 2000, respectively, the amounts allocated to the accounts of the Named Executive Officers in
connection with the Company's Profit Sharing Plan were as follows: Mr. Woodward, $2,855 and $2,750; Mr.
Brannen, $1,015 and $900; Mr. Brunelle, $1,129 and $1,073; Mr. Orsillo, $905 and $870; and Mr. Stratton,
$1,136 and $1,116.
(2) Each grant awarded in 2002 vests in four equal installments on October 17, 2000, July 1, 2001, July 1,
2002 and July 1, 2003.
(3) The compensation reported in this column is comprised of: (a) employer matching contributions allocated
to the accounts of the Named Executive Officers in connection with the Company's 401(k) Plan; and (b)
with respect to Mr. Woodward, $7,015, $6,440 and $736, which represents imputed income to Mr. Woodward
associated with the term portion of a split-dollar life insurance arrangement for 2002, 2001 and 2000,
respectively. With respect to 2002, 2001 and 2000, the reported compensation amounts also include
$14,720, $11,573 and $4,067, respectively, which amounts represent imputed income to Mr. Woodward
resulting from the premium payments by the Company under a split-dollar life insurance arrangement prior
to enactment of the Sarbanes-Oxley Act on July 30, 2002. The imputed income represents the interest the
Company would have received had it loaned the premium amounts to Mr. Woodward at a market rate of
interest. The Company expects to recover all split-dollar premiums paid by it plus interest from the
policy upon Mr. Woodward's death. The estimated cost to the Company of its premium payments, which
estimated cost is equal to the interest foregone on the premiums paid (determined using the long-term
applicable federal rate) less the interest the Company expects to receive at the time it recovers its
premium payments, is $143,580 and $200,315 for 2001 and 2000, respectively. Such estimated cost,
however, is not an expense to the Company for accounting purposes.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table shows stock option exercises by the Named Executive
Officers during the fiscal year ended December 31, 2002. In addition, this table
includes the number of shares covered by both exercisable and unexercisable
options as of December 31, 2002. Also reported are the values for "in-the money"
options, which represent the positive spread between the exercise price of any
such existing options and the year-end closing price of the Company's common
stock.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/
Options/SARs at FY- SARs at FY-End ($)
Shares Acquired Value Realized(1) End(#) Exercisable/ Exercisable/
Name On Exercise (#) ($) Unexercisable Unexercisable(1)
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William J. Woodward 0 0 13,875/2,125 79,359/18,328
James R. Brannen 0 0 3,375/625 21,047/5,391
Richard T. Brunelle 0 0 4,250/750 25,906/6,469
Richard P. Orsillo 0 0 1,125/375 9,703/3,234
John H. Stratton, Jr. 0 0 4,250/750 25,906/6,469
(1) Calculated using a market price of $31.25 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.
[GRAPHIC OMITTED]
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12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
- ------------------------------------------------------------------------------------------
NWFI $ 100.00 $ 89.26 $ 86.73 $ 79.42 $ 101.46 $115.50
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S&P 500 100.00 126.67 151.40 136.05 118.31 90.66
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NASDAQ Bank Stocks 100.00 88.23 81.19 93.10 102.48 107.11
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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 Mr. Woodward 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 he 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 he receives from such employment or self-employment. In
addition, if he 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 Mr.
Woodward's employment with the Company is terminated under certain circumstances
following a "change of control." If within 18 months following a change of
control, his employment is terminated by the Company or its successor or by
himself following the occurrence of certain adverse actions taken with respect
to his employment, or if his employment is terminated without cause, the Company
must, in lieu of any other termination benefits described above, pay to him (or
his estate, if applicable) a lump-sum payment equal to 2.99 times his "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 the Named Executive Officers as well as other senior officers of
the Company. These agreements provide for payments to the officer upon the
officer's termination or resignation in connection with certain specified
actions adverse to the officer's employment status following a change in control
of the Company. The amount of such payments ranges from 1.0 to 1.5 times such
officer's annual compensation.
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 $43,968.
AVERAGE
COMPENSATION YEARS OF SERVICE
- -------------------------------------------------------------------------------
15 20 25 30 35
- -------------------------------------------------------------------------------
$125,000 26,651 35,534 44,418 53,301 53,301
$150,000 32,838 43,784 54,730 65,676 65,676
$170,000 37,788 50,384 62,980 75,576 75,576
$175,000 39,026 52,034 65,043 78,051 78,051
$200,000 45,213 60,284 75,355 90,426 90,426
$225,000 45,213 60,284 75,355 90,426 90,426
$250,000 45,213 60,284 75,355 90,426 90,426
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 except that under federal tax laws a maximum of $200,000 of
compensation may be recognized. 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, five years; Mr. Brannen,
nineteen years; Mr. Brunelle, twelve years; Mr. Orsillo, four 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 2002 were Arnold P. Hanson, Jr., Chairman; Stephen G.
Boucher; Barry J. Kelly; and John H. Noyes. At the end of 2002, the Board of
Directors reviewed the composition of the Audit and Compliance Committee. Mr.
Noyes stepped down from the Audit and Compliance Committee as the Board
determined that he may not be deemed independent due to his membership on the
Executive Committee. The Board then placed Brien L. Ward and Frederick C.
Anderson on the Audit and Compliance Committee. 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 2002, 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, 2002, based on its
review and the discussions described above.
During the year ended December 31, 2002, the Company paid the following
fees to Shatswell, MacLeod & Company, P.C., the Company's principal accountants:
FEES PAID TO INDEPENDENT AUDITORS
Audit Fees $89,000
Financial Information Systems Design and Implementation Fees None
All Other Fees ($12,500 for tax preparation; $5,300 for certification
of the retirement plan;$18,300 for assistance in the preparation
of a disaster recovery plan) $36,100
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, 2002 through December 31, 2002 was $914,990. The aggregate
amount owing to the Company from such individuals on December 31, 2002 was
$839,464, or 1.89% 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 2002 the Company received services from certain directors and their
affiliated business or professional entities, which either totaled $60,000 or
represented more than 5% of that firm's gross revenue, as follows: Vaillancourt
& Woodward, Inc., of which William J. Woodward is a part owner and treasurer,
provided insurance services totaling $92,000; Noyes Insurance Agency, of which
John H. Noyes is owner, provided insurance services totaling $64,000; and New
Hampshire Electric Cooperative, of which Frederick C. Anderson is President,
provided electric services totaling $95,000.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Shatswell, MacLeod & Company, P.C. was the Company's independent auditing
firm for 2002. 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. To our
knowledge, each of the following individuals failed to timely report
transactions in Northway's common stock: Barry J. Kelley, one occasion
representing three transactions; and John D. Morris, one occasion representing
one transaction. 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 28, 2003. 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, free of charge, by writing Richard P. Orsillo, Senior Vice
President & Chief Financial Officer, 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 13, 2004 and no earlier than January 28, 2004; 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 2004 must be received by the Company not less than 120 calendar
days prior to the anniversary date of the immediately preceding proxy statement,
or December 16, 2003, 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 14, 2003
APPENDIX A
NORTHWAY FINANCIAL, INC BOARD OF DIRECTORS AUDIT COMMITTEE CHARTER
(Adopted by the Board of Directors at a meeting held on December 17, 2002)
I. GENERAL STATEMENT OF PURPOSE
The purposes of the Audit Committee of the Board of Directors (the "Audit
Committee") of Northway Financial, Inc. (the "Company") are to:
o assist the Board of Directors (the "Board") in its oversight of (1) the
integrity of the Company's financial statements, and (2) the
qualifications, independence and performance of the Company's independent
auditors; and
o prepare the report required by the rules of the Securities and Exchange
Commission (the "SEC") to be included in the Company's annual proxy
statement.
II. COMPOSITION
The Audit Committee shall consist of at least three (3) members of the
Board, each of whom must (1) be "independent" as defined under the
Marketplace Rules of the National Association of Securities Dealers, Inc.
("NASD"), (2) satisfy the criteria for independence set forth in Section
301 of the Sarbanes-Oxley Act of 2002 (the "S-O Act"), and (3) not own or
control 20% or more of the Company's voting securities, or such lesser
amount as may be established by the SEC in rules promulgated pursuant to
Section 301 of the S-O Act.
Notwithstanding the foregoing, one director who (1) is not "independent" as
defined under the rules established by the Marketplace Rules of the NASD,
(2) satisfies the criteria for independence set forth in Section 301 of the
S-O Act, (3) does not own or control 20% or more of the Company's voting
securities, and (4) is not a current officer or employee or a "family
member" (as defined under applicable NASD Rules) of such employee, may be
appointed to the Audit Committee, if the Board, under exceptional and
limited circumstances, determines that membership on the Audit Committee by
the individual is required by the best interests of the Company and its
stockholders, and the Board discloses, in the next annual proxy statement
subsequent to such determination, the nature of the relationship and the
reasons for that determination. A member appointed under this exception may
not serve on the Audit Committee for more than two years and may not chair
the Audit Committee.
Each member of the Audit Committee must be able to read and understand
fundamental financial statements, including a company's balance sheet,
income statement, and cash flow statement.
The Nominating Committee shall recommend nominees for appointment to the
Audit Committee annually and as vacancies or newly created positions occur.
The members of the Audit Committee shall be appointed annually by the Board
and may be replaced or removed by the Board with or without cause.
Resignation or removal of a Director from the Board, for whatever reason,
shall automatically and without any further action constitute resignation
or removal, as applicable, from the Audit Committee. Any vacancy on the
Audit Committee, occurring for whatever reason, may be filled only by the
Board. The Board shall designate one member of the Audit Committee to be
Chairman of the committee.
III. COMPENSATION
A member of the Audit Committee may not, other than in his or her capacity
as a member of the Audit Committee, the Board or any other committee
established by the Board, receive from the Company any consulting, advisory
or other compensatory fee from the Company. A member of the Audit Committee
may receive additional directors' fees to compensate such member for the
significant time and effort expended by such member to fulfill his or her
duties as an Audit Committee member. Such additional fees may be greater
than those fees paid to other directors, but should be commensurate with
the time and effort expected to be expended by such Audit Committee member
in the performance of his or her duties as an Audit Committee member.
IV. MEETINGS
The Audit Committee shall meet as often as it determines is appropriate to
carry out its responsibilities under this charter, but not less frequently
than quarterly. A majority of the members of the Audit Committee shall
constitute a quorum for purposes of holding a meeting and the Audit
Committee may act by a vote of a majority of the members present at such
meeting. The Chairman of the Audit Committee, in consultation with the
other Committee members, may determine the frequency and length of the
committee meetings and may set meeting agendas consistent with this
Charter.
V. RESPONSIBILITIES AND AUTHORITY
A. REVIEW OF CHARTER
o The Audit Committee shall review and reassess the adequacy of this
Charter annually and recommend to the Board any amendments or
modifications to the Charter that the Audit Committee deems
appropriate.
B. MATTERS RELATING TO SELECTION, PERFORMANCE AND INDEPENDENCE OF
INDEPENDENT AUDITOR
o The Audit Committee shall have the sole authority to appoint
(subject, if applicable, to stockholder ratification), terminate and
determine funding for the Company's independent auditor.
o The Audit Committee shall be directly responsible for oversight of
the work of the independent auditor (including resolution of
disagreements between management and the independent auditor
regarding financial reporting) for the purpose of preparing or
issuing an audit report or related work.
o The Audit Committee shall instruct the independent auditor to report
directly to the Audit Committee.
o The Audit Committee shall pre-approve all auditing services and the
terms thereof (which may include providing comfort letters in
connection with securities underwritings) and non-audit services
(other than non-audit services prohibited under Section 10A(g) of
the Exchange Act or the applicable rules of the SEC or the Public
Company Accounting Oversight Board) to be provided to the Company by
the independent auditor; provided, however, the pre-approval
requirement is waived with respect to the provision of non-audit
services for the Company if the "de minimus" provisions of Section
10A(i)(1)(B) of the Exchange Act are satisfied. This authority to
pre-approve non-audit services may be delegated to one or more
members of the Audit Committee, who shall present all decisions to
pre-approve an activity to the full Audit Committee at its first
meeting following such decision.
o The Audit Committee may review and approve the scope and staffing of
the independent auditors' annual audit plan(s).
o The Audit Committee shall request that the independent auditor
provide the Audit Committee with the written disclosures and the
letter required by Independence Standards Board Standard No. 1, as
modified or supplemented, require that the independent auditor
submit to the Audit Committee on a periodic basis a formal written
statement delineating all relationships between the independent
auditor and the Company, discuss with the independent auditor any
disclosed relationships or services that may impact the objectivity
and independence of the independent auditor, and based on such
disclosures, statement and discussion take or recommend that the
Board take appropriate action in response to the independent
auditor's report to satisfy itself of the independent auditor's
independence.
o The Audit Committee may consider whether the provision of the
services covered in Items 9(e)(2) and 9(e)(3) of Regulation 14A of
the Exchange Act (or any successor provision) is compatible with
maintaining the independent auditor's independence.
o The Audit Committee shall assure the regular rotation of the lead
audit partner and lead reviewing partner as required under Section
10A(j) of the Exchange Act.
o The Audit Committee may recommend to the Board policies with respect
to the potential hiring of current or former employees of the
independent auditor.
o The Audit Committee shall evaluate annually the independent
auditor's qualifications, performance and independence, and present
its conclusions with respect to the independent auditors to the full
Board.
C. AUDITED FINANCIAL STATEMENTS AND ANNUAL AUDIT
o The Audit Committee shall review the overall audit plan (both
internal and external) with the independent auditor and the members
of management who are responsible for preparing the Company's
financial statements, including the Company's Chief Financial
Officer and/or principal accounting officer or principal financial
officer (the Chief Financial Officer and such other officer or
officers are referred to herein collectively as the "Senior
Accounting Executive").
o The Audit Committee shall review and discuss with management
(including the Company's Senior Accounting Executive) and with the
independent auditor:
(i) the Company's annual audited financial statements and
Management's Discussion and Analysis, including (a) all
critical accounting policies and practices used or to be used
by the Company and (b) any significant financial reporting
issues that have arisen in connection with the preparation of
such audited financial statements and Management's Discussion
and Analysis, prior to the filing of the Company's Annual
Report on Form 10-K;
(ii) any analyses prepared by management, the internal auditors
and/or the independent auditors setting forth significant
financial reporting issues and judgments made in connection
with the preparation of the financial statements, including
analyses of the effects of alternative GAAP methods on the
financial statements. The Audit Committee may consider the
ramifications of the use of such alternative disclosures and
treatments on the financial statements, and the treatment
preferred by the independent auditor. The Audit Committee may
also consider other material written communications between
the registered public accounting firm and management, such as
any management letter or schedule of unadjusted differences;
(iii) the adequacy of the Company's internal controls and procedures
for financial reporting;
(iv) major changes in and other issues regarding accounting and
auditing principles and procedures, including any significant
changes in the Company's selection or application of
accounting principles; and
(v) the effect of regulatory and accounting initiatives, as well
as off-balance sheet transactions and structures, on the
financial statements of the Company.
o The Audit Committee shall review and discuss with the independent
auditor (outside of the presence of management) how the independent
auditor plans to handle its responsibilities under the Private
Securities Litigation Reform Act of 1995, and request assurance from
the auditor that Section 10A of the Private Securities Litigation
Reform Act of 1995 has not been implicated.
o The Audit Committee shall review and discuss with the independent
auditor any audit problems or difficulties and management's response
thereto. This review shall include (1) any difficulties encountered
by the auditor in the course of performing its audit work, including
any restrictions on the scope of its activities or its access to
information, (2) a discussion of the responsibilities, budget and
staffing of the Company's internal audit function, and (3) any
significant disagreements with management.
o The Audit Committee shall review and discuss with the independent
auditor those matters brought to the attention of the Audit
Committee by the auditors pursuant to Statement on Auditing
Standards No. 61 ("SAS 61") and may otherwise consider in connection
with its review of any difficulties that the auditor may have
encountered with management or others:
(i) any restrictions on the scope of the independent auditors'
activities or access to requested information;
(ii) any accounting adjustments that were noted or proposed by the
auditors but were "passed" (as immaterial or otherwise);
(iii) any communications between the audit team and the audit firm's
national office regarding auditing or accounting issues
presented by the engagement;
(iv) any management or internal control letter issued, or proposed
to be issued, by the auditors; and
(v) any significant disagreements between the Company's management
and the independent auditors.
o The Audit Committee shall review and discuss with the
independent auditors the report required to be delivered by
such auditors pursuant to Section 10A(k) of the Exchange Act.
o If brought to the attention of the Audit Committee, the Audit
Committee shall discuss with the CEO and CFO of the Company (1) all
significant deficiencies and material weaknesses in the design or
operation of internal controls and procedures for financial
reporting which could adversely affect the Company's ability to
record, process, summarize and report financial information required
to be disclosed by the Company in the reports that it files or
submits under the Exchange Act, within the time periods specified in
the SEC's rules and forms, and (2) any fraud involving management or
other employees who have a significant role in the Company's
internal controls and procedures for financial reporting.
o Based on the Audit Committee's review and discussions (1) with
management of the audited financial statements, (2) with the
independent auditor of the matters required to be discussed by SAS
61, and (3) with the independent auditor concerning the independent
auditor's independence, the Audit Committee shall make a
recommendation to the Board as to whether the Company's audited
financial statements should be included in the Company's Annual
Report on Form 10-K for the last fiscal year.
o The Audit Committee shall prepare the Audit Committee report
required by Item 306 of Regulation S-K of the Exchange Act (or any
successor provision) to be included in the Company's annual proxy
statement.
D. UNAUDITED QUARTERLY FINANCIAL STATEMENTS
o The Audit Committee shall discuss with management and the
independent auditor, such issues as may be brought to the Audit
Committee's attention by the independent auditor pursuant to
Statement on Auditing Standards No. 71 and in connection with such
auditor's review of Management's Discussion and Analysis in the
related quarterly report.
E. PROCEDURES FOR ADDRESSING COMPLAINTS AND CONCERNS
o The Audit Committee shall establish procedures for (1) the receipt,
retention and treatment of complaints received by the Company
regarding accounting, internal accounting controls, or auditing
matters and (2) the confidential, anonymous submission by employees
of the Company of concerns regarding questionable accounting or
auditing matters.
o The Audit Committee may review and reassess the adequacy of these
procedures periodically and adopt any changes to such procedures
that the Audit Committee deems necessary or appropriate.
F. REGULAR REPORTS TO THE BOARD
o The Audit Committee shall regularly report to and review with the
Board any issues that arise with respect to the quality or integrity
of the Company's financial statements, the Company's compliance with
legal or regulatory requirements, the performance and independence
of the independent auditors, the performance of the internal audit
function and any other matters that the Audit Committee deems
appropriate or is requested to review for the benefit of the Board.
VI. ADDITIONAL AUTHORITY
The Audit Committee is authorized, on behalf of the Board, to do any of
the following as it deems necessary or appropriate:
A. ENGAGEMENT OF ADVISORS
o The Audit Committee may engage independent counsel and such other
advisors it deems necessary or advisable to carry out its
responsibilities and powers, and, if such counsel or other advisors
are engaged, shall determine the compensation or fees payable to
such counsel or other advisors.
B. LEGAL AND REGULATORY COMPLIANCE
o The Audit Committee may discuss with management and the independent
auditor the legal and regulatory requirements applicable to the
Company and its subsidiaries and the Company's compliance with such
requirements. The Audit Committee may, if it determines it to be
appropriate, make recommendations to the Board or other committees
of the Board with respect to the Company's policies and procedures
regarding compliance with applicable laws and regulations.
o The Audit Committee may discuss with management legal matters
(including pending or threatened litigation) that may have a
material effect on the Company's financial statements or its
compliance policies and procedures.
C. GENERAL
o The Audit Committee may form and delegate authority to subcommittees
consisting of one or more of its members as the Audit Committee
deems appropriate to carry out its responsibilities and exercise its
powers.
o The Audit Committee may perform such other oversight functions as
may be requested by the Board from time to time.
o In performing its oversight function, the Audit Committee shall be
entitled to rely upon advice and information that it receives in its
discussions and communications with management, the independent
auditor and such experts, advisors and professionals as may be
consulted with by the Audit Committee.
o The Audit Committee is authorized to request that any officer or
employee of the Company, the Company's outside legal counsel, the
Company's independent auditor or any other professional retained by
the Company to render advice to the Company attend a meeting of the
Audit Committee or meet with any members of or advisors to the Audit
Committee.
Notwithstanding the responsibilities and powers of the Audit Committee
set forth in this Charter, the Audit Committee does not have the responsibility
of planning or conducting audits of the Company's financial statements or
determining whether the Company's financial statements are complete, accurate
and in accordance with GAAP. Such responsibilities are the duty of management
and, to the extent of the independent auditor's audit responsibilities, the
independent auditor. In addition, it is not the duty of the Audit Committee to
conduct investigations or to assure compliance with laws and regulations or the
Company's Ethics & Conflict of Interest Policy.
DETACH HERE ZNWF22
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 27, 2003 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 2002 Annual Report to Stockholders.
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SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
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NORTHWAY FINANCIAL, INC.
C/O EQUISERVE TRUST COMPANY N.A.
P.O. BOX 8694
EDISON, NJ 08818-8694
DETACH HERE ZNWF21
- -- 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) Frederick C. Anderson, (02) Charles H. Clifford, Such other business as may properly come before the
Jr., (03) John D. Morris and (04) Brien L. Ward for a three year term to meeting or any adjournments or postponements
continue until the 2006 Annual Meeting of Stockholders, and until the thereof.
successor of each is duly elected and qualified.
FOR -------- --------- WITHHELD
ALL FROM ALL
NOMINEES -------- --------- NOMINEES
---------
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For all nominees except as noted above
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MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT.
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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: __________