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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 0-9517
BANK OF NEW HAMPSHIRE CORPORATION
(Exact name of Registrant as specified in its charter)
NEW HAMPSHIRE 02-0346918
(State or other jurisdition of (I.R.S. Employer
incorporation or organization) Identification No.)
300 FRANKLIN STREET, MANCHESTER, NEW HAMPSHIRE 03101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (603) 624-6600
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, no par, with a stated value of $2.50 per share
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports re-
quired to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such report(s), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
The Exhibit Index is on page 33 of this Form 10-K.
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The aggregate market value of the shares of common stock held by
nonaffiliates of the registrant was $59,539,669, based upon the reported
closing price per share on March 11, 1994 of $17.25. The Registrant, solely
for the purpose of this required presentation, has deemed the Rule 13
d-5(b)(1) Group, (Thurber Family, so called,) to be affiliates, and deducted
from its outstanding shares in determining the aggregate market value, their
beneficial holdings of 615,368 shares or $10,615,098.
Number of Shares Outstanding at March 11, 1994 - 4,066,943 shares
DOCUMENTS INCORPORATED BY REFERENCE
Sections of the Registrant's 1993 Part I, Items 1 and 2
Annual Report to Stockholders Part II, Items 5, 6, 7, and 8;
and Part IV, Item 14
Sections of the Registrant's Part III, Items 10, 11, 12 and
Proxy Statement, 1994 Annual Meeting 13
of Stockholders
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INDEX
Name of Item Page
PART I
ITEM 1. BUSINESS 4
Table of Contents of Statistical Information 14
ITEM 2. PROPERTIES 28
ITEM 3. LEGAL PROCEEDINGS 28
ITEM 3A. EXECUTIVE OFFICERS OF THE COMPANY 28
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 30
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 30
ITEM 6. SELECTED FINANCIAL DATA 30
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 30
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 31
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 31
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY 31
ITEM 11. EXECUTIVE COMPENSATION 32
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 32
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 32
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K 32
SIGNATURES
SIGNATURES 35
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PART I
ITEM 1. BUSINESS
THE COMPANY
Bank of New Hampshire Corporation (the "Company") is a registered bank
holding company incorporated in 1979 under the laws of the State of New
Hampshire. The Company is a member of the Federal Reserve System and
transacts its business through its only subsidiary, Bank of New Hampshire
(the "Bank"), a state-chartered, Federal Reserve non-member, commercial bank
organized under the laws of the State, headquartered, along with the
executive offices of the Company, at 300 Franklin Street, Manchester, New
Hampshire 03105 (telephone 603-624-6600).
The Company assumed its present structure on September 30, 1991, with the
merger of its five separate subsidiary banks into the Bank. The Company
conducts its business through twenty-eight offices of the Bank located
throughout the southern, central, seacoast, and lakes regions of New
Hampshire, which areas contain approximately 80% of the State's population,
and employs approximately 570 employees.
BUSINESS OF THE COMPANY
The Bank is a full service commercial bank engaged in providing a wide
variety of financial services to New Hampshire individuals, businesses and
governments, including commercial and real estate lending, retail banking,
consumer finance, mortgage origination, sales and servicing, cash management,
and trust and investment services. Through its Trust and Investment Services
Division, the Bank administers estates, personal and corporate trusts, and
provides fiduciary services to individuals, businesses, and governments. The
Bank also offers electronic banking services through a network of twenty-four
ATMs. The Bank maintains a centralized data processing facility at its Data
Services Center located in Manchester, New Hampshire.
The Company, from time to time, may investigate possible future acquisitions
of deposits and banking assets which could strengthen the Company and enhance
market coverage within New Hampshire. No agreements presently exist
regarding possible future acquisitions. The Company, primarily, provides
management resources to the Bank.
Activities in which the Company and the Bank are presently engaged or which
they may undertake in the future are subject to certain statutory and regula-
tory restrictions. Banks and bank holding companies are extensively
regulated under both federal and state law. There are various legal
limitations upon the extent to which the Bank can finance or otherwise supply
funds to the Company. In addition, there are certain regulatory limitations
on the payment of dividends by the Company and by the Bank. See "REGULATORY
MATTERS," "DIVIDENDS AND DIVIDEND POLICY," and "SUPERVISION AND REGULATION,"
on pages 5 and 7 of this Report.
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COMPETITION
The business of the Bank is extremely competitive. In addition to competing
actively with other commercial banks in their market area for deposits and
loans, the Bank competes with larger commercial banks
located outside of New Hampshire. The Bank also competes with other
financial institutions, including mutual and stock savings banks, savings and
loan associations, finance companies and credit unions in addition to
non-banking institutions including insurance companies and other financial
services organizations. Competition among financial
institutions is based upon product pricing, customer service, convenience of
banking locations and a variety of other factors. At December 31, 1993, the
Bank's deposits totalled $865 million which represents approximately 6% of
the total time, savings and demand deposits of all banks, national banks,
federal and state savings banks and state co-operatives and savings and
loan's based in the State of New Hampshire.
REGULATORY MATTERS
During 1992, the Bank entered into a Memorandum of Understanding (the "MOU")
and a Capital Directive (the "Capital Directive") with the Federal Deposit
Insurance Corporation ("the FDIC") and the State of New Hampshire Banking
Department. The MOU and the Capital Directive require, among other things,
the attainment of increased capital ratios on an incremental basis, through
and by, June 30, 1994. As of December 31, 1993, the Bank's capital ratios
already exceed the minimum levels required on June 30, 1994 under the MOU and
the Capital Directive. See "DIVIDENDS AND DIVIDEND POLICY."
CAPITAL
Information concerning the Company and the Bank with respect to capital is
set forth in Management's Financial Review - "Capitalization" and "Capital
Resources", contained in the Company's 1993 Annual Report to Stockholders on
pages 12 and 24, respectively, filed as Exhibit 1, which is incorporated
herein by reference. See "DIVIDENDS AND DIVIDEND POLICY" and "SUPERVISION
AND REGULATION" discussed on pages 5 and 7, respectively, of this Report.
DIVIDENDS AND DIVIDEND POLICY
The Company is a legal entity separate and distinct from the Bank. The
Company's revenues (on a Parent Company only basis) result, in part, from
dividends paid to the Company by the Bank. The Bank did not pay dividends
to the Company in either 1993 or 1992. The right of the Company, and
consequently the right of creditors and stockholders of the Company, to
participate in any distribution of the assets or earnings of the Bank through
the payment of such dividends or otherwise is necessarily subject to the
prior claims of creditors of the Bank (including depositors), except to the
extent that claims of the Company in its capacity as a creditor may be
recognized.
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The Company's dividend policy with respect to its common stock is reviewed
quarterly. Prior to 1991, the Company paid quarterly cash dividends on its
common stock. However, commencing with the first quarter of 1991 and
continuing through the third quarter of 1993, the Company's Board of
Directors (the "Board") consistently voted, on a quarterly basis, not to
declare a dividend. Such votes acknowledged (i) the need for a continued
conservative approach in utilization of the Company's capital, (ii)
regulatory restrictions on the Bank's capital and the resultant limited
capacity of the Company to pay dividends without the benefit of upstreamed
dividends from the Bank, and (iv) actions taken by the regulators at other
financial institutions to restrict or otherwise direct the discontinuance of
dividend payments to stockholders.
On November 17, 1993, the Board declared a quarterly dividend of eight cents
per share payable December 15, 1993, to stockholders of record at December
1, 1993. Such dividends totalled approximately $325,000 and did not require
upstreaming of Bank earnings, in the form of a dividend, to the Company.
The Board voted to declare a quarterly dividend after giving consideration
to the following events - eight consecutive quarters of reported net income
totalling $10.7 million; the previously mentioned sale of common stock on
September 30, 1993, which generated $11.6 million in net proceeds for the
Company and a $7.5 million contribution from the Company to the capital of
the Bank. Consideration was also given to the fact that the federal and
state regulators (the "Regulators") granted prior approval of the dividend.
The Regulators have indicated that, provided the Bank maintains a leverage
ratio of at least 6.00%, the Bank will have the capacity to upstream
dividends to the Company out of current earnings on a quarterly basis in
amounts determined in accordance with the current rules and regulations,
subject to approval by the Bank's independent Board of Directors.
Additionally, in accordance with the requirements of the Regulators, common
stock dividend declarations and payments by the Company require prior notice
to and approval of the Federal Reserve Bank of Boston and dividend declara-
tions and payments by the Bank require prior approval of the State and FDIC.
Any dividend declaration by the Company or the Bank must consider factors
such as the amount of current period earnings, capital adequacy and other
factors. However, the Regulators have the authority to prohibit the Bank and
the Company from paying dividends at any time if they deem such payment to
be an unsafe or unsound practice.
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SUPERVISION AND REGULATION
Bank holding companies and banks are subject to extensive supervision,
regulation and examination by various bank regulatory authorities and other
agencies of Federal and State governments. The supervision, regulation and
examinations to which the Company and the Bank are subject are often intended
by the regulators primarily for the protection of depositors or are aimed at
carrying out broad public policy goals rather than for the protection of
security holders.
Several of the more significant regulatory provisions applicable to banks and
bank holding companies to which the Company and the Bank are subject are
noted below along with certain current regulatory matters concerning the
Company and the Bank. To the extent that the following information describes
statutory or regulatory provisions, it is qualified in its entirety by
reference to the particular statutory provisions. Any change in applicable
law or regulation may have a material effect on the business and prospects
of the Company.
BANK HOLDING COMPANY REGULATION
The Company is a bank holding company registered under the Bank Holding
Company Act of 1956 (the "BHCA") and is subject to supervision by the Board
of Governors of the Federal Reserve ("FRB"). The Company is required to file
an annual report and certain other information with the Federal Reserve Bank
of Boston ("FRBB"). The FRBB also makes examinations of the Company. Under
regulations issued under the BHCA and other provisions, a bank holding
company may be required to serve as a source of financial and managerial
strength to its subsidiary banks. As a result, the FRB, pursuant to such
regulations, may initiate efforts to require the Company to use its resources
to provide adequate capital funds to the Bank during periods of financial
stress or adversity, even in situations where the Company would be adversely
affected by the provision of such capital funds.
The Company, currently a "one" bank holding company, may also in the future,
under certain circumstances discussed below, be regulated under the
provisions of the New Hampshire Bank Holding Company Act (the "NH BHCA").
Acquisitions by Bank Holding Companies
The BHCA prohibits the Company from acquiring direct or indirect control of
more than 5% of the outstanding shares of any class of voting stock or
substantially all of the assets of any bank, or merging or consolidating with
another bank holding company, without prior approval of the FRB. Similar
restrictions apply to acquisition of control of shares of stock of the
Company by other bank holding companies.
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The BHCA also prohibits the Company from engaging in, or from acquiring
ownership or control of, more than 5% of the outstanding shares of any class
of voting stock of any company engaged in a nonbanking activity unless such
activity has been determined by the FRB to be so closely related to banking
as to be a proper incident thereto. The BHCA does not place territorial
restrictions on the activities of such nonbanking-related activities.
Although the Company is not presently subject to the NH BHCA as a one bank
holding company, the Company may in the future again become subject to the
NH BHCA if it acquires 25% or more of the voting stock of another bank. The
NH BHCA prohibits bank holding companies (defined as companies owning 25% or
more of the voting stock of "two or more" banks) from acquiring any voting
stock of an additional bank if, after such acquisition, the bank holding
company would (i) have more than twelve affiliates in New Hampshire, or (ii)
if the total deposits of such bank holding company and all its affiliates in
New Hampshire would exceed twenty percent of the dollar volume of total
deposits, time, savings, and demand, of all banks, national banks, and
federal savings and loan associations, in the State of New Hampshire. If the
test in (ii) is met, the banking subsidiaries of a bank holding company may
not engage in further branching activities. Under certain circumstances the
State Banking Department is permitted to waive the above limits.
Control of Bank Holding Company
The Change in Bank Control Act (the "CBCA") requires notice to and approval
of the FRB prior to the acquisition by any person or entity of "control" of
a bank holding company. The CBCA defines "control" as the power, directly
or indirectly, to vote 25% or more of any class of voting securities. The
FRB has promulgated regulations pursuant to which it presumes that one has
"control" of a bank holding company if one owns, controls, or holds with the
power to vote 10% or more of any class of voting securities of a
publicly-traded bank holding company.
New Hampshire statutes and regulations also place certain potential
restrictions on acquisitions of control of New Hampshire bank holding
companies. Since September 1987, interstate banking has been permitted, with
certain restrictions, in New Hampshire. These restrictions, which limited
such acquisitions or affiliations to New England financial institutions, were
deleted from the statute effective April 13, 1990. The statute was further
amended in July 1992 to allow the Board of Directors of individual banks, or
bank holding companies, to adopt resolutions which, upon filing with the
State Banking Department, prohibit their acquisition by an out-of-state bank.
Neither the Board of Directors of the Company nor the Board of Directors of
the Bank has taken action with regard to these resolutions.
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Other New Hampshire legislation exists which requires full and fair
disclosure and prior registration of acquiring corporations, and in the
discretion of the New Hampshire Secretary of State, may require public
hearings on registration compliance. The Company is excluded from this
statute, so long as any takeover bid is subject to federal regulatory
approval.
Capital Adequacy
The FRB has adopted risk-based capital adequacy guidelines to evaluate the
capital adequacy of bank holding companies. Such guidelines require bank
holding companies to maintain risk-based capital ratios substantially similar
to those required for state banks, as described below. In addition to the
risk-based capital guidelines, the FRB and the FDIC have adopted the use of
the leverage ratio as an additional tool to evaluate the capital adequacy of
bank holding companies. Under current regulations, all except the most
highly rated institutions are expected to exceed the 3% minimum regulatory
ratio by 100 to 200 basis points or more.
Dividends
The FRB has issued a policy statement that bank holding companies should
serve as a source of managerial and financial strength to their subsidiary
banks. As part of this policy, the FRB expects that if a major subsidiary
bank is unable to pay dividends to a bank holding company, the bank holding
company should seriously consider reducing or eliminating its dividends in
order to conserve its capacity to provide capital assistance to the
subsidiary bank. The policy also discourages bank holding companies with
subsidiary banks which are experiencing earnings weaknesses, other serious
problems, or that have inadequate capital, from paying dividends not covered
by current earnings, from borrowed funds, or from unusual or nonrecurring
gains. In addition, a bank holding company is prohibited under the Federal
Deposit Insurance Act from paying dividends without the prior approval of the
FRB if an insured bank subsidiary is deemed to be "significantly
undercapitalized" (as discussed below) or is deemed to be "undercapitalized"
and has failed to submit and implement a required capital restoration plan.
BANK REGULATION
Deposits in the Bank are insured by the FDIC to the extent allowed by law.
The Bank is not a member of the FRB system and is a state-chartered
institution; therefore, the Bank is subject to supervision and regulation by
both the FDIC and the State Banking Department.
The Bank is required to maintain cash reserves against deposits and is
subject to restrictions, among others, upon (i) the nature and amount of
loans which it may make to a borrower, (ii) the nature and amount of
securities in which it may invest, (iii) the portion of its assets
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which may be invested in bank premises, (iv) the geographic location of its
branches, and (v) the nature and extent to which it can borrow money.
In December 1991, the Federal government enacted the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"). In general, FDICIA
(i) requires the adoption of regulations establishing minimum capital ratio
requirements for insured institutions such as the Bank, (ii) establishes a
system of classifications for insured institutions based on capital ratios
and other factors under which federal regulatory agencies are required to
take "prompt corrective action" with regard to capital and other
deficiencies, and (iii) provides for the recapitalization of the FDIC's Bank
Insurance Fund (the "BIF") by setting up a risk-based scheme of premium
assessments of insured institutions.
Capital Adequacy
Under the FDIC's minimum capital ratio regulations, state banks are required
to have a ratio of "Tier 1," or core, capital-to-total risk-weighted assets
of 4.0% and a ratio of total capital-to-total risk-weighted assets of 8.0%.
Except in the case of the strongest institutions, the FDIC expects state
banks to substantially exceed these minimum risk-based capital ratios. As
of December 31, 1993, the Bank's ratio of "Tier 1" capital-to-total
risk-weighted assets was 12.88% and its ratio of total capital-to-total
risk-weighted assets was 14.16%. Also under FDIC regulations, state banks
are required, in most cases, to maintain a leverage ratio, or "Tier 1"
capital-to-average total assets ratio, of no less than 4.0%. As of December
31, 1993, the Bank's leverage ratio was 6.09%. Under certain circumstances,
the FDIC may establish higher minimum capital ratio requirements than set
forth above; for example, when a bank has received special regulatory
attention or has high susceptibility to interest rate risk. A bank is
restricted from paying dividends it if is, or as a result of the dividend
would be, considered to be undercapitalized under these minimum capital ratio
requirements. Banks with capital ratios below the required minimums are also
subject to certain administrative actions, including termination of deposit
insurance upon notice and hearing, or temporary suspension of insurance
without a hearing in the event the institution has no tangible capital.
Prompt Corrective Action
The regulations relating to "prompt corrective action" establish five
classifications based on capital levels, some of which require or permit the
FRB or the FDIC to take supervisory action -- "well capitalized," "adequately
capitalized," "undercapitalized," "signficantly undercapitalized," and
"critically undercapitalized." The classifications are determined by the
ratios of the institution's "Tier 1" capital-to-total risk-weighted assets,
its total capital-to-total
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risk-weighted assets, and its leverage ratio. To fall within the "well
capitalized" category, ratios (as described above) must be at least 6.0%,
10.0%, and 5.0%, respectively. The regulations require a bank to notify the
appropriate agency of material events that decrease the capital level of the
bank, and to do so within 15 days. In addition, the federal banking
regulators are authorized to effectively downgrade an institution to a lower
capital category than the institution's capital ratios would otherwise
indicate, based upon safety and soundness considerations (such as when the
institution has received a less than satisfactory examination rating for any
of the rating categories for asset quality, management, earnings, or
liquidity).
The scope and degree of regulatory intervention is linked to the extent of
the shortfall in the capital ratios of the insured institution. In the case
of an insured institution which is "critically undercapitalized" (a term
defined to include institutions which have a positive net worth), the federal
bank regulatory authorities are generally required to appoint a conservator
or receiver. An "undercapitalized" bank must develop a capital restoration
plan and its parent holding company must guarantee the bank's compliance with
the plan. The liability of the parent holding company under any such
guarantee is limited to the lesser of 5% of the bank's assets at the time it
became "undercapitalized" or the amount needed to comply with the plan. An
"undercapitalized" bank also is subject to limitations in numerous areas,
including, but not limited to: capital distributions, asset growth,
acquisitions, branching, new business lines and borrowings from the FRB.
Under the regulations relating to brokered deposits, "well capitalized" banks
may accept brokered deposits without restriction, "adequately capitalized"
banks may accept such funds only if they first obtain a waiver from the FDIC,
and "undercapitalized" banks are prohibited from accepting such deposits.
In addition, banks which are not "well capitalized" (even if meeting minimum
capital requirements) are subject to limits on the rates of interest they may
pay on brokered and other deposits.
Based on its capital ratios as of December 31, 1993, the Bank would be deemed
to be "well capitalized" under the prompt corrective action regulations. Due
to the fact that the Bank is subject to the Capital Directive, however, the
Bank is deemed to be "adequately capitalized" under these regulations. As
such, the Bank may not accept brokered deposits without the prior waiver from
the FDIC, but it is not subject to any of the above restrictions with respect
to "undercapitalized" institutions.
Deposit Insurance Assessments
In order to implement the recapitalization of the BIF pursuant to FDICIA, the
FDIC has established a schedule to increase the reserve ratio of the BIF to
1.25% of insured deposits by January 1, 2002, and may impose higher deposit
insurance premiums on BIF members, if necessary, to achieve that ratio. Each
institution is placed in one of nine risk categories using a two-step
process. First, a bank will be assigned to one of three groups based on
whether it is "well capitalized," "adequately capitalzied," or
"undercapitalized" based on the same definitions contained in
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the prompt corrective action regulations discussed above. Second, a bank
will be assigned to one of three subgroups based on an evaluation of the risk
posed by the bank. Based on these new classifications, the FDIC has adopted
an insurance premium schedule under which the healthiest banks will pay 23
cents per $100 of deposits, which is the same rate previously in effect. The
rates increase incrementally to a top rate of 31 cents per $100 of deposits
for the weakest banks. The Bank does not presently expect that any increased
BIF insurance assessments which are reasonably foreseeable would
significantly impair the Bank's overall financial condition or results of
operations.
FDICIA contains numerous other provisions, including new accounting, audit
and reporting requirements, the termination (beginning not later than January
1, 1995) of the "too big to fail" doctrine except in special cases, new
regulatory standards in areas such as asset quality, earnings and
compensation, and revised regulatory standards for, among other things,
powers of state chartered banks, real estate lending, branch closures, and
capital adequacy.
The full impact of FDICIA will not be completely known until the enactment
by the various federal banking agencies of all the underlying regulations
implementing the new legislation's provisions. However, it is anticipated
that FDICIA will result in increased costs for the banking industry due to
higher FDIC assessments, higher costs of compliance and recordkeeping, and
more limitations on the activities of all but the most well capitalized
banks.
FIRREA
The Bank may also be affected on an ongoing basis by various provisions of
the Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA"). FIRREA empowers regulatory authorities to use their
"cease-and-desist" authority to require institutions to take certain
affirmative actions. Such cease-and-desist orders may include restricting
the growth of the institution, disposing of any loan or assets, rescinding
agreements or contracts, employing qualified officers or employees or taking
other actions. Regulatory agencies also have the authority to order
restitution where an institution or "institution-affiliated party" (a term
which does not include bank holding companies) was "unjustly enriched" or
recklessly disregarded the law.
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OTHER MATTERS
GOVERNMENTAL POLICIES AND ECONOMIC CONDITIONS
The earnings and business of the Company and the Bank are and will be
affected by a number of external influences, including general economic
conditions in New Hampshire and New England and the policies of various
regulatory authorities. Important functions of the FRB, in addition to those
enumerated under "SUPERVISION AND REGULATION" on page 7 of this Report, are
to regulate the supply of money and of bank
credit, to deal with general economic conditions within the United States and
to be responsive to international economic conditions. Among the means
available to the FRB to affect the money supply are open market operations
in U.S. Government securities, changes in the discount rate on member bank
borrowings, and changes in reserve requirements against member bank deposits.
These means are used in varying combinations to influence overall growth and
distribution of bank loans, investments and deposits, and their use may
affect interest rates charged on loans or paid for deposits.From time to
time, the FRB has taken specific steps to control domestic inflation and to
control the country's money supply. FRB monetary policies have materially
affected the operating results of commercial banks in the past and are
expected to continue to do so in the future. The nature of future monetary
policies and the effect of such policies on the business and earnings of the
Company cannot be predicted.
Economic fundamentals indicated that U.S. economic activity strengthened
during 1993 and, most economists believe, should continue to show improvement
in 1994.
Similarly, during 1993, the New Hampshire economy showed definite signs of
improvement. For example, the unemployment rate declined to a four year low
of 5.3% in November, 1993, sales of existing homes have increased during the
last several years and building permits issued for new privately-owned
housing units have risen since 1991. In addition, property values appear to
have stabilized, and there was a modest increase in the average sale price
of homes from $113,000 in 1992 to $115,000 in 1993.
Overall, the Company remains optimistic that these favorable trends will
continue, and anticipates that these economic factors will have a positive
effect on its 1994 operating results.
The impact upon the future business and earnings of the Company, of
prospective economic and political conditions, and of the policies of the FRB
as well as other regulatory authorities, cannot be precisely determined at
this time. This section should be read in conjunction with "Management's
Financial Review" contained in the Company's 1993 Annual Report to
Stockholders on pages 10 through 28 of this Report, filed as Exhibit 1, which
is incorporated herein by reference.
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Table of Contents of Statistical Information Page No.
I. A. Distribution of Assets, Liabilities,
and Stockholders' Equity 15
B. Interest Income and Expense 16
C. Interest Rates 17
D. Volume and Rate Analysis 18
II. Investment Securities 19
III. A. Loans 20
B. Maturities and Interest Rate
Sensitivity of Loans 21
C. Nonperforming Assets 22
IV. A. Analysis of Allowance for Possible Loan
Losses 23
B. Allocation of Allowance for Possible
Loan Losses 24
V. Deposits 25
VI. Return on Equity and Assets and Other Ratios 25
VII. Federal Funds Purchased and Securities Sold
Under Agreements to Repurchase 26
VIII. Trust Data 27
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I. A. Distribution of Assets, Liabilities and Stockholders' Equity
The following Table presents, for the years indicated, the
average balances of each principal category of assets,
liabilities and stockholders' equity of the Company.
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
(In thousands)
ASSETS
<S> <C> <C> <C>
Earning assets:
Loans $573,561 $646,040 $672,954
Taxable investment securities 207,846 189,844 135,529
Non-taxable investment securities 2,464 3,795 13,272
Federal funds sold and securities
purchased under agreements to resell 84,320 62,692 83,398
Total earning assets 868,191 902,371 905,153
Non-earning assets:
Cash and due from banks 56,767 51,752 49,427
Premises and equipment, net 11,581 11,547 12,539
Other real estate 15,406 20,205 21,855
Other assets 16,539 19,057 23,554
Allowance for possible loan losses (15,950) (18,812) (22,108)
Total assets $952,534 $986,120 $990,420
_______ _______ _______
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Savings deposits $481,521 $477,460 $416,014
Certificates of deposit of $100,000 or more 12,896 19,073 46,536
Other time deposits 222,097 259,591 289,946
Federal funds purchased and securities sold
under agreements to repurchase 35,431 46,417 63,512
Other borrowed funds 3,529 4,063 4,070
Total interest-bearing liabilities 755,474 806,604 820,078
Non-interest-bearing liabilities:
Demand deposits 131,335 120,988 110,046
Other liabilities 9,032 11,065 14,220
Total liabilities 895,841 938,657 944,344
Stockholders' equity 56,693 47,463 46,076
Total liabilities and stockholders' equity $952,534 $986,120 $990,420
</TABLE>
<PAGE>
Page 16 of 249
I. B. Interest Income and Expense
The following Table presents, for the years indicated, interest
income on earning assets on a fully taxable equivalent ("FTE")
basis, interest expense on interest-bearing liabilities and net
interest income. Interest earned from loans includes fees earned
on loans.
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
(In thousands)
<S> <C> <C> <C>
Interest earned from:
Loans (1) $ 51,782 $ 61,076 $70,813
Taxable investment securities 8,429 9,634 10,380
Non-taxable investment securities (1) 170 348 1,523
Federal funds sold and securities
purchased under agreements to resell 2,570 2,206 4,719
Total interest income (1) 62,951 73,264 87,435
Interest expense on:
Savings deposits 12,203 15,340 22,189
Certificates of deposit of $100,000 or more 467 835 3,112
Other time deposits 9,395 13,660 20,936
Federal funds purchased and securities sold
under agreements to repurchase 721 1,376 3,559
Other borrowed funds 84 100 207
Total interest expense 22,870 31,311 50,003
Net Interest Income (1) $ 40,081 $ 41,953 $ 37,432
_______ _______ _______
(1) Includes an FTE adjustment based on a 34%
federal income tax rate. $ 232 $ 358 $ 686
_______ _______ _______
</TABLE>
<PAGE>
Page 17 of 249
I. C. Interest Rates
The following Table presents, for the years indicated, the
interest rate earned on average earning assets, on an FTE basis,
and the interest rate paid on average interest-bearing
liabilities:
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Rate earned on:
Loans (1) 9.03% 9.45% 10.52%
Taxable investment securities 4.06 5.07 7.66
Non-taxable investment securities 6.90 9.17 11.47
Federal funds sold and securities
purchased under agreements to resell 3.05 3.52 5.66
Total 7.25 8.12 9.66
Rate paid on:
Savings deposits 2.53 3.21 5.33
Certificates of deposit of $100,000 or more 3.62 4.37 6.69
Other time deposits 4.23 5.26 7.22
Federal funds purchased and securities sold
under agreements to repurchase 2.03 2.97 5.60
Other borrowed funds 2.38 2.46 5.08
Total 3.03 3.88 6.10
Interest Rate Spread (2) 4.22% 4.24% 3.56%
_____ _____ _____
Interest Rate Margin (3) 4.62% 4.65% 4.13%
_____ _____ _____
</TABLE>
____________________
(1) For the calculation of rate earned on loans, non-accrual and
restructured loans are included in the average amounts outstanding.
(2) Interest rate spread is the average rate earned on total earning
assets less the average rate paid for interest-bearing liabilities.
(3) Interest rate margin is calculated by dividing net interest income by
total earning assets.
<PAGE>
Page 18 of 249
I. D. Volume and Rate Analysis
The following Table presents an analysis of the effect on net
interest income, on an FTE basis, of volume and rate changes for
1993 as compared with 1992. The effect of changes due to both
volume and rate have been allocated to the change in volume and
change in rate categories in proportion to the relationship of the
absolute dollar amounts of the change in each category.
<TABLE>
<CAPTION>
1993 vs 1992 1992 vs 1991
Due to Changes Due to Changes
Net in Interest Net in Interest
Increase Increase
(Decrease) Volume Rate (Decrease) Volume Rate
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest income from:
Loans $(9,294) $(6,657) $(2,637) $(9,737) $(2,748) $(6,989)
Taxable investment
securities (1,205) 848 (2,053) (746) 3,403 (4,149)
Non-taxable investment
securities (178) (104) (74) (1,175) (917) (258)
Federal funds sold and
securities purchased
under agreements to resell 364 687 (323) (2,513) (997) (1,516)
Total interest income (10,313) (5,226) (5,087) (14,171) (1,259) (12,912)
Interest expense on:
Savings deposits (3,137) 129 (3,266) (6,849) 2,922 (9.771)
Certificates of deposit
of $100,000 or more (368) (241) (127) (2,278) (1,435) (843)
Other time deposits (4,265) (1,810) (2,455) (7,276) (2,025) (5,251)
Federal funds purchased
and securities sold
under agreements to
repurchase (655) (280) (375) (2,182) (795) (1,387)
Other borrowed funds (16) (13) (3) (107) (107)
Total interest expense (8,441) (2,215) (6,226) (18,692) (1,333) (17,359)
Net Interest Income $(1,872) $(3,011) $ 1,139 $ 4,521 $ 74 $ 4,447
______ ______ ______ ______ ______ ______
</TABLE>
<PAGE>
Page 19 of 249
II. Investment Securities
The following Table presents, for the years indicated, the book values
of investment securities of the Company:
<TABLE>
<CAPTION>
December 31,
1993 1992 1991
(In thousands)
<S> <C> <C> <C>
U.S. Treasury and Other
U.S. Government agencies $256,380 $180,616 $168,050
State and municipal 1,215 1,765 5,698
Other 797 2,897 5,247
Total investment securities $258,392 $185,278 $178,995
_______ _______ _______
</TABLE>
The following Table presents the relative maturities at book value and
weighted average interest rates of investment securities at December 31,
1993. The Parent Company's investment in equity securities having a book
value of $606,000 is not included in the Table. Weighted average rates on
tax-exempt obligations have been computed on an FTE basis assuming a tax rate
of 34%. The rates are calculated by dividing annual interest, net of
amortization of premiums and accretion of discounts, by the book value of the
securities at December 31, 1993:
<TABLE>
<CAPTION>
Within After One But After Five But After
One Year Within Five Years Within Ten Years Ten Years
Amount Rate Amount Rate Amount Rate Amount Rate
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury
and other U.S.
Government
agencies $155,478 3.74% $99,200 3.73% $ 559 9.88% $ 1,143 9.24%
State and
municipal 310 6.68% 565 8.25% 340 9.59%
Other 191 7.04%
Total $155,788 3.74% $99,765 3.75% $ 559 9.88% $ 1,674 9.06%
_______ ______ ______ ______
</TABLE>
<PAGE>
Page 20 of 249
III. A. Loans
The balance of loans outstanding and the percent, for each cate
gory, of loans to total loans at the dates indicated are shown
in the following Tables.
<TABLE>
<CAPTION>
December 31,
1993 1992 1991 1990
Balance % Balance % Balance % Balance %
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural $ 55,430 11% $ 80,256 13% $104,468 16% $128,760 18%
Real estate - commercial 133,837 25 163,594 26 166,627 26 187,419 27
Real estate - construction 3,019 1 5,620 1 8,598 1 15,695 2
Real estate - residential 285,582 54 331,270 53 320,564 50 304,517 43
Installment 46,975 9 43,641 7 47,277 7 66,861 10
Total loans $524,843 100% $624,381 100% $647,534 100% $703,252 100%
_______ ___ _______ ___ _______ ___ _______ ___
</TABLE>
<TABLE>
<CAPTION>
December 31,
1989
Balance %
(Dollars in thousands)
<S> <C> <C>
Commercial, financial and
agricultural $142,765 19%
Real estate - commercial 208,971 28
Real estate - construction 18,670 3
Real estate - residential 279,593 38
Installment 85,879 12
Total loans $735,878 100%
_______ ___
</TABLE>
The Company does not have an automatic renewal policy for maturing loans.
Rather, loans are renewed at the maturity date only at the request of those
customers who are deemed to be creditworthy by the Company. Additionally,
the Company reviews such requests in substantially the same manner as
applications by new customers for extensions of credit. The maturity date
and interest terms of renewed loans are based, in part, upon the needs of the
individual customer and the Company's credit review and evaluation of current
and future economic conditions. Since these factors have varied considerably
and will most likely continue to do so, the Company believes it is
impracticable to estimate the amount of loans in the portfolio which may be
renewed in the future.
<PAGE>
Page 21 of 249
III. B. Maturities and Interest Rate Sensitivity of Loans
The following Table presents the maturities and interest rate
sensitivity, based on original contractual terms, of the
Company's loans exclusive of residential real estate
construction loans and loans secured by residential properties
and installment loans as of December 31, 1993:
<TABLE>
<CAPTION>
Maturing
After One
Within But Within After
One Year Five Years Five Years Total
(In thousands)
<S> <C> <C> <C> <C>
Commercial, financial and
agricultural $ 34,678 $ 11,609 $ 9,143 $ 55,430
Real estate - commercial 61,912 38,243 33,682 133,837
Real estate - construction 2,521 152 32 2,705
Total $ 99,111 $ 50,004 $ 42,857 $191,972
_______ _______ _______ _______
Loans with fixed interest rates $ 43,740 $ 30,009 $ 31,123 $104,872
Loans with variable interest rates 55,371 19,995 11,734 87,100
Total $ 99,111 $ 50,004 $ 42,857 $191,972
_______ _______ _______ _______
</TABLE>
<PAGE>
Page 22 of 249
III. C. Nonperforming Assets
The following Table summarizes the Company's nonperforming
assets:
<TABLE>
<CAPTION>
As of December 31,
1993 1992 1991 1990 1989
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans:
Commercial, financial and
agricultural $ 2,167 $ 3,486 $ 7,344 $ 3,570 $ 6,140
Real estate - commercial 3,979 4,407 6,011 8,004
Real estate - construction 593 650 648 2,566
Real estate - residential 6,263 7,547 4,370 4,020
Real estate 4,046
Installment 37 301 575 704 674
Total nonaccrual 13,039 16,391 18,948 18,864 10,860
Past due 90 days or more(accruing) 2,006 1,770 3,738 3,979 13,855
Restructured loans 1,012 1,628 1,991 4,517 641
Total nonperforming loans 16,057 19,789 24,677 27,360 25,356
Other real estate owned, net 9,865 7,287 9,862 9,450 1,733
In-substance foreclosures 3,528 8,569 12,764 12,077
Total other real estate 13,393 15,856 22,626 21,527 1,733
Total nonperforming assets $ 29,450 $ 35,645 $ 47,303 $ 48,887 $ 27,089
_______ _______ _______ _______ _______
Total assets $976,719 $967,202 $1,015,061 $1,001,709 $948,049
APLL (See Page 23) $ 14,581 $ 16,619 $ 20,012 $ 21,575 $ 7,438
APLL/Nonaccrual loans 112% 101% 106% 114% 68%
APLL/Nonperforming loans 91 84 81 79 29
APLL/Nonperforming assets (NPA) 50 47 42 44 27
NPA/Total assets 3.0 3.7 4.7 4.9 2.9
NPA/Total loans plus ORE 5.5 5.6 7.1 6.7 3.7
</TABLE>
Substantially all of the nonaccrual loans at December 31, 1993 are secured.
At December 31, 1993, the Company had $19.8 million in commercial loans which
are not 90 day past due, restructured, or on nonaccrual but which are
internally rated substandard, defined as inadequately protected by the
current sound worth and paying capacity of the obligor or of the collateral
pledged, if any, with well defined weakness(s) that jeopardize the
liquidation of the debt.
The following information and analysis of unrecorded interest income relates
to loans on nonaccrual and/or restructured loans at December 31:
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
(In thosuands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $13,039 $16,391 $18,948 $18,864 $10,860
Restructured loans 1,012 1,628 1,991 4,517 641
$14,051 $18,019 $20,939 $23,381 $11,501
______ ______ ______ ______ ______
Originally contracted interest income
for the year $ 1,555 $ 1,852 $ 2,654 $ 3,388 $ 1,360
Interest income actually recorded (367) (571) (1,001) (1,316) (497)
Difference - unrecorded interest $ 1,188 $ 1,281 $ 1,653 $ 2,072 $ 863
______ ______ ______ ______ ______
</TABLE>
<PAGE>
Page 23 of 249
IV. A. Analysis of Allowance for Possible Loan Losses
The Company's allowance for possible loan losses (the "APLL") is
available for future charge-offs of loans. The provision for
possible loan losses (the "Provision"), added to the APLL by charges
to income, is based upon management's estimation of the amount
necessary to maintain the APLL at an adequate level, considering
evaluations of individual credits and concentrations of credit risk,
net losses charged to the APLL, changes in the quality of the loan
portfolio, levels of nonaccrual loans, current economic conditions,
changes in the size and character of the loan risks and other
pertinent factors warranting current recognition. The Company
charges all or a portion of a loan against the APLL when a
probability of loss has been established, with consideration given to
such factors as the customer's financial condition, underlying
collateral and guarantees. In addition, the Company's independent
certified public accountants perform reviews of the loan portfolio.
The loans of the Company are also subject to periodic examination by
bank regulatory authorities.
The following Table presents a five year analysis of the Company's
allowance for possible loan losses.
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at January 1 $16,619 $20,012 $21,575 $ 7,438 $ 5,550
Provision for possible loan losses 4,200 6,800 12,542 37,334 4,422
Loans charged off:
Commercial, financial and agricultural (1,028) (3,160) (4,564) (8,120) (667)
Real estate-commercial (2,026) (1,564) (6,202) (8,720) (717)
Real estate-construction (202) (431) (1,333) (60)
Real estate-residential (4,080) (4,698) (3,073) (2,400) (421)
Installment (777) (1,242) (1,959) (3,647) (1,082)
Total loans charged off (8,113) (11,095) (15,798) (24,220) (2,947)
Recoveries of loans:
Commercial, financial and agricultural 775 334 666 188 116
Real estate-commercial 449 152 189
Real estate-construction 147 80
Real estate-residential 102 14 244 46 77
Installment 402 402 594 709 220
Total recoveries of loans 1,875 902 1,693 1,023 413
Net loans charged off (6,238) (10,193) (14,105) (23,197) (2,534)
APLL at December 31 $ 14,581 $16,619 $20,012 $21,575 $ 7,438
______ ______ ______ ______ ______
Loans at December 31 $524,843 $624,381 $647,534 $703,252 $735,878
_______ _______ _______ _______ _______
Average loans $573,561 $646,040 $672,954 $729,145 $720,334
_______ _______ _______ _______ _______
APLL/Total loans 2.78% 2.66% 3.09% 3.07% 1.01%
Net charge-offs/Average loans 1.09 1.58 2.10 3.18 .35
Net charge-offs/Provision 148.52 149.90 112.46 62.13 57.30
Recoveries/Charge-offs 23.11 8.13 10.72 4.22 14.01
Provision/Average loans .73 1.05 1.86 5.12 .61
</TABLE>
<PAGE>
Page 24 of 249
IV. B. Allocation of Allowance for Possible Loan Losses
The Company's allowance for possible loan losses is a general reserve
available for all categories of possible loan loss. The Company has
made an allocation of its reserve giving consideration to
management's evaluation of risk in the portfolios. The allocations
are based on estimates and subjective judgments and are not necessar
ily indicative of the specific amounts or loan categories in which
losses may ultimately occur. The following Table presents a four
year analysis of the allocation of the reserve by loan categories.
For the percentage of loans outstanding in each category to total
loans, refer to the Table "Loans" on page 21.
<TABLE>
<CAPTION>
As of December 31,
1993 1992 1991
% of % of % of
Amount Total Amount Total Amount Total
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural $ 1,507 10.3% $ 1,956 11.8% $ 4,626 23.1%
Real estate-commercial 4,073 27.9 6,218 37.4 7,379 36.9
Real estate-construction 40 .2 380 1.8
Real estate-residential 1,742 12.0 5,033 30.3 2,417 12.1
Installment 1,566 10.7 1,045 6.3 934 4.7
Unallocated 5,693 39.1 2,327 14.0 4,276 21.4
$14,581 100.0% $16,619 100.0% $20,012 100.0%
______ _____ ______ _____ ______ _____
</TABLE>
<TABLE>
<CAPTION>
1990
% of
Amount Total
<S> <C> <C>
Commercial, financial and
agricultural $ 3,920 18.2%
Real estate-commercial 6,096 28.3
Real estate-construction 330 1.5
Real estate-residential 1,910 8.9
Installment 989 4.6
Unallocated 8,330 38.5
$21,575 100.0%
______ _____
</TABLE>
<PAGE>
Page 25 of 249
V. Deposits
The average daily amount of deposits and rates paid on such
deposits is summarized for the years indicated in the
following Table:
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
Amount Rate Amount Rate Amount Rate
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Demand deposits $131,335 $120,988 $110,046
Savings deposits 481,521 2.53% 477,460 3.21% 416,014 5.33%
Certificate deposits
of $100,000 or more 12,896 3.62 19,073 4.37 46,536 6.69
Other time deposits 222,097 4.23 259,591 5.26 289,946 7.22
Total $847,849 $877,112 $862,542
_______ _______ _______
</TABLE>
The maturity schedule of time certificates of deposit of $100,000 or more at
December 31, 1993, is as follows (in thousands):
<TABLE>
<CAPTION>
Time Certificates of Deposit
<S> <C>
3 months or less $ 3,746
Over 3 through 6 months 4,011
Over 6 through 12 months 1,723
Over 12 months 2,161
Total $11,641
______
</TABLE>
VI. Return on Equity and Assets and Other Ratios
The ratio of net income (loss) to average stockholders' equity
("ROE") and average total assets ("ROA") and certain other ratios for
the last three years are presented below:
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
ROE 11.27% 11.43% (6.99%)
ROA .67 .55 (.33)
Dividends declared per share as a percent of
net income per share 4.44 .00 .00
Average stockholders' equity as a percent of
average total assets 5.95 4.81 4.65
Leverage ratio 6.78 5.00 4.23
Tier 1 risk-based capital ratio 14.31 9.26 7.41
Total risk-based capital ratio 15.59 10.53 8.94
</TABLE>
<PAGE>
Page 26 of 249
VII. Federal Funds Purchased and Securities Sold Under Agreements to
Repurchase
The following Table presents the distribution of the Company's
federal funds purchased and securities sold under agreements to
repurchase and the weighted average interest rates thereon at the end
of each of the last three years. Also provided are the maximum
amount of these borrowings and the average amount of these borrowings
as well as weighted average interest rates for the last three years.
<TABLE>
<CAPTION>
Federal Funds Purchased &
Securities Sold Under
Agreements to Repurchase
(Dollars in thousands)
<S> <C>
Balance at December 31:
1993 $ 32,238
1992 $ 36,107
1991 $ 50,165
Weighted average interest
rate at December 31:
1993 1.75%
1992 2.05%
1991 3.75%
Maximum amount outstanding
at any month's end:
1993 $ 44,381
1992 $ 59,498
1991 $106,133
Average amount outstanding
during the year:
1993 $ 35,431
1992 $ 46,417
1991 $ 63,512
Weighted average interest
rate during the year:
1993 2.03%
1992 2.97%
1991 5.60%
</TABLE>
<PAGE>
Page 27 of 249
VIII. Trust Data
The following presents information with respect to Trust Investments
and Trust Accounts for which the Bank has both sole and shared
investment responsibility at December 31, 1993.
<TABLE>
<CAPTION>
Market Percentage
Trust Investments Value of Total
(Dollars in thousands)
<S> <C> <C>
Common and preferred stocks $224,517 43%
Bonds, notes and short-term obligations 115,244 22%
U.S. Government and agency obligations 84,636 16%
State, county and municipal obligations 45,753 9%
Nondiscretionary assets(1) 36,184 8%
Real estate and real estate mortgages 5,483 1%
Miscellaneous assets 5,891 1%
Cash (2) 1,863
$519,571 100%
_______ ___
</TABLE>
<TABLE>
<CAPTION>
Number of Market Percentage
Trust Accounts Accounts Value of Total
(Dollars in thousands)
<S> <C> <C> <C>
Personal trusts 1,376 $250,914 49%
Employee benefit trusts 256 103,236 20%
Agencies 864 164,729 31%
Estates, conservatorships and guardians 16 692
2,512 $519,571 100%
_____ _______ ___
</TABLE>
(1) Assets for which the Bank has shared investment responsibility
(2) Predominantly invested in certificates of deposit
<PAGE>
Page 28 of 249
ITEM 2. PROPERTIES
The Company's headquarters occupies a portion of the Bank's building at 300
Franklin Street, Manchester, New Hampshire, and the Company conducts its
meetings of the Board of Directors at the Bank's Data Services Center at John
Devine Drive, Manchester, New Hampshire.
The Bank owns or leases numerous premises used in the conduct of the business
of the Company. The Company does not own or lease any real property, other
than a branch office in Portsmouth, which is sub-let to the Bank. Additional
information on the Bank's properties is set forth in Note H on page 38 of the
Company's 1993 Annual Report to Stockholders, filed as Exhibit 1, and such
information is hereby incorporated by reference.
ITEM 3. LEGAL PROCEEDINGS
Various actions and proceedings are presently pending to which the Company
and the Bank are parties. All such actions are deemed to be ordinary routine
litigation incidental to the business of the Company and/or the Bank.
Resolution of these matters is not expected to have a material effect on the
consolidated financial statements of the Company.
ITEM 3A. EXECUTIVE OFFICERS OF THE COMPANY
The names, positions, ages and backgrounds of the executive officers of the
Company, as of March 11, 1994 are set forth below. Executive officers are
generally elected annually by the Board of Directors and hold office until
the following year and until their successors are chosen and qualified,
unless they sooner resign, retire, die, are removed or become disqualified.
There are no family relationships existing between or among any of the
executive officers listed below.
Names Position Age
Davis P. Thurber Chairman of the Board, 68
President, and Director of
Company; Chairman of the Board
and Director of Bank
Paul R. Shea Executive Vice President and 61
Director of Company; Director,
President and Chief Executive
Officer of Bank
Gregory D. Landroche Senior Vice President, Chief 45
Financial Officer and Treasurer
of Company and Chief Financial
Officer of Bank
Alice L. DeSouza Senior Vice President/ 49
Administration & Planning
of Company; Executive Vice
President/Administration and
Retail Banking of Bank
<PAGE>
Page 29 of 249
Names Position Age
Robert J. McDonald Senior Vice President/Loan 44
Administration of Company
Allen G. Tarbox, Jr. Senior Vice President/Data 59
Services of Company and
Director of Information
Systems of Bank
William D. Biser Vice President/Auditor 52
of Company
Robert A. Boulay Vice President/Controller 40
of Company
Robert B. Field, Jr. Director and Secretary of 51
Company
Mr. Thurber became a Director of the Bank in 1949, and joined The Second
National Bank of Nashua, a predecessor to the Bank, in 1956 as Assistant
Cashier, and became President in 1962, and, Chairman and President in 1969.
On March 27, 1981, Mr. Thurber was re-elected President and Chairman of the
Board of Directors of the Company. He is additionally Chairman of the Board
of Directors of the Bank.
Mr. Shea has served the Company since October 16, 1980, when he was appointed
Assistant to the Chairman. On December 22, 1982, he was elected Vice
President, Corporate Planning. On June 26, 1985, he was elected Senior Vice
President, Corporate Planning, and on December 18, 1985, he was elected
Senior Vice President, Corporate Development of the Company. On July 22,
1987, he was elected Executive Vice President. On October 21, 1991, he was
elected President and Chief Executive Officer of the Bank. He also serves
as a Director of the Company and the Bank.
Mr. Landroche was elected Controller of the Company on September 28, 1983,
was elected Vice President, Controller of the Company on June 26, 1985, and
was elected Vice President, Treasurer of the Company on December 17, 1986.
On July 22, 1987, he was elected Senior Vice President, Chief Financial
Officer and Treasurer of the Company. On July 22, 1992 he was elected Chief
Financial Officer of the Bank. Mr. Landroche is a Certified Public
Accountant.
Ms. DeSouza was elected Vice President, Director of Marketing of the Bank in
November, 1981. On December 18, 1985, she was elected Vice President,
Marketing Services of the Company. On July 22, 1987, she was elected Senior
Vice President, Planning and Marketing for the Company. Early in 1991, her
duties were expanded to include administration, and, as of October, 1991, she
became Senior Vice President, Administration & Planning of the Company. On
July 22, 1992 she was elected Executive Vice President, Administration and
Retail Banking of the Bank.
<PAGE>
Page 30 of 249
Mr. McDonald was elected Senior Vice President, Loan Administration of the
Company on June 24, 1992. During the five years prior thereto, Mr. McDonald
was employed by Bank of Boston Corporation, most recently as a Vice President
in the Financial Institutions Division.
Mr. Tarbox was elected Senior Vice President, Data Services of the Company
on July 25, 1990. During the five years prior thereto, Mr. Tarbox was
President of Fleet/Norstar Services-NH. On July 22, 1992 he was elected
Director of Information Systems of the Bank.
Mr. Biser was elected Vice President, Auditor of the Company in September,
1987. Mr. Biser is a Certified Public Accountant.
Mr. Boulay was elected Controller of the Company on December 17, 1986. On
February 24, 1988, he was elected Vice President of the Company. Mr. Boulay
is a Certified Public Accountant.
Mr. Field was elected as a Director and Secretary of the Company on March 27,
1981, and served as a Director of the Bank, until February 22, 1989. His
principal employment during the past five years is as a practicing attor-
ney-at-law, director and member of Sheehan, Phinney, Bass + Green,
Professional Association. Mr. Field's law firm has served as general counsel
for the Company and as general, or special counsel, for the Bank since April
13, 1981.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURTIY HOLDERS
Not applicable
Part II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information required by this item is presented on page 27
of the Company's 1993 Annual Report to Stockholders, filed
as Exhibit 1, and such information is hereby incorporated
by reference.
ITEM 6. SELECTED FINANCIAL DATA
The consolidated "Summary of Selected Financial Data" of the
Company for the five years ended December 31, 1993 appears
on page 26 of the Company's 1993 Annual Report to Stockholders,
filed as Exhibit 1, and such information is hereby incorporated
by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
The information in response to this item is included in Manage-
ment's Financial Review on pages 10 through 28 of the Company's
1993 Annual Report to Stockholders, filed as Exhibit 1, and
such information is hereby incorporated by reference.
<PAGE>
Page 31 of 249
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this
Item are included as indicated below in the Company's 1993 Annual
Report to Stockholders, filed as Exhibit 1, and such statements
and data are hereby incorporated by reference.
<TABLE>
<CAPTION>
Page of the 1993 Annual
Report to Stockholders
<S> <C>
Report of Independent Auditors 29
Consolidated Balance Sheets -
December 31, 1993 and 1992 30 - 31
Consolidated Statements of
Operations - Years ended
December 31, 1993, 1992 and 1991 32
Consolidated Statements of Changes
in Stockholders' Equity - Years
ended December 31, 1993, 1992 and 1991 33
Consolidated Statements of Cash
Flows - Years ended December
31, 1993, 1992 and 1991 34
Notes to Consolidated Financial
Statements 35 - 45
Five Year Summary of Selected
Financial Data and Information
on Common Stock 26 - 27
Two Year Summary of Selected Quarterly
Consolidated Financial Information 28
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information which responds to this Item is contained, with
respect to directors, on pages 4 and 5 of the Company's
Proxy Statement for its 1994 Annual Meeting of Stockholders,
filed as Exhibit 2. Information concerning the executive
officers of the Company which responds to this Item is contained
in the response to Item 3A contained in Part I, on pages 28
through 30, of this Report. The foregoing information is hereby
incorporated by reference.
<PAGE>
Page 32 of 249
ITEM 11. EXECUTIVE COMPENSATION
The information required in response to this Item is contained on
pages 9 through 14 of the Company's Proxy Statement for its 1994
Annual Meeting of Stockholders, filed as Exhibit 2. The
foregoing information is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required in response to this Item is contained on
pages 2, 3, 7 and 8 of the Company's Proxy Statement for its 1994
Annual Meeting of Stockholders, filed as Exhibit 2. The
foregoing information is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required in response to this Item is contained on
pages 2, 3 and 9 of the Company's Proxy Statement for its 1994
Annual Meeting of Stockholders, filed as Exhibit 2. The
foregoing information is hereby incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements
The financial statements required in response to this Item
are listed in response to Item 8 on page 31 of this Report and
are incorporated herein by reference.
(a) 2. Financial Statement Schedules
Schedules have been omitted because the information is
either not required, not applicable, or is included in the
financial statements or notes thereto listed in response
to Item 8 on page 31 of this Report and are incorporated
herein by reference.
<PAGE>
Page 33 of 249
<TABLE>
<CAPTION>
<S> <C>
(a) 3. Exhibits
(A) INCORPORATED BY REFERENCE:
Document Reference Source
(3) (i) By-Laws of Registrant, amended Form 8-K, filed February 13,
as of January 23, 1991. 1991, p. 3 and Exhibit I,
attached thereto.
(ii) Articles of Agreement of Form 10-K, filed March 26,
Registrant, amended as of 1992, for the year ending
April 17, 1991. December 31, 1991, pp. 55-66.
(10) Material Contracts;
(i)* Compensation Deferral Agreement, Form 10-K, filed March 26,
Paul R. Shea, dated December 23, 1992, for the year ending
1991, effective January 1, 1992. December 31, 1991, pp. 68-78.
(ii)* Compensation Deferral Agreement, Form 10-K, filed March 29,
Davis P. Thurber, dated December 1993, for the year ending
23, 1992, effective January 1, 1993. December 31, 1992, pp. 37-42.
(iii) Termination Letter, dated Form 10-K, filed March 29,
October 1, 1992, from the Office 1993, for the year ending
of the Comptroller of the Currency. December 31, 1992, p.43.
(iv) Capital Directive, dated Form 10-K, filed March 29,
November 3, 1992. 1993, for the year ending
December 31, 1992, pp. 44-48.
(v)* 1990 Incentive Stock Plan, Form 10-K, filed March 29,
dated October 25, 1989, 1990, for the year ending
effective June 30, 1990. December 31, 1989, pp. 58-64.
(vi)* Merit performance Plan, Form 10-K, filed March 30,
dated December 21, 1988, 1989, for the year ending
continued in effect December 31, 1988, pp. 48-49.
through 1993.
(vii) Director Indemnification Form 10-K, filed March 30,
Agreement (Representative 1989, for the year ending
Form of Agreement), dated December 31, 1988, pp. 50-58.
May 25, 1988; effective
January 1, 1988. (Each
present and future Director
of Registrant is now, or is
entitled to become, a party
to an identical Agreement.)
* - Management contract or compensatory plan.
<PAGE>
Page 34 of 249
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
(viii) Agreement with Mellon Securities Form 10-K, filed March 26,
Trust Company, effective November 1992, for the year ending
30, 1989. December 31, 1991, pp. 74-77.
</TABLE>
(B) FILED BY ENCLOSURE:
Form 10-K
Document Consecutive Page No.
<TABLE>
<CAPTION>
<S> <C>
(10) Material Contracts;
(i)* 1988 Incentive Bonus Plan, adopted 38 - 44
January 22, 1988, effective
January 1, 1988.
(ii)* 1988 Incentive Bonus Plan, (1994 45 - 51
Approved Pools) adopted January 26,
1994, effective January 1, 1994.
(iii)* Change of Control Agreements, (a) (a) 52 - 90
Davis P. Thurber; (b) Paul R. Shea; (b) 91 - 130
and (c) Gregory D. Landroche, dated (c) 131 - 170
December 21, 1988, effective December
21, 1988.
(iv)* Compensation Deferral Agreement, 171
Davis P. Thurber (Amendment # (1)),
dated December 21, 1993, effective
January 1, 1994.
(v)* Compensation Deferral Agreement, 172
Paul R. Shea (Amendment #(1)),
dated December 31, 1993, effective
January 1, 1994.
(13) 1993 Annual Report to Shareholders 173 - 224
of the Company.
(21) Subsidiary of the Company. 225
(99) Notice of 1994 Annual Meeting and 226 - 249
Proxy Statement for the Annual
Meeting of Shareholders.
</TABLE>
(a) 4. During the fourth quarter of 1993, the Company filed no Reports
on Form 8-K.
* - Management contract or compensatory plan.
<PAGE>
Page 35 of 249
DOCUMENTS INCORPORATED BY REFERENCE
Exhibit 1 - 1993 Annual Report to Shareholders of the Company
Exhibit 2 - Notice of 1994 Annual Meeting of Shareholders
and Proxy Statement
<PAGE>
Page 36 of 249
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized,
in the City of Manchester, New Hampshire on the 23rd day of March,
1994.
Bank of New Hampshire
Corporation
By:/s/Davis P. Thurber
Davis P. Thurber, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the Company and in the capacities and on the dates indicated.
Date: Date:
3/23/94 /s/Davis P. Thurber 3/23/94 /s/Gregory D. Landroche
Davis P. Thurber Gregory D. Landroche
President, Chairman SVP/CFO & Treasurer
and Director (Principal Financial
(Principal Executive Officer)
Officer)
3/23/94 /s/Paul R. Shea 3/23/94 /s/Robert A. Boulay
Paul R. Shea Robert A. Boulay
Executive Vice President VP & Controller
and Director (Principal Accounting
Officer)
3/23/94 /s/Robert L. Bailey 3/23/94 /s/Sidney Thurber Cox
Robert L. Bailey Sidney Thurber Cox
Director Director
3/23/94 /s/Robert P. Bass, Jr. 3/23/94 /s/Raymond J. Creteau
Robert P. Bass, Jr. Raymond J. Creteau
Director Director
3/23/94 /s/Robert B. Field, Jr.
Arthur E. Comolli Robert B. Field, Jr.
Director Director and Secretary
3/23/94 /s/Raymond G. Cote 3/23/94 /s/Morton E.Goulder
Raymond G. Cote Morton E. Goulder
Director Director
<PAGE>
Page 37 of 249
3/23/94 /s/Joseph G. Sakey
Philip deG. Labombarde Joseph G. Sakey
Director Director
3/23/94 /s/Floyd A. Lamb 3/23/94 /s/George R. Walker
Floyd A. Lamb George R. Walker
Director Director
3/23/94 /s/Daniel R.W. Murdock
Daniel R.W. Murdock Richard S. West
Director Director
3/23/94 /s/Constance T. Prudden
Constance T. Prudden
Director
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
1988 INCENTIVE BONUS PLAN
Adopted: June 22, 1988
Effective: January 1, 1988
WHEREAS, the Directors of Bank of New Hampshire Corporation
("BNHC"), on or about June 22, 1988, adopted the 1987 Executive
Bonus Plan effective January 1, 1987 for the benefit of eligible
employee of BNHC and its subsidiaries.
WHEREAS, the 1987 Executive Bonus Plan served during 1987 as
an interim compensation plan; and
WHEREAS, the Directors of BNHC believe that the corporate
objectives of BNHC will be best achieved by establishing the 1988
Incentive Bonus Plan ("The Plan"), designed to provide integrated
compensation incentives for all subsidiaries, and discrete
operating divisions, and having universal institutional
objectives and goals.
NOW, THEREFORE, by these presents, the Directors of BNHC by
vote taken on the date first above stated, do hereby adopt the
within Plan to be effective for and as of, January 1, 1988, to be
administered, interpreted, and maintained all as set forth below:
1. Introduction. The Board of Directors of Bank of Ne
Hampshire Corporation ("BNHC") has authorized the Executive
Compensation Committee, a subcommittee of the Board of Directors
(the "Committee") duly appointed on or about April 27, 1988, to
administer and maintain The Plan for certain designated personnel
of BNHC and its present five (5) subsidiaries, to wit: (i) Bank
of New Hampshire, National Association ("Bank"); (ii) Stafford
National Bank ("Strafford"); (iii) The Bristol Bank ("Bristol");
(iv) Bank of New Hampshire - Portsmouth ("Portsmouth"); and (v)
The Suncook Bank ("Suncook") (collectively the "Subsidiaries"),
and such other subsidiaries or discrete operating divisions of
BNHC as the Directors may hereafter, from time to time,
determine. Compensation distributed pursuant to The Plan shall
be distributed pursuant to (i) a formual determined by the Board
of Directors of BNHC (the "Formula Bonus"); and (ii) the
Chairman's discretionary authority, which discretion shall be
based upon certain goals and objectives (the "Discretionary
Bonus"). The primary goal of The Plan is to help foster
continued growth in the net operating profits of BNHC and the
Subsidiaries by offering potential monetary rewards to selected
personnel if predetermined return on average assets and other
earnings targets are achieved, and in addition to offer
discretionary monetary awards based on goals and objectives to be
determined by the Board of Directors. The Plan shall be
administered and maintained at the holding company level. The
term "Subsidiaries" as used herein shall be deemed to include
<PAGE>
future subsidiaries and/or discrete operating divisions
designated by the Board of Directors as being eligible to
participate in The Plan.
Nothing contained herein shall be construed to give any
employee of BNHC or the Subsidiaries any right to be awarded a
bonus for any year, The Plan is in effect. Any incentive
compensation awarded shall always be at the ultimate and sole
discreion of the Board of Directors of BNHC. As such, BNHC shall
have the power at any time and from time to time by its Directors
to amend, modify or eliminate The Plan.
Furthermore, the terms of The Plan are not intended to
restrict or modify in any way the normal administration of
salaries, nor does the existence of The Plan in any way restrict
the payment of any bonus, or other type of compensation or
employee benefit, that may be granted outside of The Plan.
2. Effective Date. The effective date of The Plan shall be
January 1, 1988 and The Plan shall continue in effect until
withdrawn or modified by appropriate action of the Board of
Directors of BNHC.
3. Compensation Committee. The Board of Directors of BNHC
has appointed an Executive Compensation Committee, (the
"Committee") to serve at its pleasure, which shall have the
responsibility of directing the administration of The Plan. The
Committee will have complete control of the administration of The
Plan, with all powers necessary to enable it to properly carry
out its duties in that respect. The Committee may in carrying
out its duties, obtain recommendations from the Chairman of BNHC,
and the Presidents, or senior executive, of the Subsidiaries.
4. Eligible Personnel. Subject to the approval of the
Board of Directors, the Committee will determine which officers
of BNHC and the Subsidiaries will be eligible to participate in
The Plan in a given year (the "Eligible Participants").
Generally, this determination will be made by the Committee prior
to or near the beginning of each year so that affected personnel
can be advised of their status as Eligible Participants.
5. Incentive Compensation Formula. The Board of Directors
has approved The Plan, which sets forth a formula (the "Formula")
which will apply in determining the amount or amounts to be set
aside in any incentive compensation pool or pools set under the
Formula Bonus. The Formula, or any amendment thereof, shall be
appended to The Plan as Appendix A, and shall be incorporated by
reference herein. An incentive compensation and discretionary
bonus pool or pools will be generated by the Formula for the
Eligible Participants. The incentive compensation pools
generated by application of the Formula will then be allocated in
whole or in part to Eligible Participants in accordance with
Section 7 of The Plan.
<PAGE>
6. Discretionary Bonus. The Plan contains certain goals
and objectives which will apply in determining the amount or
amounts to be set aside in any discretionary bonus pool or pools
set under the Discretionary Bonus. The goals and objectives
shall be appended to The Plan as Appendix A, and shall be
incorporated by reference herein. The discretionary compensation
pools will then be allocated in whole or in part to Eligible
Participants in accordance with Section 7 of The Plan.
7. Allocation of Incentive Compensation and/or
Discretionary Bonus Pools. The incentive compensation and/or
discretionary bonus pools generated in accordance with Section 5
and 6 above, shall be allocated to Eligible Participants in
accordance with rules and procedures established, from time to
time, by the Committee.
However, there is no requirement that the entire amount in
any incentive compensation or discretionary bonus pool will be
allocated in accordance with a predetermined formula, nor is
there any requirement that the entire amount in any incentive
compensation and discretionary bonus pools be allocated to
Eligible Participants in any event.
8. Payment of Incentive Compensation and/or
Discretionary Bonus. The incentive compensation and
discretionary bonus pools determined in accordance with Sections
5 and 6 and allocated in accordance with Section 7, will be
payable to Eligible Participants on or about February 15 of each
year provided such participants are actively employed at that
time.
Based upon rules and procedures established by the
Committee, any incentive compensation or discretionary bonus
payable under The Plan will be paid as current compensation. Any
incentive compensation or discretionary bonus will not be
considered in determining the participant's rights to any benefit
under any other employee welfare or pension benefit plans
maintained by BNHC or the Subsidiaries.
<PAGE>
9. Limitation of Liability. Neither members of the
Committee nor BNHC, its agents, officers, and directors, shall be
in any way subject to any suit or litigation or to any legal
liability for any cause or reason or thing whatsoever in
connection with The Plan or its operation. Acceptance of the
status of Eligible Participant is deemed to constitute: (i)
acceptance of the provisions of this Section 9, and, (ii) an
express waiver of, and general release granted to, such Committee
member, or BNHC Agents, Officers or Directors.
10. Amendments. The Board of Directors of BNHC shall have
the power at any time, to modify or eliminate The Plan. Notice
of any such amendment shall be given in writing to each
participant.
11. Adoption. The Plan when executed shall for all matters
be deemed duly adopted by the Board of Directors of BNHC, and The
Plan may be executed in multiple counterparts.
12. Headings. Section headings as used herein are for
convenience only.
Date: August 1, 1988
Attest: BANK OF NEW HAMPSHIRE
CORPORATION
Robert B. Field, Jr. By: /s/ Davis P. Thurber
Secretary Its Chairman, duly
authorized.
Attachment: Appendix A
<PAGE>
Appendix A
(Page 1 of 3)
BANK OF NEW HAMPSHIRE CORPORATION
Target Bonus Dollars
1988
Over/Under
ROAA* Bonus Dollars Required Net Income Budget**
.90% $139,500 $7,740,000 (Approximates ($120,900)**
current Projections)
.92 157,000 7,912,000 (Approximates 62,600
Budget)
.95 176,600 8,170,000 333,600
.97 196,200 8,342,000 518,500
1.00 218,000 8,600,000 (Target) 790,900
1.02 239,800 8,772,000 977,300
1.05 263,800 9,030,000 1,251,100
1.07 287,800 9,202,000 1,439,000
1.10 311,800 9,460,000 1,712,800
*No awards if ROAA is less than .90%
**Includes iimpact of bonus expense
***As if 4/30/88 - $134,000 under budget
<PAGE>
Appendix A
(Page 2 of 3)
BANK OF NEW HAMPSHIRE CORPORATION
Distribution Ranges
Target Bonus
1988
ROAA* Distribution Factor Bonus Dollars
.90% .64% $139,500
.92 (Budget) .72 157,000
.95 (Last Year) .81 176,600
.97 .90 196,200
1.00 (Target) 1.00 218,000
1.02 1.10 239,800
1.05 1.21 263,800
1.07 1.32 287,800
1.10 1.43 311,800
*No awards if ROAA is less than .90%
<PAGE>
Appendix A
(Page 3 of 3)
BANK OF NEW HAMPSHIRE CORPORATION
1988 Bonus Plan
Discretionary
Target Pool
Chairman $ 21,500 $21,500 $12,500
President (N.A.) 15,000 15,000 9,000
EVP (Corp.) 10,000 10,000 6,000
SVPs (Corp. & N.A.) 7,000 X's 7 = 49,000 28,000*
Vps (Corp. & N.A.) 3,500 X's 22 = 77,000 44,000*
President (Bristol) 5,000 5,000 3,000
SVP (Bristol) 2,500 2,500 1,400
VP (Bristol) 2,000 2,000 1,000
President (SNB) 7,000 7,000 4,000
VPs (SNB) 3,000 X's 3 = 9,000 4,200
President (BNH-P) 4,000 4,000 2,500
President (Suncook) 7,000 7,000 4,000
SVPs (Suncook) 3,000 X's 3 = 9,000 4,200
Chairman's Discretionary -- 25,000
$218,000 $148,800
$366,800
*Cap is on total pool, not on individual amounts
<PAGE>
BNHC
January 26, 1994
Minutes - Board of Directors
Chairman West then presented the Minutes of the December 15,
1993, Meeting of the Committee , together with Exhibit A -
Memorandum, dated December 14, 1993, (Evaluation Criteria ); and
Exhibit B - Memorandum, dated January 26, 1994, (Recommendation
as to "Target" and "Discretionary" Pools, to be applied in
calendar year 1994 pursuant to the 1988 Incentive Bonus Plan).
Exhibit A was also the subject of a verbal presentation by
Chairman West.
After discussion, on motion duly made and seconded, it was,
unanimously
VOTED: To accept and adopt the written report of the
Executive Compensation Committee of its Meeting
held on December 15, 1993; including the
recommendations of Exhibit A (12/14/93), and
Exhibit B (1/26/94); and to approve the "Target"
and "Discretionary" Pools to be applied in 1994
to the 1988 Incentive Bonus Plan of the
Corporation.
<PAGE>
BANK OF NEW HAMPSHIRE
M E M O R A N D U M
TO: Executive Compensation Committee
FROM: Paul R. Shea, President
DATE: December 14, 1993
- -----------------------------------------------------------------
During 1994 every Vice President and above will be evaluated by
using quantifiable goals and objectives. For example, the five
main measurements for performance by a commercial lender would
include:
a. Business Development.
b. Business Retention and Expansion of Services.
c. Delinquency and Asset Quality.
d. Credit Administration.
e. Community Involvement.
A regional Senior Vice President and/or Division Head would haev
additional performance measurements as applicable:
a. Actual results versus budget.
b. Comparisons to other regions and/or industry peers.
c. Regulatory external and internal reviews, audits and
comments.
d. Importance of individual to bank's perforamance.
A Vice President with a defined specialty or function would also
include:
- - Professionalism
- - Growth
- - Creativity
- - Commitment
- - Ability to assume higher level of responsibility
<PAGE>
M E M O R A N D U M
TO: Board of Directors - BNHC and BNH
FROM: Executive Compensation Committee
RE: ECC Recommended 1994 Incentive Bonus Plan
DATE: January 26, 1994
- -----------------------------------------------------------------
Attached are the recommended Target and Discretionary Pools
dollar limits for the 1994 Incentive Bonus Plan and the
procedures to be followed for determining awards to be paid from
the Discretionary Pool. Also attached is a copy of the 1989
limits for your ease of reference and comparison to the last year
awards were made pursuant to the Bonus Plan.
As you can see, the approach to awards from the Target and
Discretionary Pools have been left essentially unchanged from
1989 except to reflect the merger of the five banks into one
bank.
The Target Pool continues to utilize the Coopers & Lybrand
"sliding-scale" approach in the calculation of amounts available
for distribution. And, as in 1989, there will be a minimum level
ROAA which must be achieved prior to any disbursements being made
from this pool.
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
1994 INCENTIVE PLAN
Discretionary
Target Pool
Thurber $30,000 $ 30,000 $ 15,000
Shea 25,000 25,000 12,500
Landroche 15,000 15,000 7,500
SVPs (Corp.) - (A) 8,000 X's 3 24,000 12,000
EVPs & Above (Bank) - (B) 8,000 X's 3 24,000 12,000
SVPs (Bank) - (C) 6,000 X's 7 42,000 21,000
VPs (Corp.) - (D) 4,000 X's 2 8,000 4,000
VPs (Bank) 4,000 X's 28 112,000 56,000
$280,000 $140,000
$420,000
(A) (B) (C) (D)
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
Distribution Ranges
Target Bonus
1994
ROAA* Distribution Factor Bonus Dollars
.80% .64 $179,200
.82 .72 201,600
.85 (Budget)** .81 226,800
.87 .90 252,000
.90 (Target) 1.00 280,000
.92 1.10 308,000
.95 1.21 338,800
.97 1.32 369,600
1.00 1.43 400,400
*No award if ROAA is less than .80%
**Budget for 1994 is .85%, actual for 1993 was .67%
<PAGE>
BNHC
1994 Incentive Bonus Plan
Example Distributions
Target Bonus Pool Awards
Scenario (EVPs @ Bank & SVPs @ Corp.)
<TABLE>
<CAPTION>
Distribution Bonus
Assumptions: Target Bonus Factor Awarded
<S> <C> <C> <C>
1) Actual ROAA for 1994 is .79 $8,000 .00 ---
2) Actual ROAA for 1994 is .82 8,000 .72 $5,760
3) Actual ROAA for 1994 is .90 8,000 1.00 8,000
4) Actual ROAA for 1994 is .92 8,000 1.10 8,800
</TABLE>
- -------------------------------------------------------------------------------
Discretionary Pool Awards
Awards from this pool are not based upon consolidated results, rather upon
individual achievements.
Discretionary maximum awards are equal to one-half of the Target bonus, i.e.
for Bank EVPs and Corp. SVPs the maximum amount is $4,000 per individual.
Awards from the Discretionary Pool are the result of recommendations of awards
by the Chairman of the Corporation and President and CEO of the Bank.
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
1994 Bonus Plan
Discretionary Review Process
Executive
Compensation Committee Chairman President
Chairman President All VPs and above
Corporate
Officers
- -----------------------------------------------------------------
Methodology
- -- All participants prepare goal memo outlining their individual
goals for the 1994 calendar year.
- -- Goals are reviewed by the individual's respective senior
manager for quantifiability and consistency with overall
bank goals.
- -- Departmental/Divisional goals are reviewed and approved by the
President.
- -- At the end of the year an accomplishment memo is prepared by
the individual which then follows a similar review process to
the foregoing.
- -- Actual awards are proposed and follow the following review
process:
. President reviews EVPs/SVPs/VPs and makes formal
recommendations to Chairman.
. Chairman reviews President and Corporate Officers and
makes recommendations to the Executive Compensation
Committee.
. Executive Compensation Committee reviews Chairman and
Chairman's recommendations and makes recommendations
to the BOD.
. BOD approval/changes/disapproval.
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
AGREEMENT AS TO FUTURE EMPLOYMENT
Bank of New Hampshire Corporation ("Company")
Davis P. Thurber ("Executive")
Dated: December 21, 1988
<PAGE>
INDEX
Page
1. Certain Definitions . . . . . . . . . . . . . . . . . 3
(a) Effective Date. . . . . . . . . . . . . . . . . . 3
(b) Change of Control Period. . . . . . . . . . . . . 4
2. Change of Control . . . . . . . . . . . . . . . . . . 5
3. Employment Period . . . . . . . . . . . . . . . . . . 7
4. Terms of Employment . . . . . . . . . . . . . . . . . 7
(a) Position and Dutues . . . . . . . . . . . . . . . 7
(b) Compensation. . . . . . . . . . . . . . . . . . . 9
5. Termination . . . . . . . . . . . . . . . . . . . . . 13
(a) Death or Disability . . . . . . . . . . . . . . . 13
(b) Cause . . . . . . . . . . . . . . . . . . . . . . 15
(c) Good Reason . . . . . . . . . . . . . . . . . . . 16
(d) Notice of Termination . . . . . . . . . . . . . . 17
(e) Date of Termination . . . . . . . . . . . . . . . 18
6. Obligations of the Company
Upon Termination . . . . . . . . . . . . . . . . . . 19
(a) Death . . . . . . . . . . . . . . . . . . . . . . 19
(b) Disability. . . . . . . . . . . . . . . . . . . . 20
(c) Cause; Other than for Good Reason . . . . . . . . 21
(d) Other than for Cause or
Disability; Good Reason. . . . . . . . . . . . . 22
7. Non-exclusivity of Rights . . . . . . . . . . . . . . 25
8. Full Settlement . . . . . . . . . . . . . . . . . . . 25
9. Certain Additional Payments by
the Company. . . . . . . . . . . . . . . . . . . . . 26
10. Confidential Information. . . . . . . . . . . . . . . 32
11. Successors. . . . . . . . . . . . . . . . . . . . . . 33
12. Miscellaneous . . . . . . . . . . . . . . . . . . . . 34
(a) Applicable Law; Jurisdiction. . . . . . . . . . . 34
(b) Notices and Communciations. . . . . . . . . . . . 35
(c) Validity and Enforceablity. . . . . . . . . . . . 36
(d) Withholding of Taxes. . . . . . . . . . . . . . . 36
(e) Waiver. . . . . . . . . . . . . . . . . . . . . . 36
(f) Merger of Understanding . . . . . . . . . . . . . 36
(g) Present Employment, Condition of. . . . . . . . . 36
(h) Headings and Titles . . . . . . . . . . . . . . . 37
(i) Amendments. . . . . . . . . . . . . . . . . . . . 37
(j) Counterparts. . . . . . . . . . . . . . . . . . . 37
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
AGREEMENT AS TO FUTURE EMPLOYMENT
AGREEMENT made this 21st day of December, 1988, for and
as of December 21, 1988, by and between Bank of New
Hampshire Corporation, a New Hampshire bank holding company,
registered pursuant to the Federal Bank Holding Company Act
of 1956, as amended, with a principal place of business at
300 Franklin Street, Manchester, New Hampshire 03105;
(hereafter, the "Company"), and Davis P. Thurber, of 25
Swart Terrace, Nashua, New Hampshire 03060; (hereafter, the
"Executive"), and together, sometimes hereafter referred to
as, (the "Parties").
WHEREAS the Company considers the establishment and
maintenance of a sound and vital management to be essential
to protecting and enhancing the best interests of Company
and its shareholders;
WHEREAS in connection with the maintenance of sound and
vital management, the Company recognizes that, as is the
case with many publicly held corporations, the possibility
of a "Change of Control" (as hereinafter defined) may exist
and that such continuing possibility, and the uncertainty
and questions which it may raise among management, is
unsettling and may result in the distraction of management
personnel to the detriment of Company and its shareholders;
<PAGE>
WHEREAS company further recognizes that the financial
services industry is currently undergoing structural and
legislative changes, with the expectation of additional
changes in the future, and that such changes would tend to
exacerbate the uncertainty among management that a Change of
Control might create;
WHEREAS if Company should receive proposals, whether
invited or uninvited, from third (3rd) parties with respect
to its future, it believes it important that management
personnel be in a position to assess and advise the Board of
Directors of Company (hereafter, the "Board") whether such
proposals would be in the best interests of Company and its
shareholders, without being influenced by the uncertainties
of management's own employment situations or circumstances;
WHEREAS the Board wishes to demonstrate to the members
of management that Company is concerned with the welfare of
its executives and intends to see that loyal executives are
treated fairly;
WHEREAS the Board has determined that is is in the best
interests of the Company and its shareholders to assure that
the Company will have the continued dedication of the
Executive, notwithstanding the possibility, threat, or
occurrence of a Change of Control of the Company;
WHEREAS the Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the
personal uncertainties and risks created by a pending or
threatened Change of Control, to encourage the Executive's
<PAGE>
full attention and dedication to the Company currently, and
in the event of any threatened or pending Change of Control,
and to provide the Executive with compensation arrangements
upon a Change of Control which provide the Executive with
individual financial security and which are competitive with
those of other corporations similarly situated in the
financial industry;
WHEREAS the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued
attention and dedication of members of Company's management,
including Executive, to the assigned duties without
disturbance in the face of the potentially disturbing
uncertainties arising from the possibility of a Change of
Control; and
WHEREAS in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, in consideration of the promises,
representations and covenants herein contained, and for
other and valuable consideration, the receipt of which is
hereby acknowledged, the Parties hereto agree as follows:
1. Certain Definitions.
(a) The "Effective Date" shall be the first date
during the "Change of Control Period" (as defined
in Section 1(b)) on which a Change of Control
occurs. Anything in this Agreement to the
contrary notwithstanding, if the Executive's
employment with the Company is terminated prior
<PAGE>
to the date on which a Change of Control occurs,
and it is reasonably demonstrated that such
termination (i) was at the request of a third
(3rd) party who has taken steps reasonably
calculated to effect a Change of Control, or (ii)
otherwise arose in connection with, or in
anticipation of, a Change of Control, then for
all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to
the date of such termination.
(b) The "Change of Control Period" is the period
commencing on the date hereof and ending on the
earlier to occur of (i) the third (3rd)
anniversary of such date, or (ii) the first (1st)
day of the month next following the Executive's
actual retirement date ("Retirement Date") under
The Retirement Plan For Employees of Bank of New
Hampshire, National Association, as adopted by
Company for the benefit of its employees,
including Executive, or any successor or
replacement retirement plan hereafter adopted by
Company at any time, and from time to time, (the
"Retirement Plan"); provided however, that
commencing on the date one (1) year after the
date hereof, and on each annual anniversary of
such date (such date and each annual anniversary
thereof is hereinafter referred to as the
<PAGE>
"Renewal Date"), the Change of Control Period
shall be automatically extended so as to
terminate on the earlier date of (x) three (3)
years from such Renewal Date, or (y) the first
(1st) day of the month coinciding with, or next
following, the Executive's Retirement Date,
unless, at least sixty (60) days prior to the
Renewal Date, the Company shall give notice that
the Change of Control Period shall not be so
extended.
2. Change of Control. For the purpose of this
Agreement, the phrase "Change of Control" shall mean:
(a) The acquisition (other than from the Company) by
any person, entity or "group", within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the "Exchange Act"),
(excluding, for this purpose, the Company or its
subsidiaries, or any employee benefit plan of
either the Company or its subsidiaries which
acquires beneficial ownership of voting
securities of the Company) of beneficial
ownership, (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty
percent (20%) or more of either (x) the then
outstanding shares of common stock, or (y) the
combined voting power of the Company's then
outstanding voting securities entitled to vote
<PAGE>
generally in the election of directors; or
(b) Individuals who, as of the date hereof,
constitute the Board (as of the date hereof, the
"Incumbent Board") cease for any reason to
constitute at least a majority of the Board,
provided that any person becoming a director
subsequent to the date hereof whose election, or
nomination for election by the Company's
shareholders, was approved by a vote of at least
a majority of the directors then comprising the
Incumbent Board (other than an election or
nomination of an individual whose initial
assumption of office is in connection with an
actual or threatened election contest relating to
the election of the Directors of the Company, as
such terms are used in Rule 14a-11 of the
Regulation 14A promulgated under the Exchange
Act) shall be, for purposes of this Agreement,
considered as though such person were a member of
the Incumbent Board; or
(c) Approval by the shareholders of the Company of a
reorganization, merger, consolidation, in each
case, with respect to which persons who were the
shareholders of the Company immediately prior to
such reorganization, merger or consolidation do
not, immediately thereafter, own more than fifty
percent (50%) of the combined voting power
<PAGE>
entitled to vote generally in the election of
directors of the reorganized, merged or
consolidated company's then outstanding voting
securities, or a liquidation or dissolution of
the Company or of the sale of all or
substantially all of the assets of the Company;
or
(d) A determination made by the Board that a person,
entity or "group" within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act,
directly or indirectly, exercises a controlling
influence over the management or policy of the
Company, except to the extent such person, entity
or "group" presently exists and has been
identified, prior to the date hereof, by the
Board in Exchange Act filings.
3. Employment Period. The Company hereby agrees to
continue the Executive in its employ, and the Executive
hereby agrees to remain in the employ of the Company, for
the period commencing on the Effective Date and ending on
the earlier to occur of (x) the third (3rd) anniversary of
such date, or (y) the first (1st) day of the month
coinciding with or next following the Executive's Retirement
Date (the "Employment Period").
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive's
<PAGE>
position (including status, offices, titles and
reporting requirements), authority, duties and
responsibilities shall be at least commensurate
in all material respects with the most
significant of those held, exercised and assigned
any time during the ninety (90) day period
immediately preceding the Effective Date, and (B)
the Executive's services shall be performed at
the location where the Executive was employed
immediately preceding the Effective Date or any
office or location less than thirty-five (35)
miles from such location and within the State of
New Hampshire.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the
Executive is entitled, the Executive agrees to
devote reasonable attention and time during
normal business hours to the business and affairs
of the Company, and, to the extent necessary to
discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the
Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill
<PAGE>
speaking engagements or teach at educational
institutions, and/or (C) manage personal
investments (including investments in financial
institutions and other business entities, whether
public or closely held, or whether existing in
partnership form, that may be in competition with
Company), so long as such activities do not
significantly and materially interfere with the
performance of the Executive's responsibilities
as an employee of the Company in accordance with
this Agreement. It is expressly understood and
agreed that to the extent any such activities
have been conducted by the Executive prior to the
Effective Date, the continued conduct of such
activities (or the conduct of activities similar
in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the
Executive shall receive a base salary ("Base
Salary") at a monthly rate at least equal to the
highest monthly base salary paid to the Executive
by the Company during the twenty-four (24) months
period immediately preceding the month in which
the Effective Date occurs. During the Employment
<PAGE>
Period, the Base Salary shall be reviewed by the
Board at least annually and shall be increased at
any time, and from time to time, as shall be
substantially consistent with increases in base
salary awarded in the ordinary course of business
to other key executives then employed by the
Company and its affiliates. Any increase in Base
Salary shall not serve to either limit or reduce
any other obligation(s) to the Executive under
this Agreement. During the Employment Period, at
no time following the award of any such increase
to Base Salary shall the Base Salary of Executive
ever be reduced.
(ii) Annual Bonus. In addition to Base Salary, the
Executive shall be awarded, for each fiscal year
during the Employment Period, an annual bonus (an
"Annual Bonus") (either pursuant to the incentive
compensation plan of the Company then in effect,
or otherwise), in a "Lump Sum In Cash", as
hereinafter defined, at least equal to the
average bonus received by the Executive from the
Company and its affiliates in respect of the
three (3) fiscal years immediately preceding the
fiscal year in which the Effective Date occurs.
(iii) Incentive, Savings and Retirement Plans. In
addition to Base Salary and Annual Bonus payable
as hereinabove provided, the Executive shall be
<PAGE>
entitled to participate during the Employment
Period in all incentive, savings and retirement
plans and programs applicable to other key
executives, and/or individual to Executive, of
the Company and its affiliates (including
Company's employee benefit plans, in each case
comparable to those in effect or as subsequently
amended). Such plans and programs, in the
aggregate, shall provide the Executive with
compensation, benefits and reward opportunities
at least as favorable as the most favorable of
such compensation, benefits and reward
opportunities provided by the Company for the
Executive under such plans and programs in effect
at any time during the ninety (90) day period
immediately preceding the Effective Date, or, if
more favorable to the Executive, as provided at
any time thereafter with respect to other key
executives.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's
family, as the case may be, shall be eligible for
participation in and shall receive all benefits
under welfare benefit plans provided by the
Company and its affiliates (including, without
limitation, medical, prescription, dental,
disability, salary continuance, executive life,
group life, accidental death and travel accident
insurance plans and programs), at least as
favorable as the most favorable of such plans and
programs in effect at any time during the ninety
(90) day period immediately preceding the
Effective Date as to Executive and/or the
Executive's family, or, if more favorable to the
Executive and/or the Executive's family, as in
effect at any time thereafter with respect to
other key executives of Company.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses
incurred by the Executive in accordance with the
most favorable policies and procedures of the
Company and its affiliates in effect at any time
during the ninety (90) day period immediately
preceding the Effective Date, or, if more
favorable to the Executive, as in effect at any
time thereafter with respect to other key
executives of the Company.
(vi) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe
benefits, including use of an automobile and
payment of related expenses, if applicable,
comparable to, and in accordance with, the
policies of the Company and its affiliates,
applicable to Executive, in effect at any time
during the ninety (90) day period immediately
preceding the Effective Date.
(vii) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an
office (or offices) of a size and with
furnishings and other appointments, and to
secretarial and other staff assistance, at least
equal to the most favorable of the foregoing
provided to the Executive at any time during the
ninety (90) day period immediately preceding the
Effective Date.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in
accordance with the most favorable policies of
the Company and its affiliates as in effect at
any time during the ninety (90) day period
immediately preceding the Effective Date.
(ix) Pension Benefit Plan. Anything in this Agreement
or in the Retirement Plan to the contrary
notwithstanding, in the event of a Change of
Control, Executive shall be entitled to "full
vesting" to age sixty-five (65), payable at age
sixty (60), under the terms of the Retirement
Plan, and Company shall, to the extent permitted
by law, within thirty (30) days of Change of
Control, either (i) amend and fund the Retirement
Plan with such additional amounts of money as
shall be deemed actuarily required to provide
Executive with "full vesting", to age sixty-five
(65), normal retirement status, or (ii) agree in
writing with Executive to provide Executive with
a Lump-Sum In Cash payment at Retirement Date in
an amount, net of Federal and State income taxes,
as may be necessary for Executive to purchase an
annuity equal to the difference between
Executive's retirement benefit computed at the
then current vesting level as provided by the
Retirement Plan and that to which Executive would
be entitled at "full vesting" age sixty-five (65)
normal retirement status.
5. Termination.
(a) Death or Disability. This Agreement shall
terminate automatically upon the Executive's
death. (See Section 6(a) for obligations of
Company on account of termination for death.) If
the Company determines in good faith that the
Disability of the Executive has occurred
(pursuant to to the definition of "Disability" as
set forth below), it may give to the Executive
written notice of its intention to terminate the
Executive's employment. In such event, the
executive's employment with the Company shall
terminate effective on the thirtieth (30th) day
after receipt of such notice by the Executive
(the "Disability Effective Date"), provided that,
within the thirty (30) days after such receipt,
the Executive shall not have returned to full-
time performance of the Executive's duties. (See
Section 6(b) for obligations of Company on
account of termination for Disability). For
purposes of this Agreement, "Disability" means
any mental or physical illness or disability, or
other incapacitation of Executive that renders
the Executive unable regularly to perform his
usual duties for either (x) a consecutive period
in excess of twenty-six (26) weeks or more after
commencement, or (y) a cumulative period of
twenty-six (26) weeks or more in any consecutive
twelve (12) month period, after commencement, and
which is determined to be total and permanent in
characteristic by a physician.
(b) Cause. The Executive's employment may be
terminated by the Company for "Cause" upon a
finding made in good faith by the Board. For
purposes of this Agreement, "Cause" means serious
willful misconduct by the Executive, including,
but not limited to, (i) an act or acts of
personal dishonesty taken by the Executive and
intended to result in substantial personal
enrichment of the Executive at the expense of the
Company, any of its affiliates or subsidiaries,
and/or its shareholders, or (ii) repeated
violations by the Executive of the Executive's
obligations under Section 4(a) of this Agreement
which are demonstrably willful and deliberate on
the Executive's part and which are not remedied
in a reasonable period of time after receipt of
written notice from the Company, or (iii) the
conviction of the Executive of a felony, or (iv)
the perpetration of a common-law fraud upon
Company or any of its affiliates or subsidiaries,
or (v) a determination in final non-applicable
form made by any State or Federal regulatory
agency having supervising jurisdiction over the
Company, or of any of its affiliates or
subsidiaries, that Executive be removed from his
management or directorale responsibilities.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for "Good Reason".
For purposes of this Agreement, "Good Reason"
means
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's
position (including status, offices, titles and
reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a)
of this Agreement, or any other action by the
Company which results in a diminution in such
position, authority, duties or responsibilities,
or creates an inhospitable, hostile, or
uncomfortable employment environment as to
Executive, excluding for this purpose an
isolated, insubstantial and inadvertent action
not taken in bad faith and which is remedied by
the Company promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company to comply with any of
the provisions of Section 4(b) of this Agreement,
other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith
and which is remedied by the Company promptly
after receipt of notice thereof given by the
Executive;
(iii) The Company's requiring the Executive to be based
at any office or location other than that
described in Section 4(a)(i)(B) hereof, except
for travel reasonably required in the performance
of the Executive's responsibilities;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as
expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive. Anything in this Agreement to the contrary
notwithstanding, a termination by the Executive for any
reason during the thirty (30) day period immediately
following the first (1st) anniversary of the Effective Date
shall be deemed to be a termination for "Good Reason" for
all purposes of this Agreement.
(d) Notice of Termination. Any termination by the
Company for "Cause", or by the Executive for
"Good Reason", shall be communicated by Notice of
Termination to the other party hereto given and
delivered in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice
which (i) indicates the specific termination
provision in this Agreement relied upon, (ii)
sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for
termination of the Executive's employment under
the provision so indicated, and (iii) if the Date
of Termination (as defined below) is other than
the date of receipt of such notice, specifies the
termination date (which date shall be not more
than fifteen (15) days after the giving of such
notice). The failure by the Executive to set
forth in the Notice of Termination any fact or
circumstance which contributes to a showing of
Good Reason shall not waive any right of the
Executive hereunder or preclude the Executive
from adding or otherwise asserting such
additional fact(s) or circumstance(s) at a
subsequent date in enforcing his rights
hereunder.
(e) Date of Termination. "Date of Termination" means
the date of receipt of the Notice of Termination
or any later date specified therein, as the case
may be; provided, however, that (i) if the
Executive's employment is terminated by the
Company other than for Cause or Disability, the
Date of Termination shall be the date on which
the Company notifies the Executive of such
termination, and (ii) if the Executive's
employment is terminated by reason of death or
Disability, the Date of Termination shall be the
date of death of the Executive, or the Disability
Effective Date, as the case may be.
6. Obligations of the Company Upon Termination.
(a) Death. If the Executive's employment is
terminated by reason of the Executive's death,
this Agreement shall terminate without further
obligations to the Executive's legal
representatives, other than those obligations
accrued or earned by the Executive hereunder as
of the Date of Termination, including, for this
purpose the sum of (i) the Executive's full Base
Salary through the Date of Termination at the
rate in effect on the Date of Termination or, if
higher, at the highest rate in effect at any time
from the ninety (90) day period preceding the
Effective Date through the Date of Termination
(the "Highest Base Salary"), (ii) the product of
the Annual Bonus paid to the Executive for the
last full fiscal year and a fraction, the
numerator of which is the number of days in the
current fiscal year through the Date of
Termination, and the denominator of which is 365,
(iii) any compensation previously deferred by the
Executive (together with any accrued interest
thereon) and not yet paid by the Company and any
accrued vacation pay not yet paid by the Company,
and (iv) any other amounts or benefits owing to,
or accrued or vested for the account of,
Executive under the then applicable employee
benefit plans or policies of the Company (such
amounts specified in clauses (i), (ii), (iii) and
(iv) are hereinafter referred to as "Accrued
Obligations"). All such Accrued Obligations
shall be paid to the Executive in a "Lump Sum In
Cash" within thirty (30) days of the Date of
Termination. "Lump Sum In Cash" as used herein,
means United States currency or certified or
cashiers check in immediately and payable Federal
funds. Anything in this Agreement to the
contrary notwithstanding, the Executive's family
shall be entitled to receive benefits at least
equal to the most favorable benefits provided by
the Company and any of its affiliates to
surviving families of executives of the Company
and such affiliates under such plans, programs
and policies relating to family death benefits,
if any, in accordance with the most favorable
policies of the Company and its affiliates in
effect at any time during the ninety (90) day
period immediately preceding the Effective Date,
or, if more favorable to the Executive and/or the
Executive's family, as in effect on the date of
the Executive's death with respect to other key
executives and their families.
(b) Disability. If the Executive's employment is
terminated by reason of the Executive's
Disability, this Agreement shall terminate
without further obligations to the Executive,
other than those obligations accrued or earned by
the Executive hereunder as of the Date of
Termination, including for this purpose, all
Accrued Obligations. All such Accrued
Obligations shall be paid to the Executive in a
Lump Sum In Cash within thirty (30) days of the
Date of Termination. Anything in this Agreement
to the contrary notwithstanding, the Executive
shall be entitled after the Disability Effective
Date to receive disability and other benefits at
least equal to the most favorable of those
provided by the Company and its affiliates to
disabled employees and/or their families in
accordance with such plans, programs and policies
relating to disability, if any, in accordance
with the most favorable policies of the Company
and its affiliates in effect at any time during
the ninety (90) day period immediately preceding
the Effective Date or, if more favorable to the
Executive and/or the Executive's family, as in
effect at any time thereafter with respect to
other key executives and their families.
(c) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated by
Company for "Cause", this Agreement shall
terminate without further obligations to the
Executive other than the obligation of Company to
pay to the Executive the Highest Base Salary
through the Date of Termination plus the amount
of any compensation previously deferred by the
Executive (together with accrued interest
thereon). If the Executive terminates employment
other than for "Good Reason", this Agreement
shall terminate without further obligations of
Company to the Executive, other than those
obligations accrued or earned by the Executive
through the Date of Termination, including for
this purpose, all Accrued Obligations.
(d) Other Than for Cause or Disability; Good Reason.
If, during the Employment Period, the Company
shall terminate the Executive's employment other
than for Cause, Disability, or death, or the
Executive shall terminate his employment for
"Good Reason":
(i) the Company shall pay to the Executive in a Lump
Sum In Cash within thirty (30) days after the
Date of Termination the aggregate of the
following amounts:
A. to the extent not theretofore paid, the
Executive's Highest Base Salary through the
Date of Termination; and
B. the product of (x) the Annual Bonus paid to
the Executive for the last full fiscal year
(if any) ending during the Employment Period
or, if higher, the Annual Bonus paid to the
Executive for the last full fiscal year prior
to the Effective Date (as applicable, the
"Recent Bonus") and (y) a fraction, the
numerator of which is the number of days in
the current fiscal year through the Date of
Termination and the denominator of which is
365; and
C. the product of (x) three (3) and (y) the sum of
(i) the Highest Base Salary and (ii) the
Recent Bonus; and
D. in the case of compensation previously
deferred by the Executive, all amounts
previously deferred (together with any
accrued interest thereon) and not yet paid by
the Company, and any accrued vacation pay not
yet paid by the Company; and
E. all other amounts accrued or earned by the
Executive through the Date of Termination and
amounts otherwise owing under the then
existing plans and policies at the Company;
and
F. the Executive shall be entitled to receive a
lump-sum retirement benefit equal to the
difference between (x) the actuarial
equivalent of the benefit under the
Retirement Plan and the supplemental and/or
excess retirement plan, if any, the Executive
would receive if he remained employed by the
company at the compensation level provided
for in Sections 4(b)(i) and 4(b)(ii) of this
Agreement for the remainder of the Employment
Period, and (y) the actuarial equivalent of
his benefit, if any, under the Retirement
Plan and the supplemental and/or excess
retirement plan; and
(ii) for the remainder of the Employment Period, or
for a period of thirty-six (36) months from Date
of Termination, if longer, or for such longer
period as any plan, program or policy may
provide, at Executive's election, the Company
shall continue benefits to the Executive, and/or
the Executive's family, at least equal to those
which would have been provided to them in
accordance with the plans, programs and policies
described in Section 4(b)(iv) of this Agreement
if the Executive's employment had not been
terminated, including health insurance and life
insurance, in accordance with the most favorable
plans, programs and policies described in Section
4(b)(iv) of this Agreement if the Executive's
employment had not been terminated, including
health insurance and life insurance, in
accordance with the most favorable plans,
programs or policies of the Company and its
affiliates during the ninety (90) day period
immediately preceding the Effective Date, or, if
more favorable to the Executive, as in effect at
any time thereafter with respect to other key
executives and their families and for purposes of
eligibility for retiree benefits pursuant to such
plans, programs and policies, the Executive shall
be considered to have remained employed until the
end of the Employment Period and to have retired
on the last day of such period.
7. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing
or future participation in any benefit, bonus, incentive or
other plan or program provided by the Company or any of its
affiliated companies and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect
such rights as the Executive may have under any stock option
or other agreements with the Company or any of its
affiliates companies. Amounts which are vested benefits or
which the Executive is otherwise entitled to receive under
any plan or program of the Company or any of its affiliates
companies at or subsequent to the Date of Termination shall
be payable in accordance with such plan or program.
8. Full Settlement. The Company's obligation to
make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense
or other claim, right or action which the Company may have
against the Executive or others. In no event shall the
Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to
the Executive under any of the provisions of this Agreement.
The Company agrees to pay, to the full extent permitted by
law, all legal fees and expenses which the Executive may
reasonable incur as a result of any contest (regardless of
the outcome thereof) by the Company or others of the
validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to
Section 9 of this Agreement), plus in each case interest at
the applicable Federal rate provided for in Section
7872(f)(2) of the Code.
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be
determined that any payment or distribution by
the Company to or for the benefit of the
Executive, whether paid or payable or distributed
or distributable pursuant to the terms of this
Agreement or otherwise (a "Payment"), would be
subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as
hereafter amended (the "Code"), or any similar
provision of any successor or amended Code, or
any interest or penalties with respect to such
excise tax (such excise tax, together with any
such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive
an additional payment (a "Gross-Up Payment") in
an amount such that after payment by the
Executive of all taxes (including any interest or
penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-
Up Payment, the Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this
Section 9, including whether a Gross-Up Payment
is required and the amount of such Gross-Up
Payment, shall be made by Messrs. Ernst &
Whinney, or the certified public accounting firm
then regularly engaged by Company to review and
audit its financial records (the "Accounting
Firm"), which shall provide detailed supporting
calculations both to the Company and the
Executive within fifteen (15) business days of
the Date of Termination, if applicable, or such
earlier time as is requested by the Company. If
the Accounting Firm determines that no Excise Tax
is payable by the Executive, it shall furnish the
Executive with a professional opinion that
substantial authority exists for him not to
report any Excise Tax on his federal income tax
return. Any determination by the Accounting Firm
shall be binding upon the Company and the
Executive. As a result of any uncertainty in the
application of Section 4999 of the Code at the
time of an initial determination by the
Accounting Firm made hereunder, it is possible
that Gross-Up Payments which will not have been
made by the Company should have been made
("Underpayment"), consistent with the
calculations required to be made hereunder. In
the event that the Company exhausts its remedies
pursuant to Section 9(c) and the Executive
thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine
the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid
in a Lump Sum In Cash by the Company to or for
the benefit of the Executive.
(c) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service
that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such
notification shall be given as soon as
practicable but not later than ten (10) business
days after the Executive knows of such claim and
shall apprise the Company of the nature of such
claim and the date on which such claim is
requested to be paid. The Executive shall not
pay such claim prior to the expiration of the
thirty (30) days period following the date on
which it gives such notice to the Company (or
such shorter period ending on the date that any
payment of taxes with respect to such claim is
due). If the Company notifies the Executive in
writing prior to the expiration of such period
that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such
claim,
(ii) take such action in connection with
contesting such claim as the Company shall
reasonably request in writing from time to
time, including, without limitation,
accepting legal representation with respect
to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim,
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear
and pay directly all costs and expenses
(including additional interest and penalties)
incurred in connection with such contest and
shall indemnify and hold the Executive harmless,
on an after-tax basis, for any Excise Tax or
income tax, including interest and penalties with
respect thereto, imposed as a result of such
representation and payment of costs and expenses.
Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all
proceedings taken in connection with such contest
and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings,
hearings and conferences with the taxing
authority in respect of such claim and may, at
its sole option, either direct the Executive to
pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and
the Executive agrees to prosecute such contest to
a determination before any administrative
tribunal, in a court of initial jurisdiction and
in one or more appellate courts, as the Company
shall determine; provided, however, that if the
Company directs the Executive to pay such claim
and sue for a refund, the Company shall advance
the amount of such payment to the Executive, on
an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax,
including interest or penalties with respect
thereto, imposed with respect to such advance or
with respect to any imputed income with respect
to such advance; and further provided that any
extension of the statute of limitations relating
to payment of taxes for the taxable year of the
Executive with respect to which such contested
amount is claimed to be due is limited solely to
such contested amount. Furthermore, the
Company's control of the contest shall be limited
to issues with respect to which a Gross-Up
Payment would be payable hereunder and the
Executive shall be entitled to settle or contest,
as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to
Section 9(c), the Executive becomes entitled to
receive any refund with respect to such claim,
the Executive shall (subject to the Company's
complying with the requirements of Section 9(c))
promptly pay to the Company the amount of such
refund (together with any interest paid or
credited thereon after taxes applicable thereto).
If, after the receipt by the Executive of an
amount advanced by the Company pursuant to
Section 9(c), a determination is made that the
Executive shall not be entitled to any refund
with respect to such claim and the Company does
not notify the Executive in writing of its intent
to contest such denial of refund prior to the
expiration of thirty (30) days after such
determination, then such advance shall be
forgiven and shall not be required to be repaid
and the amount of such advance (less any Excise
Tax or income tax, including interest and
penalties with respect thereto, imposed with
respect to such forgiveness), shall offset, to
the extent thereof, the amount of Gross-Up
Payment required to be paid.
10. Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company
all proprietary, secret or confidential information,
knowledge or data relating to (a) the Company or any of its
affiliates or subsidiaries, and their respective businesses,
and (b) the customers of each, which shall have been
obtained by the Executive during the Executive's employment
by the Company, or any of its affiliates, and which shall
not be or hereafter become public knowledge (other than by
acts perpetrated by the Executive, or his representatives,
in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or
data to anyone other than to the Company and/or those
designated by it to receive same, except (i) as such
disclosures or communications may be ordered by a court of
competent jurisdiction, or by any State or Federal
regulatory agency or body having supervisory jurisdiction
over the business and affairs of Company and its affiliates
and subsidiaries; (ii) disclosures or communications made to
legal counsel or accountants of Executive, as required in
the performance of their professional duties. In no event
shall an asserted violation of the provisions of this
Section 10 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this
Agreement.
11. Successors.
(a) This Agreement is a personal to the Executive
and, without the prior written consent of the
Company, shall not be assignable by the Executive
otherwise than by will or by assignment to the
Trustee of a revocable intervivos trust (grantor
type) created by Executive for the benefit of
Executive and/or Executive's family, or by the
laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable
by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors
and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger,
consolidation or otherwise) to all or
substantially all of the business and/or assets
of the Company to expressly assume and agree to
perform this Agreement in the same manner and to
the same extent that the Company would be
required to perform it if no such succession had
taken place. As used in this Agreement, the
expression "Company" shall mean the Company as
hereinbefore defined, its predecessors, and any
successor to its business and/or assets as
aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
12. Miscellaneous.
(a) Applicable Law; Jurisdiction. This Agreement
shall be governed by and construed in accordance
with the laws of the State of New Hampshire,
without reference to principles of conflict of
laws. Disputes which may arise in connection
with this Agreement, or any provision thereof,
shall be litigated and/or arbitrated within the
State of New Hampshire. The captions of this
Agreement are not part of the provisions hereof
and shall have no force or effect. This
Agreement may not be amended or modified
otherwise than by a written agreement executed by
the parties hereto or their respective successors
and legal representatives.
(b) Notices and Communications. All notices and
other communications hereunder shall be in
writing and shall be given by hand delivery to
the other party or by United States registered or
certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive: Davis P. Thurber
25 Swart Terrace
Nashua, New Hampshire 03060;
and
If to the Company: Bank of New Hampshire Corp.
300 Franklin Street - Box 600
Manchester, New Hampshire 03105
cc: Executive Compensation Committee
Board of Directors
Bank of New Hampshire Corp.
c/o 300 Franklin Street
P.O. Box 600
Manchester, New Hampshire 03105
Attention: Chairman
or, to such other address as either Party shall
have furnished to the other in writing in
accordance therewith. Notice and communications
shall be effective on the earlier of actual
receipt by the Party to whom it is addressed, or
such Party's delegate, or the tenth (10th) day
following confirmed evidence of deposit in the
United States postal system.
(c) Validity and Enforceability. The invalidity or
unenforceability of any provision of this
Agreement shall not affect the validity or
enforceability of any other provision of this
Agreement.
(d) Withholding for Taxes. The Company may withhold
from any amounts payable under this Agreement
such Federal, state or local taxes as shall be
required to be withheld pursuant to any
applicable law or regulation.
(e) Waiver. The Executive's failure to insist upon
strict compliance with any provision hereof shall
not be deemed to be a waiver of such provision or
any other provision thereof.
(f) Merger of Understanding. This Agreement contains
the entire understanding of the Company and the
Executive with respect to the subject matter
hereof.
(g) Present Employment, Condition of. The Executive
and the Company acknowledge that the employment
of the Executive by the Company is "at will",
and, prior to the Effective Date, may be
terminated by either the Executive or the Company
at any time. Upon a termination of the
Executive's employment or upon the Executive's
ceasing to be an officer of the Company, in each
case, prior to the Effective Date, there shall be
no further rights under this Agreement.
(h) Headings and Titles. The headings and titles of
sections and subsections of this Agreement are
for convenience only and shall not have any
independent legal effect.
(i) Amendments. This Agreement may be amended only
by a written instrument of Amendment signed by
each of the Parties.
(j) Counterparts. This Agreement may be executed in
multiple counterparts for retention by the
Executive, the Company, and legal counsel to the
Company.
IN WITNESS WHEREOF, the Executive has hereunto set his
hand and, pursuant to the authorization from its Board of
Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and
year first above written.
WITNESS:
/s/ Robert B. Field, Jr. /s/ Davis P. Thurber
Davis P. Thurber (EXECUTIVE)
BANK OF NEW HAMPSHIRE CORPORATION
Attest: /s/ Robert B. Field, Jr. BY: /s/ Paul R. Shea
Secretary Its Executive VP, duly
authorized
(COMPANY)
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
AGREEMENT AS TO FUTURE EMPLOYMENT
Bank of New Hampshire Corporation ("Company")
Paul R. Shea ("Executive")
Dated: December 21, 1988
<PAGE>
INDEX
Page
1. Certain Definitions . . . . . . . . . . . . . . . . . 3
(a) Effective Date. . . . . . . . . . . . . . . . . . 3
(b) Change of Control Period. . . . . . . . . . . . . 4
2. Change of Control . . . . . . . . . . . . . . . . . . 5
3. Employment Period . . . . . . . . . . . . . . . . . . 7
4. Terms of Employment . . . . . . . . . . . . . . . . . 7
(a) Position and Dutues . . . . . . . . . . . . . . . 7
(b) Compensation. . . . . . . . . . . . . . . . . . . 9
5. Termination . . . . . . . . . . . . . . . . . . . . . 13
(a) Death or Disability . . . . . . . . . . . . . . . 13
(b) Cause . . . . . . . . . . . . . . . . . . . . . . 15
(c) Good Reason . . . . . . . . . . . . . . . . . . . 16
(d) Notice of Termination . . . . . . . . . . . . . . 17
(e) Date of Termination . . . . . . . . . . . . . . . 18
6. Obligations of the Company
Upon Termination . . . . . . . . . . . . . . . . . . 19
(a) Death . . . . . . . . . . . . . . . . . . . . . . 19
(b) Disability. . . . . . . . . . . . . . . . . . . . 20
(c) Cause; Other than for Good Reason . . . . . . . . 21
(d) Other than for Cause or
Disability; Good Reason. . . . . . . . . . . . . 22
7. Non-exclusivity of Rights . . . . . . . . . . . . . . 25
8. Full Settlement . . . . . . . . . . . . . . . . . . . 25
9. Certain Additional Payments by
the Company. . . . . . . . . . . . . . . . . . . . . 26
10. Confidential Information. . . . . . . . . . . . . . . 32
11. Successors. . . . . . . . . . . . . . . . . . . . . . 33
12. Miscellaneous . . . . . . . . . . . . . . . . . . . . 34
(a) Applicable Law; Jurisdiction. . . . . . . . . . . 34
(b) Notices and Communciations. . . . . . . . . . . . 35
(c) Validity and Enforceablity. . . . . . . . . . . . 36
(d) Withholding of Taxes. . . . . . . . . . . . . . . 36
(e) Waiver. . . . . . . . . . . . . . . . . . . . . . 36
(f) Merger of Understanding . . . . . . . . . . . . . 36
(g) Present Employment, Condition of. . . . . . . . . 36
(h) Headings and Titles . . . . . . . . . . . . . . . 37
(i) Amendments. . . . . . . . . . . . . . . . . . . . 37
(j) Counterparts. . . . . . . . . . . . . . . . . . . 37
BANK OF NEW HAMPSHIRE CORPORATION
AGREEMENT AS TO FUTURE EMPLOYMENT
AGREEMENT made this 21st day of December, 1988, for and
as of December 21, 1988, by and between Bank of New
Hampshire Corporation, a New Hampshire bank holding company,
registered pursuant to the Federal Bank Holding Company Act
of 1956, as amended, with a principal place of business at
300 Franklin Street, Manchester, New Hampshire 03105;
(hereafter, the "Company"), and Paul R. Shea, of 420
Midhurst Road, Nashua, New Hampshire 03060; (hereafter, the
"Executive"), and together, sometimes hereafter referred to
as, (the "Parties").
WHEREAS the Company considers the establishment and
maintenance of a sound and vital management to be essential
to protecting and enhancing the best interests of Company
and its shareholders;
WHEREAS in connection with the maintenance of sound and
vital management, the Company recognizes that, as is the
case with many publicly held corporations, the possibility
of a "Change of Control" (as hereinafter defined) may exist
and that such continuing possibility, and the uncertainty
and questions which it may raise among management, is
unsettling and may result in the distraction of management
personnel to the detriment of Company and its shareholders;
WHEREAS company further recognizes that the financial
services industry is currently undergoing structural and
legislative changes, with the expectation of additional
changes in the future, and that such changes would tend to
exacerbate the uncertainty among management that a Change of
Control might create;
WHEREAS if Company should receive proposals, whether
invited or uninvited, from third (3rd) parties with respect
to its future, it believes it important that management
personnel be in a position to assess and advise the Board of
Directors of Company (hereafter, the "Board") whether such
proposals would be in the best interests of Company and its
shareholders, without being influenced by the uncertainties
of management's own employment situations or circumstances;
WHEREAS the Board wishes to demonstrate to the members
of management that Company is concerned with the welfare of
its executives and intends to see that loyal executives are
treated fairly;
WHEREAS the Board has determined that is is in the best
interests of the Company and its shareholders to assure that
the Company will have the continued dedication of the
Executive, notwithstanding the possibility, threat, or
occurrence of a Change of Control of the Company;
WHEREAS the Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the
personal uncertainties and risks created by a pending or
threatened Change of Control, to encourage the Executive's
full attention and dedication to the Company currently, and
in the event of any threatened or pending Change of Control,
and to provide the Executive with compensation arrangements
upon a Change of Control which provide the Executive with
individual financial security and which are competitive with
those of other corporations similarly situated in the
financial industry;
WHEREAS the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued
attention and dedication of members of Company's management,
including Executive, to the assigned duties without
disturbance in the face of the potentially disturbing
uncertainties arising from the possibility of a Change of
Control; and
WHEREAS in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, in consideration of the promises,
representations and covenants herein contained, and for
other and valuable consideration, the receipt of which is
hereby acknowledged, the Parties hereto agree as follows:
1. Certain Definitions.
(a) The "Effective Date" shall be the first date
during the "Change of Control Period" (as defined
in Section 1(b)) on which a Change of Control
occurs. Anything in this Agreement to the
contrary notwithstanding, if the Executive's
employment with the Company is terminated prior
to the date on which a Change of Control occurs,
and it is reasonably demonstrated that such
termination (i) was at the request of a third
(3rd) party who has taken steps reasonably
calculated to effect a Change of Control, or (ii)
otherwise arose in connection with, or in
anticipation of, a Change of Control, then for
all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to
the date of such termination.
(b) The "Change of Control Period" is the period
commencing on the date hereof and ending on the
earlier to occur of (i) the third (3rd)
anniversary of such date, or (ii) the first (1st)
day of the month next following the Executive's
actual retirement date ("Retirement Date") under
The Retirement Plan For Employees of Bank of New
Hampshire, National Association, as adopted by
Company for the benefit of its employees,
including Executive, or any successor or
replacement retirement plan hereafter adopted by
Company at any time, and from time to time, (the
"Retirement Plan"); provided however, that
commencing on the date one (1) year after the
date hereof, and on each annual anniversary of
such date (such date and each annual anniversary
thereof is hereinafter referred to as the
"Renewal Date"), the Change of Control Period
shall be automatically extended so as to
terminate on the earlier date of (x) three (3)
years from such Renewal Date, or (y) the first
(1st) day of the month coinciding with, or next
following, the Executive's Retirement Date,
unless, at least sixty (60) days prior to the
Renewal Date, the Company shall give notice that
the Change of Control Period shall not be so
extended.
2. Change of Control. For the purpose of this
Agreement, the phrase "Change of Control" shall mean:
(a) The acquisition (other than from the Company) by
any person, entity or "group", within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the "Exchange Act"),
(excluding, for this purpose, the Company or its
subsidiaries, or any employee benefit plan of
either the Company or its subsidiaries which
acquires beneficial ownership of voting
securities of the Company) of beneficial
ownership, (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty
percent (20%) or more of either (x) the then
outstanding shares of common stock, or (y) the
combined voting power of the Company's then
outstanding voting securities entitled to vote
generally in the election of directors; or
(b) Individuals who, as of the date hereof,
constitute the Board (as of the date hereof, the
"Incumbent Board") cease for any reason to
constitute at least a majority of the Board,
provided that any person becoming a director
subsequent to the date hereof whose election, or
nomination for election by the Company's
shareholders, was approved by a vote of at least
a majority of the directors then comprising the
Incumbent Board (other than an election or
nomination of an individual whose initial
assumption of office is in connection with an
actual or threatened election contest relating to
the election of the Directors of the Company, as
such terms are used in Rule 14a-11 of the
Regulation 14A promulgated under the Exchange
Act) shall be, for purposes of this Agreement,
considered as though such person were a member of
the Incumbent Board; or
(c) Approval by the shareholders of the Company of a
reorganization, merger, consolidation, in each
case, with respect to which persons who were the
shareholders of the Company immediately prior to
such reorganization, merger or consolidation do
not, immediately thereafter, own more than fifty
percent (50%) of the combined voting power
entitled to vote generally in the election of
directors of the reorganized, merged or
consolidated company's then outstanding voting
securities, or a liquidation or dissolution of
the Company or of the sale of all or
substantially all of the assets of the Company;
or
(d) A determination made by the Board that a person,
entity or "group" within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act,
directly or indirectly, exercises a controlling
influence over the management or policy of the
Company, except to the extent such person, entity
or "group" presently exists and has been
identified, prior to the date hereof, by the
Board in Exchange Act filings.
3. Employment Period. The Company hereby agrees to
continue the Executive in its employ, and the Executive
hereby agrees to remain in the employ of the Company, for
the period commencing on the Effective Date and ending on
the earlier to occur of (x) the third (3rd) anniversary of
such date, or (y) the first (1st) day of the month
coinciding with or next following the Executive's Retirement
Date (the "Employment Period").
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive's
position (including status, offices, titles and
reporting requirements), authority, duties and
responsibilities shall be at least commensurate
in all material respects with the most
significant of those held, exercised and assigned
any time during the ninety (90) day period
immediately preceding the Effective Date, and (B)
the Executive's services shall be performed at
the location where the Executive was employed
immediately preceding the Effective Date or any
office or location less than thirty-five (35)
miles from such location and within the State of
New Hampshire.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the
Executive is entitled, the Executive agrees to
devote reasonable attention and time during
normal business hours to the business and affairs
of the Company, and, to the extent necessary to
discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the
Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill
speaking engagements or teach at educational
institutions, and/or (C) manage personal
investments (including investments in financial
institutions and other business entities, whether
public or closely held, or whether existing in
partnership form, that may be in competition with
Company), so long as such activities do not
significantly and materially interfere with the
performance of the Executive's responsibilities
as an employee of the Company in accordance with
this Agreement. It is expressly understood and
agreed that to the extent any such activities
have been conducted by the Executive prior to the
Effective Date, the continued conduct of such
activities (or the conduct of activities similar
in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the
Executive shall receive a base salary ("Base
Salary") at a monthly rate at least equal to the
highest monthly base salary paid to the Executive
by the Company during the twenty-four (24) months
period immediately preceding the month in which
the Effective Date occurs. During the Employment
Period, the Base Salary shall be reviewed by the
Board at least annually and shall be increased at
any time, and from time to time, as shall be
substantially consistent with increases in base
salary awarded in the ordinary course of business
to other key executives then employed by the
Company and its affiliates. Any increase in Base
Salary shall not serve to either limit or reduce
any other obligation(s) to the Executive under
this Agreement. During the Employment Period, at
no time following the award of any such increase
to Base Salary shall the Base Salary of Executive
ever be reduced.
(ii) Annual Bonus. In addition to Base Salary, the
Executive shall be awarded, for each fiscal year
during the Employment Period, an annual bonus (an
"Annual Bonus") (either pursuant to the incentive
compensation plan of the Company then in effect,
or otherwise), in a "Lump Sum In Cash", as
hereinafter defined, at least equal to the
average bonus received by the Executive from the
Company and its affiliates in respect of the
three (3) fiscal years immediately preceding the
fiscal year in which the Effective Date occurs.
(iii) Incentive, Savings and Retirement Plans. In
addition to Base Salary and Annual Bonus payable
as hereinabove provided, the Executive shall be
entitled to participate during the Employment
Period in all incentive, savings and retirement
plans and programs applicable to other key
executives, and/or individual to Executive, of
the Company and its affiliates (including
Company's employee benefit plans, in each case
comparable to those in effect or as subsequently
amended). Such plans and programs, in the
aggregate, shall provide the Executive with
compensation, benefits and reward opportunities
at least as favorable as the most favorable of
such compensation, benefits and reward
opportunities provided by the Company for the
Executive under such plans and programs in effect
at any time during the ninety (90) day period
immediately preceding the Effective Date, or, if
more favorable to the Executive, as provided at
any time thereafter with respect to other key
executives.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's
family, as the case may be, shall be eligible for
participation in and shall receive all benefits
under welfare benefit plans provided by the
Company and its affiliates (including, without
limitation, medical, prescription, dental,
disability, salary continuance, executive life,
group life, accidental death and travel accident
insurance plans and programs), at least as
favorable as the most favorable of such plans and
programs in effect at any time during the ninety
(90) day period immediately preceding the
Effective Date as to Executive and/or the
Executive's family, or, if more favorable to the
Executive and/or the Executive's family, as in
effect at any time thereafter with respect to
other key executives of Company.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses
incurred by the Executive in accordance with the
most favorable policies and procedures of the
Company and its affiliates in effect at any time
during the ninety (90) day period immediately
preceding the Effective Date, or, if more
favorable to the Executive, as in effect at any
time thereafter with respect to other key
executives of the Company.
(vi) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe
benefits, including use of an automobile and
payment of related expenses, if applicable,
comparable to, and in accordance with, the
policies of the Company and its affiliates,
applicable to Executive, in effect at any time
during the ninety (90) day period immediately
preceding the Effective Date.
(vii) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an
office (or offices) of a size and with
furnishings and other appointments, and to
secretarial and other staff assistance, at least
equal to the most favorable of the foregoing
provided to the Executive at any time during the
ninety (90) day period immediately preceding the
Effective Date.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in
accordance with the most favorable policies of
the Company and its affiliates as in effect at
any time during the ninety (90) day period
immediately preceding the Effective Date.
(ix) Pension Benefit Plan. Anything in this Agreement
or in the Retirement Plan to the contrary
notwithstanding, in the event of a Change of
Control, Executive shall be entitled to "full
vesting" to age sixty-five (65), payable at age
sixty (60), under the terms of the Retirement
Plan, and Company shall, to the extent permitted
by law, within thirty (30) days of Change of
Control, either (i) amend and fund the Retirement
Plan with such additional amounts of money as
shall be deemed actuarily required to provide
Executive with "full vesting", to age sixty-five
(65), normal retirement status, or (ii) agree in
writing with Executive to provide Executive with
a Lump-Sum In Cash payment at Retirement Date in
an amount, net of Federal and State income taxes,
as may be necessary for Executive to purchase an
annuity equal to the difference between
Executive's retirement benefit computed at the
then current vesting level as provided by the
Retirement Plan and that to which Executive would
be entitled at "full vesting" age sixty-five (65)
normal retirement status.
5. Termination.
(a) Death or Disability. This Agreement shall
terminate automatically upon the Executive's
death. (See Section 6(a) for obligations of
Company on account of termination for death.) If
the Company determines in good faith that the
Disability of the Executive has occurred
(pursuant to to the definition of "Disability" as
set forth below), it may give to the Executive
written notice of its intention to terminate the
Executive's employment. In such event, the
executive's employment with the Company shall
terminate effective on the thirtieth (30th) day
after receipt of such notice by the Executive
(the "Disability Effective Date"), provided that,
within the thirty (30) days after such receipt,
the Executive shall not have returned to full-
time performance of the Executive's duties. (See
Section 6(b) for obligations of Company on
account of termination for Disability). For
purposes of this Agreement, "Disability" means
any mental or physical illness or disability, or
other incapacitation of Executive that renders
the Executive unable regularly to perform his
usual duties for either (x) a consecutive period
in excess of twenty-six (26) weeks or more after
commencement, or (y) a cumulative period of
twenty-six (26) weeks or more in any consecutive
twelve (12) month period, after commencement, and
which is determined to be total and permanent in
characteristic by a physician.
(b) Cause. The Executive's employment may be
terminated by the Company for "Cause" upon a
finding made in good faith by the Board. For
purposes of this Agreement, "Cause" means serious
willful misconduct by the Executive, including,
but not limited to, (i) an act or acts of
personal dishonesty taken by the Executive and
intended to result in substantial personal
enrichment of the Executive at the expense of the
Company, any of its affiliates or subsidiaries,
and/or its shareholders, or (ii) repeated
violations by the Executive of the Executive's
obligations under Section 4(a) of this Agreement
which are demonstrably willful and deliberate on
the Executive's part and which are not remedied
in a reasonable period of time after receipt of
written notice from the Company, or (iii) the
conviction of the Executive of a felony, or (iv)
the perpetration of a common-law fraud upon
Company or any of its affiliates or subsidiaries,
or (v) a determination in final non-applicable
form made by any State or Federal regulatory
agency having supervising jurisdiction over the
Company, or of any of its affiliates or
subsidiaries, that Executive be removed from his
management or directorale responsibilities.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for "Good Reason".
For purposes of this Agreement, "Good Reason"
means
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's
position (including status, offices, titles and
reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a)
of this Agreement, or any other action by the
Company which results in a diminution in such
position, authority, duties or responsibilities,
or creates an inhospitable, hostile, or
uncomfortable employment environment as to
Executive, excluding for this purpose an
isolated, insubstantial and inadvertent action
not taken in bad faith and which is remedied by
the Company promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company to comply with any of
the provisions of Section 4(b) of this Agreement,
other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith
and which is remedied by the Company promptly
after receipt of notice thereof given by the
Executive;
(iii) The Company's requiring the Executive to be based
at any office or location other than that
described in Section 4(a)(i)(B) hereof, except
for travel reasonably required in the performance
of the Executive's responsibilities;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as
expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive. Anything in this Agreement to the contrary
notwithstanding, a termination by the Executive for any
reason during the thirty (30) day period immediately
following the first (1st) anniversary of the Effective Date
shall be deemed to be a termination for "Good Reason" for
all purposes of this Agreement.
(d) Notice of Termination. Any termination by the
Company for "Cause", or by the Executive for
"Good Reason", shall be communicated by Notice of
Termination to the other party hereto given and
delivered in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice
which (i) indicates the specific termination
provision in this Agreement relied upon, (ii)
sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for
termination of the Executive's employment under
the provision so indicated, and (iii) if the Date
of Termination (as defined below) is other than
the date of receipt of such notice, specifies the
termination date (which date shall be not more
than fifteen (15) days after the giving of such
notice). The failure by the Executive to set
forth in the Notice of Termination any fact or
circumstance which contributes to a showing of
Good Reason shall not waive any right of the
Executive hereunder or preclude the Executive
from adding or otherwise asserting such
additional fact(s) or circumstance(s) at a
subsequent date in enforcing his rights
hereunder.
(e) Date of Termination. "Date of Termination" means
the date of receipt of the Notice of Termination
or any later date specified therein, as the case
may be; provided, however, that (i) if the
Executive's employment is terminated by the
Company other than for Cause or Disability, the
Date of Termination shall be the date on which
the Company notifies the Executive of such
termination, and (ii) if the Executive's
employment is terminated by reason of death or
Disability, the Date of Termination shall be the
date of death of the Executive, or the Disability
Effective Date, as the case may be.
6. Obligations of the Company Upon Termination.
(a) Death. If the Executive's employment is
terminated by reason of the Executive's death,
this Agreement shall terminate without further
obligations to the Executive's legal
representatives, other than those obligations
accrued or earned by the Executive hereunder as
of the Date of Termination, including, for this
purpose the sum of (i) the Executive's full Base
Salary through the Date of Termination at the
rate in effect on the Date of Termination or, if
higher, at the highest rate in effect at any time
from the ninety (90) day period preceding the
Effective Date through the Date of Termination
(the "Highest Base Salary"), (ii) the product of
the Annual Bonus paid to the Executive for the
last full fiscal year and a fraction, the
numerator of which is the number of days in the
current fiscal year through the Date of
Termination, and the denominator of which is 365,
(iii) any compensation previously deferred by the
Executive (together with any accrued interest
thereon) and not yet paid by the Company and any
accrued vacation pay not yet paid by the Company,
and (iv) any other amounts or benefits owing to,
or accrued or vested for the account of,
Executive under the then applicable employee
benefit plans or policies of the Company (such
amounts specified in clauses (i), (ii), (iii) and
(iv) are hereinafter referred to as "Accrued
Obligations"). All such Accrued Obligations
shall be paid to the Executive in a "Lump Sum In
Cash" within thirty (30) days of the Date of
Termination. "Lump Sum In Cash" as used herein,
means United States currency or certified or
cashiers check in immediately and payable Federal
funds. Anything in this Agreement to the
contrary notwithstanding, the Executive's family
shall be entitled to receive benefits at least
equal to the most favorable benefits provided by
the Company and any of its affiliates to
surviving families of executives of the Company
and such affiliates under such plans, programs
and policies relating to family death benefits,
if any, in accordance with the most favorable
policies of the Company and its affiliates in
effect at any time during the ninety (90) day
period immediately preceding the Effective Date,
or, if more favorable to the Executive and/or the
Executive's family, as in effect on the date of
the Executive's death with respect to other key
executives and their families.
(b) Disability. If the Executive's employment is
terminated by reason of the Executive's
Disability, this Agreement shall terminate
without further obligations to the Executive,
other than those obligations accrued or earned by
the Executive hereunder as of the Date of
Termination, including for this purpose, all
Accrued Obligations. All such Accrued
Obligations shall be paid to the Executive in a
Lump Sum In Cash within thirty (30) days of the
Date of Termination. Anything in this Agreement
to the contrary notwithstanding, the Executive
shall be entitled after the Disability Effective
Date to receive disability and other benefits at
least equal to the most favorable of those
provided by the Company and its affiliates to
disabled employees and/or their families in
accordance with such plans, programs and policies
relating to disability, if any, in accordance
with the most favorable policies of the Company
and its affiliates in effect at any time during
the ninety (90) day period immediately preceding
the Effective Date or, if more favorable to the
Executive and/or the Executive's family, as in
effect at any time thereafter with respect to
other key executives and their families.
(c) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated by
Company for "Cause", this Agreement shall
terminate without further obligations to the
Executive other than the obligation of Company to
pay to the Executive the Highest Base Salary
through the Date of Termination plus the amount
of any compensation previously deferred by the
Executive (together with accrued interest
thereon). If the Executive terminates employment
other than for "Good Reason", this Agreement
shall terminate without further obligations of
Company to the Executive, other than those
obligations accrued or earned by the Executive
through the Date of Termination, including for
this purpose, all Accrued Obligations.
(d) Other Than for Cause or Disability; Good Reason.
If, during the Employment Period, the Company
shall terminate the Executive's employment other
than for Cause, Disability, or death, or the
Executive shall terminate his employment for
"Good Reason":
(i) the Company shall pay to the Executive in a Lump
Sum In Cash within thirty (30) days after the
Date of Termination the aggregate of the
following amounts:
A. to the extent not theretofore paid, the
Executive's Highest Base Salary through the
Date of Termination; and
B. the product of (x) the Annual Bonus paid to
the Executive for the last full fiscal year
(if any) ending during the Employment Period
or, if higher, the Annual Bonus paid to the
Executive for the last full fiscal year prior
to the Effective Date (as applicable, the
"Recent Bonus") and (y) a fraction, the
numerator of which is the number of days in
the current fiscal year through the Date of
Termination and the denominator of which is
365; and
C. the product of (x) two (2) and (y) the sum of
(i) the Highest Base Salary and (ii) the
Recent Bonus; and
D. in the case of compensation previously
deferred by the Executive, all amounts
previously deferred (together with any
accrued interest thereon) and not yet paid by
the Company, and any accrued vacation pay not
yet paid by the Company; and
E. all other amounts accrued or earned by the
Executive through the Date of Termination and
amounts otherwise owing under the then
existing plans and policies at the Company;
and
F. the Executive shall be entitled to receive a
lump-sum retirement benefit equal to the
difference between (x) the actuarial
equivalent of the benefit under the
Retirement Plan and the supplemental and/or
excess retirement plan, if any, the Executive
would receive if he remained employed by the
company at the compensation level provided
for in Sections 4(b)(i) and 4(b)(ii) of this
Agreement for the remainder of the Employment
Period, and (y) the actuarial equivalent of
his benefit, if any, under the Retirement
Plan and the supplemental and/or excess
retirement plan; and
(ii) for the remainder of the Employment Period, or
for a period of twenty-four (24) months from Date
of Termination, if longer, or for such longer
period as any plan, program or policy may
provide, at Executive's election, the Company
shall continue benefits to the Executive, and/or
the Executive's family, at least equal to those
which would have been provided to them in
accordance with the plans, programs and policies
described in Section 4(b)(iv) of this Agreement
if the Executive's employment had not been
terminated, including health insurance and life
insurance, in accordance with the most favorable
plans, programs and policies described in Section
4(b)(iv) of this Agreement if the Executive's
employment had not been terminated, including
health insurance and life insurance, in
accordance with the most favorable plans,
programs or policies of the Company and its
affiliates during the ninety (90) day period
immediately preceding the Effective Date, or, if
more favorable to the Executive, as in effect at
any time thereafter with respect to other key
executives and their families and for purposes of
eligibility for retiree benefits pursuant to such
plans, programs and policies, the Executive shall
be considered to have remained employed until the
end of the Employment Period and to have retired
on the last day of such period.
7. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing
or future participation in any benefit, bonus, incentive or
other plan or program provided by the Company or any of its
affiliated companies and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect
such rights as the Executive may have under any stock option
or other agreements with the Company or any of its
affiliates companies. Amounts which are vested benefits or
which the Executive is otherwise entitled to receive under
any plan or program of the Company or any of its affiliates
companies at or subsequent to the Date of Termination shall
be payable in accordance with such plan or program.
8. Full Settlement. The Company's obligation to
make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense
or other claim, right or action which the Company may have
against the Executive or others. In no event shall the
Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to
the Executive under any of the provisions of this Agreement.
The Company agrees to pay, to the full extent permitted by
law, all legal fees and expenses which the Executive may
reasonable incur as a result of any contest (regardless of
the outcome thereof) by the Company or others of the
validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to
Section 9 of this Agreement), plus in each case interest at
the applicable Federal rate provided for in Section
7872(f)(2) of the Code.
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be
determined that any payment or distribution by
the Company to or for the benefit of the
Executive, whether paid or payable or distributed
or distributable pursuant to the terms of this
Agreement or otherwise (a "Payment"), would be
subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as
hereafter amended (the "Code"), or any similar
provision of any successor or amended Code, or
any interest or penalties with respect to such
excise tax (such excise tax, together with any
such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive
an additional payment (a "Gross-Up Payment") in
an amount such that after payment by the
Executive of all taxes (including any interest or
penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-
Up Payment, the Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this
Section 9, including whether a Gross-Up Payment
is required and the amount of such Gross-Up
Payment, shall be made by Messrs. Ernst &
Whinney, or the certified public accounting firm
then regularly engaged by Company to review and
audit its financial records (the "Accounting
Firm"), which shall provide detailed supporting
calculations both to the Company and the
Executive within fifteen (15) business days of
the Date of Termination, if applicable, or such
earlier time as is requested by the Company. If
the Accounting Firm determines that no Excise Tax
is payable by the Executive, it shall furnish the
Executive with a professional opinion that
substantial authority exists for him not to
report any Excise Tax on his federal income tax
return. Any determination by the Accounting Firm
shall be binding upon the Company and the
Executive. As a result of any uncertainty in the
application of Section 4999 of the Code at the
time of an initial determination by the
Accounting Firm made hereunder, it is possible
that Gross-Up Payments which will not have been
made by the Company should have been made
("Underpayment"), consistent with the
calculations required to be made hereunder. In
the event that the Company exhausts its remedies
pursuant to Section 9(c) and the Executive
thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine
the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid
in a Lump Sum In Cash by the Company to or for
the benefit of the Executive.
(c) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service
that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such
notification shall be given as soon as
practicable but not later than ten (10) business
days after the Executive knows of such claim and
shall apprise the Company of the nature of such
claim and the date on which such claim is
requested to be paid. The Executive shall not
pay such claim prior to the expiration of the
thirty (30) days period following the date on
which it gives such notice to the Company (or
such shorter period ending on the date that any
payment of taxes with respect to such claim is
due). If the Company notifies the Executive in
writing prior to the expiration of such period
that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such
claim,
(ii) take such action in connection with
contesting such claim as the Company shall
reasonably request in writing from time to
time, including, without limitation,
accepting legal representation with respect
to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim,
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear
and pay directly all costs and expenses
(including additional interest and penalties)
incurred in connection with such contest and
shall indemnify and hold the Executive harmless,
on an after-tax basis, for any Excise Tax or
income tax, including interest and penalties with
respect thereto, imposed as a result of such
representation and payment of costs and expenses.
Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all
proceedings taken in connection with such contest
and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings,
hearings and conferences with the taxing
authority in respect of such claim and may, at
its sole option, either direct the Executive to
pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and
the Executive agrees to prosecute such contest to
a determination before any administrative
tribunal, in a court of initial jurisdiction and
in one or more appellate courts, as the Company
shall determine; provided, however, that if the
Company directs the Executive to pay such claim
and sue for a refund, the Company shall advance
the amount of such payment to the Executive, on
an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax,
including interest or penalties with respect
thereto, imposed with respect to such advance or
with respect to any imputed income with respect
to such advance; and further provided that any
extension of the statute of limitations relating
to payment of taxes for the taxable year of the
Executive with respect to which such contested
amount is claimed to be due is limited solely to
such contested amount. Furthermore, the
Company's control of the contest shall be limited
to issues with respect to which a Gross-Up
Payment would be payable hereunder and the
Executive shall be entitled to settle or contest,
as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to
Section 9(c), the Executive becomes entitled to
receive any refund with respect to such claim,
the Executive shall (subject to the Company's
complying with the requirements of Section 9(c))
promptly pay to the Company the amount of such
refund (together with any interest paid or
credited thereon after taxes applicable thereto).
If, after the receipt by the Executive of an
amount advanced by the Company pursuant to
Section 9(c), a determination is made that the
Executive shall not be entitled to any refund
with respect to such claim and the Company does
not notify the Executive in writing of its intent
to contest such denial of refund prior to the
expiration of thirty (30) days after such
determination, then such advance shall be
forgiven and shall not be required to be repaid
and the amount of such advance (less any Excise
Tax or income tax, including interest and
penalties with respect thereto, imposed with
respect to such forgiveness), shall offset, to
the extent thereof, the amount of Gross-Up
Payment required to be paid.
10. Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company
all proprietary, secret or confidential information,
knowledge or data relating to (a) the Company or any of its
affiliates or subsidiaries, and their respective businesses,
and (b) the customers of each, which shall have been
obtained by the Executive during the Executive's employment
by the Company, or any of its affiliates, and which shall
not be or hereafter become public knowledge (other than by
acts perpetrated by the Executive, or his representatives,
in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or
data to anyone other than to the Company and/or those
designated by it to receive same, except (i) as such
disclosures or communications may be ordered by a court of
competent jurisdiction, or by any State or Federal
regulatory agency or body having supervisory jurisdiction
over the business and affairs of Company and its affiliates
and subsidiaries; (ii) disclosures or communications made to
legal counsel or accountants of Executive, as required in
the performance of their professional duties. In no event
shall an asserted violation of the provisions of this
Section 10 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this
Agreement.
11. Successors.
(a) This Agreement is a personal to the Executive
and, without the prior written consent of the
Company, shall not be assignable by the Executive
otherwise than by will or by assignment to the
Trustee of a revocable intervivos trust (grantor
type) created by Executive for the benefit of
Executive and/or Executive's family, or by the
laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable
by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors
and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger,
consolidation or otherwise) to all or
substantially all of the business and/or assets
of the Company to expressly assume and agree to
perform this Agreement in the same manner and to
the same extent that the Company would be
required to perform it if no such succession had
taken place. As used in this Agreement, the
expression "Company" shall mean the Company as
hereinbefore defined, its predecessors, and any
successor to its business and/or assets as
aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
12. Miscellaneous.
(a) Applicable Law; Jurisdiction. This Agreement
shall be governed by and construed in accordance
with the laws of the State of New Hampshire,
without reference to principles of conflict of
laws. Disputes which may arise in connection
with this Agreement, or any provision thereof,
shall be litigated and/or arbitrated within the
State of New Hampshire. The captions of this
Agreement are not part of the provisions hereof
and shall have no force or effect. This
Agreement may not be amended or modified
otherwise than by a written agreement executed by
the parties hereto or their respective successors
and legal representatives.
(b) Notices and Communications. All notices and
other communications hereunder shall be in
writing and shall be given by hand delivery to
the other party or by United States registered or
certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive: Paul R. Shea
420 Midhurst Road
Nashua, New Hampshire 03060;
and
If to the Company: Bank of New Hampshire Corp.
300 Franklin Street - Box 600
Manchester, New Hampshire 03105
cc: Executive Compensation Committee
Board of Directors
Bank of New Hampshire Corp.
c/o 300 Franklin Street
P.O. Box 600
Manchester, New Hampshire 03105
Attention: Chairman
or, to such other address as either Party shall
have furnished to the other in writing in
accordance therewith. Notice and communications
shall be effective on the earlier of actual
receipt by the Party to whom it is addressed, or
such Party's delegate, or the tenth (10th) day
following confirmed evidence of deposit in the
United States postal system.
(c) Validity and Enforceability. The invalidity or
unenforceability of any provision of this
Agreement shall not affect the validity or
enforceability of any other provision of this
Agreement.
(d) Withholding for Taxes. The Company may withhold
from any amounts payable under this Agreement
such Federal, state or local taxes as shall be
required to be withheld pursuant to any
applicable law or regulation.
(e) Waiver. The Executive's failure to insist upon
strict compliance with any provision hereof shall
not be deemed to be a waiver of such provision or
any other provision thereof.
(f) Merger of Understanding. This Agreement contains
the entire understanding of the Company and the
Executive with respect to the subject matter
hereof.
(g) Present Employment, Condition of. The Executive
and the Company acknowledge that the employment
of the Executive by the Company is "at will",
and, prior to the Effective Date, may be
terminated by either the Executive or the Company
at any time. Upon a termination of the
Executive's employment or upon the Executive's
ceasing to be an officer of the Company, in each
case, prior to the Effective Date, there shall be
no further rights under this Agreement.
(h) Headings and Titles. The headings and titles of
sections and subsections of this Agreement are
for convenience only and shall not have any
independent legal effect.
(i) Amendments. This Agreement may be amended only
by a written instrument of Amendment signed by
each of the Parties.
(j) Counterparts. This Agreement may be executed in
multiple counterparts for retention by the
Executive, the Company, and legal counsel to the
Company.
IN WITNESS WHEREOF, the Executive has hereunto set his
hand and, pursuant to the authorization from its Board of
Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and
year first above written.
WITNESS:
/s/ Robert B. Field, Jr. /s/ Paul R. Shea
Paul R. Shea (EXECUTIVE)
BANK OF NEW HAMPSHIRE CORPORATION
Attest: /s/ Robert B. Field, Jr. BY: /s/ Davis P. Thurber
Secretary Its Chairman, duly authorized
(COMPANY)
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
AGREEMENT AS TO FUTURE EMPLOYMENT
Bank of New Hampshire Corporation ("Company")
Gregory D. Landroche ("Executive")
Dated: December 21, 1988
<PAGE>
INDEX
Page
1. Certain Definitions . . . . . . . . . . . . . . . . . 3
(a) Effective Date. . . . . . . . . . . . . . . . . . 3
(b) Change of Control Period. . . . . . . . . . . . . 4
2. Change of Control . . . . . . . . . . . . . . . . . . 5
3. Employment Period . . . . . . . . . . . . . . . . . . 7
4. Terms of Employment . . . . . . . . . . . . . . . . . 7
(a) Position and Dutues . . . . . . . . . . . . . . . 7
(b) Compensation. . . . . . . . . . . . . . . . . . . 9
5. Termination . . . . . . . . . . . . . . . . . . . . . 13
(a) Death or Disability . . . . . . . . . . . . . . . 13
(b) Cause . . . . . . . . . . . . . . . . . . . . . . 15
(c) Good Reason . . . . . . . . . . . . . . . . . . . 16
(d) Notice of Termination . . . . . . . . . . . . . . 17
(e) Date of Termination . . . . . . . . . . . . . . . 18
6. Obligations of the Company
Upon Termination . . . . . . . . . . . . . . . . . . 19
(a) Death . . . . . . . . . . . . . . . . . . . . . . 19
(b) Disability. . . . . . . . . . . . . . . . . . . . 20
(c) Cause; Other than for Good Reason . . . . . . . . 21
(d) Other than for Cause or
Disability; Good Reason. . . . . . . . . . . . . 22
7. Non-exclusivity of Rights . . . . . . . . . . . . . . 25
8. Full Settlement . . . . . . . . . . . . . . . . . . . 25
9. Certain Additional Payments by
the Company. . . . . . . . . . . . . . . . . . . . . 26
10. Confidential Information. . . . . . . . . . . . . . . 32
11. Successors. . . . . . . . . . . . . . . . . . . . . . 33
12. Miscellaneous . . . . . . . . . . . . . . . . . . . . 34
(a) Applicable Law; Jurisdiction. . . . . . . . . . . 34
(b) Notices and Communciations. . . . . . . . . . . . 35
(c) Validity and Enforceablity. . . . . . . . . . . . 36
(d) Withholding of Taxes. . . . . . . . . . . . . . . 36
(e) Waiver. . . . . . . . . . . . . . . . . . . . . . 36
(f) Merger of Understanding . . . . . . . . . . . . . 36
(g) Present Employment, Condition of. . . . . . . . . 36
(h) Headings and Titles . . . . . . . . . . . . . . . 37
(i) Amendments. . . . . . . . . . . . . . . . . . . . 37
(j) Counterparts. . . . . . . . . . . . . . . . . . . 37
BANK OF NEW HAMPSHIRE CORPORATION
AGREEMENT AS TO FUTURE EMPLOYMENT
AGREEMENT made this 21st day of December, 1988, for and
as of December 21, 1988, by and between Bank of New
Hampshire Corporation, a New Hampshire bank holding company,
registered pursuant to the Federal Bank Holding Company Act
of 1956, as amended, with a principal place of business at
300 Franklin Street, Manchester, New Hampshire 03105;
(hereafter, the "Company"), and Gregory D. Landroche, of
Checkerberry Lane, Goffstown, New Hampshire 03045;
(hereafter, the "Executive"), and together, sometimes
hereafter referred to as, (the "Parties").
WHEREAS the Company considers the establishment and
maintenance of a sound and vital management to be essential
to protecting and enhancing the best interests of Company
and its shareholders;
WHEREAS in connection with the maintenance of sound and
vital management, the Company recognizes that, as is the
case with many publicly held corporations, the possibility
of a "Change of Control" (as hereinafter defined) may exist
and that such continuing possibility, and the uncertainty
and questions which it may raise among management, is
unsettling and may result in the distraction of management
personnel to the detriment of Company and its shareholders;
WHEREAS company further recognizes that the financial
services industry is currently undergoing structural and
legislative changes, with the expectation of additional
changes in the future, and that such changes would tend to
exacerbate the uncertainty among management that a Change of
Control might create;
WHEREAS if Company should receive proposals, whether
invited or uninvited, from third (3rd) parties with respect
to its future, it believes it important that management
personnel be in a position to assess and advise the Board of
Directors of Company (hereafter, the "Board") whether such
proposals would be in the best interests of Company and its
shareholders, without being influenced by the uncertainties
of management's own employment situations or circumstances;
WHEREAS the Board wishes to demonstrate to the members
of management that Company is concerned with the welfare of
its executives and intends to see that loyal executives are
treated fairly;
WHEREAS the Board has determined that is is in the best
interests of the Company and its shareholders to assure that
the Company will have the continued dedication of the
Executive, notwithstanding the possibility, threat, or
occurrence of a Change of Control of the Company;
WHEREAS the Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the
personal uncertainties and risks created by a pending or
threatened Change of Control, to encourage the Executive's
full attention and dedication to the Company currently, and
in the event of any threatened or pending Change of Control,
and to provide the Executive with compensation arrangements
upon a Change of Control which provide the Executive with
individual financial security and which are competitive with
those of other corporations similarly situated in the
financial industry;
WHEREAS the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued
attention and dedication of members of Company's management,
including Executive, to the assigned duties without
disturbance in the face of the potentially disturbing
uncertainties arising from the possibility of a Change of
Control; and
WHEREAS in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, in consideration of the promises,
representations and covenants herein contained, and for
other and valuable consideration, the receipt of which is
hereby acknowledged, the Parties hereto agree as follows:
1. Certain Definitions.
(a) The "Effective Date" shall be the first date
during the "Change of Control Period" (as defined
in Section 1(b)) on which a Change of Control
occurs. Anything in this Agreement to the
contrary notwithstanding, if the Executive's
employment with the Company is terminated prior
to the date on which a Change of Control occurs,
and it is reasonably demonstrated that such
termination (i) was at the request of a third
(3rd) party who has taken steps reasonably
calculated to effect a Change of Control, or (ii)
otherwise arose in connection with, or in
anticipation of, a Change of Control, then for
all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to
the date of such termination.
(b) The "Change of Control Period" is the period
commencing on the date hereof and ending on the
earlier to occur of (i) the third (3rd)
anniversary of such date, or (ii) the first (1st)
day of the month next following the Executive's
actual retirement date ("Retirement Date") under
The Retirement Plan For Employees of Bank of New
Hampshire, National Association, as adopted by
Company for the benefit of its employees,
including Executive, or any successor or
replacement retirement plan hereafter adopted by
Company at any time, and from time to time, (the
"Retirement Plan"); provided however, that
commencing on the date one (1) year after the
date hereof, and on each annual anniversary of
such date (such date and each annual anniversary
thereof is hereinafter referred to as the
"Renewal Date"), the Change of Control Period
shall be automatically extended so as to
terminate on the earlier date of (x) three (3)
years from such Renewal Date, or (y) the first
(1st) day of the month coinciding with, or next
following, the Executive's Retirement Date,
unless, at least sixty (60) days prior to the
Renewal Date, the Company shall give notice that
the Change of Control Period shall not be so
extended.
2. Change of Control. For the purpose of this
Agreement, the phrase "Change of Control" shall mean:
(a) The acquisition (other than from the Company) by
any person, entity or "group", within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the "Exchange Act"),
(excluding, for this purpose, the Company or its
subsidiaries, or any employee benefit plan of
either the Company or its subsidiaries which
acquires beneficial ownership of voting
securities of the Company) of beneficial
ownership, (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty
percent (20%) or more of either (x) the then
outstanding shares of common stock, or (y) the
combined voting power of the Company's then
outstanding voting securities entitled to vote
generally in the election of directors; or
(b) Individuals who, as of the date hereof,
constitute the Board (as of the date hereof, the
"Incumbent Board") cease for any reason to
constitute at least a majority of the Board,
provided that any person becoming a director
subsequent to the date hereof whose election, or
nomination for election by the Company's
shareholders, was approved by a vote of at least
a majority of the directors then comprising the
Incumbent Board (other than an election or
nomination of an individual whose initial
assumption of office is in connection with an
actual or threatened election contest relating to
the election of the Directors of the Company, as
such terms are used in Rule 14a-11 of the
Regulation 14A promulgated under the Exchange
Act) shall be, for purposes of this Agreement,
considered as though such person were a member of
the Incumbent Board; or
(c) Approval by the shareholders of the Company of a
reorganization, merger, consolidation, in each
case, with respect to which persons who were the
shareholders of the Company immediately prior to
such reorganization, merger or consolidation do
not, immediately thereafter, own more than fifty
percent (50%) of the combined voting power
entitled to vote generally in the election of
directors of the reorganized, merged or
consolidated company's then outstanding voting
securities, or a liquidation or dissolution of
the Company or of the sale of all or
substantially all of the assets of the Company; or
(d) A determination made by the Board that a person,
entity or "group" within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act,
directly or indirectly, exercises a controlling
influence over the management or policy of the
Company, except to the extent such person, entity
or "group" presently exists and has been
identified, prior to the date hereof, by the
Board in Exchange Act filings.
3. Employment Period. The Company hereby agrees to
continue the Executive in its employ, and the Executive
hereby agrees to remain in the employ of the Company, for
the period commencing on the Effective Date and ending on
the earlier to occur of (x) the third (3rd) anniversary of
such date, or (y) the first (1st) day of the month
coinciding with or next following the Executive's Retirement
Date (the "Employment Period").
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive's
position (including status, offices, titles and
reporting requirements), authority, duties and
responsibilities shall be at least commensurate
in all material respects with the most
significant of those held, exercised and assigned
any time during the ninety (90) day period
immediately preceding the Effective Date, and (B)
the Executive's services shall be performed at
the location where the Executive was employed
immediately preceding the Effective Date or any
office or location less than thirty-five (35)
miles from such location and within the State of
New Hampshire.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the
Executive is entitled, the Executive agrees to
devote reasonable attention and time during
normal business hours to the business and affairs
of the Company, and, to the extent necessary to
discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the
Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill
speaking engagements or teach at educational
institutions, and/or (C) manage personal
investments (including investments in financial
institutions and other business entities, whether
public or closely held, or whether existing in
partnership form, that may be in competition with
Company), so long as such activities do not
significantly and materially interfere with the
performance of the Executive's responsibilities
as an employee of the Company in accordance with
this Agreement. It is expressly understood and
agreed that to the extent any such activities
have been conducted by the Executive prior to the
Effective Date, the continued conduct of such
activities (or the conduct of activities similar
in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the
Executive shall receive a base salary ("Base
Salary") at a monthly rate at least equal to the
highest monthly base salary paid to the Executive
by the Company during the twenty-four (24) months
period immediately preceding the month in which
the Effective Date occurs. During the Employment
Period, the Base Salary shall be reviewed by the
Board at least annually and shall be increased at
any time, and from time to time, as shall be
substantially consistent with increases in base
salary awarded in the ordinary course of business
to other key executives then employed by the
Company and its affiliates. Any increase in Base
Salary shall not serve to either limit or reduce
any other obligation(s) to the Executive under
this Agreement. During the Employment Period, at
no time following the award of any such increase
to Base Salary shall the Base Salary of Executive
ever be reduced.
(ii) Annual Bonus. In addition to Base Salary, the
Executive shall be awarded, for each fiscal year
during the Employment Period, an annual bonus (an
"Annual Bonus") (either pursuant to the incentive
compensation plan of the Company then in effect,
or otherwise), in a "Lump Sum In Cash", as
hereinafter defined, at least equal to the
average bonus received by the Executive from the
Company and its affiliates in respect of the
three (3) fiscal years immediately preceding the
fiscal year in which the Effective Date occurs.
(iii) Incentive, Savings and Retirement Plans. In
addition to Base Salary and Annual Bonus payable
as hereinabove provided, the Executive shall be
entitled to participate during the Employment
Period in all incentive, savings and retirement
plans and programs applicable to other key
executives, and/or individual to Executive, of
the Company and its affiliates (including
Company's employee benefit plans, in each case
comparable to those in effect or as subsequently
amended). Such plans and programs, in the
aggregate, shall provide the Executive with
compensation, benefits and reward opportunities
at least as favorable as the most favorable of
such compensation, benefits and reward
opportunities provided by the Company for the
Executive under such plans and programs in effect
at any time during the ninety (90) day period
immediately preceding the Effective Date, or, if
more favorable to the Executive, as provided at
any time thereafter with respect to other key
executives.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's
family, as the case may be, shall be eligible for
participation in and shall receive all benefits
under welfare benefit plans provided by the
Company and its affiliates (including, without
limitation, medical, prescription, dental,
disability, salary continuance, executive life,
group life, accidental death and travel accident
insurance plans and programs), at least as
favorable as the most favorable of such plans and
programs in effect at any time during the ninety
(90) day period immediately preceding the
Effective Date as to Executive and/or the
Executive's family, or, if more favorable to the
Executive and/or the Executive's family, as in
effect at any time thereafter with respect to
other key executives of Company.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses
incurred by the Executive in accordance with the
most favorable policies and procedures of the
Company and its affiliates in effect at any time
during the ninety (90) day period immediately
preceding the Effective Date, or, if more
favorable to the Executive, as in effect at any
time thereafter with respect to other key
executives of the Company.
(vi) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe
benefits, including use of an automobile and
payment of related expenses, if applicable,
comparable to, and in accordance with, the
policies of the Company and its affiliates,
applicable to Executive, in effect at any time
during the ninety (90) day period immediately
preceding the Effective Date.
(vii) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an
office (or offices) of a size and with
furnishings and other appointments, and to
secretarial and other staff assistance, at least
equal to the most favorable of the foregoing
provided to the Executive at any time during the
ninety (90) day period immediately preceding the
Effective Date.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in
accordance with the most favorable policies of
the Company and its affiliates as in effect at
any time during the ninety (90) day period
immediately preceding the Effective Date.
(ix) Pension Benefit Plan. Anything in this Agreement
or in the Retirement Plan to the contrary
notwithstanding, in the event of a Change of
Control, Executive shall be entitled to "full ten
(10) year vesting" status under the terms of the
Retirement Plan, and Company shall, to the extent
permitted by law, within thirty (30) days of
Change of Control, either (i) amend and fund the
Retirement Plan with such additional amounts of
money as shall be deemed actuarily required to
provide Executive with "full ten (10 year
vesting" status, or (ii) agree in writing with
Executive to provide Executive with a Lump-Sum In
Cash payment at Retirement Date in an amount, net
of Federal and State income taxes, as may be
necessary for Executive to purchase an annuity
equal to the difference between Executive's
retirement benefit computed at the then current
vesting level and that to which Executive would
be entitled at "full ten (10) year vesting"
status.
5. Termination.
(a) Death or Disability. This Agreement shall
terminate automatically upon the Executive's
death. (See Section 6(a) for obligations of
Company on account of termination for death.) If
the Company determines in good faith that the
Disability of the Executive has occurred
(pursuant to to the definition of "Disability" as
set forth below), it may give to the Executive
written notice of its intention to terminate the
Executive's employment. In such event, the
executive's employment with the Company shall
terminate effective on the thirtieth (30th) day
after receipt of such notice by the Executive
(the "Disability Effective Date"), provided that,
within the thirty (30) days after such receipt,
the Executive shall not have returned to full-
time performance of the Executive's duties. (See
Section 6(b) for obligations of Company on
account of termination for Disability). For
purposes of this Agreement, "Disability" means
any mental or physical illness or disability, or
other incapacitation of Executive that renders
the Executive unable regularly to perform his
usual duties for either (x) a consecutive period
in excess of twenty-six (26) weeks or more after
commencement, or (y) a cumulative period of
twenty-six (26) weeks or more in any consecutive
twelve (12) month period, after commencement, and
which is determined to be total and permanent in
characteristic by a physician.
(b) Cause. The Executive's employment may be
terminated by the Company for "Cause" upon a
finding made in good faith by the Board. For
purposes of this Agreement, "Cause" means serious
willful misconduct by the Executive, including,
but not limited to, (i) an act or acts of
personal dishonesty taken by the Executive and
intended to result in substantial personal
enrichment of the Executive at the expense of the
Company, any of its affiliates or subsidiaries,
and/or its shareholders, or (ii) repeated
violations by the Executive of the Executive's
obligations under Section 4(a) of this Agreement
which are demonstrably willful and deliberate on
the Executive's part and which are not remedied
in a reasonable period of time after receipt of
written notice from the Company, or (iii) the
conviction of the Executive of a felony, or (iv)
the perpetration of a common-law fraud upon
Company or any of its affiliates or subsidiaries,
or (v) a determination in final non-applicable
form made by any State or Federal regulatory
agency having supervising jurisdiction over the
Company, or of any of its affiliates or
subsidiaries, that Executive be removed from his
management or directorale responsibilities.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for "Good Reason".
For purposes of this Agreement, "Good Reason"
means
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's
position (including status, offices, titles and
reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a)
of this Agreement, or any other action by the
Company which results in a diminution in such
position, authority, duties or responsibilities,
or creates an inhospitable, hostile, or
uncomfortable employment environment as to
Executive, excluding for this purpose an
isolated, insubstantial and inadvertent action
not taken in bad faith and which is remedied by
the Company promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company to comply with any of
the provisions of Section 4(b) of this Agreement,
other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith
and which is remedied by the Company promptly
after receipt of notice thereof given by the
Executive;
(iii) The Company's requiring the Executive to be based
at any office or location other than that
described in Section 4(a)(i)(B) hereof, except
for travel reasonably required in the performance
of the Executive's responsibilities;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as
expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive. Anything in this Agreement to the contrary
notwithstanding, a termination by the Executive for any
reason during the thirty (30) day period immediately
following the first (1st) anniversary of the Effective Date
shall be deemed to be a termination for "Good Reason" for
all purposes of this Agreement.
(d) Notice of Termination. Any termination by the
Company for "Cause", or by the Executive for
"Good Reason", shall be communicated by Notice of
Termination to the other party hereto given and
delivered in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice
which (i) indicates the specific termination
provision in this Agreement relied upon, (ii)
sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for
termination of the Executive's employment under
the provision so indicated, and (iii) if the Date
of Termination (as defined below) is other than
the date of receipt of such notice, specifies the
termination date (which date shall be not more
than fifteen (15) days after the giving of such
notice). The failure by the Executive to set
forth in the Notice of Termination any fact or
circumstance which contributes to a showing of
Good Reason shall not waive any right of the
Executive hereunder or preclude the Executive
from adding or otherwise asserting such
additional fact(s) or circumstance(s) at a
subsequent date in enforcing his rights
hereunder.
(e) Date of Termination. "Date of Termination" means
the date of receipt of the Notice of Termination
or any later date specified therein, as the case
may be; provided, however, that (i) if the
Executive's employment is terminated by the
Company other than for Cause or Disability, the
Date of Termination shall be the date on which
the Company notifies the Executive of such
termination, and (ii) if the Executive's
employment is terminated by reason of death or
Disability, the Date of Termination shall be the
date of death of the Executive, or the Disability
Effective Date, as the case may be.
6. Obligations of the Company Upon Termination.
(a) Death. If the Executive's employment is
terminated by reason of the Executive's death,
this Agreement shall terminate without further
obligations to the Executive's legal
representatives, other than those obligations
accrued or earned by the Executive hereunder as
of the Date of Termination, including, for this
purpose the sum of (i) the Executive's full Base
Salary through the Date of Termination at the
rate in effect on the Date of Termination or, if
higher, at the highest rate in effect at any time
from the ninety (90) day period preceding the
Effective Date through the Date of Termination
(the "Highest Base Salary"), (ii) the product of
the Annual Bonus paid to the Executive for the
last full fiscal year and a fraction, the
numerator of which is the number of days in the
current fiscal year through the Date of
Termination, and the denominator of which is 365,
(iii) any compensation previously deferred by the
Executive (together with any accrued interest
thereon) and not yet paid by the Company and any
accrued vacation pay not yet paid by the Company,
and (iv) any other amounts or benefits owing to,
or accrued or vested for the account of,
Executive under the then applicable employee
benefit plans or policies of the Company (such
amounts specified in clauses (i), (ii), (iii) and
(iv) are hereinafter referred to as "Accrued
Obligations"). All such Accrued Obligations
shall be paid to the Executive in a "Lump Sum In
Cash" within thirty (30) days of the Date of
Termination. "Lump Sum In Cash" as used herein,
means United States currency or certified or
cashiers check in immediately and payable Federal
funds. Anything in this Agreement to the
contrary notwithstanding, the Executive's family
shall be entitled to receive benefits at least
equal to the most favorable benefits provided by
the Company and any of its affiliates to
surviving families of executives of the Company
and such affiliates under such plans, programs
and policies relating to family death benefits,
if any, in accordance with the most favorable
policies of the Company and its affiliates in
effect at any time during the ninety (90) day
period immediately preceding the Effective Date,
or, if more favorable to the Executive and/or the
Executive's family, as in effect on the date of
the Executive's death with respect to other key
executives and their families.
(b) Disability. If the Executive's employment is
terminated by reason of the Executive's
Disability, this Agreement shall terminate
without further obligations to the Executive,
other than those obligations accrued or earned by
the Executive hereunder as of the Date of
Termination, including for this purpose, all
Accrued Obligations. All such Accrued
Obligations shall be paid to the Executive in a
Lump Sum In Cash within thirty (30) days of the
Date of Termination. Anything in this Agreement
to the contrary notwithstanding, the Executive
shall be entitled after the Disability Effective
Date to receive disability and other benefits at
least equal to the most favorable of those
provided by the Company and its affiliates to
disabled employees and/or their families in
accordance with such plans, programs and policies
relating to disability, if any, in accordance
with the most favorable policies of the Company
and its affiliates in effect at any time during
the ninety (90) day period immediately preceding
the Effective Date or, if more favorable to the
Executive and/or the Executive's family, as in
effect at any time thereafter with respect to
other key executives and their families.
(c) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated by
Company for "Cause", this Agreement shall
terminate without further obligations to the
Executive other than the obligation of Company to
pay to the Executive the Highest Base Salary
through the Date of Termination plus the amount
of any compensation previously deferred by the
Executive (together with accrued interest
thereon). If the Executive terminates employment
other than for "Good Reason", this Agreement
shall terminate without further obligations of
Company to the Executive, other than those
obligations accrued or earned by the Executive
through the Date of Termination, including for
this purpose, all Accrued Obligations.
(d) Other Than for Cause or Disability; Good Reason.
If, during the Employment Period, the Company
shall terminate the Executive's employment other
than for Cause, Disability, or death, or the
Executive shall terminate his employment for
"Good Reason":
(i) the Company shall pay to the Executive in a Lump
Sum In Cash within thirty (30) days after the
Date of Termination the aggregate of the
following amounts:
A. to the extent not theretofore paid, the
Executive's Highest Base Salary through the
Date of Termination; and
B. the product of (x) the Annual Bonus paid to
the Executive for the last full fiscal year
(if any) ending during the Employment Period
or, if higher, the Annual Bonus paid to the
Executive for the last full fiscal year prior
to the Effective Date (as applicable, the
"Recent Bonus") and (y) a fraction, the
numerator of which is the number of days in
the current fiscal year through the Date of
Termination and the denominator of which is
365; and
C. the product of (x) two (2) and (y) the sum of
(i) the Highest Base Salary and (ii) the
Recent Bonus; and
D. in the case of compensation previously
deferred by the Executive, all amounts
previously deferred (together with any
accrued interest thereon) and not yet paid by
the Company, and any accrued vacation pay not
yet paid by the Company; and
E. all other amounts accrued or earned by the
Executive through the Date of Termination and
amounts otherwise owing under the then
existing plans and policies at the Company;
and
F. the Executive shall be entitled to receive a
lump-sum retirement benefit equal to the
difference between (x) the actuarial
equivalent of the benefit under the
Retirement Plan and the supplemental and/or
excess retirement plan, if any, the Executive
would receive if he remained employed by the
company at the compensation level provided
for in Sections 4(b)(i) and 4(b)(ii) of this
Agreement for the remainder of the Employment
Period, and (y) the actuarial equivalent of
his benefit, if any, under the Retirement
Plan and the supplemental and/or excess
retirement plan; and
(ii) for the remainder of the Employment Period, or
for a period of twenty-four (24) months from the
Date of Termination, if longer, or for such
longer period as any plan, program or policy may
provide, at Executive's election, the Company
shall continue benefits to the Executive, and/or
the Executive's family, at least equal to those
which would have been provided to them in
accordance with the plans, programs and policies
described in Section 4(b)(iv) of this Agreement
if the Executive's employment had not been
terminated, including health insurance and life
insurance, in accordance with the most favorable
plans, programs and policies described in Section
4(b)(iv) of this Agreement if the Executive's
employment had not been terminated, including
health insurance and life insurance, in
accordance with the most favorable plans,
programs or policies of the Company and its
affiliates during the ninety (90) day period
immediately preceding the Effective Date, or, if
more favorable to the Executive, as in effect at
any time thereafter with respect to other key
executives and their families and for purposes of
eligibility for retiree benefits pursuant to such
plans, programs and policies, the Executive shall
be considered to have remained employed until the
end of the Employment Period and to have retired
on the last day of such period.
7. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing
or future participation in any benefit, bonus, incentive or
other plan or program provided by the Company or any of its
affiliated companies and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect
such rights as the Executive may have under any stock option
or other agreements with the Company or any of its
affiliates companies. Amounts which are vested benefits or
which the Executive is otherwise entitled to receive under
any plan or program of the Company or any of its affiliates
companies at or subsequent to the Date of Termination shall
be payable in accordance with such plan or program.
8. Full Settlement. The Company's obligation to
make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense
or other claim, right or action which the Company may have
against the Executive or others. In no event shall the
Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to
the Executive under any of the provisions of this Agreement.
The Company agrees to pay, to the full extent permitted by
law, all legal fees and expenses which the Executive may
reasonable incur as a result of any contest (regardless of
the outcome thereof) by the Company or others of the
validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to
Section 9 of this Agreement), plus in each case interest at
the applicable Federal rate provided for in Section
7872(f)(2) of the Code.
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be
determined that any payment or distribution by
the Company to or for the benefit of the
Executive, whether paid or payable or distributed
or distributable pursuant to the terms of this
Agreement or otherwise (a "Payment"), would be
subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as
hereafter amended (the "Code"), or any similar
provision of any successor or amended Code, or
any interest or penalties with respect to such
excise tax (such excise tax, together with any
such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive
an additional payment (a "Gross-Up Payment") in
an amount such that after payment by the
Executive of all taxes (including any interest or
penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-
Up Payment, the Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this
Section 9, including whether a Gross-Up Payment
is required and the amount of such Gross-Up
Payment, shall be made by Messrs. Ernst &
Whinney, or the certified public accounting firm
then regularly engaged by Company to review and
audit its financial records (the "Accounting
Firm"), which shall provide detailed supporting
calculations both to the Company and the
Executive within fifteen (15) business days of
the Date of Termination, if applicable, or such
earlier time as is requested by the Company. If
the Accounting Firm determines that no Excise Tax
is payable by the Executive, it shall furnish the
Executive with a professional opinion that
substantial authority exists for him not to
report any Excise Tax on his federal income tax
return. Any determination by the Accounting Firm
shall be binding upon the Company and the
Executive. As a result of any uncertainty in the
application of Section 4999 of the Code at the
time of an initial determination by the
Accounting Firm made hereunder, it is possible
that Gross-Up Payments which will not have been
made by the Company should have been made
("Underpayment"), consistent with the
calculations required to be made hereunder. In
the event that the Company exhausts its remedies
pursuant to Section 9(c) and the Executive
thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine
the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid
in a Lump Sum In Cash by the Company to or for
the benefit of the Executive.
(c) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service
that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such
notification shall be given as soon as
practicable but not later than ten (10) business
days after the Executive knows of such claim and
shall apprise the Company of the nature of such
claim and the date on which such claim is
requested to be paid. The Executive shall not
pay such claim prior to the expiration of the
thirty (30) days period following the date on
which it gives such notice to the Company (or
such shorter period ending on the date that any
payment of taxes with respect to such claim is
due). If the Company notifies the Executive in
writing prior to the expiration of such period
that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such
claim,
(ii) take such action in connection with
contesting such claim as the Company shall
reasonably request in writing from time to
time, including, without limitation,
accepting legal representation with respect
to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim,
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear
and pay directly all costs and expenses
(including additional interest and penalties)
incurred in connection with such contest and
shall indemnify and hold the Executive harmless,
on an after-tax basis, for any Excise Tax or
income tax, including interest and penalties with
respect thereto, imposed as a result of such
representation and payment of costs and expenses.
Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all
proceedings taken in connection with such contest
and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings,
hearings and conferences with the taxing
authority in respect of such claim and may, at
its sole option, either direct the Executive to
pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and
the Executive agrees to prosecute such contest to
a determination before any administrative
tribunal, in a court of initial jurisdiction and
in one or more appellate courts, as the Company
shall determine; provided, however, that if the
Company directs the Executive to pay such claim
and sue for a refund, the Company shall advance
the amount of such payment to the Executive, on
an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax,
including interest or penalties with respect
thereto, imposed with respect to such advance or
with respect to any imputed income with respect
to such advance; and further provided that any
extension of the statute of limitations relating
to payment of taxes for the taxable year of the
Executive with respect to which such contested
amount is claimed to be due is limited solely to
such contested amount. Furthermore, the
Company's control of the contest shall be limited
to issues with respect to which a Gross-Up
Payment would be payable hereunder and the
Executive shall be entitled to settle or contest,
as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to
Section 9(c), the Executive becomes entitled to
receive any refund with respect to such claim,
the Executive shall (subject to the Company's
complying with the requirements of Section 9(c))
promptly pay to the Company the amount of such
refund (together with any interest paid or
credited thereon after taxes applicable thereto).
If, after the receipt by the Executive of an
amount advanced by the Company pursuant to
Section 9(c), a determination is made that the
Executive shall not be entitled to any refund
with respect to such claim and the Company does
not notify the Executive in writing of its intent
to contest such denial of refund prior to the
expiration of thirty (30) days after such
determination, then such advance shall be
forgiven and shall not be required to be repaid
and the amount of such advance (less any Excise
Tax or income tax, including interest and
penalties with respect thereto, imposed with
respect to such forgiveness), shall offset, to
the extent thereof, the amount of Gross-Up
Payment required to be paid.
10. Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company
all proprietary, secret or confidential information,
knowledge or data relating to (a) the Company or any of its
affiliates or subsidiaries, and their respective businesses,
and (b) the customers of each, which shall have been
obtained by the Executive during the Executive's employment
by the Company, or any of its affiliates, and which shall
not be or hereafter become public knowledge (other than by
acts perpetrated by the Executive, or his representatives,
in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or
data to anyone other than to the Company and/or those
designated by it to receive same, except (i) as such
disclosures or communications may be ordered by a court of
competent jurisdiction, or by any State or Federal
regulatory agency or body having supervisory jurisdiction
over the business and affairs of Company and its affiliates
and subsidiaries; (ii) disclosures or communications made to
legal counsel or accountants of Executive, as required in
the performance of their professional duties. In no event
shall an asserted violation of the provisions of this
Section 10 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this
Agreement.
11. Successors.
(a) This Agreement is a personal to the Executive
and, without the prior written consent of the
Company, shall not be assignable by the Executive
otherwise than by will or by assignment to the
Trustee of a revocable intervivos trust (grantor
type) created by Executive for the benefit of
Executive and/or Executive's family, or by the
laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable
by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors
and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger,
consolidation or otherwise) to all or
substantially all of the business and/or assets
of the Company to expressly assume and agree to
perform this Agreement in the same manner and to
the same extent that the Company would be
required to perform it if no such succession had
taken place. As used in this Agreement, the
expression "Company" shall mean the Company as
hereinbefore defined, its predecessors, and any
successor to its business and/or assets as
aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
12. Miscellaneous.
(a) Applicable Law; Jurisdiction. This Agreement
shall be governed by and construed in accordance
with the laws of the State of New Hampshire,
without reference to principles of conflict of
laws. Disputes which may arise in connection
with this Agreement, or any provision thereof,
shall be litigated and/or arbitrated within the
State of New Hampshire. The captions of this
Agreement are not part of the provisions hereof
and shall have no force or effect. This
Agreement may not be amended or modified
otherwise than by a written agreement executed by
the parties hereto or their respective successors
and legal representatives.
(b) Notices and Communications. All notices and
other communications hereunder shall be in
writing and shall be given by hand delivery to
the other party or by United States registered or
certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive: Gregory D. Landroche
Checkerberry Lane
Goffstown, New Hampshire 03045;
and
If to the Company: Bank of New Hampshire Corp.
300 Franklin Street - Box 600
Manchester, New Hampshire 03105
cc: Executive Compensation Committee
Board of Directors
Bank of New Hampshire Corp.
c/o 300 Franklin Street
P.O. Box 600
Manchester, New Hampshire 03105
Attention: Chairman
or, to such other address as either Party shall
have furnished to the other in writing in
accordance therewith. Notice and communications
shall be effective on the earlier of actual
receipt by the Party to whom it is addressed, or
such Party's delegate, or the tenth (10th) day
following confirmed evidence of deposit in the
United States postal system.
(c) Validity and Enforceability. The invalidity or
unenforceability of any provision of this
Agreement shall not affect the validity or
enforceability of any other provision of this
Agreement.
(d) Withholding for Taxes. The Company may withhold
from any amounts payable under this Agreement
such Federal, state or local taxes as shall be
required to be withheld pursuant to any
applicable law or regulation.
(e) Waiver. The Executive's failure to insist upon
strict compliance with any provision hereof shall
not be deemed to be a waiver of such provision or
any other provision thereof.
(f) Merger of Understanding. This Agreement contains
the entire understanding of the Company and the
Executive with respect to the subject matter
hereof.
(g) Present Employment, Condition of. The Executive
and the Company acknowledge that the employment
of the Executive by the Company is "at will",
and, prior to the Effective Date, may be
terminated by either the Executive or the Company
at any time. Upon a termination of the
Executive's employment or upon the Executive's
ceasing to be an officer of the Company, in each
case, prior to the Effective Date, there shall be
no further rights under this Agreement.
(h) Headings and Titles. The headings and titles of
sections and subsections of this Agreement are
for convenience only and shall not have any
independent legal effect.
(i) Amendments. This Agreement may be amended only
by a written instrument of Amendment signed by
each of the Parties.
(j) Counterparts. This Agreement may be executed in
multiple counterparts for retention by the
Executive, the Company, and legal counsel to the
Company.
IN WITNESS WHEREOF, the Executive has hereunto set his
hand and, pursuant to the authorization from its Board of
Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and
year first above written.
WITNESS:
/s/ Robert B. Field, Jr. /s/ Gregory D. Landroche
Gregory D. Landroche
(EXECUTIVE)
BANK OF NEW HAMPSHIRE CORPORATION
Attest: /s/ Robert B. Field, Jr. BY: /s/ Davis P. Thurber
Secretary Its Chairman, duly authorized
(COMPANY)
<PAGE>
COMPENSATION DEFERRAL AGREEMENT
Davis P. Thurber
Amendment - #1 Date: December 21, 1993
With respect to an Agreement dated December 23, 1992 between Bank
of New Hampshire, Bank of New Hampshire Corporation, and Davis P.
Thurber, each party agree to the following changes to Paragraph
#3, namely:
A. Base Compensation will be $260,000 Per Annum.
B. The amount of bi-weekly Deferred Compensation will be
$1,540.00.
Bank of New Hampshire
/s/ Maureen Donovan By: /s/ Gregory D. Landroche 12/21/93
Attest
Its Chief Financial Officer
Duly Authorized (Bank)
Bank of New Hampshire Corporation
/s/ Maureen Donovan By: /s/ Gregory D. Landroche 12/21/93
Attest
Its SVP, Treasurer and CFO
Duly Authorized (Corporation)
/s/ Maureen Donovan /s/ Davis P. Thurber
Attest Davis P. Thurber, Employee
<PAGE>
COMPENSATION DEFERRAL AGREEMENT
Paul R. Shea
Amendment - #1 Date: December 21, 1993
With respect to an Agreement dated December 23, 1992 between Bank
of New Hampshire, Bank of New Hampshire Corporation, and Paul R.
Shea, each party agree to the following changes to Paragraph #3,
namely:
A. Base Compensation will be $200,000 Per Annum.
B. Total Deferred Compensation will be $54,300. This amount is
to be divided as separate credits to my IRC 401-K account and
the Compensation Deferral Agreement dated December 23, 1992.
Initially, $45,000 per year to my deferred compensation
account and $9,300* per year to my IRC 401-K account,
however, of the total deferred, the credit to my IRC 401-K
account shall be maintained at the maximum allowed by current
regulations.
(*$9,300, approximation based on Pre-tax limits.)
BANK OF NEW HAMPSHIRE
/s/ Maureen Donovan BY: /s/ Gregory D. Landroche 12/21/93
Attest Date
Its Chief Financial Officer
Duly Authorized (Bank)
BANK OF NEW HAMPSHIRE CORPORATION
/s/ Maureen Donovan BY: /s/ Gregory D. Landroche 12/21/93
Attest Date
/s/ Maureen Donovan /s/ Paul R. Shea
Attest Paul R. Shea, Employee
<PAGE>
Exhibit 1
BANK OF NEW HAMPSHIRE CORPORATION
Cover page to Annual Report
[Logo of Company appears here]
<PAGE>
TABLE OF CONTENTS
Chairman's Message 1
1993: An Overview 4
Management's Financial Review 10
Report of Independent Auditors 29
Financial Statements 30
Officers and Directors of the Corporation 46
Officers and Directors of the Bank 47
Bank Locations 48
ABOUT THE COMPANY
Bank of New Hampshire Corporation
("BNHC") is a registered bank holding company with headquarters in
Manchester, New Hampshire. Bank of New Hampshire is a wholly-owned subsidiary
of Bank of New Hampshire Corporation. Bank of New Hampshire has twenty-eight
offices located in the southern, central, coastal, and lakes regions of the
state and provides a full range of banking and fiduciary services to
individuals, businesses, and governmental units.
The cover photo was taken in Windham, N.H. by Sandy Galvis. It was one of
the entries in an employee photography contest for our annual calendar.
Photography by Rob Karosis, Portsmouth, N.H.
Additional photography: Page 7 (Robert Esau) by Britain Hill.
"We have earned our way to a
full recovery."
Davis P. Thurber
Chairman of the Board and President
Bank of New Hampshire Corporation
[Davis P. Thurber pictured here]
CHAIRMAN'S MESSAGE
This past year, we reinforced our contention that Bank of New Hampshire is
well-positioned for the future. We reported our ninth consecutive profitable
quarter, completed a sale of common stock, and reinstated a quarterly
dividend. Net income for the fourth quarter 1993 of $1.6 million brought
total net income for the year to $6.4 million, or $1.80 per share.
Over the last few years, much of our energy, resources and attention
have been focused on dealing with asset quality and the economic problems of
our region. At the same time, by adhering to traditionally conservative
banking practices and controlling expenses, we have earned our way to a full
recovery. While doing so, we have continued to provide high quality service
to our customers. As a result, we have solidified our position as the largest
bank in New Hampshire that is locally owned and operated.
SUCCESSFUL STOCK OFFERING. In September of last year, we completed the sale
of 690,000 shares of common stock, thereby raising approximately $11.6
million in new capital. This stock offering was oversubscribed by more than
300%--an indication, we believe, of a favorable reputation in the financial
markets. This gives us the flexibility to take advantage of opportunities for
future financial growth, while exceeding regulatory capital requirements. At
year-end, our capital leverage ratio was 6.78%, tier 1 risk-based capital was
14.31%, and total risk-based capital was 15.59%.
<PAGE>
[Graph appears here]
Earnings (loss) Per Share
Measurement period (FY) 1989 1990 1991 1992 1993
Earnings (loss) Per Share $2.32 ($5.79) ($.95) $1.60 $1.80
REINSTATING THE QUARTERLY DIVIDEND. I am also very pleased to report that on
November 17th, the Board of Directors voted a quarterly dividend of eight
cents per share, our first dividend since the fourth quarter of 1990.
Throughout the 1980s, we insisted that bank stocks should not be bought for
speculation, but rather to provide investors with stable, long-term growth
and reliable income. That is our mission, and reinstating a regular dividend
is an essential component of achieving it.
ASSET QUALITY IMPROVEMENT As a result of improved asset quality, our
provision for loan losses has decreased. Our other real estate (ORE) carrying
costs also have fallen. At year end, our allowance for loan losses
represented 91% coverage against all non-performing loans and 112% coverage
against all non accrual loans. ORE decreased last year from $15.9 million to
$13.4 million. Also of significance, non-interest income as a percentage of
total income grew to 14%, and our efficiency ratio continued to improve.
Return on average assets is steadily rising.
[Graph appears here]
Non-performing Assets (In thousands)
Measurement Period (YE) 1989 1990 1991 1992 1993
Total non-performing Assets $27,089 $48,887 $47,303 $35,645 $29,450
A STRONG, STABLE ORGANIZATION. As stated earlier, we are well-positioned
to prosper throughout the remainder of the 1990s. We continue to benefit from
local ownership and decision making. Our loan portfolio is well diversified.
Core deposits have risen to $639.2 million, and they represent 74% of total
deposits. Our Trust and Investment Services Division exceeds $2 billion in
assets, of which over $500 million are under management.
[Graph appears here]
Market and Book Value Per Share
Measurement Period (YE) 1989 1990 1991 1992 1993
Market Value Per Share $14.50 $ 5.00 $ 5.00 $12.75 $17.25
Book Value Per Share $20.67 $14.17 $13.29 $14.96 $16.78
THE ECONOMY AND THE REGULATORS. For the first time in several years, I am
able to write in a positive way about these two critical issues. The New
Hampshire economy has clearly stabilized, and both deposit and loan demand
in our market niche--the consumer and small business markets--are growing.
At the same time, in spite of the additional burdens of the Federal Deposit
Insurance Corporation Improve-ment Act, the regulatory environment is
becoming less restrictive in terms of our ability to make the types of loans
that are appropriate for our Bank and this market.
<PAGE>
A UNIQUE POSITION IN THE MARKET. Banks can no longer rely only on interest
rate spreads for income--they are simply too volatile. Fees have become
increasingly important, and that means that good service is crucial. Bank of
New Hampshire must continue to be responsive to our communities in providing
needed products and services. In the remarks that follow, Paul Shea,
President and CEO of the Bank, will illustrate in more detail how our
commitment to service is paying off. Suffice it to say that we have the
reputation and the resources to maintain our competitive edge for many years
to come.
[Graph appears here]
Measurement Period (YE) 1989 1990 1991 1992 1993
Stockholders' Equity $69,532 $47,952 $44,984 $50,545 $68,242
Davis P. Thurber
Chairman of the Board and President
Bank of New Hampshire Corporation
[Signature - Davis P. Thurber]
[Paul R. Shea pictured here]
"If you live, work, or do business in one of the communities we serve, we
want you as our customer."
Paul R. Shea
President and Chief Executive Officer
Bank of New Hampshire
1993:AN OVERVIEW
Bank of New Hampshire's reputation, convenient office locations and local
decision-making give us a competitive edge in providing the kind of personal
service required by customers in our markets. We make over 99% of our loans
in New Hampshire, primarily to small businesses, single-family homeowners,
and local consumers. "If you live, work or do business in one of the
communities we serve, we want you as our customer." That is our message to
the marketplace.
As a consumer-oriented bank that doesn't have to rely on large
institutional deposits, we have a loyal core deposit base that has continued
growing despite low interest rates.
[Harold R. Acres, Senior Executive Vice President, pictured here]
THE LENDING SITUATION: PAST & PRESENT.
Because of the economic downturn and heightened regulatory requirements, a
contraction in lending clearly occurred. This was due also, in part, to the
fact that many surviving businesses were determined to avoid risk by delaying
borrowing and new hiring. They opted instead to use this period to pay down
debt and streamline operations.
However, it must be acknowledged that there was also a natural reaction
on the part of most banks to concern themselves with existing economic and
regulatory problems and, therefore, to become less pro-active in lending.
This situation was compounded by the number of business loans placed in the
<PAGE>
various loan pools by the newly restructured banks. As a result, many New
Hampshire businesses and consumers were impacted unfairly and became
frustrated and embittered toward the entire banking industry.
[Alice L. DeSouza and R. Scott Bacon, Executive Vice Presidents, pictured
here]
OUR REPUTATION IS OUR MOST VALUABLE ASSET.
While credit has begun to ease significantly, dissatisfaction with banks has
probably been at an all-time high. We were, therefore, extremely gratified
by a survey taken in September 1993 in which the University of New Hampshire
polled consumers about the state's four major banks. The results were
published in the December issue of New Hampshire Premier Magazine which
wrote, "Bank of New Hampshire receives the highest ratings from its
customers. Nearly half (48%) say they are very satisfied with the bank's
services, while no one said they were not satisfied at all." Our competition
lagged far behind in customer satisfaction.
Needless to say, we were delighted with these results which, we feel,
reflect our long-term stability, strong middle management team, and emphasis
on service.
The Bank's future prospects are very positive. The economy is improving.
Loan demand is up. And we are placing an increased emphasis on fee-based
services. We also fully expect to be able to continue to increase earnings
by controlling costs, and taking further advantage of recently installed
technology and opportunities for outsourcing other technologies.
DEPOSIT BASE GROWTH CONTINUES. Our core deposit growth this year can be
attributed to a competitive mix of checking and savings accounts including
our Preferred Passbook, special accounts for seniors, an ATM-only account for
students, and a new checking account developed specifically for small
businesses.
Responsive, courteous, and knowledgeable service is a key factor in
retaining customers. One phone call to our new Deposit Services Department
puts them in touch with a well-trained representative who can answer all
their questions about balances, transfers, ATM transactions, rates, fees, and
more.
FOCUSING ON INVESTMENT MANAGEMENT. For many years, most banks have seen
investment management as simply one aspect of trust and investment services.
With over $2 billion in assets and $500 million under management, we see it
as the primary focus. Sophisticated investment modeling enables us to create
custom diversified portfolios based on size, risk tolerance, and income
needs. We also offer pooled funds designed to meet the typical investment
goals of those with smaller portfolios.
Our customers include individuals, corporations, non-profits, and
municipalities. This year, we restructured the Division so that the wealth
of expertise we have in areas such as estate planning, tax issues, corporate
trust, and administration are not presented as separate capabilities, but
rather as support services which enable us to deliver our investment
management services to these diverse constituencies as efficiently as
possible.
PEOPLE-ORIENTED TECHNOLOGY. Technology must do more than reduce expenses.
It must also make banking more convenient and regulatory compliance easier
while freeing employees from routine chores so that they can provide better
service. These have been our primary aims as we work on a company-wide review
of systems.
With technology changing so fast, however, it often is not
cost-effective or strategically prudent to make a major investment in the
latest hardware. So our review is also considering ways to take advantage of
data processing sources that are available outside the Bank to provide our
customers with better products and service, cost-effectively.
<PAGE>
INVESTING IN THE WHOLE COMMUNITY.
Whether you're a recent college graduate trying to finance a car, an
individual or couple looking for a mortgage, an immigrant family trying to
run a small business, or a corporate executive establishing an employee
benefit program, we want your business. That's our message to every community
we serve.
Our employees play major roles in over 200 charitable and civic
organizations--still the best way to identify unmet needs and new
opportunities. The Bank itself is active in low-income housing programs and
SBA-backed loan initiatives. In other words, for us, complying with the
requirements of the Community Reinvestment Act (CRA)--to provide equal access
to banking services regardless of income, race, or gender--is not a
regulatory burden. Rather, it's business as usual. We truly believe that the
future of banking lies in thriving communities served by strong, involved
banks.
Paul R. Shea
President and Chief Executive Officer Bank of New Hampshire
Balancing the Loan Portfolio
Our goal is to maintain a balance between commercial and consumer lending
while being responsive to the changing demand for various types of loans in
the communities we serve. For example, in 1993, due to lower interest rates
and real-estate prices, residential mortgage originations remained strong.
In fact, we sold $45.7 million in new fixed-rate mortgages (while retain-ing
the servicing), yet there was very little shift in the over-all composition
of the portfolio. We are now well positioned to take advantage of the
increasing demand for commercial, residential, and consumer loans in our
markets.
[Chart appears here]
Balancing the Loan Portfolio
Residential Real Estate:
Home Equity 6.3%
Multifamily 2.2
Single Family 45.9
54.4%
Real Estate - Commercial 26.1%
Commercial 10.6%
Installment 8.9%
To help first-time home buyers through the process of obtaining a mortgage,
the Bank produced a video that walks them through every step.
[Single family home pictured here]
Strong Core Funding
This chart illustrates the stability of our deposit base. While we, like
other banks, have seen holders of larger maturing CDs move to mutual funds
(including those offered by our own Trust and Investment Services Division),
we have simultaneously seen a continued increase in our core deposits. This
year these accounts (including savings, checking, money market) grew to
$639.2 million, up from $624.6 million last year. And, as the economy
improves, this solid base of lower-cost deposits will allow us to be very
aggressive in meeting increased loan demand.
<PAGE>
[Chart appears here]
Core Deposits:
Non-Interest Bearing Deposits 17.2%
MMDAs 6.3
Savings and NOW Accounts 50.4
73.9%
Time deposits less than $100,000 24.8%
Time deposits greater than $100,000 1.3%
Our new Deposit Services Center, which handles about 10,000 calls a month,
lets customers get answers to their deposit questions with one phone call
during expanded hours, including evenings and Saturdays.
[Deposit Service Center pictured here]
Improving Service And Efficiency
The challenge for any bank in today's competitive environment is to deliver
better products to customers as cost-effectively as possible. This is
particularly true in light of the advanced technology available today.
Thanks to technological improvements in the last year alone, our
customer-service representatives can access on-line information to help
customers make better product choices, our mortgage originators can process
applications more quickly, and compliance staff can meet the reporting
requirements of the Bank Secrecy Act more easily. These are just a few
examples of the many ways we are improving efficiency without compromising
the personal service we are dedicated to providing to our customers.
[Allen G. Tarbox pictured here]
Allen G. Tarbox, Jr., Director of Information Systems, works with employees
throughout the Company to identify ways technology can be used to help them
better serve customers.
Robert B. Esau, who was appointed this year to the position of Executive Vice
President/Trust and Investment Services, came to us with 23 years of trust
and investment management experience in New England.
[Robert B. Esau, Executive Vice President, and JoAnne T. Howard, Senior Vice
President, pictured here]
JoAnne T. Howard, Senior Vice President/ Branch Administration, is
responsible for the extensive training that ensures our Customer Service
Representatives and Tellers are as well informed and helpful as possible.
Senior Vice Presidents Edward P. Carter, Mary W. McLaughlin and Paul E. Duffy
are responsible for our community-based commercial lending and business
development in the Manchester, Concord, and Nashua regions, respectively.
[Four Senior Vice Presidents pictured here]
Cornelius J. Joyce, Senior Vice President of Consumer Loan Services, has
spent several years helping customers restructure finances during difficult
financial times. Now his focus is developing new lending opportunities.
<PAGE>
[Gregory D. Landroche, Chief Financial Officer, pictured here]
Gregory D. Landroche, CPA, Senior Vice President, Treasurer and Chief
Financial Officer, Bank of New Hampshire Corporation.
MANAGEMENT'S FINANCIAL REVIEW
GENERAL
Bank of New Hampshire Corporation (the "Company") is a registered bank
holding company incorporated in 1979 under the laws of the State of New
Hampshire. The Company is a member of the Federal Reserve System and
transacts its business through Bank of New Hampshire (the "Bank"), a state-
chartered, Federal Reserve non-member, commercial bank organized under the
laws of the State of New Hampshire.
The Company assumed its present structure on September 30, 1991 with the
merger of its five separate subsidiary banks into the Bank. As a result of
the merger, the Company has realized significant cost reductions and income
augmentation from product standardization, refinements in branch automation,
electronic data processing conversions, consolidation of departments and
staff reductions. The Company conducts its business through 28 offices of
the Bank located throughout the southern, central, seacoast and lakes regions
of New Hampshire, which areas contain approximately 80% of the State's
population.
1993 FINANCIAL HIGHLIGHTS
On September 30, 1993, the Company completed the sale of 690,000 shares of
its common stock and received approximately $11.6 million in net proceeds.
Upon receipt of the proceeds, the Company made a $7.5 million capital
contribution to the Bank. The balance of the proceeds is being retained by
the Company for general corporate purposes. See "Regulatory Matters."
On November 17, 1993, the Company's Board of Directors (the "Board") voted
a quarterly dividend of eight cents per share. Since the first quarter of
1991, the Board had consistently voted, on a quarterly basis, not to declare
a dividend. See "Dividends and Dividend Policy."
NEW HAMPSHIRE ECONOMY
During 1993 the New Hampshire economy showed definite signs of improvement.
For example, the unemployment rate declined to a four year low of 5.3% in
November, 1993; sales of existing homes have increased during the last
several years; and building permits issued for new privately owned housing
units have risen since 1991. In addition, property values appear to have
stabilized, and there was a modest increase in the average sale price of
homes from $113,000 in 1992 to $115,000 in 1993.
Overall, the Company remains optimistic that these favorable trends will
continue, and anticipates that these economic factors will have a positive
effect on its 1994 operating results.
REGULATORY MATTERS
During 1992, the Bank entered into a Memorandum of Understanding (the "MOU")
and a Capital Directive (the "Capital Directive") with the FDIC and the State
of New Hampshire Banking Department. The MOU and the Capital Directive
require, among other things, the attainment of increased capital ratios on
an incremental basis, through and by, June 30, 1994. As of December 31,
1993, the Bank's capital ratios already exceed the minimum levels required
on June 30, 1994 under the MOU and the Capital Directive. See "Dividends and
<PAGE>
Dividend Policy."
Moreover, the Company believes the Bank is currently in compliance with the
other provisions of the MOU.
DIVIDENDS AND DIVIDEND POLICY
The Company's dividend policy with respect to its common stock is reviewed
quarterly. Prior to 1991, the Company paid quarterly cash dividends on its
common stock. However, commencing with the first quarter of 1991 and
continuing through the third quarter of 1993, the Board had consistently
voted, on a quarterly basis, not to declare a dividend. Such votes
acknowledged (i) the need for a continued conservative approach in
utilization of the Company's capital, (ii) regulatory restrictions on the
Bank's capital and the resultant capacity of the Bank to "upstream" dividends
to the Company, (iii) the limited ongoing capacity of the Company to pay
dividends without the benefit of upstreamed dividends from the Bank, and (iv)
actions taken by the regulators at other financial institutions to restrict
or otherwise direct the discontinuance of dividend payments to stockholders.
As previously noted, on November 17, 1993, the Board declared a quarterly
dividend of eight cents per share payable December 15, 1993 to stockholders
of record at December 1, 1993. Such dividends totalled approximately
$325,000 and did not require upstreaming of Bank earnings, in the form of a
dividend, to the Company.
The Board voted to resume the dividend after giving consideration to the
following events - eight consecutive quarters of reported net income
totalling $10.7 million; the previously mentioned sale of common stock on
September 30, 1993, which generated $11.6 million in net proceeds for the
Company and a $7.5 million contribution from the Company to the capital of
the Bank. Consideration was also given to the fact that the federal and
state regulators (the "Regulators") granted prior approval of the dividend.
The Regulators have indicated that, provided the Bank maintains a leverage
ratio of at least 6.00%, the Bank will have the capacity to upstream
dividends to the Company out of current earnings on a quarterly basis in
amounts determined in accordance with the current rules and regulations,
subject to approval by the Bank's independent Board of Directors. However,
the Regulators may prohibit the Bank and the Company from paying dividends
at any time if they deem such payment to be an unsafe or unsound practice.
<PAGE>
CAPITALIZATION
The following Table presents the regulatory capital ratios of the Company at
December 31, 1993 and 1992.
Regulatory
Minimum 1993 1992
Regulatory Capital Ratios:
Leverage ratio 3.00%(1) 6.78% 5.00%
Tier 1 risk-based ratio 4.00 14.31 9.26
Total risk-based ratio 8.00 15.59 10.53
The following Table presents the regulatory capital ratios of the Bank at
December 31, 1993 and 1992.
Regulatory
Minimum 1993 1992
Regulatory Capital Ratios:
Leverage ratio 3.00%(1) 6.09% 4.71%
Tier 1 risk-based ratio 4.00 12.88 8.42
Total risk-based ratio 8.00 14.16 9.69
__________
(1) Under current regulations, all except the most highly rated institutions
are expected to exceed the minimum regulatory ratio by 100 to 200 basis
points or more.
As noted under "Regulatory Matters" and "Capital Resources," the MOU and the
Capital Directive require the attainment by the Bank of certain minimum
capital levels established under applicable regulations, as well as phased
in leverage ratios (5.25% and 6.00% on or before December 31, 1993 and June
30, 1994, respectively) that exceed the minimums to which the Bank would
otherwise be subject under applicable regulations. As of December 31, 1993,
the Bank had already exceeded the required June 30, 1994 leverage ratio of
6.00% by nine basis points.
<PAGE>
ASSET QUALITY
As can be seen in the folloiwng Table, the Bank has experienced an overall
decline in total nonperforming assets. Despite this positive trend, the
Company, during 1993, continued adhering to a conservative philosophy in
maintaining the allowance for possible loan losses (the "APLL"). At year-
end, the APLL represented 50% coverage of nonperforming assets, 91% coverage
of nonperforming loans and 112% coverage of nonaccrual loans. See "Risk
Elements and Nonperforming Assets."
12/31/93 9/30/93 6/30/93 3/31/93
(In thousands)
Loans 90 days or more past
due and still accruing $ 2,006 $ 2,768 $ 2,609 $ 2,589
Loans which have been
restructured 1,012 963 1,505 1,576
Nonaccrual loans 13,039 15,004 15,030 16,796
Total nonperforming loans 16,057 18,735 19,144 20,961
Other real estate 13,393 14,149 16,982 16,554
Total nonperforming assets $29,450 $32,884 $36,126 $37,515
The following Graph shows the APLL coverages of nonperforming loans and
nonaccrual loans at December 31 for the years presented:
[Graph appears here]
APLL Coverages
Measurement Period (YE) 1989 1990 1991 1992 1993
APLL/Nonperforming Loans 29% 79% 81% 84% 91%
APLL/Nonaccrual Loans 68% 114% 106% 101% 112%
REVIEW OF FINANCIAL STATEMENTS
The following is a discussion and analysis of the Company's consolidated
results of operations and financial condition. In order to understand this
section in context, it should be read in conjunction with the Financial
Statements on pages 30 through 45 and with the Statistical Information
contained in the Company's Annual Report on Form 10-K, on pages 15 through
27.
OVERVIEW
RESULTS OF OPERATIONS
The Company reported net income of $6.4 million in 1993 versus net income of
$5.4 million in 1992 and a net loss of $3.2 million in 1991. Earnings per
share in 1993 was $1.80 versus $1.60 in 1992 and a per share loss of $.95 in
1991. The sale of 690,000 shares of common stock on September 30, 1993, had
a dilutive effect on earnings per share in 1993 of $.09 per share. Return
on average assets was .67% in 1993 compared to .55% in 1992. Return on
average equity was 11.27% in 1993 compared to 11.43% in 1992. Included in
earnings for 1992 was a $1.1 million, or $.32 per share, adjustment resulting
from the early adoption of Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes." The $1.1 million adjustment
represents the cumulative effect of the change in accounting principle as of
January 1, 1992. The principal reason for the 18% increase in net income for
1993 compared to 1992 was the significant decrease in credit costs. The
provision for possible loan losses totalled $4.2 million in 1993 compared to
<PAGE>
$6.8 million in 1992, and expenses related to Other Real Estate ("ORE")
totalled $3.3 million in 1993 compared to $6.3 million in 1992. The $3.2
million net loss in 1991 resulted primarily from the provision for possible
loan losses of $12.5 million and ORE expense of $5.1 million.
CONSOLIDATED BALANCE SHEET
At December 31, 1993, the Company had consolidated assets of $976.7 million,
deposits of $865.3 million and stockholders' equity of $68.2 million. Based
on deposits, the Company is the second largest independent banking
institution headquartered in New Hampshire, and the Bank is the fourth
largest bank operating in the State.
Total assets of $976.7 million at December 31, 1993, represented an increase
of $9.5 million, or 1%, from the 1992 year-end balance of $967.2 million.
Cash and cash equivalents totalled $166.0 million at December 31, 1993, an
increase of $39.4 million from year-end 1992. The increase was substantially
the result of a decreasing loan demand and the sale of residential mortgages
totalling $45.7 million. Management believes this level of liquid assets
allows the Company to remain responsive to external conditions; however,
Management expects this balance to decrease in 1994.
Total loans were $524.8 million at December 31, 1993, compared with $624.4
million at the end of 1992. As previously noted, the decrease in the loan
portfolio was due primarily to overall weak loan demand and sales of
mortgages to the secondary market. In response to the recent loan portfolio
decrease, Management has implemented certain loan growth initiatives and
anticipates growth in both the commercial and commercial real estate
portfolios in 1994. The Bank continues to pursue new lending opportunities,
but there can be no assurance as to the future level of the loan portfolio.
See "Loans."
The following Chart presents the components of the Company's assets as of
December 31, 1993:
[Chart appears here]
Total Assets at December 31, 1993
Net Loans 52.2%
Investment Securities 26.5
Cash and Cash Equivalents 17.0
Premises and Equipment 1.2
Other Assets 1.6
Other Real Estate 1.4
Mortgage Held for Sale .1
Nonaccrual loans and ORE totalled $26.4 million at December 31, 1993,
compared to $32.2 million at the end of 1992, a $5.8 million, or 18%,
decrease. See "Risk Elements and Nonperforming Assets."
The allowance for possible loan losses was $14.6 million at December 31,
1993, compared with $16.6 million at the end of 1992. The allowance as a
percent of nonaccrual loans was 112% at December 31, 1993 and 101% at the end
<PAGE>
of 1992. The allowance as a percent of total loans was 2.78% at the end of
1993 and 2.66% at the end of 1992. See "Provision for Possible Loan Losses"
and "Allowance for Possible Loan Losses."
Stockholders' equity totalled $68.2 million at December 31, 1993, compared
with $50.5 million at the end of 1992. The Company's regulatory risk-based
capital ratios at December 31, 1993 were 14.31% for Tier 1 capital, 15.59%
for total capital and its leverage ratio was 6.78%. This compares with
ratios of 9.26% for Tier 1 capital, 10.53% for total capital and 5.00% for
leveraged capital on December 31, 1992. All capital ratios exceeded the
requirements of current regulations. The increases in both stockholders'
equity and capital ratios in 1993 reflected the retention of earnings, as
well as $11.6 million of net proceeds from the Company's common stock sale
in September. See "Capital Resources."
<PAGE>
RESULTS OF OPERATIONS
Net Interest Income
All interest income, yields, rates, interest rate spreads and net interest
margins which follow in this discussion are stated on a fully taxable
equivalent ("FTE") basis using a tax rate of 34%. Net interest income
changes are caused by interest rate movements, changes in the amounts and the
mix of earning assets and interest bearing liabilities, and changes in the
amounts of non-earning assets and non-interest bearing liabilities.
Net interest income was $40.1 million for 1993 compared to $42.0 million for
1992 and $37.4 million for 1991. The decrease of $1.9 million in 1993
compared to 1992 was the result of lower yields on average earning assets for
1993, offset somewhat by lower interest rates paid on deposits. The increase
of $4.6 million in 1992 compared to 1991 was the result of significantly
lower interest rates paid on deposits and borrowings in 1992 than in 1991.
The following Table presents Average Rate Earned, on an FTE basis, Average
Rate Paid, Interest Rate Spread and Net Interest Margin for the years
indicated.
1993 1992 1991
Average Rate Earned 7.25% 8.12% 9.66%
Average Rate Paid 3.03 3.88 6.10
Interest Rate Spread 4.22 4.24 3.56
Net Interest Margin 4.62 4.65 4.13
Interest rate spread is the average yield earned on total earning assets less
the average rate paid for interest bearing liabilities. Net interest margin
is calculated by dividing net interest income by total average earning
assets. The net interest margin was under pressure during 1993 as the
positive effect of declining market rates diminished, maturing investment
securities were reinvested at lower yields, and average balances in the loan
portfolio continued to decrease. Management believes the net interest margin
has stabilized and factors contributing to the downward pressure throughout
1993 will not be present in 1994. However, net interest income is affected
by the current interest rate environment, the mix and volume of assets and
liabilities, the level of nonperforming assets, economic, political and other
factors. Consequently, there can be no assurance as to the level of future
net interest income or margins. See "Loans."
Average earning assets totalled $868.2 million for 1993, a decrease of $34.2
million compared to 1992. The yield on average earning assets for 1993
equalled 7.25%, a decrease of 87 basis points from 1992. The decrease in
yield was mitigated somewhat by lower interest rates paid on deposits and
borrowings in 1993 compared to 1992. Rates paid on deposits and borrowings
decreased from 3.88% in 1992 to 3.03% in 1993. Average interest bearing
liabilities totalled $755.5 million for 1993, a decrease of $51.1 million,
or 6%, from 1992. Average earning assets totalled $902.4 million for 1992,
a decrease of $2.8 million compared to 1991. The yield on average earning
assets for 1992 equalled 8.12%, a decrease of 154 basis points from 1991.
The decrease in yield was offset by significantly lower interest rates paid
on deposits and borrowings in 1992 compared to 1991. Rates paid on deposits
and borrowings decreased from 6.10% in 1991 to 3.88% in 1992. Average
interest bearing liabilities totalled $806.6 million for 1992, a decrease of
$13.5 million,or 2%, from 1991.
<PAGE>
During 1993, 1992 and 1991, the effect on net interest income of nonaccrual
and restructured loans was significant. The reduction in interest income as
a result of the effect of these two categories was $1.2 million, $1.3
million, and $1.7 million, in 1993, 1992 and 1991, respectively. For 1993,
a taxable equivalent adjustment of $232,000 was added to net interest income,
compared to $358,000 and $686,000 in 1992 and 1991, respectively.
The Bank sold $65.0 million of investment securities at a gain of $3.1
million on December 30, 1991. These securities had an average yield of 7.77%
and maturity of two years. Securities purchased with the proceeds of the
sale had an average yield of 3.86% and maturities of nine and 12 months.
This resulted in a net reduction of interest income of approximately $1.6
million, after tax, in 1992. See "Investment Securities."
PROVISION FOR POSSIBLE LOAN LOSSES
In determining an appropriate provision for possible loan losses for any
period, Management evaluates the current financial condition of specific
borrowers, the general economic climate, loan portfolio composition,
concentration of credits, loan loss history, adequacy of collateral, the
trends and amounts of nonaccrual and past due loans and estimation of future
potential losses and the level of the allowance for possible loan losses.
The aforementioned criteria are monitored by Management regularly. The
amount of the provision for possible loan losses is recommended by Management
and is then reviewed and approved quarterly by the Board based on its
assessment of the size, composition and quality of the loan portfolio and the
level of the allowance for possible loan losses relative to the risks within
the loan portfolio. See "Allowance for Possible Loan Losses."
Commencing in the late 1980's, the economy of New Hampshire experienced the
effects of a severe recession which affected all of New England. Due in
significant part to the effects of this recession, the Company, like many
other New England financial institutions, experienced deterioration in asset
quality, particularly in the areas of commercial real estate, construction
and residential loans. Downward trends in property sales and fair market
value appraisals during 1990 led to substantial deterioration in real estate
values. Further downturns in the defense and high technology industries were
also experienced during 1990, which contributed to a general rise in
unemployment in New Hampshire to a year-end level of approximately 6.3%.
This rapid deterioration of the economy within the Company's market area
resulted in net loan losses of $23.2 million, $14.1 million, $10.2 million
and $6.2 million for the years ended December 31, 1990, 1991, 1992 and 1993,
respectively, representing 3.18%, 2.10%, 1.58% and 1.09% of average loans for
the respective years. Additionally, the Bank experienced an overall increase
in "loans 90 days or more past due and still accruing," "restructured loans,"
"nonaccrual loans" and "ORE" (collectively "nonperforming assets").
Nonperforming assets increased from $10.8 million at year-end 1988 to a peak
of $52.9 million at June 30, 1991. Management has devoted significant effort
to reducing these nonperforming assets with the objective of achieving and
thereafter maintaining an overall improvement in asset quality. The level
of nonperforming assets has decreased and totalled $47.3 million, $35.6
million and $29.5 million at December 31, 1991, 1992 and 1993, respectively.
In response to the deteriorating economic situation and the high levels of
nonperforming assets, the Company determined that the level of the allowance
for possible loan losses should be maintained to provide coverage for
potential losses in light of the uncertain economic climate. This resulted
in a provision for possible loan losses totalling approximately $37.3
million for 1990, $12.5 million for 1991, $6.8 million for 1992 and $4.2
million for 1993. The ratio of the allowance for possible loan losses to
total loans was 2.78% at December 31, 1993, compared to 2.66% at year-end
<PAGE>
1992 and 3.09% at year-end 1991. The lower provisions for possible loan
losses resulted from the concurrent decreases in nonperforming assets and
loan losses. The Company continues to be affected by the recession's
residual economic impact in the region; however, these trends indicate steady
improvement in asset quality since 1990.
The following Graph presents the Provision for Possible Loan Losses and Net
Loan Losses for the years indicated:
[Graph appears here]
Measurement Period (YE) 1989 1990 1991 1992 1993
Provision $ 4,422 $37,334 $12,542 $ 6,800 $ 4,200
Net Loan Losses $ 2,534 $23,197 $14,105 $10,193 $ 6,238
Non-Interest Income
Non-interest income was $9.8 million for 1993, $9.2 million for 1992 and
$10.2 million for 1991. The increase of $668,000,or 7%,in 1993 compared to
1992 resulted from higher gains on mortgage sales of $112,000, securities
gains of $174,000, trust fee income of $305,000, service charges on deposit
accounts of $41,000 and other miscellaneous income of $36,000. The decrease
of $1.0 million in 1992 compared to 1991 resulted from lower securities gains
of $3.1 million which were offset somewhat by gains on sales of mortgages of
$862,000, higher trust fee income of $324,000, higher service charges on
deposits of $102,000 and higher other miscellaneous income of $794,000.
Gains and losses on sales of mortgages are recognized based upon the
difference between the selling price and the carrying value of the sold
loans. The Bank services all mortgages sold and servicing fees are
recognized as income when earned. Mortgage sales are on a non-recourse
basis. The Bank expects to record lower gains on sales of mortgages in 1994
compared to 1993 and 1992. See "Mortgage Loans Held for Sale."
Non-Interest Expense
Total non-interest expense was $35.9 million in 1993, $38.2 million in 1992
and $38.1 million in 1991. In 1993, non-interest expense decreased $2.3
million, or 6%, compared to 1992, primarily due to lower ORE costs. In 1993,
ORE expense decreased $3.0 million, or 48%, from the 1992 total of $6.3
million. Included in ORE expense in 1993 were $680,000 of write-downs to
fair value and $350,000 of provisions for possible ORE losses. This was a
decrease of $2.0 million from the $3.0 million of fair value write-downs and
provisions for 1992. ORE general carrying costs totalled $2.3 million in
1993 compared to $3.5 million in 1992, a $1.2 million, or 34%, decrease. In
1992, ORE expense increased $1.2 million over the 1991 total of $5.1 million.
Included in ORE expense in 1992 was $2.4 million of write-downs to fair value
and provisions for possible ORE losses of $564,000. This was an increase of
$863,000 over the $2.1 million of similar write-downs and provisions for
1991. FDIC insurance expense was $2.5 million, $2.0 million and $1.8 million
for the years 1993, 1992 and 1991, respectively. In 1993, the decreases in
ORE expense ($3.0 million) and occupancy and equipment expenses ($98,000)
were offset somewhat by net increases in salaries and employee benefits
($349,000), FDIC insurance expense ($511,000) and other miscellaneous
expenses ($27,000). The increases in ORE expense and FDIC insurance expense
in 1992 were offset by decreases in salaries and benefits ($59,000),
occupancy and equipment expense ($167,000), examination and audit fees
($280,000) and other miscellaneous expenses ($899,000).
<PAGE>
ORE expense totalled $3.3 million, $6.3 million and $5.1 million for 1993,
1992 and 1991, respectively. ORE decreased substantially from the $22.6
million total at December 31, 1991 to $13.4 million at December 31, 1993, a
41% decrease. See "Risk Elements and Nonperforming Assets." General
carrying costs, a significant component of ORE expense, totalled $2.3 million
in 1993 and $3.5 million in both 1992 and 1991. These costs over the three-
year period ended December 31, 1993 consist of foreclosure expenses and real
estate taxes, as well as the expenses associated with maintaining ORE
properties. General carrying costs decreased by $1.2 million in 1993
compared to 1992, due to lower real estate tax expense ($262,000) and legal
expense ($393,000) coupled with a non-recurring recovery and other
miscellaneous recoveries totalling $537,000. In addition, write-downs to
fair value, the other primary component of ORE expense, amounted to $680,000,
$2.4 million and $1.9 million for 1993, 1992 and 1991, respectively, and are
an indication of the general decline in real estate values during 1992 and
1991 in the Company's market area. However, the significantly lower write-
downs to fair value in 1993 compared to prior years are indicative of
stabilizing real estate values, as well as Management's ability to determine
an appropriate initial fair value for foreclosed properties.
FDIC insurance expense increased in 1993, 1992 and 1991 primarily as a result
of increases in the premium rate charged on applicable deposits. Management
expects the Bank's FDIC insurance expense to be lower in 1994 compared to
1993.
Income Tax Expense (Benefit)
The Company's results of operations in 1993 and 1992 produced pretax income
of $9.5 million and $5.8 million, respectively, compared to a pretax loss in
1991 of $3.7 million. The effective tax rate (benefit) was 32.9% in 1993,
25.2% in 1992 and (13.6%) in 1991. During 1993 and 1992, the Company
recorded income tax expense of $3.1 million and $1.5 million, respectively.
During 1991, the Company recorded tax benefits of $509,000 pursuant to the
10-year carryback rule which applies to loan losses.
In February, 1992, the Financial Accounting Standards Board (the "FASB")
issued SFAS No. 109, "Accounting For Income Taxes." The Company elected to
adopt SFAS 109 effective January 1, 1992. As permitted under SFAS 109, prior
years' financial statements have not been restated. Under the new rules,
deferred taxes are recognized using the liability method, whereby tax rates
are applied to cumulative temporary differences based on when and how they
are expected to affect the tax return. Deferred tax assets and liabillities
are adjusted for tax rate changes. Under the prior rules, deferred taxes
were based on items of income and expense that were reported in different
years on the financial statements and tax returns, measured using tax rates
for the year in which timing differences arose. Deferred taxes were not
adjusted for tax rate changes.
The cumulative effect of adopting SFAS 109 on years prior to 1992 was an
increase of $1.1 million, or $.32 per share, to the results of operations for
1992. SFAS 109 requires a valuation allowance against deferred tax assets
if, based on the weight of available evidence, it is more likely than not
that some or all of the deferred tax assets will not be realized. The
Company believed that some uncertainty existed with respect to future
realization and established a valuation allowance of $550,000 as of January
1, 1992. Reported earnings in 1992 reduced this uncertainty and,
accordingly, resulted in a reduction in income tax expense of $352,000 during
1992.
The $198,000 valuation allowance at year end 1993 is based on the expectation
that the Company will generate pretax earnings in 1994 from ordinary and
recurring operations at least equivalent to that earned in 1993. In
<PAGE>
Management's judgment, future earnings are more likely than not to result in
sufficient taxable income to realize the Company's deferred tax asset. The
Company will continue to evaluate the value of the deferred tax asset by
assessing the need for a valuation allowance on a quarterly basis.
FINANCIAL CONDITION
Loans
Total loans at December 31, 1993 were $524.8 million, a decrease of $99.6
million, or 16%, from the 1992 year-end balance of $624.4 million.
While the Bank made loans within its defined geographic market during 1992
and 1993, a commitment to managed credit risk, weaker loan demand and
increased price competition resulted in a continuation of slower loan growth.
Average total loans for 1993 were $573.6 million compared to $646.0 million
in 1992, a decrease of $72.4 million or 11%. All loan portfolio categories
decreased during 1993 with the exception of installment loans, which
increased by approximately $3.3 million. Those categories of loans which
decreased were the result of principal payments, an overall decrease in
customer demand for new loans which also increased pricing competition,
charge-offs of existing problem loans, and reclassification of loans to ORE.
Additionally, beginning in the second half of 1992, the Bank began to sell
residential real estate loans in the secondary market. See "Mortgage Loans
Held for Sale." Sales of mortgages amounted to $45.7 million during 1993 and
$44.1 million during the second half of 1992.
Beginning in 1990, Management implemented a series of changes to strengthen
and improve its loan underwriting procedures. Such changes included defining
maximum loan amounts lenders can approve and setting up an approval structure
which may require review by several committees and, at certain levels, Bank
Board review of loans exceeding defined maximum amounts. This centralized
approach to loan approval is supported by a separate Credit Analysis
Department and by a Credit Documentation Department, each of which required
additions to staff.
During 1993, Management implemented a number of loan growth initiatives
designed to reverse the decreases in the loan portfolio. Management's goal
is to increase both the commercial and commercial real estate loan portfolios
by expansion of loan business with existing customers and by developing a
larger customer base within New Hampshire. Management expects to increase
loan participations with smaller community banks and continue to participate
in various government sponsored loan programs available to customers, such
as the Small Business Administration (SBA and SBA 504 programs) and the New
Hampshire Business Finance Authority (BFA).
<PAGE>
The following Table summarizes the Bank's loan portfolio by major category
at December 31, 1993 and 1992. At December 31, 1993, residential real estate
loans totalled $285.6 million, or 54%, of the portfolio balance. This
balance consisted of $273.8 million of loans secured by one to four family
residential properties and $11.8 million of loans secured by multi-family
residential properties. The Bank has no foreign loans or energy loans, and
had agricultural loans of only $17,000 at December 31, 1993.
December 31,
1993 1992
Amount % Amount %
(Dollars in thousands)
Commercial, financial and
agricultural $ 55,430 11% $ 80,256 13%
Real estate--commercial 133,837 25 163,594 26
Real estate--construction 3,019 1 5,620 1
Real estate--residential 285,582 54 331,270 53
Installment 46,975 9 43,641 7
Total loans $524,843 100% $624,381 100%
A significant amount of the commercial real estate loans have been made to
owner occupied businesses. Even though these loans are collateralized by
real estate, the primary repayment source is the cash flow generated by the
related business. Some of these businesses are located in areas where
general economic conditions may remain weak. However, the diversification
of the commercial real estate loan portfolio and the size of the potential
loss exposure are such that a material adverse impact on future operations
of the Company is unlikely. See "Mortgage Loans Held for Sale" and "Non-
Interest Income."
Mortgage Loans Held for Sale
During the fourth quarter of 1991, mortgage interest rates began to decline.
This downward trend continued during 1992 and 1993 and, coupled with a
stabilization of residential real estate market values, resulted in a
significant increase in mortgage loan activity. The Bank capitalized on
these conditions by providing home loans or refinancings to qualified
borrowers. The resultant growth in the residential mortgage portfolio,
however, increased the interest rate risk of holding long-term fixed rate
loans. In response, Management implemented a plan to reduce the residential
mortgage portfolio by selling qualified fixed rate loans in the secondary
market, to the extent necessary to adjust the loan portfolio mix to desired
levels. This mix is determined by the Company's Asset/Liability Committee
and is based on periodic reviews of the overall interest rate risk in the
loan portfolio. The Bank continues to service the residential mortgage loans
sold, in line with its commitment to maintain close contact with its
customers.
The Bank had $2.0 million and $2.5 million of fixed rate residential mortgage
loans held for sale at December 31, 1993 and 1992, respectively. Fixed rate
residential mortgage loans totalling $45.7 million were sold to the secondary
market during 1993 at a net gain of $974,000. Mortgage loans totalling $44.1
million were sold during 1992 at a net gain of $862,000. No mortgage loans
were sold during 1991.
<PAGE>
Allowance for Possible Loan Losses (the "APLL")
The APLL is available for future loan losses. The provision for possible
loan losses (the "Provision"), added to the APLL by charges to income, is
based upon Management's evaluation of individual credits and concentrations
of credit risk, net losses charged to the APLL, changes in the quality of the
loan portfolio, levels of nonaccrual loans, current economic conditions,
changes in the size and character of the loan risks and other pertinent
factors warranting current recognition. See "Risk Elements and Nonperforming
Assets." After review and approval by the Board, Management charges all or
a portion of a loan against the APLL when a probability of loss has been
established, with consideration given to such factors as the prospects for
recovery of the principal, the customer's financial condition, underlying
collateral and guarantees. The loans are also subject to periodic
examination by bank regulatory authorities. Each credit on the internal
Asset Quality Report is evaluated periodically to estimate potential losses.
In addition, minimum loss estimates for each category of classified credits
are also provided based on Management's judgment, which considers past loan
loss experience and other factors. For installment and real estate mortgage
loans, general allocations are based on past loss experience adjusted for
recent portfolio growth and economic trends. The amounts specifically
provided for individual loans and pools of loans from this analysis are
considered allocated allowances and are supplemented by an unallocated amount
for possible loan losses. This unallocated amount is determined based on
judgments regarding risk of error in the specific allocations, other
potential exposure in the loan portfolio, economic conditions and trends, and
other factors. Recoveries of previously charged-off loans are credited to
the APLL. Credit card loans are charged off at the earlier of notice of
bankruptcy, at 150 days past due, or when otherwise deemed uncollectible.
All other installment loans that are 90 to 120 days past due are charged off
monthly, unless insured for credit loss or where scheduled payments have been
resumed. Real estate mortgage loans are written down to fair value upon the
earlier of receipt of a deed of foreclosure, upon completion of foreclosure
proceedings, or upon classification as in-substance foreclosure. Commercial
and other loan charge-offs are made based on Management's ongoing evaluation
of nonperforming loans.
Net loan losses totalled $6.2 million in 1993, $10.2 million in 1992 and
$14.1 million in 1991. During 1993, Management devoted additional personnel
and resources to recovering previously charged-off commercial and real estate
loans. A centralized system has been developed to control and administer the
recovery effort in the Loan Workout Department. Loan loss recoveries
totalled $1.9 million in 1993, $902,000 in 1992 and $1.7 million in 1991.
Management is unable at this time to project the amount and timing of
recoveries in 1994 and thereafter of previously charged-off loans.
<PAGE>
The following Table presents an analysis of the APLL activity for each of the
past three years.
1993 1992 1991
(Dollars in thousands)
Balance at January 1 $ 16,619 $ 20,012 $ 21,575
Provision for possible loan losses 4,200 6,800 12,542
Loan losses:
Commercial, financial and
agricultural (1,028) (3,160) (4,564)
Real estate--commercial (2,026) (1,564) (6,202)
Real estate--construction (202) (431)
Real estate--residential (4,080) (4,698) (3,073)
Installment (777) (1,242) (1,959)
Total loan losses (8,113) (11,095) (15,798)
Recoveries:
Commercial, fiancial and
agricultural 775 334 666
Real estate--commercial 449 152 189
Real estate--construction 147
Real estate--residential 102 14 244
Installment 402 402 594
Total recoveries of loans 1,875 902 1,693
Net loan losses (6,238) (10,193) (14,105)
APLL at December 31 $ 14,581 $ 16,619 $ 20,012
Total loans at December 31 $524,843 $624,381 $647,534
Average loans $573,561 $646,040 $672,954
APLL/Total loans 2.78% 2.66% 3.09%
Net loan losses/Average loans 1.09 1.58 2.10
Net loan losses/Provision 148.52 149.90 112.46
Recoveries/Loan losses 23.11 8.13 10.72
Provision/Average loans .73 1.05 1.86
<PAGE>
The APLL is a general reserve available for all categories of possible loan
losses. Management has made an allocation of its APLL giving consideration
to it's evaluation of risk in the portfolios. The allocations are based on
estimates and subjective judgments, and are not necessarily indicative of the
specific amounts or loan categories in which losses may ultimately occur.
The following Table presents an analysis of the allocation of the APLL by
loan category for the years indicated.
December 31,
1993 1992
% of % of
Total Total
Amount Loans Amount Loans
Commercial, financial and
agricultural $ 1,507 11% $ 1,956 13%
Real estate--commercial 4,073 25 6,218 26
Real estate--construction 1 40 1
Real estate--residential 1,742 54 5,033 53
Installment 1,566 9 1,045 7
Unallocated 5,693 2,327
$ 14,581 100% $16,619 100%
Risk Elements and Nonperforming Assets
Most of the Bank's loans and in-substance foreclosures ("ISF") are
collateralized by real estate in New Hampshire. In addition, substantially
all ORE properties are located in New Hampshire. The ultimate collectibility
of this portion of the loan portfolio and the recovery of this portion of the
carrying amount of ORE are susceptible to changes in the State's market
conditions. Management is required to make estimates and assumptions that
affect these reported amounts at the balance sheet date and which affect
revenues and expenses for the period. Actual results could differ from those
estimates. Material estimates that are potentially susceptible to change in
the near-term relate to determination of the APLL and the valuation of real
estate acquired in connection with foreclosures or in satisfaction of loans.
Management believes it is prudent in its approach to charging off
uncollectible portions of problem loans and writing down the carrying value
of ORE, as its policy is to make such charge-offs and write-downs on a timely
basis. Management also believes there are no adverse concentrations in any
loan category, except real estate loans which constitute a higher than normal
risk because of the difficulties being experienced by various real estate
borrowers in meeting their debt service requirements. However, changes in
economic conditions may require currently unanticipated additions to the APLL
or reductions in ORE valuations, which would reduce earnings in the period
within which such additions or reductions occur.
The allowance for possible ORE losses was $350,000 and $568,000 at December
31, 1993 and 1992, respectively. These allowances were established to
account for estimated ORE losses on specific properties on which appraisals
were not yet available on the reporting date.
A loan generally is classified as nonaccrual when full collectibility of
principal or interest is doubtful or a loan becomes 90 days past due as to
principal or interest, unless Management determines that the estimated net
realizable value of the collateral is sufficient to cover the principal
balance and accrued interest and the loan is in the process of collection.
<PAGE>
When interest accruals are discontinued, unpaid interest accrued in prior
years is charged to the APLL and current year interest is reversed. Payments
received on nonaccrual loans are applied to principal. A loan is classified
as restructured if the original interest rate, repayment terms, or both have
been modified due to the deterioration in the financial condition of the
borrower. Nonperforming loans are returned to performing status when the
loan is brought current and has performed in accordance with contract terms
for a reasonable period of time.
At December 31, 1993, loans 90 days past due and still accruing were $2.0
million, compared to $1.8 million at December 31, 1992. Included in this
nonperforming loan category were commercial loans at December 31, 1993 and
December 31, 1992, which totalled $17,000 and $61,000, respectively, loans
secured by real estate, which totalled $1.7 million and $1.4, respectively,
and personal installment debt, which was $240,000 and $289,000, respectively.
At December 31, 1993 and 1992, the nonaccrual loan balance of $13.0 million
and $16.4 million, respectively, represented $2.2 million and $3.5 million
in commercial loans, $10.8 million and $12.6 million in real estate loans
and $37,000 and $301,000 in installment loans, respectively. There were no
condominium development loans on nonaccrual at December 31, 1993.
Although restructured loans have not been material, amounting to $1.0 million
as of December 31, 1993, Management has encouraged restructuring when it is
likely to result in a paying credit for the remainder of the restructured
term.
The following Table summarizes the nonperforming assets at year-end for the
years listed.
December 31,
1993 1992
(Dollars in thousands)
Nonaccrual loans:
Commercial, financial and
agricultural $ 2,167 $ 3,486
Real estate--commercial 3,979 4,407
Real estate--construction 593 650
Real estate--residential 6,263 7,547
Installment 37 301
Total nonaccrual 13,039 44% 16,391 46%
Past due 90 days or more
(accruing) 2,006 7 1,770 5
Restructured loans 1,012 3 1,628 5
Total nonperforming loans 16,057 54 19,789 56
Other real estate, net 9,865 7,287
In-substance foreclosures 3,528 8,569
Total other real estate(ORE) 13,393 46 15,856 44
Total nonperforming assets(NPA) $ 29,450 100% $ 35,645 100%
Total assets $976,719 $967,202
APLL $ 14,581 $ 16,619
APLL/Nonaccrual loans 112% 101%
APLL/Nonperforming loans 91 84
APLL/NPA 50 47
NPA/Total assets 3.0 3.7
NPA/Total loans plus ORE 5.5 5.6
<PAGE>
The following Table presents the distribution of ORE, before deducting the
allowance for ORE losses, as of December 31, 1993 and 1992.
December 31,
1993 1992
(Dollars In thousands)
Commercial $ 7.1 52% $ 8.4 51%
Residential 4.4 32 4.8 29
Land and sub-divided lots 2.2 16% 3.2 20
Total $13.7 100% $16.4 100%
ORE at December 31, 1993 consisted of over 200 properties. The two largest
properties were commercial real estate recorded at $1.6 million (foreclosed)
and $551,000 (in-substance foreclosed). All other ORE properties are each
recorded at less than $450,000. Substantially all residential properties are
one to four family and most of the land and sub-divided lots are intended for
residential one to four family homes.
ORE at December 31, 1993 was $13.7 million compared to $16.4 million at
December 31, 1992, a $2.7 million, or 17%, decrease. During 1993, additions
and sales totalled $7.3 million each and losses and other decreases totalled
$2.7 million. During 1992, additions of $7.1 million were offset by sales
of $9.9 million and losses and other decreases of $3.7 million resulting in
a 28% decrease in ORE from December 31, 1991.
The following Table summarizes the real estate operations of ORE property
held for sale for each of the three years ended December 31:
1993 1992 1991
(In thousands)
Balance, January 1 $16,424 $22,876 $21,527
ORE additions 7,327 7,071 16,927
ORE losses (1,248) (2,678) (1,883)
ORE sales (7,335) (9,937) (12,481)
Other, net (1,425) (908) (1,214)
13,743 16,424 22,876
Less allowance for
possible ORE losses 350 568 250
Balance, December 31 $13,393 $15,856 $22,626
Investment Securities
Investment securities totalled $258.4 million and $185.3 million at December
31, 1993 and 1992, respectively. The portfolio is comprised of short-term
U.S. Treasury instruments and high-grade municipal obligations with short
maturities. Federal funds sold and securities purchased under agreements to
resell totalled $105.0 million at December 31, 1993, compared to $64.0
million at year-end 1992 reflecting additional liquidity in the Bank's
balance sheet. The 1993 increases in investment securities of $73.1 million
and federal funds sold and securities purchased under agreements to resell
of $41.0 million are primarily the result of decreasing loan demand and sales
of residential real estate mortgages to the secondary market.
Management determines the appropriate classification of securities at the
time of purchase. Pursuant to its policy, Management has the intent and the
Bank has the ability at the time of purchase to hold securities until
<PAGE>
maturity or on a long-term basis. They are classified as investments and
carried at amortized historical cost. Securities to be held for indefinite
periods of time and not intended to be held to maturity or on a long-term
basis are classified as available for sale and carried at the lower of cost
or market value.
The following Table summarizes the book value of the investment portfolio for
the years listed.
December 31,
1993 1992
(In thousands)
U.S. Treasury and other U.S.
Government agencies $256,380 $180,616
State and municipal 1,215 1,765
Other 797 2,897
Total $258,392 $185,278
Deposits
Interest bearing deposit balances at December 31, 1993 totalled $716.6
million compared to $723.7 million at year-end 1992, a decrease of $7.1
million. The decrease occurred primarily in certificates of deposit ($18.1
million) and money market accounts ($8.1 million), but was significantly
offset by increases in other deposit categories totalling $19.1 million. The
impact of decreases in deposits for 1993 was not material to the overall
liquidity position of the Bank. Given the current stabilization in deposit
activity, future significant net outflows of deposits are not anticipated at
this time, although no assurance can be given, as a result of factors beyond
the control of the Company (such as further declines in market interest
rates), that additional reductions in deposits may not occur. Demand
deposits increased $3.6 million in 1993 from the 1992 year-end balance of
$145.2 million.
Average balances followed the same trends as year-end balances. Average
demand deposits increased, totalling $131.3 million and $121.0 million for
1993 and 1992, respectively. Average savings deposits increased, totalling
$481.5 million and $477.5 million in 1993 and 1992, respectively. Average
time deposits decreased, totalling $235.0 million for 1993 and $278.7 million
for 1992.
The shift from time deposits to savings deposits and the overall decline in
total deposits were due to lower interest rates being paid on time deposits
and a continued emphasis on personal liquidity, as some depositors chose to
move their funds into savings accounts or mutual funds.
<PAGE>
The following Table presents the types of deposit balances for the years
listed.
December 31,
1993 1992
(In thousands)
Demand deposits $148,784 $145,188
NOW accounts 138,822 126,993
Savings deposits 297,205 289,958
Money market accounts 54,347 62,483
Time deposits of $100,000
or more 11,641 12,776
Other time deposits 214,536 231,527
Total deposits $865,335 $868,925
Short-Term Borrowings
Short-term borrowings include federal funds purchased, securities sold under
agreements to repurchase and all other borrowed funds. Such borrowings
totalled $35.3 million and $39.2 million at December 31, 1993 and 1992,
respectively. Average balances and rates paid on short-term borrowings have
declined steadily since 1990.
Capital Resources
The Company's two sources of capital are internally generated capital and the
capital markets. Primary reliance is placed on internally generated capital;
however, as previously discussed, on September 30, 1993, the Company sold
690,000 shares of common stock, generating approximately $11.6 million in new
capital.
In January 1989, the Board of Governors of the Federal Reserve (the "FRB")
released new standards for measuring capital adequacy for U.S. banking
institutions. In general, the standards require banks and bank holding
companies to maintain capital based on risk-adjusted assets so that
categories of assets with potentially higher credit risk will require more
capital backing than assets with lower risk. In addition, banks and bank
holding companies are required to maintain capital to support, on a risk-
adjusted basis, certain off-balance sheet activities such as loan commitments
and interest rate swaps.
The FRB standards classify capital into two tiers, Tier 1 and Tier 2. Tier
1 capital consists of common stockholders' equity, noncumulative and
cumulative (bank holding companies only) perpetual preferred stock, and
minority interests, less goodwill. Tier 2 capital consists of a portion of
the APLL, perpetual preferred stock (not included in Tier 1), hybrid capital
instruments, term subordinated debt, and intermediate-term preferred stock.
At December 31, 1993, all bank holding companies and banks are required to
meet a minimum ratio of 8% of qualifying total capital to risk-adjusted total
assets with at least 4% Tier 1 capital. Capital that qualifies as Tier 2
capital is limited to 100% of Tier 1 capital. The FRB regulations require
a minimum Tier 1 leverage capital ratio (the "Leverage Ratio") of 3% plus an
additional cushion of 100 to 200 basis points or more. Under certain
circumstances, the FRB may establish higher minimum capital ratio
requirements than set forth above where increased regulatory attention is
warranted.
<PAGE>
The Table below illustrates the Company's regulatory capital, regulatory
minimum required capital and corresponding capital ratios as of December 31,
1993.
Minimum
Actual Required
(Dollars in thousands)
Tier 1 Capital $ 66,380 $ 18,549
Tier 2 Capital 5,905
Total Qualifying Capital $ 72,285 $ 37,098
Risk Adjusted Total Assets(including
off-balance sheet exposures) $463,726
Leverage Ratio 6.78% 3.00%
Tier 1 Risk-Based Capital Ratio 14.31 4.00
Total Risk-Based Capital Ratio 15.59 8.00
As shown in the Table above, the Company's Tier 1 and total qualifying
capital and capital ratios exceed the current minimum requirements. The
amount of capital required for the Company to maintain the required minimum
Leverage Ratio of 3% is $29.4 million.
The Bank's minimum Leverage Ratio is 3% plus an additional cushion of 100 to
200 basis points or more depending upon risk profiles and other factors. As
previously noted in "Regulatory Matters," the MOU and Capital Directive
require the attainment by the Bank at specified dates through June 30, 1994
of certain levels established under regulations applicable to banking
institutions generally, as set forth above, as well as specified Leverage
Ratios (5.25% and 6.00% on or before December 31, 1993 and June 30, 1994,
respectively) that exceed the minimums to which the Bank would otherwise be
subject under applicable banking regulations. As of December 31, 1993, the
Bank had already exceeded the required June 30, 1994 Leverage Ratio of 6.00%
by nine basis points.
Liquidity and Interest Rate Sensitivity Management
The primary functions of asset/liability management are to assure adequate
liquidity and maintain an appropriate balance between interest-sensitive
earning assets and interest bearing liabilities. Liquidity management
involves the Bank's ability to meet the cash flow requirements of customers
who may be either depositors wanting to withdraw funds or borrowers needing
assurance that sufficient funds will be available to meet their credit needs.
Interest rate sensitivity management seeks to avoid fluctuating net interest
margins and to enhance consistent growth of net interest income through
periods of changing interest rates.
The Company's most important source of liquidity is liability liquidity, the
ability to raise new funds and to renew maturing liabilities in a variety of
markets. The most important factor in assuring liability liquidity is
maintenance of confidence in the Bank by depositors of funds. Such
confidence, in turn, is based on performance and reputation. The Company
believes that its reputation, its financial strength and numerous long-term
customer relationships, should enable it to raise funds as needed in many
markets. This belief is based upon an increase in average "core" deposits
(i.e., demand deposits and savings deposits including NOW, passbook and money
market accounts) from $598.4 million in 1992 and to $612.9 million in 1993.
Funds are primarily generated locally and regionally and the Bank has no
brokered deposits. Other types of assets such as federal funds sold and
securities purchased under agreements to resell, as well as maturing loans,
are supplemental sources of liquidity.
<PAGE>
The objective of interest rate sensitivity management is to minimize changes
in net interest income resulting from volatility in interest rates.
Interest rate sensitivity varies with different types of interest earning
assets and interest bearing liabilities. Overnight federal funds on which
rates change daily and loans which are tied to the prime rate differ
considerably from long-term investment securities and fixed rate loans.
Similarly, time deposits over $100,000 and money market accounts are much more
interest sensitive than passbook savings accounts. The shorter term interest
rate sensitivities are key to measuring the interest sensitivity gap, which is
defined as excess interest sensitive earning assets over interest bearing
liabilities.
The following Table shows the interest sensitivity gaps for four different
time intervals as of December 31, 1993. In the 12-month time frame the Bank
was liability sensitive at December 31, 1993. An increase
in the general level of interest rates would have an unfavorable effect on
net interest income by increasing rates paid on liabilities faster than
rates earned on assets. Conversely, declining rates would have a favorable
effect on net interest income.
<TABLE>
<CAPTION>
0-3 4-12 1-5 Over 5
Months Months Years Years
(In thousands)
<S> <C> <C> <C> <C>
Rate Sensitive Assets:
Loans $168,583 $ 47,862 $134,044 $176,332
Investments 25,817 129,971 99,765 2,233
Federal funds sold and other 105,000
Total 299,400 177,833 233,809 178,565
Rate Sensitive Liabilities:
NOW accounts 138,822
Savings deposits 297,205
Time deposits greater than $100,000 8,634 5,734 2,161
All other time deposits(1) 100,908 104,637 61,525 1,813
Federal funds purchased and other 35,266
Total (2) 580,835 110,371 63,686 1,813
Interest sensitivity gap (281,435) 67,462 170,123 176,752
Cumulative interest sensitivity gap (281,435) (213,973) (43,850) 132,902
</TABLE>
(1) Includes Money Market Accounts totalling $54.3 million.
(2) Excludes non-interest bearing deposits.
Inflation
The effects of inflation on financial institutions differ from the effects
on other commercial enterprises since financial institutions make few
significant capital or inventory expenditures, which are directly affected
by changing prices. Because virtually all bank assets and liabilities are
monetary in nature, inflation does not affect a financial institution as much
as changes in interest rates. The general level of inflation does, in fact,
underlie the general level of most interest rates; however, interest rates
do not increase at the rate of inflation as do the prices of goods and
services. Rather, interest rates react more to the changes in the expected
rate of inflation and to changes in government monetary and fiscal policy.
New Accounting Standards
The Company has adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" in its 1993 Financial
Statements. In addition, the Company will adopt SFAS No. 112, "Employers'
Accounting for Postemployment Benefits," and SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" in 1994. Information on
SFAS 106, 112 and 115 can be found in Notes A and L to the Financial
Statements.
In May, 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan." This statement will, in connection with recent
regulatory guidance, allow the Company to reclassify its in-substance
foreclosures to loans and disclose them as impaired loans. SFAS 114 will
require the Company to identify impaired loans and generally value them at
the lower of either the present value of expected future cash flows
discounted at the loan's effective interest rate or at the loan's observalble
market price or the fair value of the collateral if the loan is collateral
dependent. SFAS 114 is effective in 1995, with adoption required as of the
beginning of the year, although earlier adoption is allowed. The effect of
adopting the new rules in 1995 is not expected to have a significant effect
on financial position or results of operations of the Company.
<PAGE>
Summary of Selected Financial Data
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Interest income $ 62,719 $ 72,906 $ 86,749 $ 92,405 $ 94,939
Interest expense 22,870 31,311 50,003 55,879 55,983
Net interest income 39,849 41,595 36,746 36,526 38,956
Provision for possible loan losses 4,200 6,800 12,542 37,334 4,422
Non-interest income 9,824 9,156 10,189 6,959 6,438
Non-interest expense 35,943 38,171 38,128 37,878 30,090
Income taxes (benefit) 3,138 1,457 (509) (12,213) 3,049
Cumulative effect of a change in
accounting principle (1) 1,100
Net income (loss) $ 6,392 $ 5,423 $ (3,226) $ (19,514) $ 7,833
Total assets $ 976,719 $ 967,202 $1,015,061 $1,001,709 $ 948,049
Total equity $ 68,242 $ 50,545 $ 44,984 $ 47,952 $ 69,532
Per share data:
Income(loss) before cumulative
effect of a change in
accounting principle $ 1.80 $ 1.28 $ (.95) $ (5.79) $ 2.32
Cumulative effect of a change
in accounting principle (1) .32
Net income (loss) $ 1.80(2) $ 1.60 $ (.95) $ (5.79) $ 2.32
Cash dividends declared $ .08 $ .00 $ .00 $ .64 $ .92
Book value $ 16.78 $ 14.96 $ 13.29 $ 14.17 $ 20.67
Ratios:
Interest Rate Margin (FTE) 4.62% 4.65% 4.13% 4.29% 4.73%
Return on average stockholders'
equity (ROE) 11.27% 11.43% (6.99%) (30.76%) 11.60%
Return on average assets (ROA) .67% .55% (.33%) (2.05%) .85%
</TABLE>
(1) The Company elected to adopt SFAS No. 109, "Accounting for Income Taxes,"
effective January 1, 1992 (see footnote K)
(2) The sale of 690,000 shares of common stock on September 30, 1993, diluted
1993 earnings per share by $.09.
<PAGE>
Information on Common Stock
Bank of New Hampshire Corporation common stock is traded in the over-the-counter
market and is quoted on the National Association of Securities Dealers
Automated Quotation (NASDAQ) National Market System under
the symbol "BNHC." The Table below sets forth the high and low sales prices for
the common stock as reported by NASDAQ, in addition to the cash dividends
declared in each period, if any. Such prices reflect inter-dealer quotations
without retail markup, markdown or commissions and may not necessarily reflect
actual transactions. As of February 18, 1994, there were approximately
1,540 holders of record of common stock. There were no dividends
declared during 1992 or during the first three quarters of 1993. See
"Dividends and Dividend Policy."
<TABLE>
<CAPTION>
1993 1992
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High $20.50 $19.75 $19.75 $18.25 $13.50 $10.50 $10.50 $12.25
Low $16.00 $15.00 $14.25 $13.25 $ 7.50 $ 9.00 $ 8.00 $ 4.25
Cash dividends declared per share $ .08 $ .00 $ .00 $ .00 $ .00 $ .00 $ .00 $ .00
</TABLE>
The Company is authorized by its Articles of Agreement to issue up to 500,000
shares of preferred stock, no par value. No shares of preferred stock
have been issued. Subject to the rights as may hereafter be granted to
holders of preferred stock, the holders of shares of common stock of the
Company are entitled to receive dividends when and as declared by the
Board of Directors out of funds legally available therefore.
<PAGE>
Selected Quarterly Data
In the opinion of Management, all adjustments which include only normal
recurring adjustments necessary to present fairly the results of operations
for each of the following quarterly periods, have been made.
The following is a summary of selected quarterly data of the Company for the
years ended December 31, 1993 and 1992 (In thousands, except per share data):
<TABLE>
<CAPTION>
1993 1992
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $ 15,270 $ 15,368 $ 15,787 $ 16,294 $ 17,525 $ 17,999 $ 18,812 $ 18,570
Interest expense 5,477 5,827 5,754 5,812 6,278 7,425 8,424 9,184
Net interest income 9,793 9,541 10,033 10,482 11,247 10,574 10,388 9,386
Provision for possible loan losses 250 1,050 1,400 1,500 1,500 1,500 1,500 2,300
Non-interest income 2,471 2,384 2,721 2,248 2,561 2,481 2,088 2,026
Non-interest expense 9,592 8,862 9,095 8,394 9,655 9,379 9,584 9,553
Income(loss) before income taxes
(benefit) and cumulative effect of
a change in accounting principle 2,422 2,013 2,259 2,836 2,653 2,176 1,392 (441)
Income taxes (benefit) 785 661 747 945 767 484 303 (97)
Income(loss) before cumulative
effect of a change in accounting
principle 1,637 1,352 1,512 1,891 1,886 1,692 1,089 (344)
Cumulative effect on years prior to
1992 of a change in accounting
principle 1,100(A)
Net income $ 1,637 $ 1,352 $ 1,512 $ 1,891 $ 1,886 $ 1,692 $ 1,089 $ 756
Per share amounts:
Income(loss) before cumulative
effect of a change in accounting
principle $ .40 $ .40 $ .45 $ .55 $ .56 $ .50 $ .32 $ (.10)
Cumulative effect on years prior to
1992 of a change in accounting
principle .32(A)
Earnings per share $ .40 $ .40 $ .45 $ .55 $ .56 $ .50 $ .32 $ .22
</TABLE>
(A) The Company elected to adopt SFAS No. 109, "Accounting for Income Taxes,"
effective January 1, 1992 (see footnote K).
<PAGE>
REPORT OF ERNST & YOUNG,
INDEPENDENT AUDITORS
Board of Directors and Stockholders
Bank of New Hampshire Corporation
We have audited the accompanying consolidated balance sheets of Bank of New
Hampshire Corporation as of December 31, 1993 and 1992, and the related
consolidated statements of operations, changes in stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1993.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of mate-
rial misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant esti-
mates made by management, as well as evaluating the overall financial state-
ment presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above pres-
ent fairly, in all material respects, the consolidated financial position of
Bank of New Hampshire Corporation as of December 31, 1993 and 1992, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles.
As discussed in Note L to the consolidated financial statements, the Company
changed its method of accounting for postretirement benefits other than pen-
sions in the year ended December 31, 1993. As discussed in Note K to the
consolidated financial statements, the Company changed its method of account-
ing for income taxes in the year ended December 31, 1992.
Manchester, New Hampshire
January 19, 1994
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
(Dollars in thousands, except per share amounts) 1993 1992
ASSETS
<S> <C> <C>
Cash and due from banks $ 60,999 $ 62,584
Federal funds sold and securities purchased under
agreements to resell 105,000 64,000
Total cash and cash equivalents 165,999 126,584
Investment securities (approximate market value
$258,627 in 1993 and $186,733 in 1992):
U.S. Treasury and other U.S. Government agencies 256,380 180,616
State and municipal 1,215 1,765
Other 797 2,897
Total investment securities 258,392 185,278
Mortgages held for sale 1,978 2,500
Loans:
Commercial, financial and agricultural 55,430 80,256
Real estate-commercial 133,837 163,594
Real estate-construction 3,019 5,620
Real estate-residential 285,582 331,270
Installment 46,975 43,641
Total loans (net of unearned income of
$1,157 in 1993 and $1,581 in 1992) 524,843 624,381
Less: Allowance for possible loan losses 14,581 16,619
Net loans 510,262 607,762
Premises and equipment 11,366 11,333
Other real estate 13,393 15,856
Other assets 15,329 17,889
Total assets $ 976,719 $ 967,202
_________ _________
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 148,784 $ 145,188
Interest bearing 716,551 723,737
Total deposits 865,335 868,925
Federal funds purchased and securities sold
under agreements to repurchase 32,238 36,107
Other borrowed funds 3,028 3,140
Accrued expenses and other liabilities 7,876 8,485
Total liabilities 908,477 916,657
Stockholders' Equity:
Preferred stock - no par value
Authorized - 500,000 shares; none issued
Common stock - stated value $2.50 per share
Authorized - 6,000,000 shares
Issued - 4,066,943 shares in 1993
and 3,497,313 shares in 1992 10,167 8,743
Surplus 27,320 17,700
Retained earnings 30,755 24,688
68,242 51,131
Less cost of 118,296 shares in treasury 586
Total stockholders' equity 68,242 50,545
Total liabilities and stockholders' equity $ 976,719 $ 967,202
_________ _________
</TABLE>
See notes to consolidated financial statements.
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 51,608 $ 60,836 $ 70,635
Interest on investment securities:
Subject to federal taxes 8,429 9,634 10,380
Exempt from federal taxes 112 230 1,015
Total interest on investment
securities 8,541 9,864 11,395
Other interest income 2,570 2,206 4,719
Total interest income 62,719 72,906 86,749
Interest expense:
Deposits 22,065 29,835 46,237
Borrowings 805 1,476 3,766
Total interest expense 22,870 31,311 50,003
Net interest income 39,849 41,595 36,746
Provision for possible loan losses 4,200 6,800 12,542
Net interest income after
provision for possible loan losses 35,649 34,795 24,204
Non-interest income:
Trust fees 3,321 3,016 2,692
Service charges on deposit accounts 3,181 3,140 3,038
Securities gains 182 8 3,123
Other 3,140 2,992 1,336
Total non-interest income 9,824 9,156 10,189
Non-interest expense:
Salaries and employee benefits 17,651 17,302 17,361
Net occupancy expense 3,043 2,896 2,869
Equipment expense 1,839 2,084 2,278
ORE expense 3,268 6,285 5,054
FDIC insurance expense 2,524 2,013 1,796
Other 7,618 7,591 8,770
Total non-interest expense 35,943 38,171 38,128
Income (loss) before income taxes
(benefit) and cumulative effect of a
change in accounting principle 9,530 5,780 (3,735)
Income taxes (benefit) 3,138 1,457 (509)
Income (loss) before cumulative effect
of a change in accounting principle 6,392 4,323 (3,226)
Cumulative effect on years prior to 1992
of a change in accounting principle 1,100
Net income (loss) $ 6,392 $ 5,423 $ (3,226)
Average shares outstanding 3,552 3,382 3,384
Per share amounts:
Income (loss) before cumulative
effect of a change in accounting
principle $1.80 $1.28 $ (.95)
Cumulative effect on years prior
to 1992 of a change in accounting
principle .32
Earnings (loss) per share $1.80 $1.60 $ (.95)
Cash dividends declared $ .08 $ .00 $ .00
</TABLE>
See notes to consolidated financial statements.
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Retained Treausry
Stock Surplus Earnings Stock Total
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1991 $ 8,755 $17,292 $22,491 $ (586) $47,952
Net loss (3,226) (3,226)
Issuance of common stock
for the 1990 and 1988
Incentive Stock Plans,
net of forfeitures 7 (7)
Repurchase and retirement of
common stock (6) (8) (14)
Compensation cost of
Stock Plans 272 272
Balance at December 31, 1991 8,756 17,549 19,265 (586) 44,984
Net income 5,423 5,423
Issuance of common stock
for the 1990 Incentive
Stock Plan, net of
forfeitures (4) 4
Repurchase and retirement
of common stock (9) (26) (35)
Compensation cost of Stock
Plans 173 173
Balance at December 31, 1992 8,743 17,700 24,688 (586) 50,545
Net income 6,392 6,392
Issuance of common stock 1,725 9,871 11,596
Cash dividends declared (325) (325)
Retirement of treasury stock (296) (290) 586
Repurchase and retirement of
common stock (5) (24) (29)
Compensation cost of Stock
Plan 63 63
Balance at December 31, 1993 $10,167 $27,320 $30,755 $ $68,242
</TABLE>
See notes to consolidated financial statements.
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Operating Activities:
Net income (loss) $ 6,392 $ 5,423 $ (3,226)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Provision for possible loan losses 4,200 6,800 12,542
Depreciation, amortization
and accretion 1,299 (2,678) 3,486
Net change in interest receivables
and payables 393 (685) 722
Gains on sales of mortgages (974) (862)
Losses on other real estate, net 960 2,788 1,600
Securities gains (182) (8) (3,123)
Deferred tax provision (benefit) 1,306 352 (525)
Other tax benefit (cumulative
effect change) (1,100)
Other (net) (249) 1,027 6,931
Net cash provided by operating
activities 13,145 11,057 18,407
Investing Activities:
Sales of investment securities 1,309 85,000
Maturities of investment securities 217,562 146,512 53,711
Purchases of investment securities (291,331) (150,034) (184,873)
Proceeds from sales of mortgages 46,720 45,037
Proceeds from sales of other real
estate 7,405 10,145 13,014
Net cash from (used for) loans 42,175 (38,164) 26,216
Purchases of premises and equipment (1,241) (1,029) (576)
Net cash provided by (used for)
investing activities 22,599 12,467 (7,508)
Financing Activities:
Net increase in demand deposits, NOW
accounts, and savings accounts 14,536 25,192 98,466
Net decrease in certificates of
deposit (18,126) (61,641) (57,732)
Net decrease in short-term
borrowings (3,981) (15,456) (22,265)
Cash dividends paid (325) (169)
Net proceeds from issuance of
common stock 11,596
Repurchase and retirement of
common stock (29) (35) (14)
Net cash provided by (used for)
financing activities 3,671 (51,940) 18,286
Increase (decrease) in cash and
cash equivalents 39,415 (28,416) 29,185
Cash and cash equivalents at January 1 126,584 155,000 125,815
Cash and cash equivalents at
December 31 $165,999 $126,584 $155,000
</TABLE>
See notes to consolidated financial statements.
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial reporting and accounting policies of Bank of New Hampshire
Corporation (the "Company") conform to generally accepted accounting princi-
ples. The following is a summary of the significant accounting policies.
Basis of Presentation: The financial statements include the accounts of the
Company and its sole banking subsidiary. All significant intercompany ac-
counts and transactions have been eliminated in consolidation.
Effective as of the close of business, September 30, 1991, the Company merged
its five affiliate banks (Bank of New Hampshire, N.A., The Bristol Bank,
Strafford National Bank, Bank of New Hampshire - Portsmouth and The Suncook
Bank) into one state-chartered bank under the name Bank of New Hampshire (the
"Bank"). The Bank provides banking services in the central, southern,
coastal and lakes regions of New Hampshire.
Investment Securities: Management determines the appropriate classification
of securities at the time of purchase. If management has the intent and the
Company has the ability at the time of purchase to hold securities until
maturity or on a long-term basis, they are classified as held-for-investment
and carried at amortized historical cost. Securities to be held for indefi-
nite periods of time and not intended to be held to maturity or on a
long-term basis are classified as held for sale and carried at the lower of
cost or market value. The adjusted cost of specific securities sold is used
to compute gain or loss on the sale of investment securities. Any investment
security for which there has been a decline in value that is other than
temporary is written down to its estimated value. Marketable equity
securities are carried at the lower of aggregate cost or market value.
In May 1993, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," effective for fiscal
years beginning after December 15, 1993. Under the new rules, debt
securities that the Company has both the positive intent and ability to hold
to maturity are carried at amortized cost. Debt securities that the Company
does not have the positive intent and ability to hold to maturity and all
marketable equity securities are classified as available-for-sale or trading
and carried at fair value. Unrealized holding gains and losses on securities
classified as available-for-sale are carried as a separate component of
stockholders' equity. Unrealized holding gains and losses on securities
classified as trading are reported in net income.
Presently, the Company classifies all debt securities as held-for-investment
and carries them at amortized historical cost. The Company will apply the
new rules starting in the first quarter of 1994. The effect of adopting the
new rules is not expected to have a significant effect on the Company's
financial position or results of operations. Financial statements prior to
the date of adoption cannot be restated.
Loans: Loans are stated at their principal amount outstanding net of
unearned income, if any, except for mortgages held for sale which are carried
at the lower of aggregate cost or market value. Interest income on loans is
accrued as earned based on the principal amount outstanding.
Loan origination fees and costs are accounted for in accordance with SFAS 91
which requires the deferral of these fees and costs and subsequent amortiza-
tion to income over the life of the loan.
The Company places loans on nonaccrual when any portion of the principal or
interest is ninety days past due, unless it is well secured and in the
process of collection, or earlier when concern exists as to the ultimate
collection of principal or interest. When loans are placed on nonaccrual,
the current year related interest receivable is reversed against interest
income of the current period while prior year interest is charged to the
allowance for possible loan losses. Interest payments received on nonaccrual
<PAGE>
loans are applied as a reduction of the principal balance when concern exists
as to the ultimate collection of principal; otherwise such payments are
recognized as interest income. Loans are removed from nonaccrual when they
become current as to both principal and interest and when concern no longer
exists as to the collectibility of principal or interest.
The Company may renegotiate the contractual terms of a loan because of a
deterioration in the financial condition of the borrower. The carrying value
of a restructured loan is reduced by the fair value of any asset or equity
interest received, and by the extent, if any, that future cash receipts
specified by the new terms do not equal the loan balance at the time of
renegotiation. Restructured loans performing in accordance with their new
terms are not included in nonaccrual loans unless concern exists as to the
ultimate collection of principal or interest. Interest, if any, is
recognized in income to yield a level rate of return over the life of the
restructured loan.
In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for Im-
pairment of a Loan," effective for fiscal years beginning after December 14,
1994. The statement requires that impaired loans be measured based on the
present value of expected future cash flows discounted at the loan's
effective interest rate or, as a practical expedient, at the loan's
observable market price or the fair value of the collateral if the loan is
collateral dependent. The Company will apply the new rules starting in the
first quarter of 1995. The effect of adopting the new rules is not expected
to have a significant effect on the Company's financial position or results
of operations.
Other Real Estate (ORE): Other real estate includes real estate acquired in
satisfaction of a loan and in-substance foreclosures. In-substance fore-
closures are properties in which the borrower has little or no equity in the
collateral, where repayment of the loan is expected only from the operation
or sale of the collateral, and the borrower either effectively abandons
control of the property or the borrower has retained control of the property
but his ability to rebuild equity based on current financial conditions is
considered doubtful. Properties acquired by foreclosure or deed in lieu of
foreclosure and properties classified as in-substance foreclosures are
transferred to ORE and recorded at the lower of cost or fair value based on
appraised value at the date actually or constructively received. Loan losses
arising from the acquisition of such property are charged against the
allowance for possible loan losses. ORE is stated at the lower of cost or
fair value. An allowance for possible ORE losses is maintained for
subsequent valuation adjustments on a specific property basis. Subsequent
declines in the value of the property and net gains or losses on sales of
property are included in ORE expense.
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," which will
be adopted by the Company in the first quarter of 1995, specifies that a
collateral-dependent real estate loan would be reported as ORE only if the
lender has taken possession of the collateral. Other collateral-dependent
real estate loans which currently meet the criteria of in-substance foreclo-
sure would remain in the loan category.
Allowance for and Provision for Possible Loan Losses: The allowance for
possible loan losses is maintained at a level considered adequate by manage-
ment to absorb potential losses in the loan portfolio. The allowance is
increased by the provision for possible loan losses charged against income
and recoveries of previously charged off loans. The allowance is decreased
as loans are charged off. A loan loss occurs once a probability of loss has
been determined, with consideration given to such factors as the customer's
financial condition, underlying collateral and guarantees. The provision for
possible loan losses is based upon management's estimate of the amount neces-
sary to maintain the allowance at an adequate level, considering an
evaluation of the individual credit risks and concentrations of credit risks,
levels of nonaccrual loans, past loan loss experience, current economic
conditions, volume, growth and composition of the loan portfolio, and other
relevant factors.
<PAGE>
Premises and Equipment: Premises and equipment are stated at cost less accu-
mulated depreciation and amortization. Depreciation and amortization for
financial reporting purposes is computed primarily on the straight-line
method over the estimated useful lives of the assets. Accelerated methods
of depreciation and amortization are used for income tax purposes. Leasehold
improvements are amortized over their useful lives or the terms of the
respective leases, whichever is less.
Retirement Plan: The Company has a noncontributory defined benefit
retirement plan covering substantially all employees. The benefits are based
on years of service and the employee's compensation. The Company's funding
policy is to contribute the minimum amount that can be deducted for federal
income tax purposes. Plan assets consist primarily of common stocks, bonds
and U.S. Government obligations.
Income Taxes: In February, 1992, the FASB issued SFAS No. 109, "Accounting
for Income Taxes." The statement is effective for fiscal years beginning
after December 15, 1992, although earlier adoption was encouraged. The
Company elected to adopt SFAS 109 effective January 1, 1992 and prior years'
financial statements have not been restated.
Under SFAS 109, the liability method is used in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based
on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse. Prior to the
adoption of SFAS 109, income tax expense was determined using the deferred
method. Under the deferred method, deferred tax expense was based on items
of income and expense that were reported in different years in the financial
statements and tax returns and were measured at the tax rate in effect in the
year the differences originated. Income taxes for 1991 are calculated under
the deferred method.
Earnings (Loss) Per Share: Earnings (loss) per share is computed by dividing
net income (loss) by the weighted average number of common shares outstanding
during the year.
Cash Flow Information: For purposes of the statements of cash flows, the
Company considers cash and due from banks, federal funds sold, and securities
purchased under agreements to resell as cash and cash equivalents. Cash paid
for interest during the years ended December 31, 1993, 1992 and 1991 was
$22.5 million, $33.1 million and $51.7 million, respectively. The Company
made income tax payments of $2.5 million in 1993 and received an income tax
refund of $400,000. The Company received net income tax refunds of
approximately $437,000 and $5.4 million in 1992 and 1991, respectively.
NOTE B-RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS
The Bank is required to maintain average reserve balances with the Federal
Reserve Bank of Boston. The average amount of reserve balances for the year
ended December 31, 1993 was approximately $8.7 million.
<PAGE>
NOTE C-INVESTMENT SECURITIES
The amortized cost and estimated market value of investments in debt and
equity securities at December 31, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
1993
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(In thousands)
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S.
Government agencies $256,380 $ 306 $ 340 $256,346
State and municipal 1,215 51 1,266
Other debt securities 191 10 181
Total debt securities 257,786 357 350 257,793
Equity securities 606 233 5 834
Total securities $258,392 $ 590 $ 355 $258,627
</TABLE>
<TABLE>
<CAPTION>
1992
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(In thousands)
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S.
Government agencies $180,616 $ 1,124 $ 7 $181,733
State and municipal 1,765 62 6 1,821
Other debt securities 1,335 17 22 1,330
Total debt securities 183,716 1,203 35 184,884
Equity securities 1,562 367 80 1,849
Total securities $185,278 $ 1,570 $ 115 $186,733
</TABLE>
The amortized cost and estimated market value of debt securities at December
31, 1993, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Market
Cost Value
(In thousands)
<S> <C> <C>
Due in one year or less $155,788 $155,933
Due after one year through five years 99,765 99,517
Due after five years through ten years 559 577
Due after ten years 1,674 1,766
$257,786 $257,793
</TABLE>
Proceeds from sales of investments totalled $1.3 million during 1993. Gross
gains of $249,000 and gross losses of $69,000 were realized on those sales.
During 1993 and 1992, certain debt securities were called resulting in gains
totalling $2,000 and $8,000, respectively. Proceeds from sales of
investments in debt securities during 1991 were $85.0 million. Gross gains
of $3.5 million and gross losses of $400,000 were realized on those sales.
<PAGE>
The book value of investment securities pledged to secure U.S. Government
deposits and trust deposits, and for other purposes, amounted to
approximately $94.3 million and $79.4 million at December 31, 1993 and 1992,
respectively.
NOTE D-MORTGAGES HELD FOR SALE AND LOAN SALES
Mortgage loans held for sale to the secondary market are carried at the lower
of aggregate cost or market value. Gains and losses on sales of mortgages
are recognized based upon the difference between the selling price and the
carrying value of the related loans sold. Gains on mortgage sales, including
unearned fees, are recorded at the time of funding of the sales. The Bank
retains the servicing for all mortgages sold and servicing fees are
recognized as income when earned. Mortgage sales are on a non-recourse
basis. During 1993 and 1992, $45.7 million and $44.1 million of mortgages
were sold for net gains of $974,000 and $862,000, respectively, excluding
unearned fees. There were no mortgage sales in 1991. Mortgage loans held
for sale totalled $2.0 million and $2.5 million at December 31, 1993 and
1992, respectively, and book value equals market value for both years.
NOTE E-ALLOWANCE FOR POSSIBLE LOAN LOSSES
An analysis of changes in the allowance for possible loan losses is as
follows:
1993 1992 1991
(In thousands)
Balance, January 1 $16,619 $20,012 $21,575
Provision 4,200 6,800 12,542
Loan losses (8,113) (11,095) (15,798)
Recoveries 1,875 902 1,693
Net loan losses (6,238) (10,193) (14,105)
Balance, December 31 $14,581 $16,619 $20,012
NOTE F-NONACCRUAL AND RESTRUCTURED LOANS
Included in loans are loans which, because of the weakened financial position
of the borrower, were placed on nonaccrual or were restructured to provide
for a reduction or deferral of interest or principal payments.
Nonaccrual and restructured loans were as follows at December 31:
1993 1992
(In thousands)
Nonaccrual................ $13,039 $16,391
Restructured.............. 1,012 1,628
$14,051 $18,019
The effect on interest income in 1993, 1992 and 1991 of nonaccrual and
restructured loans is summarized as follows:
1993 1992 1991
(In thousands)
Originally contracted interest
income for the year......... $1,555 $1,852 $2,654
Less interest income actually
recorded for the year....... 367 571 1,001
Reduction in interest income
for the year............... $1,188 $1,281 $1,653
At December 31, 1993, there were no commitments to advance additional funds
on any of the nonaccrual or restructured loans.
<PAGE>
NOTE G-LOANS TO RELATED PARTIES
The Bank has granted loans to the officers and directors of the Company and
the Bank and to their associates. Related party loans are made on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with unrelated
persons and do not involve more than normal risk of collectibility. The
aggregate dollar amount of these loans was approximately $6,818,000 and
$7,178,000 at December 31, 1993 and 1992, respectively. During 1993,
$1,795,000 of new loans were made and repayments totaled $2,155,000.
NOTE H-PREMISES AND EQUIPMENT AND LEASE COMMITMENTS
Premises and equipment as of December 31, 1993 and 1992 consist of the
following:
1993 1992
(In thousands)
Land $ 1,803 $ 1,803
Buildings 12,349 11,581
Leasehold improvements 1,915 1,915
Furniture and equipment 15,478 14,372
31,545 29,671
Less accumulated depre-
ciation and amortization 20,179 18,338
$11,366 $11,333
The Bank occupies certain branch offices under lease contracts which expire
between 1994 and 2008. Several of the leases include options to renew for
periods ranging from five to fifteen years and clauses providing for
increased rentals based on increases in property taxes and other operating
expenses. Rental expense for all leases, excluding property taxes, insurance
and certain maintenance expenses was $669,000, $665,000 and $693,000 for
1993, 1992 and 1991, respectively.
The aggregate minimum lease commitments at December 31, 1993 under
non-cancelable long-term leases are as follows (in thousands):
1994 $ 626
1995 575
1996 521
1997 426
1998 336
Thereafter 1,805
$4,289
NOTE I-OTHER REAL ESTATE
The following table summarizes the real estate operations of property held
for sale for the years ended December 31:
1993 1992 1991
(In thousands)
Balance, January 1 $16,424 $22,876 $21,527
ORE additions 7,327 7,071 16,927
ORE losses (1,248) (2,678) (1,883)
ORE sales (7,335) (9,937) (12,481)
Other, net (1,425) (908) (1,214)
13,743 16,424 22,876
Allowance for possible ORE losses (350) (568) (250)
Balance, Decmeber 31 $13,393 $15,856 $22,626
<PAGE>
An analysis of the changes in the allowance for possible ORE losses is as
follows:
1993 1992 1991
(In thousands)
Balance, January 1 $ 568 $250
Provision for possible ORE losses 350 564 $250
ORE losses (568) (246)
Balance, December 31 $ 350 $568 $250
The following Table summarizes the components of ORE expense for the years
ended December 31:
1993 1992 1991
(In thousands)
Valuation adjustments:
ORE losses $ 680 $ 2,432 $ 1,883
Provision for possible ORE losses 350 564 250
Net gain on ORE sales (70) (208) (533)
960 2,788 1,600
General carrying costs 2,308 3,497 3,454
ORE expense $ 3,268 $ 6,285 $ 5,054
General carrying costs include legal fees, real estate taxes, maintenance,
appraisals, insurance and miscellaneous other costs.
Gross gains and losses and net gains on ORE sales were as follows:
Gross gains on ORE sales $ (550) $ (963) $ (906)
Gross losses on ORE sales 480 755 373
Net gain on ORE sales $ (70) $ (208) $ (533)
NOTE J-DEPOSITS
The following Table presents the types of deposit balances for the years
listed:
December 31,
1993 1992
(In thousands)
Demand deposits $148,784 $145,188
NOW accounts 138,822 126,993
Savings deposits 297,205 289,958
Money market accounts 54,347 62,483
Time deposits of $100,000 or more 11,641 12,776
Other time deposits 214,536 231,527
Total deposits $865,335 $868,925
NOTE K-INCOME TAXES
Effective January 1, 1992, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by
SFAS 109 (see Note A). As permitted under the new rules, prior years'
financial statements have not been restated. The cumulative effect of
adopting SFAS 109 as of January 1, 1992, was to increase net income by $1.1
million, or $.32 per share, for the quarter ended March 31, 1992.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The Company
does not expect to incur a New Hampshire Business Profits Tax ("NHBPT") in
the foreseeable future as a result of income derived from state tax free
sources and tax credits for the Nwe Hampshire Business Enterprise Tax.
Therefore, no deferred income taxes have been recognized for NHBPT purposes.
<PAGE>
Significant components of the Company's deferred tax liabilities and assets
are as follows:
December 31,
1993 1992
(In thousands)
Deferred tax liabilities:
Tax over book depreciation $ 599 $ 594
Prepaid assets 291 128
Purchase price accounting adjustment 293 334
Other 22 27
Total deferred tax liabilities 1,205 1,083
Deferred tax assets:
Allowance for possible loan losses 5,981 6,456
Income on nonaccrual loans 675 1,088
Deferred fee income 460 591
Accrued book expenses 766 944
Other 54 41
Total deferred tax assets 7,936 9,120
Valuation allowance for deferred tax
assets (198) (198)
Deferred tax assets, net of
valuation allowance 7,738 8,922
Net deferred tax assets $6,533 $7,839
Significant components of the provision (benefit) for income taxes attribut-
able to continuing operations are as follows:
Deferred
Liability Method Method
1993 1992 1991
(In thousands)
Current tax provision:
Federal $1,828 $1,105 $ 16
State 4
Deferred tax provision
(benefit) 1,306 352 (525)
$3,138 $1,457 $ (509)
The components of the benefit for deferred income taxes for the year ended
December 31, 1991 are as follows:
(In thousands)
Provision for possible loan
losses $ (553)
Income on nonaccrual loans 190
Deferred loan origination fees 12
Other timing differences (174)
$ (525)
Income tax expense related to net investment securities gains was $64,000,
$3,000 and $425,000 for the years ended December 31, 1993, 1992 and 1991,
respectively.
SFAS 109 requires a valuation allowance against deferred tax assets if, based
on the weight of available evidence, it is more likely than not that some or
all of the deferred tax assets will not be realized. The Company believed
that some uncertainty existed with respect to future realization and
established a valuation allowance of $550,000 as of January 1, 1992, the
effective date of adoption of SFAS 109. Reported earnings in 1992 reduced
this uncertainty and, accordingly, resulted in a reduction in income tax
expense of $352,000 during the year ended December 31, 1992. The valuation
allowance is $198,000 at December 31, 1993 and 1992.
<PAGE>
The reconciliation of income taxes attributable to continuing operations
computed at the U.S. federal statutory tax rate to income tax expense is as
follows:
<TABLE>
<CAPTION>
Liability Method Deferred Method
1993 1992 1991
(Dollars in thousands) Amount % Amount % Amount %
<S> <C> <C> <C> <C> <C> <C>
Federal income tax provision
(benefit) at statutory rate $3,240 34.0% $1,965 34.0% $(1,270) (34.0%)
Effect of:
Alternative minimum taxes 567 15.2
Investment tax credits 169 4.5
NOL carryforwards 207 5.6
Tax-exempt income (139) (1.5) (220) (3.8) (397) (10.6)
Change in SFAS 109 valuation
allowance (352) (6.1)
Other 37 .4 64 1.1 215 5.7
$3,138 32.9% $1,457 25.2% $ (509) (13.6)
</TABLE>
<PAGE>
NOTE L-RETIREMENT PLAN AND OTHER POSTEMPLOYMENT BENEFITS
Retirement Plan
The Company maintains a noncontributory defined benefit retirement plan
covering substantially all employees. Benefits are based on compensation and
years of service.
The following sets forth the funded status and amounts recognized in the
consolidated balance sheets for the Company's retirement plan:
December 31,
1993 1992
(In thousands)
Projected benefit obligation:
Vested benefits $ 13,112 $ 11,752
Nonvested benefits 251 274
Accumulated benefit obligation 13,363 12,026
Effect of projected future
compensation levels 2,162 2,394
Projected benefit obligation $ 15,525 $ 14,420
Plan assets at fair value $ 12,391 $ 12,470
Projected benefit obligation in
excess of plan assets $ 3,134 $ 1,950
Unrecognized prior service cost (504) (567)
Unrecognized net loss (2,720) (1,667)
Unrecognized net asset,
net of amortization 973 1,101
Minimum additional liability 89
Net pension liability $ 972 $ 817
A summary of the components of net periodic pension expense follows:
1993 1992 1991
(In thousands)
Service cost - benefits earned during
the year $ 556 $ 568 $ 554
Interest cost on the projected benefit
obligation 1,190 1,105 1,020
Actual return on plan assets (295) (290) (1,561)
Net amortization and deferral (996) (986) 411
Net periodic pension expense $ 455 $ 397 $ 424
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 8.0% and 8.5% and 4.0% and 5.5%,
respectively, as of December 31, 1993 and 1992. The expected long-term rate
of return on plan assets was 10% in 1993, 1992 and 1991. The impact of
changes in the discount rate and rate of increase in future compensation as
of December 31, 1993 was to increase the net pension liability by $89,000.
The year-end 1993 and 1992 net pension accrued liability of $972,000 and
$817,000, respectively, is included in other liabilities.
Other Post Retirement Benefits
In addition to the Company's retirement plan, the Company sponsors a defined
benefit welfare plan that provides postretirement medical and life insurance
benefits to full-time employees who have worked 10 years and attained age 55
while in service with the Company. The plan is contributory, with retiree
contributions adjusted annually, and contains other cost-sharing features
such as deductibles and coinsurance. The Company's future contributions will
be capped at the 1996 per capita cost. The Company will continue to credit
each retiree based on his or her years of service. Retirees will bear the
cost of any future annual increases above the 1996 cost levels.
<PAGE>
In 1993, the Company adopted SFAS No. 106, "Employers' Accounting for Postre-
tirement Benefits Other Than Pensions." The effect of adopting the new rules
increased 1993 net periodic postretirement benefit cost by $316,000 and de-
creased 1993 net income by $209,000. Postretirement benefit costs for 1992
and 1991, which were recorded on a cash basis, have not been restated. The
Company's policy is to fund the cost of medical benefits in amounts
determined at the discretion of management. The plan is unfunded at December
31, 1993.
The following Table sets forth the plan's accumulated postretirement benefit
obligation reconciled with the amount shown in the Company's balance sheet:
December 31,
1993 1992
(In thousands)
Accumulated postretirement benefit obligation:
Retirees $2,121 $2,083
Fully eligible plan participants 738 642
Other active plan participants 916 720
$3,775 $3,445
Plan assets $ -0- $ -0-
Accumulated postretirement benefit obligation
in excess of plan assets $3,775 $3,445
Unrecognized net loss (186) -0-
Unrecognized transition obligation (3,273) (3,445)
Accrued postretirement benefit cost $ 316 $ -0-
Net periodic postretirement benefit cost for 1993 and 1992 included the fol-
lowing components:
1993 1992
(In thousands)
Service cost $ 71 $
Interest cost 284
Amortization of transition obligation over 20 years 172
Net periodic postretirement benefit cost $ 527 $ 203
The weighted-average annual assumed rate of increase in the per capita cost
of covered benefits (i.e. health care cost trend rate) is 12 percent for 1994
(same as the rate previously assumed for 1993) and is assumed to decrease
gradually to 6 percent for 2050 and remain at that level thereafter. The
health care cost trend rate assumption has a significant effect on the
amounts reported. For example, increasing the assumed health care cost trend
rates by one percentage point would increase the accumulated postretirement
benefit obligation as of December 31, 1993 by $306,000 and the aggregate of
the service and interest cost components of net periodic postretirement
benefit cost for 1993 by $27,000. The weighted-average discount rate used
in determining the accumulated postretirement benefit obligation was 8
percent at December 31, 1993 and 1992, respectively.
Other Benefits
In November 1992, the FASB issued SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," which presents new rules that require accrual ac-
counting for postemployment benefits, such as salary continuation benefits,
supplemental unemployment benefits, severance benefits and disability-related
benefits, instead of recognizing an expense for those benefits when paid.
The Company will be required to comply with the new rules beginning in 1994.
The effect of adopting the new rules is not expected to be material to the
Company's financial position or results of operations.
<PAGE>
NOTE M-FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Company is a party to financial instru-
ments with off-balance sheet risk to meet the financing needs of its custom-
ers. These financial instruments include commitments to extend credit and
standby letters of credit. These financial instruments involve, to varying
degrees, elements of credit risk in excess of the amount recognized in the
balance sheet.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit written is represented by the contractual amount
of those instruments. The Company generally requires collateral to support
such financial instruments in excess of the contractual amount of those
instruments and, therefore, is in a fully secured position. The Company uses
the same credit policies in making commitments and conditional obligations
as it does for on-balance sheet instruments.
The Company has outstanding loan commitments/lines of credit of $119.8
million and $121.8 million at December 31, 1993 and 1992, respectively, and
standby letters of credit aggregating $4.0 million and $4.9 million at
December 31, 1993 and 1992, respectively. The fair values for loan
commitments/lines of credit and for standby letters of credit approximate
book values at December 31, 1993 and 1992.
Loan commitments/lines of credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract. Com-
mitments generally have fixed expiration dates. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
The Company evaluates each customer's creditworthiness on a case-by-case
basis. The amount of collateral obtained, if any, is based on management's
credit evaluation of the counterparty.
Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing, and similar
transactions. Letters of credit usually expire within one year of issuance.
The credit risk involved in issuing letters of credit is essentially the same
as that involved in extending loans to customers. The Company holds
collateral supporting those commitments for which collateral is deemed
necessary.
NOTE N-CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk exist when changes in economic, industry or
geographic factors affect groups of counterparties with similar economic
characteristics, whose aggregate credit exposure is significant to the Com-
pany's total credit exposure. The Company originates commercial, real estate
and installment loans to customers throughout the southern, central, coastal
and lakes regions of the state. The Company estimates that most of its loans
are based in New Hampshire with less than 1% of total loans based
out-of-state. There are no other significant concentrations of credit risk.
NOTE O-RESTRICTIONS ON BANK DIVIDENDS, LOANS OR ADVANCES
Federal Reserve regulations restrict the amount the Bank may loan or advance
to the Company, unless such loans are collateralized by specified
obligations. Additionally, in accordance with the requirements of the
Regulators, common stock dividend declarations and payments by the Company
require the prior notice to and approval of the Federal Reserve Bank of
Boston and dividend declarations and payments by the Bank require prior
approval of the State and the FDIC. Also, prior regulatory approval must be
obtained if the dividends declared by the Bank exceed certain prescribed
limits. Any dividend declaration by the Company or the Bank must consider
additional factors such as the amount of current period earnings, capital
adequacy and other factors. Also, the Regulators have authority to prohibit
dividend payments if they deem such payments to be an unsafe or unsound prac-
<PAGE>
tice. At December 31, 1993, subject to State and FDIC approval,
approximately $875,000 of net assets of the Bank were available for transfer
to the Company.
NOTE P-COMMON STOCK
On September 30, 1993, the Company received net proceeds of approximately
$11,596,000 (net of issuance costs of $306,860) from the sale of 690,000
newly-issued shares of its common stock. The excess of proceeds received
over the stated value was credited to surplus.
NOTE Q-REGULATORY MATTERS AND CAPITALIZATION
During 1992, the Bank entered into a Memorandum of Understanding (the "MOU")
and a Capital Directive (the "Capital Directive") with the FDIC and the State
of New Hampshire Banking Department. The MOU and the Capital Directive re-
quire, among other things, the attainment by the Bank of certain minimum
capital levels established under applicable regulations, as well as phased
in Leverage Ratios (5.25% and 6.00% on or before December 31, 1993 and June
30, 1994, respectively) that exceed the minimums to which the Bank would
otherwise be subject under applicable regulations. As of December 31, 1993,
the Bank had already exceeded the required June 30, 1994 Leverage Ratio of
6.00% by 9 basis points. Additionally, the Company believes the Bank is
currently in compliance with the other provisions of the MOU.
The following Table presents the consolidated capital ratios of the Company
at December 31, 1993 and 1992.
Regulatory
Minimum 1993 1992
Regulatory Capital Ratios:
Leverage ratio 3.00%(1) 6.78% 5.00%
Tier 1 risk-based ratio 4.00 14.31 9.26
Total risk-based ratio 8.00 15.59 10.53
The following Table presents the consolidated capital ratios of the Bank at
December 31, 1993 and 1992.
Regulatory
Minimum 1993 1992
Regulatory Capital Ratios:
Leverage ratio 3.00%(1) 6.09% 4.71%
Tier 1 risk-based ratio 4.00 12.88 8.42
Total risk-based ratio 8.00 14.16 9.69
____________
(1) Under current regulations, all except the most highly rated institutions
are expected to exceed the minimum regulatory ratio by 100 to 200 basis
points or more.
NOTE R-INCENTIVE STOCK PLAN
The Company has an Incentive Stock Plan whereby all full-time employees of
the Company receive shares of common stock which have an aggregate fair
market value or book value equal to a specified percentage of the employee's
base salary determined as of specified dates over specified periods.
Shares of common stock issued pursuant to the Stock Plan receive dividends
and have voting rights; however, certain restrictions apply which expire
ratably over one-year intervals after the grant date(s), through June 30,
1994.
<PAGE>
Shares issued or forfeited, and retiree vesting and restriction expirations
of the Stock Plan, are as follows:
Year Ended December 31
1993 1992
Shares issued 614 1,510
Shares forfeited (791) (5,068)
Retiree vesting and
restriction expiration (6,322) (20,252)
Restricted shares outstanding
at January 1 12,949 36,759
Restricted shares outstanding
at December 31 6,450 12,949
Deferred compensation expense is being amortized on the straight-line method
over the restriction period. For the years ended December 31, 1993, 1992 and
1991, $63,000, $173,000 and $272,000, respectively, was charged to
operations.
NOTE S-LEGAL PROCEEDINGS
Various claims and lawsuits, incidental to the ordinary course of business,
are pending against the Company and the Bank. In the opinion of management,
after consultation with legal counsel, resolution of these matters is not
expected to have a material effect on the consolidated financial statements.
NOTE T-FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," re-
quires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable
to estimate that value. In cases where quoted market prices are not
available, fair values are based on estimates using present value or other
valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases, could
not be realized in immediate settlement of the instrument. SFAS 107 excludes
certain financial instruments and all nonfinancial instruments from its
disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash and Cash Equivalents: The carrying amounts reported in the balance
sheet for cash and short-term instruments approximate those assets' fair
values.
Investment Securities: Fair values for investment securities are based on
quoted market prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of comparable
instruments.
Morgages Held for Sale: Fair values of mortgages held for sale are based on
quoted bid market prices.
Loans: Fair values are estimated for portfolios of loans with similar finan-
cial characteristics, segregated by type such as commercial, real estate and
installment loans. For variable-rate loans that reprice frequently and with
no significant change in credit risk, fair values are based on carrying val-
ues. The fair values for other loans are estimated using a discounted cash
flow calculation that applies a discount rate, based upon the loan's terms,
structure of interest, credit quality factors, and prepayment risk inherent
in the portfolio, to a schedule of aggregated expected monthly maturities on
loans.
<PAGE>
Interest Receivable: The carrying amount of interest receivable approximates
fair value.
Deposits: The fair values disclosed for demand deposits (e.g., interest
bearing NOW accounts and non-interest bearing checking, passbook savings, and
money market accounts) are, by definition, equal to the amount payable on
demand at the reporting date (i.e., their carrying amounts). Fair values for
fixed-rate certificates of deposit are estimated using a discount rate based
upon the certificate's terms, structure of interest and withdrawal risk to
a schedule of aggregated expected monthly maturities on time deposits.
For deposits with no stated maturities, SFAS 107 defines fair value as the
amount payable on demand. SFAS 107 defines the fair value of demand deposits
as the amount payable on demand, and prohibits adjusting fair value for any
value derived from retaining those deposits for an expected future period of
time. That component, commonly referred to as a deposit base intangible, is
estimated to be approximately $4.9 million at December 31, 1993 and is
neither considered in the fair value amounts nor is it recorded as an
intangible asset in the balance sheet.
Short-Term Borrowings: The carrying amounts of federal funds purchased,
borrowings under repurchase agreements, and other short-term borrowings ap-
proximate their fair values.
<PAGE>
The following presents carrying value and the fair value of the Company's
financial instruments at:
December 31,
1993 1992
Carrying Fair Carrying Fair
Value Value Value Value
(In thousands)
Financial Assets:
Cash and cash equivalents $165,999 $165,999 $126,584 $126,584
Investment securities 258,392 258,627 185,278 186,733
Mortgages held for sale 1,978 1,978 2,500 2,500
Net loans 510,262 511,381 607,762 614,894
Interest receivable 5,059 5,059 5,070 5,070
Financial Liabilities:
Deposits (with no stated
maturity) 639,158 639,158 624,622 624,622
Time deposits 226,177 227,476 244,303 245,966
Short-term borrowings 35,266 35,266 39,247 39,247
<PAGE>
NOTE U-BANK OF NEW HAMPSHIRE CORPORATION (Parent Company Only)
CONDENSED FINANCIAL STATEMENTS
BALANCE SHEETS
December 31
1993 1992
(In thousands)
Assets
Cash $ 5,558 $ 1,398
Investments 606 910
Taxes due from Bank 54 74
Investment in Bank 61,998 48,210
Other assets 52
$68,268 $50,592
Liabilities
Accrued expenses $ 26 $ 47
Total liabilities 26 47
Stockholders' equity 68,242 50,545
$68,268 $50,592
STATEMENTS OF OPERATIONS
Year Ended December 31
1993 1992 1991
(In thousands)
Operating income:
Dividends from Bank $ 518
Other income $ 241 $ 57 63
241 57 581
Operating expenses:
Professional fees 99 182 151
Management fee 30 30 150
Stock award plan 272
Other 41 103 144
170 315 717
Income (loss) before income tax bene-
fit and equity in undistributed
net income (loss) of Bank 71 (258) (136)
Income tax benefit 33 74 66
Income (loss) before equity in
undistributed net income (loss)
of Bank 104 (184) (70)
Equity in undistributed net income
(loss) of Bank 6,288 5,607 (3,156)
Net income (loss) $ 6,392 $ 5,423 $(3,226)
<PAGE>
STATEMENTS OF CASH FLOWS
Year Ended December 31
1993 1992 1991
(In thousands)
Operating Activities:
Net income (loss) $ 6,392 $ 5,423 $(3,226)
Adjustments to reconcile net income
(loss) to net cash (used) provided
by operating activities:
Equity in undistributed net (income)
loss of Bank (6,288) (5,607) 3,156
Securities gains (177)
Provision for amortization 272
Other, net 67 445 (104)
Net cash (used) provided by
operating activities (6) 261 98
Investing Activities:
Capital contribution to the Bank (7,500)
Sales of investment securities 654 500
Purchases of investment securities (230)
Net cash (used) provided by
investing activities (7,076) 500
Financing Activities:
Net proceeds from the issuance
of common stock 11,596
Cash dividends paid (325) (169)
Repurchase and retirement of
common stock (29) (35) (14)
Net cash provided (used) by
financing activities 11,242 (35) (183)
Increase in cash and cash
equivalents 4,160 226 415
Cash and cash equivalents at
January 1 1,398 1,172 757
Cash and cash equivalents at
December 31 $ 5,558 $ 1,398 $ 1,172
<PAGE>
DIRECTORY (AS OF 12/31/93)
BANK OF NEW HAMPSHIRE CORPORATION OFFICERS AND DIRECTORS
OFFICERS
DAVIS P. THURBER
Chairman and President
PAUL R. SHEA
Executive Vice President
GREGORY D. LANDROCHE
CPA, Senior Vice President,
Treasurer and Chief Financial Officer
ALICE L. DeSOUZA
Senior Vice President
Administration and Planning
ROBERT J. McDONALD
Senior Vice President
Loan Administration
ALLEN G. TARBOx, JR.
Senior Vice President
Data Services
WILLIAM D. BISER, CPA
Vice President, Director of Audit
ROBERT A. BOULAY, CPA
Vice President and Controller
JOANNE NICHOLS
Assistant Controller
ROBERT B. FIELD,JR., Esq.
Secretary
BOARD OF DIRECTORS
DAVlS P. THURBER
Chairman and President
PAUL R. SHEA
President and Chief Executive Officer
Bank of New Hampshire
Manchester, NH
ROBERT L. BAILEY
President (Retired)
Bank of New Hampshire, N.A.
<PAGE>
ROBERT P. BASS, JR.
Of Council
Cleveland, Waters & Bass, P.A.
Concord, NH
ARTHUR E. COMOLLI, D.M.D.
General Dentistry
Nashua, NH
RAYMOND G. COTE
President (Retired)
Harvey Construction Co., Inc.
Bedford, NH
SIDNEY THURBER COX
(Retired)
Watertown, NY
RAYMOND J. CRETEAU
President (Retired)
Riverside Millwork Co., Inc.
Penacook, NH
ROBERT B. FIELD, JR.
Attorney at Law
Sheehan, Phinney, Bass + Green Professional Association
Portsmouth, NH
MORTON E. GOULDER
President
M.E. Goulder Enterprises, Inc.
Hollis, NH
PHILIP LABOMBARDE
(Retired)
Nashua, NH
FLOYD A. LAMB
Senior Vice President (Retired)
John Hancock Mutual Life
Insurance Co.
Kingston, MA
DANIEL R. W. MURDOCK
Executive Vice President (Retired)
Bank of New Hampshire, N.A.
Nashua, NH
CONSTANCE T. PRUDDEN
(Retired)
Hingham, MA
JOSEPH G. SAKEY
Director of Libraries and Communications (Retired)
Cambridge, MA
ROSS A. TAIT
(Retired)
Nashua, NH
<PAGE>
GEORGE R. WALKER
Senior Vice President/Counsel
The Concord Group Insurance Companies
Concord, NH
RICHARD S. WEST
Chairman
Parker & West Management Inc.
Boston, MA
DIRECTORY (AS OF 2/23/94)
BANK OF NEW HAMPSHIRE OFFICERS AND DIRECTORS
SENIOR OFFICERS
DAVIS P. THURBER
Chairman
PAUL R. SHEA
President and Chief Executive Officer
GREGORY D. LANDROCHE
Chief Financial Officer
HAROLD R. ACRES
Senior Executive Vice President Commercial Banking
R. SCOTT BACON
Executive Vice President
Commercial Banking
ALICE L. DeSOUZA
Executive Vice President
Administration and Retail Banking
ROBERT B. ESAU
Executive Vice President
Trust and Investment Services
ALLEN G. TARBOX, JR.
Director of Information Systems
REGIONAL MANAGEMENT
Manchester
EDWARD P. CARTER
Senior Vice President
Nashua
PAUL E. DUFFY, II
Senior Vice President
Concord
MARY W. McLAUGHLIN
Senior Vice President
Seacoast/Dover
DAVID G. TORR
Regional President
Suncook
ROGER A. MENARD
Senior Vice President
Lakes/Bristol
DOUGLAS C. BENTON
Regional Vice President
Portsmouth
DAVID SCHOFF
Vice President
<PAGE>
OTHER OFFICERS
Branch Administration
JOANNE T. HOWARD
Senior Vice President
Consumer Loan Services
CORNELIUS J. JOYCE
Senior Vice President
Finance and Accounting
DONNA F. CLARICO, CPA
Vice President and Treasurer
General Services Administration
KRISTINE NIELSEN
Vice President
Human Resources
MAUREEN F. DONOVAN
Vice President
Marketing
CHERYL C. CORNISH
Vice President
Residential Real Estate
<PAGE>
DENISE LYONS
Vice President
ORE Management
STEVEN C. WEBB
Vice President
Regulatory Compliance
PAULINE A. IKAWA
Compliance Officer
BOARD OF DIRECTORS
DAVIS P. THURBER
Chairman
PAUL R. SHEA
President and Chief Executive Officer Bank of New Hampshire
ARTHUR E. COMOLLI, D.M.D.
General Denistry
Nashua, NH
RAYMOND G. COTE
President (Retired)
Harvey Construction Co., Inc.
RAYMOND J. CRETEAU
President (Retired)
Riverside Millwork Co., Inc.
JOSEPH A. DESMOND
Chairman and Chief Executive Officer The Concord Group
Insurance Companies
DIANA JURIS
Vice President
Nashua Motor Express
RICHARD S. WEST
Chairman
Parker & West Management, Inc.
TRUST AND INVESTMENT
SERVICES COMMITTEE
ROBERT P. BASS, JR., Esq., Chairman
ROBERT L. BAILEY
CHARLES N. BLOSSOM, JR.
ALICE L. DeSOUZA
ROBERT B. ESAU
MORTON E. GOULDER
CHARLES W. HEARD
FLOYD A. LAMB
FREDERIC R. PILCH
DOUGLAS ROLLINS
PAUL R. SHEA
DAVIS P. THURBER
BANK OF NEW HAMPSHIRE CORPORATION
TWENTY-EIGHT BANKING OFFICES
CORPORATE HEADQUARTERS
<PAGE>
BANK OF NEW HAMPSHIRE
CORPORATION
300 Franklin Street
Manchester, NH 03101
603-624-6600
BANKING OFFICES
ALLENSTOWN
Junction Routes 3 and 28
Allenstown, NH 03275
603-485-4011
BARRINGTON
Route 125 and Province Road
Barrington, NH 03825
603-664-5800
BRISTOL
Central Square
Bristol, NH 03222
603-744-8521
CONCORD
143 N. Main Street
Concord, NH 03301
603-225-4500
Concord Heights
216 Loudon Road
Concord, NH 03301
603-225-4500
<PAGE>
CONTOOCOOK
884 Main Street
Contoocook, NH 03229
603-746-4121
DOVER
353 Central Avenue
Dover, NH 03820
603-742-2100
Shaw's Plaza
845 Central Avenue
Dover, NH 03820
603-742-2100
EPSOM
Epsom Circle
Epsom, NH 03234
603-736-9363
HAMPTON
887 Lafayette Road
Hampton, NH 03842
603-926-6868
HILLSBOROUGH
School Street
Hillsborough, NH 03244
603-464-5527
HOOKSETT
1288 Hooksett Road
Hooksett, NH 03106
603-668-2192
HUDSON
80 Derry Road
Hudson, NH 03051
603-880-5400
MANCHESTER
300 Franklin Street
Manchester, NH 03101
603-624-6600
<PAGE>
Two S. Beech Street
Manchester, NH 03103
603-624-6600
1541 N. Elm Street
Manchester, NH 03101
603-624-6600
115 John Devine Drive
Manchester, NH 03103
603-624-6600
293 S. Main Street
Manchester, NH 03102
603-624-6600
MERRIMACK
300 Daniel Webster Highway
Merrimack, NH 03054
603-880-5400
Harris Pond
32 Daniel Webster Highway
Merrimack, NH 03054
603-880-5400
NASHUA
191 Main Street
Nashua, NH 03060
603-880-5400
Nashua Mall
Nashua, NH 03060
603-880-5400
Daniel Webster Plaza
225 Daniel Webster Highway
Nashua, NH 03060
603-880-5400
<PAGE>
Simoneau Plaza
300 Main Street
Nashua, NH 03060
603-880-5400
NEWMARKET
72 Exeter Street
Newmarket, NH 03857
603-659-6746
NORTHWOOD
Route 4
Northwood, NH 03261
603-942-8739
PORTSMOUTH
Two Harbour Place
Portsmouth, NH 03801
603-433-4320
SUNCOOK
50 Glass Street
Suncook, NH 03275
603-485-9564
INSIDE BACK COVER
PRINCIPAL EXECUTIVE OFFICE.
Bank of New Hampshire Corporation
300 Franklin Street
Manchester, New Hampshire 03101
1-603-624-6600
STOCK TRANSFER AGENT.
Mellon Securities Trust Company
c/o Mellon Financial Services
85 Challenger Road
Overpeck Center
Ridgefield Park, New Jersey 07660
1-201-296-4052
TRADE NAMES
Bank of New Hampshire Corporation and Bank of New Hampshire are trade names
used by the Company and are registered with the New Hampshire Secretary of
State.
INVESTOR INFORMATION AND FORM 10-K REPORT.
Requests for general investor information or a copy of the Company's annual
report on Form 10-K for 1993 to be filed with the Securities and Exchange
Commission may be obtained without charge upon written request made to:
Gregory D. Landroche,
Senior Vice President,
Treasurer and C.F.O.
Bank of New Hampshire Corporation
P.O. Box 600
Manchester, New Hampshire 03105
<PAGE>
ANNUAL REPORT 1993.
This annual report and the financial statements contained herein are submitted
to the stockholders of the Company for their general information and not in
connection with any sale, offer to sell, or solicitation of an offer to buy
any securities. The annual report uses such terms as Company, Bank,
BNHC, we and our, sometimes for the Parent Company and the subsidiary,
together, and sometimes for one or the other, individually.
TRADING OF COMMON STOCK.
Bank of New Hampshire Corporation common stock is traded nationally in the
over-the-counter market and is reported through the NASDAQ National Market
System under the symbol BNHC.
NOTICE OF ANNUAL MEETING.
The annual meeting of the stock-holders of the Company will be held at the
Manchester Country Club, 180 South River Road, Manchester, New Hampshire
on April 27, 1994 at 11:00 A.M.
<PAGE>
GRAFIC AND IMAGE MATERIAL
INDEX
Annual Report Cover Page - 1993
Chairman of the Board and President (Pictured) 1
Earnings Per Share Line Graph 2
Non-performing Assets Bar Graph 2
Market and Book Value Per Share Bar Graph 3
Stockholders' Equity Bar Graph 3
Bank President and CEO (Pictured) 4
Bank Senior Executive VP (Pictured) 4
Bank Executive Vice Presidents (Pictured) 5
Bank Executive Vice Presidents (Pictured) 5
Single Family Home (Pictured) 5
Core Deposits Pie Chart 6
Deposit Services Center (Pictured) 6
Bank Executive Vice President - Trust Division (Pictured) 7
Bank Senior Vice President - Branch Administration (Pictured) 7
Bank Senior Vice Presidents (Pictured) 8
Director of Information Systems (Pictured) 9
Chief Financial Officer (Pictured) 10
Allowance for Possible Loan Losses - Bar Graph 12
Total Assets Pie Chart 13
Provision for Possible Loan Losses - Bar Graph 16
<PAGE>
Page 225 of 249
DOCUMENT (21)
SUBSIDIARY OF THE COMPANY
1. Bank of New Hampshire, a wholly-owned subsidary of the Company
(equity ownership 100%). The Bank is the entity resulting
from the merger of four former affiliates of the Company with
and into one former affiliate, Bank of New Hampshire-
Portsmouth, effective as of the close of business, September
30, 1991.
<PAGE>
[LOGO OF BANK OF NEW HAMPSHIRE APPEARS HERE]
BANK OF NEW HAMPSHIRE
CORPORATION
NOTICE OF
1994 ANNUAL MEETING
0F SHAREHOLDERS
AND
PROXY STATEMENT
<PAGE>
[LOGO OF BANK OF NEW HAMPSHIRE APPEARS HERE]
BANK OF NEW HAMPSHIRE
CORPORATION
March 24, 1994
Dear Shareholder:
The 1994 Annual Meeting of Shareholders will be held on Wednesday, April 27,
1994 at 11:00 A.M. at the Manchester Country Club, Manchester, New Hampshire.
The notice of meeting and proxy statement which follow describe the business
to be conducted at the meeting. Our Annual Report for 1993 accompanies the
notice of meeting and proxy statement.
I hope you will be able to attend the meeting in person. Your vote is very
important. If you cannot attend the meeting, please promptly return your
completed proxy card in the envelope provided.
I look forward to seeing you.
Sincerely,
[SIGNATURE OF DPT APPEARS HERE]
Davis P. Thurber
Chairman of the Board and President
<PAGE>
[LOGO OF BANK OF NEW HAMPSHIRE APPEARS HERE]
BANK OF NEW HAMPSHIRE CORPORATION
300 FRANKLIN STREET
MANCHESTER, NEW HAMPSHIRE 03105
NOTICE OF 1994 ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of
BANK OF NEW HAMPSHIRE CORPORATION:
The 1994 Annual Meeting of Shareholders of Bank of New Hampshire
Corporation will be held on Wednesday, April 27, 1994, at 11:00 a.m., local
time, at the Manchester Country Club, South River Road, Manchester, New
Hampshire, for the following purposes:
1. To fix the number of directors at Seventeen;
2. To elect seventeen directors to serve, each for a one year term;
3. To ratify the re-engagement of Ernst & Young, as independent
auditors for the Company for the year ending December 31, 1994;
and
4. To transact such other business as may properly be brought
before the meeting, including matters incident to the conduct
of the meeting, and at any adjournment, continuation or
postponement thereof.
Shareholders of record at the close of business on March 11, 1994 are
entitiled to notice of and to vote at the meeting and at any adjournment,
continuation or postponement thereof.
IMPORTANT -- YOUR PROXY IS ENCLOSED
PLEASE MARK, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE
ACCOMPANYING ENVELOPE REGARDLESS OF THE NUMBER OF SHARES YOU HOLD.
FURNISHING THIS PROXY WILL NOT AFFECT YOUR RIGHT TO REVOKE THIS PROXY OR TO
VOTE IN PERSON SHOULD YOU ATTEND THE MEETING.
By Order of the Board of Directors
March 24, 1994 Robert B. Field, Jr.
Secretary
<PAGE>
BANK OF NEW HAMPSHIRE CORPORATION
300 Franklin Street
Manchester, New Hampshire 03105
(603) 624-6600
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Bank of
New Hampshire Corporation (the "Company") for use at the 1994 Annual Meeting
of Shareholders to be held on Wednesday, April 27, 1994, at 11:00 a.m., local
time, at the Manchester Country Club, South River Road, Manchester, New
Hampshire, and at any adjournment, continuation or postponement thereof (the
"Meeting"). This Proxy Statement and the enclosed proxy cards will be first
mailed to shareholders on or about March 24, 1994. The Company's Board of
Directors (the "Board") has fixed the close of business on March 11, 1994,
as the Record Date, for determining the shareholders entitled to notice of,
and to vote at, the Meeting. On the Record Date 4,066,943 shares of the
Company's common stock were outstanding and entitled to vote. These shares
of common stock are the only voting securities of the Company. A copy of the
Company's Annual Report for the year ended December 31, 1993 is also
enclosed.
The Company will bear the cost of soliciting proxies, including the
cost of reimbursing brokerage houses and other custodians, nominees or
fiduciaries for forwarding proxies and Proxy Statements to their principals.
In addition to solicitation of proxies by mail, certain officers and
employees of the Company may solicit in person or by telephone without
compensation other than reimbursement for their actual expenses. Valid
proxies may be transmitted by any means which results in or produces a
written or printed document or facsimile thereof.
VOTING OF PROXIES
Each share of Common Stock is entitled to one vote on all proposals
other than the election of directors. The shares represented by proxies will
be voted as instructed on the valid proxies, and, in the absence of
instructions, proxies will be voted in accordance with the recommendations
of the Board. The Board recommends a vote FOR proposals 1. To fix the number
of directors at seventeen; 2. To elect seventeen directors to serve, each for
a one year term; and 3. To ratify the re-engagement of Ernst & Young, as
independent auditors for the Company for the year ending December 31, 1994.
Proxies may be revoked, at any time before they are voted, by written notice
to the Company, by executing a later dated proxy, or in person at the
Meeting.
The presence, in person, or by proxy, of the holders of a majority of
the outstanding shares of common stock entitled to vote at the Meeting, shall
be necessary to constitute a quorum for the transaction of business.
Abstentions and broker non-votes will not be counted as votes cast but will
be considered as present for quorum purposes. If a quorum exists, the
approval of any proposal being submitted to the shareholders for a vote,
other than the election of directors, requires that the votes cast FOR the
proposal exceed the votes cast AGAINST the proposal. If the votes required
to act upon the aforementioned proposals are not obtained, the named Proxies
intend to adjourn the Meeting.
IN THE ELECTION OF DIRECTORS, SUCH SHARES OF COMMON STOCK HAVE
CUMULATIVE VOTING RIGHTS. CUMULATIVE VOTING ENABLES EACH SHAREHOLDER TO GIVE
ONE NOMINEE FOR DIRECTOR AS MANY VOTES AS IS EQUAL TO THE NUMBER OF DIRECTORS
TO BE ELECTED MULTIPLIED BY THE NUMBER OF SHARES THE SHAREHOLDER MAY VOTE,
OR TO DISTRIBUTE HIS VOTES ON THE SAME PRINCIPLE AMONG TWO OR MORE NOMINEES
AS HE SEES FIT. ACCORDINGLY, EACH SHARE WILL BE ENTITLED TO SEVENTEEN VOTES
ON A CUMULATIVE BASIS IN VOTING FOR DIRECTORS SHOULD CUMULATIVE VOTING BE
REQUESTED BY ANY SHAREHOLDER AT THE MEETING.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following Table lists persons known to the Company to constitute
a group within the meaning of SEC Rule 13d-5(b)(1) of the Securities Exchange
Act of 1934 for the purpose of acting together to vote their beneficially
owned shares.
Number of Shares Percentage of Common
Name and Address of Common Stock Stock Outstanding
Sidney Thurber Cox (1) 173,680 4.27%
241 Clinton Street
Watertown, New York 13601
Davis P. Thurber (1) 169,051 4.16
25 Swart Terrace
Nashua, New Hampshire 03060
Constance T. Prudden (1) 100,037 2.46
1 Button Cove Road
Hingham, Massachusetts 02043
Shelley D. Thurber (3) 40,280 .99
109 Kingston Street
Boston, Massachusetts 02111
Steven A. Thurber (2) (3) 38,480 .95
39-A Manchester Street
Nashua, New Hampshire 03060
George Frederick Thurber (3) 46,920 1.15
227 Summit Avenue
Brookline, Massachusetts 02146
Matthew T. Thurber (3) 46,920 1.15
1 Carey Circle
Revere, Massachusetts 02151
Group Total 615,368 15.13%
(1) See "Securities of the Company owned by Directors and Executive
Officers" and related footnotes on page 7.
(2) Mr. Thurber disclaims a beneficial interest in 200 shares held as
custodian for his minor child.
(3) Includes 2,200 shares held in the Shirley A. Thurber Trust.
FMR Corp., 82 Devonshire Street, Boston, Massachusetts 02109, an
investment management company, filed a Schedule 13G dated February 11, 1994,
with the Securities and Exchange Commission (the "SEC") stating that Fidelity
Management & Research Company ("Fidelity"), a wholly-owned subsidiary of FMR
Corp. and a registered investment advisor is the beneficial owner, as of
February 11, 1994, of 226,500 shares, or 5.61%, of the common stock of the
Company, outstanding on such date, as a result of acting as investment
adviser to several investment companies. Neither FMR Corp. nor Edward C.
Johnson 3d, Chairman of FMR Corp. and owner of 34% of the outstanding voting
common stock of FMR Corp., has the sole power to vote or direct the voting
of the 226,500 shares owned directly by the Fidelity Funds (the "Funds"),
which power resides with the Fund's Boards of Trustees. Fidelity carries out
the voting of the shares under written guidelines established by the Fund's
Boards of Trustees. Edward C. Johnson 3d, FMR Corp., through its control of
Fidelity, and the Funds each has sole power to dispose of the 226,500 shares
owned by the Funds.
The Company knows of no other person who beneficially owned five
percent or more of the Company's outstanding common stock as of the Record
Date.
<PAGE>
FIXING THE NUMBER OF DIRECTORS
The Company's bylaws provide for a Board of Directors of not less than
five nor more than twenty-five directors, the number to be set initially by
the incorporators and thereafter from time to time by the shareholders. The
Board, in accordance with the general authority to add directors as provided
in the Company's bylaws, may in any calendar year increase the number of
directors by no more than two and appoint qualified persons to fill any
vacancies until the next annual meeting of shareholders. At present, the
number of directors is seventeen. The Board recommends a vote FOR fixing the
number of directors at seventeen for the ensuing year.
ELECTION OF DIRECTORS
The Board has designated as nominees the seventeen individuals elected
as a director at the 1993 Annual Meeting of Shareholders and presently
serving on the Board. All nominees have indicated, in writing, both their
willingness to be nominated and to serve as directors, if elected. Subject
to the removal provisions in the Company's bylaws, each director will be
elected to hold office until the 1995 Annual Meeting of Shareholders and
until a successor is elected and qualified. Shareholders may instruct the
Proxies to vote for all nominees listed, to withhold authority to vote for
all nominees listed or to withhold authority to vote for any individual
nominee(s) listed. The Board recommends a vote FOR all nominees listed.
The Proxies will vote the shares of common stock represented thereby
at the Meeting to effect the election of all of the nominees. However, if
at the Meeting, any shareholder or group of shareholders requests cumulative
voting in an attempt to elect a director who is not a nominee of the Board,
the Proxies will vote the shares represented thereby at the Meeting to effect
the election of as many of the nominees proposed herein for director as in
the judgment of the Proxies may be elected under the provision of cumulative
voting. Should any nominee(s) become unavailable or unwilling to accept
nomination and election, which is not anticipated, it is intended that the
Proxies will vote for the election of such substitute nominee(s) as the
Nominating Committee of the Board may suggest.
Information About the Board of Directors of the Company
The Board of Directors has the overall responsibility for the conduct
of the business of the Company. Of the present seventeen directors, fourteen
are outside directors and three are executive officers of the Company.
The following sets forth certain information concerning the nominees
for election as directors, including the name and age of each nominee, the
principal occupation of each nominee, and the year in which each nominee
first became a director of the Company. Terms of service as a director of
the Company are stated in a manner which includes service as a director with
a predecessor of the Bank of New Hampshire (the "Bank"), Bank of New
Hampshire, National Association and its predecessors. The following
information is based upon information furnished by directors and officers of
the Company as of the Record Date.
Robert L. Bailey, age 72, has been a director since 1985. He has been
retired for two years and for the three years prior thereto, he served as
President and Chief Executive Officer of Bank of New Hampshire, National
Association. Mr. Bailey also served as President and Chief Executive Officer
of Strafford National Bank.
Robert P. Bass, Jr., age 70, has been a director since 1960, except for an
eleven year period ending in 1981. He has been retired for two years and for
the three year period prior thereto he served as director and shareholder of
the law firm of Cleveland, Waters and Bass, P.A. For the past two years he
has been of counsel to said firm, which firm is counsel to the Bank's Trust
and Investment Services Division and performs other legal services for the
Bank. He is also a director of Bird Incorporated.
<PAGE>
Arthur E. Comolli, DMD, age 61, has been a director since 1981. His
principal occupation during the past five years is as a practitioner of
general dentistry.
Raymond G. Cote, age 64, has been a director since 1982. He has been retired
for three years, and, for the two years prior thereto, he was President of
Harvey Construction Co., Inc.
Sidney Thurber Cox, age 71, has been a director since 1979. Mr. Cox has been
retired for the past five years. He is an Underwriting Member at Lloyd's of
London.
Raymond J. Creteau, age 67, has been a director since 1981. He has been
retired for three years, and, for the two years prior thereto, was President
and General Manager of Riverside Millwork Co., Inc.
Robert B. Field, Jr., age 51, has been a director since 1981. His principal
occupation during the past five years is as a director and member of the law
firm of Sheehan, Phinney, Bass + Green, Professional Association, which
serves as general counsel to the Company and the Bank. Mr. Field is also
Secretary of the Company. He is an Underwriting Member at Lloyd's of London.
Morton E. Goulder, age 73, has been a director since 1981. His principal
occupation during the past five years is as President of M.E. Goulder
Enterprises, Inc. (personal investments and business consulting).Prior
thereto Mr. Goulder served as a Deputy Assistant Secretary of Defense. He
is a Director of Computer Devices, Inc. and is an Underwriting Member at
Lloyd's of London.
Philip deG. Labombarde, age 73, has been a director since 1964. He has been
retired since 1984. Prior thereto he was Senior Vice President, The
International Paper Box Machine Company. Floyd A. Lamb, age 73, has been a
director since 1981. He has been retired since 1981. Prior thereto he was
Senior Vice President, John Hancock Mutual Life Insurance Company and Chief
Executive Officer, John Hancock Advisors, Inc.
Daniel R.W. Murdock, age 81, has been a director since 1962. He has been
retired since 1977. Prior thereto he was Executive Vice President of Bank
of New Hampshire, National Association.
Constance T. Prudden, age 73, has been a director since 1981. She has been
retired since 1988. Prior thereto she was Treasurer of Prudden and Son, Inc.
Joseph G. Sakey, age 68, has been a director since 1981. He has been retired
for one year, and for the four years prior thereto his principal occupation
was Director of Libraries and Communications, City of Cambridge,
Massachusetts.
Paul R. Shea, age 61, has been a director since 1989. His principal
occupation for the past five years is as Executive Vice President and Senior
Vice President of the Company. Mr. Shea is also the President and Chief
Executive Officer of the Bank.
Davis P. Thurber, age 68, has been a director since 1949. His principal
occupation for the past five years is as Chairman of the Board of Directors
and President of the Company. Mr. Thurber is also Chairman of the Board of
the Bank. He is a director of Pennichuck Corporation and EnergyNorth, Inc.
George R. Walker, age 79, has been a director since 1961, except for a two
year period ending in 1981. His principal occupation for the past five years
was as Chairman of Concord Group Insurance Companies, from which position he
retired in 1991, and he is currently serving as Senior Vice President/Counsel
to that group.
Richard S. West, age 68, has been a director since 1981. His principal
occupation for the past three years is as Chairman of the Board of Parker &
West Management, Inc., American Syndicate Advisors, Inc., and West Capital
Corp. Prior thereto, he was President of such entities for a period of more
than two years. Mr. West is a registered investment advisor, and an
Underwriting Member at Lloyd's of London.
<PAGE>
Information Concerning Committees of the Board of Directors
The Board annually appoints four permanent Committees consisting of an
Executive Committee, an Examining (Audit) Committee, an Executive
Compensation Committee, and, a Nominating Committee. In addition to such
Committees, the Board created a Special Committee for Mergers and
Acquisitions in 1983 and a Special Committee for Dividend Policy in 1985.
With the exception of Directors Thurber, Shea and Field, no directors serving
on such Committees are executive officers.
The Executive Committee consists of Directors Thurber (Chairman),
Field, Labombarde, Murdock and Shea. The Committee is charged with
exercising all of the authority of the Board, as may be required, between
meetings of the directors except as limited by resolution of the Board, the
bylaws, or general corporate statutes. The Committee did not meet in 1993.
The Examining (Audit) Committee consists of Directors Murdock
(Chairman), Comolli, Cote, Cox, Lamb and Walker. Its function is to review
the scope of internal auditing, to recommend selection of and to oversee the
performance of the Company's independent auditors, and to review reports
received from or filed with regulatory agencies. The Committee met on five
occasions during 1993.
The Executive Compensation Committee consists of Directors West
(Chairman), Creteau, and Sakey. It performs a general oversight function in
connection with personnel matters including the review and recommendation of
salaries for senior personnel and other compensation matters as may, from
time to time, be requested by the Board. The Committee met on seven
occasions during 1993.
The Nominating Committee consists of Directors Thurber, (Chairman, ex
officio with vote), Bass, Goulder and Prudden. The Committee is charged with
the responsibility of conducting continuing studies of the size and
composition of the Board, and, from time to time, identifying and
recommending persons suitable for service as a director. The Committee met
on one occasion in 1993.
The Special Committee for Mergers and Acquisitions consists of
Directors Thurber (Chairman), Bailey, Field, Labombarde, Murdock and Shea.
The Committee is charged with the responsibility of evaluating and
recommending the engagement of financial advisors to the Company and
evaluating and overseeing the negotiation of merger opportunities as
presented from time to time by management. The Committee did not meet in
1993.
The Special Committee for Dividend Policy consists of Directors Thurber
(Chairman), Bailey, Goulder, Lamb and Prudden. The Committee is charged
with the responsibility of evaluating and making recommendations from time
to time to the Board as to an appropriate dividend policy for the Company.
The Committee met as a committee of the whole with the entire Board on three
occasions and on one occasion in independent session during 1993.
There were twelve regular meetings, including the Organizational
meeting, of the Board in 1993. All directors, except Director Walker who
attended seventy-one percent of his possible aggregate meetings, attended at
least seventy-five percent of the aggregate number of meetings of the Board
and all Committees of the Board on which they served.
Compensation Committee Interlock and Insider Participation
Since 1981, the Executive Compensation Committee has been composed of
Directors West (Chairman), Creteau, and Sakey, three independent non-employee
directors. The Committee is noit aware of any interlocks and/or any
reportable insider participation in compensation decisions during 1993.
<PAGE>
Compensation of Directors
Directors receive an annual retainer of $5,000, plus $350 for
attendance at each Board meeting. However, annual retainers and meeting fees
are not paid to directors employed by the Company. Members of the Executive
Committee and the Examining (Audit) Committee receive an annual fee of
$1,000, plus $100 per meeting, and members of the remaining committees
receive $200 per meeting.
Several directors also serve as directors of the Bank, and receive $100
per meeting for such service. Director Cote, Chairman of both the Bank's
Compliance Committee and Investment Committee receives a fee of $2,000 per
year, Director Bass, Chairman of the Bank's Trust and Investment Services
Committee receives a fee of $3,000 per year and Director Lamb, Chairman of
the Bank's Investment Sub-Committee of the Trust and Investment Services
Committee receives a fee of $1,000 per year. Directors Bailey, Goulder and
Lamb each receive a fee of $1,000 per year as members of the Bank's Trust and
Investment Services Committee. Director Creteau receives a fee of $2,000 per
year as a member of both the Bank's Investment Committee and Compliance
Committee. Bank committee members also receive attendance fees ranging from
$100 to $200 per meeting.
Director meeting fees have been frozen since 1990. Directors are
accorded the privilege of utilizing, on a space available basis, conference
space in the offices of the Bank. Management is unable to assign a value to
such benefit. Further, all directors are eligible to participate in several
group insurance programs maintained by the Company for the general benefit
of all employees who elect to participate in such programs. Such
participation, when elected by a director, is at the sole personal expense
of each such director.
<PAGE>
Securities of the Company Owned by Directors and Executive Officers
The following Table sets forth the number of shares and percentage of the
Company's common stock beneficially owned by each nominee for director and
all directors and executive officers of the Company as a group as of the
Record Date. Each beneficial owner listed has sole investment and voting
power with respect to the shares indicated unless otherwise noted.
<TABLE>
<CAPTION>
Number of Shares Percentage of Common
Nominees of Common Stock Stock Outstanding(7)
<S> <C> <C>
Robert L. Bailey 17,074 *
Robert P. Bass, Jr.(1) 10,180 *
Arthur E. Comolli(2) 4,530 *
Raymond G. Cote(2) 6,800 *
Sidney Thurber Cox(3) 173,680 4.27%
Raymond J. Creteau(2) 17,380 *
Robert B. Field, Jr.(1) 12,850 *
Morton E. Goulder(1) 72,752 1.79%
Philip deG. Labombarde(1) 7,140 *
Floyd A. Lamb 400 *
Daniel R.W. Murdock 12,084 *
Constance T. Prudden(1)(3) 100,037 2.46%
Joseph G. Sakey(1) 5,565 *
Paul R. Shea(2)(4) 4,130 *
Davis P. Thurber(1)(2)(3)(4)(6) 169,051 4.16%
George R. Walker 5,500 *
Richard S. West(1)(2) 15,024 *
All directors and executive officers
as a group (4)(5) 639,042 15.71%
</TABLE>
* - Less than 1%
(1) Includes shares owned by a nominee's spouse, minor children,
children or family members living at home, shares to which investment advice
is given, and shares held or owned as a custodian for the benefit of minors,
as to which each beneficial owner disclaims any beneficial interests as
follows:
Director Bass disclaims a beneficial interest in 2,500 shares owned by
his spouse; Director Field disclaims a beneficial interest in 2,550 shares
owned by family members (2,200) and the Robert B. Field Revocable Trust
(350); Director Goulder disclaims a beneficial interest in 45,990 shares
owned by Goulder Investments, Ltd. (35,240), Claire T. Goulder Revocable
Trust (7,206), and his sons (5,544); Director Labombarde disclaims a
beneficial interest in 3,440 shares owned by deGaspe Corporation (3,000) and
by his daughter (440); Director Prudden disclaims a beneficial interest in
4,068 shares owned by her spouse; Director Sakey disclaims a beneficial
interest in 1,168 shares owned by family members; Director Thurber disclaims
a beneficial interest in 4,000 shares owned by his spouse;and Director West
disclaims a beneficial interest in 9,900 shares owned by family members.
(2) On February 23, 1994, Directors Comolli, Cote, Creteau, Shea,
Thurber and West were elected to serve as directors of the Bank.
(3) Directors Thurber and Prudden are brother and sister, and first
cousins to Director Cox. Each deemed to be a control person of the Company
as such term is defined under Rule 12b-2 of the Securities Exchange Act of
1934. Each reserves the right to vote their shares in person at the Meeting
and such proxy will thereafter be voted individually with respect to all
other matters along with the shares of common stock of the George F. Thurber,
Sr. and Muriel D. Thurber testamentary trusts as such persons may have power
to vote. See Note 6.
<PAGE>
(4) Includes shares of restricted common stock granted, but not yet
vested, to Director Thurber (148), to Director Shea (71), to the other named
executive officers, Mr. Landroche (64), Ms. DeSouza (46), and Mr. Tarbox (85)
and to other officers (75), pursuant to the 1990 Incentive Stock Plan. See
"Summary Compensation Table."
(5) Includes 4,090 shares, including the restricted shares, of Common
Stock beneficially owned by the following named executive officers, Mr.
Landroche (1,248), Mr. Tarbox (2,170), and Ms. DeSouza (672), representing
less than one percent of common stock outstanding and entitled to vote. See
"Summary Compensation Table".
(6) Includes an interest in 41,113 shares of common stock held by the
Bank as Trustee under testamentary trusts created under the wills of George
F. Thurber, Sr. and Muriel D. Thurber. Such shares will be voted at the
Meeting by Director Prudden, in accordance with the terms of the underlying
instruments.
(7) Computed on the basis of 4,066,943 shares outstanding and entitled
to vote on the Record Date.
Section 16 (a) Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities
("Insiders"), to file with the SEC initial reports of ownership, and reports
of changes in ownership, of common stock and other equity securities of the
Company. Insiders are required by SEC regulation to furnish the Company with
copies of all such reports they file.
The Company believes that during 1993, based solely on review of the
copies of such reports furnished to the Company and written representation
that no other report was required, all Section 16(a) filing requirements
applicable to its Insiders were met.
Certain Transactions
During 1993 certain directors and officers of the Company and the Bank,
as well as firms and companies with which they are associated, were customers
of the Bank and as such have had ordinary banking transactions, including
loans and loan commitments, with the Bank. Such loans and loan commitments
were made in the ordinary course of business and on substantially the same
terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with unrelated parties. In the opinion of
management, such loans and loan commitments do not involve more than the
normal risk of collectibility or present other unfavorable features. The
Bank made loans within approved regulatory limits to other officers and
employees at interest rates which are similar to interest rates charged on
comparable loans to unrelated parties.
Director Field, Secretary of the Company, is a member of the law firm
of Sheehan, Phinney, Bass + Green, Professional Association, which firm
serves as general counsel to the Company and the Bank. Director Bass is of
counsel to the law firm of Cleveland, Waters & Bass, P.A., which firm is
counsel to the Bank's Trust and Investment Services Division and performs
other legal services.
Executive Compensation
Executive Compensation Committee Report
The Executive Compensation Committee of the Board of Directors has fur-
nished the following report on executive compensation:
The Executive Compensation Committee was first formed in 1970 as a
standing committee of the Board of Directors of Bank of New Hampshire,
National Association, and it performs a general oversight function in
connection with executive officer compensation and personnel matters for both
the Company and the Bank, including the review and recommendation of salaries
for senior personnel, and, other compensation matters as may, from time to
time, be requested by the Board. Following review and approval by the
<PAGE>
Committee, all issues pertaining to executive compensation are submitted to
the Board for approval. In calendar year 1993, the Committee met on seven
occasions.
The Committee meets as frequently as required, but not less than once
each year, to review and consider the compensation and perquisite
recommendations made by management for all senior executive officers. The
Committee, with the assistance of outside counsultants and the benefit of
data obtained from independent professional publications, has developed and
refined incentive and performance bonuses, and stock incentive plans or
programs for all employees including executive officers.
On July 25, 1990, and upon the unilateral recommendation of the
Chairman of the Board, the Committee endorsed, and the Board adopted, a
general salary freeze for all officers (vice presidents and above). On
January 22, 1992, upon the recommendation of the Committee, the Board
continued to maintain such salary freeze in effect, except in circumstances
in which an executive(s) assumed new, or substantially increased,
responsibilities. The sole exception has been an annual allocation of
$25,000 to the Merit Performance Plan (the "Merit Plan") which serves as a
source of funds to be awarded to employees who have made significant
contributions to the performance of the Company and the Bank, or who have
made significant efforts in the performance of his or her duties. All
employees are eligible to participate, except for the Chairman. All awards
are made at the sole discretion of the Chairman, subject to funding of the
Merit Plan by the Board. The 1990 salary freeze has also been made
applicable to the meeting fees paid to directors.
Since 1981, the compensation philosophy generally followed by the
Committee has been to develop a program which will attract, motivate, and
retain executives demonstrating outstanding potential and/or ability. The
manifestation of this philosophy is a compensation program that sets
compensation base bands (ranges) for the various executive positions which
are believed to be competitive in the labor market within which the Company
competes for qualified personnel. Upon this compensation base band, has been
superimposed a two part incentive program, the 1988 Incentive Bonus Plan (the
"Bonus Plan"). The first component of the Bonus Plan is an individual
performance bonus triggered whenever an individual employee exceeds goals
agreed to with supervising management; and second, a bonus program based upon
the Company's overall performance set against goals approved by the Board at
the beginning of each calendar year. All officers, with a vice president or
higher title are eligible to participate in the Bonus Plan. The Committee's
goal is to ensure that an appropriate linkage is maintained between executive
compensation, efficient operations, and the maintenance or enhancement of
shareholder value.
In addition to the Bonus Plan, the Committee recommended, following
consultation with independent advisors, and the Board adopted, the 1988 and
1990 Incentive Stock Plans (the "Stock Plan(s)") which were intended as an
incentive to retain employees during a tight labor market and to foster a
sense of ownership and direct participation of employees in the Company's
performance and market perception.
Further, on June 6, 1988, the Committee recommended and the Board
agreed, that it was in the best interest of the Company and its shareholders
to diminish the inevitable distractions of its senior executives often
associated with the personal uncertainties and risks created by pending or
threatened change of control of the Company, and to reinforce and encourage
the continued attention and dedication of such officers in the face of
potentially disturbing and disrupting uncertainties arising from the
possibility of a change of control. Change of control contracts were
executed by and between the Company and Davis P. Thurber, Chairman and
President; Paul R. Shea, Executive Vice President; and Gregory D. Landroche,
Senior Vice President, Treasurer, and Chief Financial Officer. See "Change
of Control Agreements with Executives."
During 1993, the Committee continued in effect the 1992 executive
compensation program outlined below:
1. Executive Officers other than Chief Executive Officer. The executive
compensation program consisted of (i) base salary; (ii) the possibility
of a Merit Plan award; (iii) participation in the 1990 Stock Plan;
<PAGE>
and, (iv) contribution by the Company to a Tax Deferred Savings &
Investment Plan, a, so-called, IRC 401(k) plan, (the "Savings & Investment
Plan"); and (v) as to Mr. Shea, a Deferred Compensation Agreement. The
Bonus Plan was not funded for 1993; and, except for individuals who were
assigned new, or increased responsibility, the salary freeze, first
implemented on July 25, 1990 remained in effect.
2. Chief Executive Officer. The Chief Executive Officer compensation
package consisted of (i) base salary; (ii) a Deferred Compensation
Agreement (iii) the 1990 Stock Plan; and, (iv) contributions by the
Company to the Savings & Investment Plan. The Bonus Plan was not
funded for 1993. The Chief Executive Officer's base salary remained
frozen at the July 25, 1990 level. In recommending the compensation
package for the Chief Executive Officer, the Committee followed the same
general philosophy as stated above for all executive officers.
However, beginning in December 1992, and continuing during the first
six months of 1993, the Committee conducted a fact finding exercise and
concluded that a review of the salary freeze was appropriate. The
Committee's actions were taken after substantive consideration of the
following factors:
1. The Company had reported profits for seven consecutive quarters.
2. The overall improvement noted in the Bank's most recently completed
Regulatory Report of Examination.
3. The market value of the Company's common stock had increased from a low
in 1991 of $3.50 per share to a high of $19.75 per share in the second
quarter of 1993, an increase of approximately $55 million in aggregate
shareholder value.
4. The Company was the only independent New Hampshire bank holding company
with assets of approximately $1 billion or more to have survived the
regional economic recession without some form of outside assistance.
Upon completion of the review, the Committee determined that it was in
the best interest of the shareholders of the Company to recognize the
significant efforts put forth and the results obtained by the senior
executives during the preceeding three years. Further, the Committee sought
to ensure that the compensation package provided by the Company remained
competitive in the New England banking market. Accordingly, the Committee
recommended, and the Board approved, on August 25, 1993, salary adjustments
and discretionary bonus payments for the Chief Executive Officer and each of
the named executive officers in the Summary Compensation Table presented on
page 13 of this Proxy Statement.
During the remainder of 1993, the Committee continued its comprehensive
review and assessed the advisability of reinstituting the Bonus Plan for
1994. The Committee concluded that the Bonus Plan, as revised, would provide
a meaningful incentive for management to further improve overall Company
performance and, as a result, enhance shareholder value. Accordingly, in
January, 1994, the Committee recommended, and the Board approved
reinstitution of the Bonus Plan for 1994.
The Committee maintains its independence, but relies, in part on the
advice and counsel of independent advisors in connection with its
compensation analysis and recommendations. It enjoys the prerogative to (i)
engage independent legal, and/or compensation counsel of its choosing from
time to time, and at any time, and (ii) to engage such staff or
administrative assistance as may be deemed necessary to maintain and preserve
an accurate record of the proceedings and business of the Committee.
<PAGE>
The Committee will continue to regularly monitor the Company's
performance and progress and refine the related executive compensation
packages as required. The Committee believes that a competitive base salary
augmented with a well defined and responsive employee incentive program
contributes significantly to the enhancement of shareholder value.
Submitted by:
February 23, 1994 Executive Compensation Committee
Richard S. West, Chairman
Raymond J. Creteau
Joseph G. Sakey
<PAGE>
Executive Compensation Summary Table
The following Summary Compensation Table is included to provide the
shareholders with a concise, comprehensive review of compensation awarded,
earned or accrued, in the reporting period. The Table includes individual
compensation information for the (i) Chief Executive Officer, and (ii) the
four other most highly compensated executive officers, for services rendered
in all capacities for each year in the reporting period ending December 31,
1993. Except for grants to all participants made pursuant to the 1990 Stock
Plan, no stock options or other rights to acquire shares of the Company have
either been awarded or are outstanding as to any executive officer.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Name Annual Restricted All Other
and Compen- Stock LTIP Compen-
Principal (1) (1) sation Awards Options/ Payouts sation
Position Year Salary($) Bonus($) ($) ($)(2) SARs(#) ($) ($)(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Davis P. Thurber 1993 248,800 30,000 - 2,220 - - 17,937
Chairman of the 1992 237,600 - - 3,227 - - 20,995
Board and 1991 237,600 - - 1,986 - - 21,119
President
Paul R. Shea 1993 177,500 25,000 - 1,065 - - 11,949
Executive Vice 1992 155,000 - - 1,511 - - 10,523
President of 1991 132,500 - - 930 - - 7,461
Company and President
and CEO of Bank
Gregory D. Landroche 1993 125,000 15,000 - 960 - - 4,030
Senior Vice 1992 110,000 - - 1,336 - - 3,748
President, Chief 1991 110,000 - - 822 - - 3,768
Financial Officer
and Treasurer
Allen G. Tarbox, Jr. 1993 97,500 5,000 - 1,275 - - 5,503
Senior Vice 1992 95,000 - - - - - 5,365
President, Data 1991 95,000 - - - - - 3,588
Services
Alice L. DeSouza 1993 95,000 7,500 - 690 - - 3,235
Senior Vice 1992 83,000 - - 1,151 - - 2,928
President, Admini- 1991 76,000 - - 708 - - 2,718
stration and Planning
</TABLE>
See Notes to Summary Compensation Table
<PAGE>
Notes to Summary Compensation Table
(1) On July 25, 1990, the Board voted to freeze salaries for
executives holding the office of vice president and above until further
notice. On January 23, 1991, such action was affirmed by the directors for
calendar year 1991; and, on January 22, 1992, the freeze on executive level
compensation was continued in effect for calendar year 1992, except for
special circumstances in which an executive assumes significantly new, or
substantially increased, responsibilities. On October 1, 1991, Mr. Shea,
Executive Vice President of the Company, was elected to the additional posts
of Bank President and Chief Executive Officer, and was awarded compensation
at the frozen level, i.e., $155,000 per annum, previously awarded to his
predecessor in office. Adjustments to Ms. DeSouza's salary in 1992 and 1991
recognized significantly new and substantially increased responsibilities in
both such years. The 1990 salary freeze on the compensation of Messrs.
Thurber, Landroche and Tarbox remained in place in 1992 and 1991. The
rationale for the increases in salary and the bonuses paid in 1993 to the
above named executive officers is provided in the Executive Compensation
Committee Report on pages 8 through 11 of this Proxy Statement.
(2) The Company maintains the 1990 Stock Plan whereby all full-time
employees receive shares of common stock which have an aggregate fair market
value or book value equal to a specified percentage of the employee's base
salary determined as of specified dates over specified periods.
Shares issued pursuant to the 1990 Stock Plan receive dividends and
have voting rights; however, certain restrictions apply which expire ratably
over one-year intervals after the grant date, through June 30, 1994.
As of December 31, 1993, Messrs. Thurber, Shea, Landroche and Tarbox
and Ms. DeSouza held restricted stock awards under the 1990 Stock Plan of
148, 71, 64, 85 and 46 shares, respectively, with the restrictions expiring
on June 30, 1994. The aggregate fair market value of the restricted stock
as of December 31, 1993 was $2,553, $1,225, $1,104, $1,466 and $794 for
Messrs. Thurber, Shea, Landroche and Tarbox and Ms. DeSouza,
respectively.
<PAGE>
(3) The Company maintains and contributes to the Savings & Investment
Plan and group term life insurance ("Life Insurance") for all of its regular
full-time employees. The Company's matching contribution made pursuant to
the Savings & Investment Plan and premiums paid for Life Insurance on behalf
of the above named executive officers follows:
Savings &
Investment Life
Plan Insueance
Davis P. Thurber 1993 $4,707 $13,230
1992 4,489 16,506
1991 4,490 16,629
Paul R. Shea 1993 2,998 8,951
1992 2,798 7,725
1991 2,646 4,815
Gregory D. Landroche 1993 2,273 1,757
1992 2,199 1,549
1991 2,198 1,570
Allen G. Tarbox, Jr. 1993 1,948 3,555
1992 1,900 3,465
1991 - 3,588
Alice L. DeSouza 1993 1,896 1,339
1992 1,658 1,270
1991 1,520 1,198
<PAGE>
Stock Performance Graph
The following line graph compares, for the last five years, the
performance of the Company's common stock to the NASDAQ Market Value Index
and a Peer Group Index, assuming $100 invested in the Company's common stock
and in each index and assuming reinvestment of dividends. The Peer Group
Index is comprised of ten New England bank holding companies with total
assets ranging from $750 million to $1.5 billion. The graph indicates a Peer
Group return on investment of approximately 58% for 1993 versus 38% for the
Company. During 1993, four of the bank holding companies in the Peer Group
entered into agreements to be acquired and/or merge with larger New England
bank holding companies. The effect of these four agreements was to signifi-
cantly increase the Peer Group return for 1993. If these four bank holding
companies were excluded from the Peer Group, the 1993 Peer Group return would
be 30% versus a return of 38% for the Company.
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG BANK OF NEW HAMPSHIRE CP, PEER GROUP AND BROAD MARKET.
Bank of
Measurement period New Peer Broad
(Fiscal year Covered) Hampshire Group Market
- -------------------- --------- ------- -------
Measurement PT -
__/--/88 $100.00 $100.00 $100.00
FYE __/__/89 $ 75.93 $ 82.37 $112.89
FYE __/__/90 $ 27.88 $ 37.07 $ 91.57
FYE __/__/91 $ 27.88 $ 54.58 $117.56
FYE __/__/92 $ 69.71 $100.35 $118.71
FYE __/__/93 $ 96.67 $163.38 $142.40
<PAGE>
Pension Plan
Effective April 1, 1989, The Retirement Plan for Employees of the Bank
of New Hampshire, National Association was renamed The Retirement Plan
for the Employees of Bank of New Hampshire Corporation and Affiliates
(the "Plan") pursuant to a recommendation made by the Retirement
Committee and vote by the Board on August 23, 1989, to consolidate the
Retirement Plans of Bank of New Hampshire, National Association,
The Suncook Bank ("Suncook") and Strafford National Bank ("Strafford")
into one Plan sponsored by the Company.
<TABLE>
<CAPTION>
Pension Plan Table
Average Annual Estimated Annual Retirement
Compensation Benefit With Indicated Years of
at Retirement Credited Service at Retirement
15 Years 20 Years 25 Years 30 Years 35 Years
<S> <C> <C> <C> <C> <C>
$100,000 $ 25,467 $ 33,956 $ 42,444 $ 50,933 $ 59,422
125,000 32,217 42,956 53,694 64,433 75,172
150,000 38,967 51,956 64,944 77,933 90,922
175,000 45,717 60,956 76,194 91,433 106,672
200,000 52,467 69,956 87,444 104,933 122,422(2)
225,000 59,217 78,956 98,694 118,433(2) 138,172(2)
235,840(1) 62,143 82,858 103,572 124,287(2) 145,001(2)
</TABLE>
(1) The maximum tax deductible contribution amount for the Plan year ending
December 31, 1993, was $676,193.
(2) Capped at maximum benefit limitation of $115,641
The Table above shows the estimated annual straight life retirement
benefits payable at retirement in 1993 for employees, by wage and years of
service classification. Projected benefit amounts are currently subject to
a maximum benefit limitation under the Internal Revenue Code (the "Code") and
for 1993 this amount was $115,641. In addition, effective for 1993, the
annual compensation applied for benefit purposes is restricted to $235,840
and such amount has been indexed each year commencing in 1990. The amounts
shown are the benefits expected to be paid and are in addition to any Social
Security benefits earned.
Each employee is entitled to participate in the Plan, effective
retroactively to January 1, 1989 for former Bank of New Hampshire, National
Association participants, and April 1, 1989 for Strafford and Suncook
employees. Such Plan is a defined benefit plan for which substantially all
employees are eligible after one year of service of 1,000 hours or more and
attainment of age twenty-one. The Plan provides for one hundred percent
vesting after five years of employment. Benefits are based upon (i)
compensation which is defined as amounts subject to the Code Form W-2
withholding plus deferrals less extraordinary payments (e.g., payments made
pursuant to change of control agreements with executives), and (ii) the years
of service. Retirement prior to age sixty-five, normal retirement date,
results in a proportionate reduction of benefits whereas retirement after age
sixty-five does not result in an increase of pension benefits.
The normal retirement benefit of a participant is determined by
multiplying the base percentage of 1.35%, times the average of a participants
three highest years of compensation (final average compensation) plus .45%,
the supplemental percentage, times the final average compensation in excess
of the covered compensation times years of benefit service up to a maximum
of thirty-five years.
The benefit to be paid to a participant at retirement, termination, or
death, shall not be less than the frozen accrued benefit determined on a
straight line basis under prior plan provisions as of December 31, 1988 for
the Bank of New Hampshire, National Association participants and as of March
31, 1989 for participants of plans maintained previously by Suncook and
Strafford.
<PAGE>
During the year ending December 31, 1993, none of the executive
officers of the Company received any payments from the Plan. Credited years
of service through January 1, 1994, for each of the named executive officers
of the Company are as follows: Davis P. Thurber-38 years; Paul R. Shea-13
years; Gregory D. Landroche-10 years; Allen G. Tarbox, Jr.-3 years; and Alice
L. DeSouza-12 years.
Change of Control Agreements With Executives
The Company, in 1988, entered into agreements (the "Agreements") with
three key executives, Davis P. Thurber, Paul R. Shea and Gregory D. Landroche
(the "Executives"). The agreements are intended to reinforce and encourage
the continued attention and dedication of the Executives in the face of
potentially disturbing and disrupting uncertainties arising from the
possibility of a change in control. A change of control is defined to
include (i) shareholder approval of a liquidation, dissolution, asset sale,
or reorganization, etc.; (ii) acquisition by an outsider of twenty percent
or more of the outstanding voting Common Stock of the Company; (iii)
incumbent Board members cease to be a majority of the Board; and (iv) the
Board determines that an outside group not presently identified by it
exercises direct or indirect influence on, or control of, management.
The Agreements are currently in effect and are subject to automatic
annual extensions of one year each unless notice of intent not to extend has
been given by the Company to the Executives or the actual retirement or
employment termination of the executive(s), not arising out of a change of
control, has occurred. In the event of a change of control, the Agreements
provide that there will be no adverse change in the executive's salary, bonus
opportunity, benefits, duties, indemnification and location of employment for
a period of three years after the change of control. If, during such period,
the executive's employment is terminated by his employer other than for cause
or disability, or by the executive for good reason (as defined in the
Agreements), the executive shall receive his accrued salary and vacation pay,
pro rata bonus, deferred compensation and a lump sum cash payment equal to
the sum of his highest base salary and recent bonus multiplied by a factor
of three for Mr. Thurber and two for Mr. Shea and Mr. Landroche. At the
election of the Executives, continuation of medical benefits and group term
life insurance coverage for not less than three years for Mr. Thurber and two
years for Mr. Shea and Mr. Landroche is also available. The Executives would
be entitled to all other amounts earned and an actuarial adjustment of
eligible retirement benefits.
<PAGE>
RE-ENGAGEMENT OF INDEPENDENT AUDITORS
The Board, upon recommendation of the Examining (Audit) Committee,
re-engaged the firm of Ernst & Young to serve as the independent auditors for
the Company for the year ending December 31, 1994. It is expected that
representatives of Ernst & Young will be at the Meeting to respond to
appropriate questions and will have the opportunity to make a statement if
they so desire. The Board recommends a vote FOR ratification of the
re-engagement of Ernst & Young.
OTHER MATTERS
The Board is unaware of any other matters which may be presented for
action at the Meeting. Should any other matters come before the Meeting, the
persons named on the enclosed proxy will have discretionary authority to vote
the shares represented by such proxies in accordance with their best
judgement.
PROPOSALS AND NOMINATIONS BY SHAREHOLDERS
Shareholder proposals, intended to be included in the Proxy Statement
for the 1995 annual meeting, must be received by the Company no later than
November 23, 1994.
The Company's bylaws provide that nominations for election to the Board
may be made by any shareholder of record entitled to vote at the annual
meeting subject to certain requirements. A shareholder who wishes to
recommend an individual for Board membership should direct the
recommendation, in writing, to any member of the Nominating Committee and
notice of intent to make a director nomination, must be received by the
President of the Company not less than ninety days in advance of the
Company's annual meeting. As to the 1995 Annual Meeting of Shareholders,
such notice shall be presumed to be timely if it is received by the
President, on, or before, January 25, 1995, and it is prepared in accordance
with the provisions of Section 2.2 of the bylaws. A copy of this bylaw
provision may be obtained by written request directed to the President of the
Company.
Dated: March 24, 1994 Davis P. Thurber
Chairman of the Board
