SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No.)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
GRANITE STATE BANKSHARES, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date Filed:
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[PROXY STATEMENT]
[GRANITE STATE BANKSHARES LETTERHEAD]
March 16, 2000
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders
(the "Annual Meeting") of Granite State Bankshares, Inc. ("Granite State" or
the "Company"), to be held on April 11, 2000 at 10:00 a.m., at the Keene
Country Club, Keene, New Hampshire.
Matters to be considered at the Annual Meeting include the election of
three directors and the ratification of the appointment of independent
auditors for the fiscal year ending December 31, 2000. During this meeting,
we will also report on the operations of Granite State. Directors and
officers of Granite State, as well as representatives of Grant Thornton LLP,
the Company's independent auditors, will be present at the Annual Meeting to
respond to any questions that our stockholders may have. For the reasons set
forth in the proxy statement, the Board unanimously recommends a vote "FOR"
each of the nominees listed under Proposal 1 and "FOR" Proposal 2.
Detailed information concerning the activities and operating
performance of Granite State during the year ended December 31, 1999, is
contained in our annual report, which is enclosed.
I hope you will be able to attend this meeting in person. Whether or
not you expect to attend, I urge you to sign, date and return the enclosed
proxy card so that your shares will be represented.
We look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ Charles W. Smith
Charles W. Smith
<PAGE>
GRANITE STATE BANKSHARES, INC.
122 West Street
Keene, New Hampshire 03431
(603) 352-1600
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on April 11, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Granite State Bankshares, Inc. will be held on April 11, 2000, at 10:00
a.m., at the Keene Country Club, West Hill Road, Keene, New Hampshire.
A proxy statement and proxy card for this Annual Meeting are enclosed
herewith. The Annual Meeting is for the purpose of considering and voting
upon the following matters:
1. The election of three directors, for terms of three years each,
or until their successors are elected and qualified;
2. The ratification of Grant Thornton LLP as independent auditors of
the Company for the fiscal year ending December 31, 2000; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof. Management is not aware of
any such other business.
Pursuant to the Bylaws, the Board of Directors has fixed March 3,
2000, as the record date for the determination of stockholders entitled to
notice of and to vote at the Annual Meeting. Only holders of Common Stock of
the Company as of the close of business on March 3, 2000 will be entitled to
vote at the Annual Meeting or any adjournments thereof. In the event there
are not sufficient votes for a quorum or to approve or ratify any of the
foregoing proposals at the time of the Annual Meeting, the Annual Meeting
may be adjourned in order to permit further solicitation of proxies by the
Company.
EACH STOCKHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE ANNUAL
MEETING, IS REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
WITHOUT DELAY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE
STOCKHOLDER MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED. A PROXY MAY
BE REVOKED BY FILING WITH THE SECRETARY OF GRANITE STATE A WRITTEN
REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER DATE. ANY STOCKHOLDER OF
RECORD PRESENT AT THE ANNUAL MEETING MAY REVOKE HIS OR HER PROXY AND VOTE
PERSONALLY ON EACH MATTER BROUGHT BEFORE THE ANNUAL MEETING.
By Order of the Board of Directors
/s/ Charles B. Paquette
Charles B. Paquette
Secretary
Keene, New Hampshire
March 16, 2000
<PAGE>
GRANITE STATE BANKSHARES, INC.
122 West Street
Keene, New Hampshire 03431
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
GRANITE STATE BANKSHARES, INC.
April 11, 2000
Solicitation and Voting of Proxies
This proxy statement is being furnished to stockholders of Granite
State Bankshares, Inc. ("Granite State" or the "Company"), in connection
with the solicitation by the Board of Directors of the Company ("Board of
Directors" or the "Board") of proxies to be used at the annual meeting of
stockholders (the "Annual Meeting") to be held on April 11, 2000, at the
Keene Country Club, Keene, New Hampshire, at 10:00 a.m., and at any
adjournments thereof.
This proxy statement and the accompanying proxy card are initially
being mailed to recordholders on or about March 16, 2000.
Regardless of the number of shares of common stock owned, it is
important that recordholders of a majority of the shares be represented by
proxy or in person at the Annual Meeting. Stockholders are requested to vote
by completing the enclosed proxy card and returning it signed and dated in
the enclosed postage-paid envelope. Stockholders are urged to indicate their
vote in the spaces provided on the proxy card. Proxies solicited by the
Board of Directors of Granite State will be voted in accordance with the
directions given therein. Where no instructions are indicated, signed
proxies will be voted FOR the election of each of the nominees for director
named in this proxy statement and FOR the ratification of Grant Thornton LLP
as independent auditors of the Company for the fiscal year ending December
31, 2000.
The Board of Directors knows of no additional matters that will be
presented for consideration at the Annual Meeting. Execution of a proxy,
however, confers on the designated proxyholders discretionary authority to
vote the shares in accordance with their best judgment on such other
business, if any, that may properly come before the Annual Meeting or any
adjournments thereof, including any motion to adjourn the Annual Meeting in
order to solicit additional proxies or otherwise.
The cost of solicitation of proxies in the form enclosed herewith will
be borne by Granite State. In addition to the solicitation of proxies by
mail, Registrar and Transfer Company, a proxy solicitation firm, will assist
the Company in soliciting proxies for the Annual Meeting and will be paid a
fee estimated to be $2,000, plus out-of-pocket expenses. Proxies may also be
solicited personally or by telephone by directors, officers and regular
employees of the Company or Granite Bank, a subsidiary of the Company (the
"Bank"), without additional compensation therefor. Granite State will also
request persons, firms and corporations holding shares in their names, or in
the name of their nominees, which are beneficially owned by others, to send
proxy materials to and obtain proxies from such beneficial owners, and will
reimburse such holders for their reasonable expenses in doing so.
Revocation of Proxy
A proxy may be revoked at any time prior to its exercise by the filing
of a written notice of revocation with the Secretary of the Company, by
delivering to the Company a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person. However, if you are a
stockholder whose shares are not registered in your own name, you will need
additional documentation from your recordholder to vote personally at the
Annual Meeting.
Voting Securities
The securities which may be voted at the Annual Meeting consist of
shares of common stock of Granite State, par value $1.00 per share (the
"Common Stock"), with each share entitling its owner to one vote on all
matters to be voted on at the Annual Meeting.
<PAGE> 1
The close of business on March 3, 2000 has been fixed by the Board of
Directors as the record date (the "Record Date") for the determination of
stockholders entitled to notice of and to vote at this Annual Meeting and
any adjournments thereof. On the Record Date, Granite State had 5,746,193
shares of Common Stock outstanding.
The presence, in person or by proxy, of the holders of at least a
majority of the total number of shares of Common Stock entitled to vote is
necessary to constitute a quorum at the Annual Meeting. In the event there
are not sufficient votes for a quorum or to approve or to ratify any
proposal at the time of the Annual Meeting, the Annual Meeting may be
adjourned in order to permit the further solicitation of proxies.
As to the election of directors, the proxy card being provided by the
Board of Directors enables a stockholder to vote for the election of the
nominees proposed by the Board, or to withhold authority to vote for one or
more of the nominees being proposed. Under New Hampshire law and the
Company's Certificate of Incorporation and Bylaws, directors are elected by
a plurality of shares voted, without regard to either (i) broker non-votes
or (ii) proxies as to which authority to vote for one or more of the
nominees being proposed is withheld.
Concerning the other matter to come before the Annual Meeting, by
checking the appropriate box, a stockholder may: (i) vote "FOR" the item;
(ii) vote "AGAINST" the item; or (iii) "ABSTAIN" with respect to the item.
This matter shall be determined by a majority of the votes cast FOR or
AGAINST. Hence, shares as to which the "ABSTAIN" box has been selected on
the proxy card and broker non-votes will not affect the vote as to that
matter.
Proxies solicited hereby will be returned to the proxy solicitors or
the Company's transfer agent, and will be tabulated by inspectors of
election designated by the Board. After the final adjournment of the Annual
Meeting, the proxies will be returned to the Company for safekeeping.
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information as to those persons
believed by management to be beneficial owners of more than 5% of the
Company's outstanding shares of Common Stock on the Record Date as disclosed
in certain reports regarding such ownership filed with the Company and with
the Securities and Exchange Commission ("SEC"), in accordance with Sections
13(d) or 13(g) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), by such persons or groups. Other than those persons listed below, the
Company is not aware of any person or group that owns more than 5% of the
Company's Common Stock as of the Record Date.
<TABLE>
<CAPTION>
Title of Name and Address Amount and Nature of Percent of
Class of Beneficial Owner Beneficial Ownership Class
- -------- ------------------- -------------------- ----------
<S> <C> <C> <C>
Common Stock Granite State Bankshares, Inc. 345,879<F1> 6.02%
Employee Stock Ownership
Plan and Trust ("ESOP")
122 West Street
Keene, New Hampshire 03431
<FN>
- --------------------
<F1> Messrs. Koontz, Smedley and Smith serve as the administrative
committee of the ESOP (the "ESOP Committee"). In addition, Future
Planning Associates, Inc., an unrelated corporate trustee, has been
appointed ESOP Trustee ("ESOP Trustee"). All shares held in the ESOP
Trust and allocated to participants (340,216 shares), will be voted by
the ESOP Trustee as directed by such participants. Unallocated shares
are voted by the ESOP Trustee in a manner that reflects the directions
received as to the allocated shares.
</FN>
</TABLE>
<PAGE> 2
PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING
PROPOSAL 1 -- ELECTION OF DIRECTORS
In accordance with the Bylaws, Granite State currently has ten (10)
directors. Directors of the Company are elected for staggered terms of three
years each, with a term of office of only one of the three classes of
directors expiring each year. Directors serve until their successors are
elected and qualified. The Bylaws of Granite State provide that no person
may serve as director after attaining 70 years of age.
All nominees named are presently directors of the Company. No person
being nominated as a director is being proposed for election pursuant to any
agreement or understanding between any person and Granite State.
In the event that a nominee is unable to serve or declines to serve
for any reason, it is intended that proxies will be voted for the election
of the balance of those nominees named and for such other persons as may be
designated by the Board of Directors. The Board of Directors has no reason
to believe that any of the persons named will be unable or unwilling to
serve. Unless authority to vote for the directors is withheld, it is
intended that the shares represented by the enclosed proxy card if executed
and returned will be voted FOR the election of all nominees proposed by the
Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL
NOMINEES NAMED IN THIS PROXY STATEMENT.
Information with Respect to Nominees, Continuing Directors and Executive
Officers
The following table sets forth, as of the Record Date, the names of
nominees, continuing directors and "named executive officers", as defined
below, their ages, the year in which each became a director and the year in
which their terms (or in the case of nominees, their proposed terms) as
director of the Company expire and the amount of Common Stock and the
percent thereof beneficially owned by each and all directors and executive
officers as a group.
<TABLE>
<CAPTION>
Expiration Percent
Director of Term as Amount and Nature of of
Name Age Since Director Beneficial Ownership<F1> Class
- ---- --- -------- ---------- ------------------------ -------
<S> <C> <C> <C> <C> <C>
NOMINEES
Philip M. Hamblet 54 1990 2003 54,436<F2> *
Joseph S. Hart 50 1999 2003 11,179<F3> *
James L. Koontz 65 1994 2003 16,452<F2> *
CONTINUING DIRECTORS
Dr. David M. Bartley 65 1997 2001 10,981<F2> *
Charles W. Smith 57 1986 2001 185,067<F4><F5> 3.20%
C. Robertson Trowbridge 68 1988 2001 30,692<F6> *
James C. Wirths III 63 1994 2001 34,010<F2> *
David J. Houston 65 1997 2002 35,941<F7> *
William Smedley, V 68 1986 2002 39,958<F2> *
E. Story Wright 60 1999 2002 16,564<F3> *
NAMED EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
William C. Henson 44 -- -- 77,787<F8><F9> 1.35%
Charles B. Paquette 47 -- -- 126,105<F8><F9> 2.19%
William G. Pike 48 -- -- 74,678<F8><F9> 1.29%
All directors and executive officers
as a group (15 persons) 741,171<F10><F11><F12> 12.51%
(footnotes on next page)
<PAGE> 3
<FN>
- --------------------
<F*> Represents less than 1.00% of the Company's voting securities.
<F1> Includes all shares of stock owned by each director or named executive
officer, their spouse, or as custodian or trustee, over which shares
such individuals effectively exercise sole or shared voting or
investment power.
<F2> Includes 9,000 shares subject to options granted to each of Messrs.,
Hamblet, Koontz, Bartley, Wirths and Smedley, which are currently
exercisable.
<F3> Includes 5,625 shares subject to options granted to each of Mr. Hart
and Ms. Wright, which are currently exercisable.
<F4> Includes 53,576 shares held by the ESOP Trust for the benefit of Mr.
Smith and over which Mr. Smith has current voting rights.
<F5> Includes 33,242 shares subject to options granted to Mr. Smith, which
are currently exercisable.
<F6> Includes 3,375 shares subject to options granted to Mr. Trowbridge,
which are currently exercisable.
<F7> Includes 1,125 shares subject to options granted to Mr. Houston, which
are currently exercisable.
<F8> Includes 24,738 shares, 27,890 shares, and 8,358 shares held by the
ESOP Trust for the benefit of Messrs. Henson, Paquette, and Pike,
respectively, and over which they have current voting rights.
<F9> Includes 21,442 shares subject to options granted to each of Messrs.
Henson, Paquette and Pike, which are currently exercisable.
<F10> Excludes shares held by the ESOP Trust that are allocated to non-
executive officers and employees.
<F11> Includes 27,321 shares (including 17,951 shares subject to options)
owned by two persons who are members of the Board of Directors of
Granite Bank, but not of the Company.
<F12> Includes 176,269 shares subject to options granted to Directors and
executive officers, which are currently exercisable and 114,512 shares
held by the ESOP Trust for the benefit of executive officers and over
which the executive officers have current voting rights.
</FN>
</TABLE>
Directors' Principal Occupation and Business Experience for Five Years
Dr. David M. Bartley is President of Holyoke Community College,
Holyoke, Massachusetts.
Philip M. Hamblet is President of Fred H. Hamblet, Inc., an electrical
contracting firm.
Joseph S. Hart is President and Chief Executive Officer of
Peterborough Oil Co., Inc., a wholesaler and retailer of branded gasolines
and an operator of convenience stores.
David J. Houston is President of David J. Houston Company, a surplus
equipment sales company and also is President of Hadley Properties, Inc.
James L. Koontz is Chairman of the Executive Committee of the Board of
Granite Bank. Effective March 1, 2000 Mr. Koontz is a business consultant to
and prior to that was President and Chief Executive Officer of Kingsbury
Corporation, a manufacturer of factory automation and machine tools.
William Smedley, V, is retired and formerly was the Vice President of
Human Resources at National Grange Mutual Insurance Co., Keene, New
Hampshire.
Charles W. Smith is Chairman of the Board and Chief Executive Officer
of Granite State and Granite Bank. Mr. Smith has been the Chief Executive
Officer of Granite Bank since October 1982. Mr. Smith is also Chairman of
the Board of the Federal Home Loan Bank of Boston.
C. Robertson Trowbridge is Chairman of the Board of Yankee Publishing,
Inc., a publishing firm.
James C. Wirths, III is retired and formerly was the Vice President of
Finance and Treasurer of Tilcon-Arthur Whitcomb, Inc., a building supplier
of ready-mix concrete.
E. Story Wright, has been active in community affairs, serving as a
trustee of Cheshire Hospital, New Hampshire Charitable Foundation, Monadnock
Community Foundation and Monadnock United Way and as a governor of New
Hampshire Public Television.
<PAGE> 4
Committees of the Board of Granite State
Granite State's Board of Directors has appointed an Executive
Committee consisting of Messrs. Smith, Koontz, Bartley, Smedley and Wirths,
an Audit Committee composed of Messrs. Wirths, Bartley, Hamblet, Houston,
Koontz and Trowbridge and a Personnel Committee which serves as the
Company's Compensation Committee consisting of Messrs. Smedley, Smith,
Bartley, Koontz and Hart. The Board of Directors of Granite State does not
have a standing Nomination Committee. The Executive Committee met 5 times
during 1999, the Audit Committee met 3 times and the Personnel Committee met
3 times. The Executive Committee is vested with the authority of the Granite
State Board in most matters between meetings of the Granite State Board. The
Audit Committee reviews audit procedures and internal controls at the
Company and the report and performance of the Company's independent
auditors. The Personnel Committee determines compensation for the officers
and other employees of the Company, as well as reviewing the employee
benefit plans of the Company. The Company's Board of Directors met 5 times,
and Granite Bank's Board of Directors met 13 times in 1999. All directors
were present for at least 75% of the meetings of the Board and the
Committees of which they were a member.
Directors' Compensation
Directors' Fees. The directors of Granite State are paid $1,000 for
each Board of Directors meeting attended and $150 for each committee meeting
attended. The directors of Granite State who are also directors of Granite
Bank, are paid $1,000 for attendance at board meetings and $150 for each
committee meeting attended of the subsidiary. Additionally, the Chairman of
the Executive Committee of the Board of Directors of the Bank is also paid a
$1,500 annual retainer. The directors may elect to defer their compensation.
Additionally, in the first quarter of each year Directors are given the
opportunity to receive eighty percent of their estimated fees for attendance
at Board meetings during the upcoming year, as a retainer payment, which
amount is utilized for the purpose of purchasing shares of Company Common
Stock in the open market for the benefit of the individual Directors. During
1999, directors received option grants under the 1997 Long-Term Incentive
Stock Benefit Plan. Directors serving on the board of directors of both
Granite State and Granite Bank (Directors Bartley, Hamblet, Hart, Koontz,
Smedley, Wirths and Wright) were each granted an option to purchase 650
shares of common stock. Directors serving on the Granite State board but not
on the board of Granite Bank (Directors Houston and Trowbridge) were each
granted an option to purchase 300 shares of common stock. Directors serving
on the Granite Bank board but not on the board of Granite State (two
persons) were each granted an option to purchase 450 shares of common stock.
The exercise price of all shares underlying the options granted is the fair
market value of the common stock on the date of grant.
EXECUTIVE COMPENSATION
Personnel Committee Report on Executive Compensation
Under rules established by the Securities and Exchange Commission
("SEC"), the Company is required to provide certain data and information in
regard to the compensation and benefits provided to the Company's Chief
Executive Officer and other executive officers of the Company. The
disclosure requirements for the Chief Executive Officer and other executive
officers include the use of tables and a report explaining the rationale and
considerations that led to fundamental compensation decisions affecting
those individuals. In fulfillment of this requirement, the Personnel
Committee, at the direction of the Board of Directors, has prepared the
following report for inclusion in this proxy statement.
The Company does not pay direct cash compensation to the executive
officers of the Company. However, the Company's executives are also
executive officers of the Bank and are compensated by the Bank. The members
of the Personnel Committee are four non-employee members of the Board of
Directors and Charles W. Smith, Chairman and Chief Executive Officer of
Granite State and the Bank. Mr. Smith offers input and advice as to
executive compensation affecting members of the senior management team other
than himself. Compensation decisions and recommendations made as to Mr.
Smith are made without the participation of Mr. Smith. All decisions by the
Personnel Committee relating to the compensation of the Company's executive
officers are reviewed by the full Board of Directors, except for decisions
about awards under certain of the Company's stock-based compensation plans,
which can be made solely by the Committee. The Committee meets at least
annually to review and make recommendations to the Board of Directors
regarding the compensation of the Chief Executive Officer and other
executives.
The decisions made by the Personnel Committee as to executive
compensation are subjective in nature, and not subject to specific criteria.
Set forth below are certain considerations taken into account in determining
compensation for the Chief Executive Officer ("CEO") and the other executive
officers.
<PAGE> 5
Base Salaries-In determining the base salaries for the CEO and other
executive officers, the committee reviews salaries to ensure that the Bank's
base salary levels are competitive with financial institutions similar in
size, geographic market and business profile in order for the Bank to
attract and retain persons of high quality. The Bank has retained the
services of Tom Warren and Associates, Inc., compensation consultants
("Warren"), to provide an independent outside survey and analysis of the
appropriateness of senior management compensation. Warren's salary data was
based upon financial institutions engaged in comparable activities and
provided information as to the median salary by position. Warren relied on
several established surveys in establishing the salary ranges for senior
management positions. The Committee relied upon the market salaries as
indicated by the Warren report in approving salary adjustments.
Bonus Awards-Bonus compensation for the executive officers generally consist
of cash bonuses and long-term benefits such as stock options and restricted
stock awards. There is no established incentive compensation or bonus plan.
Historically, the Personnel Committee has granted cash bonuses to executive
officers based on profitability and/or other factors regarding individual
accomplishments and performance towards meeting overall Company and Bank
goals and objectives.
The Company also maintains a stock benefit plan in order to promote the
growth and profitability of Granite State and to provide key officers and
employees with an incentive to achieve corporate objectives. Under the 1997
Long-Term Incentive Stock Benefit Plan, grants of stock options and shares
of restricted stock may be made to officers and employees.Information
concerning individual grants of options and restricted stock is included
elsewhere in this proxy statement.
Compensation of Chief Executive Officer-The Board of Directors approved a
base salary for the CEO for the year 1999 of $307,400 which represented a 6%
increase from the base salary provided in 1998. The salary level was based
in part upon the compensation survey provided by Warren. Mr. Smith's
contract calls for a minimum increase of 10% per year, although actual
increases, with the consent of Mr. Smith, historically have been less. The
increase in salary for 1999 was also based on the overall performance of the
Bank during 1998. The Committee also recommended that a bonus of $122,960 be
paid to the CEO. In arriving at the bonus amount, the committee considered
the Company's net earnings for 1999, including return on average assets and
return on average equity. The CEO also received an allocation of shares of
Common Stock under the Employee Stock Ownership Plan (which was established
in 1986), which allocation was automatic under the ESOP in accordance with
the provisions of the ESOP Plan. Under the 1997 Long-Term Incentive Stock
Benefit Plan, the Board granted Mr. Smith options to purchase 5,800 shares
of Common Stock at an exercise price equal to the market value of the Common
Stock at the date of grant, which represented 30.21% of all options granted
to employees in 1999. These options become exercisable over a five year
period. The Board also granted Mr. Smith 1,800 shares of restricted stock
under this plan, which shares vest over a five year period. In making the
grants of options and shares of restricted stock, the committee wanted to
provide Mr. Smith with additional performance incentives.
Personnel Committee
William Smedley, V, Chairman
David M. Bartley
Joseph S. Hart
James L. Koontz
Charles W. Smith
<PAGE> 6
Comparison of Five-Year Cumulative Total Return*
The graph below compares the cumulative total shareholder return on
Granite State common stock for the last five years against the cumulative
total return of the SNL New England Bank Index and the NASDAQ Total Return
Index for the same period.
Granite State Bankshares, Inc.
Total Return Performance
<TABLE>
<CAPTION>
Period Ending
--------------------------------------------------------------------
Index 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Granite State Bankshares, Inc. $100.00 $148.80 $200.81 $375.66 $337.13 $292.83
NASDAQ-Total US 100.00 141.33 173.89 213.07 300.25 542.43
SNL New England Bank Index 100.00 163.97 223.59 355.91 389.49 364.09
<FN>
- --------------------
<F*> Investment of $100 in Granite State's common stock, the SNL New
England Bank Index and the NASDAQ Total Return Index. Total return
assumes reinvestment of all dividends.
</FN>
</TABLE>
<PAGE> 7
Summary Compensation Table. The following table shows, for the years
ended December 31, 1999, 1998 and 1997, the cash compensation paid by
Granite State or its subsidiary, as well as certain other forms of
compensation paid or accrued for those years, to the executive officers of
the Company who each received total salary and bonus in excess of $100,000
in 1999 ("Named Executive Officers").
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
--------------------------------------------- -----------------------
Awards
-----------------------
Securities
Other Restricted Underlying
Annual Stock Options All Other
Name and Principal Position Year Salary($) Bonus($) Compensation ($)<F2> ($)<F4> (#) Compensation<F5>
- --------------------------- ---- --------- -------- -------------------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles W. Smith 1999 $319,300<F1> $122,960 $ -- $ 38,588 5,800 $ 7,273
Chairman and Chief Executive 1998 301,900<F1> 116,000 279,280<F3> 374,750 46,000 9,927
Officer of Granite State and 1997 270,082<F1> 101,933 132,804<F3> -- 75,000 12,947
Granite Bank
William C. Henson 1999 146,440 41,735 -- 19,294 2,900 7,273
Executive Vice President of the 1998 140,000 39,200 41,684<F3> 187,375 23,000 9,927
Company and Senior Executive 1997 125,198 35,055 19,674<F3> -- 37,500 12,947
Vice President and Chief Credit
Officer of the Bank
Charles B. Paquette 1999 146,440 41,735 -- 19,294 2,900 7,273
Executive Vice President, Chief 1998 140,000 39,200 77,114<F3> 187,375 23,000 9,927
Operations Officer and Secretary 1997 125,198 35,055 37,382<F3> -- 37,500 12,947
of the Company and Senior
Executive Vice President and
Chief Operations Officer of
the Bank
William G. Pike 1999 146,440 41,735 -- 19,294 2,900 7,273
Executive Vice President and 1998 140,000 39,200 -- 187,375 23,000 9,927
Chief Financial Officer of the 1997 125,198 35,055 -- -- 37,500 12,947
Company and Senior Executive
Vice President and Chief
Financial Officer of the Bank
<FN>
- --------------------
<F1> Includes Board of Directors' fees.
<F2> For the periods presented, there were no (a) perquisites over the
lesser of $50,000 or 10% of the individual's total salary and bonus
for each year; (b) payments of above-market preferential earnings on
deferred compensation; (c) payments of earnings with respect to long-
term incentive plans prior to settlement or maturation; or (d)
preferential discounts on stock.
<F3> Represents the reimbursement by the Company of taxes related to the
exercise by the executive of nonstatutory stock options, which
reimbursement approximated the tax benefit received by the Company.
<F4> Amounts reported in this column represent the fair value of the
restricted stock awards at the date of the award. With respect to
Messrs. Smith, Henson, Paquette and Pike, the number of unvested
shares at December 31, 1999 were 14,200 shares, 7,100 shares, 7,100
shares and 7,100 shares, respectively, and, based upon the year-end
price per share of Common Stock of $19.875, the value of these
unvested shares were $282,225, $141,113, $141,113 and $141,113,
respectively. Awards granted in 1999 and 1998 vest over five years.
Dividends paid with respect to all shares awarded are paid to the
recipient of the award.
<F5> With respect to Messrs. Smith, Henson, Paquette and Pike, reflects
amounts allocated to officers' accounts pursuant to the Employee Stock
Ownership Plan ("ESOP"). Amounts reflect the number of shares
allocated for the respective year, multiplied by the year-end price
per share of Common Stock, which were $19.875, $23.50 and $26.75 at
December 31, 1999, 1998 and 1997, respectively.
</FN>
</TABLE>
<PAGE> 8
Employment Agreements. Granite State and Granite Bank have entered
into contracts with Messrs. Smith, Paquette, Henson and Pike. Mr. Smith
receives a minimum base salary of $328,918 under this 5 year contract
subject to minimum annual increases of 10%. The contract automatically
renews each year, so that the remaining term is five years unless notice of
nonrenewal is provided by the Board in which event the contract expires five
years after such notice. In the event of a change in control as defined in
the contract of Granite State or Granite Bank, resulting in a termination of
employment, other than for cause, or upon certain other events of
termination of employment other than for cause, Mr. Smith would receive a
severance payment equal to the greater of the payments remaining under the
contract or three times his average annual salary for the five immediately
preceding years, plus an accelerated retirement benefit. In addition, the
Company is obligated to indemnify Mr. Smith for any golden parachute excise
tax, and any income tax with respect to such indemnification payment, for
which he would become liable in connection with a termination following a
change in control.
Messrs. Paquette, Henson and Pike have entered into contracts for
three year terms providing that in the event of a change in control as
defined therein, followed by a termination of employment or upon certain
other events of termination of employment, other than for cause, each would
receive a severance payment equal to three times their respective average
annual salaries (over the last 3 years) plus accelerated retirement benefits
and continued health insurance. These contracts automatically renew each
year, so that the remaining term is three years, unless notice of nonrenewal
is provided by the Board, in which event the contracts expire three years
after such notice.
Under all of the contracts, in the event of a change in control of
Granite State or Granite Bank, previously granted but unexercised stock
options will become fully vested and accelerated retirement benefits and
insurance coverage will be provided and continued. The officer will be
reimbursed for all legal expenses incurred in enforcing the employment
contract. Such payments will be made and such rights will vest if the
officer terminates his employment following a change in control, either
involuntarily or voluntarily.
Under current tax law, certain of the payments that may be made under
these agreements in the event of a change in control may not be deductible
by Granite State.
Stock Options. Options to purchase common stock may be granted under
the 1997 Long-Term Incentive Stock Benefit Plan.
Set forth below is information relating to options granted under the
Stock Option Plans to Named Executive Officers during 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term
- ------------------------------------------------------------------------------------------- ----------------------------------
Percent of Total
Options Granted
to Employees in Exercise or Expiration
Name Options Granted<F1> 1999 Base Price Date 5% 10%
- ---- ------------------- ---------------- ----------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Charles W. Smith 5,800 30.21% $21.44 10/01/09 $78,195 $198,162
William C. Henson 2,900 15.10% 21.44 10/01/09 39,098 99,081
Charles B. Paquette 2,900 15.10% 21.44 10/01/09 39,098 99,081
William G. Pike 2,900 15.10% 21.44 10/01/09 39,098 99,081
<FN>
- --------------------
<F1> Options granted to Messrs. Smith, Henson, Paquette and Pike vest over
a five year period. All options granted include a reload feature, which
automatically grants a new option, with an exercise price at the then
fair market value, equal in number to the number of shares used as
payment for the exercise.
</FN>
</TABLE>
<PAGE> 9
Set forth below is certain information concerning options exercised in
1999, by the Named Executive Officers, and options outstanding to such Named
Executive Officers at December 31,1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at In-the-Money Options at
Fiscal Year-End (#) Fiscal Year-End<F1>
------------------------- -------------------------
Shares Acquired Value Exercisable/Unexercisable Exercisable/Unexercisable
Name Upon Exercise Realized (#) ($)
- ---- --------------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Charles W. Smith -- $ -- 23,171 103,629 $59,225 $236,900
William C. Henson -- -- 14,799 48,601 38,853 109,210
Charles B. Paquette -- -- 14,799 48,601 38,853 109,210
William G. Pike -- -- 14,799 48,601 38,853 109,210
<FN>
- --------------------
<F1> Equals the difference between the aggregate exercise price of such
options and the aggregate fair market value of the shares of Common
Stock that would be received upon exercise, assuming such exercise
occurred on December 31, 1999, at which date the last sale price of
the Common Stock as quoted on the Nasdaq Stock Market was $19.875.
</FN>
</TABLE>
Defined Benefit Plan. Granite State provides a defined benefit
retirement plan for all eligible employees of Granite State and its
subsidiary, age 21 or older, who have completed at least one year of
credited service. Benefits earned become 100% vested after 5 years of
vesting service after the attainment of age 18. The normal form of benefit
at retirement is a straight life annuity. A participant's retirement benefit
will equal 2% of the participant's average annual earnings (over a 3-year
period) multiplied by the number of years of credited service (up to a
maximum of 30 years), reduced by 1-2/3% of his primary social security
benefit multiplied by the number of years of credited service (up to 30
years).
The following table indicates the estimated annual benefit payable to
employees under the Defined Benefit Plan by the salary and years of service
classifications indicated, assuming retirement at age 65, during 1999 and a
straight life annuity form of payment. As of December 31, 1999, Messrs.
Smith, Henson, Paquette and Pike, had 26 years and 10 months, 19 years, 25
years and 2 months and 8 years and 1 month, respectively, of credited
service for purposes of the defined benefit retirement plan. Messrs. Smith,
Henson and Paquette will have more than the maximum credited service of 30
years at the normal retirement age. Mr. Pike will have 24 years and 9 months
of credited service at the normal retirement age.
<TABLE>
<CAPTION>
Benefit Based Upon Years of Credited Service at Age 65
Average --------------------------------------------------------
Earnings 10 years 15 years 20 years 25 years 30 years
- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 40,000 $ 5,459 $ 8,188 $10,918 $13,647 $16,377
60,000 9,146 13,719 18,293 22,866 27,439
80,000 13,062 19,593 26,124 32,655 39,186
100,000 17,062 25,593 34,124 42,655 51,186
120,000 21,062 31,593 42,124 52,655 63,186
140,000 25,062 37,593 50,124 62,655 75,186
150,000 27,062 40,593 54,124 67,655 81,186
160,000 29,062 43,593 58,124 72,655 87,186
</TABLE>
Under the Internal Revenue Code of 1986 (the "Code"), the maximum
benefit payable under the Defined Benefit Plan per year, in 1999, was
$130,000. The compensation utilized in the formula to calculate pension
benefits consists of the salary reported in the "Summary Compensation
Table." The benefit amounts shown in the preceding table are subject to
deductions for Social Security benefits or other offset amounts. Under the
Code, only $160,000 of compensation may be considered for purposes of
determining retirement benefits.
<PAGE> 10
Supplemental Executive Retirement Plan. The Bank maintains a
Supplemental Executive Retirement Plan ("SERP"), which was restated and
amended in 1999. Prior to 1999, Mr. Smith was the only designated
participant in the SERP. Under the amended SERP, Mr. Smith is to be provided
a retirement benefit (less the benefits in fact provided under the defined
benefit plan) that is equal to 75% of his final 3 calendar years highest
average annual rate of salary at retirement. The SERP also is designed to
provide a benefit to replace amounts given up under the Bank's ESOP as a
result of Code restrictions. The benefit will be paid over the executive's
life or 20 years, whichever is greater. Under the amended SERP, the amount
of the projected benefit to which Mr. Smith would be entitled has been
actuarially determined to be $282,502 upon retirement at age 62.
In 1999, the SERP was amended to include Messrs. Henson, Paquette and
Pike as participants. If each of the new participants retires on or after
attaining age 65, he will be entitled to a benefit equal to the "specified
wage replacement" (70% for each of Messrs. Henson and Paquette; 50% for Mr.
Pike) multiplied by his projected annual salary at age 60 less the final
projected wage replacement for such person at age 65 from the Bank's defined
benefit plan. Although the supplemental benefit will be based on a specified
percentage of the executive's wages at age 60, the benefit will be expensed
and accrued to age 65. The projected benefits to which Messrs. Henson,
Paquette and Pike would be entitled at age 65 has been actuarially
determined to be $118,117, $118,117 and $64,967, respectively.
The Bank has established a rabbi trust which has purchased life
insurance policies on each of the executive's lives in order to ensure that
the Bank can satisfy its obligation under the SERP. The Bank makes annual
contributions in an amount equal to the expense accrual under the SERP, into
a secular trust for the benefit of the executives. In the event of the
executive's termination of employment within 36 months of a change in
control of the Bank, or in the event of the executive's death, the Bank is
required to make contributions to the secular trust from its general assets
or from the assets held by the rabbi trust which, when added to the
remaining assets in the secular trust, are sufficient to fund the
supplemental retirement income benefit. Contributions for the benefit of Mr.
Smith with respect to the SERP relating to the years 1999, 1998 and 1997
were $459,170, $256,873 and $256,873, respectively. Contributions for the
benefit of Messrs. Henson, Paquette and Pike relating to the year 1999 were
$50,738, $60,586 and $34,419, respectively.
Compensation Committee Interlocks
During the year ending December 31, 1999, the Company had no
"interlocking" relationships in which (1) any executive officer is a member
of the board of directors of another entity, one of whose executive officers
is a member of the Company's Board of Directors, or (2) any executive
officer is a member of the compensation committee of another entity, one of
whose executive officers is a member of the Company's Board of Directors.
Indebtedness of Management and Transactions with Certain Related Persons
In the ordinary course of business, Granite Bank makes loans to Granite
State's and the Bank's directors, officers and parties related to them. Such
transactions are on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions
with other persons, and do not involve more than normal risk of
collectibility or present other unfavorable features.
PROPOSAL 2 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company's independent auditors for the fiscal year ended December
31, 1999 were Grant Thornton LLP. The Company's Board of Directors has
reappointed Grant Thornton LLP to continue as independent auditors for the
Bank and the Company for the year ending December 31, 2000 subject to
ratification of such appointment by the stockholders.
Representatives of Grant Thornton LLP will be present at the Annual
Meeting. They will be given an opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions
from stockholders present at the Annual Meeting. Unless marked to the
contrary, the shares represented by the enclosed proxy will be voted FOR
ratification of the appointment of Grant Thornton LLP as the independent
auditors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF GRANT THORNTON LLP AS THE INDEPENDENT AUDITORS OF THE
COMPANY.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
David J. Houston, Director of the Company, filed a report on Form 4 on
November 23, 1999 to report the exercise of options to purchase 4,000 shares
of Common Stock during the month of March 1999, which Form 4 should have
been filed by April 10, 1999.
<PAGE> 11
ADDITIONAL INFORMATION
Stockholder Proposals
To be considered for inclusion in the proxy statement and proxy
relating to the Annual Meeting of Stockholders to be held in the year 2001,
a stockholder proposal must be received by the Secretary of the Company at
the address set forth on the first page of this Proxy Statement, not later
than November 16, 2000. Any such proposal will be subject to 17 C.F.R.
240.14a-8 of the Rules and Regulations under the Exchange Act.
Notice of Business to be Conducted at an Annual Meeting
The Bylaws of the Company provide an advance notice procedure for a
stockholder to properly bring business before an Annual Meeting. The
stockholder must give written advance notice to the Secretary of the Company
not less than one hundred twenty (120) days before the date on which the
Company's proxy statement was released to stockholders in connection with
the previous annual meeting. The advance notice by a stockholder must
include the stockholder's name and address, as it appears on the Company's
record of stockholders, a brief description of the proposed business, the
reason for conducting such business at the Annual Meeting, the class and the
number of shares of the Company's capital stock that are beneficially owned
by such stockholder and any material interest of such stockholder in the
proposed business. In the case of nominations to the Board, certain
information regarding the nominee must be provided. Accordingly, advance
written notice for certain business, or nominations to the Board of
Directors, to be brought before the Annual Meeting to be held in the year
2001, must be given to the Company by November 16, 2000. Nothing in this
paragraph shall be deemed to require the Company to include in its proxy
statement and proxy relating to the Annual Meeting any stockholder proposal
which does not meet all of the requirements for inclusion established by the
Securities and Exchange Commission in effect at the time such proposal is
received.
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING
The Board of Directors knows of no business which will be presented
for consideration at the Annual Meeting other than as stated in the Notice
of Annual Meeting of Stockholders. If, however, other matters are properly
brought before the Annual Meeting, it is the intention of the persons named
in the accompanying proxy to vote the shares represented thereby on such
matters in accordance with their best judgment.
Whether or not you intend to be present at this Annual Meeting, you
are urged to return your proxy promptly. If you are present at this Annual
Meeting and wish to vote your shares in person, your proxy may be revoked.
A COPY OF THE COMPANY'S FORM 10-K (WITHOUT EXHIBITS) FOR THE YEAR
ENDED DECEMBER 31, 1999, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS OF RECORD UPON
WRITTEN REQUEST TO GRANITE STATE BANKSHARES, INC., MR. WILLIAM G. PIKE,
EXECUTIVE VICE PRESIDENT, 122 WEST STREET, KEENE, NEW HAMPSHIRE 03431.
By Order of the Board of Directors
/s/ Charles B. Paquette
Charles B. Paquette, Secretary
Keene, New Hampshire
March 16, 2000
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
<PAGE> 12
[PROXY CARD]
REVOCABLE PROXY
GRANITE STATE BANKSHARES, INC.
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
ANNUAL MEETING OF STOCKHOLDERS
APRIL 11, 2000
The undersigned hereby appoints the Proxy Committee of the Board of
Directors, with full power of substitution, to act as attorneys and proxies
for the undersigned to vote all shares of Common Stock of the Company which
the undersigned is entitled to vote at an Annual Meeting of Stockholders
("Meeting") to be held at the Keene Country Club, Keene, New Hampshire at
10:00 a.m. (local time) on April 11, 2000. The Proxy Committee of the Board
of Directors is authorized to cast all votes to which the undersigned is
entitled as follows:
FOR ALL
FOR WITHHOLD EXCEPT
1. The election as directors of all nominees [ ] [ ] [ ]
listed (except as marked to the contrary
below):
Philip M. Hamblet Joseph S. Hart James L. Koontz
INSTRUCTION: To withhold your vote for any nominee(s), mark
"For All Except" and write that nominee's name on the line below.
________________________________________________________________________
FOR AGAINST ABSTAIN
2. The ratification of the appointment of Grant [ ] [ ] [ ]
Thornton LLP as auditors for the fiscal year
ending December 31, 2000.
Check box if you plan to attend Meeting--------------------------> [ ]
The Board of Directors recommends a vote "FOR" each of the nominees
listed under Proposal 1 and "FOR" Proposal 2.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED
ABOVE. IF ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING, INCLUDING WITHOUT
LIMITATION A MOTION TO ADJOURN OR POSTPONE THE ANNUAL MEETING TO ANOTHER
TIME AND/OR PLACE FOR THE PURPOSE OF SOLICITING ADDITIONAL PROXIES OR
OTHERWISE, THIS PROXY WILL BE VOTED BY THE PROXY COMMITTEE OF THE BOARD OF
DIRECTORS IN THEIR DISCRETION. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
-------------------------
Please be sure to sign and date | Date |
this Proxy in the box below. | |
---------------------------------------------------------------------------
| |
| |
-------Stockholder sign above-----------Co-holder (if any) sign above------
<PAGE>
Detach above card, sign, date and mail in postage paid envelope provided.
GRANITE STATE BANKSHARES, INC.
Should the above signed be present and elect to vote at the Meeting or
at any adjournment thereof and after notification to the Secretary of the
Company at the Meeting of the stockholder's decision to terminate this
proxy, then the power of said attorneys and proxies shall be deemed
terminated and of no further force and effect. This proxy may also be
revoked by sending written notice to the Secretary of the Company at the
address set forth on the Notice of Annual Meeting of Stockholders, or by the
filing of a later dated proxy card prior to a vote being taken on a
particular proposal at the Meeting.
The above signed acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of the Meeting and a proxy statement
dated March 16, 2000 and the 1999 Annual Report to Stockholders.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your
full title. If shares are held jointly, each holder should sign.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
<PAGE>
