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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 (S) 240.14a-11(c) or (S) 240.14a-12
FIRST NATIONAL LINCOLN CORPORATION
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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)(4) 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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First National Lincoln Corporation
March 19, 2004
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of First
National Lincoln Corporation ("the Company"), which will be held at St.
Patrick's Parish Center, Academy Hill, Newcastle, Maine 04553, on Tuesday,
April 27, 2004 at 11:00 a.m. Eastern Daylight Time. The accompanying Notice of
Annual Meeting of Shareholders and Proxy Statement describe the matters to be
considered and acted upon.
This year we will be fixing the number of directors at ten, electing three
directors, and ratifying independent auditors. You are also being asked to
consider and vote on a proposal to increase the number of authorized shares of
common stock with a change to the Articles of Incorporation. These matters are
discussed in greater detail in the accompanying Proxy Statement. The Board of
Directors unanimously recommends that you vote FOR each proposal. Your prompt
completion and return of the proxy will be appreciated.
It is important that you be represented at the Annual Meeting, regardless
of the number of shares that you own and whether or not you are able to attend
the meeting in person.
Please take the time to review the material, mark, sign, date, and return
the enclosed proxy in the envelope provided for your convenience.
If you have any questions about matters discussed in the Proxy Statement,
please contact me at 207-563-3195 or 1-800-564-3195, extension 2010. Your
continued support of First National Lincoln Corporation is sincerely
appreciated.
Very truly yours,
/s/ DANIEL R. DAIGNEAULT
Daniel R. Daigneault
President and Chief Executive Officer
First National Lincoln Corporation
Post Office Box 940, Main Street, Damariscotta, Maine 04543
Notice of Annual Meeting of Shareholders
To Be Held Tuesday, April 27, 2004
To the Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders of First
National Lincoln Corporation, the one-bank holding company of The First
National Bank of Damariscotta, will be held at St. Patrick's Parish Center,
Academy Hill, Newcastle, Maine 04553, on Tuesday, April 27, 2004 at 11:00 a.m.
Eastern Daylight Time, for the following purposes:
* To ratify the Board of Directors' vote to fix the number of directors at ten.
* To elect as directors of the Company the three (3) nominees listed in the
enclosed Proxy Statement dated March 19, 2004, for three-year terms.
* To approve the increase of the number of authorized shares of common stock to
18,000,000.
* To ratify the Audit Committee's selection of Berry, Dunn, McNeil & Parker as
independent auditors of the Company for 2004.
* To transact such other business as may properly come before the meeting or
any adjournment thereof.
By Order of the Board of Directors
/s/ CHARLES A. WOOTTON
Charles A. Wootton, Clerk
Damariscotta, Maine
March 19, 2004
Regardless of the number of shares you own, your vote is important. Whether or
not you expect to attend the meeting, the prompt return of your proxy will save
follow-up expenses and assure the proper representation of your shares.
Please mark, date, sign, and promptly return the enclosed proxy, using the
postage-paid envelope provided. You may revoke your proxy if you so desire at
any time before it is voted.
First National Lincoln Corporation
Post Office Box 940, Main Street, Damariscotta, Maine 04543
Proxy Statement
Annual Meeting of Shareholders
To be Held Tuesday, April 27, 2004
This Proxy Statement is being furnished to shareholders of First National
Lincoln Corporation (the "Company") in connection with the solicitation of
Proxies on behalf of the Board of Directors, to be used at the Annual Meeting
of Shareholders of the Company to be held at St. Patrick's Parish Center,
Academy Hill, Newcastle, Maine 04553, on Tuesday, April 27, 2004, at 11:00 a.m.
Eastern Daylight Time, and at any adjournment thereof for matters described in
the Notice of Annual Meeting of Shareholders. This Proxy Statement is first
being mailed to shareholders on March 19, 2004. This solicitation is made by
the Company, which will bear the expenses thereof.
The Proxy solicited hereby, if properly signed and returned to the Company
and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, each
Proxy received will be voted for the nominees for Directors described herein
and for approval of the matters described below and, upon the transaction of
such other business as may properly come before the meeting, in accordance with
the best judgment of the persons appointed as Proxies. Any shareholder giving a
Proxy has the power to revoke it at any time before it is exercised by (i)
filing with the Clerk of the Company a written notice thereof (Charles A.
Wootton, First National Lincoln Corporation, Post Office Box 940, 223 Main
Street, Damariscotta, Maine 04543); (ii) submitting a duly executed Proxy
bearing a later date; or (iii) appearing at the Annual Meeting and giving the
Clerk notice of his or her intention to vote in person. Proxies solicited
hereby may be exercised only at the Annual Meeting and any adjournment thereof
and will not be used for any other meeting.
Only shareholders of record at the close of business on February 17, 2004
(the "Voting Record Date") will be entitled to vote at the Annual Meeting. On
the Voting Record Date, there were 2,434,286 shares of Common Stock of the
Company, $0.01 par value per share, issued and outstanding, and the Company had
no other class of equity securities outstanding. Each share of Common Stock is
entitled to one vote at the Annual Meeting on all matters properly presented
thereat.
PROPOSAL 1: FIX THE NUMBER OF DIRECTORS AT TEN
The Bylaws of the Company provide that the Board of Directors shall consist of
not fewer than five (5) nor more than twenty-five (25) persons as determined by
the Board prior to each Annual Meeting, with Directors serving for "staggered
terms" of three years. A resolution of the Board of Directors adopted pursuant
to the Company's Bylaws has established the number of Directors at ten.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO RATIFY BOARD'S VOTE TO FIX THE
NUMBER OF DIRECTORS AT TEN.
PROPOSAL 2: ELECTION OF DIRECTORS
Set forth below is a list of the nominees for directors of the Company as
proposed by the Nominating Committee of the Board of Directors. In order to be
a candidate for a Director of the Company, each individual must meet the
following criteria:
* Be a citizen of the United States.
* Have the financial capacity to own and/or purchase the minimum equity
interest in First National Lincoln Corporation as specified in the Company's
bylaws.
* Be available to attend the monthly meetings of the Board of Directors and
Board Committee meetings, as scheduled from time to time.
* Be of good character and an experienced business professional.
* Contribute to the range of talent, skill and expertise appropriate for the
Board.
* Have the ability and willingness to represent the interests of the
Shareholders of the Company.
* Meet any additional criteria that the Office of the Comptroller of the
Currency may establish for Directors of a National Bank.
If any person named as nominee should be unwilling or unable to stand for
election at the time of the Annual Meeting, the holder of the Proxy will vote
for any replacement nominee or nominees recommended by the Board of Directors.
Each person listed below has consented to be named as a nominee, and the Board
of Directors knows of no reason why any of the nominees listed below may not be
able to serve as a Director if elected.
The following are nominees for three-year terms as Director Expiring in 2007:
Malcolm E. Blanchard has served as a Director of the Company since its
organization in 1985 and as a Director of The First National Bank of
Damariscotta (the "Bank"), the Company's wholly owned subsidiary, since 1976.
Mr. Blanchard has been actively involved, either as sole proprietor or as a
partner, in real estate development since 1970.
Randy A. Nelson has served as a Director of the Company and the Bank since
2004. He currently is the Douglas Professor of Economics and Finance at Colby
College, where he teaches corporate finance and economics. Prior to joining the
faculty of Colby in 1987, he taught for eight years in the business school at
the University of Delaware.
Stuart G. Smith has served as a Director of the Company and the Bank since
1997. A resident of Camden, he and his wife own and operate Maine Sport
Outfitters in Rockport and Lord Camden Inn and Bayview Landing in Camden,
Maine. Mr. Smith is also on the board and part owner of the Mid Coast
Recreation Center in Rockport, an indoor tennis and ice skating facility. In
addition, Mr. Smith serves as the Chairperson of the MSAD #28 Elementary School
New School Site Selection Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES FOR DIRECTOR.
Directors Continuing in Office:
The following Directors' terms will expire in 2005:
Katherine M. Boyd has served as a Director of the Company and the Bank since
1993. A resident of Boothbay Harbor, she owns the Boothbay Region Greenhouses
with her husband. Ms. Boyd serves as President of the Boothbay Region YMCA.
Carl S. Poole, Jr. has served as a Director of the Company since its
organization in 1985 and has served as a Director of the Bank since 1984. Mr.
Poole is President, Secretary, and Treasurer of Poole Brothers Lumber, a lumber
and building supply company with locations in Damariscotta, Pemaquid and
Boothbay Harbor, Maine.
David B. Soule, Jr. has served as a Director of the Company and the Bank since
1989. Mr. Soule has been practicing law in Wiscasset since 1971. He served two
terms in the Maine House of Representatives, is a past President of the Lincoln
County Bar Association and is a former Public Administrator, Lincoln County. He
also serves as Trustee of the Wiscasset Public Library and has served as
Selectman, Planning Board Chair and other volunteer positions with the Town of
Westport.
Bruce B. Tindal has served as a Director of the Company and the Bank since
1999. Mr. Tindal has been a licensed real estate broker since 1974. Mr. Tindal
formed and is owner of Tindal & Callahan Real Estate in Boothbay Harbor, which
has been in operation since 1985. Mr. Tindal serves on the Board of Directors
of the St. Andrews Village Association, a subsidiary of St. Andrews Hospital.
Mr. Tindal is also a member of the National Association of Realtors, Council of
Residential Specialists, Real Estate Buyers Agent Council and the Boothbay
Harbor Rotary Club.
The following Directors' terms will expire in 2006:
Daniel R. Daigneault has served as President, Chief Executive Officer and as a
member of the Board of Directors of the Company and the Bank since 1994. Prior
to being employed by the Bank, Mr. Daigneault was Vice President, Senior
Commercial Loan Officer and Chief Financial Officer at Camden National Bank,
Camden, Maine. He is a member of the American Bankers Association's Government
Relations Council and a member of the University of Maine Business School
Advisory Board. Mr. Daigneault is past Chairman of the Maine Bankers
Association and past President of the Boothbay Region YMCA Board of Trustees.
Dana L. Dow has served as a Director of the Company and the Bank since 1999.
Mr. Dow is President of Dow Furniture, located in Waldoboro, Maine, which he
purchased from his father in 1977 and Dow's Fine Furniture located in Rockland,
Maine. Prior to purchasing Dow Furniture, Mr. Dow taught chemistry and physics
at Medomak Valley High School.
Robert B. Gregory has served as a Director of the Company and the Bank since
1987 and has served as Chairman of both the Company and the Bank since
September 1998. Mr. Gregory has been a practicing attorney since 1980, first in
Lewiston, Maine and since 1983 in Damariscotta, Maine.
There are no family relationships among any of the Directors of the Company,
and there are no arrangements or understandings between any Director and any
other person pursuant to which that Director has been or is to be elected. No
Director of the Bank or the Company serves as a Director on the board of any
other corporation with a class of securities registered pursuant to Section 12
of the Securities Exchange Act of 1934 or that is subject to the reporting
requirements of Section 15(d) of the Securities Exchange Act of 1934, or of any
company registered as an investment company under the Investment Company Act of
1940, as amended.
Director Independence
The Board reviewed the independence of the Company's directors in February 2004
on the basis of the standards adopted by the NASDAQ. In this review, the Board
considered transactions and relationships between each director, and any member
of his or her immediate family and of the Company or the Bank and between
certain entities in which any director or any immediately family member has
certain interest, on the one hand and the Company or the Bank, on the other
hand. The purpose of this review was to determine which of such transactions or
relationships were inconsistent with a determination that the director is
independent under the NASDAQ rules.
As a result of the review, the Board affirmatively determined that all of
the directors are independent of the Company, the Bank and under the NASDAQ
rules with the exception of President Daigneault.
About the Board of Directors and Its Committees
As of the date of this Proxy Statement, First National Lincoln Corporation had
a Board comprised of ten directors. During 2003 there were 12 regular Board
meetings, one special Board meeting and one Annual Meeting. All directors
attended at least 75% of Board meetings and meetings held by Committees of
which they were members in 2003, and the aggregate attendance at Board and
Committee meetings by all members of the Board of Directors in 2003 was in
excess of 90%. All Directors are expected to attend the Annual Meeting of
Shareholders, and all Directors were in attendance at the 2003 Annual Meeting.
There are three standing committees of the Company's Board of Directors:
Audit, Options and Nominating.
Audit Committee. The members of the Company's Audit Committee are David B.
Soule, Jr., Chairman, Dana L. Dow, Robert B. Gregory and Randy A. Nelson. This
committee met four times during 2003. The Company's Audit Committee receives
and reviews reports on examinations and accounting audits of the Company, and
works to ensure the adequacy of operating practices, procedures and controls.
The Company's Board of Directors has adopted a written charter for the
Company's Audit Committee.
Nominating Committee. The members of the Company's Nominating Committee
consisted of Malcolm E. Blanchard, Chair, Robert B. Gregory, Carl S. Poole,
Jr., and Stuart G. Smith. This committee met three times during 2003. The
Company's Nominating Committee is responsible for the nomination of Board of
Director members, establishing the tenure and the retirement policies for
members of the Board of Directors and reviewing the Board of Directors' overall
effectiveness. Each of the members of the Nominating Committee is independent
as defined under the listing standards of the NASDAQ stock market.
Options Committee. The members of the Company's Options Committee consisted of
Malcolm E. Blanchard, Chair, Robert B. Gregory, Carl S. Poole, Jr., and Stuart
G. Smith. This committee met one time during 2003. The Company's Options
Committee is responsible for administering the 1995 Stock Option Plan which
provides for grants of incentive stock options to purchase Company common
stock.
Compensation Committee. The Company's Compensation Committee is a standing
committee of the Bank's Board of Directors since all executive compensation is
paid by the Bank. The Committee consisted of Malcolm E. Blanchard, Chair,
Robert B. Gregory, Carl S. Poole, Jr., and Stuart G. Smith. This committee met
one time during 2003. None of the members of this committee served on a similar
committee for any other company. The function of this committee is to establish
the compensation of the Chief Executive Officer and to review the compensation
of other senior executive officers.
In addition to the Compensation Committee, there are five other standing
committees of the Bank's Board of Directors: Executive, Audit, Asset/Liability,
Trust, and Directors' Loan. Certain members of management also serve on some
committees of the Bank.
Director Compensation
In 2003, each of the outside directors of the Bank, with the exception of the
Chairman of the Board, received a director's fee in the amount of $550 for each
meeting attended and $300 for each meeting attended of a committee of which the
director is a member. The Chairman of the Board received an annual fee of
$19,000. The Chairman of the Executive Committee also received a stipend of
$4,500 in addition to meeting fees paid for meetings attended. In addition to
the above referenced fees, each of the outside directors was reimbursed for 85%
of the cost of his or her health insurance premiums. This reimbursement amount
is equivalent to the average rate provided to employees of the Company. Certain
Board members were also paid fees for appraisals, consulting services and legal
services, and such fees are on terms no more favorable to the recipient than
are generally paid by the Bank for such services to other providers in the
area. Fees and health insurance premiums paid by the Bank to its Directors as a
group totaled $168,000 in 2003, but no fees are paid to Directors of the
Company. President Daigneault, who is the only director who is also an employee
of the Company, receives no additional compensation for serving on the Board of
Directors of the Company or the Bank.
Security Ownership of Directors, Management and Principal Shareholders(1)
The following table sets forth the number of shares of common stock of
the Company beneficially owned as of February 17, 2004 by (i) each person known
by the Company to own beneficially more than five percent of the Company's
common stock, (ii) each current director of the Company and nominee for a
position on the Board, (iii) the named executive officers, and (iv) all
executive officers and directors of the Company as a group. Except as otherwise
indicated below, each of the directors, executive officers and shareholders
owning more than five percent of the Company's stock has sole voting and
investment power with respect to all shares of stock beneficially owned as set
forth opposite his or her name.
Directors & Executive Officers
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Name Position Term Shares Percent
Age(2) Expires Owned Owned
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Malcolm E. Blanchard Director of the Bank and the Company; 2004 27,361 1.12%
69 Chairman, Executive Committee
Katherine M. Boyd Director of the Bank and the Company; 2005 11,283 *
52 Chairman, Trust Committee
Daniel R. Daigneault President, Chief Executive Officer 2006 78,890(3) 3.24%
51 and Director of the Bank and the Company
Dana L. Dow Director of the Bank and the Company 2006 1,795 *
52
Robert B. Gregory Chairman of the Board of Directors of 2006 14,557 *
50 the Bank and the Company
Randy A. Nelson Director of the Bank and the Company 2004 325 *
51
Carl S. Poole, Jr. Director of the Bank and the Company; 2005 91,834 3.77%
58 Chairman, Asset/Liability Committee
Stuart G. Smith Director of the Bank and the Company; 2004 30,163 1.24%
51 Chairman, Directors' Loan Committee
David B. Soule, Jr. Director of the Bank and the Company; 2005 5,889 *
58 Chairman, Audit Committees of the
Bank and the Company
Bruce B. Tindal Director of the Bank and the Company 2005 2,930 *
53
Walter F. Vietze Senior Vice President - Senior n/a 20,714(3) *
62 Operations Officer of the Bank.
F. Stephen Ward Treasurer & Chief Financial Officer n/a 27,542(3) 1.13%
50 of the Company; Senior Vice President
and Chief Financial Officer of the Bank
Charles A. Wootton Clerk of the Company; Senior Vice n/a 5,089(3) *
47 President Banking Services Officer
and Senior Loan Officer of the Bank
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Total Ownership of all Directors and
Executive Officers as a group 332,592 13.66%
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Owners of 5% Daniel P. & Edith I. Thompson 162,804 6.69%
or More 20 Pounds Road, New Harbor, ME 04545
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* Less than one percent of total outstanding shares
(1)For purposes of this table, beneficial ownership has been determined in
accordance with the provisions of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended. In general, a person is deemed to be the
beneficial owner of a security if he/she has or shares the power to vote or to
direct the voting of the security or the power to dispose or direct the
disposition of the security, or if he/she has the right to acquire beneficial
ownership of the security within 60 days. The figure set forth includes
director's qualifying shares owned by each person.
(2)As of December 31, 2003.
(3)Includes exercisable stock options.
Executive Officers
Each Executive Officer of the Company and the Bank is identified in the
following table, which also sets forth their respective ages, offices and
periods served as an Executive Officer of the Company or the Bank:
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Name & Age (1) Office & Position Period Served
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Daniel R. Daigneault President & Chief Executive Officer 1994 to date
51 of the Company and of the Bank
F. Stephen Ward Treasurer & Chief Financial Officer 1993 to date
50 of the Company; Senior Vice President and
Chief Financial Officer of the Bank;
Principal of Pemaquid Advisors
Charles A. Wootton Clerk of the Company, Senior Vice President 2000 to date
47 Banking Services Officer and Senior Loan
Officer of the Bank
Walter F. Vietze Senior Vice President and Senior 1984 to date
62 Operations Officer of the Bank
Michael T. Martin Senior Vice President and Credit 1993 to date
48 Administration Officer of the Bank
Richard M. Elder Vice President, Retail Services 2002 to date
38
Susan A. Norton Vice President, Human Resources and 2002 to date
43 Compliance
William M. Hunter, II Managing Principal, Pemaquid Advisors 2003 to date
53
R. Kraig Buthy Controller 2003 to date
38
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(1) As of December 31, 2003
Daniel R. Daigneault has served as President, Chief Executive Officer and as a
member of the Board of Directors of both the Company and the Bank since 1994.
Prior to being employed by the Company and the Bank, Mr. Daigneault was Vice
President, Senior Commercial Loan Officer and Chief Financial Officer at Camden
National Bank, Camden, Maine.
F. Stephen Ward has served as Treasurer & Chief Financial Officer of the
Company since 1994 and as Chief Financial Officer of the Bank since 1993. Mr.
Ward has been employed by the Bank since 1990 and served as Assistant Vice
President and Marketing Officer from 1990 to 1993. From 1978 to 1990 Mr. Ward
was employed by Down East Enterprises, Inc.
Charles A. Wootton has been employed by the Bank since January 2000. In 2001,
Mr. Wootton was promoted to Senior Vice President for Banking Services and
Senior Loan Officer. From 1981 to 2000 Mr. Wootton was employed by Camden
National Bank, serving as branch manager, commercial loan and business
development officer. In 1996, Mr. Wootton became Vice President responsible for
branch administration.
Walter F. Vietze has been employed by the Bank since 1984. From 1979 to 1984,
Mr. Vietze was employed by Casco Bank, Portland, Maine. His primary
responsibilities involved providing online banking services to correspondent
banks. Prior to 1979, Mr. Vietze was affiliated with BayBanks in Massachusetts.
Michael T. Martin has been employed by the Bank since 1993 and was promoted to
Senior Vice President for Credit Administration in 2001. He was employed by
Fleet Bank from 1980 to 1992 and by Canal National Bank from 1977 to 1980. His
primary responsibilities were in Loan Review and Credit Administration.
Richard M. Elder has served as Vice President, Retail Services since 2000. Mr.
Elder previously served as Manager of the Bank's Boothbay Harbor branch and
Senior Commercial Loan Officer. Mr. Elder has been employed by the Bank since
1993.
Susan A. Norton has been employed by the Bank since 1992 and was promoted to
Vice President, Human Resources and Compliance in 2000. In 1995, Ms. Norton was
the Assistant Compliance Officer and Education Officer. She also holds the
position of CRA Officer as well as being the Compliance Officer for the
Company.
William M. Hunter, II joined the Company in 2001 with the acquisition by
Pemaquid Advisors of White Pine Asset Management. In 2002, Mr. Hunter was named
as Chief Investment Officer and in 2003 he was promoted to Managing Principal
of Pemaquid Advisors. Prior to joining the Company, Mr. Hunter was Executive
Vice President in charge of KeyCorp's national trust business.
R. Kraig Buthy has been employed by the Bank as Controller since 2003. Prior to
joining the Bank, Mr. Buthy was Controller at Sunday River Ski Resort in
Bethel, Maine.
There are no family relationships among any of the Executive Officers, nor
are there any arrangements or understandings between any Executive Officer and
any other person pursuant to which that Executive Officer has been or is to be
elected.
The Federal Reserve Act permits the Bank to contract for or purchase
property from any of its Directors only when such purchase is made in the
regular course of business upon terms not less favorable to the Bank than those
offered by others unless the purchase has been authorized by a majority of the
Board of Directors not interested in the transaction. Similarly, the Federal
Reserve Act prohibits loans to Executive Officers of the Bank unless such loans
are on terms not more favorable than those afforded other borrowers and certain
other prescribed conditions have been met.
The Bank has had, and expects to have in the future, banking transactions
in the ordinary course of its business with Directors, Officers and principal
shareholders of the Company and their affiliates. All such transactions have
been made upon substantially the same terms, including interest rates and
collateral, as those prevailing at the same time for comparable transactions
with others. In the opinion of management, such loans have not involved more
than the normal risk of collectibility nor have they presented other
unfavorable features. The total amount of loans outstanding at December 31,
2003 to the Company's Directors, Executive Officers and their associates was
$9,048,000, which constituted 2.27% of the Bank's total loans outstanding at
that date.
Report of Compensation Committee on Executive Compensation
The Compensation Committee consists of four outside members of the Board of
Directors. This Committee has the responsibility for conducting the annual
performance evaluation of the Chief Executive Officer. The Committee is also
responsible for determining the compensation of the Chief Executive Officer and
approving the compensation of the other senior executive officers.
The Company is committed to providing competitive compensation packages to
attract and retain quality high performance executives who can and do make
major contributions to the Company's overall success. The compensation package
generally includes base salary, cash bonuses, stock option grants and other
benefits which the Committee may deem appropriate to remain competitive and
reward the executive for high performance.
Base Salaries
The amount of base compensation potentially payable to the Chief Executive
Officer and other senior executive officers is determined by reviewing
independent salary surveys of compensation of officers for similar financial
institutions located primarily in the New England region. Base salaries are
targeted at market levels taking into consideration the executive's level of
responsibility, experience, knowledge, leadership and attainment of performance
goals and objectives.
Annual Bonuses
In 1994, the Company instituted a formal performance-based compensation program
called "Performance Compensation for Stakeholders". The objective of the
program is to align the performance of all employees with the Company's short
term and long term objectives. In 2003, total cash payout under this
Stakeholder Performance Compensation program was 18.50% of the participating
employees' base salaries paid to all eligible employees.
The performance compensation program's overall objective is to maximize
the long-term viability of the Company and increase shareholder value. It
addresses this by tying the bonus payout to multiple goals which include
profitability, growth, productivity and loan quality. The guiding principle is
to reach a balance of profitability, growth, productivity and loan quality
which should collectively have a positive impact on maximizing long-term
shareholder value. The Committee believes that this bonus program rewards
current performance without sacrificing the achievement of long-term goals.
Each year specific key performance indicators are chosen along with company
wide financial performance trigger levels. In 2003 some of the indicators were:
loan volume, deposit volume, nonperforming loan levels, non-interest income,
net interest income and the efficiency ratio. Since its introduction in 1994 in
the opinion of Management and this Committee, the program has been successful
in meeting its objectives as measured by the Company's performance over this
same period.
In addition to this bonus program the Committee, with the consent of the
Board of Directors, may also establish a discretionary bonus pool. From this
available pool the CEO with the consent of this Committee may grant additional
cash bonuses to selected employees in recognition of their outstanding
performance during the year. The Chief Executive Officer has been excluded for
eligibility under this discretionary bonus program since 2003. This Committee,
however, may from time to time with the consent of the Board of Directors grant
the Chief Executive Officer a cash bonus in addition to the formal Stakeholder
Performance Compensation program.
Compensation of Chief Executive Officer
As previously noted, the amount of base salary potentially payable to the Chief
Executive Officer was determined by reviewing independent salary surveys of
CEOs of similar financial institutions located in New England. The Committee
took into consideration the actual salaries paid to CEOs of these banks and
the performance of the Company in comparison to the selected peer group.
At the beginning of each year the Chief Executive Officer and the Board of
Directors agree to a set of performance objectives for the Company as a whole
and the CEO individually. Throughout the year the attainment of the performance
objectives is carefully monitored and evaluated. These performance objectives
are a combination of Company financial targets such as attainment of certain
net income levels, return on equity levels, and increases in earnings per
share. In addition, goals are set for asset growth as well as loan quality
targets. Goals are also set for non-financial performance items such as
implementation of strategic plan goals and compliance with regulatory matters.
For the year ended December 31, 2002, the Company posted outstanding
performance results with an 18.46% increase in net income and a Return on
Average Equity of 16.34%. In addition to these strong financial performance
results the Chief Executive Officer also did an excellent job at meeting all of
his other performance objectives. Therefore, based on these results as well as
the review of base salaries of CEOs of peer group companies, the Chief
Executive Officer's base compensation for 2003 was set at $241,500,
representing an $11,500 or 5.00% increase in base salary over the $230,000 base
salary set for 2002.
In addition to the above base salary, the Chief Executive Officer also
earned a cash bonus of 18.50% under the Company's Stakeholder Performance
Compensation program for all employees. This accounted for the $44,678
disclosed in the compensation table.
2003 Compensation Committee Members:
Malcolm E. Blanchard, Chair
Robert B. Gregory
Carl S. Poole, Jr.
Stuart G. Smith
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
During 2003, Directors Gregory, Blanchard, Poole and Smith served as members of
the Compensation Committee. No member of the Committee was, or ever has been,
an officer or employee of the Company or the Bank. All Committee members are
customers of and engage in transactions with the Bank in the ordinary course of
business. As described in the section entitled "Certain Relationships and
Related Transactions", all loans to such individuals were made on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other persons and, in the opinion of
Management, did not involve more than the normal risk of collectability or
present other unfavorable features.
Executive Compensation
The table below sets forth the cash compensation and certain other compensation
paid to the President & Chief Executive Officer as well as the Treasurer &
Chief Financial Officer, the Senior Vice President/Senior Loan Officer and the
Senior Vice President/Senior Operations Officer during 2003, 2002 and 2001. No
other Executive Officers of the Company received compensation in excess of
$100,000 for the years ended December 31, 2003, 2002 and 2001.
-------------------------------------------------------------------------------
Name Annual Long-Term
and Compensation Compensation
Principal ----------------------------- ------------
Position Year Salary Bonus(1) Other(2) # Options
-------------------------------------------------------------------------------
Daniel R. Daigneault 2003 $ 241,500 $ 44,678 $ 17,387 -0-
President and CEO 2002 $ 230,000 $ 49,960 $ 19,217 -0-
2001 $ 195,000 $ 48,750 $ 14,660 -0-
-------------------------------------------------------------------------------
F. Stephen Ward 2003 $ 131,250 $ 31,281 $ 13,728 -0-
Treasurer and CFO 2002 $ 125,000 $ 25,000 $ 11,283 -0-
2001 $ 115,000 $ 10,560 $ 11,972 -0-
-------------------------------------------------------------------------------
Charles A. Wootton 2003 $ 115,500 $ 28,868 $ 12,079 -0-
SVP and Senior Loan 2002 $ 110,000 $ 22,720 $ 11,800 5,000
Officer 2001 $ 80,000 $ 11,200 $ 10,000 -0-
-------------------------------------------------------------------------------
Walter F. Vietze 2003 $ 86,500 $ 18,503 $ 6,684 -0-
SVP and Senior 2002 $ 83,000 $ 13,836 $ 5,973 -0-
Operations Officer 2001 $ 78,000 $ 10,920 $ 5,396 -0-
-------------------------------------------------------------------------------
(1) Bonuses are listed in the year earned and normally accrued. Such bonuses
may be paid in the following year. (2) (a) Amounts shown include contributions
paid by the Company to the respective accounts of the named Executive Officers
in the 401(k) Plan. In 2003 the Company and the Bank contributed to the Bank's
401(k) Plan a matching amount for the salary deferred by Messrs. Daigneault,
Ward, Wootton and Vietze equal to 3.0% of their respective earnings and a
profit-sharing component of 2.5% for 2003 and 3.0% for 2002 and 2001, of their
respective earnings, which were subject to IRS regulations limiting the maximum
amount of an officer's earnings eligible for matching or profit-sharing 401(k)
contributions to $200,000. These percentages were equivalent to the 401(k) Plan
match and profit sharing contributions made for all eligible employees.
(b) This figure also recognizes the value to the officers of a Company-owned
vehicle to Messrs. Daigneault, Ward and Wootton which were $5,665, $5,273 and
$5,150 respectively for 2003. (c) Also included in 2003 is the economic value
of split dollar life insurance benefits provided to Messrs. Daigneault, Ward
and Vietze under the Life Insurance Endorsement Split Dollar Plan agreement for
Bank Owned Life Insurance. This value was $722 for Mr. Daigneault, $466 for Mr.
Ward and $490 for Mr. Vietze.
Stock Option Plan
In April 1995, the stockholders approved a Stock Option Plan. The purpose of
the Stock Option Plan is to encourage the retention of key employees by
facilitating their purchase of a stock interest in the Company and to align
their interest with those of the shareholders. The 1995 Stock Option Plan
provides for grants of options to purchase Company common stock and is
administered by an Options Committee, which consists of four outside directors.
During 2003, no stock options were granted under the 1995 Stock Option Plan.
The following table sets forth the status of the Stock Option Plan as of
December 31, 2003:
-------------------------------------------------------------------------------
Options approved by Shareholders 200,000
-------------------------------------------------------------------------------
Options granted (194,000)
Options forfeited 7,000
-------------------------------------------------------------------------------
Ungranted options remaining 13,000
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Outstanding Weighted average Number of
unexercised options exercise price options
-------------------------------------------------------------------------------
Exercisable $ 10.11 73,700
Non-exercisable 19.12 24,500
-------------------------------------------------------------------------------
$ 13.23 98,200
-------------------------------------------------------------------------------
2003 Option Committee Members:
Malcolm E. Blanchard, Chair
Robert B. Gregory
Carl S. Poole, Jr.
Stuart G. Smith
Long-Term Compensation
Long-term compensation may be distinguished from annual compensation by the
time frame for which performance results are measured to determine awards.
While annual compensation covers a calendar year, long-term compensation is
provided through the Company's stock option plan, which covers a period of two
to ten years. The following table sets forth information with respect to the
named executives and all other employees concerning grants of stock options
during 2003:
-------------------------------------------------------------------------------
Option Grants During the Year Ended December 31, 2003
-------------------------------------------------------------------------------
% of Potential realizable
Number of options value at assumed rates
securities granted Exercise of stock appreciation
underlying in price for option term(1)
options fiscal per Expiration ---------------------
granted year Share(2) Date 5% 10%
-------------------------------------------------------------------------------
Daniel R. Daigneault -0- 0.0% $ -0- - $ -0- $ -0-
F. Stephen Ward -0- 0.0% $ -0- - $ -0- $ -0-
Charles A. Wootton -0- 0.0% $ -0- - $ -0- $ -0-
Walter F. Vietze -0- 0.0% $ -0- - $ -0- $ -0-
All other employees -0- 0.0% $ -0- - $ -0- $ -0-
-------------------------------------------------------------------------------
All -0- 0.0% $ -0- - $ -0- $ -0-
-------------------------------------------------------------------------------
1) The dollar gains under these columns result from calculations assuming 5%
and 10% growth rates compounded over a 10-year period as set by the Securities
and Exchange Commission and are not intended to forecast future price
appreciation of the Company's common stock. The gains reflect a future value
based upon growth at these prescribed rates. The values have not been
discounted to present value. It is important to note that options have value to
the listed executive and to all option recipients only if the stock price
advances beyond the exercise price shown on the table during the effective
option period.
2) Under the Stock Option Plan, the exercise price may not be less than the
fair market value of the common stock on the date the option is granted.
The following table sets forth information with respect to exercisable and
unexercisable options held as of December 31, 2003:
-------------------------------------------------------------------------------
Aggregated Option Exercises in 2003 and December 31, 2003 Option Values
-------------------------------------------------------------------------------
Number of securities Value of unexercised
underlying unexercised in-the-money
Shares options at year end options at year end
acquired ------------------- ---------------------
on Value Exer- Unexer- Exer- Unexer-
exercise realized cisable cisable cisable cisable
-------------------------------------------------------------------------------
Daniel R. Daigneault -0- $ -0- 39,000 4,000 $ 1,634,000 $ 126,000
F. Stephen Ward -0- $ -0- 11,500 1,500 $ 434,000 $ 45,000
Charles A. Wootton -0- $ -0- 5,000 10,000 $ 166,000 $ 276,000
Walter F. Vietze 4,000 $ 95,000 10,000 1,000 $ 386,000 $ 29,000
All other employees 2,600 $ 69,000 8,200 8,000 $ 313,000 $ 192,000
-------------------------------------------------------------------------------
All optionees 6,600 $164,000 73,700 24,500 $ 2,933,000 $ 668,000
-------------------------------------------------------------------------------
Description of the Company's Benefit Plans
Overview
The Company has reserved 160,000 shares of its common stock to be made
available to directors and employees who elect to participate in the directors'
deferral, employee stock purchase, or 401(k) savings and investment plans. As
of December 31, 2003, 119,014 shares had been issued pursuant to these plans,
leaving 40,986 shares available for future issuance. The issuance price is
based on the market price of the stock at issuance date. All shares issued
under the 401(k) savings and investment plans are issued pursuant to an
exemption from registration under the Securities Act of 1933, as amended (the
"Securities Act"), contained in Section 3(a)(11) thereof and Rule 147
promulgated thereunder. During the period ending nine months after the date of
issuance of these shares, these shares may be transferred only to residents of
the State of Maine. Each certificate issued for these plan shares bears a
legend referring to this restriction.
Shares issued under the employee stock purchase plan prior to September
11, 1998, were issued pursuant to exemptions from registration under Section
3(a)(11) and Rule 147 of the Securities Act. Shares issued under the employee
stock purchase plan on or after September 11, 1998, have been issued pursuant
to a registration statement filed under the Securities Act. The members of the
Board of Directors and certain officers of the Company, who may be deemed to be
"affiliates", may resell shares of the Company's common stock purchased or
acquired under this plan only in accordance with certain restrictions imposed
by the Securities Act and Rule 144 promulgated thereunder.
401(K) Plan
The Bank's 401(k) Plan (The First National Bank of Damariscotta Savings and
Investment Plan) is the Bank's sole retirement plan, and was modified in 1996
after termination of the Bank's traditional defined benefit pension plan. It is
available to any employee who has attained the age of 21 and completed six
months of continuous service. Employees may contribute up to 50.0% of their
compensation (not to exceed $12,000 if under age 50 and $14,000 if over age
50), and the Bank may provide a match of up to 3.0% of compensation. Subject to
a vote of the Board of Directors, the Bank may also make a profit-sharing
contribution to the Plan, and in 2003 this contribution equaled 2.5% of each
eligible employee's compensation. The 401(k) Plan is administered by a special
committee appointed by the Board of Directors.
Employee contributions are 100% vested at all times, while employer
contributions are vested over a five-year period. Upon termination of
employment for any reason, a plan participant may receive his or her
contribution account and earnings allocated to it, as well as the vested
portion of his or her employer-matching account and earnings allocated to it.
Non-vested amounts are forfeited and are used by the Bank to help defray plan
administration expenses incurred by the Bank. The Bank paid $104,000 in
matching contributions and $113,000 in profit-sharing contributions to this
plan in 2003. Plan participants may direct the trustees of the 401(k) Plan to
purchase specific assets for their accounts from a selection which includes
seven mutual funds as well as the Company's stock. As of December 31, 2003,
63,484 shares of the Company's stock had been purchased by the 401(k) Plan at
the direction of plan participants.
Stock Purchase Plan
The Bank instituted an employee and director stock purchase plan effective
February 1, 1987, and the Board of Directors has allocated 80,000 shares of
stock to be available for purchase under this plan. Employees who have been
employed by the Bank for three consecutive calendar months are eligible to
purchase shares on a quarterly basis through payroll deduction. The price per
share for shares sold pursuant to the plan is defined as the closing price on
the day the shares are purchased. As of December 31, 2003, 55,530 shares of the
Company's stock had been purchased pursuant to the plan.
Employee Benefits
The Bank provides all full-time employees with group life, health, and long-
term-disability insurance through the Independent Bankers' Employee Benefits
Trust of Maine. A Flexible Benefits Plan is available to all full-time
employees after satisfying eligibility requirements and to part-time employees
scheduled to work 20 or more hours a week.
Supplemental Executive Retirement Plan
The Bank also sponsors an un-funded, non-qualified supplemental retirement plan
for certain officers. The plan provides supplemental retirement benefits
payable in installments over 20 years upon retirement or death. The costs for
this plan are recognized over the service lives of the participating officers.
The projected retirement benefit for Mr. Daigneault, assuming he remains
employed by the Bank until normal retirement age of 65, is $169,329 per year,
with such payments beginning in the year 2017. The projected retirement benefit
for Mr. Ward, assuming he remains employed by the Bank until normal retirement
age of 65, is $61,127 per year, with such payments beginning in the year 2018.
The projected retirement benefit for Mr. Vietze, assuming he remains employed
by the Bank until normal retirement age of 65, is $39,235 per year, with such
payments beginning in the year 2006. The expense for all participants in this
supplemental plan was $135,000 in 2003, $112,000 in 2002 and $141,000 in 2001.
As of December 31, 2003 and 2002, the accrued liability of this plan was
$709,000 and $591,000, respectively.
Stock Option Plan
On December 15, 1994, the Company's board of directors adopted a Stock Option
Plan (the "Option Plan") for the benefit of officers and other full-time
employees of the Company and the Bank. This plan was approved by the Company's
shareholders at the 1995 Annual Meeting. Under the Option Plan, 200,000 shares
(subject to adjustment to reflect stock splits and similar events) are reserved
from the authorized but unissued common stock of the Company for future
issuance by the Company for exercise of stock options granted to certain key
employees of the Company and the Bank from time to time. The purpose of the
Option Plan is to encourage the retention of such key employees by facilitating
their purchase of a stock interest in the Company. The Option Plan is intended
to provide for the granting of incentive stock options under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") to employees of the
Company or the Bank.
The Option Plan is administered by the Options Committee of the Company's
board of directors, which is comprised solely of directors who are ineligible
to receive grants of stock options under the Option Plan and who have not
received grants of options within the 12 months preceding their appointment to
the Options Committee. The Options Committee selects the employees of the Bank
and the Company to whom options are to be granted and designates the number of
options to be granted. The Option Plan may be amended only by the vote of the
holders of a majority of the Company's outstanding common stock if such
amendment would increase the number of shares available for issuance under the
Option Plan, change the eligibility criteria for grants of options under the
Option Plan, change the minimum option exercise price or increase the maximum
term of options. Other amendments may be effected by the Options Committee.
Employees selected by the Options Committee receive, at no cost to them,
options under the Option Plan. The option exercise prices are equal to or
exceed the fair market value of the shares on the date of the grant, and no
option is exercisable after the expiration of ten years from the date it is
granted. The fair market value of the shares is determined by the Options
Committee as specified in the Option Plan. The optionee cannot transfer or
assign any option other than by will or in accordance with the laws of descent
and distribution, and the option may be exercised only by the employee during
the employee's lifetime. After an employee's death, options may be exercised by
the employee's estate or heirs up to one year following the date of death. Code
Section 422 limits option grants by providing that during the term of the
Option Plan, no grant may be made to any employee owning more than 10% of the
Company's outstanding shares unless the exercise price is at least 110% of the
underlying shares' fair market value and such option is not exercisable more
than five years following the option grant. The aggregate fair market value of
the stock for which any employee may be granted incentive stock options which
are first exercisable in any calendar year may generally not exceed $100,000.
While generally no options may be exercisable before the second
anniversary of the grant date, in the event of a change in control involving
the Company all options (other than those held by officers or directors of the
Company or the Bank for less than six months) shall become immediately
exercisable. Also, an employee whose employment is terminated in connection
with or within two years after such a change in control event shall be entitled
to exercise all options for up to three months following the date of
termination; provided that options held by officers or directors shall not be
exercisable until six months after the grant date. Employees whose services are
terminated, other than following a change in control as described above, shall
thereupon forfeit any options held; provided, however, that following
termination due to disability an employee shall be entitled to exercise options
for up to one year (provided, further, that officers may exercise only with
respect to options held for at least six months).
The Company receives no monetary consideration for the granting of
incentive stock options. Upon the exercise of options, the Company receives
payment in cash from optionees in exchange for shares issued. No federal income
tax consequences are incurred by the Company at the time incentive stock
options are granted or exercised, unless the optionee incurs liability for
ordinary income tax treatment upon exercise of the option, as discussed below,
in which event the Company would be entitled to a deduction equal to the
optionee's ordinary income attributable to the options. Provided the employee
holds the shares received on exercise of a stock option for the longer of two
years after the option was granted or one year after it was exercised, the
optionee will realize capital gains income (or loss) in the year of sale in an
amount equal to the difference between the sale price and the option exercise
price paid for shares. If the employee sells the shares prior to the expiration
of the period, the employee realizes ordinary income in the year of disposition
equal to the difference between the fair market value of the shares on the date
of exercise and the exercise price and capital gains income (or loss) equal to
the difference (if any) between the sale price of the shares and the fair
market value of the shares on the date of exercise.
In addition to the tax consequences discussed above, the excess of the
option price over the fair market value of the optioned stock at the time of
option exercise is required to be treated by an incentive optionee as an item
of tax preference for purposes of the alternative minimum tax.
Performance Graph
Set forth below is a line graph comparing the five-year cumulative total return
of $100.00 invested in the Company's common stock ("FNLC"), assuming
reinvestment of all cash dividends and retention of all stock dividends, with a
comparable amount invested in the Standard & Poor's 500 Index ("S&P 500") and
the NASDAQ Combined Bank Index ("NASD Bank"). The NASD Bank index is a
capitalization-weighted index designed to measure the performance of all NASDAQ
stocks in the banking sector.
GRAPHIC OMITTED
-------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
-------------------------------------------------------------------------------
FNLC 100.00 74.44 74.03 110.97 163.66 267.18
-------------------------------------------------------------------------------
NASD Bank 100.00 92.02 105.52 116.15 121.40 161.51
-------------------------------------------------------------------------------
S&P 500 100.00 120.84 109.93 96.90 75.48 97.14
-------------------------------------------------------------------------------
PROPOSAL 3:INCREASE AUTHORIZED COMMON STOCK
The Company's Board of Directors has unanimously approved an amendment to the
Company's Articles of Incorporation which will increase the number of shares of
common stock authorized for issuance from 6,000,000 to 18,000,000.
The primary purpose of the proposed increase in the number of authorized shares
of common stock is to provide the Company with the flexibility to issue
additional shares of stock to effect a stock split in the form of a stock
dividend. The normal purpose of a stock split in the form of a stock dividend
is to restore the trading price of the Company's stock within a range that may
be more conducive to the maintenance of a market in the shares.
The authorized but unissued shares of Common Stock could also be used in
private or public offerings to raise additional capital. These shares could
also be used to make more difficult a change in control of the Company, and in
certain circumstances, such shares could be used to dilute the stock ownership
of a person or entity seeking to obtain control of the Company. Such shares
could also be privately placed with purchasers who might side with the Board in
opposing a hostile takeover bid. No such issuances, however, are presently
planned for the near term.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING COMMON
STOCK OF THE COMPANY IS REQUIRED IN ORDER TO EFFECTUATE THE PROPOSED AMENDMENT.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE PROPOSED
AMENDMENT.
PROPOSAL 4: APPOINTMENT OF AUDITORS
Berry, Dunn, McNeil & Parker (BDMP) has served as independent auditor for the
Company and the Bank since 1994. In the opinion of the Board of Directors, the
reputation, qualifications and experience of the firm make its reappointment
appropriate for 2004.
It is the desire of the Board of Directors Audit Committee that the appointment
of BDMP as independent auditors be ratified by the shareholders at the annual
meeting. Representatives from BDMP will be present at the annual meeting of
shareholders and will have an opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions from
shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS OF THE COMPANY RATIFY THE
APPOINTMENT OF BERRY, DUNN, McNEIL & PARKER AS INDEPENDENT AUDITORS FOR 2004.
ADDITIONAL INFORMATION
Disclosure of Audit Fees
Audit Fees. The aggregate fees billed for professional services rendered by the
principal accountant, Berry, Dunn, McNeil & Parker (BDMP), for the audit of the
Company's annual financial statements and review of financial statements
included in the Company's Form 10-Q for the years ended December 31, 2003 and
2002 were $54,462 and $48,340, respectively.
Audit-Related Fees. The aggregate fees billed for assurance and related
services rendered by BDMP related to the performance of the audit or review of
the Company's financial statements for the years ended December 31, 2003 and
2002 were $1,042 and $1,364, respectively. These services related to audit
requirements under the Sarbanes Oxley Act of 2002 and implementation of
internal control reporting under FDICIA.
Tax Fees. The aggregate fees billed for professional services rendered by BDMP
for tax compliance, tax advice and tax planning for the years ended December
31, 2003 and 2002 were $13,451 and $14,858, respectively. The nature of the
services comprising the fees disclosed under this category are preparation of
federal and state tax returns, review of estimated tax payments, review of
compliance with information reporting requirements and tax planning.
All Other Fees. The aggregate fees billed for services provided by BDMP, other
than the services reported in the paragraphs above, for the years ended
December 31, 2003 and 2002 were $32,710 and $29,055, respectively. The nature
of the services comprising the fees disclosed under this category are
administration and recordkeeping for an employee benefit plan and an employee
benefit plan audit.
None of the services described in each of the paragraphs above were provided
under the de minimis exception set forth in Rule 2-01 (c)(7)(i)(C).
Report of the Audit Committee
February 27, 2004
To the Board of Directors of First National Lincoln Corporation:
The Audit Committee has reviewed and discussed with management the Company's
audited financial statements as of and for the year ended December 31, 2003.
The Audit Committee has discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61,
"Communication with Audit Committees," as amended, promulgated by the Auditing
Standards Board of the American Institute of Certified Public Accountants.
The Audit Committee has received and reviewed the written disclosures and the
letter from the independent auditors required by Independence Standard No. 1,
"Independence Discussions with Audit Committees," as amended, by the
Independence Standards Board, and has discussed with the auditors the auditors'
independence.
Based on the reviews and discussions referred to above, the Audit Committee
recommends to the Board of Directors that the financial statements referred to
above be included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2003.
Each of the members of the Audit Committee is independent as defined under the
listing standards of the NASDAQ stock market.
The Company's Audit Committee Charter, as adopted by the Board of Directors, is
included as Appendix A to this Proxy Statement and can be accessed on the
Company's website at www. fnlc.com.
/s/ DAVID B. SOULE /s/ ROBERT B. GREGORY
David B. Soule, Robert B. Gregory
Audit Committee Chairman
/s/ DANA L. DOW /s/ RANDY A. NELSON
Dana L. Dow Randy A. Nelson
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires that the Company's directors,
executive officers, and any person holding more than ten percent of the
Company's Common Stock file with the SEC reports of ownership changes, and that
such individuals furnish the Company with copies of the reports.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that all of its executive officers and directors complied with all Section
16(a) filing requirements applicable to them in 2003.
Information About Stockholder Proposals
If you wish to submit proposals to be included in the Company's 2005 proxy
statement for the 2005 Annual Meeting of Stockholders, the Company must receive
them by December 31, 2004, pursuant to the proxy solicitation regulations of
the SEC. SEC rules contain standards as to which stockholder proposals are
required to be in the proxy statement. Any such proposal will be subject to 17
C.F.R. ss.240.14a-8 of the rules and regulations promulgated by the SEC.
In addition, under the Company's Bylaws, if you wish to nominate a
director or bring other business before an annual meeting:
* You must be a stockholder of record and have given timely notice in writing
to the Clerk of the Company.
* Your notice must contain specific information required in the Company's
Bylaws.
Shareholder Communication with the Board
Shareholders and other parties interested in communicating directly with the
non-management Chairman of the Board or with other non-management directors as
a group may do so by writing to, Chairman, First National Lincoln Corporation,
Post Office Box 940 , Main Street, Damariscotta, Maine 04543. The Board
approved a process requiring that all such addressed correspondence be reviewed
by the Secretary to the Board. The Board Secretary in turn upon review of the
correspondence will forward to the non-management Chairman all such
correspondence that deals with the functions of the Board or committees thereof
or that she determines requires the attention of the Board. Concerns relating
to accounting, internal controls or auditing matters are immediately brought to
the attention of the Company's Audit Committee Chairman in accordance with
procedures established by the Audit Committee with respect to such matters.
Accessing Company Financial Statements and Reports
An annual report to shareholders, including consolidated financial statements
of the Company and its subsidiaries prepared in conformity with generally
accepted accounting principles, is being distributed to all Company
shareholders of record and is enclosed herewith. Shareholders may obtain a copy
of the Company's Annual Report to the Securities and Exchange Commission on
Form 10-K, without charge. Written requests should be directed to F. Stephen
Ward, Treasurer, at P.O. Box 940, Damariscotta, ME 04543. First National
Lincoln Corporation has a website in which all press releases, SEC filings and
other reports or information issued by the Company are available at:
www.fnlc.com.
Other Matters
The Annual Meeting is called for the purposes set forth in this notice.
Management is not aware of any other matter that will come before the meeting.
However, if any other business should come before the meeting, your Proxy, if
signed and returned, will give to the persons designated in it discretionary
authority to vote according to their best judgment. It is the intention of the
persons named in the Proxy to vote pursuant to the Proxy in accordance with the
recommendations of Management.
By Order of the Board of Directors
/s/ CHARLES A. WOOTTON
Charles A. Wootton, Clerk
Damariscotta, Maine, March 19, 2004
APPENDIX A: Audit Charter
Committee Membership
The Audit Committee of First National Lincoln Corporation (the "Company") shall
be comprised of at least three directors each of whom is
(i) "independent" under the rules of the Nasdaq Stock Market, Inc., except
as provided below, and under the Sarbanes Oxley Act of 2002, and the rules
promulgated thereunder,
(ii) does not accept, directly or indirectly, any consulting, advisory or
other compensatory fee from the Company or any of its subsidiaries other than
in his or her capacity as a member of the Board or any committee of the Board,
(iii) is not an "affiliate" of the Company or any subsidiary of the
Company, as such term is defined in Rule 10A 3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"),
(iv) has not participated in the preparation of the financial statements
of the Company or any subsidiary at any time during the preceding three years,
(v) a person none of whose Family Members has served as an executive
officer of the Company or any subsidiary at any time during the preceding three
years, or as an executive officer of another entity where at any time during
the preceding three years any of the executive officers of the Company or any
subsidiary served on that other entity's compensation committee, and
(vi) a person none of whose Family Members is a current partner of the
Company's outside auditor, or was a partner or employee of the Company's
outside auditor who worked on the Company's audit at any time during any of the
preceding three years.
For purposes hereof, "affiliate" means a person who directly, or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, the person specified. A person is deemed not
to be in control of an entity if he or she is not an executive officer of the
entity and is not the beneficial owner, directly or indirectly, of more than
10% of any class of voting equity securities of the entity. "Indirect"
acceptance by a Committee member of any consulting, advisory or compensatory
fee includes acceptance of such a fee by a spouse, parent, child, sibling, or
anyone sharing a home with the Committee member (a "Family Member"), or an
entity in which such Committee member or Family Member is a partner, member, an
officer such as "managing director" occupying a comparable position or
executive officer, or occupies a similar position (except limited partners, non
managing members and those occupying similar positions who, in each case, have
no active role in providing services to the Company or any subsidiary) and
which entity provides accounting, consulting, legal, investment banking or
financial advisory services to the Company or any subsidiary. With respect to
clause (ii) of this paragraph, payments received (directly or indirectly) from
the Company or any subsidiary by a Committee member or Family Member during the
three years ending December 31, 2003 shall not render such Committee member not
"independent" if such payments did not exceed, in any year, the greater of (a)
$200,000, or (b) 5% of the recipient's consolidated gross revenues.
All members of the Committee must be able to read and understand
fundamental financial statements, including a company's balance sheet, income
statement, and cash flow statement.
Notwithstanding the second preceding paragraph, one director who is not
"independent" under the rules of the Nasdaq Stock Market, Inc., who does not
accept any consulting, advisory or other compensatory fee from the Company or
any subsidiary other than in his or her capacity as a member of the Board or
any committee of the Board, who is not an "affiliate" of the Company or any
subsidiary of the Company, as such term is defined in Rule 10A 3 under the
Exchange Act, and who is not a current officer or employee, or a spouse,
parent, child or sibling, whether by blood, marriage or adoption, of, or a
person who has the same residence as, any current officer or employee of the
Company or any subsidiary, may be appointed to the Committee if the Board,
under exceptional and limited circumstances, shall have determined that such
individual's membership on the Committee is required by the best interests of
the Company and its stockholders, and the Board discloses, in the next annual
meeting proxy statement subsequent to such determination, the nature of the
relationship, and the reasons for the determination. Any such member appointed
to the Committee may only serve for up to two years and may not chair the
Committee.
Members shall be appointed by the Board based on nominations recommended
by the Company's Nominating Committee, and shall serve at the pleasure of the
Board and for such term or terms as the Board may determine.
Committee Purposes
The purpose of the Audit Committee is to oversee the accounting and financial
reporting processes of the Company and the audits of the financial statements
of the Company, and to function as the Company's "qualified legal compliance
committee" as required under 17 C.F.R. Part 205.
The function of the Committee is oversight with respect to the matters
described above, and to ensure the independence of the Company's independent
auditors. The management of the Company is responsible for the preparation,
presentation and integrity of the Company's consolidated financial statements.
Management is responsible for maintaining appropriate accounting and financial
reporting principles and policies as well as internal controls and procedures
designed to assure compliance with accounting standards and applicable laws and
regulations. The independent public accountants are responsible for planning
and performing proper audits, including an audit of the Company's annual
consolidated financial statements filed on Form 10-K, and certain other
accounting procedures, including reviews of the Company's unaudited interim
consolidated financial statements prior to the filing of each quarterly report
on Form 10-Q. The Committee is responsible for maintaining open communication
between the Committee and the independent public accountants, internal
auditors, management, and the Board of Directors with respect to the matters
within the scope of the Committee's responsibilities as set forth in this
Charter.
The Committee is entitled to place reasonable reliance on
(i) the integrity of those persons and organizations within and outside
the Company from whom and from which it receives information and
(ii) the accuracy of the financial and other information provided to the
Committee by such persons or organizations.
The Company's independent auditors shall submit to the Audit Committee
annually a formal written statement (the "Auditors' Statement") describing: the
auditors' internal quality control procedures; any material issues raised by
the most recent internal quality control review or peer review of the auditors,
or by any inquiry or investigation by governmental or professional authorities,
within the preceding five years, respecting one or more independent audits
carried out by the auditors, and any steps taken to deal with any such issues;
and (to assess the auditors' independence) all relationships between the
independent auditors and the Company or any subsidiary, including each non
audit service provided to the Company or any subsidiary and at least the
matters set forth in Independence Standards Board No. 1.
The independent auditors shall submit to the Audit Committee annually a
formal written statement of the fees billed in each of the last two fiscal
years for each of the following categories of services rendered to the Company
or any subsidiary by the independent auditors:
(i) the audit of the Company's annual financial statements and the reviews
of the financial statements included in the Company's Quarterly Reports on Form
10 Q or services that are normally provided by the independent auditors in
connection with statutory and regulatory filings or engagements;
(ii) assurance and related services not included in clause (i) that are
reasonably related to the performance of the audit or review of the Company's
financial statements, in the aggregate and by each service;
(iii) tax compliance, tax advice and tax planning services, in the
aggregate and by each service; and (iv) all other products and services
rendered by the independent auditors, in the aggregate and by each service.
Committee Duties and Responsibilities
To carry out its purposes, the Audit Committee shall have the following duties
and responsibilities.
A. With respect to the Company's independent auditors,
(i) to be directly responsible for the appointment, compensation,
retention and oversight of the work of the independent auditors (including the
resolution of disagreements between management and the independent auditors
regarding financial reporting), who shall report directly to the Audit
Committee; provided that the auditor appointment shall be subject to
shareholder ratification;
(ii) to be directly responsible for the appointment, compensation,
retention and oversight of the work of any other registered public accounting
firm engaged for the purpose of preparing or issuing an audit report or to
perform audit, review or attestation services for the Company, which firm shall
also report directly to the Audit Committee;
(iii) to pre-approve, or to adopt appropriate procedures to pre approve,
all audit and non audit services to be provided by the independent auditors;
(iv) to ensure that the independent auditors prepare and deliver annually
an Auditors' Statement (it being understood that the independent auditors are
responsible for the accuracy and completeness of this Statement), and to
discuss with the independent auditors any relationships or services disclosed
in this Statement that may impact the quality of audit services or the
objectivity and independence of the Company's independent auditors;
(v) to obtain from the independent auditors in connection with any audit a
timely report relating to the Company's annual audited financial statements
describing all critical accounting policies and practices used, all alternative
treatments within generally accepted accounting principles for policies and
practices related to material items that have been discussed with management,
ramifications of the use of such alternative disclosures and treatments, and
the treatment preferred by the independent auditors, and any material written
communications between the independent auditors and management, such as any
"management" letter or schedule of unadjusted differences;
(vi) to review and evaluate the qualifications, performance and
independence of the lead partner of the independent auditors;
(vii) to discuss with management the timing and process for implementing
the rotation of the lead audit partner, the concurring partner and any other
active audit engagement team partner and consider whether there should be a
regular rotation of the audit firm itself; and
(viii) to take into account the opinions of management and the Company's
internal auditors in assessing the independent auditors' qualifications,
performance and independence.
B. With respect to the internal auditing function,
(i) to review the appointment and replacement of the third party engaged
to perform the internal audit function; and
(ii) to advise the third party engaged to perform the internal audit
function that he, she or it is expected to provide to the Audit Committee
summaries of and, as appropriate, the significant reports to management
prepared by the third party engaged to perform the internal audit function and
management's responses thereto.
C. With respect to accounting principles and policies, financial reporting and
internal audit control over financial reporting,
(i) to advise management, the third party engaged to perform the internal
audit function and the independent auditors that they are expected to provide
to the Audit Committee a timely analysis of significant issues and practices
relating to accounting principles and policies, financial reporting and
internal control over financial reporting;
(ii) to consider any reports or communications (and management's and/or
third party internal auditor's responses thereto) submitted to the Audit
Committee by the independent auditors required by or referred to in SAS 61 (as
codified by AU Section 380), as it may be modified or supplemented or other
professional standards, including reports and communications related to:
* deficiencies, including significant deficiencies or material weaknesses,
in internal control identified during the audit or other matters
relating to internal control over financial reporting;
* consideration of fraud in a financial statement audit;
* detection of illegal acts;
* the independent auditors' responsibility under generally accepted
auditing standards;
* any restriction on audit scope;
* significant accounting policies;
* management judgments and accounting estimates;
* any accounting adjustments arising from the audit that were noted or
proposed by the auditors but were passed (as immaterial or otherwise);
* the responsibility of the independent auditors for other information in
documents containing audited financial statements;
* disagreements with management;
* consultation by management with other accountants;
* major issues discussed with management prior to retention of the
independent auditors;
* difficulties encountered with management in performing the audit;
* the independent auditors' judgments about the quality of the Company's
accounting principles;
* reviews of interim financial information conducted by the independent
auditors; and
* the responsibilities, budget and staffing of the Company's internal
audit function;
* to meet with management, the independent auditors and, if appropriate,
the third party engaged to perform the internal audit function:
* to discuss the scope of the annual audit;
* to discuss the annual audited financial statements and quarterly
financial statements, including the Company's disclosures under
"Management's Discussion and Analysis of Financial Condition and Results
of Operations";
* to discuss any significant matters arising from any audit, including any
audit problems or difficulties, whether raised by management, the third
party engaged to perform the informal audit function or the independent
auditors, relating to the Company's financial statements;
* to discuss any difficulties the independent auditors encountered in the
course of the audit, including any restrictions on their activities or
access to requested information and any significant disagreements with
management;
* to discuss any "management" or "internal control" letter issued, or
proposed to be issued, by the independent auditors to the Company;
* to review the form of opinion the independent auditors propose to render
to the Board of Directors and shareholders; and
* to discuss, as appropriate: (a) any major issues regarding accounting
principles and financial statement presentations, including any
significant changes in the Company's selection or application of
accounting principles, and major issues as to the adequacy of the
Company's internal controls and any special audit steps adopted in light
of material control deficiencies; (b) analyses prepared by management
and/or the independent auditors setting forth significant financial
reporting issues and judgments made in connection with the preparation
of the financial statements, including analyses of the effects of
alternative GAAP methods on the financial statements; and (c) the effect
of regulatory and accounting initiatives, as well as off balance sheet
structures, on the financial statements of the Company;
(iv) to inquire of the Company's chief executive officer and chief
financial officer as to the existence of any significant deficiencies or
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
Company's ability to record, process, summarize and report financial
information, and as to the existence of any fraud, whether or not material,
that involves management or other employees who have a significant role in the
Company's internal control over financial reporting;
(v) to discuss guidelines and policies governing the process by which
senior management of the Company and the relevant departments of the Company
assess and manage the Company's exposure to risk, and to discuss the Company's
major financial risk exposures and the steps management has taken to monitor
and control such exposures;
(vi) to obtain from the independent auditors assurance that the audit was
conducted in a manner consistent with Section 10A of the Exchange Act, which
sets forth certain procedures to be followed in any audit of financial
statements required under the Exchange Act;
(vii) to discuss with the Company's counsel any significant legal,
compliance or regulatory matters that may have a material effect on the
financial statements or the Company's business, financial statements or
compliance policies, including material notices to or inquiries received from
governmental agencies;
(viii) to discuss and review the type and presentation of information to
be included in earnings press releases;
(ix) to discuss the types of financial information and earnings guidance
provided, and the types of presentations made, to analysts and rating agencies;
(x) to establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting
controls or auditing matters, and for the confidential, anonymous submission by
Company employees of concerns regarding questionable accounting or auditing
matters; and
(xi) to establish hiring policies for employees or former employees of the
independent auditors.
D. With respect to its role as the Company's qualified legal compliance
committee, to review and discuss any reports concerning material violations
submitted to it by outside counsel pursuant to the SEC attorney professional
responsibility rules (17 C.F.R. Part 205).
In connection with such reports, the Audit Committee shall inform the
Company's President of any report received by it of evidence of a material
violation of federal or state securities laws, a possible material breach of
fiduciary duty arising under federal or state law, or a similar material
violation of any federal or state law, in each case by the Company or any of
its officers, directors, employees or agents (a "Material Violation") and which
report contains credible evidence based upon which it would be unreasonable
under the circumstances for a prudent and competent attorney not to conclude
that it is reasonably likely that a Material Violation has occurred, is
ongoing, or is about to occur. Such reports may originate from attorneys
representing the Company, from Company employees or otherwise. However, if the
Audit Committee determines that informing the President would be futile or
otherwise inappropriate, it shall instead inform the Board thereof. The Audit
Committee shall determine whether an investigation with respect to such report
as to a possible Material Violation is necessary and, if it so determines,
shall so notify the Board and initiate such investigation, to be conducted by
counsel selected by the Committee with the involvement of such other expert
personnel as the Committee deems necessary. At the conclusion of any such
investigation, the Committee shall recommend, by majority vote, that the
Company implement an appropriate response to evidence of a Material Violation
and inform the President and the Board of the results of such investigation and
the appropriate remedial measures to be adopted. The Committee has the
authority and the responsibility, acting by majority vote, to take all other
appropriate action, including the authority to notify the SEC in the event that
the Company fails in any material respect to implement an appropriate response
that the Committee has recommended the Company to take.
Any report of a Material Violation submitted to the Audit Committee in
good faith, and the identity of the person submitting it (if an employee or
director), shall be kept confidential (both by the submitting person and the
recipient(s) thereof) and disclosed only to Audit Committee members, Board
members, legal counsel and other experts retained by the Audit Committee, and
senior executives and other personnel of the Company having, in the judgment of
the Audit Committee, a need to know the contents of the report in order for the
Audit Committee to effectively evaluate and, if appropriate, investigate and
take further action with respect to the subject matter of the report. There
shall be no retaliatory action whatsoever taken with respect to any person who
submits such a report in good faith. The fact that such reports should be
submitted to a member of the Audit Committee, and the provisions of this
paragraph, should be communicated to all Company employees promptly following
the adoption of this Charter, at the time of hiring of any Company employees
hired after the adoption of this Charter, and on a recurring basis at least
annually.
E. With respect to reporting and recommendations,
(i) to prepare any report or other disclosures, including any
recommendation of the Audit Committee, required by the rules of the SEC to be
included in the Company's annual proxy statement;
(ii) to review and reassess the adequacy of this Charter at least annually
and recommend any changes to the full Board of Directors;
(iii) to report its activities to the full Board of Directors on a regular
basis and to make such recommendations with respect to the above and other
matters as the Audit Committee may deem necessary or appropriate; and
(iv) to prepare and review with the Board an annual performance evaluation
of the Audit Committee, which evaluation must compare the performance of the
Audit Committee with the requirements of this charter. The performance
evaluation by the Audit Committee shall be conducted in such manner as the
Audit Committee deems appropriate. The report to the Board may take the form of
an oral report by the chairperson of the Audit Committee or any other member of
the Audit Committee designated by the Audit Committee to make this report.
Committee Structure and Operations
The Audit Committee Chair is designated by the Company's Board of Directors.
The Audit Committee shall meet once every fiscal quarter, or more frequently if
circumstances dictate, to discuss with management the annual audited financial
statements and quarterly financial statements, as applicable. The Audit
Committee should meet periodically with management, the third party engaged to
perform the internal audit function and the independent auditors to discuss any
matters that the Audit Committee or any of these persons or firms believe
should be discussed privately. The Audit Committee may request any officer or
employee of the Company or the Company's outside counsel or independent
auditors to attend a meeting of the Audit Committee or to meet with any members
of, or consultants to, the Audit Committee. Members of the Audit Committee may
participate in a meeting of the Audit Committee by means of conference call or
similar communications equipment by means of which all persons participating in
the meeting can hear each other.
Delegation to Subcommittee
The Audit Committee may, in its discretion, delegate all or a portion of its
duties and responsibilities to a subcommittee of the Audit Committee. The Audit
Committee may, in its discretion, delegate to one or more of its members the
authority to pre approve any audit or non audit services to be performed by the
independent auditors, provided that any such approvals are presented to the
Audit Committee at its next scheduled meeting.
Resources and Authority of the Audit Committee
The Audit Committee shall have the resources and authority appropriate to
discharge its duties and responsibilities, including the authority to select,
retain, terminate, and approve the fees and other retention terms of special or
independent counsel, accountants or other experts and advisors, as it deems
necessary or appropriate, without seeking approval of the Board or management.
The Committee will have full access to the Company's books, records,
facilities, and personnel. The Committee has the authority and available
funding to perform or supervise special investigations and to incur
administrative expenses in connection with fulfilling its obligations. The
Committee will have the sole authority to approve fees and related terms of
such engagements for outside experts.
The Company shall provide for appropriate funding, as determined by the
Audit Committee, in its capacity as a committee of the Board, for payment of:
1. Compensation to the independent auditors and any other public
accounting firm engaged for the purpose of preparing or issuing an audit report
or performing other audit, review or attest services for the Company;
2. Compensation of any advisers employed by the Audit Committee; and
3. Ordinary administrative expenses of the Audit Committee that are
necessary or appropriate in carrying out its duties.
APPENDIX B: Nominating Committee Charter
Committee Membership
The Nominating Committee (the "Committee") of the Board of Directors (the
"Board") of First National Lincoln Corporation (the "Company") shall consist
solely of "independent directors," i.e., those directors who neither are
officers or employees of the Company or its subsidiaries nor have a
relationship which, in the opinion of the Board, would interfere with the
exercise of independent judgment in carrying out the responsibilities of a
director, and who are otherwise "independent" under the rules of the Nasdaq
Stock Market, Inc.
The initial members of the Committee shall be appointed by the Board.
Candidates to fill subsequent vacancies in the Committee shall be appointed by
the Board based on nominations by the Committee. Members shall serve at the
pleasure of the Board and for such term or terms as the Board may determine.
Committee Purpose and Responsibilities
The Committee shall have the purpose and responsibilities to:
1. Make recommendations to the Board from time to time as to changes that the
Committee believes to be desirable to the size of the Board or any committee
thereof.
2. Identify individuals believed to be qualified to become Board members,
consistent with criteria approved by the Board and applicable laws and
regulations, and to select, or recommend to the Board, the nominees to stand
for election as directors at the annual meeting of stockholders or, if
applicable, at a special meeting of stockholders. In the case of a vacancy in
the office of a director (including a vacancy created by an increase in the
size of the Board), the Committee shall recommend to the Board an individual to
fill such vacancy either through appointment by the Board or through election
by stockholders. In selecting or recommending candidates, the Committee shall
take into consideration the criteria approved by the Board and such other
factors as it deems appropriate. These factors may include judgment, skill,
diversity, experience with businesses and other organizations of comparable
size, the interplay of the candidate's experience with the experience of other
Board members, and the extent to which the candidate would be a desirable
addition to the Board and any committees of the Board. The Committee shall
consider all candidates recommended by the Company's shareholders in accordance
with the procedures set forth in the Company's annual proxy statement. The
Committee may consider candidates proposed by management, but is not required
to do so.
3. Develop and recommend to the Board standards to be applied in making
determinations as to the absence of material relationships between the Company
and a director.
4. In the case of a director nominee to fill a Board vacancy created by an
increase in the size of the Board, make a recommendation to the Board as to the
class of directors in which the individual should serve.
5. Identify Board members qualified to fill vacancies on any committee of the
Board (including the Committee) and to recommend that the Board appoint the
identified member or members to the respective committee. In nominating a
candidate for committee membership, the Committee shall take into consideration
the criteria approved by the Board and the factors set forth in the charter of
that committee, if any, as well as any other factors it deems appropriate,
including without limitation the consistency of the candidate's experience with
the goals of the committee and the interplay of the candidate's experience with
the experience of other committee members.
6. Establish procedures for the Committee to exercise oversight of the
evaluation of the Board and management.
7. Develop and recommend to the Board a set of corporate governance principles
applicable to the Company, and to review those principles at least once a year.
8. Prepare and issue the evaluation required under "Performance Evaluation"
below.
9. Assist management in the preparation of the disclosure in the Company's
annual proxy statement regarding the operations of the Committee.
10. Report to the Board on a regular basis, and not less than once per year.
11. Perform any other duties or responsibilities expressly delegated to the
Committee by the Board from time to time relating to the nomination of Board
and committee members.
Committee Structure and Operations
The Board shall designate one member of the Committee as its chairperson. The
Committee shall meet in person or telephonically at least twice a year, and
perhaps more frequently, in conjunction with regularly scheduled meetings of
the Board at regularly scheduled times and places determined by the Committee
chairperson, with further meetings to occur, or actions to be taken by
unanimous written consent, when deemed necessary or desirable by the Committee
or its chairperson.
Delegation to Subcommittee
The Committee may, in its discretion, delegate all or a portion of its duties
and responsibilities to a subcommittee of the Committee.
Performance Evaluation
The Committee shall prepare and review with the Board an annual performance
evaluation of the Committee, which evaluation shall compare the performance of
the Committee with the requirements of this charter. The performance evaluation
shall also recommend to the Board any improvements to the Committee's charter
deemed necessary or desirable by the Committee. The performance evaluation by
the Committee shall be conducted in such manner as the Committee deems
appropriate. The report to the Board may take the form of an oral report by the
chairperson of the Committee or any other member of the Committee designated by
the Committee to make this report.
Resources and Authority of the Committee
The Committee shall have the resources and authority appropriate to discharge
its duties and responsibilities, including the authority to select, retain,
terminate, and approve the fees and other retention terms of special counsel or
other experts or consultants, as it deems appropriate, without seeking approval
of the Board or management. With respect to consultants or search firms used to
identify director candidates, this authority shall be vested solely in the
Committee.
PROXY
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoint Daniel R. Daigneault and F. Stephen Ward as
Proxies, each with power to appoint a substitute, and hereby authorize them to
represent and to vote, as designated below, all the shares of common stock of
the Company held of record by the undersigned as of the close of business on
February 17, 2004, at the Annual Meeting of Stockholders to be held on April
27, 2004, or at any adjournment thereof.
1. To ratify the Board of Directors' vote to fix the number of Directors at
ten.
____For ____Against ____Abstain
2. To elect as directors of the Company the three persons listed for a three-
year term:
Malcolm E. Blanchard Randy A. Nelson Stuart G. Smith
_____Vote for all Listed Nominees
_____Authority to Vote for Directors is Withheld
_____Vote for Listed Nominees Except the Following:
Instruction: to withhold authority to vote for any individual Nominee(s), write
the name(s) of the Nominee(s) in the space provided above.
3. To approve the increase of the number of shares of authorized common stock
to 18,000,000.
____For ____Against ____Abstain
4. To ratify the Board of Directors Audit Committee's selection of Berry, Dunn,
McNeil & Parker as independent auditors for the Company for 2004
____For ____Against ____Abstain
5. To transact such other business as may properly come before the meeting or
any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED ON BEHALF OF THE UNDERSIGNED
STOCKHOLDER IN THE MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED IN FAVOR OF PROPOSALS 1, 2, 3 AND 4 AND IN THE DISCRETION OF
MANAGEMENT WITH RESPECT TO ANY OTHER MATTERS WHICH MAY COME BEFORE THE MEETING.
Please date and then sign exactly as name appears above. Only one joint tenant
need sign. When signing as attorney, executor, administrator, trustee or
guardian, or in any representative capacity, please give full title.
Date __________________________________________________ 2004
Signature___________________________________________________
Signature___________________________________________________
Please mark this proxy and return in the enclosed self addressed stamped
envelope
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