First National Lincoln Corporation
March 19, 2001
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 24, 2001 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. 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 or 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 card 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 24, 2001
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 24, 2001 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 persons listed in the enclosed Proxy
Statement dated March 19, 2001, for three-year terms.
* To ratify the Board of Directors' selection of Berry, Dunn, McNeil & Parker
as independent auditors of the Company for 2001.
* To transact such other business as may properly come before the meeting or
any adjournment thereof.
By Order of the Board of Directors
/s/ Donald C. Means
Donald C. Means, Clerk
Damariscotta, Maine
March 19, 2001
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 24, 2001
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 24, 2001, 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, 2001.
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 (Donald C. Means,
First National Lincoln Corporation, Post Office Box 940, 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 March 5, 2001 (the
"Voting Record Date") will be entitled to vote at the Annual Meeting. On the
Voting Record Date, there were 2,376,613 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 Articles of Incorporation 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 Articles of Incorporation
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
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 2004:
Bruce A. Bartlett 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 1981.
Mr. Bartlett served as President and Chief Executive Officer of the Company and
the Bank until his retirement in 1994.
Malcolm E. Blanchard has served as a Director of the Company since its
organization in 1985 and has served as a Director of the Bank since 1976. Mr.
Blanchard has been actively involved, either as sole proprietor or as a
partner, in real estate development since 1970.
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 Skating
and Tennis Center. He also serves on the board of the Five Town CSD School
Board and the SAD 28 Camden/Rockport School Board.
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 2002:
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 trustee of the YMCA, and was
previously chairperson of the YMCA Annual Fund Drive.
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.
Bruce B. Tindal has served as a Director of the Company and the Bank since
1999. Mr. Tindal formed and is owner of Tindal & Callahan Real Estate in
Boothbay Harbor, which has been in operation since 1985. Mr. Tindal is a
Trustee of St. Andrews Hospital and serves on the Board of Directors of the
Boothbay Region Land Trust and the Boothbay Region Economic Development Corp.
Mr. Tindal is also a member of the National Association of Realtors and the
Boothbay Harbor Rotary Club.
The following Directors' terms will expire in 2003:
Daniel R. Daigneault has served as President, Chief Executive Officer and
as a member of the Board of Directors of both the Company the Bank since 1994.
Prior to being employed by the Bank, Mr. Daigneault was Vice President, Senior
Commercial Loan Officer at Camden National Bank, Camden, Maine. Mr. Daigneault
is Vice 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, Inc., located in Waldoboro, Maine,
which he purchased from his father in 1977. 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.
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 March 5, 2001 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.
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Shares Percent
Owners of 5% or More Owned Owned
-------------------------------------------------------------------------------
Daniel P. & Edith I. Thompson 152,804 6.42%
HC 61 Box 039
New Harbor, ME 04545
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Directors & Executive Officers
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Name Position Term Shares Percent
Age(2) Expires Owned Owned
-------------------------------------------------------------------------------
Bruce A. Bartlett Director of the Bank and the Company; 2001 8,928 *
67 Chairman, Trust Committee
Malcolm E. Blanchard Director of the Bank and the Company; 2001 27,354 1.15%
66 Chairman, Executive Committee
Katherine M. Boyd Director of the Bank and the Company 2002 10,282 *
49
Daniel R. Daigneault President, Chief Executive Officer 2003 78,993(3) 3.32%
48 and Director of the Bank and the Company
Dana L. Dow Director of the Bank and the Company 2003 1,133 *
49
Robert B. Gregory Chairman of The Board of Directors 2003 14,737 *
47 of the Bank and the Company
Carl S. Poole, Jr. Director of the Bank and the Company; 2002 89,233 3.76%
55 Chairman, Asset/Liability Committee
Stuart G. Smith Director of the Bank and the Company; 2001 13,612 *
48 Chairman, Directors' Loan Committee
David B. Soule, Jr. Director of the Bank and the Company; 2002 6,813 *
55 Chairman, Audit Committees of the
Bank and the Company
Bruce B. Tindal Director of the Bank and the Company 2002 1,067 *
50
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Total Ownership of all Directors and
Executive Officers as a group 317,052(3)13.34%
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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, 2000.
(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
-------------------------------------------------------------------------------
Daniel R. Daigneault President & Chief Executive Officer 1994 to date
48 of the Company and of the Bank
F. Stephen Ward Treasurer of the Company, Senior Vice 1993 to date
47 President Finance and Investments
and Chief Financial Officer of the Bank
Managing Director of Pemaquid Advisors
Donald C. Means Clerk of the Company, Senior Vice 1973 to date
63 President and Senior Loan Officer of the Bank
Walter F. Vietze Senior Vice President and Senior 1984 to date
59 Operations Officer of the Bank
Michael T. Martin Senior Vice President and Credit 1993 to date
45 Administration Officer of the Bank
Charles A. Wootton Senior Vice President, Banking Services 2000 to date
44 Officer and Senior Loan Officer of the Bank
-------------------------------------------------------------------------------
(1) As of December 31, 2000
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 Bank, Mr. Daigneault was Vice President,
Senior Commercial Loan Officer at Camden National Bank, Camden, Maine.
F. Stephen Ward has served as Treasurer of the Company since 1994 and as
Chief Financial Officer of the Bank since 1993. In 2000, Mr. Ward also became
the Managing Director of Pemaquid Advisors, the Bank's investment management
and private banking division. 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. Mr. Ward
holds a Masters of Business Administration degree in Finance.
Donald C. Means has been employed by the Bank since 1973. From 1962 to
1973 Mr. Means was employed by The First National Bank of Boston, a major New
England financial institution. While employed there, Mr. Means' primary
responsibilities involved commercial lending.
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. 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.
Charles A. Wootton has been employed by the Bank since January 2000. 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.
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,
2000 to the Company's Directors, Executive Officers and their associates was
$7,107,000, which constituted 2.68% the Bank's total loans outstanding at that
date.
Executive Compensation
The table below sets forth cash compensation paid to the President and
Chief Executive Officer during 2000, 1999, and 1998. No other Executive
Officers of the Bank received compensation in excess of $100,000 for the years
ended December 31, 2000, 1999, and 1998.
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Name Annual Long-Term
and Compensation Compensation
Principal ---------------------------- ---------------------
Position Year Salary Bonus(1) Other(2) # Options
-------------------------------------------------------------------------------
Daniel R. Daigneault 2000 $ 184,000 $ 17,112 $14,005 -0-
President and CEO 1999 $ 164,300 $ 17,416 $ 9,600 4,000
1998 $ 156,000 $ 14,040 $ 9,600 -0-
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(1) Bonuses are listed in the year earned and normally accrued. Such bonuses
may be paid in the following year.
(2) Amounts shown include contributions paid by the Company to the respective
accounts of the Named Executive Officer in the 401(k) Plan. In 2000 the Company
and the Bank contributed to the Bank's Savings and Investment Plan a matching
amount for the salary deferred by Mr. Daigneault equal to 3.0% of Mr.
Daigneault's earnings and a profit-sharing component of 2.5% of Mr.
Daigneault's 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 $170,000. These percentages were equivalent to the
401(k) Plan match and profit sharing contributions made for all eligible
employees. This figure also recognizes the value to the officer of a Company-
provided vehicle.
Executive Compensation Committee Report
The Compensation Committee consists of three outside members of the Board
of Directors. This Committee has the responsibility for conducting the annual
evaluation of the President and renders recommendations to the full Board of
Directors regarding compensation for the President. The compensation of the
President consists of a base salary plus a bonus, under an approved plan
adopted for all employees of the Bank, and other cash bonuses which the
Committee may deem appropriate based on the overall performance of the
President and the achievement of prescribed goals. These goals are a
combination of financial targets and corporate objectives such as
implementation of the strategic plan, satisfactorily addressing issues
identified as priorities by the banking regulators and overall performance of
the management team. The financial goals pertain to profitability, growth and
loan portfolio quality.
The compensation philosophy of the Company for all executive officers is
to pay a competitive base salary commensurate with salaries paid by other
similar sized financial institutions, plus a short- term incentive which is
tied to the achievement of certain performance levels. In 1994 the Company
instituted a formal performance-based compensation program called "Performance
Compensation for Stakeholders". The overall objective of the program is to
shift a portion of employee compensation from base salary to performance based
payments. In 2000, total cash payout under this Stakeholder Performance
Compensation program was 9.30% of the participating employees' base salaries.
The cash payout may be deferred to the following calendar year.
This performance compensation program's overall objective is to maximize
the long-term viability of the Company. It addresses this by tying the bonus
compensation to multiple goals which include profit, growth, productivity and
quality. The guiding principle is to reach a balance of profitability, growth,
productivity and quality which should have a positive impact on maximizing
long-term shareholder value. It rewards current performance which contributes
toward the achievement of long-term goals. Each year specific key performance
indicators are chosen along with financial performance levels. In 2000 some of
the indicators were: loan volume, deposit volume, non-performing loan levels,
non-interest income, net interest income, salaries and wages as a percentage of
income and operating expenses as a percentage of net income.
The amount of base compensation potentially payable to the President was
determined by reviewing an independent salary survey of compensation of
officers and employees for comparably sized financial institutions. The
committee took into consideration the salary ranges as well as actual salaries
paid to Presidents and CEOs of similar banks in establishing the 2000 base
salary for President Daigneault.
The President is given annual goals relating to both financial performance
and corporate objectives, which are established by the Committee pursuant to
discussions with the President. On an annual basis the Committee conducts a
formal evaluation of the President, compares his performance to the established
goals, assesses the overall performance of the Bank and makes recommendations
as appropriate.
President Daigneault's base compensation for 2000 was reflective of the
Company's overall financial performance in 1999, which, in the opinion of the
Compensation Committee, was considered excellent. All 1999 goals set for
President Daigneault were met or exceeded, which included reaching certain
targets for asset growth, asset quality, and overall profitability. Taking
these various factors into consideration and in recognition of his performance,
the committee increased his base salary by $19,700 to $184,000.
President Daigneault's 2000 bonus compensation was 9.30% of base
compensation, paid in accordance with the Company's Stakeholder Performance
Compensation program for all employees, which was described previously.
Compensation Committee Members:
Malcolm E. Blanchard, Chair
Robert B. Gregory
Carl S. Poole, Jr.
Director Compensation
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 $500 for each
meeting attended and $150 for each meeting attended of a committee of which the
director is a member. The Chairman of the Board received an annual fee of
$16,500. 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 paid by the Bank to its Directors as a group
totaled $72,275 in 2000, but no fees are paid to Directors of the Company.
President Daigneault, who is the only director who is also an officer of the
Company, receives no additional compensation for serving on the Board of
Directors of the Company or the Bank.
The Company has two standing committees of the Board of Directors: Audit
and Options. The Bank has six standing committees of the Board of Directors:
Executive, Audit, Asset/Liability, Trust, Directors' Loan and Compensation.
Certain members of management also serve on some committees. All directors
attended at least 75% of Board meetings and meetings held by Committees of
which they were members, and the aggregate attendance of Board and Committee
meetings by all members of the Board of Directors in 2000 was in excess of 90%.
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. 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 three outside
directors. During 2000, 1999, and 1998, stock options were granted under the
1995 Stock Option Plan, as set forth in the accompanying table.
2000 Option Committee Members:
Malcolm E. Blanchard, Chair
Robert B. Gregory
Carl S. Poole, Jr.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
During 2000, Directors Gregory, Blanchard, and Poole 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 banking transactions with the Bank in the ordinary
course of business. As described in the section entitled "Certain Relationships
and Related Transactions", all loans 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 collectibility or present other
unfavorable features.
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 executive and all other employees concerning grants of stock options
during 2000:
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Option Grants During the Year Ended December 31, 2000
-------------------------------------------------------------------------------
% 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(3) 5% 10%
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Daniel R. Daigneault -0- 0.0% $ -0- - $ -0- $ -0-
All other employees 5,000 100.0 16.50 12/27/10 52,000 131,000
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All 5,000 100.0 $ 16.50 12/27/10 $ 52,000 $131,000
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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. These values have also 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.
3) All options granted in 2000 require a vesting period of two years after the
date granted before 50% of the options may be exercised, and five years after
the date granted before 100% of the options may be exercised. All options
expire 10 years after the date granted.
The following table sets forth information with respect to exercisable and
unexercisable options held as of December 31, 2000:
-------------------------------------------------------------------------------
Aggregated Option Exercises in 2000 and December 31, 2000 Option Values
-------------------------------------------------------------------------------
Number of
securities underlying Value of unexercised
unexercised options in-the-money
Shares at year end options at year end
acquired ------------------ --------------------
on Value Exer- Unexer- Exer- Unexer-
exercise realized cisable cisable cisable cisable
-------------------------------------------------------------------------------
Daniel R. Daigneault 10,000 $ 93,000 41,200 36,800 $363,000 $244,000
All other employees 12,000 98,000 40,500 36,500 $302,000 $ 85,000
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All optionees 22,000 191,000 81,700 73,300 $665,000 $329,000
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Description of the Company's Benefit Plans
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, 2000, 97,793 shares had been issued pursuant to these plans,
leaving 62,207 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.
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. Eligible employees may contribute to their
plan accounts a percentage of their compensation, up to a maximum of 15%
annually. The Bank may, by an annual vote of its Directors, make matching
contributions. In addition, also by vote of its Directors, the Bank may make an
annual profit sharing contribution to the Plan. 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 $76,000 in matching
contributions and $84,000 in profit-sharing contributions to this plan in 2000.
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, 2000, 50,342 shares of
the Company's stock had been purchased by the 401(k) Plan at the direction of
plan participants.
The Bank instituted an employee 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, 2000, 47,451 shares of the Company's stock had
been purchased pursuant to the plan.
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.
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 President 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 expense for all participants
in this supplemental plan was $123,000 in 2000, $115,000 in 1999, and $84,000
in 1998. As of December 31, 2000 and 1999, the accrued liability of this plan
was $342,000 and $219,000, respectively.
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 upon 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 10 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
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 and directors 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 the Company's common stock ("FNLC"), assuming reinvestment of all
cash dividends and retention of all stock dividends, with that of 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.
The following information is presented in a line graph in the printed
Form 10-K:
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Performance graph data 1995 1996 1997 1998 1999 2000
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FNLC 100.00 127.03 173.94 289.05 215.18 213.99
NASD Bank 100.00 126.16 206.37 182.08 167.55 192.13
S&P 500 100.00 122.68 163.29 209.57 253.24 230.37
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PROPOSAL 3: APPOINTMENT OF AUDITORS
Berry, Dunn, McNeil & Parker 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 2001.
It is the desire of the Board of Directors that the appointment of Berry,
Dunn, McNeil & Parker as independent auditors be ratified by the shareholders
at the Annual Meeting. Representatives from Berry, Dunn, McNeil, & Parker 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 2001.
ADDITIONAL INFORMATION
REPORT OF THE AUDIT COMMITTEE
March 19, 2001
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, 2000.
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, 2000.
Each of the members of the Audit Committee is independent as defined under the
listing standards of the NASDAQ stock market.
/s/ David B. Soule
David B. Soule, Audit Committee Chairman
/s/ Robert B. Gregory
Robert B. Gregory
/s/ Dana L. Dow
Dana L. Dow
Audit Committee Charter
I. Audit Committee
In accordance with the bylaws of First National Lincoln Corporation, the Board
has appointed an Audit Committee for the Company. The Audit Committee shall be
composed of at least three Directors who are independent of the Management of
the Company and are free of any relationship that, in the opinion of the Board
of Directors, would interfere with their exercise of independent judgment as a
Committee Member. Each Audit Committee member must be able to read and
understand fundamental financial statements. At least one Committee Member must
have past employment experience in finance or accounting, requisite
professional certification in accounting, or other comparable experience or
background, including a current or past position as a chief executive or
financial officer or other senior officer with financial oversight
responsibilities. Audit Committee members may enhance their familiarity with
finance and accounting by participating in educational programs conducted by
the Company or through other outside programs.
II. Independence
A Director will not be considered "Independent" if, among other things, the
Director has:
1. Been employed by the Company in the current year or past three years.
2. Accepted any compensation from the Company in excess of $60,000 during the
previous fiscal year (except for board service, retirement plan benefits or
non-discretionary compensation).
3. An immediate family member who is, or has been in the past three years,
employed by the Company as an executive officer.
4. Been a partner, controlling shareholder or an executive officer of any for-
profit business to which the Company made or from which it received payments
(other than those which arise solely from investments in the Company's
securities) that exceed five percent of the Company's consolidated gross
revenues for that year, or $200,000, whichever is more, in any of the past
three years.
5. Been employed as an executive of another entity where any of the Company's
executives serve on that entity's compensation committee.
III. Statement of Policy
The Audit Committee shall provide assistance to the Company's Directors in
fulfilling their responsibilities to shareholders and investment community
relating to the Company's accounting, reporting practices, and quality and
integrity of the Company's financial reports. In so doing, it is the
responsibility of the Audit Committee to maintain free and open means of
communications between the Board of Directors, the Independent Auditors, the
Internal Auditors, and the financial management of the Bank.
IV. Meetings
The Audit Committee shall meet at least four times annually, or more frequently
as circumstances dictate. The Audit Committee will meet at least annually in a
separate executive session with Management, the Independent Auditors or
Internal Auditors to discuss any matters that the Audit Committee or each of
these groups believe should be discussed privately.
V. Responsibilities.
The basic responsibilities of the Audit Committee include the following:
1. Review and update this Charter at least annually or as conditions dictate
and ascertain that this Charter is reported in the Bank's proxy statement at
least once every three years.
2. Report periodically to the Board of Directors.
3. Review and recommend to the Board of Directors the Independent Auditors to
be selected to audit the financial statements of the Company and its
subsidiaries.
4. Meet with the Independent Auditors and Management of the Company to review
the scope of the proposed audit for the current year and the audit procedures
to be used, and at the conclusion review audit findings, including comments or
recommendations of the Independent Auditors.
5. Review the Internal Audit function of the Company and its subsidiaries
including the independence and authority of its reporting obligations, the
proposed audit plan for the current year and the coordination of such plans
with the Independent Auditors.
6. Consult with the Independent and Internal Auditors' the concerning integrity
of the Company's financial reporting processes (Internal and external).
7. Inquire as to the Independent Auditors judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial statements.
8. Consider and approve, if appropriate, major changes to the Company's
auditing and accounting principles and practices as suggested by the
Independent Auditors, Management or the Internal Auditors.
9. Review and approve the required reports to be included in the Company's
annual proxy statement to shareholders.
10. While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of Management and the Independent Auditors.
At times, the responsibilities of the Audit Committee may also include:
1. Review and concur in the appointment, replacement, reassignment, or
dismissal of the Internal Auditor.
2. Review and approve requests for any management consulting engagement to be
performed by the Company's Independent Auditors and be advised of any other
study undertaken at the request of Management that is beyond the scope of the
audit engagement letter.
3. Review periodically with the Company's counsel legal and regulatory matters
that may have a material impact on the AICPA's and Related Entities' financial
statements, compliance policies and programs.
4. Conduct or authorize investigations into any matters within the Committee's
scope of responsibilities. The Committee shall be empowered to retain
independent counsel and other professionals to assist in the conduct of any
investigation.
VI. Independent Auditors
* Each year the Independent Auditing Firm will present its Audit Plan and the
estimated fees for performing the annual audit and quarterly reviews of Form
10-Q in the form of an engagement letter. This engagement letter will be
presented to the Audit Committee for its approval.
* The Audit Committee will meet with the Independent Auditors to review the
Audit Plan and results of their annual audit and to discuss any concerns of the
Independent Auditors including those items cited in the Management Letter on
the Company's internal control function.
* Will discuss with the Audit Committee the matters required to be discussed by
Generally Accepted Auditing Standards (GAAS).
VII. Internal Auditors
The objective of the Company's internal audit function is to determine that the
Company has established effective internal controls and compliance with
managerial policies, laws, regulations and generally accepted accounting
principles.
* Internal audit responsibilities will be fulfilled by either an employee of
the Company or an outside firm that provides internal audit services. On an
annual basis, senior management and the Audit Committee will evaluate whether
the internal audit function should be fulfilled by a Company employee or by an
outside firm which provides internal audit services.
* The Internal Auditors will use follow-up procedures to ensure that exceptions
noted during regulatory exams, independent or internal audits are addressed in
a satisfactory manner.
* The President and the Audit Committee will have authority to approve internal
audit special investigations which have not been included as part of the
current Audit Plan.
Disclosure of Audit Fees
Audit Fees. The aggregate fees of Berry, Dunn, McNeil & Parker (BDMP) for the
audit of First National Lincoln Corporation's financial statements at and for
the year ended December 31, 2000 and reviews of First National Lincoln
Corporation's Quarterly Reports on Form 10-Q were $46,660, of which an
aggregate amount of $26,483 has been billed through December 31, 2000.
Financial Information Systems Design and Implementation Fees. No services were
rendered by BDMP to First National Lincoln Corporation for the year ended
December 31, 2000 for financial information systems design and implementation.
All Other Fees. The aggregate fees for services other than those discussed
above rendered by BDMP to First National Lincoln Corporation for the year ended
December 31, 2000 were $33,750, of which an aggregate amount of $24,750 has
been billed through December 31, 2000.
The audit committee has considered the compatibility of the non-audit services
furnished by BDMP with the firm's need to be independent.
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 2000.
Information About Stockholder Proposals
If you wish to submit proposals to be included in the Company's 2001 proxy
statement for the 2002 Annual Meeting of Stockholders, the Company must receive
them by December 31, 2001, 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.
Financial Statements
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.
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/ Donald C. Means
Donald C. Means, Clerk
Damariscotta, Maine
March 19, 2001
FIRST NATIONAL LINCOLN CORPORATION
Post Office Box 940, Main Street, Damariscotta, Maine 04543
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
March 5, 2001, at the Annual Meeting of Stockholders to be held on April 24,
2001, 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 in the
enclosed Proxy Statement dated March 19, 2001, for the term described therein.
__ 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 ratify the Board of Directors' selection of Berry, Dunn, McNeil & Parker
as independent auditors of the Company for 2001.
__ For __ Against __ Abstain
4. 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, AND 3, 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 below. 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___________________________________ 2001
Signature___________________________________
Signature___________________________________
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