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BAR HARBOR BANKSHARES
82 Main Street
Bar Harbor, ME 04609
March 29, 2004
April 2, 2002
Dear Stockholder:
The 20022004 Annual Meeting of Bar Harbor Bankshares will be held at 11:00 a.m. EDT on Tuesday, May 7, 200218, 2004 in the Atlantic Oakes Conference Center, located next to the Bay Ferries Terminal on Route 3 in Bar Harbor, Maine. TheOur Directors and Officers join me in inviting you to attend this meeting and the reception which will follow.following.
Enclosed are the Clerk’s official Notice of Annual Meeting, a Proxy Statement, and the Form of Proxy. Please sign the Form of Proxy and return it in the envelope provided so that your shares will be voted at the Annual Meeting if you are unable to attend. Please also complete the reception postcard and mail it separately from the Form of Proxy if you will be attending the reception.
We look forward to seeing you on May 7th.18th. Please join us for the reception even if you are unable to attend the business meeting.
Very truly yours,
/s/Joseph M. Murphy
Joseph M. Murphy
President and
Chief Executive Officer
Enclosures
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY
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BAR HARBOR BANKSHARES
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY7, 200218, 2004
Notice is hereby given that the Annual Meeting of the Stockholders of Bar Harbor Bankshares will be held at the Atlantic Oakes Conference Center on Route 3 in Bar Harbor, Maine on Tuesday, May 7, 200218, 2004 at 11:00 a.m.EDT to consider and act upon the following proposals.
Stockholders of record as of the close of business on March 19, 20022004 will be entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
Marsha C. Sawyer, Clerk
BAR HARBOR BANKSHARES
82 Main Street
Bar Harbor, ME 04609
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY, MAY 7, 2002
18, 2004
PROXY STATEMENT
This Proxy Statement is furnished to the stockholders of Bar Harbor Bankshares (the Company)("the Company") in connection with the solicitation of proxies on behalf of the Board of Directors for use at the Annual Meeting of Stockholders (the Meeting)("the Meeting"). The Meeting will be held on Tuesday, May 7, 200218, 2004 at 11:00 a.m. EDT at the Atlantic Oakes Conference Center on Route 3 in Bar Harbor, Maine. The official Notice of the Annual Meeting of Stockholders accompanies this Statement. A Form of Proxy for use at the meeting and a return envelope for the proxy are enclosed. A stockholder who executes the proxy may, prior to its use, revoke it by written instrument, by a subsequently executed proxy or, if attending the Meeting, by notifying the Clerk or by giving notice at the Meeting. This Proxy Statement and the enclosed Form of Proxy will be mailed to the stockholders of the Company on or about April 2, 2002.2004.
Proxies are being solicited by the Board of Directors of the Company, (the "Board"("the Board"), principally through the mail. The Board of Directors and Management of the Company may also solicit proxies personally, or by telephone, e-mail, or facsimile transmission. The entire expense of solicitation, including costs of preparing, assembling, and mailing the proxy material will be borne by the Company. These expenses are not expected to exceed the amount normally expended for an annual meeting at which directors will be elected.
Unless contrary instructions are specified, if the enclosed proxy is executed and returned (and not revoked) prior to the Annual Meeting, the shares of common stock of the Company represented thereby will be voted: (1) FOR the election of the four persons nominated as Directors by the Board of Directors; (2) FOR setting the number of Directors at 13; and (3) To transact such other business as may properly come before the Annual Meeting or any adjournment thereof.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of March 19, 2002,2004, the Company had outstanding 3,246,0203,105,905 shares of its common stock (the("the Common Stock)Stock"), par value $2 per share, each of which is entitled to one vote upon each matter presented at the Meeting. Only stockholders of record at the close of business on March 19, 20022004 are entitled to vote at the Meeting. The presence at the Meeting, either in person or by proxy, of the holders of not less than a majority of the shares entitled to vote at any meeting will constitute a quorum. Assuming a quorum is present, action may be taken on any matter considered by the holders of a majority of the shares present and voting. Abstentions and shares otherwise not voting will not be deemed present and voting. Stockholders who are present will have an opportunity to vote on each matter brought before the Meeting.
As of March 19, 2002,2004, to the knowledge of the Company, Bernard K. Coughno person or entity was the only beneficial owner of 5% or more of the Company’s common stock. Mr. Cough’s common stock ownership is set forth in detail in the "Directors and Executive Officers" table herein below. Mr. Cough’s address is 5 Norman Road, Bar Harbor, ME 04609.
The following table lists,sets forth information with respect to the beneficial ownership of the Common Stock as of March 19, 2002,2004, by: (i) each current director of the Company and each nominee for director on the Company’s Board of Directors, (ii) the Company’s named executive officers (as defined on page 14 of this Proxy under the heading "Compensation of Directors and Executive Officers"), and (iii) and all executive officers and directors as a group.
Name of Beneficial Owner |
Title of Class | Amount of Beneficial Ownership1 | Percent | |
Robert C. Carter | Common | 1,400 | * | |
Thomas A. Colwell | Common | 4,935 | * | |
Peter Dodge | Common | 4,260 | * | |
Martha T. Dudman | Common | 518 | * | |
Dwight L. Eaton | Common | 9,171 | 2 | * |
Ruth S. Foster | Common | 2,850 | * | |
Cooper F. Friend | Common | 4,287 | * | |
John P. McCurdy | Common | 6,000 | * | |
Joseph M. Murphy | Common | 38,762 | 2 | 1.25 |
Robert M. Phillips | Common | 1,500 | * | |
Dean S. Read | Common | 21,388 | 2 | * |
John P. Reeves | Common | 14,479 | 2 | * |
Constance C. Shea | Common | 600 | * | |
Gerald Shencavitz | Common | 6,624 | 2 | * |
Kenneth E. Smith | Common | 200 | * | |
Scott G. Toothaker | Common | 0 | 3 | * |
David B. Woodside | Common | 500 | * | |
Total Ownership of all nominees, continuing | 148,834 | 3 | 4.79% |
1The number of shares beneficially owned by the persons set forth above is determined under rules under Section 13 of the Exchange Act, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, an individual is considered to beneficially own any shares of Common Stock and the percentage of the Common Stock represented thereby, beneficially owned by each director and nominee and by all principal executive officers and directors of the Company as a group.
Name & Address of Beneficial Owner Directors and Executive Officers |
Title of Class | Amount of Direct Beneficial Ownership | Amount of Indirect Beneficial Ownership |
Percent of Class |
Thomas A. Colwell | Common | 5,400 | 0 | * |
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Bernard K. Cough | Common | 126,830 | 41,740 | 5.19 |
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Dwight L. Eaton | Common | 8,687 | 0 | * |
Ruth S. Foster | Common | 3,350 | 0 | * |
Cooper F. Friend | Common | 3,523 | 0 | * |
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H. Lee Judd | Common | 1,400 | 0 | * |
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Joseph M. Murphy | Common | 0 | 0 | * |
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Dean S. Read | Common | 1,390 | 0 | * |
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John P. Reeves | Common | 14,760 | 11.370 | * |
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Lynda Z. Tyson | Common | 1,650 | 150 | * |
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Paul G. Ahern | Common | 1,303 | 0 | * |
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Gerald Shencavitz | Common | 501 | 0 | * |
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Total Ownership of all Directors and Executive Officers of Company as a group (12 persons) | 168,814 | 53,260 | 6.84% |
* Less than 1%
For purposes of the foregoing 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, under which, in general, a person is deemed to be the beneficial owner of a security if he or she directly or indirectly has or shares, (i) voting power, which includes the power to vote or to direct the voting of the security,shares, or if he(ii) investment power, which includes the power to dispose or she haddirect the right to acquire beneficial ownershipdisposition of the securityshares. Unless otherwise indicated, an individual has sole or joint voting power and sole investment power with respect to the indicated shares. All individual holdings amounting to less than 1% of issued and outstanding Common Stock are marked with an (*).
2Includes shares over which present and former executives have voting power under our 401(k) Plan and options to purchase shares of common stock granted pursuant to our stock option plan which are exercisable within 60 days.days of March 19, 2004, as follows.
401K PlanExercisable Options
Dean S. Read 1,088 19,300
Dwight L. Eaton 8,771 - -0-
Joseph M. Murphy 8,762 30,000
John P. Reeves 1,979 - -0-
Gerald Shencavitz 934 5,290
3Total Indirect Beneficial ownership does not includesinclude, in the case of each director,, 31,360 shares (0.0097%(1.01%) of the Common Stock held by two trusts which, for purposes of voting, are allocated equally among the directors present at the Annual Stockholder’s meeting under the terms of the respective trust instruments. No director has any other beneficial interest in suchthese shares. Ownership figures for directors and nominees do notinclude 500 directors’ qualifying shares owned by each person named.named. The information provided is based on the records of the Company and on information furnished by the persons listed.
Management The Company is not aware of any arrangement, which could, at a subsequent date; result in a change in control of the Company.
Company Directors,
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s executive officers, directors, and ownerspersons who own more than 10% of 10% or morea registered class of the Common Stock of the Company are requiredCompany’s equity securities (collectively "Section 16 Persons") to file periodicinitial reports of ownership and reports of changes of ownership with the U.S. Securities and Exchange Commission (the "Commission"). Section 16 Persons are required by Commission regulations to furnish the Company with respect to their beneficial ownershipcopies of all Section 16(a) forms they file.
To the Common Stock. Based upon aCompany’s knowledge, based solely on review of appropriate forms furnishedsuch reports provided to and retained by the Company and written representations that no other reports were required during the reporting period ended March 19, 2004, all Section 16(a) filing requirements applicable to Section 16 Persons were properly met, except as follows:
(a) On April 2, 2003, Ms. Constance Shea’s spouse, Robert Shea, purchased 100 shares for which timely reporting did not occur. In February 2004, a Form 5 was filed reflecting his correct ownership.
(b) On May 15, 2003, Mr. Michael Bonsey, a Senior Vice President of Bar Harbor Banking and Trust Company isexercised 1,490 in vested Stock Options. A Form 4 was not aware of any officer, director, or owner of 10% or more of the Common Stock who has failed to file any such report.filed timely reflecting this transaction until October 3, 2003.
MANAGEMENT OF THE COMPANY
Directors and Nominees:
The Board of Directors
Management recommends that the number of Company directors for the coming year be set at 9.thirteen (13). The Bylaws of the Company provide for no fewer than 9 or more than 27 directors, with directors serving staggered terms of three years. The
Nominees for election to the Company Board of DirectorsDirector’s are described below. Each nominee has nominated for re-election two incumbent directors, Thomas A. Colwell and Dwight L. Eaton, whose terms expire in 2002. Cooper F. Friend, who was elected byconsented to serve. All nominees, with the exception of Kenneth E. Smith, currently serve on the Board of the Company.
The Board has determined that the director-nominees and a majority of the continuing directors are "independent directors" as required in accordance with applicable laws, regulations, and AMEX listing requirements. Exceptions are Director Murphy who serves as President and Chief Executive Officer of the Company and Director Eaton who retired as President and Chief Executive Officer of BTI Financial Group in February 2000. Directors on February 18, 2002,Murphy and Eaton do not serve as voting members of the Audit, Compensation and Human Resources, or Governance Committees.
Ms. Ruth S. Foster is retiring in May 2004 from the Company and Bank Boards pursuant to fillage limitations under relevant Company and Bank by-laws provisions. Mr. John P. Reeves, who would also be required to retire in May 2005 due to age limitations under the vacancy created by the resignation of Warren C. Cook, alsoCompany and Bank by-law provisions, has been nominateddecided not to stand for electionre-election when his present three-year term expires in May 2004 rather than be nominated for a termpartial, one-year term. His decision was not a result of three years. Each has been nominated for re-election for a termany disagreements with the Company or Board of three yearsDirectors. The guidance and has consentedlong dedication to the Company and stockholders by these two individuals will be named as a nominee and to serve if elected.missed.
The following table sets forth for each nominee and each director continuing in office, their name, age (as of March 19, 2004), the names, occupations, ages and terms of service of all directors. Each person listed also servesyear first elected or appointed as a Directordirector of the Company, the year of expiration of the current term as a director of the Company and the offices and positions each person holds with the Company and its subsidiaries (i.e. Bar Harbor Banking and Trust Company:
Name | Principal Occupation Now and for Past 5 Years | Age as of 3/19/02 | Year First Elected Director |
| Nominated for a Term Expiring in 2005 | |||
| Thomas A. Colwell | President of Colwell Bros., Inc. (Lobster pounding) of Stonington, Maine | 57 | 1991 |
| Dwight L. Eaton | Retired February 2000. Formerly President and CEO of BTI Financial Group and Senior Vice President and Trust Officer of Bar Harbor Banking and Trust Company; Vice President of the Company since 1987. Current Chairman and director of BTI Financial Group. | 66 | 1988 |
| Cooper F. Friend | President of Friend & Friend, Inc., a recreational motor sports dealer. | 48 | 2002 |
| Term Expires 2003 | |||
| Bernard K. Cough | Treasurer of Atlantic Oakes, Inc., Atlantic Eyrie and several other resort motels, Bar Harbor, Maine | 74 | 1985 |
| Dean S. Read | President and Chief Executive Officer of the Bank since April 2000. Executive Vice President of the Company and the Bank since January 2000. Formerly, Senior Relationship Manager of Key Bank Corporation, Augusta, Maine. Director BTI Financial Group since April 2000. | 54 | 2000 |
| Lynda Z. Tyson | Self employed writer and marketing consultant. Formerly Chief Operating Officer and Marketing Director of Tyson & Partners, Marketing consultants of Bar Harbor, Maine. | 47 | 1993 |
| Term Expires in 2004 | |||
| Ruth S. Foster | Former State Senator and owner of Ruth Foster's (retail clothing), Ellsworth, Maine. | 72 | 1986 |
| John P. Reeves | Chairman of the Board of the Company and the Bank since October 1999. Director of BTI Financial Group. Formerly served as President and Chief Executive Officer of the Company and the Bank until his retirement December 31, 1994. | 67 | 1984 |
| Joseph M. Murphy | President and Chief Executive Officer of Bar Harbor Bankshares and BTI Financial Group and Director of BTI Financial Group. Formerly Executive Vice President, Retail Banking Group for WSFS Financial Corporation. | 59 | 2002 |
Nominees for election to the Board are selected by the full Board. The Board will consider nominees recommended by stockholders if submitted in writing to Marsha C. Sawyer, Clerk,Company, BTI Financial Group, Bar Harbor Bankshares, 82 Main Street, Bar Harbor, Maine 04609, not less than three months in advance of the date of the Annual Meeting.Trust Services, Block Capital Management, and Dirigo Investments, Inc.):
The Board of Directors
CONTINUING DIRECTORS Name |
Age | Year First Elected Director | Current Term to Expire | Position with the Company | Positions with Subsidiaries |
Thomas A. Colwell | 59 | 1991 | 2005 | Director | Director, Bar Harbor Banking and Trust Company since 1991. |
Martha T. Dudman | 52 | 2003 | 2005 | Director | Director, Bar Harbor Banking and Trust Company and BTI Financial Group since 2003. Director of Bar Harbor Trust Services since 2003 |
Dwight L. Eaton | 68 | 1988 | 2005 | Director | Director, Bar Harbor Banking and Trust Company since 1988. Chairperson and Director of BTI Financial Group since 2000. Director of Bar Harbor Trust Services since 2000. President and Chief Executive Officer of BTI Financial Group January and February 2000 Formerly Senior Vice President and Trust Officer of Bar Harbor Banking and Trust Company |
Cooper F. Friend | 50 | 2002 | 2005 | Director | Director, Bar Harbor Banking and Trust Company since 1997. Director of BTI Financial Group since 2002. Director of Bar Harbor Trust Services since 2002 |
| David B. Woodside | 52 | 2003 | 2005 | Director | Director, Bar Harbor Banking and Trust Company since 2003. |
| Robert C. Carter | 61 | 2003 | 2006 | Director | Director, Bar Harbor Banking and Trust Company since 1996. |
| Peter Dodge | 60 | 2003 | 2006 | Director | Director, Bar Harbor Banking and Trust Company since 1987. |
| John P. McCurdy | 73 | 2003 | 2006 | Director | Director, Bar Harbor Banking and Trust Company since 1979. |
| Scott G. Toothaker | 41 | 2003 | 2006 | Director | Director, Bar Harbor Banking and Trust Company since 2003. |
NOMINEES for Name |
Age | Year First Elected Director | Current Term to Expire | Position with the Company | Positions with Subsidiaries | |
Joseph M. Murphy | 61 | 2002 | Nominee | Director President and Chief Executive Officer of Bar Harbor Bankshares. | Chief Executive Officer of Bar Harbor Banking and Trust Company since 2003. Chief Executive Officer and Director of BTI Financial Group since 2002. Chairperson and Director, Bar Harbor Banking and Trust Company since 2002. Director of Bar Harbor Trust Services since 2002. | |
Robert M. Phillips | 62 | 2003 | Nominee | Director | Director, Bar Harbor Banking and Trust Company since 1993. Director, BTI Financial Group since 2000. Director of Bar Harbor Trust Services since 2000. | |
Constance C. Shea | 59 | 2003 | Nominee | Director | Director, Bar Harbor Banking and Trust Company since 2001. | |
Kenneth E. Smith | 50 | Nominee | Director | |||
Executive Officers:
Each executive, policy making officer of the Company held eleven meetings in 2001. The Bylaws of the Company provide for quarterly meetings. Each director attended at least 75% of the total number of meetings held by the Board of Directors in 2001.
Executive Officers
Each principal executive officer of the Companyand its subsidiaries is identified in the following table, which also sets forthfor the respective office with the Company and its Subsidiaries, age (as of March 19, 2004), and period served in that office for each person listed.
| Name | Principal Occupation Now and for | Age as of 4/1/02 | Year First Elected Officer |
| John P. Reeves | Chairman of the Board of the Company and the Bank since October 1999. Director of BTI Financial Group. Formerly served as President and Chief Executive Officer of the Company and the Bank until his retirement December 31, 1994. | 67 | 1984 |
| Joseph M. Murphy | President and Chief Executive Officer of Bar Harbor Bankshares and BTI Financial Group. Director of BTI Financial Group and the Bank. Formerly Executive Vice President, Retail Banking Group for WSFS Financial Corporation. | 59 | 2002 |
| Dean S. Read | Former President and Chief Executive Officer of Bar Harbor Bankshares (2000-February 25, 2002). President and Chief Executive Officer of Bar Harbor Banking and Trust Company (current). Director of the Bank and BTI Financial Group since April 2000. | 54 | 2000 |
| Gerald Shencavitz | Chief Financial Officer and Treasurer of the Company since June, 2001 and Senior Vice President, Chief Financial Officer and Chief Operations Officer of the Bank since 2001. Formerly Vice President of the Bank. | 48 | 2001 |
| Marsha C. Sawyer | Clerk of the Company since July 1986; Clerk and Senior Vice President of the Bank since 1999; formerly Vice President of the Bank. | 49 | 1986 |
| Paul G. Ahern | Former President and CEO BTI Financial Group, a wholly owned subsidiary of the company. Former CEO Block Capital Management, a wholly owned subsidiary of BTI Financial Group. Previously Vice President and Trust Investment Officer of the Bank. Mr. Ahern resigned from the foregoing positions in January 2002. | 42 | 2000-March 2, 2002 |
| Edward B. Grimball | Former Chief Financial Officer of the Company and Bank since September 2000 through June 2001. Formerly served as partner of CPA firm from 1999 to September 2000 and Executive Vice President and CFO of Whitney Holding Corporation, multi-state bank holding company from 1990-1998. Presently providing temporary executive services to BTI Financial Group. | 57 | 2000-June, 2001 |
Name |
Age | Year | Positions with the Company | Positions with Subsidiaries |
Joseph M. Murphy | 61 | 2002 | President and Chief Executive Officer. | Chief Executive Officer and Chairperson of the Board of Bar Harbor Banking and Trust Company since 2003. Chief Executive Officer of BTI Financial Group since 2002. Director of Bar Harbor Trust Services since 2002. |
| Dean S. Read | 56 | 2000 | President and Chief Executive Officer of the Company from April 2000 through February 2002 | President of Bar Harbor Banking and Trust Company since April 2000. Chief Executive Officer and President from April 2000 through May 2003 Formerly Executive Vice President of Bar Harbor Banking and Trust Company. |
Name | Age | Year | Positions with the Company | Positions with Subsidiaries |
Gerald Shencavitz | 50 | 2001 | Chief Financial Officer and Treasurer of the Company since June 2001.
| Chief Financial Officer, Senior Vice President, and Chief Operating Officer of Bar Harbor Banking and Trust Company since June 2001. Treasurer of BTI Financial Group since June 2001. Formerly Senior Vice President of Bar Harbor Banking and Trust Company. |
The Bylaws of the Company provide that the executive officers be elected annually by the Board of Directors and that the President, ChairmanChairperson of the Board, Treasurer and Clerk shall serve at the pleasure of the Board and until their successors have been chosen and qualified. All other officers serve at the pleasure of the Chief Executive Officer.
The principal occupation and business experience for at least the last five (5) years for each director, nominee, and executive officer is set forth below. None of the organizations discussed below, except for Bar Harbor Banking and Trust Company, BTI Financial Group, Bar Harbor Trust Services, Block Capital Management, and Dirigo Investments, Inc., is affiliated with the Company.
Committees
Continuing Directors:
Thomas A. Colwell. Mr. Colwell of Deer Isle is President of Colwell Bros., Inc., (lobster pounding) located in Stonington, Maine.
Martha T. Dudman. Ms. Dudman of Northeast Harbor, Maine, is President of Dudman Communications Corporation, an author and professional Fund Raiser.
Dwight L. Eaton. Mr. Eaton retired in February 2000 as President and Chief Executive Officer of BTI Financial Group. Prior to 2000, Mr. Eaton served as Senior Vice President and Trust Officer of Bar Harbor Banking and Trust Company.
Cooper F. Friend. Mr. Friend is President of Friend & Friend, Inc., a recreational motor sports dealership. He is a partner of U-Store-It and Friend and Friend Realty, Ellsworth, Maine.
David B. Woodside. Mr. Woodside is President of Acadia Corporation, a corporation operating a restaurant and gift shops located in Acadia National Park and Bar Harbor, Maine.
Robert C. Carter. Mr. Carter is owner of the Machias Motor Inn, Machias, Maine.
Peter Dodge. Mr. Dodge is President and Insurance Agent with Merle B. Grindle Agency, an insurance and real estate agency located in Blue Hill, Maine.
John P. McCurdy. Mr. McCurdy is retired. He formerly owned and operated McCurdy Fish Company, Lubec, Maine.
Scott G. Toothaker. Mr. Toothaker is Principal and Vice President of Melanson Heath & Co., PC, a CPA firm with an office located in Ellsworth, Maine.
Nominees:
Joseph M. Murphy. Mr. Murphy is President and Chief Executive Officer of Bar Harbor Bankshares and Chief Executive Officer of Bar Harbor Banking and Trust Company and BTI Financial Group. Prior to February 2002, Mr. Murphy was Executive Vice President, Retail Banking Group for WSFS Financial Corporation from 1996 through 2000 where he was responsible for their retail branching system, small business and consumer lending, marketing and product development, card programs, investment and insurance products, and community relations.
Robert M. Phillips. Mr. Phillips is a consultant for Oxford Foods, a food processor located in Cherryfield, Maine.
Constance C. Shea. Ms. Shea is a Real Estate Broker and one-third owner of Lynam Real Estate Agency, Bar Harbor, Maine and one-third owner of L. S. Robinson Company, an insurance and real estate company located in Southwest Harbor, Maine.
Kenneth E. Smith. Mr. Smith is owner and Innkeeper of Manor House Inn and former owner of Wonder View Inn, both hospitality facilities located in Bar Harbor, Maine. Mr. Smith also serves as Chairperson of the Bar Harbor Town Council.
Executive Officers:
Joseph M. Murphy. See Mr. Murphy’s background set forth in the Nominee section immediately above.
Dean S. Read. Mr. Read has served as President of Bar Harbor Banking and Trust Company since April 2000. He served as President and Chief Executive Officer of Bar Harbor Bankshares from April 2000 to February 2002 and Chief Executive Officer of Bar Harbor Banking and Trust Company from April 2000 until May 2003. He held the position of Executive Vice President of Bar Harbor Banking and Trust Company from January 2000 until April 2000. Formerly he was Senior Relationship Manager, Corporate Banking for Key Bank, N.A.
Gerald Shencavitz. Mr. Shencavitz has served as Chief Financial Officer and Treasurer of the Company since June 2001 and Chief Financial Officer, Senior Vice President and Chief Operating Officer of Bar Harbor Banking and Trust Company since 2001. He formerly was a Senior Vice President at Bar Harbor Banking and Trust Company.
BOARD OF DIRECTORS AND ITS COMMITTEES
Board of Directors:
During 2003, a fourteen (14) member board, a majority of which meets the independence standards established by the American Stock Exchange, managed the Company. The Board of Directors of the Company held a total of twelve (12) regular meetings, one (1) annual meeting, and three special meetings during 2003. The Bylaws of the Company provide for a minimum of quarterly meetings. Each Director attended at least 75% of the total number of board and committee meetings that he or she was eligible to attend.
The Board encourages, but does not require, each Director to attend its Annual Meeting of Stockholders. All of the Board’s members attended the 2003 Annual Meeting.
Committees:
Executive Committee
The Bylaws of the Company provide that after each Annual Meeting of Directors, the Board shall designate from among its members an Executive Committee which haswith the authority to exercise all the powers of the Board of Directors in regard to ordinary operations of the business of the Company when the Board is not in session, subject to any specific vote of the Board. The Executive Committee for 20012003 included Messrs.Directors Reeves, Colwell, Dodge, Murphy, Eaton Read, and Ms. Tyson.Foster. The Executive Committee met one timedid not meet in 2001.2003.
The Bylaws provide that the Board may elect or appoint such other committees, as it may deem necessary or convenient to the operations of the Company. The Board has appointed a standing Audit Committee, a standing Governance Committee, and a standing Compensation and Human Resources Committee. It has not appointed a Nominating
Audit Committee
The members of the Audit Committee included Directors Colwell, Foster, Friend, Reeves, Toothaker, and Woodside. Mr. Colwell serves as Chairperson of the Committee.
The Audit Committee met six (6) times during 2003. See Appendix A for Report of Audit Committee and nominations are considereda copy of the Audit Committee Charter restated as of March 26, 2004.
The Company’s Board has determined that the Audit Committee is composed of independent directors, in accordance with applicable laws, regulations, promulgated by the Board asU.S. Securities and Exchange Commission, and AMEX listing requirements. The Audit Committee operates under a whole.
Thewritten charter, which has been adopted by the Audit Committee and the BoardCompany Board. Audit Committee members do not accept any consulting, advisory, or other compensatory fees (except director fees) and are not affiliated with the Company (except as a director) or any of Directors have adopted a written charter setting forthits subsidiaries.
The Audit Committee has the dutiessole authority to appoint and responsibilitiesreplace the independent auditor, subject to appropriate stockholder ratification. The Audit Committee is responsible for the compensation and oversight of the independent auditor. The independent auditor reports directly to the Audit Committee. The Audit Committee is responsible for assistingassists the Board of Directors to fulfillin fulfilling its fiduciary obligationsoversight responsibilities with respect to (i) the accounting, financial reporting,information to be provided to stockholders and the Securities and Exchange Commission; (ii) the review of quarterly financial statements; (iii) the system of financial controls management has established; and
(iv) the internal controlaudit, external audit and compliance functionsloan review processes.
Governance Committee (formerly the Nominating Committee)
The Governance Committee (formerly the Nominating Committee) for 2003 was comprised of Directors Foster, Murphy, Phillips, and Reeves. Directors Murphy and Reeves resigned their positions in January 2003. Directors Dodge and Shea were voted to replace them. The Governance Committee met six (6) times during 2003. Ms. Foster served as Chairperson of the Committee. The Company and its subsidiaries. The Committee recommends to the Board and the shareholders the appointment of independent accountants and oversees the audit function. It meets with and reviews the audit plans and reports of both the internal and independent auditors for the Company. The current membersDirectors has determined that each member of the AuditGovernance Committee include Messrs. Colwell, Judd, and Ms. Foster, and before their resignations, Ms. Tyson and Mr. Cook. is independent for purposes of AMEX listing standards.
The Audit Committee met four times during 2001. See Appendix A for Report of Audit Committee.
The CompensationGovernance Committee is responsible for settingscreening candidates, recommending nominees to the full Board of Directors (including the slate of returning directors) to be elected each year, making recommendations concerning the size and composition of the Board of Directors, recommending Committee structure and membership, and sponsoring new director orientation and education. The Governance Committee does not have a written charter but is in the process of developing a formal document. A copy will be available on the Company’s general website www.bhbt.com, as soon as it has been finalized and approved.
In the absence of a formal written charter, the Governance Committee expects to identify nominees to serve as directors of the Company primarily by accepting and considering the suggestions and nominee recommendations made by directors, management, and stockholders. To date, the Governance Committee has not engaged any third parties to assist it in identifying candidates for the Board of Directors. The Governance Committee considers among other things the background, business and professional experience (including any requisite financial expertise or other special qualifications), age, current employment, community service, and other board service of its directors and nominees, as well as racial, ethnic, and gender diversity of the Board as a whole. The Governance Committee generally considers a candidate’s qualifications in light of these broad criteria as well as an assessment as to whether the candidate can make decisions on behalf of or while representing the Company in a manner consistent with our stated business goals and objectives. The Governance Committee will also consider the candidate’s "independent" status in accordance with applicable regulations and listing standards.
The Company bylaws provide that the Company will consider nominees for election to the Board of Directors recommended by stockholders if made in the same manner provided for under the bylaws with regard to stockholder proposals generally. These procedures require in part that the stockholder submit the proposed nomination in writing to Marsha C. Sawyer, Clerk, Bar Harbor Bankshares, 82 Main Street, Bar Harbor, Maine 04609, no less than 120 days in advance of the date of the next Annual Meeting. Any such request shall set forth the reasons for considering such nominee, the name and address of the stockholder proposing the nominee, the number of shares of the Company’s capital stock beneficially owned by such stockholder and any material interest of the stockholder in the matter proposed to be brought before the Annual Meeting. If the Governance Committee determines that any stockholder proposal (including a nomination for election of a director) was not made in a timely fashion or that information provided in the notice does not fulfill the information requirements set forth above in any material respects, such proposal shall not be presented for action at the Annual Meeting for which it is proposed.
The four nominees for Directors identified above being proposed for election at the Annual Meeting to serve a three-year term of office are existing directors, with the exception of Mr. Smith. Mr. Smith, who has not previously served on the Board of the Company or any of its subsidiaries, was jointly nominated by Directors Shea, Reeves, and Woodside and recommended by the Governance Committee to stand for election to the Company Board.
Compensation and Human Resources Committee
The Compensation and Human Resources Committee reviews and considers recommendations from management concerning our executive compensation levelspolicies, employee benefit plans, and salary administration programs, including reviewing annually the total compensation and recommended adjustments for all employees, including executive officers. officers and the executive officers of the Company’s subsidiaries. The deliberations of the Compensation and Human Resources Committee are reported to the Board of Directors for review and approval.
The Compensation and Human Resources Committee is comprised of Company Directors Dodge, Dudman, Phillips, Shea, and Woodside. Mr. Dodge serves as Chairperson of the Committee. The Company’s and the Bank’s Chief Executive Officer, Murphy and Bar Harbor Banking and Trust Company’s President, Read, serve on the Committee in a non-voting, ex-officio capacity, as does the Bank’s Human Resource Officer, Sawyer. Directors Eaton and Reeves previously had participated in this Committee, but resigned their participation in May of 2003. All voting members of the Compensation Committee are independent for 2001 included Messrs. Dodge, Eaton, Phillips, Reeves, Read, Ms. Sawyer, and until his resignation, Mr. Cook.purposes of AMEX listing standards. The Compensation and Human Resources Committee met six times during 2001.2003.
Family Relationships and Other Arrangements
There are no family relationships among any director, executive officer, or person nominated by the Company to become a director or executive officer. There are also no arrangements or understandings between any nominee, director, executive officer, or associate of any of the foregoing and any other person pursuant to which the nominee was or is to be elected as a director or an executive officer. No person or entity listed above as the employer of an officer or director, other than the BankBar Harbor Banking and Trust Company and BTI Financial Group, is an affiliate of the Company.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth all annual compensation received during each of the Company’s last three fiscal years by Sheldon F. Goldthwait, Jr.,Joseph M. Murphy, Dean S. Read, Paul G. Ahern,and Gerald Shencavitz and Dwight L. Eaton who are the onlypolicy making, executive officers for whom compensation exceeded $100,000 in any year. Compensation for each named officer was paid bythe year ending December 31, 2003. The Company or the subsidiary of the company by which he was employed.employed paid compensation for each named officer.
Name and | Year | Salary 1 ($) | Bonus2 | Other Annual | Restricted Stock Award | Securities Underlying Options/SARs (#) | LTIP Payouts | All Other Compensation ($) |
Joseph M. Murphy, President | 2003 | 221,158 | 26,400 | 1,796 | N/A | 0 | N/A | 0 |
and CEO of Bar Harbor Bankshares and CEO of Bar Harbor Banking and Trust | 2002 2001 | 191,388 N/A | 7,140 N/A | 48,872 N/A | N/A N/A | 90,000 N/A | N/A N/A | 0 N/A |
and BTI Financial Group | ||||||||
Dean S. Read | 2003 | 185,901 | 21,886 | 2,322 | N/A | 0 | N/A | 0 |
President, Bar Harbor | 2002 | 182,588 | 7,400 | 2,412 | N/A | 0 | N/A | 0 |
Banking and Trust Company | 2001 | 183,672 | 500 | 2,741 | N/A | 45,000 | N/A | 0 |
Gerald Shencavitz | 2003 | 123,704 | 14,666 | 1,242 | N/A | 5,000 | N/A | 0 |
CFO and Treasurer, | 2002 | 119,525 | 4,495 | N/A | 5,000 | N/A | 0 | |
Bar Harbor Bankshares | 2001 | 101,130 | 500 | 873 | N/A | 15,000 | N/A | 0 |
CFO, SVP, and COO of Bar Harbor Banking and Trust Company |
1 Included in base salary amounts disclosed above for each named executive officer, are monies deferred pursuant to the Company’s 401(k) Plan, which allows employees of the Company and its wholly owned subsidiaries to defer up to 50% of their compensation, subject to applicable limitations in section 401(k) of the Internal Revenue Code of 1986, as amended, and amounts deferred pursuant to the Company’s non-qualified deferred compensation plans described in this Proxy. Also included in base salary for 2002 are one-time payments to Messrs. Murphy and Shencavitz in the amounts of $15,255.53 and $7,827.77, respectively.
SUMMARY COMPENSATION TABLEANNUAL COMPENSATION
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Name | Year | 401(k) Deferrals | Non-Qualified Deferred Compensation |
Joseph M. Murphy | 2003 | 14,000 | 0 |
2002 | 12,000 | 0 | |
2001 | N/A | N/A | |
Dean S. Read | 2003 | 14,000 | 0 |
2002 | 12,000 | 0 | |
2001 | 10,500 | 19,425 | |
Gerald Shencavitz | 2003 | 14,000 | 0 |
2002 | 11,000 | 0 | |
2001 | 10,442 | 0 |
LONG TERM COMPENSATION
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Items included in Mr. Eaton’s and Mr. Goldthwait’s Annual Compensation –Salary include deferred compensation to reflect accounting entries2 Named Executives received $500 as a bonus for the Company’s Deferred Compensation Plans. Itemsfiscal year 2001 and a payment of 4% of base salary for the fiscal year 2002. Named Executives participated in a two –tiered plan for the fiscal year 2003. They received 6% of base salary for surpassing a Net Income threshold and up to an additional 6% of base salary for achieving individually assigned goals in the areas of loan, deposit, and income growth as well as successful implementation of strategic plan initiatives
3Additional items included in the Other Annual Compensation column include social club dues, relocation expenses, and imputed life insurance amounts and reimbursed spousal travel expenses.on group term insurance in excess of the allowable $50,000, non-taxable IRS limit.
Pursuant
Name | Year | Imputed Insurance | Relocation Costs | Social Club Dues |
Joseph M. Murphy | 2003 | 1,346 | 0 | 450 |
2002 | 2,367 | 45,970 | 715 | |
2001 | N/A | N/A | N/A | |
Dean S. Read | 2003 | 2,322 | 0 | 0 |
2002 | 2,412 | 0 | 0 | |
2001 | 1,329 | 1,412 | 0 | |
Gerald Shencavitz | 2003 | 1,242 | 0 | 0 |
2002 | 841 | 0 | 0 | |
2001 | 873 | 0 | 0 | |
EQUITY COMPENSATION PLAN
The following table provides information relating to Non-Qualified Deferred Compensation Agreements Mr. Goldthwait voluntarily deferred a portion of his 1999 base salary; Mr. Goldthwait and Mr. Read deferred in 2000, and Mr. Read deferred in 2001. The deferred amounts are included in the base salaries disclosed in the Compensation Table. Mr. Goldthwait began receiving paymentsoption grants pursuant to his deferred compensation agreement in 2000.
The Bank has an incentive plan for which all employees, including the Company’s Incentive Stock Option Plan during 2003 to our named executive officers listed above, are eligible. The Bank utilizes the Performance Compensation Plan for Stakeholders developed by Mike Higgins & Associates, Inc. The plan creates an incentive model based on multiple goal achievements and is weighted to provide potential payments based on improvement over pre-established measures. Goals are established in the areas of profit, growth, productivity, and quality. Examples of these measures include growth in the area of deposits, loans, and Net Interest Margin, and reduction in the Bank’s efficiency ratio. Payments to each Bank employee were made in December 2000 equal to 3.395% of each employee’s salary. Bank Executive Officers and BTI employees voluntarily elected not to participate in the 2000 Plan. There was no payment under the plan for 2001.officers.
Options GrantsGranted During the Year Ended December 31, 20012003
| Individual Grants | Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term | Alernative to Grant and Date Value | |||||
| Name | Number of Securities Underlying Options/SARs Granted (#) | Percentage of total Options/SARs Granted to Employees in Fiscal Year | Exercise of Base Price ($/Sh) | Expiration Date | 5% ($) | 10% ($) | Grant Date Present Value ($) |
| Dean S. Read(1) | 45,000 | 23.65% | $15.40 | 6/20/2010 | |||
| Paul G. Ahern(2) | 20,000 | 10.51% | $15.40 | 6/20/2010 | |||
| Gerald Shencavitz(3) | 15,000 | 7.88% | $15.40 | 6/20/2011 | |||
Individual Grants | |||||
Name | Number of Securities Underlying Options/SARs Granted (#) | Percentage of total Options/SARs Granted to Employees in Fiscal Year | Exercise or Base Price ($/Sh) | Expiration | Grant Date Present Value ($) |
Gerald Shencavitz 1 | 5,000 | 11.2360% | $22.70 | 09/16/2013 | $7,839.10 |
1 (1)6,450 options vestedGerald Shencavitz, 5,000 shares will vest over a five-year period in equal increments, at timea base price of grant with 6,425$22.70.
The Black-Scholes option-pricing model was used to vest each June thereafter until fully vested.(2)2,850determine the value of the options vested at the time of Mr. Ahern’s resignation. Mr. Ahern is not eligible for any future vesting of options previously granted.(3)None vested at timedate of grant. First incremental vesting to occur June 2002.A risk free interest rate of 2.38%, a dividend yield of 3.30% and an expected life of 3.5 years were assumed in the model. The expected volatility at the grant date was 11.0% for Mr. Shencavitz.
Compensation Committee
The Company has a seven member Compensation Committee that includes both directors and representatives of management. The Compensation Committee meets several times each year and makes compensation recommendations for the ensuing year to the full Board of Directors for all employees, including executive officers. The recommendations of the Compensation Committee are then considered by the full Board.
Compensation Committee Interlocks and Insider Participation
The Compensation and Human Resources Committee for 2001 included Messrs.is comprised of Company Directors Dodge, Eaton,Dudman, Phillips, Shea, and Woodside. Mr. Dodge serves as Chairperson of the Committee. The Company’s and the Bank’s Chief Executive Officer, Murphy and Bar Harbor Banking and Trust Company’s President, Read, Reeves, Ms. Sawyer, and until his resignation, Mr. Cook. Messrs. Dodge,serve on the committee in a non-voting, ex-officio capacity, as does the Bank’s Human Resource Officer, Marsha C. Sawyer. Directors Eaton Phillips, Read and Reeves servedpreviously had participated in this Committee, but resigned their participation in May of 2003. Certain members of the Committee and their affiliates and families are borrowers from the Company’s banking subsidiary. All loans and credit commitments to such persons were made in the ordinary course of business and were on substantially the Board of Directors. Ms. Sawyersame terms, including interest rates and collateral as those prevailing at the time for comparable transactions with unaffiliated persons, and did not serveinvolve more than the normal amount of risk of collectability or present other unfavorable features to the Company’s subsidiaries.
Report of the Compensation and Human Resources Committee on Executive Compensation
The Compensation and Human Resources Committee administers and recommends to the Board of Directors but served as a non-voting member of the Committee. Ms. SawyerCompany its executive compensation programs. These programs are intended to provide a package of base salary, traditional benefits, options, retirement payments, and Mr. Read were full time employeesincentive opportunities to its executives to achieve both current and long-term return on the stockholder’s investment and align the executive’s interest to those of the Bank during 2001. They abstained from participatingCompany and its Subsidiaries employees, customers, and stockholders. The Committee does not use a formal set of criteria in discussion, formulating recommendations or voting with respect to their own compensation. Mr. Dodge served as chairmanevaluating the compensation of executive officers. However, some of the Committee.factors generally considered by the Compensation and Human Resources Committee are detailed below.
ReportLevels of compensation are, in part, guided by the Company’s need to attract and retain qualified executives who can make a major contribution to the success of the CompensationCompany. The Committee on Executive Compensation
The Board of Directors has no formalregularly reviews compensation policy applicable to compensation decisionssurveys comparing the Company’s subsidiaries with respect to its executive officers. While there are no objective criteria which specifically relate corporate performance to compensation determinations, in formulating its recommendation with respect to compensation of Messrs. Read, Shencavitz and Ahern during the last fiscal year, the Board of Directors considered, among other factors, overall responsibilities, individual performance, years of service, and salary surveys of executive officers at comparable financial institutions in the State of Maine and New England.
Compensation Program Components
The BoardCompany’s compensation program can be generally described as being comprised of Directors also reviewedtwo primary components: (a) base salary and benefits, and (b) executive incentive compensation programs. Base salary and benefits include items such as retirement plan benefits and insurance programs, and are intended to adequately compensate executive officers and employees for capable performance of their core duties and responsibilities associated with their positions. The named executives and six senior officers participated in a two-tiered executive incentive plan for 2003. The first tier provided for an incentive payment determined by meeting a certain earnings threshold. The second tier provided for an additional incentive payment based on individually assigned goals such as loan and deposit growth, quality measures, and implementation of strategic plan initiatives. Individual payments to these named executive officers and senior officers under this two-tiered program ranged from 9.75% to 12% of base salary. An accrual for payment of these incentives was booked in 2003, but actual payments were made to participating individuals in 2004
Performance Measures
The Committee considers certain performance measures in evaluating the Corporation’s overallcompensation of the Company’s executive officers. In addition to using Maine and New England banking surveys other guiding factors the Company uses in establishing appropriate levels of executive officer compensation are the specific performance andof each executive officer, the performance of the CorporationCompany as a whole, the financial plan for the year, and such other general factors as the business climate.
Stock Option Plan
An additional component of compensation for Company employees in relationshipmanagement positions, including named executives, is the award of options to purchase shares of Common Stock at fixed prices. The Company’s Stock Option Plan, which is scheduled to expire October 2010, is based on performance in that the options only have value if the market value of Common Stock increases.
Compensation of the Executive Officer
The Committee annually reviews the Chief Executive Officer’s existing compensation arrangement, the performance of the Company and its Subsidiaries, the Chief Executive Officer’s performance, and the compensation of chief executive officers in other similarly situatedsimilar companies of comparable size and performance characteristics.
The compensation of the Company’s Chief Executive Officer is generally divided into two basic parts: (a) salary and benefits, and (b) executive incentive compensation. The Company’s Employment Agreement with the Chief Executive Officer provides for a review of his base salary no less than annually and it may be adjusted at the Company’s sole discretion. His base salary for 2003 was increased 4.77% over 2002.
The second part of the compensation program for the Chief Executive Officer is based upon the incentive compensation programs described above, and applies to all named executive officers. The program resulted in 12.00% of additional compensation for the Chief Executive Officer based upon the achievement of strategic and financial institutions in Maineobjectives determined by the Committee and New England.approved by the Board of Directors.
The Chief Executive Officer does not receive any director fees for his participation as a member of the Company’s Board of Directors or as a director of any of the Company’s subsidiaries.
The Committee believes the Chief Executive Officer’s compensation is competitive with compensation provided by other similar companies of comparable size and performance histories.
The foregoing report to stockholders regarding compensation has been submitted by the 20012003 Compensation and Human Resources Committee including Messrs.
Peter Dodge, Cook, Read, Reeves,Chair
Martha T. Dudman
Robert M. Phillips Eaton, and Ms. Sawyer.
Constance C. Shea
David B. Woodside
Compensation of Directors
The directorsDirectors of the Company, the BankBar Harbor Banking and Trust Company, and BTI receiveFinancial Group received a fee of $300 for each meeting of the Bankshares and subsidiary boards attended and $250 for each committee meeting attended.attended in 2003. The fee paid for the attendance at the 2003 Annual Meeting is $500.00was $500 per member of the Board of Directors. The ChairmanChairperson of the BanksharesCompany Board receivesreceived an annual retainer of $3,000 in addition to meeting fees. The Chairperson of the BTI Financial Group Board received an annual retainer of $1,500 in addition to meeting fees. Meetings of the Board of Directors of the Company are held no less than quarterly. Those directorsmonthly. Director Murphy, who also serves as an officer of the Company, who are also officers dodoes not receive directors’ fees.
The Board of Directors of the Company voted to increase director fees to $400.00 for attendance at Company and Subsidiary Board meetings, committee meetings, and the Annual Stockholder’s meeting beginning in January 2004.
Bernard K. Cough deferred his director fees until his retirement in May 2003. These fees were credited to an account established for that purpose. These deferred fees are being distributed to Mr. Cough, or his designated beneficiary, since his retirement as a director.
EMPLOYEE BENEFIT PLANS
401(k) Plan
The Company has a contributory 401(k) plan available to all employees.employees including the named executive officers. Employees may contribute between 1% and 15%50% of their compensation (subject to applicable regulatory restrictions), to which the Company will match .50%50% of the first 3% deferred by an employee and 25% on the second 3% deferred. For the years ended December 31, 2001, 2000, and 1999, the Company contributed $54,021, $55,904.11, and $52,250, respectively, to its 401(k) plan. In 1999 theThe Board of Directors voted to credit each eligible participant’s 401(k) account with 3%4% of salary; that amount was increased to 4%salary for the years 20002003, 2002 and 2001. Total Company contributions madeinto the 401(k) Plan were $190,324, $184,905,$392,824, $321,085, and $133,950$244,345, for the years ended December 31, 2001, 2000,2003, 2002, and 1999,2001, respectively.
Supplemental Executive Retirement PlansAgreements
The Company’s maintains a Supplemental Executive Retirement Plan effective January 1, 2003 providing Joseph M. Murphy, President and Chief Executive Officer of the Company; Gerald Shencavitz, the Company’s Chief Financial Officer; and Dean S. Read, President of Bar Harbor Banking and Trust Company with certain supplemental retirement benefits. This plan provides a stream of future payments in accordance with individually defined vesting schedules upon retirement, termination, or in the event that the executive leaves the Company following a change of control event.
Upon Normal Retirement Age defined as age 68 for Mr. Murphy and age 65 for Mr. Read and Mr. Shencavitz, monthly payments of $11,200, $10,458, and $8,583 will be paid under this plan to the named executives (or their beneficiary) for a period of 240 months. There are also provisions under the plan for reduced monthly payments in the event of an early retirement by any of these individuals. As of December 31, 2003, Messrs Murphy, Read, and Shencavitz have vested, monthly benefits of $1,597, $2,012, and $535, respectively.
Employment Contracts and Change of Control Agreements
Change of Control Agreements
The Company has two non-qualified supplemental retirement plansalso entered into Change of Control Agreements with Messrs. Murphy, Read, and Shencavitz. These Change of Control Agreements provide for certain officers, includingseverance of both salary and benefits for twenty-four months for Mr. Murphy and eighteen months for Messrs. Reeves, Eaton, GoldthwaitRead and MacDonald.Shencavitz. These payments will be made in the event of both a change of control of the Company and subsequent termination (or constructive termination) of the executive within twelve months after a change of control, unless such termination was for cause. The agreementsCompany also agreed to pay any excise tax imposed on the executive under Section 4999 of the Internal Revenue Code and provide supplemental retirementfor health insurance and other standard benefits payable in installments overfor a period of 18 months. These agreements were entered into as part of a total compensation program to attract and retain qualified executives and not entered into in response to any effort known to the Board of Directors by any party or entity to acquire control of the Company.
Employment Contracts
Joseph M. Murphy, CEO
On November 7, 2003, the Company amended its written employment agreement with Joseph M. Murphy (CEO) originally dated January 3, 2003 (the Employment Agreement) in connection with his service as President and Chief Executive Officer Bar Harbor Bankshares to reflect changes in the Company’s Supplemental Retirement Programs and implementation of Change of Control Agreements. The Employment Agreement provides for the payment of an annual base salary to the Chief Executive Officer not less than $18,333.33 per month (an annualized rate of not less than $220,000.00 per annum). The Employment Agreement provides for a review of the Chief Executive Officer base salary not less than annually and may be adjusted at the Company’s sole discretion. The Chief Executive Officer is also eligible to participate in a performance compensation plan with goals and incentive payments to be approved by the Board annually. The Employment Agreement is for an initial term of two (2) years upon retirement or death.with provisions for automatic extensions of one (1) year each in the absence of notice from the Company of its intention not to extend the term of the Employment Agreement. The Company recognizesinitial term of the cost associatedEmployment Agreement commenced on January 3, 2003 and continues through January 3, 2005, unless sooner terminated. The Employment Agreement contains restrictions on competition by the Chief Executive Officer with the agreements overCompany during the service livesterm of the participating officers.
The Bank has entered into deferred compensation agreements with Messrs. Reeves, Goldthwait,Employment Agreement and Eaton whereby those individuals, or their beneficiaries, will receive upon death or retirement, an annual supplemental pension benefit overfor a period of 10 yearsone (1) year following the cessation of the CEO’s employment with the Company regardless of reason. The Employment Agreement also provides, with limited exceptions, for a severance payment to the Chief Executive Officer in the amount of $15,000 per annum (in the case of Mr. Reeves), andevent his employment is terminated within one (1) year following certain events defined to constitute a change in the amount of $10,000 per annum (in the case of Messrs. Goldthwait and Eaton). These plans are unfunded and benefits are paid out of Bank earnings. For 2001, 2000, and 1999, the expense of these supplemental plans was $13,750, $13,750, and $13,080, respectively. All three participating executives of this plan are now retired. Mr. Reeves began drawing his annual installment on January 1, 1996. He receives $5,300 annually, reduced from $10,000 for early retirement, under the terms of his agreement. Messrs. Eaton and Goldthwait retired in February and April 2000, respectively. Because he elected early retirement, Mr. Goldthwait’s annual benefit was reduced under the terms of his agreement from $10,000 to $6,800. Messrs. Eaton and Goldthwait began drawing their annual installments of $10,000 and $6,800, respectively in 2000.
In 1993 the Company established a non-qualified supplemental retirement plan for Messrs. Reeves, Eaton, Goldthwait, and MacDonald. The agreements provide supplemental retirement benefits payable in installments over twenty years upon retirement or death. The Company recognizes the costs associated with the agreements over the service livescontrol of the participating officers. In 1999,Company. This severance payment resulting from a termination of employment following a change in control is equal to two (2) times the company modifiedChief Executive Officer ‘s base annual salary, incentive compensation payments earned, and any accrued but unused vacation time. Both the plan for Mr. Goldthwait, which resulted in an estimated one-time expenseCompensation and Human Resources Committee and the Board of $639,700.00. The $759,683.00 Deferred Compensation entry to Mr. Goldthwait’s benefit package reflectsDirectors have reviewed and approved the 1999 plan modification and 2000 accounting entries necessitated by his early retirement. The annual expense associated with this supplemental plan was $ 125,070.12, $111,909, and $866,200, for 2001, 2000, and 1999, respectively. The agreements with Messrs. Reeves, Eaton, Goldthwait, and MacDonald provide for annual installment payments in the amounts of $49,020, $22,600, $87,176 and $7,700 respectively. Mr. Reeves began drawing his annual installment in January 1995, Mr. Eaton in March 2000, and Mr. Goldthwait in April 2000. Mr. Reeves and Mr. Goldthwait are both receiving reduced payments under a predetermined early retirement schedule.Employment Agreement.
Executive Officers of the Company are entitled to participate in certain group health, dental and term life insurance benefits. In accordance with Company policy, all such benefits are generally available generally to employees of the Company.
TRANSACTIONS WITH DIRECTORS, OFFICERS AND PRINCIPAL STOCKHOLDERS
The Company and its affiliates utilize the occasional services of self-employed marketing consultants Charles and Lynda Tyson. Ms. Tyson serves as a directorsubsidiaries.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None of the Company. Management believes thatnominees for directors, other continuing directors, or named executive officers of the fees charged by the Tyson’s are at least as favorable ascompany or any that could be obtained from persons not affiliatedof its subsidiaries engaged in 2003 in any transaction with the Company.Company or any of its subsidiaries, in which the amount involved or exceeds $60,000 other than the financial transactions described below under the heading "Indebtedness of Management".
Indebtedness of Management
The Company’s wholly owned subsidiary, Bar Harbor Banking and Trust Company, has had, and expects to have in the future, banking transactions in the ordinary course of its business with other directors, officers, principal stockholders, and their associates, including members of the Compensation Committee and Audit Committee.associates. All such transactions have been and will be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with others. No such transactions have involved more than normal risk of collectability or presented other unfavorable features, and no loans outstanding to directors, officers, principal stockholders, or their associates in an amount in excess of $60,000 are non-accruing or past due or are otherwise considered to be potential problem loans.
Employment Contracts
BTI Financial Group, a wholly owned subsidiary of the Company, entered into a written employment agreement with Paul G. Ahern dated February 3, 2000. By letter dated January 31, 2002, Mr. Ahern resigned from his position as President and CEO of BTI Financial Group and as a director of the Company and BTI. He also resigned all other officer and director positions he held with Bar Harbor Trust Services and Block Capital Management, both wholly owned subsidiaries of BTI and indirect subsidiaries of the Company. The Ahern Employment Agreement provided for the payment of an annual base salary to Mr. Ahern of not less than $115,000.00 and also provided for additional incentive based compensation under the variable incentive compensation plan, which BTI Financial Group has adopted. Mr. Ahern did not qualify during the last fiscal year for incentive compensation under that program.
PERFORMANCE GRAPH
The following graph illustrates the estimated yearly percentage change in the Company’s cumulative total shareholderstockholder return on its common stock for each of the last five years. Total shareholderstockholder return is computed by taking the difference between the ending price of the common stock at the end of the previous year and the current year, plus any dividends paid divided by the ending price of the common stock at the end of the previous year. For purposes of comparison, the graph also illustrates comparable shareholderstockholder return of American Stock Exchange (AMEX) banks as a group as measured by the AMEX Market Index and the peer group index as defined by AMEX. The graph assumes a $100 investment on December 31, 19961998 in the common stock of each of the Company, the AMEX peer group banks and the AMEX Market Index as a group and measures the amount by which the market value of each, assuming reinvestment of dividends, has increased as of December 31 of each calendar year since the base measurement point of December 31, 1996.1998.
Market values for 1997, 1998, 1999, 2000, 2001, 2002 and 20012003 are based on information obtained from the American Stock Exchange.
(GRAPH )(GRAPH)
1998 | 1999 | 2000 | 2001 | 2002 | 2003 | |
Bar Harbor Banking & Trust | 100 | 79.96 | 67.06 | 89.06 | 99.25 | 142.76 |
Peer Group Index | 100 | 83.25 | 84.92 | 106.85 | 122.52 | 157.95 |
AMEX Market Index | 100 | 124.67 | 123.14 | 117.47 | 112.78 | 153.50 |
SELECTION OF AUDITORS
Stockholder approvalOn March 26, 2004, the Audit Committee of the selectionBoard of auditors is not required, but the Board is of the view that an expression of opinion by the stockholders as to the appropriateness of this selection is desirable. The Board recommends that its selection ofDirectors Bar Harbor Bankshares (the "Company") dismissed Berry Dunn, McNeil & Parker ("BDMP") as its independent accountants, and approved the principalappointment of KPMG LLP as its independent accountantpublic accountants for the Company’s fiscal year ending December 31, 2004, subject to KPMG LLP completing their client acceptance processes and procedures. The Company intends to file a Form 8-K upon completion of the acceptance process and procedures.
The reports of BDMP on the Company’s consolidated financial statements for the year 2001 be ratified. Ifyears ended December 31, 2003 and 2002 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles.
During the Board selection is not ratified,Company’s fiscal years 2003 and 2002 and the Board will take action to appoint a different auditor forinterim period preceding the dismissal of BDMP on March 26, 2004, there have been no disagreements between the Company and BDMP on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreement(s), if not resolved to the satisfaction of BDMP, would have caused it to make reference to the subject matter of the disagreement(s) in connection with its prior reports.
During the two-year period ending December 31, 2003, and the interim period preceding the dismissal of BDMP, no reportable events occurred in connection with the relationship between BDMP and the Company.
We do not anticipate that representatives of BDMP or KPMG LLP will be present at the Annual Stockholders’ meeting or will be available to respond to questions or make a statement(s) at the meeting.
Audit Fees
The following summarizes BDMP’s audit fees for
its subsidiaries. It is anticipated that a representative of2003 and 2002.
| Service | 2003 | 2002 |
| Audit Fees | $ 74,815 | $ 86,500 |
| Audit Related Fees | 35,544 | 77,393 |
| Tax Fees | 11,402 | 13,080 |
| All Other Fees | 38,468 | 13,795 |
| Total | $160,229 | $190,768 |
1.Audit Fees. The aggregate fees billed for professional services rendered by the principal accountant, Berry, Dunn, McNeil & Parker will be present at(BDMP), for the Meeting to respond to appropriate questions or to make a statement.audit of the Company’s annual financial statements and review of financial statements included in the Company’s Forms 10-Q for the years ended December 31, 2003 and 2002 were $74,815 and $86,500, respectively.
2. Audit Related Fees. The aggregate fees billed for assurance and related services rendered by BDMP related to the performance of Berry, Dunn, McNeil & Parker for the audit or review of Bar Harbor Bankshares’ and Subsidiariesthe Company’s financial statements at and forin the yearyears ended December 31, 20012003 and reviews2002 were $35,544 and $77,393, respectively. These services related to the Sarbanes-Oxley Act of Bar Harbor Bankshares’ Quarterly Reports on Form 10-Q were $84,181,2002, implementation of whichinternal control reporting under FDICIA, an employee benefit plan audit, the acquisition of the Rockland Branch of Androscoggin Savings Bank, and accounting consultations.
3. Tax fees. The aggregate amount of $38,601 has beenfees billed through December 31, 2001.
4. All Other Fees.other fees: The aggregate fees billed for services provided by BDMP, other than those discussedthe services reported in the paragraphs above, rendered by Berry, Dunn, McNeil & Parker to Bar Harbor Bankshares and Subsidiaries forin the yearyears ended December 31, 20012003 and 2002 were $122,250,$38,468 and $13,795 respectively. The nature of which an aggregate amount of $115,450 has been billed through December 31, 2001.
The Audit Committee’s pre-approval policies and procedures require the Audit Committee has considered the compatibility of theChair to pre-approve all audit and non-audit services, furnished by Bar Harbor Bankshares’ auditing firm withand report such pre-approvals to the firm’s needAudit Committee at its next regularly scheduled meeting.
No services were required to be independent. No internal audit services were performed by Berry, Dunn, McNeil & Parker during the year ended December 31, 2001.
OTHER MATTERS
Management knows of no other matters to be presented for action at the Meeting. If any other matters properly come before the Meeting, the shares represented by the proxies will be voted with respect thereto in accordance with the judgment of the person(s) voting the proxies.
FINANCIAL STATEMENTS
A copy of the Company’s Annual Report is being provided to each stockholder with thethis Proxy Statement.
THE COMPANY IS ALSO INCLUDING A COPY OF THE ANNUAL REPORT BY THE COMPANY TO THE SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K, INCLUDING CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES FOR THE LAST FISCAL YEAR.YEAR IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES,PRINCIPLES. UPON WRITTEN REQUEST, STOCKHOLDERS MAY ALSO OBTAIN THE BANK’S MOST RECENT ANNUAL DISCLOSURE STATEMENT THAT CONTAINS FINANCIAL INFORMATION COVERING THE LAST TWO YEARS.
Any request for a copy of the Annual Disclosure Statement must contain a representation that the person making the request was a beneficial owner of Common Stock on March 19, 2002,2004, which is the record date for this proxy solicitation. Requests should be addressed to: Marsha C. Sawyer, Clerk, Bar Harbor Bankshares, 82 Main Street, Bar Harbor, ME 04609.
STOCKHOLDER PROPOSALS and COMMUNICATIONS WITH THE BOARD
Stockholders may submit proposals for consideration at the 20032005 Annual Meeting, which presently is scheduled for May 6, 2003.17, 2005. In order to be included in the Company’s Proxy Statement and Form of Proxy relating to that meeting, such proposals must be received by the Company no later than December 15, 2002,7, 2004, which is 120 days in advance of the proposed mailing date of the 20032005 proxy materials. Proposals should be addressed to Marsha C. Sawyer, Clerk, Bar Harbor Bankshares, 82 Main Street, Bar Harbor, ME 04609.
The Board of Directors does not have a formal process for stockholders to send communications to the Board. In view of the infrequency of stockholder communications to the Board of Directors, the Board does not believe that a formal process is necessary. Written communications received by the Company from stockholders will be shared with the full Board of Directors no later than the next regularly scheduled Board meeting.
By Order of the Board of Directors
/s/Marsha C. Sawyer, Clerk
Marsha C. Sawyer, Clerk
APPENDIX A
REPORT OF THE AUDIT COMMITTEE
April 1, 2002March 26, 2004
To the Board of Directors of Bar Harbor Bankshares:
The Audit Committee has reviewed and discussed with management the Company’s audited financial statements as of and for the year ended December 31, 2001.2003.
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, 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 havehas 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, 2001.2003.
Each of the members of the Audit Committee is independent as defined under the listing standards of the AMEX stock market.American Stock Exchange as of December 31, 2003.
The Board of Directors has determined that the Company has at least one "audit committee financial expert" serving on its Audit Committee. Mr. Scott Toothaker, CPA, meets the criteria for an "audit committee financial expert" and is "independent" within the meaning of the rules adopted by the American Stock Exchange pursuant to the Sarbanes-Oxley Act of 2002.
Thomas A. Colwell, ChairWarren C. Cook*
Ruth S.A. FosterH. Lee JuddCooper F. FriendLynda Z. Tyson**John P. Reeves
Scott G. Toothaker
David B. Woodside
*Resigned as a Director and Audit Committee member January 2, 2002.**Resigned as an Audit Committee member January 31, 2002
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