SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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/ / Preliminary Proxy Statement
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14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
Merrill Merchants Bancshares, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Merrill Merchants Bancshares, Inc.
Notice of 2001
Annual Meeting
and
Proxy Statement
Dear Stockholder:
On behalf of the Board of Directors and management, you are cordially invited to
attend the 2001 Annual Meeting of Stockholders to be held on Thursday, April 19,
2001, at 5:00 p.m. at Pilot's Grill Restaurant located at 1528 Hammond Street,
Bangor, Maine.
The notice of meeting and proxy statement accompanying this letter describe the
specific business to be acted upon. In addition to the specific matters to be
acted upon, there will be a report on the progress of the Company and an
opportunity for questions of general interest to the stockholders.
It is important that your shares be represented at the meeting. Whether or not
you plan to attend in person, you are requested to vote, sign, date, and
promptly return the enclosed proxy in the envelope provided.
Sincerely yours,
/s/ EDWIN N. CLIFT /s/ WILLIAM C. BULLOCK, JR.
Edwin N. Clift William C. Bullock, Jr.
PRESIDENT AND CHIEF EXECUTIVE OFFICER CHAIRMAN
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Merrill Merchants Bancshares, Inc. (the
"Company") will be held on Thursday, April 19, 2001 at 5:00 p.m. at Pilot's
Grill Restaurant, located at 1528 Hammond Street, Bangor, Maine. The Annual
Meeting is for the purpose of considering and acting upon:
1. The election of Directors as provided by the By-Laws.
2. Ratification of the appointment of the Company's independent
public accountants for 2001.
3. Any other business as may properly be brought before the
meeting or any adjournment thereof.
You may vote at the Annual Meeting and at any adjournment or postponement
thereof, if you were a stockholder of the Company on March 7, 2001, the record
date.
By Order of the Board of Directors,
/s/ JAMES A. MACLEOD
James A. MacLeod
SECRETARY
March 12, 2001
WHETHER YOU EXPECT TO ATTEND THE MEETING OR NOT, PLEASE VOTE, SIGN, DATE, AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE AS PROMPTLY AS
POSSIBLE. IF YOU ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON, EVEN
THOUGH YOU HAVE PREVIOUSLY SIGNED AND RETURNED YOUR PROXY.
MERRILL MERCHANTS BANCSHARES, INC.
201 MAIN STREET
BANGOR, ME 04401
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 19, 2001
SOLICITATION AND REVOCATION OF PROXIES
This proxy statement is furnished to the stockholders of Merrill Merchants
Bancshares, Inc., a Maine corporation, in connection with the Annual Meeting of
Stockholders of the Company.
A proxy card is furnished by the Company. This proxy is being solicited by the
Board of Directors of the Company for use at the April 19, 2001 Annual Meeting
of Stockholders and at any adjournment thereof. A proxy duly executed and
returned by a stockholder will be voted as directed by the proxy. If no choice
is specified, the proxy will be voted FOR proposals 1 and 2. As to other
matters, if any, to be voted upon, the persons named in the proxy will take such
action as the Board of Directors may deem advisable.
A stockholder who signs and returns a proxy may revoke it at any time before it
is exercised by notifying the Secretary of the Company in writing or by
attending the meeting and voting in person.
All expenses of the solicitation of proxies are being borne by the Company. It
is expected that solicitations will be made primarily by mail, but regular
employees or representatives of the Company and Merrill Merchants Bank (the
"Bank") may also solicit proxies by telephone, telex, facsimile and in person.
We will, upon request, reimburse brokerage firms and others for their reasonable
expenses in forwarding solicitation material to the beneficial owners of stock.
We began mailing this Proxy Statement, the Notice of Annual Meeting and the
enclosed proxy card on or about March 12, 2001, to all stockholders entitled to
vote. If you owned the Company's common stock at the close of business on March
7, 2001, the record date, you are entitled to vote at the Annual Meeting.
QUORUM
A quorum of stockholders is necessary to hold a valid meeting. If the holders of
at least a majority of the total number of the outstanding shares of common
stock of the Company entitled to vote are represented in person or by proxy at
the Annual Meeting, a quorum will exist. We will include proxies marked as
abstentions and broker non-votes to determine the number of shares present at
the Annual Meeting.
CONFIDENTIAL VOTING POLICY
The Company maintains a policy of keeping stockholder votes confidential. We
only let our Inspector of Election and certain employees of our trust and
investment group examine the voting materials. We will not disclose your vote to
management unless it is necessary to meet legal requirements. We will, however,
forward any written comments that you may have to management.
VOTING SECURITIES
Only stockholders of record at the close of business on March 7, 2001, are
entitled to vote at the Annual Meeting. As of January 31, 2001, there were
2,587,153 shares of common stock outstanding. Each share has one vote.
The nominees for directors who receive the most votes will be elected. If you
vote against the nominees for director or "withhold authority" for any nominee
on your proxy card, your vote will not count "for" or "against" the nominee. The
approval of the independent public accountants requires the majority of the
votes cast by stockholders present in person or by proxy and entitled to vote at
the Annual Meeting. If you "abstain"
from voting on the independent public accountant proposal, it will have the same
effect as if you voted "against" the proposal. Broker non-votes will not be
counted as having voted in person or by proxy for each proposal and will have no
effect on the outcome of the proposals.
The following table shows the amount of Merrill Merchants Bancshares, Inc.
common stock beneficially owned by the Company's directors, the executive
officers named in the Summary Compensation Table and the directors and executive
officers as a group. All information is as of January 31, 2001.
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AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
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ACQUIRABLE
CURRENTLY WITHIN 60 PERCENT OF
NAME OF BENEFICIAL OWNER OWNED(1) DAYS(2) CLASS(2)
Perry B. Hansen (3) 150,724 122,377 10.1%
The Bullock Family Trust (4) 116,410 120,194 8.7%
William C. Bullock, Jr. (4) 116,410 120,194 8.7%
Edwin N. Clift 62,054 59,396 4.6%
Joseph H. Cyr (5) 105,283 - 4.1%
John S. Bacon (6) 79,436 - 3.1%
Dennis L. Shubert, M.D., Ph.D. (7) 66,259 - 2.6%
J. Donald Mackintosh (8) 45,498 5,359 2.0%
Robert E. Knowles (9) 46,189 - 1.8%
Frederick A. Oldenburg, Jr., M.D. (10) 44,033 2,044 1.8%
Susan B. Singer 40,280 5,359 1.8%
Lloyd D. Robinson (11) 40,502 - 1.6%
William P. Lucy (12) 1,081 33,158 1.3%
All current directors and executive officers as 800,542 436,136 40.9%
a group (15 persons)
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(1) Except as otherwise noted, each individual in the table above has the
sole voting and investment power over the shares listed.
(2) The calculation of percent of class includes shares of common stock
acquirable within 60 days. Shares acquirable within 60 days includes
common stock issuable upon the conversion of mandatory convertible
debentures, Series A preferred stock and the exercise of stock options.
(3) Mr. Hansen's mailing address is 67 South Longspur Drive, The Woodlands,
Texas 77380.
(4) Mr. Bullock is the trustee of The Bullock Family Trust. Mr. Bullock's
mailing address is 44 Bald Hill Reach Road, Orrington, Maine 04474.
(5) Includes 76,567 shares of common stock held jointly with spouse.
(6) Includes 14,371 shares of common stock held in the name of Mr. Bacon's
various family members, of which he serves as Trustee.
(7) Includes 46,745 shares of common stock held by Walden Partnership, of
which Dr. Shubert holds a controlling interest. Includes 8,818 shares
of common stock held in the name of Dr. Shubert's children, of which
his spouse serves as Trustee. Also includes 3,244 shares of common
stock held by spouse.
(8) Includes 34,712 shares of common stock held jointly with spouse.
(9) Includes 34,835 shares of common stock held jointly with spouse.
(10) Includes 18,415 shares of common stock held under the name Penobscot
Respiratory PA FBO Frederick A. Oldenburg, Jr. and 15,286 shares of
common stock held by spouse and child.
(11) Includes 38,510 shares of common stock held jointly with spouse.
(12) Includes 1,081 shares of common stock held by spouse.
ELECTION OF DIRECTORS OF MERRILL MERCHANTS BANCSHARES, INC.
(Item 1 on Proxy Card)
The Board has nominated five persons for election as directors at the Annual
Meeting. Mr. Bullock, Mr. Clift and Ms. Singer currently serve on the Company's
Board of Directors. Mr. Knowles and Mr. Robinson were nominated by the Board of
Directors to replace Mr. Bacon and Mr. Mackintosh, who are retiring from the
Board of Directors. If you elect the nominees, Mr. Bullock, Mr. Clift and Ms.
Singer will hold office until the Annual Meeting in 2004 and Mr. Knowles and Mr.
Robinson will hold office until the Annual Meeting in 2003, or until their
successors have been elected.
We know of no reason why any nominee may be unable to serve as a director. If
any nominee is unable to serve, your proxy may vote for another nominee proposed
by the Board. If for any reason these nominees prove unable or unwilling to
stand for election, the Board will nominate alternates or reduce the size of the
Board of Directors to eliminate the vacancy. The Board has no reason to believe
that its nominees would prove unable to serve if elected. We recommend that you
vote "FOR" each of the nominees for election as directors.
NOMINEES
WILLIAM C. BULLOCK, JR., 64, has served as Chairman of the Company and the Bank
since its inception in 1992. He is the former Chairman of The Merrill Trust
Company and its successor bank, Merrill/Norstar Bank. He also served as an
executive vice president and director of the holding company, Fleet/Norstar
Financial Group of Providence, Rhode Island. Prior to moving to Maine in 1969,
he held a number of officer positions with Morgan Guaranty Trust Company of New
York. Mr. Bullock has served on and chaired several committees of the American
Bankers Association ("ABA") and is a former chairman of the Maine Bankers
Association ("MBA"). From 1987 to 1989, Mr. Bullock was a Class A director of
the Federal Reserve Bank of Boston. Mr. Bullock is a graduate of Yale
University. He currently serves as a director of Bangor Hydro-Electric Company
and Eastern Maine Healthcare, both of Bangor.
EDWIN N. CLIFT, 61, has served as President and Chief Executive Officer of the
Company and the Bank since its inception in 1992. Prior to that, Mr. Clift was
associated with three other Maine banks including more than 20 years as an
executive of The Merrill Trust Company. Mr. Clift is chairman of the St. Joseph
Healthcare Foundation board of trustees and the Maine Committee for Employer
Support for the Guard and Reserve. He serves as the ABA state chair and is also
a member of the ABA's Community Bankers Council. Mr. Clift recently completed a
three-year term as a Class A director of the Federal Reserve Bank of Boston. He
is a past chairman of the MBA and a past president of the Independent Community
Bankers Association of Maine. Mr. Clift is a graduate of Strayer College in
Washington, D.C. He serves as a director of Seven Islands Land Company, a
privately held company that manages one million acres of certified forest in
Maine.
SUSAN B. SINGER, 51, has served as a Director of the Company since May 1998 and
as a Director of the Bank since 1992. She presently serves as comptroller and
vice president of MTL, Inc., a family-owned sales, rental and leasing company
located in Bangor, with which she has been associated for 20 years. Ms. Singer
is a current member of Congregational Beth Israel and a past board member and
treasurer. She serves as a director of the Bangor-Brewer Y.W.C.A and is a former
director of Eastern Maine Medical Center Auxiliary.
ROBERT E. KNOWLES, 66, has served as Director of the Bank since 1992. He
presently serves as president of White Mountain Imaging, a privately held
company that manufactures x-ray chemicals. From 1971 to 1984, he was the owner
and president of Maine X-Ray Equipment, Pittsfield, Maine, one of the largest
distributors of X-ray film and chemicals in New England. Mr. Knowles currently
serves as a director of X-Ray Marketing Associates, Inc. He has been active in a
number of civic and fraternal organizations including the Unity Rotary and Anah
Temple.
LLOYD D. ROBINSON, 66, has served as a Director of the Bank since 1992 and a
Director of Maine Acceptance Corporation since 1999. He has been retired since
1985. From 1977 to 1985, he was the owner/operator of
McKay's R.V. Center, a privately held recreational equipment business. He also
has investments in real estate in the Bangor area. Mr. Robinson is a U.S. Air
Force veteran.
CONTINUING DIRECTORS
JOSEPH H. CYR, 60, has served as a Director of the Company and the Bank since
1992. He has been the owner of John T. Cyr & Sons, Inc., Old Town, Maine, a
privately held charter bus service, since 1967. Mr. Cyr has been involved in
that business since 1962. He was formerly a director of Norstar Bank in Bangor.
He has been active in a number of civic and charitable organizations including:
trustee of Husson College; president of the Bangor Area Chamber of Commerce;
director of St. Joseph Hospital; and director of the Maine Community Foundation.
He is also a director of Bangor Hydro-Electric Company, Bangor, Maine. Mr. Cyr's
term expires in 2003.
PERRY B. HANSEN, 53, has been a Director of the Company and the Bank since 1992.
He is chairman and chief executive officer of THE National Bank, Bettendorf,
Iowa and a director of its bank holding company, National Bancshares, Inc. He is
also chairman of Auto Parts Express, LLP, an auto parts wholesaler and retailer.
Mr. Hansen's thirty years of banking experience includes management of two other
banks in the Quad City area. Presently he is also an investor, holding senior
management positions in several privately held companies. Mr. Hansen's term
expires in 2002.
FREDERICK A. OLDENBURG, JR., M.D., 53, has served as a Director of the Company
since May 1999 and a Director of the Bank since 1996. He has been a practicing
physician since 1973 and director of Penobscot Respiratory and Respiratory Care
at St. Joseph Hospital in Bangor since 1993. He is a graduate of Dartmouth
College and Case Western Reserve University Medical School. Dr. Oldenburg is
past president of the National Association for the Medical Direction of
Respiratory Care. Dr. Oldenburg's term expires in 2002.
DENNIS L. SHUBERT, M.D., PH.D., 53, has served as a Director of the Company
since May 1998 and a Director of the Bank since 1992. He is a neurosurgeon and
past president of Maine Neurosurgery of Bangor and Portland, Maine. Dr. Shubert
is a Bangor native who graduated from Tufts University, received an M.D. from
George Washington University and a Ph.D. from the University of Minnesota. Dr.
Shubert has been active in a number of professional organizations including:
president of the Penobscot County Medical Association and president of the Maine
Neurosurgical Society. Dr. Shubert's term expires in 2002.
RETIRING DIRECTORS
JOHN S. BACON, 70, has served as a Director of the Company since 2000 and
Director of the Bank since 1996. He is president of Bacon Printing Company, a
Bangor-based, family-owned printing business with which he has been associated
since 1948. Mr. Bacon was previously a director of The Merrill Trust Company. He
is a member of Bangor Rotary.
J. DONALD MACKINTOSH, 70, has served as a Director of the Company since 2000 and
Director of the Bank since 1992. He is retired from the automobile industry
where he worked for over 40 years, most recently as the owner, president and
general manager of Dow Motors, Inc., a privately held automobile dealership in
Ellsworth, Maine. Mr. Mackintosh is a graduate of General Motors Institute where
he received a B.A. degree. He is currently a member of the Aircraft Owners and
Pilots Association.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(Item 2 on Proxy Card)
The Board of Directors has appointed Berry Dunn McNeil & Parker (BDMP) as the
Company's independent public accountants for the fiscal year ending December 31,
2001. BDMP has served as the Company's independent public accountants since the
incorporation of the Company in 1992. We recommend that you vote "FOR" the
ratification of the appointment of BDMP.
Representatives of BDMP will be present at the Annual Meeting to respond to
appropriate questions and will have the opportunity to make a statement if they
desire to do so.
AUDIT FEES. The aggregate fees of BDMP for the audit of the Company's financial
statements at and for the year ended December 31, 2000 and reviews of the
Company's quarterly reports on Form 10-QSB were $38,700, of which an aggregate
amount of $22,389 has been billed through December 31, 2000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. No services were
rendered by BDMP to the Company 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 the Company for the year ended December 31, 2000 were
$13,155, of which an aggregate amount of $7,155 has been billed through December
31, 2000.
BOARD OF DIRECTORS AND ITS COMMITTEES
The Company's Board of Directors currently consists of nine members. The
Company's Articles of Incorporation provides that the Board of Directors shall
be divided into three classes, as nearly equal in number as possible. The terms
of three directors expire at the Annual Meeting.
The Board of Directors oversees our business and monitors the performance of our
management. In accordance with our corporate governance procedures, the Board of
Directors does not involve itself in the day-to-day operations of the Company.
The Company's executive officers and management oversee the day-to-day
operations of the Company. Our directors fulfill their duties and
responsibilities by attending regular meetings of the Board.
The Board of Directors of the Company held twelve meetings during the calendar
year 2000 and each director other than Mr. Hansen and Mr. Mackintosh attended at
least 75% of all Board meetings.
AUDIT COMMITTEE
The Audit Committee is comprised of Directors Shubert (Chair), Hansen, Oldenburg
and Singer. The function of the Audit Committee is described below under the
heading REPORT OF THE AUDIT COMMITTEE. The Audit Committee met four times during
2000. The Audit Committee operates under a written charter adopted by the Board
of Directors of the Company, a copy of which is attached as Appendix A to this
proxy statement.
EXECUTIVE COMMITTEE
The Executive Committee is comprised of Directors Bullock (Chair), Clift, Cyr,
Shubert and Singer. The Executive Committee considers strategic planning and
industry issues and is authorized to act as appropriate between meetings of the
Board of Directors. The Executive Committee did not meet during 2000.
COMPENSATION COMMITTEE
The Compensation Committee is comprised of Directors Hansen (Chair), Cyr,
Oldenburg, Shubert and Singer. The Compensation Committee determines the
salaries and incentive compensation of the officers of the Company and Bank and
provides recommendations for the salaries and incentive compensation of the
other employees and the consultants of the Bank. The Compensation Committee also
administers the Company's various incentive compensation, stock and benefit
plans. The Compensation Committee met three times during 2000 and each director
other than Cyr, Hansen and Singer attended at least 75% of all committee
meetings.
The Board of Directors, acting as the nominating committee, met in January, 2001
to select the nominees for election as directors at the Annual Meeting.
REPORT OF THE AUDIT COMMITTEE March 7, 2001
The Audit Committee of the Board of Directors of the Company serves as the
representative of the Board for general oversight of the Company's financial
accounting and reporting process, system of internal control, audit process, and
process for monitoring compliance with laws and regulations. The Company's
management has primary responsibility for preparing the Company's financial
statements and financial reporting process. The Company's independent auditors,
Berry, Dunn, McNeil & Parker, are responsible for expressing an opinion on the
conformity of the Company's audited financial statements to generally accepted
accounting principles.
In this context, the Audit Committee hereby reports as follows:
1. The Audit Committee has reviewed and discussed the audited financial
statements with management.
2. 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).
3. The Audit Committee has received written disclosures and the letter from the
independent auditors required by the Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and has discussed with the
auditors the auditors' independence.
On the basis of these reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 2000, for filing with the Securities and Exchange
Commission.
The Audit Committee has considered the compatibility of the non-audit services
furnished by BDMP with the firm's need to be independent.
Each of the members of the Audit Committee is independent as defined under the
listing standards of The Nasdaq Stock Market.
Members of the Audit Committee
DENNIS L. SHUBERT, M.D. PH.D., CHAIR PERRY B. HANSEN
FREDERICK A. OLDENBURG, JR., M.D. SUSAN B. SINGER
REMUNERATION OF DIRECTORS AND OFFICERS
DIRECTORS' FEES
Currently, each director of the Company receives the following fees:
- Non-employee directors of the Bank receive $250 for their
attendance at monthly and any special meetings of the Board of
Directors.
- Non-employee directors of the Company receive $50 per month
for their attendance at monthly and any special meetings of
the Board of Directors and any committee meeting held on the
same day as the Board of Directors' meetings.
- Non-employee committee members also receive $100 for each
committee meeting that is not held on the same day as the
Board of Directors meetings.
On June 14, 2000, each non-employee director received 100 shares of Merrill
Merchants Bancshares, Inc. common stock.
Non-employee directors may elect to have the payment of their directors' fees
deferred pursuant to the Directors' Deferred Compensation Plan. Total directors'
meeting and committee fees for fiscal 2000 (including
the granting of common stock) were $62,219. We do not compensate our employees
for service as directors. Directors are also entitled to the protection of
certain indemnification provisions in our Articles of Incorporation and Bylaws.
STOCK OPTION PLAN. In addition, our directors are eligible to participate in the
Stock Option Plan. This stock benefit plan is discussed under "Executive
Compensation -- Stock Option Plan." No options under the Stock Option Plan were
granted to any non-employee director during the 2000 fiscal year.
EXECUTIVE OFFICERS
The following individuals are executive officers of the Company and the Bank and
hold the offices set forth below opposite their names.
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POSITION HELD WITH THE
NAME COMPANY BANK
William C. Bullock, Jr. Chairman Chairman
Edwin N. Clift President/Chief Executive Officer President/Chief Executive Officer
Charles W. Hart - Executive Vice President/Secretary
Deborah A. Jordan Treasurer Executive Vice President/Treasurer
William P. Lucy - Executive Vice President
James A. MacLeod Secretary Senior Vice President
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The Board of Directors elects the executive officers of the Company and the Bank
annually. The elected officers hold office until their respective successors
have been elected and qualified, or until death, resignation or removal by the
Board of Directors.
Biographical information of executive officers, who are not directors of the
Company, is set forth below.
CHARLES W. HART, age 61, has served as Executive Vice President since December
1999, and as head of Branch Administration of the Bank since its inception. Mr.
Hart also serves as president of Maine Acceptance Corporation (MAC), a position
he has held since MAC was formed in April 1999. He has been involved with the
Company and the Bank since February 1992. From 1989 to 1991, he was the chief
financial officer of a private company engaged in the sales and service of heavy
duty trucks. Mr. Hart's thirty-five year banking career also includes management
positions with The Merrill Trust Company and Merchants National Bank. Mr. Hart
served in the U.S. Navy and is a graduate of St. Anselm College. He is a member
of the Dedham School Board.
DEBORAH A. JORDAN, age 35, has served as Executive Vice President since December
1999, and as Chief Financial Officer of the Bank and Treasurer of the Company
since 1993. From 1987 to 1992, she was employed as an audit manager at Arthur
Andersen, LLP in Boston. She is a graduate of Husson College, Eastern Maine
Technical College and is a Certified Public Accountant. Ms. Jordan serves as a
director of Eastern Maine Technical College Foundation and OHI as well as a
trustee of Husson College.
WILLIAM P. LUCY, age 42, has served as Executive Vice President since December
1999, and as Senior Loan Officer of the Bank since 1992. Mr. Lucy began his
banking career at The Merrill Trust Company in 1981, and he has both commercial
lending and branch administration experience. He is a graduate of the University
of Maine and Williams College School of Banking. Mr. Lucy serves on the board of
directors of the Bangor Symphony Orchestra, Penobscot Community Healthcare, New
Hope Hospice, Action Committee of 50, Sewall Holding Company, a privately held
corporation, and M & J Company, a subsidiary of St. Joseph Healthcare
Foundation. In addition, he is a trustee of the YMCA Foundation, as well as an
advisory board member for Beal College.
JAMES A. MACLEOD, age 41, serves as Senior Vice President and Senior Trust
Officer for the Bank. Prior to joining the Bank in 1997, Mr. MacLeod practiced
law for 10 years in New Hampshire. A Bangor native, he graduated from Boston
University School of Law (LLM), Franklin Pierce Law Center (JD) and the
University of Maine (BA). Mr. MacLeod is a member of the New Hampshire
(inactive) and Maine Bar Associations. Mr. MacLeod serves as a director of the
Warren Center for Communication and Learning as well as a trustee of the Good
Samaritan Agency.
EXECUTIVE COMPENSATION
The following table sets forth cash and non-cash compensation received during
each of the Company's last three fiscal years by Mr. Clift and Mr. Lucy who are
the only executive officers for whom compensation exceeded $100,000 in any year.
SUMMARY COMPENSATION TABLE
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ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------------------ --------------
NUMBER OF
NAME AND STOCK OPTIONS
PRINCIPAL POSITION YEAR SALARY BONUS GRANTED ALL OTHER COMPENSATION
Edwin N. Clift 2000 135,000 50,000 -- 21,327 (2)
President and Chief Executive
Officer 1999 125,000 40,000 -- 20,165
1998 115,000 40,000 7,154 (1) 7,842
William P. Lucy 2000 88,000 20,000 -- 6,301 (2)
Executive Vice President 1999 80,000 16,000 -- 4,789
1998 77,000 14,000 -- 2,799
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(1) The 7,154 options granted in 1998 are adjusted to reflect stock
dividends of 800% in 1998, 5% in 1999 and 3% in 2000 and have an
exercise price of $6.26 per share.
(2) Totals in this column are comprised of: (1) employer contributions to
the 401(k) plan of $5,100 for Mr. Clift and $3,111 for Mr. Lucy, (2)
dollar value of premiums paid by the Bank with respect to term life
insurance and life insurance under the Life Insurance Endorsement
Method Split-Dollar Plan Agreement of $2,667 for Mr. Clift and $238 for
Mr. Lucy and (3) the vested benefit accrued under the Supplemental
Executive Retirement Plan of $13,560 for Mr. Clift and $2,952 for Mr.
Lucy.
STOCK OPTION PLAN
The Company provides long-term incentives to executives, employees and directors
through the grant of options under the Company's Stock Option Plan (the "Plan").
The Plan is administered by the Compensation Committee which has the authority
to select the individuals who will be awarded options and determine the amount
and other conditions of such awards subject to the terms of the Plan.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Company provides a non-qualified supplemental executive retirement plan for
the benefit of key employees. Life insurance policies were acquired for the
purpose of serving as the primary funding source. The amount of each annual
benefit is indexed to the financial performance of each insurance policy owned
by the Bank over the Bank's cost of funds expense.
The following table sets forth the aggregate number of options exercised in 2000
and the value of options held as of December 31, 2000 by the Company's Named
Executive Officers.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2000
AND OPTION VALUES ON DECEMBER 31, 2000
- --------------------------------------------------------------------------------------------------------------
SHARES
ACQUIRED NUMBER OF UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-THE-
ON VALUE 12/31/00 MONEY OPTIONS 12/31/00(1)
NAME EXERCISE REALIZED EXERCISABLE(E)/UNEXERCISABLE(U) EXERCISABLE(E)/UNEXERCISABLE(U)
Edwin N. Clift - - 35,357 E $135,540 E
William P. Lucy - - 33,158 E $144,128 E
- --------------------------------------------------------------------------------------------------------------
(1) Based upon a market price of $8.75 per share at December 31, 2000 minus
the exercise price.
EMPLOYMENT AGREEMENTS
The Company currently has an employment agreement with Mr. Bullock. This
agreement provides for the payment of an annual salary of $24,000 through
December 2006 and a $12,000 annual payment thereafter for the remainder of Mr.
Bullock's life or his spouse whichever survives.
The agreement also provides that, to the extent not inconsistent with applicable
federal, state or local law (including common law), or with the Articles of
Incorporation or Bylaws of the Company and the Bank, and to the extent that Mr.
Bullock is not in material breach of the agreement, the Company will provide for
representation on or will recommend nomination for election to the Board of
Directors of the Company and the Bank for Mr. Bullock, another designee of the
Bullock Family Trust (the "Trust") or a member of Mr. Bullock's immediate
family, so long as the Trust and/or Mr. Bullock's immediate family owns more
than 3% of the common stock of the Company.
INTERESTS IN CERTAIN TRANSACTIONS
The Company's executive officers, its directors and their associates have had,
and can be expected to have in the future, financial transactions with the Bank.
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. As of December 31, 2000, the aggregate
of loans by the Bank outstanding to the Company's executive officers, directors
and their associates amounted to $4.6 million.
Mr. Bullock and Mr. Hansen each own mandatory convertible debentures issued by
the Company in the original principal amount of $150,000, for a total aggregate
original principal amount of $300,000. On or prior to September 30, 2002, the
holders of the Debentures must convert the entire principal amount thereof into
shares of common stock of the Company at a conversion rate equal to $4.16 of
principal amount of the Debentures for one share of Common stock.
The Company and the Bank have utilized Bacon Printing Company for certain
printing services and to purchase office supplies. Mr. Bacon, a director of the
Company and Bank, is President of Bacon Printing Company. During the fiscal
years ended December 3l, 2000 and 1999, the Company and the Bank paid to Bacon
Printing Company for services and office supplies a total of $105,000 and
$86,000, respectively.
The Company's general counsel is the law firm of Gross, Minsky, Mogul and
Singal, P.A. Mr. Kornreich, the clerk of the Company and a director of the Bank
is an attorney at this law firm. The firm represents the Bank in real estate and
commercial loan closings, wherein the Bank's borrower typically pays the legal
fees and expenses.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 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 their ownership and
changes in ownership of the Company's securities. The Company believes that
during
2000, its directors, executive officers and 10% shareholders complied with all
Section 16(a) filing requirements with the following exceptions: a late report
for both Mr. Robinson and Mr. Knowles regarding the exercise of stock options
and a late report for Mr. MacLeod regarding the grant of stock options. In
making this statement, the Company has relied upon examination of the copies of
Forms 3, 4 and 5 provided to the Company and the representations of its
directors, executive officers and 10% shareholders.
ADDITIONAL INFORMATION
STOCKHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
Stockholders interested in submitting a proposal for inclusion in the proxy
materials for the Annual Meeting of Stockholders in 2002 may do so by following
the procedures prescribed in SEC Rule 14a-8. To be eligible for inclusion,
stockholder proposals must be received by the Company's Corporate Secretary no
later than November 12, 2001. In addition, under our Bylaws, if you wish to
nominate a director or bring other business before the Annual Meeting, you must
be a stockholder and give timely notice in writing to the Company as specified
in our Bylaws.
OTHER MATTERS
The Board of Directors of the Company knows of no business that will be
presented for consideration at the Annual Meeting other than the items referred
to above. If any other matter is properly brought before the meeting for action
by stockholders, proxies in the enclosed form returned to the Company will be
voted in accordance with the recommendation of the Board of Directors or, in the
absence of such a recommendation, in accordance with the judgment of the proxy
holder.
A copy of the Company's Annual Report on Form 10-KSB for the year ended December
31, 2000, as filed with the Securities and Exchange Commission, will be
furnished free of charge to beneficial owners of the Company's stock upon
written request to:
Deborah A. Jordan, Treasurer
Merrill Merchants Bancshares, Inc.
201 Main Street
Bangor, ME 04402-0925
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
PURPOSE
The Audit Committee (the "Committee") assists the Board of Directors (the
"Board") of Merrill Merchants Bancshares, Inc. in their responsibilities to
oversee the independent auditor and evaluate the Company's financial reporting
practices, accounting policies and internal control structure.
The Audit Committee fulfills these responsibilities by carrying out the
activities enumerated in the Specific Duties section of the Charter.
COMPOSITION
The Committee will be comprised of three or more directors as determined by the
Board. The members of the Committee will meet the independence and experience
requirements specified by Nasdaq. The members of the Committee will be elected
each year at the Annual Meeting of the full Board held in April. The Board will
elect one of the members to the Committee Chair.
RESPONSIBILITY
The Committee is a part of the Board. It's primary function is to assist the
Board in fulfilling its oversight responsibilities with respect to (i) the
annual financial information to be provided to shareholders and the
Securities and Exchange Commission (SEC); (ii) the review of quarterly financial
statements (iii) the system of internal controls that management has
established; and (iv) the internal audit, external audit and loan review
processes. In addition, the Committee provides an avenue for communication
between the internal auditor, the independent auditor, financial management and
the Board. The Committee should have a clear understanding with the independent
auditor that they must maintain an open and transparent relationship with the
Committee, and that the ultimate accountability of the independent auditor is to
the Board and the Committee.
The Committee will make regular reports to the Board concerning its activities.
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 auditor. Nor is it the duty of
the Audit Committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditor or to assure compliance with laws
and regulations and the Company's business conduct guidelines.
AUTHORITY
Subject to the prior approval of the Board, the Committee is granted the
authority to investigate any matter or activity involving financial accounting
and financial reporting, as well as the internal controls of the Company. In
that regard, the Committee will have the authority to approve the retention of
external professionals to render advice and counsel in such matters. All
employees will be directed to cooperate with respect thereto as requested by
members of the Committee.
MEETINGS
The Committee will meet at least four times annually, or more frequently as
circumstances dictate. The Committee may, at its discretion, meet in separate
executive sessions with the chief financial officer, independent auditor and the
internal auditor.
ATTENDANCE
Committee members will strive to be present at all meetings. The Committee
Chair, may as necessary or desirable, request that members of management and
representatives of the independent auditor and the internal auditor be present
at Committee meetings.
SPECIFIC DUTIES
TO FULFILL ITS RESPONSIBILITIES AND DUTIES THE AUDIT COMMITTEE SHALL:
1. Review and reassess the adequacy of this charter annually and recommend
any proposed changes to the Board for approval. This should be done in
compliance with applicable Nasdaq Audit Committee requirements. The
charter is to be published as an appendix to the proxy statement every
three years.
2. Evaluate, select, and where appropriate, replace an independent auditor
who is ultimately accountable to the Audit Committee and Board of
Directors as representatives of the Company's shareholders.
3. Review the scope and general extent of the independent auditor's annual
audit. The Committee's review should include an explanation from the
independent auditor of the factors considered in determining the audit
scope, including the major risk factors. The independent auditor should
confirm to the Committee that no limitations have been placed on the
scope or nature of their audit procedures. The Committee will review
annually with management the fee arrangement with the independent
auditor.
4. Review with management, the internal auditor and the independent
auditor the Company's accounting and financial reporting controls.
5. Review with management, the internal auditor and the independent
auditor significant accounting and reporting principles, practices and
procedures applied by the Company in preparing its financial
statements. Discuss with the independent auditor their judgments about
the quality, not just the acceptability, of the Company's accounting
principles used in financial reporting. Review legal and regulatory
matters that may significantly impact the financial affairs or
operations of the Company.
6. Inquire as to the independence of the independent auditor and obtain
from the independent auditor, at least annually, a formal written
statement delineating all relationships between the independent auditor
and the Company as contemplated by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees.
7. Review with financial management and the independent auditor the
quarterly financial statements preferably prior to the release of
earnings but no later than the filing of the 10-Q. The review will
focus on the impact of significant events, transactions and changes in
accounting estimates considered by the independent auditor in
performing their review of the Company's interim financial statements.
The Chair of the Committee may represent the entire Committee for
purpose of this review.
8. At the completion of the annual audit, review with management and the
independent auditor the following:
/ / The annual financial statements and related footnotes and
financial information to be included in the Company's annual
report to shareholders and on Form 10-K.
/ / Results of the audit of the financial statements and the
related report thereon and, if applicable, a report on changes
during the year in accounting principles and their
application.
/ / Significant changes to the audit plan, if any, and any
serious disputes or difficulties with management encountered
during the audit. Inquire about the cooperation received by
the independent auditor during the audit, including access to
all requested records, data and information. Inquire of the
independent auditor whether there have been any disagreements
with management, which, if not satisfactorily resolved, would
have caused them to issue a nonstandard report on the
Company's financial statements.
/ / Other communications as required to be communicated by the
independent auditor by Statement of Auditing Standards (SAS)
61 as amended by SAS 90 relating to the conduct of the audit.
Such communication should include a discussion of the
independent auditor's judgment about the quality of the
Company's accounting principles.
If deemed appropriate after such review and discussion, recommend to
the Board that the financial statements be included in the Company's
annual report on Form 10-KSB.
9. Meet with management, the internal auditor and the independent auditor
to discuss any relevant significant recommendations that the
independent auditor may have, particularly those characterized as
"reportable conditions". The Committee should review responses of
management to the reportable conditions from the independent auditor
and receive follow-up reports on action taken concerning the
aforementioned recommendations.
10. Review the appointment, replacement and compensation of both the
internal auditor and loan review officer. The internal auditor and loan
review officer will report directly to the audit committee chairman and
administratively to a designated senior officer.
11. Review the scope of the annual internal audit and loan review plans.
Evaluate the internal auditor's risk assessment of the Company's
activities used in developing the annual audit plan.
12. Receive reports of major findings from the internal auditor and the
loan review officer and evaluate management's response in addressing
the reported conditions.
13. Evaluate the performance of and, where appropriate, replace the
internal auditor and loan review officer.
14. The audit committee shall have the power to conduct or authorize
investigations into any matters within the committee's scope of
responsibilities. The committee shall be empowered to retain
independent counsel, accountants, or others to assist it in the conduct
of any investigation.
15. The committee will perform such other functions as assigned by law, the
Company's charter or bylaws, or the board of directors.
MERRILL MERCHANTS BANCSHARES, INC. REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Charles W. Hart and Deborah A. Jordan,
and each of them, as proxies of the undersigned, with full powers of
substitution, to act and to vote all the shares of common stock of Merrill
Merchants Bancshares, Inc. held of record by the undersigned on March 7, 2001,
at the Annual Meeting of Stockholders to be held on April 19, 2001, or at any
adjournment thereof, and hereby revokes all former proxies.
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. IF NO DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES LISTED IN ITEM 1 AND FOR
THE PROPOSAL LISTED IN ITEM 2.
PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
MERRILL MERCHANTS BANCSHARES, INC.
PLEASE MARK VOTE IN SQUARE IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
1. ELECTION OF DIRECTORS -
Directors with Terms Expiring in 2003:
01 - Robert E. Knowles, 02 - Lloyd D. Robinson
Directors with Terms Expiring in 2004:
03 - William C. Bullock, Jr., 04 - Edwin N. Clift,
05 - Susan B. Singer
Withhold For All
For All Except
/ / / / / /
-----------------------------------------
(Except nominee(s) written above)
2. Ratification of the appointment of Berry, Dunn, McNeil & Parker as
independent public accountants for the fiscal year ending December 31,
2001.
For Against Abstain
/ / / / / /
In their discretion the Proxies are authorized to vote upon such other business
as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKOWNER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR ITEMS 1 AND 2.
- --------------------------------- --------------------------------
Signature Signature
Dated: ___________________, 2001
Please sign exactly as your name or names appear above. For joint accounts, each
owner should sign. When signing as executor, administrator, attorney, trustee or
guardian, please give your full title.