SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for use of the Commission
Only (as permitted by Rule 14a 6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to ss.240.14a-11(c) or ss.240.14a-12
WHG Bancshares Corporation
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (set forth the amount on which the filing
fee is calculated and state how it was determined):
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
--------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------------
(3) Filing Party:
--------------------------------------------------------------------------------
(4) Date Filed:
--------------------------------------------------------------------------------
<PAGE>
[WHG Bancshares Corporation Letterhead]
December 18, 2000
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of WHG Bancshares
Corporation (the "Company"), I cordially invite you to attend the Annual Meeting
of Stockholders to be held at the Holiday Inn, 2004 Greenspring Drive, Timonium,
Maryland, on Tuesday, January 16, 2001, at 10:00 a.m. The attached Notice of
Annual Meeting and Proxy Statement describe the formal business to be transacted
at the Annual Meeting. During the Annual Meeting, the Chairman of the Board will
report on the operations of the Company. Directors and Officers of the Company
will be present to respond to any questions stockholders may have.
You will be asked to vote on the election of two directors for a
three-year term and to ratify the 2001 Stock Option Plan. The Board of Directors
unanimously recommends a vote "FOR" both proposals described in the accompanying
notice of annual meeting and proxy statement.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ACCOMPANYING POSTAGE-PAID
RETURN ENVELOPE AS PROMPTLY AS POSSIBLE. This will not prevent you from voting
in person at the Annual Meeting, but will assure that your vote is counted if
you are unable to attend the Annual Meeting. YOUR VOTE IS VERY IMPORTANT.
Sincerely,
/s/Peggy J. Stewart
---------------------------------------
Peggy J. Stewart
President and Chief Executive Officer
<PAGE>
--------------------------------------------------------------------------------
WHG BANCSHARES CORPORATION
1505 YORK ROAD
LUTHERVILLE, MARYLAND 21093
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 16, 2001
--------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Meeting")
of WHG Bancshares Corporation (the "Company"), will be held at the Holiday Inn,
2004 Greenspring Drive, Timonium, Maryland, on Tuesday, January 16, 2001, at
10:00 a.m.
The Meeting is for the purpose of considering and acting upon the following
matters:
I. To elect two directors of the Company;
II. To ratify the 2001 Stock Option Plan ("Stock Option Plan"); and
all as set forth in the proxy statement accompanying this notice, and to
transact such other business as may properly come before the Meeting and any
adjournments. The Board of Directors has set the close of business on November
30, 2000 as the record date for the determination of stockholders who are
entitled to notice of, and to vote at, the Meeting.
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU
OWN. WE ENCOURAGE YOU TO VOTE BY PROXY SO THAT YOUR SHARES WILL BE REPRESENTED
AND VOTED AT THE MEETING EVEN IF YOU CANNOT ATTEND. ALL STOCKHOLDERS OF RECORD
CAN VOTE BY WRITTEN PROXY CARD. AND, OF COURSE, YOU MAY VOTE IN PERSON AT THE
MEETING IF YOU SO CHOOSE.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Diana L. Rohrback
--------------------------------------
Diana L. Rohrback
Corporate Secretary
Lutherville, Maryland
December 18, 2000
--------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM AT THE MEETING. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.
--------------------------------------------------------------------------------
<PAGE>
--------------------------------------------------------------------------------
PROXY STATEMENT
OF
WHG BANCSHARES CORPORATION
1505 YORK ROAD
LUTHERVILLE, MARYLAND 21093
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
JANUARY 16, 2001
--------------------------------------------------------------------------------
This proxy statement and the accompanying proxy card are being mailed
to stockholders of WHG Bancshares Corporation (the "Company") commencing on or
about December 15, 2000 in connection with the solicitation by the Company's
Board of Directors of proxies to be used at the annual meeting of stockholders
(the "Meeting") to be held at the Holiday Inn, 2004 Greenspring Drive, Timonium,
Maryland, on Tuesday, January 16, 2001, at 10:00 a.m.
All properly executed written proxies that are delivered pursuant to
this proxy statement will be voted on all matters that properly come before the
Meeting for a vote. If your signed proxy specifies instructions with respect to
matters being voted upon, your shares will be voted in accordance with your
instructions. If no instructions are specified, your shares will be voted (a)
FOR the election of directors named in Proposal I, (b) FOR Proposal II
(ratification of the 2001 Stock Option Plan), and (c) in the discretion of the
proxy holders, as to any other matters that may properly come before the
Meeting. Your proxy may be revoked at any time prior to being voted by: (i)
filing with the Corporate Secretary of the Company (Diana L. Rohrback, at 1505
York Road, Lutherville, Maryland 21093) written notice of such revocation, (ii)
submitting a duly executed proxy bearing a later date, or (iii) attending the
Meeting and giving the Secretary notice of your intention to vote in person.
WHETHER OR NOT YOU ATTEND THE MEETING, YOUR VOTE IS IMPORTANT.
ACCORDINGLY, REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOU ARE ASKED TO VOTE
PROMPTLY BY SIGNING AND RETURNING THE ACCOMPANYING PROXY CARD. SHARES CAN BE
VOTED AT THE MEETING ONLY IF YOU ARE REPRESENTED BY PROXY OR ARE PRESENT IN
PERSON.
--------------------------------------------------------------------------------
VOTING STOCK AND VOTE REQUIRED
--------------------------------------------------------------------------------
The Board of Directors has fixed the close of business on November 30,
2000 as the record date for the determination of stockholders who are entitled
to notice of, and to vote at, the Meeting. On the record date, there were
1,285,609 shares of the Company common stock outstanding (the "Common Stock").
Each stockholder of record on the record date is entitled to one vote for each
share held.
The Articles of Incorporation of the Company ("Articles of
Incorporation") provides that in no event shall any record owner of any
outstanding Common Stock which is beneficially owned, directly or indirectly, by
a person who beneficially owns in excess of 10% of the then outstanding shares
of Common Stock (the "Limit") be entitled or permitted to any vote with respect
to the shares held in excess of the Limit. Beneficial ownership is determined
pursuant to the definition in the Articles of Incorporation and includes shares
beneficially owned by such person or any of his or her affiliates (as such terms
are defined in the Articles of Incorporation), or which such person or any of
his or her affiliates has the right to acquire upon the exercise of conversion
rights or options and shares as to which such person or any of his or her
-1-
<PAGE>
affiliates or associates have or share investment or voting power, but neither
any employee stock ownership or similar plan of the Company or any subsidiary,
nor any trustee with respect thereto or any affiliate of such trustee (solely by
reason of such capacity of such trustee), shall be deemed, for purposes of the
Articles of Incorporation, to beneficially own any Common Stock held under any
such plan.
The presence in person or by proxy of at least one-third of the
outstanding shares of Common Stock entitled to vote (after subtracting any
shares held in excess of the Limit) is necessary to constitute a quorum at the
Meeting. With respect to any matter, any shares for which a broker indicates on
the proxy that it does not have discretionary authority as to such shares to
vote on such matter (the "Broker Non- Votes") will not be considered present for
purposes of determining whether a quorum is present. In the event there are not
sufficient votes for a quorum or to ratify any proposals at the time of the
Meeting, the Meeting may be adjourned in order to permit the further
solicitation of proxies.
As to the election of directors, as set forth in Proposal I, the proxy
being provided by the Board enables a stockholder to vote for the election of
the nominees proposed by the Board, or to withhold authority to vote for the
nominees being proposed. Directors are elected by a plurality of votes of the
shares present, in person or represented by proxy, at a meeting and entitled to
vote in the election of directors.
As to the ratification of the 2001 Stock Option Plan, which is
submitted as Proposal II, a stockholder may: (i) vote "FOR" the ratification,
(ii) vote "AGAINST" the ratification, or (iii) "ABSTAIN" with respect to the
ratification. Unless otherwise required by law, Proposal II and all other
matters shall be determined by a majority of votes cast affirmatively or
negatively without regard to (a) Broker Non-Votes or (b) proxies marked
"ABSTAIN" as to that matter.
--------------------------------------------------------------------------------
PRINCIPAL HOLDERS
--------------------------------------------------------------------------------
Persons and groups owning in excess of 5% of the Common Stock are
required to file certain reports regarding such ownership pursuant to the
Securities Exchange Act of 1934, as amended. The following table sets forth, as
of the record date, persons or groups who own more than 5% of the Common Stock
and the ownership of all executive officers and directors of the Company as a
group. Other than as noted below, management knows of no person or group that
owns more than 5% of the outstanding shares of Common Stock at the record date.
-2-
<PAGE>
<TABLE>
<CAPTION>
Amount and Percent of Shares
Nature of of Common Stock
Name and Address of Beneficial Owner Beneficial Ownership Outstanding (%)
------------------------------------ -------------------- ----------------
<S> <C> <C>
Heritage Savings Bank, F.S.B.
Employee Stock Ownership Plan and Trust ("ESOP")
1505 York Road
Lutherville, Maryland 21093 (1) 145,469 11.3
Peggy J. Stewart
1505 York Road
Lutherville, Maryland 21093 (2) 89,089 6.7
All directors and officers of the Company as a group
(11 persons) (3) 323,688 23.0
</TABLE>
------------------------------
(1) The ESOP purchased such shares for the exclusive benefit of plan
participants with funds borrowed from the Company. The shares are held
in a suspense account and will be allocated among ESOP participants
annually on the basis of compensation as the ESOP debt is repaid. The
Board of Directors has appointed a committee consisting of the
Compensation and Benefits Committee of the bank comprised of
non-employee directors Chase, Davis, Lauterbach, Francis, and Muhly to
serve as the ESOP administrative committee ("ESOP Committee") and to
serve as the ESOP trustees ("ESOP Trustee"). The ESOP Committee or the
Board instructs the ESOP Trustee regarding investment of ESOP plan
assets. The ESOP Trustee must vote all shares allocated to participant
accounts under the ESOP as directed by participants. Unallocated shares
and shares for which no timely voting direction is received, will be
voted by the ESOP Trustee as directed by the ESOP Committee. As of the
record date, 75,389 shares have been allocated under the ESOP to
participant accounts.
(2) Includes 36,612 shares of Common Stock which may be acquired through
the exercise of stock options within 60 days of the record date.
(3) Includes shares of Common Stock held directly as well as by spouses or
minor children, in trust and other indirect ownership, over which
shares the individuals effectively exercise sole voting and investment
power, unless otherwise indicated. Includes options to purchase 123,349
shares of Common Stock that may be exercised within 60 days of the
record date. Excludes 21,028 shares of Common Stock previously awarded
but presently subject to forfeiture held by the Management Stock Bonus
Plan ("MSBP") and excludes 70,080 unallocated shares under the ESOP,
over which certain directors, as trustees to the MSBP and the ESOP,
exercise shared voting and investment power. Such individuals disclaim
beneficial ownership with respect to ESOP and MSBP shares. See
"Proposal I - Election of Directors."
--------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
--------------------------------------------------------------------------------
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's directors and executive officers to file reports of
ownership and changes in ownership of their equity securities of the Company
with the Securities and Exchange Commission and to furnish the Company with
copies of such reports. To the best of the Company's knowledge, all of the
filings by the Company's directors and executive officers were made on a timely
basis during the 2000 fiscal year. The Company is not aware of any beneficial
owners of more than ten percent of its Common Stock.
-3-
<PAGE>
--------------------------------------------------------------------------------
PROPOSAL I - ELECTION OF DIRECTORS
--------------------------------------------------------------------------------
The Board of Directors currently consists of eight members, each of
whom also serves as a director of Heritage Savings Bank, FSB (the "Bank").
During fiscal 2000, the size of the Board of Directors of the Company and the
Bank was reduced to eight members due to the resignation of August J. Seifert.
The Company's Articles of Incorporation provides that the Board of Directors
must be divided into three classes as nearly equal in number as possible. At
each annual meeting of stockholders, each of the successors of the directors
whose terms expire at the meeting will be elected to serve for a term of three
years expiring at the third annual meeting of stockholders following the annual
meeting of stockholders at which the successor director was elected.
Herbert A. Davis and D. Edward Lauterbach, Jr. have been nominated by
the Board of Directors for a term of three years. Messrs. Davis and Lauterbach
currently serve as directors of the Company.
The persons named as proxies in the enclosed proxy card intend to vote
for the election of the person listed below, unless the proxy card is marked to
indicate that such authorization is expressly withheld. Should any of the
nominees withdraw or be unable to serve (which the Board of Directors does not
expect) or should any other vacancy occur in the Board of Directors, it is the
intention of the persons named in the enclosed proxy card to vote for the
election of such person as may be recommended to the Board of Directors by the
Nominating Committee of the Board. If there is no substitute nominee, the size
of the Board of Directors may be reduced.
The following table sets forth the names, ages, terms of, and length of
board service for the persons nominated for election as directors of the Company
at the Meeting and each other director of the Company who will continue to serve
as director after the Meeting. Beneficial ownership of executive officers and
directors of the Company, as a group, is set forth under the caption "Principal
Holders."
<TABLE>
<CAPTION>
Shares of Common
Stock Beneficially
Age at Year First Current Owned as of Percent
September Elected or Term to November 30, Owned
Name and Title 30, 2000 Appointed (1) Expire 2000(2) (%)
-------------- -------- ------------- ------ ----------------- -------
<S> <C> <C> <C> <C> <C>
BOARD NOMINEES FOR TERM TO EXPIRE IN 2004
Herbert A. Davis 75 1953 2001 17,516(3)(4) 1.4
D. Edward Lauterbach, Jr. 76 1970 2001 17,516(3) 1.4
DIRECTORS CONTINUING IN OFFICE
Philip W. Chase, Jr. 82 1947 2002 21,516(3) 1.7
Edwin C. Muhly, Jr. 70 1976 2002 18,016(3) 1.4
Peggy J. Stewart 64 1982 2002 89,089 6.7
Urban P. Francis, Jr. 74 1981 2003 22,816(3) 1.8
John E. Lufburrow 75 1966 2003 65,506 4.9
Hugh P. McCormick 80 1947 2003 27,516(4) 2.1
</TABLE>
(footnotes begin on next page.)
-4-
<PAGE>
--------------
(1) Refers to the year the individual first became a director of the Bank.
(2) Includes 5,491 shares of Common Stock (except for Mr. Lufburrow and Ms.
Stewart) which may be acquired pursuant to the exercise of stock options
which are exercisable within 60 days of the record date. For Mr. Lufburrow
and Ms. Stewart, includes 36,612 shares of Common Stock. Excludes proposed
stock options to purchase shares of Common Stock issuable under the 2001
Stock Option Plan, the granting of which are subject to stockholder
ratification and are not exercisable within 60 days of the Record Date. See
"Proposal II - Ratification of the 2001 Stock Option Plan."
(3) Excludes 145,469 shares of Common Stock under the ESOP for which such
individual serves as a member of the ESOP committee or as an ESOP Trust.
Also, excludes 21,028 MSBP shares for which such individuals serves as a
member of the MSBP trust committee. Such individuals disclaim beneficial
ownership with respect to ESOP and MSBP shares.
(4) Mr. Herbert A. Davis and Mr. Hugh P. McCormick are first cousins.
Executive Officers of the Company
The following individuals hold the executive offices in the Company set
forth below opposite their name.
<TABLE>
<CAPTION>
Age at
September
Name 30, 2000 Positions Held With the Company
---- -------- -------------------------------
<S> <C> <C>
John E. Lufburrow 75 Chairman of the Board
Peggy J. Stewart 64 President, Chief Executive Officer and Director
Robin L. Taylor 40 Controller
Diana L. Rohrback 48 Vice President and Corporate Secretary
Daniel J. Gallagher 43 Executive Vice President, Chief Financial Officer and
Senior Compliance Officer
</TABLE>
Biographical Information
Set forth below is certain information with respect to the directors,
including director nominees and executive officers of the Company. All directors
and executive officers (except Mr. Gallagher) of the Bank in December 1996
became directors and executive officers of the Company at that time. Executive
officers receive compensation from the Bank. See "-- Executive Compensation."
All directors and executive officers have held their present positions for five
years unless otherwise stated.
Nominees:
Herbert A. Davis has served as a director of the Bank since 1953. Mr.
Davis is the President/Owner of Herbert Davis Associates, a real estate
brokerage and development firm.
D. Edward Lauterbach, Jr. has been a director of the Bank since 1970.
Mr. Lauterbach served as President of H.U. Dove & Co., Inc., an insurance
company, from which he retired in 1991. Mr. Lauterbach continues to be a
consultant to H.U. Dove & Co., Inc.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
ABOVE NOMINEES FOR DIRECTORS.
-5-
<PAGE>
Continuing Directors:
Philip W. Chase, Jr. has served as a director of the Bank since 1947.
From 1980 to 1995, he was the Chairman of the Board of Chase, Fitzgerald & Co.,
Inc., and he also served as President from 1967 to 1980.
Edwin C. Muhly, Jr. has served as a director of the Bank since 1976.
Mr. Muhly retired in 1992 as President and Chief Executive Officer of Muhly's
Bakery, a retail bakery of which he held the majority stockholder interest.
Peggy J. Stewart was appointed Chief Executive Officer of the Bank in
1995 and has served as President since 1994. From 1981 to 1994, Ms. Stewart
served as Senior Vice President and Corporate Secretary of the Bank. Ms. Stewart
also served as Treasurer of the Bank and was appointed in 1982 to the Bank's
Board of Directors. Ms. Stewart has been employed by the Bank since 1953.
Urban P. Francis, Jr. has been a director of the Bank since 1981. Mr.
Francis retired from Urban Francis Inc., an electrical contracting company in
1994 and is currently the majority stockholder of U and M, Inc.
John E. Lufburrow joined the Bank in 1950, has been a director of the
Bank since 1966 and currently serves as Chairman of the Board. Mr. Lufburrow
preceded Ms. Stewart as President and Chief Executive Officer of the Bank.
Hugh P. McCormick has been a director of the Bank since 1947. He
retired in 1982 from McCormick & Co., Inc., a manufacturer and importer of
spices and flavorings. Prior to retirement, Mr. McCormick served as the
Corporate Assistant Secretary and the Director of a division of McCormick & Co.,
Inc. He also served as President of a subsidiary of McCormick & Co., Inc. of
Baltimore County.
Executive Officers Who Are Not Directors:
Daniel J. Gallagher has been employed by the Bank since January 1997.
Mr. Gallagher is Executive Vice President, Chief Financial Officer, and Senior
Compliance Officer. From 1993 to 1997, Mr. Gallagher was employed by Liberty
Federal Savings and Loan Association in Baltimore, Maryland, during which time
he also served as president of that institution. From 1985 to 1993, Mr.
Gallagher was employed by First National Bank of Maryland.
Diana L. Rohrback has been employed by the Bank for 31 years and has
served as an officer of the Bank since 1993. Ms. Rohrback is a Vice President
and the Corporate Secretary for the Bank and has served as a branch manager.
Robin L. Taylor has been an officer of the Bank since 1990 and has been
employed by the Bank for 22 years. Ms. Taylor is a certified public accountant
and currently serves as the Controller for the Bank.
-6-
<PAGE>
Meetings and Committees of the Board of Directors
The Board of Directors conducts its business through the meetings of
its board and through activities of its committees. All committees act for both
the Company and the Bank. During the fiscal year ended September 30, 2000, the
Board of Directors of the Company held 4 regular meetings and 3 special
meetings. No director attended fewer than 75% of the total meetings of the
Boards of Directors and committees during the period of his or her service. In
addition to other committees, as of September 30, 2000, the Board had a
Nominating Committee, an Audit Committee and a Compensation and Benefits
Committee.
The Company's full Board of Directors acts as a nominating committee
("Nominating Committee") for selecting the management's nominees for election of
directors in accordance with the Company's Bylaws. Nomination to the Board of
Directors made by stockholders must be made in writing to the Secretary of the
Company and received by the Company not less than 60 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders of
the Company. Notice to the Company of such nominations must include certain
information required pursuant to the Company's Bylaws. This non- standing
committee met once during the 2000 fiscal year.
The Compensation and Benefits Committee is comprised of non-employee
Directors Chase, Davis, Lauterbach, Francis and Muhly. This standing committee
establishes the Bank's salary budget, director and committee member fees, and
employee benefits provided by the Bank for approval by the Board of Directors.
The Committee met once during the 2000 fiscal year.
The Audit Committee is comprised of Directors Chase, Davis, Francis,
Lauterbach, McCormick and Muhly. The Board of Directors has determined that each
of the members of the Audit Committee is independent in accordance with the
small business issuer rules of the Nasdaq. The Audit Committee is a standing
committee and responsible for developing and maintaining the Company's audit
program. The Committee also meets with the Company's outside accountants to
discuss the results of the annual audit and any related matters. The Audit
Committee met once during the 2000 fiscal year. In addition to one regularly
scheduled meeting annually, the Audit committee is available either as a group
or individually to discuss any matters that might affect the financial
statements, internal controls or other financial aspects of the operations of
the Company.
The Board of Directors has reviewed, assessed the adequacy of and
approved a formal written charter for the Audit Committee. The full text of the
Charter of the Audit Committee appears as an Appendix A to this Proxy Statement.
--------------------------------------------------------------------------------
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
--------------------------------------------------------------------------------
Director Compensation
In the fiscal year ended September 30, 2000, each non-employee Director
and the Chairman of the Board of Directors of the Bank received a monthly fee of
$700, regardless of attendance, and $300 for each meeting attended. Each member
of the Compensation and Benefits Committee and the member of the Asset/Liability
Committee received an additional $300 for attendance at each meeting attended.
Each non-employee director who is a member of the Loan Committee is each paid
$50 for the first loan reviewed and $25 for each additional loan reviewed. For
the fiscal year ended September 30, 2000, total fees paid by the Bank to
Directors were approximately $118,000.
-7-
<PAGE>
Subject to stockholder ratification of the 2001 Stock Option Plan
presented to stockholders as Proposal II in this proxy statement, Ms. Stewart
and Mr. Lufburrow have each been awarded options to purchase 25,000 shares of
Common Stock and each of the six non-employee directors have been awarded
options to purchase 4,950 shares of Common Stock. The exercise price of the
awarded options is equal to the market price of such stock on November 13, 2000,
the date of approval of the plan by the Board of Directors.
During the fiscal year ended 1999, the Bank implemented a change in
control severance plan with the directors of the Bank. The plan provides that
following a change in control of the Bank and the termination of the services of
the directors (or within 18 months after the change in control), the directors
will receive their current board compensation, at the time of termination, for a
period of 18 months.
Executive Compensation
Summary Compensation Table. The following table sets forth the cash and
non-cash compensation awarded to or earned by the chief executive officer. No
other executive officer of either the Bank or the Company had a salary and bonus
during the three years ended September 30, 2000, that exceeded $100,000 for
services rendered in all capacities to the Bank or the Company.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
-------------------------------------- ------------------------------
Restricted Securities
Name and Fiscal Other Annual Stock Underlying All Other
Principal Position Year Salary($) Bonus($) Compensation Award($) Options (#) Compensation($)
------------------- ---- --------- -------- ------------ -------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Peggy J. Stewart 2000 150,000 10,154 -- -- -- 48,620(3)
President and CEO 1999 132,000 9,231 -- -- -- 44,796
1998 120,000 8,462 -- 174,150(1) 45,765(2) 34,968
</TABLE>
-------------------
(1) Represents awards of 12,960 shares of Common Stock under the MSBP based
upon the value of such stock of $13.4375 per share as of the date of such
award. Such stock awards become non-forfeitable at the rate of 2,592 shares
per year commencing on October 8, 1997. Dividend rights associated with
such stock are accrued and held in arrears to be paid at the time that such
stock becomes non-forfeitable. At September 30, 2000, 5,184 shares with a
market value of $42,444 at such date (based on the closing price of Common
Stock $8.1875 at such date) remain unvested.
(2) Represents award of 36,613 options as of October 8, 1996, at $11.8916 and
9,152 options as of December 9, 1996, at $11.1726 per share. See "-- Stock
Awards."
(3) For fiscal year 2000 represents an allocation of 4,862 shares of Common
Stock under the ESOP, at a cost of $10 per share. As of September 30, 2000,
the market value of such shares was $39,808.
Employment Agreement. The Bank entered into an employment agreement
with Peggy J. Stewart, President and CEO of the Bank ("Agreement"). The
Agreement has a three year term. Under the Agreement, Ms. Stewart's employment
may be terminated by the Bank for "just cause" as defined in the Agreement. If
the Bank terminates Ms. Stewart without just cause, Ms. Stewart will be entitled
to a continuation of her salary from the date of termination through the
remaining term of the Agreement, but not less than one year's salary. In the
event of the termination of employment in connection with any change in control
of the Bank during the term of the Agreement, Ms. Stewart will be paid in a lump
sum an amount equal to 2.99 times the five year average of her annual taxable
compensation. In the event of a change in control at September 30, 2000, Ms.
Stewart would have been entitled to a lump sum payment of approximately
$430,000.
-8-
<PAGE>
Stock Awards
The following table sets forth information with respect to options to
purchase the Company's common stock previously granted to Ms. Stewart and held
by her as of September 30, 2000 and the value of unexercised in-the-money
options (i.e., options that had a positive spread between the exercise price of
such option and the fair market value of the Company's common stock) as of
September 30, 2000. The Company has not granted to Ms. Stewart any stock
appreciation rights ("SARs").
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year, and FY-End Option/SAR Values
---------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs In-The-Money Options
at FY-End (#) at FY-End ($)
-------------------------- --------------------
Shares Acquired Value
Name on Exercise(#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------- ------------ -------------------------
<S> <C> <C> <C> <C>
Peggy J. Stewart -- $ -- 21,967 / 14,646 0 / 0 (1)
-- $ -- 5,490 / 3,662 0 / 0 (2)
</TABLE>
-------------
(1) Based upon an exercise price of $11.89 per share and estimated price of
$8.1875 as of September 30, 2000.
(2) Based upon an exercise price of $11.17 per share and estimated price of
$8.1875 as of September 30, 2000.
--------------------------------------------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------------------------------
The Bank, like many financial institutions, has followed a policy of
granting various types of loans to officers, directors, and employees. The loans
have been made in the ordinary course of business and on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with the Bank's other customers, and do not involve
more than the normal risk of collectibility, or present other unfavorable
features.
--------------------------------------------------------------------------------
PROPOSAL II - RATIFICATION OF THE 2001 STOCK OPTION PLAN
--------------------------------------------------------------------------------
General
The Company's Board of Directors has adopted the 2001 Stock Option
Plan. The Option Plan is subject to ratification by the Company's stockholders.
Pursuant to the Option Plan, up to 109,000 shares of Common Stock, approximately
8.5% of the Common Stock presently outstanding, are to be reserved for issuance
by the Company upon exercise of stock options that may be granted to officers,
directors, employees and other persons from time to time. The purpose of the
Option Plan is to attract and retain qualified personnel for positions of
substantial responsibility and to provide additional incentive to them to
promote the success of the business of the Company and the Bank. The Option
Plan, which is effective as of November 13, 2000, subject to ratification by the
stockholders of the Company, provides for a term of ten years, after which time
no awards may be made. The following summary of the material features of the
Option Plan is qualified in its entirety by reference to the Option Plan
attached as Appendix B to this proxy statement.
The Option Plan will be administered by the Board of Directors or a
committee of not less than two non-employee directors appointed by the Company's
Board of Directors and serving at the pleasure of the
-9-
<PAGE>
Board (the "Option Committee"). The Option Committee will select the individuals
to be granted options (the "Optionees") and the number of options to be granted.
Grants are provided at no cost to the Optionees. It is anticipated that grants
will constitute either Incentive Stock Options (options that afford favorable
tax treatment to recipients upon compliance with certain restrictions pursuant
to Section 422 of the Internal Revenue Code ("Code") and that do not normally
result in tax deductions to the Company) or Non-Incentive Stock Options (options
that do not afford recipients favorable tax treatment under Code Section 422).
Option shares may be paid for in cash, shares of Common Stock, or a combination
of both. The Company will receive no monetary consideration for the granting of
stock options under the Option Plan. Further, the Company will receive no
consideration upon exercise other than the option exercise price per share.
Shares issuable under the Option Plan may be from authorized but
unissued shares, treasury shares or shares purchased in the open market. An
Option which expires, becomes unexercisable, or is forfeited for any reason
prior to its exercise will again be available for issuance under the Option
Plan. No Option or any right or interest therein is assignable or transferable
except by will or the laws of descent and distribution. The Option Plan will
continue in effect for a term of ten years from the date the plan is approved by
stockholders.
Interest of Certain Persons
Employees, officers, and directors of the Company and the Bank have an
interest in the ratification of the Option Plan because they have been granted
stock options, subject to such stockholder ratification. See "Voting Securities
and Principal Holders Thereof" for information regarding the number of shares of
Common Stock beneficially owned by executive officers and Directors.
Stock Options
The Option Committee may grant either Incentive Stock Options or
Non-Incentive Stock Options. In general, if an Optionee ceases to serve as an
employee of the Company for any reason other than disability or death, an
exercisable Incentive Stock Option will be exercisable for three months
following the cessation of employment but in no event after the expiration date
of the option, except as may otherwise be determined by the Option Committee at
the time of the award. In the event of the disability or death of an Optionee
during employment, an exercisable Incentive Stock Option will continue to be
exercisable for one year and two years, respectively, to the extent exercisable
by the Optionee immediately prior to the Optionee's disability or death but only
if, and to the extent that, the Optionee was entitled to exercise Incentive
Stock Options on the date of termination of employment. The terms and conditions
of Non- Incentive Stock Options relating to an Optionee's termination of
employment or service, disability, or death will be determined by the Option
Committee, in its sole discretion, at that time unless those terms and
conditions were specifically determined at the time of grant of the options.
The exercise price for the purchase of Common Stock subject to an
Option may not be less than one hundred percent (100%) of the fair market value
of the Common Stock covered by the Option on the date of grant. For purposes of
determining the fair market value of the Common Stock, the exercise price per
share of the Option will be not less than the mean between the last bid and ask
price on the date the Option is granted or, if there is no bid and ask price on
said date, then on the immediately prior business day on which there was a bid
and ask price. If no bid and ask price is available, then the exercise price per
share will be determined in good faith by the Option Committee. If the Common
Stock is listed on a national securities exchange (currently, the Common Stock
is not listed on a national securities exchange)
-10-
<PAGE>
at the time of the granting of an Option, then the exercise price per share of
the Option will be not less than the average of the highest and lowest selling
price of the Common Stock on the exchange on the date an Option is granted or,
if there were no sales on that date, then the exercise price will be not less
than the mean between the last bid and ask price on that date. If an officer or
employee owns more than ten percent of the outstanding Common Stock at the time
an Incentive Stock Option is granted, then the exercise price will not be less
than one hundred and ten percent (110%) of the Fair Market Value of the Common
Stock at the time the Incentive Stock Option is granted. No more than $100,000
of Incentive Stock Options can become exercisable for the first time in any one
year for any one person. The Option Committee may impose additional conditions
upon the right of an Optionee to exercise any Option which are not inconsistent
with the terms of the Option Plan or the requirements for qualification as an
Incentive Stock Option, if the Option is intended to qualify as an incentive
stock option.
No shares of Common Stock will be issued upon the exercise of an Option
until full payment has been received by the Company, and no Optionee will have
any of the rights of a stockholder of the Company until shares of Common Stock
are issued to the Optionee. Upon the exercise of an Option, the Option
Committee, in its sole and absolute discretion, may make a cash payment to the
Optionee, in whole or in part, in lieu of the delivery of shares of Common
Stock. The cash payment will be equal to the difference between the Fair Market
Value of the Common Stock on the date of the Option exercise and the exercise
price per share of the Option and will be in exchange for the cancellation of
the Option.
The Option Plan provides that the Board of Directors of the Company may
authorize the Option Committee to direct the execution of an instrument
providing for the modification, extension or renewal of any outstanding option,
provided that no modification, extension or renewal will confer on the Optionee
any right or benefit which could not be conferred on the Optionee by the grant
of a new Option at that time, and will not materially decrease the Optionee's
benefits under the Option without the Optionee's consent, except as otherwise
provided under the Option Plan.
Awards
Pursuant to the terms of the Option Plan, Non-Incentive Stock Options
to purchase up to 4,950 shares of Common Stock have been granted to each
non-employee director of the Company, as of the Effective Date (November 13,
2000) at an exercise price equal to the Fair Market Value of the Common Stock on
such date of grant ($8.125 per share). Such awards are subject to stockholder
ratification of the Option Plan. Options may be granted to newly appointed or
elected non-employee directors within the sole discretion of the Option
Committee, and the exercise price shall be equal to the Fair Market Value of
such Common Stock on the date of grant. Of such awards, 331/3% of the Options
granted to non-employee directors on the Effective Date will be first
exercisable commencing on the one year anniversary of such Effective Date of the
Option Plan and 331/3% annually thereafter, during such period of service as a
director or a director emeritus. Such Options granted to non-employee directors
will remain exercisable for up to ten years from the date of grant. Upon the
death, retirement or disability or a director or director emeritus, such Options
shall be deemed immediately 100% exercisable for their remaining term. All
outstanding Options become immediately exercisable in the event of a change in
control (as defined in the Option Plan) of the Company or the Bank.
The Board or the Option Committee will from time to time determine the
officers, directors, key employees and other persons who will be granted awards,
the award to be granted to any participant, and whether the awards will be
Incentive Stock Options and/or Non-Incentive Stock Options. In making this
determination, the Board or the Option Committee may consider several factors
including prior and
-11-
<PAGE>
anticipated future job duties and responsibilities, job performance, the
Company's financial performance and a comparison of awards given by other
financial institutions. Participants who have been granted an award may be
granted additional awards.
The table below presents information related to stock option awards
awarded under the Option Plan, subject to stockholder ratification of the Option
Plan.
NEW PLAN BENEFIT
2001 OPTION PLAN
----------------
Number of Options
Name and Position Dollar Value ($)(1) to be Granted
----------------- ------------------- -----------------
Peggy J. Stewart, President and Chief
Executive Officer 3,125 25,000(2)(3)
John E. Lufburrow, Chairman of the Board 3,125 25,000(2)(3)
Herbert A. Davis, Director (4) 619 4,950(5)
D. Edward Lautebach, Jr., Director (4) 619 4,950(5)
Executive Group (5 persons)................ 8,103 64,820(6)
Non-Executive Director Group
(6 persons)................................ 3,713 29,700(5)(7)
Non-Executive Officer Employee Group ...... 1,810 14,480(6)
----------------
(1) The exercise price of such options is equal to the fair market value of
the Common Stock on the date of award (November 13, 2000), which was
$8.125 per share, the date of the Board of Directors approval of the
Option Plan. As of the record date, the fair market value of such
Common Stock was $8.25 per share.
(2) Options awarded are 100% exercisable on the date of grant.
(3) Options not exercised within three months of termination of service as
an employee shall thereafter be deemed non-incentive stock options.
(4) Nominee for director.
(5) Options awarded to directors are first exercisable at a rate of 331/3%
one year after the date of grant and 331/3% annually thereafter, during
such period of service as a director or director emeritus, and shall
remain exercisable for ten years without regard to continued service as
a director or director emeritus. Upon disability, death, retirement or
a change in control of the Company or the Bank, such awards shall be
100% exercisable.
(6) Options awarded to certain officers are 100% exercisable on the date of
grant. Options awarded to all other officers and employees will be
exercisable as follows: Options awarded at the time of stockholder
approval are first exercisable at the rate of 331/3% on the one year
anniversary of the date of grant and 331/3% annually thereafter during
periods of continued service as an employee, director or director
emeritus. Such awards shall be 100% exercisable in the event of death,
disability, retirement, or upon a change in control of the Company or
the Bank. Options awarded to employees shall continue to be exercisable
during continued service as an employee, director or director emeritus.
(7) Each non-employee director of the Company was awarded 4,950 Options.
-12-
<PAGE>
Effect of Mergers, Change of Control and Other Adjustments and Anti-Takeover
Aspects
Subject to any required action by the stockholders of the Company,
within the sole discretion of the Option Committee, the aggregate number of
shares of Common Stock for which Options may be granted hereunder or the number
of shares of Common Stock represented by each outstanding Option will be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding shares of Common Stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend or any other increase
or decrease in the number of shares of Common Stock effected without the receipt
or payment of consideration by the Company. Subject to any required action by
the stockholders of the Company, in the event of any change in control,
recapitalization, merger, consolidation, exchange of shares, spin-off,
reorganization, tender offer, partial or complete liquidation or other
extraordinary corporate action or event, the Option Committee, in its sole
discretion, will have the power, prior to or subsequent to the action or events,
to (i) appropriately adjust the number of shares of Common Stock subject to each
Option, the exercise price per share of the Option, and the consideration to be
given or received by the Company upon the exercise of any outstanding Options;
(ii) cancel any or all previously granted Options, provided that appropriate
consideration is paid to the Optionee in connection therewith; and/or (iii) make
other adjustments in connection with the Option Plan as the Option Committee, in
its sole discretion, deems appropriate. However, no action may be taken by the
Option Committee without the consent of the Optionee that would cause Incentive
Stock Options granted pursuant to the Option Plan to fail to meet the
requirements of Section 422 of the Code.
The Option Committee will at all times have the power to accelerate the
exercise date of all unvested Options granted (if any) under the Option Plan. In
the case of a change in control of the Company, all outstanding options become
immediately exercisable. A change in control is defined to include (i) the sale
of all, or a material portion, of the assets of the Company; (ii) the merger or
recapitalization of the Company if the Company is not the surviving entity;
(iii) a change in control of the Company; or (iv) the acquisition, directly or
indirectly, of the beneficial ownership of 25% or more of the outstanding voting
securities of the Company by any person, trust, entity, or group. This
limitation does not apply to the purchase of shares by underwriters in
connection with a public offering of Company stock or the purchase of shares of
up to 25% of any class of securities of the Company by a tax-qualified employee
stock benefit plan.
In the event of a change in control, the Option Committee and the Board
of Directors will take one or more of the following actions to be effective as
of the date of the change in control: (i) provide that Options will be assumed,
or equivalent options will be substituted, ("Substitute Options") by the
acquiring or succeeding corporation (or an affiliate thereof), provided that:
(A) any Substitute Options exchanged for Incentive Stock Options meet the
requirements of Section 424(a) of the Code, and (B) the shares of stock issuable
upon the exercise of Substitute Options constitute securities registered in
accordance with the Securities Act of 1933, as amended, ("1933 Act") or the
securities are exempt from registration in accordance with Sections 3(a)(2) or
3(a)(5) of the 1933 Act, (collectively, "Registered Securities"), or in the
alternative, if the securities issuable upon the exercise of Substitute Options
will not constitute Registered Securities, then the Optionee will receive, upon
the change in control, a cash payment for each Option surrendered equal to the
difference between (1) the Fair Market Value of the consideration to be received
for each share of Common Stock in the change in control multiplied by the number
of shares of Common Stock subject to surrendered Options, and (2) the aggregate
exercise price of all surrendered Options, or (ii) in the event of a transaction
under the terms of which the holders of the Common Stock of the Company will
receive upon consummation thereof a cash payment (the "Merger Price") for each
share of Common Stock exchanged in the change in control, to make or to provide
for a cash payment to
-13-
<PAGE>
the Optionees equal to the difference between (A) the Merger Price times the
number of shares of Common Stock subject to Options held by each Optionee (to
the extent then exercisable at prices not in excess of the Merger Price) and (B)
the aggregate exercise price of all of the surrendered Options.
The provisions of the Option Plan related to a change in control of the
Company could have an anti-takeover effect by making it more costly for a
potential acquiror to obtain control of the Company due to the higher number of
shares outstanding following the exercise of Options. The power of the Option
Committee to make adjustments, including adjusting the number of shares subject
to Options and canceling Options, prior to or after the occurrence of an
extraordinary corporate action, allows the Option Committee to adapt the Option
Plan to operate in changed circumstances, to adjust the Option Plan to fit a
smaller or larger company, and to permit the issuance of Options to new
management following extraordinary corporate action. However, this power of the
Option Committee also has an anti-takeover effect, by allowing the Option
Committee to adjust the Option Plan in a manner to allow the present management
of the Company to exercise more options and hold more shares of the Company's
Common Stock, and to possibly decrease the number of Options available to new
management of the Company.
Although the Option Plan may have an anti-takeover effect, the
Company's Board of Directors did not adopt the Option Plan specifically for
anti-takeover purposes. The Option Plan could render it more difficult to obtain
support for stockholder proposals opposed by the Company's Board and management
in that recipients of Options could choose to exercise Options and thereby
increase the number of shares for which they hold voting power. Also, the
exercise of Options could make it easier for the Board and management to block
the approval of certain transactions requiring the voting approval of 80% of the
Common Stock. In addition, the exercise of Options could increase the cost of an
acquisition by a potential acquiror.
Amendment and Termination
The Board of Directors may alter, suspend or discontinue the Option
Plan, except that no action of the Board may increase the maximum number of
shares of Common Stock issuable under the Option Plan, materially increase the
benefits accruing to Optionees under the Option Plan or materially modify the
requirements for eligibility for participation in the Option Plan unless the
action of the Board is subject to approval or ratification by the stockholders
of the Company.
Possible Dilutive Effects
The Common Stock issuable may either be authorized but unissued shares
of Common Stock or shares purchased in the open market. Because the stockholders
of the Company do not have preemptive rights, to the extent that the Company
funds the Option Plan, in whole or in part, with authorized but unissued shares,
the interests of current stockholders will be diluted. If upon the exercise of
all of the Options, the Company delivers newly issued shares of Common Stock
(i.e., 109,000 shares of Common Stock), then the dilutive effect to ownership of
current stockholders would be approximately 7.8%.
Federal Income Tax Consequences
Under present federal tax laws, awards under the Option Plan will have
the following consequences:
-14-
<PAGE>
1. The grant of an Option will not by itself result in the
recognition of taxable income to an Optionee or entitle the
Company to a tax deduction at the time of grant.
2. The exercise of an Option which is an "Incentive Stock Option"
within the meaning of Section 422 of the Code generally will not,
by itself, result in the recognition of taxable income to an
Optionee or entitle the Company to a deduction at the time of
exercise. However, the difference between the Option exercise
price and the Fair Market Value of the Common Stock on the date
of Option exercise is an item of tax preference which may, in
certain situations, trigger the alternative minimum tax for an
Optionee. An Optionee will recognize capital gain or loss upon
resale of the shares of Common Stock received pursuant to the
exercise of Incentive Stock Options, provided that the shares are
held for at least one year after transfer of the shares or two
years after the grant of the Option, whichever is later.
Generally, if the shares are not held for that period, the
Optionee will recognize ordinary income upon disposition in an
amount equal to the difference between the Option exercise price
and the Fair Market Value of the Common Stock on the date of
exercise, or, if less, the sales proceeds of the shares acquired
pursuant to the Option.
3. The exercise of a Non-Incentive Stock Option will result in the
recognition of ordinary income by the Optionee on the date of
exercise in an amount equal to the difference between the
exercise price and the Fair Market Value of the Common Stock
acquired pursuant to the Option.
4. The Company will be allowed a tax deduction for federal tax
purposes equal to the amount of ordinary income recognized by an
Optionee at the time the Optionee recognizes ordinary income.
5. In accordance with Section 162(m) of the Code, the Company's tax
deductions for compensation paid to the most highly paid
executives named in the Company's proxy statement may be limited
to no more than $1 million per year, excluding certain
"performance-based" compensation. The Company intends for the
award of Options under the Option Plan to comply with the
requirement for an exception to Section 162(m) of the Code
applicable to stock option plans so that the Company's deduction
for compensation related to the exercise of Options would not be
subject to the deduction limitation set forth in Section 162(m)
of the Code.
Accounting Treatment
The Company expects to use the "intrinsic value based method" as
prescribed by APB Opinion 25. Accordingly, neither the grant nor the exercise of
an Option under the Option Plan currently requires any charge against earnings
under generally accepted accounting principles. Common Stock issuable pursuant
to outstanding Options which are exercisable under the Option Plan will be
considered outstanding for purposes of calculating earnings per share on a
diluted basis.
Stockholder Ratification
Stockholder ratification of the Option Plan is being sought in order to
qualify the Option Plan for the granting of Incentive Stock Options in
accordance with the Code, to meet the requirements of The Nasdaq Stock Market
upon which the Common Stock is listed and to enable Optionees to qualify for
certain
-15-
<PAGE>
exemptive treatment from the short-swing profit recapture provisions of Section
16(b) of the 1934 Act. An affirmative vote of the holders of a majority of the
total votes cast at the Meeting in person or by proxy is required to constitute
stockholder ratification of this Proposal II.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF THE 2001 STOCK OPTION PLAN.
--------------------------------------------------------------------------------
2002 ANNUAL MEETING STOCKHOLDER PROPOSALS
--------------------------------------------------------------------------------
In order to be considered for inclusion in the Company's proxy
statement for the annual meeting of stockholders to be held in 2002, all
stockholder proposals must be submitted to the Secretary of the Company at its
offices at 1505 York Road, Lutherville, Maryland 21093, on or before August 20,
2001. Under the Company's Articles of Incorporation, stockholder nominations for
director and stockholder proposals not included in the Company's 2002 proxy
statement, in order to be considered for possible action by stockholders at the
2002 annual meeting of stockholders must be submitted to the Secretary of the
Company, at the address set forth above, by November 16, 2001.
--------------------------------------------------------------------------------
OTHER MATTERS
--------------------------------------------------------------------------------
The Board of Directors does not know of any other matters that are
likely to be brought before the annual meeting. If any other matters, not now
known, properly come before the meeting or any adjournments, the persons named
in the enclosed proxy card, or their substitutes, will vote the proxy in
accordance with their judgment on such matters.
--------------------------------------------------------------------------------
MISCELLANEOUS
--------------------------------------------------------------------------------
The cost of soliciting proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers, and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation.
-16-
<PAGE>
--------------------------------------------------------------------------------
FORM 10-KSB
--------------------------------------------------------------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 2000, WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE
RECORD DATE UPON WRITTEN REQUEST TO THE SECRETARY, WHG BANCSHARES CORPORATION,
1505 YORK ROAD, LUTHERVILLE, MARYLAND 21093.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Diana L. Rohrback
-----------------------------------
Diana L. Rohrback
Corporate Secretary
Lutherville, Maryland
December 18, 2000
-17-
<PAGE>
APPENDIX A
WHG BANCSHARES CORPORATION
AUDIT COMMITTEE CHARTER
Committee Responsibilities
The Audit Committee of the Board of Directors of WHG Bancshares
Corporation (the "Company") shall be a standing committee and is responsible for
oversight of the Company's financial reporting and internal controls. The Audit
Committee (the "Committee") reports to the Board of Directors (the "Board") and
its primary function is to assist the Board in fulfilling its responsibility to
shareholders related to financial accounting and reporting, the system of
internal controls established by management and the adequacy of auditing
relative to these activities. The Committee is granted the authority to
investigate any activity of the Company and it is empowered to retain persons
having special competence as necessary to assist the Committee in fulfilling its
responsibilities.
The Committee shall:
o Provide for an open avenue of communications between the
independent accountants and the Board and, at least once
annually, meet with the independent accountants in private
session.
o Review the qualifications and evaluate the performance of the
independent accountants and make recommendations to the Board
regarding the selection, appointment or termination of the
independent accountants. The independent accountants shall be
ultimately accountable to the Board and the Committee, as
representatives of shareholders.
o Receive on an annual basis a written statement from the
independent accountant detailing all relationships between the
independent accountant and the Company consistent with
requirements of the Independence Standards Board Standard 1, as
may be modified or supplemented. The Committee shall actively
engage in a dialogue with the independent accountants with
respect to any disclosed relationships or services that may
impact objectivity and independence of the independent
accountants, and take, or recommend that the full Board take,
appropriate action to oversee the independence of the independent
accountants.
o Review and approve the independent accountants' annual engagement
letter.
o Review with the independent accountants (1) the proposed scope of
their examination with emphasis on accounting and financial areas
where the Committee, the independent accountants or management
believe special attention should be directed, (2) results of
their audit, (3) their evaluation of the adequacy of the system
of internal controls, (4) significant disputes, if any, with
management and (5) cooperation received from management in the
conduct of the audit.
o Review significant accounting, reporting, regulatory or industry
developments affecting the Company.
A-1
<PAGE>
o Review interim results with the Company's financial officer and
the independent accountants prior to the public announcement of
financial results and the filing of the Form 10-QSB.
o Discuss with management and the independent accountants, any
issues regarding significant risks or exposures and assess the
steps management has taken to minimize such risk.
o Discuss with the independent accountants SAS 61 matters, as may
be, modified or supplemented.
o Make a recommendation to the Board as to whether the financial
statements should be included in the Company's Annual Report on
Form 10-KSB.
o Approve the report of Audit Committee to be included in the
Company's Proxy Statement for its Annual Meeting of Shareholders.
o Perform such other functions as assigned by law, the Company's
bylaws or as the Board deems necessary and appropriate.
Committee Membership
The membership of the Committee shall be:
o appointed by the Board,
o comprised of a majority of independent directors as defined by
the applicable regulatory authorities, and
o consist of at least two members.
Committee Meetings
Meetings will be held as required, but no less than once a year.
Minutes will be recorded and reports of committee meetings will be presented at
the next Board meeting.
Committee Charter Review and Approval
This Audit Committee Charter shall be reviewed, reassessed, and
approved by the Board annually and shall be included in the proxy at least every
three years.
A-2
<PAGE>
APPENDIX B
WHG BANCSHARES CORPORATION
2001 STOCK OPTION PLAN
1. Purpose of the Plan. The Plan shall be known as the WHG BANCSHARES
CORPORATION 2001 Stock Option Plan (the "Plan"). The purpose of the Plan is to
attract and retain qualified personnel for positions of substantial
responsibility and to provide additional incentive to officers, directors,
employees and other persons providing services to the Company, the Bank or any
present or future Parent or Subsidiary of the Company, the Bank to promote the
success of the business. The Plan is intended to provide for the grant of
"Incentive Stock Options," within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") and Non-Incentive Stock Options,
options that do not so qualify. The provisions of the Plan relating to Incentive
Stock Options shall be interpreted to conform to the requirements of Section 422
of the Code.
2. Definitions. The following words and phrases when used in this Plan
with an initial capital letter, unless the context clearly indicates otherwise,
shall have the meaning as set forth below. Wherever appropriate, the masculine
pronoun shall include the feminine pronoun and the singular shall include the
plural.
"Award" means the grant by the Committee of an Incentive Stock
Option or a Non-Incentive Stock Option, or any combination thereof, or grants of
Stock Options made in accordance with Section 9(a) of the Plan.
"Board" shall mean the Board of Directors of the Company, or
any successors thereto.
"Change in Control" shall mean: (i) the sale of all, or a
material portion, of the assets of the Company or the Bank; (ii) the merger or
recapitalization of the Company whereby the Company is not the surviving entity;
(iii) a change in control of the Company, as otherwise defined or determined by
the Office of Thrift Supervision ("OTS") or regulations promulgated by it; or
(iv) the acquisition, directly or indirectly, of the beneficial ownership
(within the meaning of that term as it is used in Section 13(d) of the
Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder) of twenty-five percent (25%) or more of the outstanding voting
securities of the Company by any person, trust, entity or group. This limitation
shall not apply to the purchase of shares by underwriters in connection with a
public offering of Company stock, or the purchase of shares of up to 25% of any
class of securities of the Company by a tax-qualified employee stock benefit
plan. The term "person" refers to an individual or a corporation, partnership,
trust, association, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not specifically listed
herein.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and regulations promulgated thereunder.
"Committee" shall mean the Board or the Stock Option Committee
appointed by the Board in accordance with Section 5(a) of the Plan.
B-1
<PAGE>
"Common Stock" shall mean the common stock of the Company, or
any successor or parent corporation thereto.
"Company" shall mean WHG BANCSHARES CORPORATION.
"Continuous Employment" or "Continuous Status as an Employee"
shall mean the absence of any interruption or termination of employment with the
Company or any present or future Parent or Subsidiary of the Company. Employment
shall not be considered interrupted in the case of sick leave, military leave or
any other leave of absence approved by the Company or in the case of transfers
between payroll locations, of the Company or between the Bank, its Parent, its
Subsidiaries or a successor.
"Director" shall mean a member of the Board of the Company, or
any successor or Parent thereto.
"Director Emeritus" shall mean a person serving as a director
emeritus, advisory director, consulting director, or other similar position as
may be appointed by the Board of Directors of the Bank or the Company from time
to time.
"Disability" means (a) with respect to Incentive Stock
Options, the "permanent and total disability" of the Employee as such term is
defined at Section 22(e)(3) of the Code; and (b) with respect to Non-Incentive
Stock Options, any physical or mental impairment which renders the Participant
incapable of continuing in the employment or service of the Company, the Bank or
any present or future Parent or Subsidiary of the Company in his then current
capacity as determined by the Committee.
"Effective Date" shall mean November 13, 2000.
"Employee" shall mean any person employed by the Company, the
Bank, or any present or future Parent or Subsidiary of the Company.
"Fair Market Value" shall mean: (i) if the Common Stock is
traded otherwise than on a national securities exchange, then the Fair Market
Value per Share shall be equal to the mean between the last bid and ask price of
such Common Stock on such date or, if there is no bid and ask price on said
date, then on the immediately prior business day on which there was a bid and
ask price. If no such bid and ask price is available, then the Fair Market Value
shall be determined by the Committee in good faith; or (ii) if the Common Stock
is listed on a national securities exchange, then the Fair Market Value per
Share shall be not less than the average of the highest and lowest selling price
of such Common Stock on such exchange on such date, or if there were no sales on
said date, then the Fair Market Value shall be not less than the mean between
the last bid and ask price on such date.
"Incentive Stock Option" or "ISO" shall mean an option to
purchase Shares granted by the Committee pursuant to Section 8 hereof which is
subject to the limitations and restrictions of Section 8 hereof and is intended
to qualify as an incentive stock option under Section 422 of the Code.
"Non-Incentive Stock Option" or "Non-ISO" shall mean an option
to purchase Shares granted pursuant to Section 9 hereof, which option is not
intended to qualify under Section 422 of the Code.
B-2
<PAGE>
"Option" shall mean an Incentive Stock Option or Non-Incentive
Stock Option granted pursuant to this Plan providing the holder of such Option
with the right to purchase Common Stock.
"Optioned Stock" shall mean stock subject to an Option granted
pursuant to the Plan.
"Optionee" shall mean any person who receives an Option or
Award pursuant to the Plan.
"Parent" shall mean any present or future corporation which
would be a "parent corporation" as defined in Sections 424(e) and (g) of the
Code.
"Participant" means any director, officer or employee of the
Company, the Bank, or any Parent or Subsidiary of the Company or any other
person providing a service to the Company who is selected by the Committee to
receive an Award, or who by the express terms of the Plan is granted an Award.
"Plan" shall mean the WHG BANCSHARES CORPORATION 2001 Stock
Option Plan.
"Retirement" shall mean termination of service in all
capacities as an Employee, Director and Director Emeritus following attainment
of not less than age 55 and completion of not less than ten years of Service to
the Company. Service to the Company rendered prior to the Effective Date shall
be recognized in determining eligibility to meet the requirements of Retirement
under the Plan.
"Savings Bank" or "Bank" shall mean Heritage Savings Bank,
F.S.B., or any successor corporation thereto.
"Share" shall mean one share of the Common Stock.
"Subsidiary" shall mean any present or future corporation
which constitutes a "subsidiary corporation" as defined in Sections 424(f) and
(g) of the Code.
3. Shares Subject to the Plan. Except as otherwise required by the
provisions of Section 13 hereof, the aggregate number of Shares with respect to
which Awards may be made pursuant to the Plan shall not exceed 109,000 Shares.
Such Shares may either be from authorized but unissued shares or shares
purchased in the market for Plan purposes. If an Award shall expire, become
unexercisable, or be forfeited for any reason prior to its exercise, new Awards
may be granted under the Plan with respect to the number of Shares as to which
such expiration has occurred.
4. Six Month Holding Period.
Subject to vesting requirements, if applicable, except in the
event of death or Disability of the Optionee or a Change in Control of the
Company, a minimum of six months must elapse between the date of the grant of an
Option and the date of the sale of the Common Stock received through the
exercise of such Option.
B-3
<PAGE>
5. Administration of the Plan.
(a) Composition of the Committee. The Plan shall be
administered by the Board of Directors of the Company or a Committee which shall
consist of not less than two Directors of the Company appointed by the Board and
serving at the pleasure of the Board. All persons designated as members of the
Committee shall meet the requirements of a "Non-Employee Director" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, as
found at 17 CFR ss.240.16b-3.
(b) Powers of the Committee. The Committee is authorized (but
only to the extent not contrary to the express provisions of the Plan or to
resolutions adopted by the Board) to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the form and
content of Awards to be issued under the Plan and to make other determinations
necessary or advisable for the administration of the Plan, and shall have and
may exercise such other power and authority as may be delegated to it by the
Board from time to time. A majority of the entire Committee shall constitute a
quorum and the action of a majority of the members present at any meeting at
which a quorum is present shall be deemed the action of the Committee. In no
event may the Committee revoke outstanding Awards without the consent of the
Participant.
The President of the Company and such other officers as shall
be designated by the Committee are hereby authorized to execute written
agreements evidencing Awards on behalf of the Company and to cause them to be
delivered to the Participants. Such agreements shall set forth the Option
exercise price, the number of shares of Common Stock subject to such Option, the
expiration date of such Options, and such other terms and restrictions
applicable to such Award as are determined in accordance with the Plan or the
actions of the Committee.
(c) Effect of Committee's Decision. All decisions,
determinations and interpretations of the Committee shall be final and
conclusive on all persons affected thereby.
6. Eligibility for Awards and Limitations.
(a) The Committee shall from time to time determine
the officers, Directors, employees and other persons who shall be granted Awards
under the Plan, the number of Awards to be granted to each such persons, and
whether Awards granted to each such Participant under the Plan shall be
Incentive and/or Non-Incentive Stock Options. In selecting Participants and in
determining the number of Shares of Common Stock to be granted to each such
Participant, the Committee may consider the nature of the prior and anticipated
future services rendered by each such Participant, each such Participant's
current and potential contribution to the Company and such other factors as the
Committee may, in its sole discretion, deem relevant. Participants who have been
granted an Award may, if otherwise eligible, be granted additional Awards.
(b) The aggregate Fair Market Value (determined
as of the date the Option is granted) of the Shares with respect to which
Incentive Stock Options are exercisable for the first time by each Employee
during any calendar year (under all Incentive Stock Option plans, as defined in
Section 422 of the Code, of the Company or any present or future Parent or
Subsidiary of the Company) shall not exceed $100,000. Notwithstanding the prior
provisions of this Section 6, the Committee may grant Options
B-4
<PAGE>
in excess of the foregoing limitations, provided said Options shall be clearly
and specifically designated as not being Incentive Stock Options.
(c) In no event shall Shares subject to Options granted
to non-employee Directors in the aggregate under this Plan exceed more than 30%
of the total number of Shares authorized for delivery under this Plan pursuant
to Section 3 herein or more than 5% to any individual non-employee Director. In
no event shall Shares subject to Options granted to any Employee exceed more
than 25% of the total number of Shares authorized for delivery under the Plan.
7. Term of the Plan. The Plan shall continue in effect for a term of
ten (10) years from the Effective Date, unless sooner terminated pursuant to
Section 18 hereof. No Option shall be granted under the Plan after ten (10)
years from the Effective Date.
8. Terms and Conditions of Incentive Stock Options. Incentive Stock
Options may be granted only to Participants who are Employees. Each Incentive
Stock Option granted pursuant to the Plan shall be evidenced by an instrument in
such form as the Committee shall from time to time approve. Each Incentive Stock
Option granted pursuant to the Plan shall comply with, and be subject to, the
following terms and conditions:
(a) Option Price.
(i) The price per Share at which each Incentive
Stock Option granted by the Committee under the Plan may be exercised shall not,
as to any particular Incentive Stock Option, be less than the Fair Market Value
of the Common Stock on the date that such Incentive Stock Option is granted.
(ii) In the case of an Employee who owns Common
Stock representing more than ten percent (10%) of the outstanding Common Stock
at the time the Incentive Stock Option is granted, the Incentive Stock Option
exercise price shall not be less than one hundred and ten percent (110%) of the
Fair Market Value of the Common Stock on the date that the Incentive Stock
Option is granted.
(b) Payment. Full payment for each Share of Common Stock
purchased upon the exercise of any Incentive Stock Option granted under the Plan
shall be made at the time of exercise of each such Incentive Stock Option and
shall be paid in cash (in United States Dollars), Common Stock or a combination
of cash and Common Stock. Common Stock utilized in full or partial payment of
the exercise price shall be valued at the Fair Market Value at the date of
exercise. The Company shall accept full or partial payment in Common Stock only
to the extent permitted by applicable law. No Shares of Common Stock shall be
issued until full payment has been received by the Company, and no Optionee
shall have any of the rights of a stockholder of the Company until Shares of
Common Stock are issued to the Optionee.
(c) Term of Incentive Stock Option. The term of exercisability
of each Incentive Stock Option granted pursuant to the Plan shall be not more
than ten (10) years from the date each such Incentive Stock Option is granted,
provided that in the case of an Employee who owns stock representing more than
ten percent (10%) of the Common Stock outstanding at the time the Incentive
Stock Option is granted, the term of exercisability of the Incentive Stock
Option shall not exceed five (5) years.
(d) Exercise Generally. Except as otherwise provided in
Section 10 hereof, no Incentive Stock Option may be exercised unless the
Optionee shall have been in the employ of the
B-5
<PAGE>
Company, the Bank, or any present or future Parent or Subsidiary of the Company
at all times during the period beginning with the date of grant of any such
Incentive Stock Option and ending on the date three (3) months prior to the date
of exercise of any such Incentive Stock Option. The Committee may impose
additional conditions upon the right of an Optionee to exercise any Incentive
Stock Option granted hereunder which are not inconsistent with the terms of the
Plan or the requirements for qualification as an Incentive Stock Option. Except
as otherwise provided by the terms of the Plan or by action of the Committee at
the time of the grant of the Options, the Options will be first exercisable at
the rate of one- third on the date of grant and one-third annually thereafter
during such periods of service as an Employee, Director or Director Emeritus.
(e) Cashless Exercise. Subject to vesting requirements, if
applicable, an Optionee who has held an Incentive Stock Option for at least six
months may engage in the "cashless exercise" of the Option. Upon a cashless
exercise, an Optionee shall give the Company written notice of the exercise of
the Option together with an order to a registered broker-dealer or equivalent
third party, to sell part or all of the Optioned Stock and to deliver enough of
the proceeds to the Company to pay the Option exercise price and any applicable
withholding taxes. If the Optionee does not sell the Optioned Stock through a
registered broker-dealer or equivalent third party, the Optionee can give the
Company written notice of the exercise of the Option and the third party
purchaser of the Optioned Stock shall pay the Option exercise price plus any
applicable withholding taxes to the Company.
(f) Transferability. An Incentive Stock Option granted
pursuant to the Plan shall be exercised during an Optionee's lifetime only by
the Optionee to whom it was granted and shall not be assignable or transferable
otherwise than by will or by the laws of descent and distribution.
9. Terms and Conditions of Non-Incentive Stock Options. Each
Non-Incentive Stock Option granted pursuant to the Plan shall be evidenced by an
instrument in such form as the Committee shall from time to time approve. Each
Non-Incentive Stock Option granted pursuant to the Plan shall comply with and be
subject to the following terms and conditions.
(a) Options Granted to Directors. Subject to the limitations
of Section 6(c), Non- Incentive Stock Options to purchase 4,950 shares of Common
Stock will be granted to each Director who is not an Employee as of the
Effective Date, at an exercise price equal to the Fair Market Value of the
Common Stock on such date of grant. The Options will be first exercisable at the
rate of one-third on the Effective Date and one-third annually thereafter during
such periods of service as a Director or Director Emeritus. Upon the death,
Disability or Retirement of the Director or Director Emeritus, such Option shall
be deemed immediately 100% exercisable. Such Options shall continue to be
exercisable for a period of ten years following the date of grant without regard
to the continued services of such Director as a Director or Director Emeritus.
In the event of the Optionee's death, such Options may be exercised by the
personal representative of his estate or person or persons to whom his rights
under such Option shall have passed by will or by the laws of descent and
distribution. Options may be granted to newly appointed or elected non-employee
Directors within the sole discretion of the Committee. The exercise price per
Share of such Options granted shall be equal to the Fair Market Value of the
Common Stock at the time such Options are granted. All outstanding Awards shall
become immediately exercisable in the event of a Change in Control of the
Company. Unless otherwise inapplicable, or inconsistent with the provisions of
this paragraph, the Options to be granted to Directors hereunder shall be
subject to all other provisions of this Plan.
B-6
<PAGE>
(b) Option Price. The exercise price per Share of Common Stock
for each Non-Incentive Stock Option granted pursuant to the Plan shall be at
such price as the Committee may determine in its sole discretion, but in no
event less than the Fair Market Value of such Common Stock on the date of grant
as determined by the Committee in good faith.
(c) Payment. Full payment for each Share of Common Stock
purchased upon the exercise of any Non-Incentive Stock Option granted under the
Plan shall be made at the time of exercise of each such Non-Incentive Stock
Option and shall be paid in cash (in United States Dollars), Common Stock or a
combination of cash and Common Stock. Common Stock utilized in full or partial
payment of the exercise price shall be valued at its Fair Market Value at the
date of exercise. The Company shall accept full or partial payment in Common
Stock only to the extent permitted by applicable law. No Shares of Common Stock
shall be issued until full payment has been received by the Company and no
Optionee shall have any of the rights of a stockholder of the Company until the
Shares of Common Stock are issued to the Optionee.
(d) Term. The term of exercisability of each Non-Incentive
Stock Option granted pursuant to the Plan shall be not more than ten (10) years
from the date each such Non-Incentive Stock Option is granted.
(e) Exercise Generally. The Committee may impose additional
conditions upon the right of any Participant to exercise any Non-Incentive Stock
Option granted hereunder which is not inconsistent with the terms of the Plan.
Except as otherwise provided by the terms of the Plan or by action of the
Committee at the time of the grant of the Options, the Options will be first
exercisable at the rate of one-third on the date of grant and one-third annually
thereafter during such periods of service as an Employee, Director or Director
Emeritus.
(f) Cashless Exercise. Subject to vesting requirements, if
applicable, an Optionee who has held a Non-Incentive Stock Option for at least
six months may engage in the "cashless exercise" of the Option. Upon a cashless
exercise, an Optionee shall give the Company written notice of the exercise of
the Option together with an order to a registered broker-dealer or equivalent
third party, to sell part or all of the Optioned Stock and to deliver enough of
the proceeds to the Company to pay the Option exercise price and any applicable
withholding taxes. If the Optionee does not sell the Optioned Stock through a
registered broker-dealer or equivalent third party, the Optionee can give the
Company written notice of the exercise of the Option and the third party
purchaser of the Optioned Stock shall pay the Option exercise price plus any
applicable withholding taxes to the Company.
(g) Transferability. Any Non-Incentive Stock Option granted
pursuant to the Plan shall be exercised during an Optionee's lifetime only by
the Optionee to whom it was granted and shall not be assignable or transferable
otherwise than by will or by the laws of descent and distribution.
10. Effect of Termination of Employment, Disability, Death and
Retirement on Incentive Stock Options.
(a) Termination of Employment. In the event that any
Optionee's employment with the Company, the Bank, or other present or future
Parent or Subsidiaries shall terminate for any reason, other than Disability or
death, all of any such Optionee's Incentive Stock Options, and all of any such
Optionee's rights to purchase or receive Shares of Common Stock pursuant
thereto, shall automatically
B-7
<PAGE>
terminate on (A) the earlier of (i) or (ii): (i) the respective expiration dates
of any such Incentive Stock Options, or (ii) the expiration of not more than
three (3) months after the date of such termination of employment; or (B) at
such later date as is determined by the Committee at the time of the grant of
such Award based upon the Optionee's continuing status as a Director or Director
Emeritus of the Bank or the Company, but only if, and to the extent that, the
Optionee was entitled to exercise any such Incentive Stock Options at the date
of such termination of employment, and further that such Award shall thereafter
be deemed a Non-Incentive Stock Option. In the event that a Subsidiary ceases to
be a Subsidiary of the Company, the employment of all of its employees who are
not immediately thereafter employees of the Company shall be deemed to terminate
upon the date such Subsidiary so ceases to be a Subsidiary of the Company.
(b) Disability. In the event that any Optionee's employment
with the Bank, the Company, or any present or future Parent or Subsidiaries of
the Company shall terminate as the result of the Disability of such Optionee,
such Optionee may exercise any Incentive Stock Options granted to the Optionee
pursuant to the Plan at any time prior to the earlier of (i) the respective
expiration dates of any such Incentive Stock Options or (ii) the date which is
one (1) year after the date of such termination of employment, but only if, and
to the extent that, the Optionee was entitled to exercise any such Incentive
Stock Options at the date of such termination of employment.
(c) Death. In the event of the death of an Optionee, any
Incentive Stock Options granted to such Optionee may be exercised by the person
or persons to whom the Optionee's rights under any such Incentive Stock Options
pass by will or by the laws of descent and distribution (including the
Optionee's estate during the period of administration) at any time prior to the
earlier of (i) the respective expiration dates of any such Incentive Stock
Options or (ii) the date which is two (2) years after the date of death of such
Optionee but only if, and to the extent that, the Optionee was entitled to
exercise any such Incentive Stock Options at the date of death. For purposes of
this Section 10(c), any Incentive Stock Option held by an Optionee shall be
considered exercisable at the date of his death if the only unsatisfied
condition precedent to the exercisability of such Incentive Stock Option at the
date of death is the passage of a specified period of time. At the discretion of
the Committee, upon exercise of such Options the Optionee may receive Shares or
cash or a combination thereof. If cash shall be paid in lieu of Shares, such
cash shall be equal to the difference between the Fair Market Value of such
Shares and the exercise price of such Options on the exercise date.
(d) Incentive Stock Options Deemed Exercisable. For purposes
of Sections 10(a), 10(b) and 10(c) above, any Incentive Stock Option held by any
Optionee shall be considered exercisable at the date of termination of
employment if any such Incentive Stock Option would have been exercisable at
such date of termination of employment without regard to the Disability or death
of the Participant.
(e) Termination of Incentive Stock Options; Vesting Upon
Retirement. Except as may be specified by the Committee at the time of grant of
an Option, to the extent that any Incentive Stock Option granted under the Plan
to any Optionee whose employment with the Company or the Bank terminates shall
not have been exercised within the applicable period set forth in this Section
10, any such Incentive Stock Option, and all rights to purchase or receive
Shares of Common Stock pursuant thereto, as the case may be, shall terminate on
the last day of the applicable period. Notwithstanding the foregoing, the
Committee may authorize at the time of the grant of an Option that such Award
shall be immediately 100% exercisable upon the Retirement of the Optionee.
B-8
<PAGE>
11. Effect of Termination of Employment, Disability, Death or
Retirement on Non-Incentive Stock Options. The terms and conditions of
Non-Incentive Stock Options relating to the effect of the Retirement or other
termination of an Optionee's employment or service, Disability of an Optionee or
his death shall be such terms and conditions as the Committee shall, in its sole
discretion, determine at the time of termination of service, unless specifically
provided for by the terms of the Agreement at the time of grant of the Award.
12. Withholding Tax. The Company shall have the right to deduct from
all amounts paid in cash with respect to the cashless exercise of Options under
the Plan any taxes required by law to be withheld with respect to such cash
payments. Where a Participant or other person is entitled to receive Shares
pursuant to the exercise of an Option, the Company shall have the right to
require the Participant or such other person to pay the Company the amount of
any taxes which the Company is required to withhold with respect to such Shares,
or, in lieu thereof, to retain, or to sell without notice, a number of such
Shares sufficient to cover the amount required to be withheld.
13. Recapitalization, Merger, Consolidation, Change in Control and
Other Transactions.
(a) Adjustment. Subject to any required action by the
stockholders of the Company, within the sole discretion of the Committee, the
aggregate number of Shares of Common Stock for which Options may be granted
hereunder, the number of Shares of Common Stock covered by each outstanding
Option, and the exercise price per Share of Common Stock of each such Option,
shall all be proportionately adjusted for any increase or decrease in the number
of issued and outstanding Shares of Common Stock resulting from a subdivision or
consolidation of Shares (whether by reason of merger, consolidation,
recapitalization, reclassification, split-up, combination of shares, or
otherwise) or the payment of a stock dividend (but only on the Common Stock) or
any other increase or decrease in the number of such Shares of Common Stock
effected without the receipt or payment of consideration by the Company (other
than Shares held by dissenting stockholders).
(b) Change in Control. All outstanding Awards shall become
immediately exercisable in the event of a Change in Control of the Company. In
the event of such a Change in Control, the Committee and the Board of Directors
will take one or more of the following actions to be effective as of the date of
such Change in Control:
(i) provide that such Options shall be assumed, or equivalent
options shall be substituted, ("Substitute Options") by the acquiring or
succeeding corporation (or an affiliate thereof), provided that: (A) any such
Substitute Options exchanged for Incentive Stock Options shall meet the
requirements of Section 424(a) of the Code, and (B) the shares of stock issuable
upon the exercise of such Substitute Options shall constitute securities
registered in accordance with the Securities Act of 1933, as amended, ("1933
Act") or such securities shall be exempt from such registration in accordance
with Sections 3(a)(2) or 3(a)(5) of the 1933 Act, (collectively, "Registered
Securities"), or in the alternative, if the securities issuable upon the
exercise of such Substitute Options shall not constitute Registered Securities,
then the Optionee will receive upon consummation of the Change in Control
transaction a cash payment for each Option surrendered equal to the difference
between (1) the Fair Market Value of the consideration to be received for each
share of Common Stock in the Change in Control transaction times the number of
shares of Common Stock subject to such surrendered Options, and (2) the
aggregate exercise price of all such surrendered Options, or
B-9
<PAGE>
(ii) in the event of a transaction under the terms of which
the holders of the Common Stock of the Company will receive upon consummation
thereof a cash payment (the "Merger Price") for each share of Common Stock
exchanged in the Change in Control transaction, to make or to provide for a cash
payment to the Optionees equal to the difference between (A) the Merger Price
times the number of shares of Common Stock subject to such Options held by each
Optionee (to the extent then exercisable at prices not in excess of the Merger
Price) and (B) the aggregate exercise price of all such surrendered Options in
exchange for such surrendered Options.
(c) Extraordinary Corporate Action. Notwithstanding any
provisions of the Plan to the contrary, subject to any required action by the
stockholders of the Company, in the event of any Change in Control,
recapitalization, merger, consolidation, exchange of Shares, spin-off,
reorganization, tender offer, partial or complete liquidation or other
extraordinary corporate action or event, the Committee, in its sole discretion,
shall have the power, prior or subsequent to such action or event to:
(i) appropriately adjust the number of Shares of
Common Stock subject to each Option, the Option exercise price per Share of
Common Stock, and the consideration to be given or received by the Company upon
the exercise of any outstanding Option;
(ii) cancel any or all previously granted Options,
provided that appropriate consideration is paid to the Optionee in connection
therewith; and/or
(iii) make such other adjustments in connection with
the Plan as the Committee, in its sole discretion, deems necessary, desirable,
appropriate or advisable; provided, however, that no action shall be taken by
the Committee which would cause Incentive Stock Options granted pursuant to the
Plan to fail to meet the requirements of Section 422 of the Code without the
consent of the Optionee.
(d) Acceleration. The Committee shall at all times have
the power to accelerate the exercise date of Options previously granted under
the Plan.
(e) Non-recurring Dividends. Upon the payment of a
special or non-recurring cash dividend that has the effect of a return of
capital to the stockholders, the Option exercise price per share shall be
adjusted proportionately and in an equitable manner.
Except as expressly provided in Sections 13(a), 13(b) and 13(e) hereof,
no Optionee shall have any rights by reason of the occurrence of any of the
events described in this Section 13.
14. Time of Granting Options. The date of grant of an Option under the
Plan shall, for all purposes, be the date on which the Committee makes the
determination of granting such Option. Notice of the grant of an Option shall be
given to each individual to whom an Option is so granted within a reasonable
time after the date of such grant in a form determined by the Committee.
15. Effective Date. The Plan shall became effective upon the date of
approval of the Plan by the Board of the Company (November 13, 2000).
16. Ratification by Stockholders. The Plan shall be ratified by
stockholders of the Company within twelve (12) months before or after the date
the Plan is approved by the Board.
B-10
<PAGE>
17. Modification of Options. At any time and from time to time, the
Board may authorize the Committee to direct the execution of an instrument
providing for the modification of any outstanding Option, provided no such
modification, extension or renewal shall confer on the holder of said Option any
right or benefit which could not be conferred on the Optionee by the grant of a
new Option at such time, or shall not materially decrease the Optionee's
benefits under the Option without the consent of the holder of the Option,
except as otherwise permitted under Section 18 hereof.
18. Amendment and Termination of the Plan.
(a) Action by the Board. The Board may alter, suspend or
discontinue the Plan, except that no action of the Board may increase (other
than as provided in Section 13 hereof) the maximum number of Shares permitted to
be optioned under the Plan, materially increase the benefits accruing to
Participants under the Plan or materially modify the requirements for
eligibility for participation in the Plan unless such action of the Board shall
be subject to approval or ratification by the stockholders of the Company.
(b) Change in Applicable Law. Notwithstanding any other
provision contained in the Plan, in the event of a change in any federal or
state law, rule or regulation which would make the exercise of all or part of
any previously granted Option unlawful or subject the Company to any penalty,
the Committee may restrict any such exercise without the consent of the Optionee
or other holder thereof in order to comply with any such law, rule or regulation
or to avoid any such penalty.
19. Conditions Upon Issuance of Shares; Limitations on Option Exercise;
Cancellation of Option Rights.
(a) Shares shall not be issued with respect to any Option
granted under the Plan unless the issuance and delivery of such Shares shall
comply with all relevant provisions of applicable law, including, without
limitation, the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities laws and the
requirements of any stock exchange upon which the Shares may then be listed.
(b) The inability of the Company to obtain any necessary
authorizations, approvals or letters of non-objection from any regulatory body
or authority deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares issuable hereunder shall relieve the Company of
any liability with respect to the non-issuance or sale of such Shares.
(c) As a condition to the exercise of an Option, the Company
may require the person exercising the Option to make such representations and
warranties as may be necessary to assure the availability of an exemption from
the registration requirements of federal or state securities law.
(d) Notwithstanding anything herein to the contrary, upon the
termination of employment or service of an Optionee by the Company or its
Subsidiaries for "cause" as determined by the Board of Directors, all Options
held by such Participant shall cease to be exercisable as of the date of such
termination of employment or service.
(e) Upon the exercise of an Option by an Optionee (or the
Optionee's personal representative), the Committee, in its sole and absolute
discretion, may make a cash payment to the
B-11
<PAGE>
Optionee, in whole or in part, in lieu of the delivery of shares of Common
Stock. Such cash payment to be paid in lieu of delivery of Common Stock shall be
equal to the difference between the Fair Market Value of the Common Stock on the
date of the Option exercise and the exercise price per share of the Option. Such
cash payment shall be in exchange for the cancellation of such Option. Such cash
payment shall not be made in the event that such transaction would result in
liability to the Optionee or the Company under Section 16(b) of the Securities
Exchange Act of 1934, as amended, and regulations promulgated thereunder.
20. Reservation of Shares. During the term of the Plan, the Company
will reserve and keep available a number of Shares sufficient to satisfy the
requirements of the Plan.
21. Unsecured Obligation. No Participant under the Plan shall have any
interest in any fund or special asset of the Company by reason of the Plan or
the grant of any Option under the Plan. No trust fund shall be created in
connection with the Plan or any grant of any Option hereunder and there shall be
no required funding of amounts which may become payable to any Participant.
22. No Employment Rights. No Director, Employee or other person shall
have a right to be selected as a Participant under the Plan. Neither the Plan
nor any action taken by the Committee in administration of the Plan shall be
construed as giving any person any rights of employment or retention as an
Employee, Director or in any other capacity with the Company, the Bank, or any
present or future Parent or Subsidiary.
23. Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of Maryland, except to the extent that
federal law shall be deemed to apply.
B-12
<PAGE>
--------------------------------------------------------------------------------
WHG BANCSHARES CORPORATION
1505 YORK ROAD
LUTHERVILLE, MARYLAND 21093
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
JANUARY 16, 2001
--------------------------------------------------------------------------------
The undersigned hereby appoints the Board of Directors of WHG
Bancshares Corporation (the "Company"), or its designee, with full powers of
substitution, to act as attorneys and proxies for the undersigned, to vote all
shares of Common Stock of the Company which the undersigned is entitled to vote
at the Annual Meeting of Stockholders (the "Meeting"), to be held at the Holiday
Inn, 2004 Greenspring Drive, Timonium, Maryland on Tuesday, January 16, 2001, at
10:00 a.m. and at any and all adjournments thereof, in the following manner:
FOR WITHHELD
----- --------
I. The election as directors of the nominees
listed below with terms to expire in 2004: |_| |_|
Herbert A. Davis
D. Edward Lauterbach, Jr.
(Instruction: To withhold authority to vote for
any individual nominee, write that nominee's
name in the space provided below)
--------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
II. To ratify the 2001Stock Option Plan. |_| |_| |_|
The Board of Directors recommends a vote "FOR" the above listed
propositions.
--------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE PROPOSITIONS STATED. IF ANY OTHER BUSINESS IS
PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY
IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO
OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
--------------------------------------------------------------------------------
B-13
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting, or
at any adjournments thereof, and after notification to the Secretary of the
Company at the Meeting of the stockholder's decision to terminate this proxy,
the power of said attorneys and proxies shall be deemed terminated and of no
further force and effect. The undersigned may also revoke this proxy by filing a
subsequently dated proxy or by written notification to the Secretary of the
Company of his or her decision to terminate this proxy.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Annual Meeting of Stockholders, a Proxy
Statement dated December 18, 2000, and the 2000 Annual Report to Stockholders.
Please check here if you plan to attend the Meeting. |_|
Dated:
---------------------- -----, -----
-------------------------------- -----------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
-------------------------------- -----------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this proxy. When signing as
attorney, executor, administrator, trustee, or guardian, please give your full
title. If shares are held jointly, each holder should sign.
--------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
--------------------------------------------------------------------------------
