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 Section 240.14a-11(c) or Section 240.14a-12
ANNAPOLIS NATIONAL BANCORP, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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>
LOGO
180 Admiral Cochrane Drive, Suite 300
Annapolis, Maryland 21401
(410) 224-4455
March 26, 1999
Dear Shareholder:
You are cordially invited and encouraged to attend the Annual Meeting of
Shareholders (the "Annual Meeting") of Annapolis National Bancorp, Inc. (the
"Company"), the holding company for Annapolis National Bank (the "Bank"),
Annapolis, Maryland, which will be held on April 29, 1999, at 6:00 p.m.,
Eastern Daylight Savings Time, at the Annapolis Holiday Inn, 210 Holiday Court,
Annapolis, Maryland 21401. Cocktails and hors d'oeuvres will be served.
The attached Notice of the Annual Meeting and the Proxy Statement describe
the formal business to be transacted at the Annual Meeting. Directors and
officers of Annapolis National Bancorp, Inc., as well as a representative of
Rowles & Company, LLP, the Company's independent auditors, will be present at
the Annual Meeting to discuss the Company and the Bank and respond to any
questions that our shareholders may have.
The Board of Directors of Annapolis National Bancorp, Inc. has determined
that the matters to be considered at the Annual Meeting are in the best
interests of the Company and its shareholders. FOR THE REASONS SET FORTH IN THE
PROXY STATEMENT, THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH
MATTER CONSIDERED.
PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. YOUR COOPERATION
IS APPRECIATED SINCE A MAJORITY OF THE COMPANY'S COMMON STOCK MUST BE
REPRESENTED, EITHER IN PERSON OR BY PROXY, TO CONSTITUTE A QUORUM FOR THE
CONDUCT OF BUSINESS.
On behalf of the Board of Directors and all of the employees of the
Company and the Bank, I thank you for your continued interest and support.
Sincerely yours,
/S/ John W.Marhefka, Jr.
John W. Marhefka, Jr.
Chief Executive Officer
<PAGE>
<PAGE>
ANNAPOLIS NATIONAL BANCORP, INC.
------------------
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 29, 1999
------------------
NOTICE IS HEREBY GIVEN that the Annual Meetingof Stockholders of Annapolis
National Bancorp, Inc. ("Company") will be held on April 29, 1999, at 6:00 p.m:
local time, at the Annapolis Holiday Inn, 210 Holiday Court, Annapolis, Maryland
21401, for the following purposes:
(1) To elect three directors.
(2) To approve the selection of Rowles & Company, LLP as independent
auditors for the fiscal year ending December 31, 1999; and
(3) To transact any other business that may properly come before the
meeting, and at any adjournments thereof, including whether or not to adjourn
the meeting.
Only those holders of record of Common Stock as of the close of business
on March 19, 1999, ("Record Date") are entitled to notice of and to vote at the
1999 Annual Meeting of Stockholders and any adjournments or postponements
thereof.
Please sign, date and mail the accompanying proxy in the enclosed,
self-addressed, stamped envelope, whether or not you expect to attend the
meeting in person. You may withdraw your proxy at the meeting should you be
present and desire to vote your shares in person. All shareholders are
cordially invited to attend.
By Order of the Board of Directors
/S/ LORI J. MUELLER
LORI J. MUELLER
Secretary
Annapolis, Maryland
March 26, 1999
<PAGE>
<PAGE>
ANNAPOLIS NATIONAL BANCORP, INC.
------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 29, 1999
------------------
SOLICITATION AND VOTING OF PROXIES
This Proxy Statement is being mailed on or about March 26, 1999, to the
stockholders of Annapolis National Bancorp, Inc. (the "Company") in connection
with the solicitation by the Board of Directors of proxies to be used at the
Annual Meeting of Stockholders to be held on April 29, 1999, at 6:00 p.m. local
time, and at any adjournments or postponements thereof, at the Annapolis
Holiday Inn, 210 Holiday Court, Annapolis, Maryland, 21401.
Regardless of the number of shares of common stock owned, it is important
that record holders of a majority of the shares be represented by proxy or in
person at the Annual Meeting. Shareholders are requested to vote by completing
the enclosed proxy card and returning it signed and dated in the enclosed
postage-paid envelope. Shareholders are urged to indicate their vote in the
spaces provided on the proxy card. PROXIES SOLICITED BY THE BOARD OF DIRECTORS
OF THE COMPANY WILL BE VOTED IN ACCORDANCE WITH THE DIRECTIONS GIVEN THEREIN.
WHERE NO INSTRUCTIONS ARE INDICATED, SIGNED PROXY CARDS WILL BE VOTED FOR THE
APPROVAL AND RATIFICATION OF THE SPECIFIC PROPOSALS PRESENTED IN THIS PROXY
STATEMENT.
Other than the matters listed on the attached Notice of Annual Meeting of
Shareholders, the Board of Directors knows of no additional matters that will
be presented for consideration at the Annual Meeting. EXECUTION OF A PROXY,
HOWEVER, CONFERS ON THE DESIGNATED PROXY HOLDERS DISCRETIONARY AUTHORITY TO
VOTE THE SHARES IN ACCORDANCE WITH THEIR BEST JUDGMENT ON SUCH OTHER BUSINESS,
IF ANY, THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND AT ANY
ADJOURNMENTS THEREOF, INCLUDING WHETHER OR NOT TO ADJOURN THE ANNUAL MEETING.
A proxy may be revoked at any time prior to its exercise by filing a
written notice of revocation with the Corporate Secretary of the Company, by
delivering to the Company a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person. However, if you are a
shareholder whose shares are not registered in your own name, you will need
appropriate documentation from your record holder to vote personally at the
Annual Meeting.
The cost of solicitation of proxies on behalf of management will be borne
by the Bank. Proxies may be solicited personally or by telephone by directors,
officers and other employees of the Company and its subsidiary, Annapolis
National Bank (the "Bank") without compensation therefor. The Company will also
request persons, firms and corporations holding shares in their names, or in
the name of their nominees, which are beneficially owned by others, to send
proxy material to and obtain proxies from such beneficial owners, and will
reimburse such holders for their reasonable expenses in doing so.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Stockholders are entitled to one vote for each share of common stock, par
value $.01 per share (the "Common Stock") registered in their names on the
stock transfer books of the Company at the close of business on March 19, 1999,
the record date fixed by the Board of Directors. At March 19, 1999, the Company
had outstanding 2,313,506 shares of Common Stock entitled to vote at the Annual
Meeting.
As to the election of a director, the proxy card being provided by the
Board of Directors enables a shareholder to vote "FOR" the election of the
nominee proposed by the Board of Directors, or to "WITHHOLD"
1
<PAGE>
authority to vote for the nominee being proposed. Under the Company's Bylaws,
directors are elected by a plurality of votes cast, without regard to either
(i) broker non-votes, or (ii) proxies as to which authority to vote for the
nominee being proposed is withheld.
As to the ratification of Rowles & Company, LLP as independent auditors of
the Company and all other matters that may properly come before the Annual
Meeting, by checking the appropriate box, you may: (i) vote "FOR" the item;
(ii) vote "AGAINST" the item; or (iii) "ABSTAIN" with respect to the item.
Under the Company's Bylaws, unless otherwise required by law, all such matters
shall be determined by a majority of the votes cast, without regard to either
(i) broker non-votes, or (ii) proxies marked "ABSTAIN" as to that matter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of Common Stock as of March 19, 1999 the Record Date, by each of the
Company's and Bank's directors, nominees and Named Executive Officers and by
each person known by the Company to own beneficially more than 5% of the
Company's voting securities, and by the executive officers and directors of the
Company as a group, including the number of shares beneficially owned by, and
percentage ownership of each such person as of that date. Other than those
persons listed below, the Company is not aware of any person, as such term is
defined in the Securities Exchange Act of 1934, as amended, that owns more than
5% of the Company's Common Stock as of the Record Date.
2
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OWNED (1) CLASS
- -------------------------------------------------------- ------------------ ------------
<S> <C> <C>
Kevin J. Barron (2) .................................... 2,000 0.09%
1523 Elwyn Avenue
Crofton, MD 21114
Ronald E. Gardner ...................................... 25,000 1.07%
1405 Goldenrain Drive
Crofton, Md. 21114
Stanley H. Katsef (3) .................................. 18,150 0.73%
2703 Coriander Place
Edgewater, Md. 21037
Stanley J. Klos Jr. .................................... 20,000 0.85%
76 Chautaugua Road
Arnold, Md. 21012
Lawrence E. Lerner ..................................... 881,453 37.64%
2711 Washington Avenue
Chevy Chase, Md. 20815
Richard M. Lerner ...................................... 100,000 4.27%
5447 Grove Ridge Way
Rockville, Md. 20852
Dimitri P. Mallios ..................................... 12,000 0.051%
3204 Ellicott Street, N.W.
Washington, D.C. 20008
John W. Marhefka Jr. (4) ............................... 74,290 3.17%
1905 White Heron Road
Annapolis, Md. 21401
Albert Phillips ........................................ 18,500 0.079%
118 Riverside Drive
Cambridge, Md. 21613
Lawrence W. Schwartz ................................... 19,766 0.084%
10854 Country Pond Lane
Oakton, Va. 22124
Officers and directors as a group (14 persons) ......... 1,180,978(5) 50.43%
</TABLE>
- ----------
(1) Information relating to beneficial ownership of Common Stock is based upon
"beneficial ownership" concepts set forth in rules of the SEC under
Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Under these rules, a person is deemed to be a "beneficial
owner" of a security if that person has or shares "voting power" which
includes the power to vote or direct the voting of such security, or
"investment power" which includes the power to dispose or to direct the
disposition of such security. A person is deemed to be a beneficial owner
of any security of which that person has the right to acquire beneficial
ownership within sixty days. Under the rules, more than one person may be
deemed to be a beneficial owner of the same securities, and a person may
be deemed to be a beneficial owner of securities in which he has no
beneficial interest. For instance, beneficial ownership may include
spouses, minor children and other relatives residing in the same
household, and trusts, partnerships, corporations, or deferred
compensation plans which are affiliated with the principal. Unless
otherwise indicated by footnote, each individual has sole voting and
dispositive powers to all shares indicated.
(2) Includes options to purchase 1,000 shares of Company Common Stock which are
currently exercisable at an exercise price of $9.75 per share and are
deemed to be outstanding for the purpose of computing the percentage of
outstanding Common Stock beneficially owned by all directors and executive
officers as a group.
3
<PAGE>
(3) Includes options to purchase 1,000 shares of Company Common Stock which are
currently exercisable at an exercise price of $6.00 per share and are
deemed to be outstanding for the purpose of computing the percentage of
outstanding Common Stock beneficially owned by all directors and executive
officers as a group.
(4) Includes options to purchase 10,000 and 6,600 shares of Company Common
Stock which are currently exercisable at an exercise price of $5.00 per
share and $10.38 per share, respectively, and are deemed to be outstanding
for the purpose of computing the percentage of outstanding Common Stock
beneficially owned by all directors and executive officers as a group.
(5) Includes options to purchase 22,100 shares of Company Common Stock which
are currently exercisable by executive officers at exercise prices ranging
from $5.00 to $10.38 per share, and are deemed to be outstanding for the
purpose of computing the percentage of outstanding Common Stock
beneficially owned by all directors and executive officers as a group.
PROPOSALS TO BE VOTED ON AT THE MEETING
PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of nine (9)
directors. The Company' Articles of Incorporation provide that the Board of
Directors shall be divided into three classes, as nearly equal in number as the
then total number of directors constituting the entire board shall permit, with
directors of each class being elected for three-year terms at each Annual
Meeting. The terms of three directors of the Company will expire at the time of
the Annual Meeting of Stockholders. The positions of these three directors are
to be filled at the Annual Meeting of Stockholders. Therefore, three incumbent
directors have been nominated to be elected to hold office until the 2002
Annual Meeting of Stockholders or until their respective successors are elected
and qualified or until their earlier resignation or removal. The nominees are
Ronald E. Gardner, Lawrence E. Lerner, and Lawrence W. Schwartz.
The proxies solicited hereby, unless directed to the contrary, will be
voted FOR the election as directors of all three nominees listed in the
following table. In order to be elected, a majority of the shares voted must be
voted FOR the election of each nominee. Each nominee has consented to serve as
a director, if elected. The Board of Directors has no reason to believe that
any nominee will be unwilling or unable to serve as a director but, if for any
reason any nominee is not willing or able to serve as a director, the
accompanying proxy will be voted FOR a substitute nominee chosen by the Board
of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE THREE
NOMINEES NAMED IN THIS PROXY STATEMENT.
INFORMATION CONCERNING NOMINEES
The following table sets forth information as of the Record Date
concerning persons nominated by the Board of Directors for election as
directors of the Company to serve until the 2002 Annual Meeting of Stockholders
or until their successors have been elected and qualified or until their
earlier resignation or removal. Except as indicated, the nominees have been
officers of the organizations named below or of affiliated organizations as
their principal occupations for more than five years.
4
<PAGE>
NOMINEES
<TABLE>
<CAPTION>
NAME OF DIRECTORS AGE, PRINCIPAL OCCUPATION, POSITION WITH THE COMPANY AND THE BANK
- ------------------------------- -------------------------------------------------------------------------
<S> <C>
Ronald E. Gardner ............. Mr. Gardner, age 45, was an owner, Director and Vice President of E.L.
Gardner, Inc. from 1969 to 1996, at which time he sold his interest in
the company and resigned. He was responsible for day to day operations
of E.L. Gardner, Inc., which is a producer of ready mix concrete in
Anne Arundel County. He has been a Director of the Company and the
Bank since April 1997. Mr. Gardner is also an Officer and Director of
Arundel Management Corporation located in Annapolis, Maryland, a
real estate and management company and President and principal owner
of Washington Street Pub located in Easton, Maryland.
Lawrence E. Lerner ............ Mr. Lerner, age 66 has been active in real estate development in the
Washington, D.C. metropolitan area for 30 years. He has been involved
in the development and construction of two regional shopping centers,
several other commercial developments, and more than 2,800 apartment
units. Mr. Lerner manages his real estate investments, comprised of
various partnership interests in entities which own real estate. He has
been a Director of the Company and the Bank since their inception.
Mr. Lerner is the father of Richard M. Lerner, a Director of the
Company and Bank.
Lawrence W. Schwartz .......... Mr. Schwartz, age 44, is a certified public accountant who has operated
CPA firms since 1984 and is currently Managing Partner of Schwartz &
Company, P.C., a CPA firm based in Bethesda, Maryland. Additionally,
he was Executive Vice President and Chief Financial Officer of Federal
Supply Contracts Group, Inc., a reseller of furniture to the government,
from 1993 to 1995. Mr. Schwartz has been a Director of the Company
since April 1997 and a Director of the Bank since its inception.
</TABLE>
INFORMATION CONCERNING CONTINUING DIRECTORS AND NAMED EXECUTIVE OFFICERS
The following table sets forth information as of the Record Date
concerning directors and Named Executive Officers of the Company and the Bank
whose terms of office will continue after the 1999 Annual Meeting of
Stockholders. As indicated, some directors will serve until the 2000 Annual
Meeting of Stockholders, and other directors will serve until the 2001 Annual
Meeting of Stockholders. Except as indicated, the directors have been officers
of the organizations named below or of affiliated organizations as their
principal occupations for more than five years.
5
<PAGE>
DIRECTORS SERVING UNTIL 2000
<TABLE>
<CAPTION>
NAME OF DIRECTORS AGE, PRINCIPAL OCCUPATION, POSITION WITH THE COMPANY AND THE BANK
- ----------------------------- -------------------------------------------------------------------------
<S> <C>
Stanley H. Katsef ........... Mr. Katsef, age 54, became a Director and Vice Chairman of the Board
of the Company and the Bank in April, 1997. He was previously a
founding Director of Annapolis Bancshares, Inc. and Bank of Annapolis
in 1988, where he served as Chairman of the Board and a full-time
employee of both companies from 1992 to 1996.
Dimitri P. Mallios .......... Mr. Mallios, age 66, is an attorney who has practiced law since 1960,
and is a member of the Bars of the State of Maryland and the District of
Columbia. He is presently a senior partner of the law firm of Margolius,
Mallios, Davis, Rider & Tomar, located in Washington, D.C.
Mr. Mallios has been a Director of the Company and the Bank since
their inception.
Albert Phillips ............. Mr. Phillips, age 72, has been the Chairman of the Board of The Phillips
Corporation, a manufacturer and supplier of manufacturing technology
products headquartered in Columbia, Maryland since 1963. He has been
a Director of the Company and the Bank since their inception.
Mr. Phillips serves as Chairman of the Board of the Company and the
Bank as well as President of the Company.
</TABLE>
DIRECTORS SERVING UNTIL 2001
<TABLE>
<CAPTION>
NAME OF DIRECTORS AGE, PRINCIPAL OCCUPATION, POSITION WITH THE COMPANY AND THE BANK
- -------------------------------- ------------------------------------------------------------------------
<S> <C>
Richard M. Lerner .............. Mr. Lerner, age 39, has been President of White Flint Builders, Inc.
since 1984. White Flint Builders, Inc. is located in Bethesda, Maryland
and is engaged in high end residential development and construction. He
has been a Director of the Company and the Bank since their inception.
Richard M. Lerner is the son of Lawrence E. Lerner, a Director of the
Company and the Bank.
John W. Marhefka, Jr. .......... Mr. Marhefka, age 44, was appointed Chief Executive Officer and Vice
President of the Company and President & Chief Executive Officer of
the Bank on February 21, 1997. He has held high level positions in the
Maryland financial institutions industry since 1978. Most recently, he
was a founder of Annapolis Bancshares, Inc. and Bank of Annapolis in
1988. As President & Chief Executive Officer of those companies, he
led them through more than eight years of earnings and asset growth
before they merged with Sandy Spring Bancorp, Inc. in 1996.
Mr. Marhefka also served as Chairman of the Board of both companies
from 1988 to 1992. He is active in community affairs and serves on the
Board of Directors of Leadership Anne Arundel (currently as Vice
President).
</TABLE>
6
<PAGE>
NAMED EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME OF EXECUTIVE OFFICER AGE, PRINCIPAL OCCUPATION, POSITION WITH THE COMPANY AND THE BANK
- --------------------------- ------------------------------------------------------------------------
<S> <C>
Kevin J. Barron ........... Mr. Barron, age 43, is a Senior Vice President of the Bank responsible
for Real Estate Lending. He joined the Bank in December of 1997 after
having worked ten years for Signet Banking Corporation where he was
in charge of construction lending for the Washington and Baltimore
markets. Prior to that he worked for three years with Mellon Bank in
Alexandria, Virginia. Mr. Barron serves on the Bank's Officers Loan
Committee and as a resource to its Facilities and Marketing Committees.
</TABLE>
COMMITTEES
The Company has standing Audit, Compensation, Executive, Facilities,
Marketing, and Nominating Committees of the Board of Directors. The members of
each of the named committees serve at the discretion of the Board of Directors.
The Audit Committee consists of Messrs. Katsef, Gardner, and Schwartz and
reviews and reports to the Board of Directors on examinations of the Bank and
its subsidiaries by regulatory authorities, recommends independent accountants
for appointment by the Boards of the Company and the Bank, reviews the scope of
the work of the independent accountants and their reports, and reviews the
activities and actions of the Bank's internal auditors. The Audit Committee met
six (6) times during 1998.
The Compensation Committee consists of Messrs. Gardner, Klos, R. Lerner
and Mallios, and Mr. Marhefka and reviews and determines salaries and other
benefits for executive and senior management persons of the Company and its
subsidiaries, reviews and determines employees to whom stock options are to be
granted and the terms of such grants, and reviews incentive and other
compensatory plans and arrangements. The Compensation Committee met four (4)
times during 1998.
The Executive Committee consists of Messrs. Katsef, Klos, L. Lerner, R.
Lerner, Mallios, Marhefka, Phillips, and Schwartz and considers new loan
applications which are in excess of the limits granted by the Board of
Directors to the Officers Loan Committee. The Executive Committee met
thirty-one (31) times during 1998.
The Facilities Committee consists of Messrs. Gardner, Katsef, R. Lerner
and Marhefka and advises the Board on matters concerning branching, facilities,
and relocations. The Facilities Committee met twelve (12) times during 1998.
The Marketing Committee consists of Messrs. Gardner, Katsef, Klos, L.
Lerner, Marhefka, and Phillips and assists management in developing and
implementing marketing strategies, advertising campaigns, and new products. The
Marketing Committee met four (4) times during 1998.
The Nominating Committee, consisting of the full Board of Directors,
nominates persons for election to the Board of Directors of the Company and the
Bank. The Nominating Committee will consider shareholder nominations submitted
to it in writing in care of the Company if such nominations are timely
submitted. To be considered timely, the nominations must be received at least
thirty (30) but not more than sixty (60) days prior to the Annual Meeting if
the company has given at least forty (40) days prior notice of the meeting,
otherwise such nominations should be submitted within ten (10) days of the
Company first giving notice of the Annual Meeting. The Nominating Committee met
one (1) time during 1998.
DIRECTORS' COMPENSATION
The Board of Directors of the Company and the Bank held thirteen (13)
meetings during 1998. All of the directors of the Company with the exception of
Director Lawrence E. Lerner attended at least 75% of the total
7
<PAGE>
number of the Company board meetings held and committee meetings on which such
director served during 1998. The Company pays no board or committee fees.
Directors of the Bank received fees for each board and committee meeting
attended in 1998 in the amount of $200 per Board of Directors meeting, $150 per
for Executive Committee meeting of the Bank, and $100 per other committee
meeting. The amount of Bank Board and Committee fees was increased effective on
January 1, 1999 to $250 per Board of Directors meeting, $200 per Executive
Committee meeting, and $150 per other committee meeting. Mr. Marhefka and Mr.
Katsef, receive no fees for attendance at board or committee meetings as they
are full time employees of the Company and the Bank.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or allocated for
services rendered to the Company or the Bank in all capacities during the years
ended December 31, 1997 and 1998 to executive officers whose compensation
exceeded $100,000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------- ------------------------- ---------
OTHER SECURITIES ALL
ANNUAL RESTRICTED UNDERLYING OTHER
COMPEN- STOCK OPTIONS/ LTIP COMPEN-
SALARY BONUS SATION AWARDS SARS PAYOUTS SATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(3) ($) (#) ($) ($)(4)
- ------------------------------ ------ ----------- ---------- --------- ------------ ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John W. Marhefka, Jr. (1) 1998 $134,439 $ -0- $3,473 -0- -0- $-0- $4,889
CEO & Vice President of 1997 $113,715 $16,979 $3,551 -0- 16,600 -0- -0-
the Company and President &
CEO of the Bank
Kevin J. Barron (2) .......... 1998 $ 80,000 $25,285 -0- -0- -0- $-0- -0-
Senior Vice President -- Real 1997 $ 4,000 -0- -0- -0- 5,000 -0- -0-
Estate Lending of the Bank
</TABLE>
- ----------
(1) Mr. Marhefka became Chief Executive Officer of the Company and the Bank on
February 21, 1997.
(2) Mr. Barron became Senior Vice President -- Real Estate Lending of the Bank
on December 15, 1997.
(3) Represents personal use of a Bank automobile. For 1997 and 1998, there were
no (a) perquisites over the lesser of $50,000 or 10% of the individual's
total salary and bonus for the years; (b) payments of above market
preferential earnings on deferred compensation; (c) payments of earnings
with respect to long term incentive plans prior to settlement or
maturation; (d) tax payment reimbursements; or (e) preferential discounts
in stock.
(4) Represents amounts contributed to the Named Executive Officer by the Bank's
401(k) Plan.
EMPLOYMENT AGREEMENT
On February 21, 1997, the Bank and Mr. Marhefka entered into a five year
employment agreement (the "Employment Agreement"). Pursuant to the Employment
Agreement, Mr. Marhefka received an initial base salary of $132,500 per year,
which base salary increases on each anniversary of the Employment Agreement by
an amount determined by multiplying the then base salary by the annual
percentage increase of the most recently released Consumer Price Index for
Urban Consumers. Additionally, the Bank provides and maintains an automobile
for Mr. Marhefka's use and provides family health insurance.
8
<PAGE>
Pursuant to the Employment Agreement, on April 25, 1997, Mr. Marhefka was
granted incentive stock options to purchase 10,000 shares of Company Common
Stock at an exercise price of $5.00 per share. In addition, Mr. Marhefka will
have an opportunity to be granted additional options at the close of each
calendar year during the term of the Employment Agreement (the "Annual
Options"). The exercise price of the Annual Options will be calculated as
133.334% of the book value per share of the Company's Common Stock at the close
of the calendar year and the number of Annual Options will be determined as a
function of the Company's return on average equity ("ROE") for the calendar
year. Should the Company's ROE for the calendar year be calculated greater than
the specified target, the amount of Annual Options to be granted will be 1,000
plus 10 additional options for each 0.01% by which the Company's ROE exceeds
the specified target for that calendar year.
Pursuant to the Employment Agreement, the Bank will also pay a bonus to
Mr. Marhefka following the close of each calendar year during the term of the
Employment Agreement (the "Annual Bonus"). The amount of each Annual Bonus will
be calculated as 5% of the amount by which the Company's ROE exceeds the
specified target during that calendar year.
No Annual Options or Annual Bonus will be paid for any calendar year in
which (i) the Company's ROE is less than the specified target during that year,
or (ii) the amount of the Bank's non-performing assets, as defined in the
contract, exceeds 0.75% of its total assets at the end of the calendar year
just completed, or (iii) the amount of the Bank's allowance for loan losses is
less than 150% of its non-accrual loans after deducting any portion thereof
which are government guaranteed.
If the Company increases its stockholder equity by virtue of selling new
shares of Common Stock, as is the case with the Offering, or another method of
external recapitalization, the Annual Options and Annual Bonus incentive
calculations will be adjusted to account for the dilutive effect of such
recapitalization on the Company's ROE.
The Employment Agreement may be terminated by either party with or without
"cause". The Employment Agreement provides that, except in certain
circumstances, if Mr. Marhefka terminates the Employment Agreement by voluntary
resignation, or his employment is terminated without cause, Mr. Marhefka will
not, without the Bank's written consent, participate or be connected with any
competing institution that has offices or does business in Anne Arundel County,
Maryland for the remaining term of the Employment Agreement, not to exceed one
year in the case of resignation, or eight months if employment is terminated
without cause. The Employment Agreement further provides that if the Bank
terminates the Employment Agreement for any reason, other than for "cause" or
due to Mr. Marhefka's death, disability or resignation, Mr. Marhefka will be
paid an amount equal to his base salary for the twelve months immediately
preceding termination of the Employment Agreement. Notwithstanding the above,
in the event of a "change in control" of the Companies (as defined in the
Employment Agreement), Mr. Marhefka will have the option within six months of
the "change in control" to continue under the terms of the Employment Agreement
with the consent of the Bank, enter into a new employment agreement with the
Bank, on mutually agreeable terms, or receive a payment equal to one and
one-half (1.5) times the base salary and bonus earned during the preceding
twelve month period. The Employment Agreement does not provide benefits to Mr.
Marhefka in the event of his death or disability, his discharge by the
Companies for "cause," or his resignation.
STOCK OPTION PLAN
The Company maintains an Employee Stock Option Plan (the "Option Plan")
which provides for discretionary awards of up to an aggregate of 100,000
options to purchase Company Common Stock to officers and key employees of the
Company and Bank as determined by a committee of disinterested directors at the
fair market value of the Common Stock on the date of grant. The Option Plan is
not qualified under Section 401(a) of the Internal Revenue Code and is not
subject to any provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). The Option Plan was approved by the Company's
stockholders on
9
<PAGE>
April 25, 1997, therefore, no grants were made in 1996. Pursuant to an
Employment Agreement dated February 21, 1997, the Company granted Mr. Marhefka
options to purchase 10,000 and 6,600 shares of Company Common Stock at an
exercise price of $5.00 and $10.38 per share. The Company also granted options
to Mr. Barron on December 15, 1997 to purchase 5,000 shares of Company Common
Stock at an exercise price of $9.75 per share, subject to a five year vesting
schedule. At March 19, 1999, the Company also had outstanding to other officers
options to purchase an aggregate of an additional 46,000 shares of Company
Common Stock at exercise prices from $6.00 to $10.63 per share. These options
are subject to a vesting schedule and will become exercisable in five equal
annual installments beginning one year from the date of grant. The Company
intends to grant additional options to certain key Bank employees in the
future, however, the timing and amount of such grants has yet to be determined.
All such options will be granted at not less than the fair market value of the
Common Stock at the time of the grant.
OTHER COMPENSATION PLANS
Executive officers participate in the Company's health and welfare and
qualified retirement plans on the same terms as non-executive employees who
meet the applicable eligibility criteria, subject to any legal limitations on
the amounts that may be contributed or the benefits that may be payable under
these plans. In addition, all full-time employees are covered as a group for
comprehensive hospitalization, including major medical, long-term disability
and dismemberment insurance and group term life insurance. Additionally,
executive officers participate in an incentive compensation plan based on the
accomplishment of specific performance goals as established by the compensation
committee.
STOCK OPTION GRANTS
As discussed above and as an inducement to attract and retain qualified
managers and employees, the Company maintains the Option Plan. During 1998,
there were no grants of options under the Stock Option Plan to the Named
Executive Officers.
STOCK OPTION EXERCISES AND HOLDINGS
There were no stock options exercised by the Named Executive Officers
during 1998. A total of 1,200 stock options were exercised by other officers of
the Bank during 1998 at the exercise price of $6.00 per share. The following
table reflects the number of shares covered by all remaining unexercised stock
options as of December 31, 1998. Also reported are the values for
"in-the-money" options which represent the difference between the exercise
price of any such remaining unexercised options and the year-end market price
of the Common Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
OPTIONS/SARS AT FY-END (#)(1) AT FY-END ($)(3)
------------------------------- --------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------------------- ------------------------------- --------------------------
<S> <C> <C>
John W. Marhefka, Jr.(1) ......... 16,600/0 $20,000/0
Kevin J. Barron (2) .............. 1,000/4,000 $ 0/0
</TABLE>
- ----------
(1) 10,000 options have an exercise price of $5.00 per share and 6,600 options
have an exercise price of $10.38 and were immediately exercisable. The
options will expire on September 30, 2007 and December 31, 2007 or ten
(10) years from the date of grant respectively.
10
<PAGE>
(2) 5,000 options, of which 1,000 are currently exercisable, have an exercise
price of $9.75 per share. The options will expire on December 15, 2007,
ten (10) years from the date of grant.
(3) Based on market value of the underlying stock at fiscal year-end minus the
exercise price. The closing price of the Common Stock on December 31, 1998
was $7.00 per share.
CERTAIN TRANSACTIONS WITH MANAGEMENT
The Bank has adopted a policy which requires that all loans or extensions
of credit to executive officers and directors must be made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with the general public and must not involve
more than the normal risk of repayment or present other unfavorable features.
PROPOSAL 2. TO APPROVE THE SELECTION OF
INDEPENDENT AUDITORS FOR THE YEAR 1999
The Board of Directors of the Company has appointed the firm of Rowles &
Company LLP, certified public accountants, as independent auditors for the
Company for the year 1999, subject to the approval of the stockholders. Rowles
& Company LLP, which has served as independent auditors for the Company and the
Bank since April 25, 1997, has advised the Company that neither the firm nor
any of its partners or associates has any direct financial interest in or any
connection with the Company or any of its subsidiaries other than as
independent auditors. Representatives of Rowles & Company LLP are expected to
be present at the Annual Meeting and will have the opportunity to make a
statement if they desire to do so and to respond to appropriate questions.
For the year ended December 31, 1996 the Company's financial statements
were audited by C.W. Amos & Company. C.W. Amos and Company was replaced on
April 25, 1997 and Rowles & Company, LLP was engaged and continues as the
independent auditors of the Company. The decision to change auditors was
approved by the Board of Directors of the Company and Bank. The financial
statements of the Company and its subsidiaries as of December 31, 1996 were
audited by C.W. Amos & Company.
For the year ended December 31, 1996 and up to the date of replacement of
C.W. Amos and Company, there were no disagreements with C.W. Amos & Company on
any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure which, not resolved to the
satisfaction of C.W. Amos & Company, would have caused it to make reference to
the subject matter of the disagreement in connection with its report. The
independent auditors' report on the financial statements for the year ended
December 31, 1996 did not contain an adverse opinion or a disclaimer of
opinion, and was not qualified or modified as to uncertainty, audit scope or
accounting principles.
Proxies will be voted FOR the Proposal unless otherwise instructed by the
Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ROWLES & COMPANY LLP AS ITS INDEPENDENT AUDITORS TO THE COMPANY
FOR THE YEAR 1999.
11
<PAGE>
ADDITIONAL INFORMATION
STOCKHOLDER PROPOSALS -- 2000 ANNUAL MEETING
Any proposal of a stockholder intended to be presented at the 2000 Annual
Meeting of the Company must be received by the Company at 180 Admiral Cochrane
Drive, Suite 300, Annapolis, Maryland 21401 prior to November 19, 1999, to be
eligible for inclusion in the proxy statement and form of proxy. In order to
curtail controversy as to compliance with this requirement, stockholders are
urged to submit proposals to the Secretary of the Company by Certified
Mail-Return Receipt Requested. Any such proposal will be subject to 17 C.F.R.
ss.240.14a-8 of the Rules and Regulations under the Exchange Act.
ANNUAL REPORTS
THE COMPANY'S 1998 ANNUAL REPORT TO STOCKHOLDERS ACCOMPANIES THIS PROXY
STATEMENT. COPIES OF THE REPORT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE
SECRETARY OF THE COMPANY, 180 ADMIRAL COCHRANE DRIVE, SUITE 300, ANNAPOLIS,
MARYLAND 21401, AND WILL BE AVAILABLE AT THE ANNUAL MEETING.
By Order of the Board of Directors
/S/LORI J. MUELLER
LORI J. MUELLER
Secretary
Annapolis, Maryland
March 26, 1999
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE
REQUESTED TO SIGN, DATE AND PROMPTLY RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
12
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
X PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE ANNAPOLIS NATIONAL BANCORP, INC.
WITH- FOR ALL
FOR HOLD EXCEPT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 29, 1999 1. ELECTION AS DIRECTORS to elect three
(3) nominees as directors listed below --- --- ---
The undersigned hereby appoints the official Proxy (except as marked to the contrary below)
Committee of the Board of Directors of Annapolis National
Bancorp, Inc. with full powers of substitution, as attorneys RONALD E. GARDNER, LAWRENCE E. LERNER AND
and proxies for the undersigned, to vote all shares of LAWRENCE W. SCHWARTZ
common stock of Annapolis National Bancorp, Inc. which the
undersigned is entitled to vote at the Annual Meeting of INSTRUCTION: To withhold authority to
Shareholders, to be held at the Annapolis Holiday Inn, 210 vote for any individual nominee, mark
Holiday Court, Annapolis, Maryland 21401 on Thursday, April "Except" and write that nominee's name
29, 1999, at 6:00 p.m., Eastern Daylight Savings Time, and in the space provided below.
at any and all adjournments thereof, as indicated to the
right. ----------------------------------------
FOR AGAINST ABSTAIN
2. To approve the selection of Rowles &
Company, LLP as independent auditors --- --- ---
for the fiscal year ending December
31, 1999.
The Board of Directors recommends a vote
"FOR" the above proposals.
THIS PROXY, PROPERLY SIGNED AND DATED, WILL
BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS
ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE
PROPOSAL 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.
Please be sure to sign and date Date
this Proxy in the box below. ------------- THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
- ------------------------------------------------------------
Stockholder sign above Co-holder (if any) sign above
</TABLE>
