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
PETROLEUM & RESOURCES CORPORATION
(Name of Registrant as Specified in its Charter)
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>
PETROLEUM & RESOURCES CORPORATION
Seven St. Paul Street
Baltimore, Maryland 21202
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 12, 1999
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Notice is hereby given that the Annual Meeting of Stockholders of
PETROLEUM & RESOURCES CORPORATION, a Maryland corporation (the "Corporation"),
will be held at The Pierre, 5th Avenue at 61st Street, New York, New York, on
Tuesday, March 30, 1999, at 11:00 a.m., for the following purposes:
(a) to elect directors as identified in the Proxy Statement for the
ensuing year;
(b) to consider and vote upon the ratification of the selection of
PricewaterhouseCoopers LLP as the firm of independent accountants to audit the
books and accounts of the Corporation for or during the year ending December
31, 1999; and
(c) to transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on February 12,
1999, as the record date for the determination of the stockholders entitled to
notice of and to vote at this meeting.
By order of the Board of Directors,
LAWRENCE L. HOOPER, JR.
SECRETARY AND GENERAL COUNSEL
Baltimore, MD
NOTE: STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE REQUESTED
TO FILL IN, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
ENVELOPE WITHOUT DELAY.
<PAGE>
<PAGE>
PETROLEUM & RESOURCES CORPORATION
Seven St. Paul Street
Baltimore, MD 21202
-------------
PROXY STATEMENT
-------------
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Petroleum & Resources Corporation, a
Maryland corporation (the "Corporation"), for the Annual Meeting of
Stockholders to be held on Tuesday, March 30, 1999, and is first being sent to
stockholders on or about February 16, 1999.
Only stockholders of record at the close of business on February 12, 1999
may vote at the Annual Meeting to be held on March 30, 1999. On the record
date, the Corporation had outstanding 13,841,375 shares of Common Stock
("Common Stock").
The holders of the Common Stock shall be entitled to one vote per share.
The Corporation has no other class of security outstanding. Directors shall be
elected by a plurality of the votes cast at the meeting. Proposal (b) referred
to below requires the affirmative vote of a majority of the votes cast at the
meeting. Unless otherwise required by the Corporation's Articles of
Incorporation or By-laws, or by applicable Maryland law, any other matter
properly presented for a vote at the meeting will require the affirmative vote
of a majority of the votes cast at the meeting. Shares of Common Stock
represented by proxies that are marked "withhold authority" (with respect to
the election of any nominee for election as director), or marked abstain, or
which constitute a broker non-vote will be counted as present at the meeting
for determining a quorum. (Broker non-votes occur when a nominee holding shares
for a beneficial owner has not received voting instructions from the beneficial
owner and such nominee does not possess or choose to exercise discretionary
authority with respect thereto.) With respect to any matter to be decided by a
plurality or majority of the votes cast at the meeting, proxies marked
"withhold authority" (with respect to the election of any nominee for election
as director), or marked abstain, or which constitute a broker non-vote will not
be counted for the purpose of determining the number of votes cast at the
meeting, and therefore will have no effect on any such vote.
The purposes for which the Annual Meeting to be held on March 30, 1999 is
being called are: (a) election of directors of the Corporation; (b)
ratification of the selection of PricewaterhouseCoopers LLP as the firm of
independent accountants to audit the books and accounts of the Corporation for
or during the year ending December 31, 1999; and (c) transaction of such other
business as may properly come before said meeting or any adjournment thereof.
At the date of this proxy statement, the only business that the management
intends to present, or knows that others will present at the meeting, are
Proposals (a) and (b) referred to above. Should any other matter come before
the meeting, however, action may be taken thereon pursuant to proxies in the
form enclosed.
Except for Proposals (a) and (b) referred to above, the proxies confer
discretionary authority on the persons named therein or their substitutes with
respect to any business that may properly come before the meeting. Any
stockholder executing and returning a proxy in the enclosed form has the power
to revoke such proxy at any time prior to the voting thereof by written notice
to the Corporation, by executing a later dated proxy, or by appearing and
voting at the meeting. Properly executed proxies will be voted as directed,
but, if no direction is specified, the shares covered by a given proxy will be
voted in favor of Proposals (a) and (b).
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The Corporation will pay all costs of soliciting proxies in the
accompanying form. See "Other Matters" below. Solicitation will be made by
mail, and officers, regular employees, and agents of the Corporation may also
solicit proxies by telephone or personal interview. The Corporation expects to
request brokers and nominees who hold stock in their names to furnish this
proxy material to their customers and to solicit proxies from them, and will
reimburse such brokers and nominees for their out-of-pocket and reasonable
clerical expenses in connection therewith.
(a) ELECTION OF DIRECTORS
Unless contrary instructions are given by the stockholder signing a proxy,
it is intended that each proxy in the accompanying form will be voted at the
Annual Meeting for the election of the following nominees to the Board of
Directors for the ensuing year, all of whom have consented to serve if elected:
Enrique R. Arzac W. D. MacCallan John J. Roberts
Allan Comrie W. Perry Neff Robert J. M. Wilson
Daniel E. Emerson Douglas G. Ober
Thomas H. Lenagh Landon Peters
If for any reason one or more of the nominees above named shall become
unable or unwilling to serve (which is not now expected) when the election
occurs, proxies in the accompanying form will, in the absence of contrary
instructions, be voted for the election of the other nominees above named and
may be voted for substitute nominees in the discretion of the persons named as
proxies in the accompanying form. The directors elected will serve until the
next annual meeting or until their successors are elected, except as otherwise
provided in the By-laws of the Corporation.
INFORMATION AS TO NOMINEES FOR ELECTION AS DIRECTORS (AS OF DECEMBER 31, 1998):
Set forth below with respect to each nominee for director are his name and
age, any positions held with the Corporation, other principal occupations
during the past five years, other directorships and business affiliations, the
year in which he first became a director, and the number of shares of Common
Stock beneficially owned by him. Also set forth below is the number of shares
of Common Stock beneficially owned by all directors and officers of the
Corporation as a group.
<TABLE>
<CAPTION>
SHARES OF
COMMON
HAS STOCK
BEEN A BENEFICIALLY
NAME, AGE, POSITIONS WITH THE CORPORATION, DIRECTOR OWNED
OTHER PRINCIPAL OCCUPATIONS AND OTHER AFFILIATIONS(a) SINCE (b)(c)(d)(e)(f)
- ------------------------------------------------------------------------------------- ---------- ----------------
<S> <C> <C>
Enrique R. Arzac, 57, Professor of Finance and Economics, formerly Vice Dean of 1987 1,671
Academic Affairs of the Graduate School of Business, Columbia University. Director
of The Adams Express Company, BEA Income Fund, Inc., BEA Strategic Income
Fund, Inc., Brazilian Equity Fund, Chile Fund, Emerging Markets Infrastructure
Fund, Emerging Markets Telecommunications Fund, First Israel Fund, Latin America
Equity Fund, Latin America Investment Fund and Portugal Fund (investment
companies).
Allan Comrie, 79, Formerly President and Chief Executive Officer of U.S. & Foreign 1984 1,418
Securities Corp. (investment company). Director of The Adams Express Company.
Formerly a director of Japan Fund, Inc. (investment company) and formerly a trustee
of Atlantic Mutual Companies (insurance).
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
COMMON
HAS STOCK
BEEN A BENEFICIALLY
NAME, AGE, POSITIONS WITH THE CORPORATION, DIRECTOR OWNED
OTHER PRINCIPAL OCCUPATIONS AND OTHER AFFILIATIONS(a) SINCE (b)(c)(d)(e)(f)
- --------------------------------------------------------------------------------------- ---------- ----------------
<S> <C> <C>
Daniel E. Emerson, 74, Retired Executive Vice President of NYNEX Corporation, 1987 3,552
retired Chairman of the Board of both NYNEX Information Resources Co. and
NYNEX Mobile Communications Co. Previously, Executive Vice President and
Director of New York Telephone Company. Presently, Past Chairman, National Board
of Directors, YMCA of the U.S.A. Director of The Adams Express Company and
Clifford of Vermont (cable and wire distribution).
Thomas H. Lenagh, 80, Financial Advisor, formerly Chairman of the Board and Chief 1987 1,202
Executive Officer of Greiner Engineering Inc. (formerly Systems Planning Corp.)
(consultants), formerly financial vice president, Aspen Institute (research), and
financial advisor and prior thereto Treasurer of the Ford Foundation (charitable
foundation). Director of Gintel Funds, Clemente Global Growth Fund, and The
Adams Express Company (investment companies), ICN Pharmaceuticals Inc.,
V-Band Corp. (telecommunications manufacturing), ASD Group (electronic contract
manufacturing), and Inrad Corp. (crystals).
W. D. MacCallan, 71, Retired Chairman of the Board and Chief Executive Officer of 1971 13,006
the Corporation. Director, former Chairman of the Board and Chief Executive Officer
of The Adams Express Company, formerly consultant to the Corporation and The
Adams Express Company. Previously, Director of the Hanover Funds, Inc. and the
Hanover Investment Funds, Inc. (investment companies). Presently, Trustee, Vista
Family of Mutual Funds (fifty funds).
W. Perry Neff, 71, Private Financial Consultant, Retired Executive Vice President of 1971 718
Chemical Bank. Director of The Adams Express Company. Previously, Chairman of
the Board and Director of both the Hanover Funds, Inc. and the Hanover Investment
Funds, Inc. (investment companies) and a Director of Van Deventer & Hoch
(investment company). Presently, Trustee, Vista Family of Mutual Funds (fifty funds).
*Douglas G. Ober, 52, Chairman of the Board and Chief Executive Officer of the 1989 38,233
Corporation since April 1, 1991. Director, Chairman of the Board and Chief
Executive Officer of The Adams Express Company.
Landon Peters, 68, Private Investor, formerly Investment Manager, Y.M.C.A. 1987 870
Retirement Fund. Formerly Executive Vice President and Treasurer and prior thereto
Senior Vice President and Treasurer of The Bank of New York. Director of The
Adams Express Company.
John J. Roberts, 76, Senior Advisor, formerly Vice-Chairman, External Affairs, 1987 902
American International Group, Inc. (insurance). Formerly Chairman and Chief
Executive Officer of American International Underwriters Corporation (insurance).
Previously President of American International Underwriters Corporation-U.S./
Overseas Operations. Director of American International Group, Inc. and The Adams
Express Company.
Robert J. M. Wilson, 78, Retired President of the Corporation. Director and retired 1975 6,812
President of The Adams Express Company.
Directors and executive officers of the Corporation as a group. 179,566
</TABLE>
- ----------
* Mr. Ober is an "interested person," as defined by the Investment Company
Act of 1940, because he is an officer of the Corporation.
(a) Each nominee is also a nominee for the Board of Directors of The Adams
Express Company (see "Principal Stockholder" below).
(b) To the Corporation's knowledge, other than shares referred to in
footnotes (c), (d) and (e) below, each director had sole investment and
voting power with respect to the shares shown opposite
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<PAGE>
his name, except (i) Mr. Lenagh, who had only investment power, and (ii)
1,145 shares shown for Mr. Emerson, which are owned jointly with his wife
and as to which he has shared investment and voting power.
(c) Of the amounts shown, 6,093 shares beneficially owned by Mr. Ober were
held by the Trustee under the Employee Thrift Plan of the Corporation.
The Trust Agreement under such plan provides that plan participants have
sole voting power but no investment power with respect to such shares.
(d) Of the amounts shown as beneficially owned by the directors and
executive officers as a group, 28,903 shares were held by the Trustee
under the Employee Thrift Plan.
(e) The amounts shown include shares subject to option under the
Corporation's Stock Option Plan (see "Stock Option Plan" below) by Mr.
Ober (32,107 shares), and directors and executive officers as a group
(120,472 shares). Mr. Ober and the officers with shares subject to option
all disclaim beneficial ownership of those shares.
(f) Calculated on the basis of 13,841,375 shares of Common Stock outstanding
on December 31, 1998, each director owned less than 1% of the Common
Stock outstanding. The directors and executive officers as a group owned
1.3% of the Common Stock outstanding.
The nominees listed below are also nominees for election to the Board of
Directors of The Adams Express Company ("Adams"), the Corporation's largest
stockholder (see "Principal Stockholder" below), and at December 31, 1998,
beneficially owned the number of shares of Adams common stock shown next to
their respective names. Of these Adams shares, 17,395 were held by the Trustee
of the Adams' Employee Thrift Plan for Mr. Ober, as to which he had sole voting
and no investment power, and 48,704 shares are subject to option by Mr. Ober.
He disclaims beneficial ownership of these latter shares.
<TABLE>
<CAPTION>
NOMINEE ADAMS SHARES NOMINEE ADAMS SHARES
- ----------------------- ------------- ----------------------- -------------
<S> <C> <S> <C>
Enrique R. Arzac 4,898 W. Perry Neff 3,586
Allan Comrie 5,525 Douglas G. Ober 66,148
Daniel E. Emerson 8,466 Landon Peters 4,756
Thomas H. Lenagh 1,423 John J. Roberts 4,574
W. D. MacCallan 98,280 Robert J. M. Wilson 28,497
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Each director and officer of the Corporation who is subject to Section 16
of the Securities Exchange Act of 1934 is required to report to the Securities
and Exchange Commission by a specified date his or her beneficial ownership of
or transactions in the Corporation's securities. Based upon a review of filings
with the Securities and Exchange Commission and written representations that no
other reports were required, the Corporation has no reason to believe that such
directors and officers have not filed all requisite reports with the Securities
and Exchange Commission on a timely basis during 1998, with the exception of
the sale of 1,000 shares by Mr. MacCallan in May 1998, which inadvertently was
not reported until June 16, 1998, due to travel by Mr. MacCallan overseas
during that period.
4
<PAGE>
INFORMATION AS TO OTHER EXECUTIVE OFFICERS
Set forth below are the names, ages and positions with the Corporation and
Adams of all executive officers of the Corporation other than those who also
serve as directors. Executive officers serve as such until the election of
their successors.
Ms. Maureen A. Jones, 51, has served as Vice President and Treasurer of
the Corporation and Adams since January 1, 1998, and Treasurer of the
Corporation and Adams since January 1, 1993.
Mr. Richard F. Koloski, 54, has served as President of the Corporation
since April 1, 1986, and Executive Vice President of Adams since January 1,
1986.
Mr. Joseph M. Truta, 54, has served as Executive Vice President of the
Corporation since January 1, 1986, and President of Adams since April 1, 1986.
Mr. Lawrence L. Hooper, Jr., 46, has served as Secretary and General
Counsel of the Corporation and Adams since April 1, 1997. Prior thereto, he was
a partner in Tydings & Rosenberg L.L.P., a Baltimore, Maryland law firm.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
SECURITY OWNERSHIP OF MANAGEMENT (a) OWNED (b)(c)(d)(e)
NAME -------------------
<S> <C>
Maureen A. Jones ................ 6,006
Richard F. Koloski .............. 57,796
Joseph M. Truta ................. 42,433
Lawrence L. Hooper, Jr. ......... 4,947
</TABLE>
- ----------
(a) As of December 31, 1998. Share ownership of directors and executive
officers as a group is shown in the table beginning on page 2 and
footnotes thereto.
(b) To the Corporation's knowledge, each officer had sole investment and voting
power with respect to the shares shown opposite his or her name above
other than shares referred to in footnote (c) below.
(c) Of the amounts shown, the following shares beneficially owned by the
respective officer were held by the Trustee under the Employee Thrift Plan
of the Corporation: Ms. Jones (1,166 shares), Mr. Koloski (14,399 shares),
Mr. Truta (7,026 shares), and Mr. Hooper (219 shares). The Trust Agreement
under such plan provides that plan participants have sole voting power but
no investment power with respect to such shares.
(d) The amounts shown include shares subject to option under the Corporation's
Stock Option Plan (see "Stock Option Plan" below), by Ms. Jones (4,840
shares), Mr. Koloski (43,397 shares), Mr. Truta (35,407 shares), and Mr.
Hooper (4,721 shares).
(e) Calculated on the basis of 13,841,375 shares of Common Stock outstanding on
December 31, 1998, each of the officers listed above owned less than 1.0%
of the Common Stock outstanding.
PRINCIPAL STOCKHOLDER
At December 31, 1998, only one person or group of persons was known by the
Corporation to own beneficially more than five percent of any class of the
Corporation's voting securities.
5
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT OF
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP CLASS
- ----------------- --------------------------- ---------------- -----------
<S> <C> <C> <C>
Common Stock The Adams Express Company 1,145,570 shs. 8.3%
Seven St. Paul Street direct
Baltimore, Maryland 21202
</TABLE>
BOARD MEETINGS
The Board of Directors held twelve meetings during 1998, at which overall
attendance was approximately 93.9%. Each Director attended at least 75% of the
total of all (i) meetings of the Board and (ii) meetings of committees of the
Board on which he served in 1998, except for Mr. Roberts.
AUDIT COMMITTEE OF THE BOARD
Messrs. Emerson, Lenagh, Peters and Wilson, none of whom is an "interested
person," constitute the membership of the Board of Directors' Audit Committee,
which met twice during 1998. The Audit Committee (1) recommends to the Board of
Directors the firm of independent accountants to be engaged to audit the books
of account and other corporate records of the Corporation, (2) reviews with the
independent accountants the scope of their audit, with particular emphasis on
the areas to which either the Committee or the independent accountants believe
special attention should be directed, (3) reviews the recommendations of the
independent accountants regarding internal controls and other matters, and (4)
makes reports, whenever deemed advisable, to the Board of Directors with
respect to the internal controls and accounting practices of the Corporation.
The Audit Committee also reviews the audit and non-audit fees of the
independent accountants.
EXECUTIVE COMMITTEE OF THE BOARD
Messrs. Arzac, Comrie, MacCallan, Marusi*, Ober**, Peters, and Roberts
constitute the membership of the Board's Executive Committee, which met twice
during 1998. The Committee has the authority of the Board of Directors between
meetings of the Board except as limited by law, the Corporation's By-laws, or
Board resolution. The Executive Committee also performs the duties of a
nominating committee. It recommends to the full Board candidates for
directorship. It is the policy of the Executive Committee not to consider
unsolicited nominations for director.
COMPENSATION COMMITTEE OF THE BOARD
Messrs. Arzac, Comrie, MacCallan, Marusi* and Neff constitute the
membership of the Board's Compensation Committee, which met three times during
1998. The Compensation Committee reviews and recommends changes in the salaries
of directors, officers, and employees, and advises upon the compensation and
stock option plans in which the executive officers, officers, and employees of
the Corporation are eligible to participate.
- ----------
* Mr. Marusi resigned as a director as of October 12, 1998.
** Mr. Ober is an "interested person."
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BOARD OF DIRECTORS COMPENSATION
During 1998, each director who is not an interested person received an
annual retainer fee of $7,750 and a fee of $500 for each Board meeting
attended. Messrs. Emerson, Lenagh, Neff, Roberts, and Wilson are the director
members of the Retirement Benefits Committee of the Corporation and Adams,
which administers the Employees' Retirement Plans, Supplemental Retirement
Plans and the Employee Thrift Plans of the Corporation and Adams. All members
of each Committee, except executive officers and/or interested persons, receive
an additional annual retainer fee of $1,500 for each committee membership and a
fee of $500 for each meeting attended; the Chairman of each committee except
for the Executive Committee receives an additional fee of $500 for each
Committee meeting attended. The total amount of fees paid to "disinterested
person" directors in 1998 was $182,750.
TRANSACTIONS WITH PRINCIPAL STOCKHOLDERS
The Corporation shares certain expenses with Adams, of which all the above
named nominees are also directors. These expenses are initially paid by Adams,
which is reimbursed by the Corporation either in proportion to the size of the
respective investment portfolios of the two companies or, where possible, on an
actual usage basis. In 1998 the Corporation's share of such expenses was
$478,379 for research, accounting services and other office services (including
proportionate salaries and other employee benefits), rent and related expenses,
and miscellaneous expenses such as office supplies, postage, subscriptions and
travel.
REMUNERATION OF DIRECTORS AND OTHERS
The following table sets forth for each of the persons named below the
aggregate current remuneration received from the Corporation and Adams during
the fiscal year ended December 31, 1998 for services in all capacities:
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT
BENEFITS
ACCRUED DURING ESTIMATED ANNUAL
AGGREGATE THE LAST FISCAL BENEFITS UPON
NAME OF PERSON, POSITION REMUNERATION (1)(2)(3)(4) YEAR (5) RETIREMENT
- ---------------------- ---------------------- --------------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Douglas G. Ober Chairman of the Board
and Chief Executive
Officer $530,000 -- $163,075
Richard F. Koloski President 270,000 -- 132,660
Joseph M. Truta Executive Vice
President 291,000 -- 134,580
Enrique R. Arzac Director (A)(C) 38,500 N/A N/A
Allan Comrie Director (A)(C) 38,500 N/A N/A
Daniel E. Emerson Director (B)(D) 40,500 N/A N/A
Thomas H. Lenagh Director (B)(D) 38,500 N/A N/A
W. D. MacCallan Director (A)(C) 34,500 N/A N/A
Augustine R. Marusi* Director (A)(C) 35,500 N/A N/A
W. Perry Neff Director (C)(D) 35,500 N/A N/A
Landon Peters Director (A)(B) 38,500 N/A N/A
John J. Roberts Director (A)(D) 29,000 N/A N/A
Robert J. M. Wilson Director (B)(D) 36,500 N/A N/A
</TABLE>
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(A) Member of Executive Committee
(B) Member of Audit Committee
(C) Member of Compensation Committee
(D) Member of Retirement Benefits Committee
* Mr. Marusi resigned as a director as of October 12, 1998.
- ----------
(1) Of the amounts shown, direct salaries paid by the Corporation to Messrs.
Ober, Koloski and Truta were $87,000, $142,000, and $58,290, respectively.
Of the amounts shown, Adams paid non-deferred salaries to Mr. Ober
($205,900), Mr. Koloski ($55,100), and Mr. Truta ($135,610). Of the amounts
shown, $7,100 for Mr. Ober, $2,900 for Mr. Koloski, and $7,100 for Mr.
Truta, was deferred compensation under the Employee Thrift Plan paid by
Adams for the respective employee's account. Of the Corporation's direct
salaries, $2,900 for Mr. Ober, $7,100 for Mr. Koloski, and $2,900 for Mr.
Truta, was deferred compensation under the Corporation's Employee Thrift
Plan. The non-employee Directors do not participate in either Thrift Plan.
(2) The Corporation and Adams each offer an Employee Thrift Plan (see "Employee
Thrift Plan" below) to their respective employees under which
contributions are made to match the contributions made by eligible
employees, and each paid bonuses to certain officers. Of the amounts
shown, $66,700, $49,700, and $26,100 were bonuses and/or plan
contributions for Messrs. Ober, Koloski, and Truta, respectively. Adams
made contributions and/or paid bonuses of $163,300 for Mr. Ober, $20,300
for Mr. Koloski, and $63,900 for Mr. Truta, respectively. The non-employee
Directors do not receive bonuses from either company.
(3) In addition, $66,237 for Mr. Ober and $200,948 for Mr. Truta was the net
gain realized by them upon the exercise of stock appreciation rights
during 1998 granted under the Corporation's Stock Option Plan (see "Stock
Option Plan" below).
(4) Of the amounts shown for non-employee Directors, exactly one-half was paid
by Adams.
(5) The Corporation and Adams each have a noncontributory Employees' Retirement
Plan. No contributions were made by the Corporation or Adams to their
respective plans in 1998.
STOCK OPTION PLAN
On December 12, 1985, the Corporation's Board of Directors adopted a Stock
Option Plan (the "Plan"), which was approved by the stockholders at the March
26, 1986 Annual Meeting of Stockholders and amended at the March 29, 1994
Annual Meeting of Stockholders. The Plan provides for the grant to "key
employees" (as defined in the Plan) of options to purchase an aggregate maximum
of 815,000 shares of Common Stock of the Corporation, together with related
stock appreciation rights, of which (i) 335,000 shares may be made subject to
options granted between December 12, 1985 and December 11, 1995, and (ii)
480,000 shares may be made subject to options granted between December 9, 1993
and December 8, 2003. All options granted or to be granted under the Plan
currently will be treated as non-qualified stock options under the Internal
Revenue Code. The Plan is administered by the Compensation Committee of the
Board of Directors, which consists of five members of the Board, none of whom
is eligible to receive grants under the Plan. The grant of options is at the
discretion of the Compensation Committee.
8
<PAGE>
The Plan provides that, among other things, (a) the option price per share
shall not be less than the fair market value of the Common Stock at the date of
grant, except that the option price per share will be reduced after grant of
the option to reflect capital gains distributions to the Corporation's
stockholders, provided that no such reduction shall be made that will reduce
the option price below 25% of the original option price; (b) an option will not
become exercisable until the optionee shall have remained in the employ of the
Corporation for at least one year after the date of grant and may be exercised
for 10 years unless an earlier expiration date is stated in the option; and (c)
no option or stock appreciation right shall be granted after December 8, 2003.
The Plan permits the grant of stock appreciation rights in conjunction
with the grant of an option, either at the time of the option grant or
thereafter during its term and in respect of all or part of such option. Stock
appreciation rights permit an optionee to request to receive (a) shares of
Common Stock of the Corporation with a fair market value, at the time of
exercise, equal to the amount by which the fair market value of all shares
subject to the option in respect of which such stock appreciation right was
granted exceeds the exercise price of such option, (b) in lieu of such shares,
the fair market value thereof in cash, or (c) a combination of shares and cash.
Stock appreciation rights are exercisable beginning no earlier than two years
after the date of grant and extend over the period during which the related
option is exercisable. To the extent a stock appreciation right is exercised in
whole or in part, the option in respect of which such stock appreciation right
was granted shall terminate and cease to be exercisable.
No disposition of shares of Common Stock acquired as the result of the
exercise of an option or stock appreciation right may be made within the later
of two years of the date of grant of the option and within one year of the
acquisition of such shares.
EMPLOYEE THRIFT PLAN
Employees of the Corporation who have completed six months of service may
elect to have 2% to 6% of their base salary deferred as a contribution to a
thrift plan instead of being paid to them currently (see table set forth on
page 8 regarding 1998 contributions for the officers and directors identified
therein). The Corporation (subject to certain limitations) contributes for each
employee out of net investment income an amount equal to 200% of each
employee's contribution or to the maximum permitted by law. Employees may also
contribute an additional 10% of base salary to the thrift plan, but these
post-tax contributions are not matched by the Corporation. All employee
contributions are credited to the employee's individual account. Employees may
elect that their salary deferral and other contributions be invested in a fixed
income fund, an intermediate bond fund, Common Stock of the Corporation or of
Adams, or a combination thereof. The Corporation's contributions are invested
entirely in its Common Stock. An employee's interest in amounts derived from
the Company's contributions becomes non-forfeitable upon completion of 36
months of service or upon death or retirement. Payment of amounts not withdrawn
or forfeited under the thrift plan may be made upon retirement or other
termination of employment in a single distribution, in ten equal installments,
or in an annuity.
EMPLOYEES' RETIREMENT PLAN
The respective employees of the Corporation and Adams with one or more
years of service participate in similar retirement plans pursuant to which
contributions are made solely by the respective employers on behalf of, and
benefits are provided for, employees meeting certain age and service
requirements. The plans provide for the payment of benefits in the event of an
employee's retirement
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at age 62 or older. Upon such retirement, the amount of the retirement benefit
is 2% of an employee's final thirty-six months average annual salary, including
bonuses, multiplied by years of service. Retirement benefits cannot exceed 55%
of final thirty-six months' average annual salary including bonuses. The
criteria for calculation of retirement benefits under Adams' plan are the same.
Benefits are payable in several alternative methods, each of which must be the
actuarial equivalent of a pension payable for the life of the employee only.
Retirement benefits (subject to any applicable reduction) are also payable in
the event of an employee's early or deferred retirement, disability, or death.
Contributions are made to a trust to fund these benefits.
On March 10, 1988, the Board of Directors of each of the Corporation and
Adams unanimously approved a supplemental retirement benefits plan (together,
the "Supplemental Plans") for employees of the Corporation or Adams, as the
case may be. On June 11, 1998, the Supplemental Plans were amended and restated
as of January 1, 1998. The purpose of each of the Supplemental Plans is to
provide deferred compensation in excess of benefit limitations imposed by the
Internal Revenue Code on tax-qualified defined benefit plans, including the
retirement plans of the Corporation and Adams described above. In accordance
with such limitations, the annual benefit payable under each retirement plan
may not exceed the lesser of $130,000 for 1999 and the employee's average total
compensation paid during the three highest-paid consecutive calendar years of
employment. The $130,000 limit will be adjusted by the Secretary of the
Treasury to reflect cost-of-living increases. In addition, the Internal Revenue
Code limits the amount of benefits payable to beneficiaries of the
tax-qualified retirement plan of each of the Corporation and Adams who are also
participants in the respective employee thrift plan of the Corporation or
Adams, as the case may be, if the combination of projected annual retirement
benefits under such retirement plan and annual contributions under such
employee thrift plan exceeds certain limits.
The Supplemental Plans authorize the Corporation or Adams, as the case may
be, to pay annual retirement benefits to beneficiaries in an amount equal to
the difference between the maximum benefits payable under such retirement plan
and the benefits that would otherwise be payable but for the Internal Revenue
Code's limitations on annual retirement benefits. All amounts payable under the
Supplemental Plans will be paid from the general funds of the responsible
company as benefits become due. The Corporation and Adams have established a
funding vehicle using life insurance policies owned by the Companies for their
respective Supplemental Plans. Payment of benefits under the Supplemental Plans
will be made concurrently with and in the same form as payment of benefits
under the related retirement plan. During 1998, the Corporation and Adams made
payments of $15,467 and $18,844 under their respective Supplemental Plans.
BROKERAGE COMMISSIONS
During the past fiscal year, the Corporation paid brokerage commissions in
the amount of $215,212 on the purchase and sale of portfolio securities traded
on the New York Stock Exchange, substantially all of which were paid to brokers
providing research and other investment services to the Corporation. The
average per share commission rate paid by the Corporation was $0.0599. No
commissions were paid to an affiliated broker.
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PORTFOLIO TURNOVER
The portfolio turnover rate (purchases or sales, whichever is lower, as a
percentage of weighted average portfolio value) for the past three years has
been as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- ----------- ----------- --------------
<S> <C> <C>
12.70% 13.09% 15.50%
</TABLE>
EXPENSE RATIO
The ratio of expenses to the average net assets of the Corporation for the
past three years has been as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- ---------- ---------- -------------
<S> <C> <C>
0.31% 0.47% 0.63%
</TABLE>
(b) RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Investment Company Act of 1940 (the "Act") requires, in effect, that
the Corporation's independent accountants be selected by a majority of those
members of the Board of Directors who are not "interested persons" (as defined
by the Act) of the Corporation; that such selection be submitted for
ratification or rejection at the annual meeting of stockholders; and that the
employment of such independent accountants be conditioned on the right of the
Corporation, by vote of the holders of a majority of its outstanding voting
securities, to terminate such employment at any time without penalty. In
accordance with such provisions, PricewaterhouseCoopers LLP, 250 W. Pratt
Street, Baltimore, Maryland, independent accountants, which firm was the
Corporation's principal auditor during the year 1998, has been selected as
independent accountants of the Corporation to audit the books and accounts of
the Corporation for or during the year ending December 31, 1999, by a majority
of those members of the Board of Directors who were not "interested persons" of
the Corporation, voting in person, and their selection is submitted to the
stockholders for ratification by the affirmative vote of a majority of all
votes cast at the meeting. Representatives of PricewaterhouseCoopers LLP are
expected to be present at the meeting to make a statement if they desire to do
so and to respond to appropriate questions. PricewaterhouseCoopers LLP does not
have any direct financial or any material indirect financial interest in the
Corporation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS RATIFICATION OF THE
SELECTION OF PRICEWATERHOUSECOOPERS LLP.
OTHER MATTERS AND ANNUAL REPORT
As of the date of this proxy statement, management knows of no other
business that will come before the meeting. Should other business be properly
brought up, it is intended that proxies in the accompanying form will be voted
thereon in accordance with the judgment of the person or persons voting such
proxies.
The Annual Report of the Corporation for the year ended December 31, 1998,
including financial statements, has been mailed to all stockholders entitled to
notice of and to vote at the annual meeting to be held on March 30, 1999. If
you did not receive a copy, you may request one by telephoning
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Lawrence L. Hooper, Jr., Secretary and General Counsel, at (800) 638-2479 or by
sending Mr. Hooper an e-mail message at [email protected].
The Corporation has retained Corporate Investor Communications, Inc.
("CIC") to assist in the solicitation of proxies. The Corporation will pay CIC
a fee for its services not to exceed $5,000 and will reimburse CIC for its
expenses, which the Corporation estimates will not exceed $2,000.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Stockholder proposals for inclusion in the proxy statement and form of
proxy relating to the 2000 Annual Meeting must be received at the office of the
Corporation, Seven St. Paul Street, Baltimore, MD 21202, no later than October
15, 1999.
In addition, pursuant to the Corporation's By-laws, stockholder proposals
for consideration at the 2000 Annual Meeting which are not to be included in
the Corporation's proxy statement and form of proxy must be received at the
office of the Corporation at the address listed in the preceding paragraph no
later than January 29, 2000 in order to be eligible for presentation at the
2000 Annual Meeting. Should the Corporation determine to allow a stockholder
proposal that is received by the Corporation after January 29, 2000 to be
presented at the 2000 Annual Meeting nevertheless, the Corporation will have
discretionary voting authority with respect to such stockholder proposal.
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