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
|x| Filed by the Registrant
| | 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 Rule 14a-11(c) or Rule 14a-12
ABIGAIL ADAMS NATIONAL BANCORP, INC.
- --------------------------------------------------------------------------------
(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| $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
| | $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
| | 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>
ABIGAIL ADAMS NATIONAL BANCORP, INC.
1627 K Street, N.W.
Washington, D.C. 20006
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 15, 1996
------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Abigail
Adams National Bancorp, Inc., a Delaware corporation (the "Company"), will be
held at The Adams National Bank, 1627 K Street, N.W., Washington, D.C. on
Tuesday, October 15, 1996 at 3:00 p.m., local time, for the purpose of
considering and acting upon the following:
(1) To elect ten directors to hold office until the next Annual Meeting of
Stockholders of the Company, or until their successors are elected and
qualified;
(2) To ratify the selection of Arthur Andersen LLP as independent
certified public accountants for the Company for 1996;
(3) To approve the Employee Incentive Stock Option Plan;
(4) To approve the Directors Stock Option Plan; and
(5) To transact such other business as properly may come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on August 30, 1996,
will be entitled to notice of and to vote at the meeting or any adjournments
thereof. Accompanying this notice is a proxy statement and proxy card. Whether
or not you plan to attend the meeting, please indicate your choice on the
matters to be voted upon, date and sign the enclosed Proxy and return it to our
transfer agent, American Stock Transfer & Trust Company, in the enclosed
postage-paid return envelope. You may revoke your Proxy at any time prior to its
exercise by written notice to the Company, by executing a Proxy bearing a later
date, or by attending the meeting and voting in person.
You are cordially invited to attend the meeting in person.
By Order of the Board of Directors
/s/ Joyce R. Hertz
------------------
Joyce R. Hertz
Secretary
September 5, 1996
<PAGE>
ABIGAIL ADAMS NATIONAL BANCORP, INC.
1627 K Street, N.W.
Washington, D.C. 20006
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 15, 1996
The enclosed Proxy is being solicited by and on behalf of the Board of
Directors of Abigail Adams National Bancorp, Inc., a Delaware corporation (the
"Company"), for the Annual Meeting of Stockholders of the Company to be held on
Tuesday, October 15, 1996 at 3:00 p.m., local time, at the principal executive
offices of The Adams National Bank, a national banking association and a
wholly-owned subsidiary of the Company (the "Bank"), located at 1627 K Street,
N.W., Washington, D.C., or at any adjournment thereof.
Stockholders of record at the close of business on August 30, 1996 (the
"Record Date") will be entitled to notice of, and to vote at, the meeting. On
the Record Date, the Company had 1,650,032 shares of common stock, par value
$0.01 per share (the "Shares"), outstanding and entitled to vote at the meeting.
Each Share is entitled to one vote. A majority of the Shares outstanding on the
Record Date represented in person or by Proxy will constitute a quorum for the
transaction of business at the meeting. A majority of the votes cast by
stockholders in person or by proxy at the meeting will be necessary for approval
of the proposals described herein.
In accordance with the laws of the State of Delaware and the Company's
Charter and By-Laws, a majority of the outstanding shares of Common Stock will
constitute a quorum at the Meeting. Abstentions and broker non-votes are counted
for purposes of determining the presence or absence of a quorum for the
transaction of business.
In accordance with the laws of the State of Delaware and the Company's
Charter and By-Laws, for election of Directors, which requires a plurality of
the votes cast, only proxies and ballots indicating votes "FOR all Nominees,"
"WITHHOLD AUTHORITY to vote all Nominees," or specifying that votes be withheld
from one or more designated Nominees are counted to determine the total number
of votes cast, and broker non-votes are not counted. Therefore, abstentions and
broker non-votes have no effect on the outcome of the election. For the adoption
of all other proposals, which are decided by a majority of the shares of the
stock of the Company present in person or by proxy and entitled to vote, only
proxies and ballots indicating votes "FOR," "AGAINST," or "ABSTAIN" on the
proposal or providing the designated proxies with the right to vote in their
judgment and discretion on the proposal are counted to determine the number of
shares present and entitled to vote, and broker non-votes are not counted. Thus
abstentions have the same effect as a vote against a proposal but broker
non-votes have no effect on the outcome of the proposal.
IT IS ANTICIPATED THAT THE DIRECTORS AND OFFICERS WILL VOTE THEIR SHARES OF
COMMON STOCK IN FAVOR OF THE NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
LISTED HEREIN, FOR THE APPROVAL OF THE EMPLOYEE INCENTIVE STOCK OPTION PLAN AND
THE DIRECTORS STOCK OPTION PLAN, AND FOR THE RATIFICATION OF THE SELECTION OF
INDEPENDENT ACCOUNTANTS LISTED HEREIN.
The cost of solicitation of Proxies will be borne by the Company. The
Company may solicit Proxies in person or by telephone, in addition to
solicitation by mail. All such further solicitation will be made by directors,
officers or regular employees of the Company or of the Bank, who will not be
additionally compensated. Arrangements will be made by the Company for the
forwarding, at the Company's expense, of soliciting materials by brokers,
nominees, fiduciaries and other custodians and their principals.
It is anticipated that the Proxy Statement and the accompanying Proxy will
be mailed to stockholders on or about September 5, 1996. Shares represented by
Proxies that are properly executed and received in time for the meeting will be
voted in accordance with the stockholders' specifications. In the absence of
specific instructions to the contrary,
1
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Proxies received in response to this solicitation will be voted (1) FOR the
election of the nominees for directors listed herein; (2) FOR ratification of
the selection of Arthur Andersen LLP as independent certified public accountants
for the Company for 1996; (3) FOR approval of the Employee Incentive Stock
Option Plan; and (4) FOR approval of the Directors Stock Option Plan. Should any
other matters properly come before the Annual Meeting, the persons named as
Proxies will, unless otherwise specified in the Proxy, vote upon such matters
according to their discretion. A Proxy may be revoked at any time prior to its
exercise by written notice to the Company, by executing a Proxy bearing a later
date, or by attending the meeting and voting in person.
ELECTION OF DIRECTORS
At the meeting, ten directors (constituting the entire Board of Directors)
of the Company are to be elected to hold office until the next Annual Meeting of
Stockholders or until their respective successors have been elected and
qualified. All of the nominees, except for Steve Protulis, are now directors of
the Company. It is not contemplated that any of the nominees will become
unavailable to serve, but if that should occur before the meeting, Proxies that
do not withhold authority to vote for directors will be voted for another
nominee, or nominees, selected by the Board of Directors. The Board of Directors
of the Company recommends that stockholders vote FOR the election of all
nominees.
Nominees for Director
The nominees are as follows:
Name Age Position with the Company Director Since
- ---- --- ------------------------- --------------
Barbara Davis Blum 57 Chairwoman of the Board, 1986
President and Chief
Executive Officer
Shireen L. Dodson 45 Director 1993
Susan Hager 51 Director 1992
Jeanne D. Hubbard 48 Director 1995
Clarence L. James, Jr. 62 Director 1993
Steve Protulis 54 Director of the Bank n/a
Marshall T. Reynolds 59 Director 1995
Robert L. Shell, Jr. 52 Director 1995
Dana B. Stebbins 49 Director 1993
Susan J. Williams 56 Director 1995
Barbara Davis Blum has served as Chairwoman of the Board of the Company and
the Bank since March 1986, President and Chief Executive Officer of the Company
since 1985 and President and Chief Executive Officer of the Bank since 1983. She
also serves as Chairwoman of the Economic Development Finance Corporation, a
quasi-public economic development corporation for the benefit of District of
Columbia businesses; Chairwoman, Center for Policy Alternatives, a national
nonprofit organization; and a Director of Kaiser Permanente Health Care of the
Mid-Atlantic States. She is a director of the Greater Washington Board of Trade;
a Trustee of the Federal City Council; a member of the National Advisory Council
of the U.S. Small Business Administration; Senior Advisor, Commercial Real
Estate
2
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Women; and a Director of the Institute of American Indian Art, a Presidential
appointment requiring Senate confirmation. She was a founder of Leadership
Washington in 1985 and served as its Chairwoman in 1987. She also served as 1995
and 1996 Greater Washington Area, United States Savings Bonds Chairwoman. From
1981 to 1983, she served as President of Direction International, an
environmental consulting firm, and from 1977 to 1981 she served as the Deputy
Administrator of the U.S. Environmental Protection Agency.
Shireen L. Dodson has served as the Assistant Director of Administration
and Planning for the Center for African American History and Culture (formerly
called the National African American Museum Project) of the Smithsonian
Institution since 1993. From 1985 to 1992, she served as Comptroller of the
Smithsonian Institution. She also served as the Commissioner of the District of
Columbia Minority Business Opportunity Commission from 1989 to 1992. She has
been President of the Coalition of 100 Black Women of D.C., Inc. and currently
serves on the Advisory Committee of that organization. She is also a member of
the Women's Advisory Board, Girl Scout Council of the National Capital. She is
Treasurer of the Washington D.C. Chamber of Commerce and has been a Director of
the Company since 1993 and a Director of the Bank since February 1992.
Susan Hager has been the President of Hager Sharp, Inc., an issues oriented
communications firm, since 1973. She is also a Director of the Greater
Washington Board of Trade, Chairwoman of the Board of the Lab School of
Washington, a member of the National Advisory Council of the U.S. Small Business
Administration and a Trustee of the Federal City Council. She served as
President of National Small Business United, a national small business trade
association, and Chairwoman of the U.S. Department of the Treasury's Small
Business Advisory Council. She was a founder of the National Association of
Women Business Owners (NAWBO). She has been a Director of the Company and the
Bank since June 1992.
Jeanne D. Hubbard began serving as an executive officer in 1996 of First
Guaranty Bank, Hammond, Louisiana and previously served as their consultant from
1993 to 1996. From 1980 to 1993, Ms. Hubbard held a variety of officer
positions, including Vice President and Senior Commercial Lender and Chairwoman
of the Loan Committee and Asset/Liability Committee, with First Bank of Ceredo,
Ceredo, West Virginia. She served as President of the C-K Rotary Club and
Chairwoman of the Citizens Advisory Committee of the United Way in Huntington,
West Virginia. She has been a Director of the Company and the Bank since October
1995.
Clarence L. James, Jr. has served as Executive Director since 1996 and an
ex-officio member of the Board since 1994 of Executive Leadership Council, an
association of the top national African American business leaders. During 1995,
he was a partner with the law firm of Manatt, Phelps & Phillips, LLP. From 1983
to 1995, he served as President and Chief Operating Officer of The Keefe
Company, a government relations and public affairs firm. From 1981 to 1983, he
was Vice President of Domestic Affairs and General Counsel of The Keefe Company.
Since 1990, he has also served as Chairman of the Board of Douglas James
Securities, Incorporated, a registered broker-dealer and a member of the
National Association of Securities Dealers, Inc. From 1977 to 1981, he served as
Commissioner and Chairman of the Copyright Royalty Tribunal, a Presidential
appointment. From 1971 to 1977, he was Managing Partner of James, Moore, Douglas
& Co., LPA, a corporate, tax and land development law practice. He has been a
Director of the Company and the Bank since February 1993.
Steve Protulis is the Executive Director of the National Council of Senior
Citizens ("NCSC"), a position he has held since August 1995. From 1988 to 1995,
he coordinated senior efforts for the AFL-CIO COPE Department, and was the
national coordinator for various related support groups. Mr. Protulis has two
decades of experience working with the United Auto Workers and various
legislative efforts. He has been an executive board member of NCSC since 1984, a
member of the board of the Congressional Hispanic Caucus Institute since 1991,
and an executive board member of the National Council on Aging since 1994. He
has been a director of the Bank since September 1995.
Marshall T. Reynolds is the Chairman of the Board, President and Chief
Executive Officer of Champion Industries, Inc., a holding company for commercial
printing and office products companies, a position he has held since 1992. He
became Chairman of the Board of Premier Financial Bancorp in the first quarter
of 1996. He became Chairman of the Board of First Guaranty Bank during the
second quarter of 1996. From 1964 to 1993, Mr. Reynolds
3
<PAGE>
was President and Manager of The Harrah and Reynolds Corporation (predecessor to
Champion Industries, Inc.). From 1983 to 1993, he was Chairman of the Board of
Banc One, West Virginia Corporation (formerly Key Centurion Bancshares, Inc.).
He has served as Chairman of United Way of the River Cities, Inc. and Boys and
Girls Clubs of Huntington. He has been a Director of the Company and the Bank
since November 1995.
Robert L. Shell, Jr., is the Chairman and Chief Executive Officer of Guyan
International, a privately held holding company for manufacturing and service
companies, a position he has held since 1985. Mr. Shell is also the Chairman of
Carolina Hose and Hydraulics, Standard Leasing Co. and Permco Hydraulik AG. He
has been a director of First State Bank of Sarasota since February 1994. He is a
member of the Huntington Boys and Girls Club, the Cabell Huntington Hospital
Foundation and the West Virginia Foundation for Independent Colleges. He was
formerly the Chairman of the Marshall Artists Series. He has been a Director of
the Company and the Bank since October 1995.
Dana B. Stebbins is a partner in Wilkes, Artis, Hedrick & Lane, a law firm
located in Washington, D.C., where she has practiced since 1989. From 1983 to
1989, she was Special Counsel for Klimek, Kolodney & Casale, P.C. From 1981 to
1983, she was Special Counsel for the U.S. House of Representatives Committee on
Small Business. From 1980 to 1982, she was Special Assistant to the Associate
Administrator of the U.S. Small Business Administration. From 1978 to 1980, she
was the Special Assistant and White House Liaison to the Chairman of the
Commodity Futures Trading Commission. From 1977 to 1978, she was Advisor to the
White House Office of Domestic and Urban Policy. She is currently President of
the Washington, D.C. Chamber of Commerce, a Trustee of the Federal City Council
and is on the Board of the Greater Washington Boys and Girls Clubs, as well as
the Lab School of Washington. She has been a Director of the Company and the
Bank since March 1993.
Susan J. Williams is the President of Bracy Williams & Company, a
government and public affairs consulting firm, a position she has held since
1982. In 1986, she was a representative on the Southern Growth Policies Board
for the State of Virginia. From 1979 to 1981, Ms. Williams served as Assistant
Secretary for Governmental Affairs of the U.S. Department of Transportation and
from 1977 to 1979 she was Deputy Assistant Secretary for Governmental and Public
Affairs for that agency. She is the Chair-Elect of the Greater Washington Board
of Trade, having previously served as Secretary. She is also a Director of the
Henry L. Stimson Center and the American Institute for Public Service. She has
been a Director of the Company since October 1995 and the Bank since September
1994.
Section 16(a) Beneficial Ownership Reporting Compliance
The Company's directors and executive officers, and persons who own more
than 10% of the Company's Common Stock, are required to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of any securities of the Company. To the Company's knowledge, based
solely on a review of the copies of such reports furnished to the Company and
written representations that no other reports were required, all of the
Company's directors, executive officers and beneficial owners of greater than
10% of the Company's Common Stock made all required filings during the fiscal
year ended December 31, 1995, with the exception of Barbara Davis Blum whose
report following an October 1995 stock purchase was filed eleven days late.
Board Meetings and Committees
During 1995, the Board of Directors of the Company met nine times. Each
incumbent member of the Board of the Company who is a nominee for reelection
attended more than 75% of the combined Board of Directors and Board Committee
meetings, except for Robert L. Shell, Jr. The Personnel Committee which
consisted of Susan Hager, Shireen Dodson, Clarence L. James, Jr. and Barbara
Davis Blum met two times during 1995 with all members in attendance, except for
Susan Hager and Clarence L. James, Jr., who each missed one meeting. The
Personnel Committee recommends nominations to the Board of Directors of the
Company and the Bank, recommends nominations to the Board Committees and reviews
personnel and compensation issues. The Personnel Committee does not consider
nominations to the Board of Directors of the Company and Bank recommended by
stockholders. Until 1996, the Company did not have an Audit Committee, however
the Bank did. The Audit Committee of the Bank met six times during 1995.
Directors of the Company who were members of the Bank's Audit Committee in 1995
are Shireen Dodson
4
<PAGE>
and Clarence L. James, Jr. Barbara Davis Blum served in 1995 as an ex-officio
member of the Audit Committee. The Audit Committee monitors the safety and
soundness of the Bank's assets and the protection of depositors by overseeing
the Bank's internal accounting controls, reviewing internal and independent
audit reports and regulatory examinations and ensuring adequate management
follow-up.
Directors' Compensation
During 1995, each director of the Company received $250 for each meeting of
the Board of Directors, $200 for each Executive Committee meeting and $100 for
all other committee meetings attended by such director.
Executive Officers
The Company's executive officers are as follows:
Executive
Name Age Position with the Company Officer Since
- ---- --- ------------------------- -------------
Barbara Davis Blum 57 Chairwoman of the Board, President 1986
and Chief Executive Officer
Kimberly J. Levine 40 Senior Vice President, Treasurer 1988
and Chief Financial Officer
Thomas O. Griel 49 Senior Vice President, Lending* 1990
- -------------------------------------
* This position is held with the Bank.
Information regarding Ms. Blum appears on page 2 of this Proxy Statement.
Kimberly J. Levine, CPA, has been Senior Vice President and Treasurer of
the Company and the Bank since 1988. From 1984 to 1987, she was Vice President
and Controller of First American Bank, N.A. From 1979 to 1984, she was Assistant
Vice President of Suburban Bank in various accounting and reporting positions.
From 1977 to 1979, she was a Senior Accountant with Arthur Andersen & Co. She
formerly served as a member of the Corporate Reporting Task Force, a combination
public and private sector task force designed to address District of Columbia
government tax issues and has been an instructor for the American Institute of
Banking. Ms. Levine holds a Bachelor of Economics from the Wharton School of
Business of the University of Pennsylvania.
Thomas O. Griel, CPA, has served as the Bank's Senior Vice President,
Lending since 1990. Prior to joining the Bank, Mr. Griel was a self-employed
business consultant from 1987 to 1990. He served as President and Chief
Executive Officer of McLachlen National Bank in Washington, D.C. from 1980 to
1987, and was a partner with Ross, Langan and McKendree, a certified public
accounting firm, from 1975 to 1980. He served as Corporate Controller for
Fairfax County National Bank from 1973 to 1974 and for Northern Virginia Bank
from 1974 to 1975. Prior to that time, he served as a national bank examiner
with the Office of the Comptroller of the Currency from 1969 to 1973. Mr. Griel
holds a Bachelors of Science degree from the University of Maryland.
BENEFICIAL OWNERSHIP OF SHARES
The table on the following page sets forth information as of the Record
Date, relating to the beneficial ownership of the Common Stock by (i) each
person or group known by the Company to own beneficially more than 5% of the
outstanding Common Stock; (ii) each of the Company's directors; and (iii) all
directors and executive officers of the Company as a group. Unless otherwise
noted below, the persons named in the table have sole voting and sole investment
powers with respect to each of the shares reported as beneficially owned by such
person.
5
<PAGE>
Beneficial Percent of
Ownership Class
Name and Address of Shares Owned
- ---------------- --------- -----
Shirley A. Reynolds................................345,495 (1)(2) 20.9%
1130 13th Avenue
Huntington, West Virginia 25701
Barbara W. Beymer...................................81,000 (1) 4.9%
214 North Boulevard West
Huntington, West Virginia 25701
Deborah P. Wright...................................81,000 (1)(3) 4.9%
1517 Diederich Boulevard
Flatwoods, Kentucky 41139
SAG, Corp. Money Purchase Plan and Trust
(Pension), Neal R. Gross, Trustee Ava S.
Gross, Trustee ..................................18,793 (4) 1.1%
4218 Lenore Lane, N.W.
Washington, D.C. 20008
Barbara Davis Blum...................................5,124 (5) *
Shireen L. Dodson......................................300 *
Susan Hager . . . . .................................1,566 *
Jeanne D. Hubbard....................................4,500 (1) *
Clarence L. James, Jr..................................300 *
Steve Protulis . . ..................................1,566 *
Marshall T. Reynolds...............................225,495 (1)(2) 13.7%
Robert L. Shell, Jr.................................66,000 (1)(6)(8) 4.0%
Dana B. Stebbins.......................................300 *
Susan J. Williams....................................1,566 *
All directors and executive officers as a group
(11 persons). . . ................................590,529 (7) 35.7%
* Less than 1%
(1) Based upon Amendment No. 1 to Schedule 13D dated July 21, 1995, Marshall T.
Reynolds, Shirley A. Reynolds, Robert L. Shell, Jr., Robert H. Beymer,
Barbara W Beymer, Thomas W. Wright, Deborah P. Wright and Jeanne D. Hubbard
acquired 609,114 outstanding shares of the Company. Amendment No. 2 to
Schedule 13D dated March 5, 1996 evidences the disposition of a total of
45,000 shares by Marshall T. Reynolds and Robert L. Shell, Jr. An
additional 13,881 shares were acquired by Mr. and Mrs. Reynolds, jointly,
in a tender offer which was completed on September 15, 1995.
6
<PAGE>
(2) Marshall T. Reynolds and Shirley A. Reynolds share voting and dispositive
power with respect to 195,495 shares owned jointly. An additional 30,000
shares are held by a dependent child.
(3) Thomas W. Wright and Deborah P. Wright share voting and dispositive power
with respect to 21,000 shares owned jointly.
(4) Based upon Amendment No. 1 to a Schedule 13D dated August 1, 1996, Neal R.
Gross and Ava S. Gross share voting and dispositive power with respect to
these shares.
(5) Includes options to purchase 2,268 shares granted to Ms. Blum under the
Employee Incentive Stock Option Plan (see EXECUTIVE COMPENSATION, Employee
Incentive Stock Option Plan).
(6) Based upon Amendment No. 2 to Schedule 13D dated March 5, 1996, upon any
default under Robert L. Shell, Jr.'s loan agreement with Bank One, West
Virginia which extended financing for the purchase of Mr. Shell's shares,
Marshall T. Reynolds would be required to purchase the shares of the
Company's Common Stock attributed to Mr. Shell, increasing the number of
shares held with sole voting and dispositive power by Mr. Reynolds to
60,000 and reducing Mr. Shell's beneficial ownership to -0-. Mr. Shell's
shares include 6,000 shares transferred by gift to his wife.
(7) Includes options to purchase 3,480 shares granted to all directors and
officers as a group.
(8) Robert L. Shell, Jr. shares voting and dispositive power with respect to
20,000 shares owned jointly with his wife, Lena Ji Shell.
EXECUTIVE COMPENSATION
The executive officers of the Company receive cash compensation from the
Bank in connection with their positions as executive officers of the Bank. The
Company generally does not separately compensate its executive officers.
The following table shows the cash compensation paid by the Bank during the
fiscal years ended December 31, 1995, 1994 and 1993 to the Chief Executive
Officer, who is the only executive officer of the Company and the Bank whose
cash compensation exceeded $100,000, for services rendered during the year:
Summary Compensation Table
Annual Compensation
------------------- All Other
Year Salary Bonus/Other Compensation(1)
---- ------ ----------- --------------
Barbara Davis Blum, 1995 $ 185,155 $ 0 $ 5,555
Chairwoman of the Board, 1994 185,155 0 5,183
President and Chief Executive 1993 173,040 0 4,271
Officer of the Company and the Bank
(1) Represents the Bank's contribution to the 401(k) Plan for the account of
Barbara Davis Blum. Ms. Blum received certain perquisites but the cost of
providing such perquisites did not exceed the lesser of $50,000 or 10% of
her salary.
Employment Agreement
On February 20, 1996, the Company and the Bank entered into an employment
agreement with Barbara Davis Blum providing for the employment by the Company
and the Bank of Ms. Blum as Chairwoman, President and Chief
7
<PAGE>
Executive Officer of the Company and the Bank through February 20, 1998. The
agreement shall automatically be extended for an additional two-year period
unless, six months prior to the expiration date, the Boards of Directors of the
Company and the Bank determine in a duly adopted resolution that the agreement
should not be extended and so notify Ms. Blum. Under the terms of the employment
agreement, which was amended on March 29, 1996, Ms. Blum is entitled to receive
a base salary for 1996 of $194,413, all benefits provided by any plan available
by the Bank to its employees, certain executive fringe benefits and annual or
other bonuses at the sole discretion of the Company's and the Bank's Boards.
Ms. Blum also was granted a nonqualified stock option (the "Option") to
purchase 75,000 shares of the Company's Common Stock. The Option vests beginning
in 1996 at an annual rate of 20% at the end of each year and is exercisable for
a period of 10 years from the date of grant at an exercise price equal to $6.74
per share, which is 85% of the fair market value of the Company's Common Stock
on the date of grant. The Option shall become fully vested in the event of a
"Change in Control" (as defined in the employment agreement) or in the event Ms.
Blum's employment should terminate for any reason, and remain exercisable for a
period of two years. Ms. Blum was granted certain registration rights in
connection with the shares subject to the Option, including "piggyback" rights
for registration at the Company's expense, and one "demand" right for
registration at the Company's expense, each subject to certain limitations.
The employment agreement provides that, in the event Ms. Blum shall resign
with 60 days notification, she shall be entitled to receive a cash payment equal
to the current year's salary then in effect. In addition, the agreement provides
that in the event of Ms. Blum's death, disability, termination without just
cause or termination without her written consent and for a reason other than
just cause in connection with or within 12 months after any Change in Control,
or upon the occurrence of certain other events in connection with a Change in
Control, she shall be entitled to receive a cash payment equal to two times her
base salary (in semi-monthly payments in the event of disability) and the
acceleration of the unvested portion of any stock options. In addition, she
shall be included to the full extent eligible in all plans providing benefits,
including group life insurance, disability insurance and pension programs for
executive employees of the Company during the term of the employment agreement
and for two years following her disability or termination without just cause or
one year following her voluntary termination. The change in control benefits are
estimated to have an aggregate value of approximately $551,000 at August 29,
1996. Ms. Blum has agreed not to engage in the banking business elsewhere in the
Washington or Baltimore, Maryland metropolitan areas or to solicit the Bank's
customers or employees for a period of one year following the voluntary
termination of her employment.
Non-Qualified Stock Option Plan
No options have been granted to date under the Company's Non-Qualified
Stock Option Plan (the "Plan"). A total of 90,000 shares of the Company's Common
Stock are authorized for issuance under the Plan, in which officers of the
Company and the Bank who have been employed for at least one year are eligible
to participate. The option exercise price of any options granted under the Plan
will equal 100% of the book value of the shares as of the date of grant. Any
options granted under the Plan will become exercisable on a cumulative basis at
a rate of 25% per year during the period of four years after the grant;
provided, however, that the first 25% will not become exercisable until the
expiration of six months after the date of grant.
Employee Incentive Stock Option Plan
On January 23, 1996, the Board of Directors of the Company approved a
qualified Employee Incentive Stock Option Plan (the "Employee Plan"). A total of
9,987 shares of the Company's Common Stock are authorized for issuance under the
Employee Plan, in which key employees of the Company and the Bank are eligible
to participate. On January 23, 1996, all such options were granted at an
exercise price of 100% of fair market value at the date of grant, or $7.93.
Options granted under the Employee Plan are immediately exercisable and expire
not later than ten years following the date of grant. The number of shares and
the exercise prices outlined in these descriptions reflect a three- for-one
stock split in the form of a stock dividend issued July 9, 1996. The Employee
Plan is subject to shareholder approval, which is being considered and acted
upon at this Annual Meeting.
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Directors Stock Option Plan
On January 23, 1996, the Board of Directors of the Company approved a
nonqualified Directors Stock Option Plan (the "Directors Plan"). A total of
6,429 shares of the Company's Common Stock are authorized for issuance under the
Directors Plan, in which all directors of the Company and the Bank in 1995 are
eligible to participate based upon the total months of 1995 Board service. On
January 23, 1996, all such options were granted at an exercise price of 85% of
fair market value at the date of grant, or $6.74. Options granted under the
Directors Plan vest beginning in 1996 at an annual rate of 20% at the end of
each year and expire at the earlier of ten years following the date of grant or
two years after leaving the Board. However, in the event of death or disability,
options expire one year after leaving the Board. The options shall become fully
vested in the event of a "Change in Control" (as defined in the Directors Plan)
or in the event the director leaves the Board. The Directors Plan is subject to
shareholder approval, which is being considered and acted upon at this Annual
Meeting.
Employee Stock Ownership Plan with 401(k) Provisions
On April 16, 1996, the Company's and the Bank's Boards of Directors adopted
an employee stock ownership plan with 401(k) provisions ("ESOP"). The ESOP
replaced the Bank's former 401(k) Plan. Employees of the Bank who are at least
21 years of age and who have completed one year of service are eligible to
participate. The Company has submitted an application to the Internal Revenue
Service for a letter of determination as to the tax-qualified status of the
ESOP. Although no assurances can be given, the Company expects the ESOP to
receive a favorable letter of determination. The ESOP may be amended or
terminated at any time by the Bank. The ESOP is to be funded by contributions
made by the Bank in cash or shares of the Company's Common Stock. On July 17,
1996, the ESOP borrowed $218,750 in funds from the Company which was an amount
sufficient to purchase 25,000 shares of Common Stock. This loan is secured by
the shares of Common Stock purchased and earnings thereon. Shares purchased with
such loan proceeds will be held in a suspense account for allocation, as the
loan is repaid, among participants who are eligible to share in the Bank's
contribution for the year. Dividends paid on allocated shares may be paid to
participants or used to repay the ESOP loan. Dividends on unallocated shares are
expected to be used to repay the ESOP loan.
Participants may elect to contribute a percentage of their salary, which
amount may not be less than 1% nor more than 15% of the participant's annual
salary (up to $9,500 for 1996). In addition, the Bank may make a discretionary
matching contribution equal to one-half of the percentage of the amount of the
salary reduction elected by each participant (up to a maximum of 3%), which
percentage will be determined each year by the Bank, and an additional
discretionary contribution determined each year by the Bank. Contributions by
the Bank and shares released from the suspense account will be allocated among
participants on the basis of their annual wages subject to federal income tax
withholding, plus amounts withheld under certain qualified plans. Each
participant is immediately vested in his or her contributions and the Bank's
matching contributions. Each participant will begin to vest in his or her
interest in the Bank's discretionary contributions to the ESOP after three years
of service and will be fully vested upon seven years of service. Benefits are
payable upon a participant's retirement, death, disability, or separation from
service, in a single lump-sum payment or in installments. Distributions at
retirement will be in the form of cash or shares of Common Stock or both. In
addition, the participant or beneficiary has certain put rights in the event
that the Common Stock distributed cannot be readily sold.
The Trustee of the ESOP will vote all shares of Common Stock held by it as
a part of the ESOP assets, provided that a participant or beneficiary will be
entitled to direct the Trustee as to the manner in which voting rights are to be
exercised, with respect to shares of Common Stock allocated to the participant,
in connection with certain corporate transactions as described in the ESOP. The
Bank intends to appoint an unrelated corporate Trustee for the ESOP.
The Company made contributions to the predecessor plan of $34,000 in 1995.
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Severance Agreements
On April 7, 1994, the Board of Directors of the Bank approved severance
arrangements for seven key management officials. These arrangements were
incorporated into Severance Agreements, dated as of April 7, 1994 (the
"Severance Agreements").
The Severance Agreements provide that, in the event of a "Change in
Control" (as defined in the Severance Agreements), the officers will be entitled
to resign from the Bank within the one year period following a Change in Control
and receive a lump sum payment equal to one year's full base salary at the rate
applicable to the officer in effect at that time. The term Change in Control
does not include a transaction approved by a majority of the "Continuing
Directors" (as defined in the Severance Agreements) then in office. In addition,
an officer will be entitled to receive such severance payment in the event the
officer's employment with the Bank is "Terminated" (as defined in the Severance
Agreements) within the one year period following a Change in Control, prior to
the resignation of the officer. These benefits are estimated to have an
aggregate value of approximately $539,000 as of August 30, 1996 based on current
salary levels. Any severance payment payable under the Severance Agreements will
be reduced to the extent that any such payment constitutes an "Excess Parachute
Payment" as such term is defined in the Internal Revenue Code of 1986, as
amended. The Severance Agreements are binding on the Bank and its successors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
1995 Stock Purchase and Tender Offer
For several years, an issue existed regarding the ownership of 609,114
shares of the Company's Common Stock (on a post-split basis). Citibank, N.A.
("Citibank") held a security interest in 609,114 shares, representing
approximately 71% of the outstanding shares (the "Pledged Shares"). Beginning in
1990, the Company and its advisors participated in various discussions with
Citibank and its advisors concerning the disposition by Citibank of the Pledged
Shares or a sale of the Company.
On April 12, 1994, the Company's Board of Directors, on the recommendation
of the Special Committee (a Board appointed Committee of Outside Directors
comprising those of the Company's directors who were neither employees nor
significant stockholders of the Company), adopted a Rights Agreement, the
purpose of which was to provide the Board of Directors with adequate time to
respond effectively to a takeover attempt and in a manner that would maximize
the value of the Company for all shareholders.
On April 14, 1994, Citibank filed a complaint against the Company and each
of its directors in the Delaware Chancery Court seeking to enjoin the Company
from implementing the Rights Agreement or distributing the Rights. The complaint
alleged, among other things, that the Rights Agreement violated Delaware law and
that in adopting the Rights Agreement the directors of the Company violated
their fiduciary duty to all of the shareholders of the Company and tortiously
interfered with the consummation of Citibank's proposed sale of the Pledged
Shares to National Bankshares, Inc., a group with whom Citibank had negotiated
the sale of the Pledged Shares from 1992 through 1994 ("NBI"). On June 24, 1994,
the Company filed an answer to the complaint denying the allegations and in a
counterclaim against Citibank requested that the court enter a judgment
declaring the Rights Agreement valid and lawfully adopted under Delaware law
(collectively, the "Delaware Litigation").
On June 29, 1994, the Special Committee was advised by Baxter Fentriss and
Company (the Company's investment advisor) of a proposal received from Marshall
T. Reynolds, now a director of the Company, to purchase the Pledged Shares from
Citibank and to make an offer to purchase up to the 245,418 shares of Common
Stock (on a post-split basis) that were not owned by Citibank (the "Minority
Shares"). On April 19, 1995, the Board of Directors of the Company, on the
recommendation of the Special Committee, authorized the entry by the Company
into an agreement with Mr. Reynolds (the "Reynolds Agreement") pursuant to which
he agreed that if his purchase of the Pledged Shares from Citibank was
completed, he would within 20 business days commence a tender offer to purchase
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the Minority Shares at a price of $7.00 per share. Under the Reynolds Agreement,
Mr. Reynolds also agreed that until the Tender Offer was completed neither he
nor any assignee of his rights to purchase the Pledged Shares would vote the
Pledged Shares, without the consent of the Company's Board of Directors, to
change in any respect the composition of the Company's Board of Directors. In
consideration for the commitment of Reynolds to undertake the Tender Offer, the
Company agreed (i) to amend the Rights Agreement to prevent the purchase by Mr.
Reynolds of the Pledged Shares or the Tender Offer from triggering the
exercisability of the Rights, (ii) to take such actions as were necessary to
ensure that neither the purchase of the Pledged Shares nor the Tender Offer
would constitute a "Change in Control" under the Bank's Severance Agreements
with certain key officers and (iii) not to, or not permit the Bank to (A) amend
the Severance Agreements (except as described above), (B) amend the Employment
Agreement among the Company, the Bank and Barbara Davis Blum (except that an
extension of the termination date to a date that is not more than 90 days
following the completion of the purchase of the Pledged Shares would be
permitted), (C) issue any stock, or any options, warrants or rights to purchase
stock, or any long-term debt securities, (D) enter into, or materially increase
the level of contributions to, any pension, retirement, stock option, profit
sharing, deferred compensation, bonus, group insurance or similar plan for
directors, officers or employees, (E) other than in the ordinary course of
business, mortgage, pledge or dispose of any assets, incur any indebtedness,
increase the compensation or benefits payable to directors, officers or
employees, incur any material obligation, or enter into any material contract,
or (F) amend the Certificate of Incorporation or Bylaws of the Company or the
Articles of Association or Bylaws of the Bank. The foregoing restrictions were
subject to the exception that the Company or the Bank was permitted to adopt a
stock option plan for its directors and employees and during the first year of
the plan issue options to purchase shares of Common Stock not in excess of 2
1/2% of the total number of shares outstanding.
On April 20, 1995, the Company amended the Rights Agreement to provide that
neither (i) the entry by Mr. Reynolds into an agreement with Citibank to
purchase the Pledged Shares or the purchase by Mr. Reynolds (or any of his
permitted assignees) of the Pledged Shares nor (ii) the announcement, conduct or
completion of the Tender Offer would trigger the exercisability of the Rights.
On April 21, 1995, Citibank and Mr. Reynolds entered into a Stock Purchase
Agreement pursuant to which Mr. Reynolds agreed to purchase the Pledged Shares
at a purchase price of $5.67 per share (on a post-split basis). The purchase was
completed on July 21, 1995. In connection with the closing of the purchase of
the Pledged Shares, the Company, the Bank and each director of the Company
(other than Richard Naing, a former director of the Bank) delivered a release
releasing Citibank and its directors, officers, employees, agents and
representatives from any and all claims relating to actions taken by Citibank
with respect to the Pledged Shares. Correspondingly, Citibank delivered a
release releasing the Company, the Bank and each director (other than Mr. Naing
who declined to deliver a release in favor of Citibank), officer, employee,
agent and representative of the Company and the Bank from any and all claims
relating to Citibank's efforts to dispose of the Pledged Shares. In addition,
the Company, the Bank and each director (other than Mr. Naing) and executive
officer of the Company delivered a release releasing NBI and its directors,
officers, employees, agents and representatives from any and all claims relating
to NBI's efforts to purchase the Pledged Shares. Correspondingly, NBI delivered
a release releasing the Company, the Bank and each director, executive officer,
employee, agent and representative of the Company and the Bank (other than Mr.
Naing who declined to deliver a release in favor of NBI). On July 21, 1995, the
Delaware Litigation was dismissed with prejudice.
On August 16, 1995, Mr. Reynolds commenced his Tender Offer to purchase up
to 245,418 shares of Common Stock (on a post-split basis), consisting of the
outstanding shares of Common Stock that were not then owned by him or his
associates at a price of $7.00 per share net to seller in cash, upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated August
16, 1995 and the related Letter of Transmittal (which together constitute the
"Tender Offer"). The Tender Offer was completed on September 15, 1995. A total
of 13,881 shares were tendered and acquired by Marshall T. Reynolds and Shirley
A. Reynolds, jointly.
Banking Transactions
The Bank has had, and it is expected that it will have in the future,
banking transactions in the ordinary course of business with the Company's
directors, officers and their associates on substantially the same terms,
including interest
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rates, collateral and payment terms on extensions of credit, as those prevailing
at the same time for comparable transactions with others. In the opinion of
Management these transactions did not in 1995 involve more than a normal risk of
collectibility or present other unfavorable features.
As of July 31, 1996, the aggregate principal amount of indebtedness to the
Bank owed by officers and directors of the Company and their associates on that
date was approximately $244,000. The highest aggregate principal amount owed
during 1995 by all officers and directors of the Company and their associates
who were indebted to the Bank during the year was approximately $1,001,000.
Other Transactions
The Company has engaged in transactions in the ordinary course of business
with some of its directors, officers, principal stockholders and their
associates. Management believes that all such transactions are made on the same
terms as those prevailing at the time with other persons. During 1994 and 1995,
the Company engaged Hager Sharp, Inc., of which Susan Hager, a director of the
Company, is President, to provide public relations services. For the fiscal year
ended December 31, 1995, the Company paid Hager Sharp, Inc. $15,000 for such
services. For the fiscal year ended December 31, 1994, the Company paid Hager
Sharp, Inc. $32,000 for such services.
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
It is proposed that the stockholders ratify the Board of Directors'
selection of Arthur Andersen LLP as the Company's independent certified public
accountants for 1996. KPMG Peat Marwick LLP previously served as the Company's
and the Bank's principal independent public accountants in 1995 and had served
the Company and the Bank in that capacity since their organization. Upon
recommendation of the Audit Committee, the Company solicited bids for the audit
of the Company's financial statements. On August 27, 1996, KPMG's appointment as
principal accountants was terminated and Arthur Andersen LLP was engaged as the
principal accountants. The decision to change accountants was approved by the
Audit Committee of the Board of Directors.
In connection with the audits as of December 31, 1995 and 1994 and for each
of the years in the three year period ended December 31, 1995 and the subsequent
interim period through August 27, 1996, there were no disagreements with KPMG
Peat Marwick LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures, which disagreements if
not resolved to their satisfaction would have caused them to make reference in
connection with their opinion to the subject matter of the disagreement.
The audit reports of KPMG Peat Marwick LLP on the consolidated financial
statements of the Company and the Bank as of December 31, 1995 and 1994 and for
each of the years in the three year period ended December 31, 1995, did not
contain any adverse opinion or disclaimer of opinion, nor were they qualified or
modified as to uncertainty, audit scope, or accounting principles.
A representative of Arthur Andersen LLP is expected to be present at the
Annual Meeting to respond to appropriate questions and to make a statement if he
or she desires to do so. A representative of KPMG Peat Marwick LLP is not
expected to be present at the Annual Meeting.
The Board of Directors of the Company recommends that stockholders vote FOR
the ratification of selection of such firm.
APPROVAL OF EMPLOYEE STOCK OPTION PLAN
The Board of Directors has adopted, subject to stockholder approval, the
Employee Incentive Stock Option Plan (the "Employee Plan"). The purpose of the
Employee Plan is to give officers and executive personnel of the
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Company and the Bank an opportunity to acquire shares of the Common Stock of the
Company in order to provide an incentive for key employees to continue to
promote the best interests of the Company and enhance its long-term performance.
The Employee Plan also provides an incentive for key employees to join or remain
with the Company. The following summarizes the principal features of the
Employee Plan, which is attached as Exhibit A to the Proxy Statement.
Principal Features of the Plan
The Employee Plan is administered by the Board of Directors which may
delegate its powers with respect to administration of the plan (except its
powers with respect to termination and amendment of the plan) to a Committee
appointed by the Board and comprised of not less than three members of the
Board. No member of the Board may exercise discretion with respect to, or
participate in the administration of the Employee Plan if, at any time within
one year prior to such exercise or participation, he or she has received stock,
stock options, stock appreciation rights or any other derivative security
pursuant to the Plan or any other plan of the Company or any affiliate thereof
as to which any discretion is exercised. However, this restriction does not
apply to a member who receives awards during such period under a formula plan.
Within the limits of the Employee Plan, the Board is authorized to determine the
key employees to whom awards hereunder shall be granted ("Optionee"), the time
or times at which such awards shall be granted; the form of awards, either
incentive stock options ("ISO") and/or stock appreciation rights ("SAR") which
may be granted; the amount of the awards which may be granted; and the
limitations, restrictions and conditions applicable to any such award. In making
such determinations, the Board may take into account the nature of the services
rendered by such employees or classes of employees, their present and potential
contributions to the Company's success and such other factors as the Board in
its discretion shall deem relevant.
If deemed by the Board to be in the best interest of the Company, any ISO
granted under the Plan may include a SAR, either at the time of grant or
thereafter while the ISO is outstanding. An SAR shall be exercisable to the
extent, and only to the extent, the ISO in which it is included is exercisable
and shall be exercisable only for such period as the Board may determine (which
period may expire prior to, but not later than, the expiration date of such
ISO). An SAR is exercisable only when the fair market value of a share of Common
Stock exceeds the option price specified in such ISO. An SAR shall entitle the
Optionee to surrender to the Company unexercised the ISO, or portion thereof, to
which it is related, or any portion thereof, and to receive from the Company in
exchange therefor that number of shares of Common Stock having an aggregate fair
market value equal to the excess of the fair market value on the date of
exercise of one share of Common Stock over the option price per share specified
in such ISO multiplied by the number of shares of Common Stock subject to the
ISO, or portion thereof, which is so surrendered. The Board shall be entitled to
elect to settle any part or all of the Company's obligation arising out of the
exercise of an SAR by the payment of cash or check equal to the aggregate fair
market value on the date on which the SAR is exercised of that part or all of
the shares of Common Stock the Company would otherwise be obligated to deliver.
The individuals eligible to participate in the Employee Plan are officers
and other key employees of the Company (approximately 15 people). A total of
9,987 shares of Common Stock are available for grant under the Employee Plan.
The aggregate fair market value of the shares (determined as of the date of
grant of an option) with respect to which any Optionee in the Employee Plan may
first exercise the ISOs in any calendar year (under the Employee Plan) may not
exceed $100,000. In the event of certain changes affecting the shares of Common
Stock resulting from a subdivision or consolidation of shares, whether through
reorganization, recapitalization, stock split-up, stock distribution or
combination of shares, or the payment of a share dividend or other increase or
decrease in the number of such shares outstanding effected without receipt of
consideration by the Company, the Board shall appropriately adjust the number of
shares available for and subject to option grants, as well as the option price.
In the event of a merger or consolidation of the Company in which the Company is
not the surviving corporation, each ISO and SAR granted shall expire as of the
ninetieth day following the effective date of such event. The Board, without
further action on the part of the stockholders of the Company, may alter, amend
or suspend the Employee Plan, or any ISO or SAR granted thereunder or may at any
time terminate the Plan, except that it may not, without the approval of the
stockholders of the Company (except as outlined above): (i) materially increase
the total number of shares of Common Stock available for grant under the
Employee Plan; (ii) materially modify the class of eligible employees under
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the Employee Plan; (iii) materially increase benefits to any key employee who is
subject to the restrictions of Section 16 of the Securities Exchange Act of
1934; or (iv) effect a change relating to ISOs granted thereunder which is
inconsistent with Section 422 of the Internal Revenue Code or regulation issued
thereunder. No action taken by the Board, either with or without the approval of
the stockholders of the Company, may materially and adversely affect any
outstanding ISO or SAR without the consent of the holder thereof.
Description of the Options
ISOs entitle the Optionee to purchase shares of Common Stock of the Company
at a prescribed price. All ISOs granted are fully vested and expire at the
earlier of ten years following the date of grant or the employees termination by
other than death or disability. If employment is terminated as a result of
disability or death, the ISOs or SARs expire a year after the termination of
employment, if not sooner by their terms. In the sole discretion of the Board,
options granted to an employee whose employment is terminated for any reason
other than death or disability may be permitted to exercise ISOs or SARs during
a period of up to three months following his or her termination. The exercise
price of an ISO may not be less than the fair market value of a share of Common
Stock on the date of grant (or 110% of the fair market value for an Optionee who
is a ten percent or more shareholder). All ISOs available for grant under the
Employee Plan were granted during 1996 at a price of $7.93 per share. No SARs
were granted.
No option may be exercisable more than 10 years after the date of grant.
The Board shall determine the terms and conditions and exercise periods of all
options. If any option granted under the Employee Plan terminates or expires
unexercised, the shares released thereby may be the subject of additional grants
under the Employee Plan, but in no event shall the number of shares subject to
outstanding options exceed the total shares reserved. The exercise of ISOs shall
cancel that number, if any, of SARs included in such ISO, which is equal to the
excess of (i) the number of shares of Common Stock subject to SARs included in
such ISO, over (ii) the number of shares of Common Stock which remain subject to
such ISO after such exercise. Options granted under the Employee Plan may not be
transferred, assigned, pledged, or hypothecated (whether by operation of law or
otherwise), except as provided by will or the applicable laws of descent or
distribution, and no ISO or SAR shall be subject to execution attachment or
similar process. On August 29, 1996, the closing bid and asked prices for the
common stock, as reported by the NASDAQ stock market were $8.625 and $9.00,
respectively.
Federal Income Tax Implications
The Company believes that, under present law, the following federal income
tax consequences generally arise with respect to awards granted under the
Employee Plan. The grant of an ISO or SAR will create no tax consequences for
the participant or the Company. A participant will not have taxable income upon
exercising an ISO (except that the alternative minimum tax may apply), and the
Company will receive no deduction at that time. Upon exercising an SAR, the
participant generally must recognize ordinary income equal to the cash or the
fair market value of the stock received. The Company will be entitled to a
deduction equal to the amount recognized as ordinary income by the participant.
A participant's disposition of shares acquired upon the exercise of an ISO
or SAR generally will result in a short-term or long-term capital gain or loss
(except in the event that shares issued pursuant to the exercise of an ISO are
disposed of within two years after the date of grant of the ISO or within one
year after the transfer of the shares to the participant) measured by the
difference between the sale price and the participant's tax basis in such shares
(or the exercise price of the option in the case of shares acquired by the
exercise of an ISO and held for the applicable ISO holding period). Generally,
there will be no tax consequences to the Company in connection with a
disposition of shares acquired under an option, except that the Company will be
entitled to a deduction (and the participant will recognize ordinary taxable
income) if shares acquired upon the exercise of an ISO are disposed of before
the applicable ISO holding period has been satisfied. With respect to awards
granted under the Employee Plan that may be settled in cash, the participant
generally must recognize compensation income equal to the cash. The Company will
be entitled to a deduction of the same amount. Special rules apply to an
employee subject to liability under Section 16(b) of the Exchange Act. In
addition, under Section 162(m) of the Internal Revenue Code, certain
compensation payments in excess of $1 million are subject to a limitation on
deductibility for the Company.
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The foregoing discussion, which is general in nature, is intended for the
information of stockholders considering how to vote at the Annual Meeting and
not as tax guidance to participants in the Employee Plan. This discussion does
not address the effects of other federal taxes (including possible "golden
parachute" excise taxes) or taxes imposed under state, local or foreign tax
laws. Participants in the Employee Plan should consult a tax advisor as to the
tax consequences of participation.
The Board of Directors of the Company recommends that stockholders vote FOR
the approval of the Employee Incentive Stock Option Plan.
APPROVAL OF DIRECTORS STOCK OPTION PLAN
The Board of Directors has adopted, subject to stockholder approval, the
Directors Stock Option Plan (the "Directors Plan"). The purpose of the Directors
Plan is to give directors of the Company and the Bank an opportunity to acquire
shares of the Common Stock of the Company in order to provide an incentive for
such directors to continue to promote the best interests of the Company and
enhance its long-term performance. The Directors Plan also provides an incentive
for directors to join or remain with the Company. The following summarizes the
principal features of the Directors Plan, which is attached as Exhibit B to the
Proxy Statement.
Principal Features of the Plan
The Directors Plan is administered by the Board of Directors. Under the
terms of the Directors Plan, nonstatutory stock options shall be allocated to
each director who holds such position on the date of the grant based upon the
total months of 1995 board service performed by each director prior to the date
of the Directors Plan.
The individuals eligible to participate in the Directors Plan are the
directors of the Company and the Bank (approximately 10 people). A total of
6,429 shares of Common Stock are available for grant under the Directors Plan.
In the event of certain changes affecting the shares of Common Stock resulting
from a subdivision or consolidation of shares, whether through reorganization,
recapitalization, stock split-up, stock distribution or combination of shares,
or the payment of a share dividend or other increase or decrease in the number
of such shares outstanding effected without receipt of consideration by the
Company, the Board shall appropriately adjust the number of shares available for
and subject to option grants, as well as the option price. In the event of a
change in control (as defined in the Directors Plan), the outstanding and
unexercised stock options previously granted shall become fully vested and
exercisable. The Board, without further action on the part of the stockholders
of the Company, may alter, amend or suspend the Directors Plan, or any stock
option granted hereunder or may at any time terminate the Plan, except that it
may not, without the approval of the stockholders of the Company (except as
outlined above): (i) materially increase the total number of shares of Common
Stock available for grant under the Directors Plan; (ii) materially increase
benefits under the Directors Plan; or (iii) materially change the class of
persons eligible to be granted stock options under the Directors Plan.
Description of the Options
Awards under the Directors Plan shall be granted in the form of
nonstatutory stock options and entitle the Optionee to purchase shares of Common
Stock of the Company at a prescribed price and subject to certain such terms and
conditions as the Board of Directors may determine. All options granted expire
at the earlier of their specified expiration dates, which can not be more than
ten years following the date of grant, or on the second anniversary of
termination of directorship. The exercise price of the option may not be less
than eighty-five percent (85%) of the fair market value of a share of Common
Stock subject to such option on the date of grant. All options available for
grant under the Directors Plan were granted during 1996 at a price of $6.74 per
share.
If any option granted under the Directors Plan terminates or expires
unexercised the shares released thereby may be the subject of additional grants
under the Directors Plan, but in no event shall the number of shares subject to
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outstanding options exceed the total shares reserved. Options granted under the
Directors Plan may not be transferred, assigned, pledged, or hypothecated
(whether by operation of law or otherwise), except as provided by will or the
applicable laws of descent or distribution, and no option shall be subject to
execution attachment or similar process. On August 29, 1996, the closing bid and
asked prices for the common stock, as reported by the NASDAQ Stock Market, were
$8.625 and $9.00, respectively.
Federal Income Tax Implications
The Company believes that, under present law, the following federal income
tax consequences generally arise with respect to awards granted under the
Directors Plan. The grant of a nonstatutory option will create no tax
consequences for the participant or the Company. Upon exercising an option, the
participant generally must recognize ordinary income equal to the difference
between the exercise price and the fair market value of the stock received on
the date of exercise. The Company will be entitled to a deduction equal to the
amount recognized as ordinary income by the participant.
A participant's disposition of shares acquired upon the exercise of an
option generally will result in a short-term or long-term capital gain or loss
measured by the difference between the sale price and the participant's tax
basis in such shares. Generally, there will be no tax consequences to the
Company in connection with a disposition of shares acquired under an option.
Special rules apply to a person subject to liability under Section 16(b) of the
Exchange Act.
The foregoing discussion, which is general in nature, is intended for the
information of stockholders considering how to vote at the Annual Meeting and
not as tax guidance to participants in the Directors Plan. This discussion does
not address the effects of other federal taxes (including possible "golden
parachute" excise taxes) or taxes imposed under state, local or foreign tax
laws. Participants in the Directors Plan should consult a tax advisor as to the
tax consequences of participation.
The Board of Directors of the Company recommends that stockholders vote FOR
the approval of the Directors Stock Option Plan.
Officers and directors of the Company have already been granted options
under these Plans. In order for these options to be effective, these Plans must
be approved by the stockholders. As recipients of options already granted to
date, officers and directors have an interest in the approval of these Plans.
The following table summarizes stock options granted during 1996 under both
the Employee Incentive Stock Option Plan and the Directors Stock Option Plan.
New Plan Benefits
Employee Directors Total Options
Name Position Plan Plan Awarded
- ---- -------- ---- ---- -------
Barbara Davis Blum Chairwoman,
President and Chief
Executive Officer 2,268 918 3,186
Shireen L. Dodson Director -- 918 918
Susan Hager Director -- 918 918
16
<PAGE>
Employee Directors Total Options
Name Position Plan Plan Awarded
- ---- -------- ---- ---- -------
Jeanne D. Hubbard Director -- 231 231
Clarence L. James, Jr. Director -- 918 918
Steve Protulis Director -- 306 306
Marshall T. Reynolds Director -- 153 153
Robert L. Shell, Jr. Director -- 231 231
Dana B. Stebbins Director -- 918 918
Susan J. Williams Director -- 918 918
All executive officers
as a group 3,480 918 4,398
All current directors who
are not executive
officers as a group -- 5,511 5,511
All employees, including
all officers, who are not
executive officers, as
a group 6,507 -- 6,507
- --------------
(1) Each option entitles the holder to purchase one share of stock, subject to
the restrictions of the plan.
All options available for grant under both Plans have been granted.
OTHER MATTERS
The Board of Directors is not aware of any other matters that may come
before the meeting. If any other business properly comes before the meeting, the
persons designated as proxies will vote upon such matters in their discretion.
STOCKHOLDER PROPOSALS
A stockholder who intends to present a proposal at the Company's next
Annual Meeting of Stockholders must submit the written text of the proposal to
the Company no later than December 31, 1996 in order for the proposal to be
considered for inclusion in the proxy statement for that meeting.
17
<PAGE>
ANNUAL REPORT
The Annual Report to Stockholders of the Company including financial
statements for the year ended December 31, 1995, is included herein if it has
not previously been delivered to you. Copies of the Annual Report as filed with
the Securities and Exchange Commission on Form 10-KSB are available without
charge, upon written request to Ms. Kimberly J. Levine, Senior Vice President
and Treasurer, Abigail Adams National Bancorp, Inc., 1627 K Street, N.W.,
Washington, D.C. 20006.
By Order of the Board of Directors
/s/ Joyce R. Hertz
------------------
Joyce R. Hertz
Secretary
September 5, 1996
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE REMINDED TO MARK, SIGN,
DATE AND RETURN THE ENCLOSED PROXY IN THE POSTAGE PAID ENVELOPE PROVIDED.
18
EXHIBIT A
ABIGAIL ADAMS NATIONAL BANCORP, INC.
EMPLOYEE INCENTIVE STOCK OPTION PLAN
1. Purpose
-------
The purpose of this Employee Incentive Stock Option Plan (the "Plan") is to
give officers and executive personnel ("key employees") of Abigail Adams
National Bancorp, Inc. (The "Company") and The Adams National Bank (the
"Bank") an opportunity to acquire shares of the common stock of the
Company, $10.00, par value ("Common Stock") to provide an incentive for key
employees to continue to promote the best interests of the Company and
enhance its long-term performance, and to provide an incentive for key
employees to join or remain with the Company.
2. Administration
--------------
(a) Board of Directors. The Plan shall be administered by the Board of
-------------------
Directors of the Company (the "Board"), which, to the extent it shall
determine, may delegate its powers with respect to the administration of
the Plan (except its powers under Section 12(c) to a committee (the
"Committee") appointed by the Board and composed of not less than three
members of the Board. If the Board chooses to appoint a Committee,
references hereinafter to the Board (except in Section 12(c)) shall be
deemed to refer to the Committee. Notwithstanding the preceding provisions
of the Section, no member of the Board may exercise discretion with respect
to, or participate in, the administration of the Plan if, at any time
within one year prior to such exercise or participation, he or she has
received stock, stock options, stock appreciation rights or any other
derivative security pursuant to the Plan or any other plan of the Company
or any affiliate thereof as to which any discretion is exercised. This
restriction does not apply to a member who receives awards during such
period under a formula plan.
(b) Powers. Within the limits of the express provisions of the Plan, the
-------
Board shall determine:
(i) the key employees to whom awards hereunder shall be granted,
(ii) the time or times at which such awards shall be granted,
(iii) the form and amount of the awards, and
(iv) the limitations, restrictions and conditions applicable to
any such award.
In making such determinations, the Board may take into account the nature
of the services rendered by such employees, or classes of employees, their
present and potential contributions to the Company's success and such other
factors as the Board in its discretion shall deem relevant.
(c) Interpretations. Subject to the express provisions of the Plan, the
---------------
Board may interpret the Plan, prescribe, amend and rescind rules and
regulations relating to it, determine the terms and provisions of the
respective awards and make all other determinations it deems necessary or
advisable for the administration of the Plan.
(d) Determinations. The determinations of the Board on all matters
---------------
regarding the Plan shall be conclusive. A member of the Board shall only be
liable for any action taken or determination made in bad faith.
(e) Non-uniform Determinations. The Board's determinations under the Plan,
--------------------------
including without limitation, determinations as to the persons to receive
awards, the terms and provisions of such awards and the agreements
evidencing the same, need not be uniform and may be made by it selectively
among persons who receive or are eligible to receive awards under the Plan,
whether or not such persons are similarly situated.
19
<PAGE>
3. Awards Under the Plan
---------------------
(a) Form. Awards under the Plan may be granted in either or both the
following forms:
(i) Incentive Stock Options, as described in Section 4, and
(ii) Stock Appreciation Rights, as described in Section 6.
(b) Maximum Limitations. The aggregate number of shares of Common Stock
--------------------
available for grant under the Plan is 3,329 subject to adjustment pursuant
to Section 8. Shares of Common Stock issued pursuant to the Plan may be
either authorized but unissued shares or shares now or hereafter held in
the treasury of the Company. In the event that, prior to the end of the
period during which Incentive Stock Options under the Plan, any Incentive
Stock Options under the Plan expires unexercised or is terminated,
surrendered or canceled (other than in connection with the exercise of a
Stock Appreciation Right with respect to which common stock is delivered to
the key employee under Section 6(b)(ii)), without being exercised, in whole
or in part, for any reason, the number of shares theretofore subject to
such Incentive Stock Option, or the unexercised, terminated, forfeited or
unearned portion thereof, shall be added to the remaining number of shares
of Common Stock available for grant as an Incentive Stock Option under the
Plan, including a grant to a former holder of such Incentive Stock Option,
upon such terms and conditions as the Board shall determine, which terms
may be more or less favorable than those applicable to such former
Incentive Stock Option.
(c) Ten Percent Shareholder. Notwithstanding any other provision herein
------------------------
contained, no key employee may receive an Incentive Stock Option under the
Plan if such employee, at the time the award is granted owns (as defined in
Section 424(d) of the Internal Revenue Code, as amended (the "Code")) stock
possessing more than 10% of the total combined voting power of all classes
of stock of the Company, unless the option price for such Incentive Stock
Option is at least 110% of the fair market value of the Common Stock
subject to such Incentive Stock Option on the date of grant and such Option
is not exercisable after the date five years from the date such Option is
granted.
4. Incentive Stock Options
-----------------------
It is intended that Incentive Stock Options granted under the Plan shall
constitute Incentive Stock Options within the meaning of Section 422 of the
Code. Incentive Stock Options may be granted under the Plan for the
purchase of shares of Common Stock. Incentive Stock Options shall be in
such form and upon such conditions as the Board shall from time to time
determine, subject to the following:
(a) Option Prices. The option price of each Incentive Stock Option shall be
--------------
at least 100% of the fair market value of the Common Stock subject to such
Incentive Stock Option on the date of grant.
(b) Terms of Options. No Incentive Stock Option shall be exercisable after
----------------
the date, ten years, from the date such Incentive Stock Option is granted.
(c) Limitation on Amounts. The aggregate fair market value (determined with
---------------------
respect to each Incentive Stock Option as of the time such Incentive Stock
Option is granted) of the capital stock with respect to which Incentive
Stock Options are exercisable for the first time by a key employee during
any calendar year (under this Plan or any other plan of the Company) shall
not exceed $100,000.
5. Provisions Applicable to Incentive Stock Options
------------------------------------------------
(a) Exercise. Incentive Stock Options shall be subject to such terms and
--------
conditions, shall be exercisable at such time or times, and shall be
evidenced by such form of written option agreement between the optionee and
the Company, as the Board shall determine; provided, that such terms are
not inconsistent with the other provisions of the Plan, and with Section
422 of the Code or regulations thereunder.
(b) Manner of Exercise of Options and Payment for Common Stock. Incentive
----------------------------------------------------------
Stock Options may be exercised by an optionee by giving written notice to
the Secretary of the Company stating the number of shares
20
<PAGE>
of Common Stock with respect to which the Incentive Stock Option is being
exercised and tendering payment therefor. At the time that an Incentive
Stock Option granted under the Plan, or any part thereof, is exercised,
payment for the Common Stock issuable thereupon shall be made in full in
cash or by certified check or, if the Board at its discretion agrees to
accept, in shares of Common Stock of the Company (the number of shares paid
for each share subject to the Incentive Stock Option, or part thereof,
being exercised shall be determined by dividing the option price by the
fair market value per share of the Common Stock purchased, registered in
the name of the optionee shall be delivered to the optionee.
(c) Cancellation of Stock Appreciation Rights. The exercise of any
----------------------------------------------
Incentive Stock Option shall cancel that number, if any, of Stock
Appreciation Rights (as defined in Section 6) included in such Incentive
Stock Options, which is equal to the excess of (i) the number of shares of
Common Stock subject to Stock Appreciation Rights included in such
Incentive Stock, over (ii) the number of shares of Common Stock which
remain subject to such Incentive Stock Option after such exercise.
6. Stock Appreciation Rights
--------------------------
(a) Award. If deemed by the Board to be in the best interest of the
------
Company, any Incentive Stock Option granted under the Plan may include a
stock appreciation right ("Stock Appreciation Right"), either at the time
of grant or thereafter while the Incentive Stock Option is outstanding.
(b) Terms of Rights. Stock Appreciation Rights shall be subject to such
---------------
terms and conditions not inconsistent with the other provisions of the Plan
as the Board shall determine, provided that:
(i) Limitations. A Stock Appreciation Right shall be exercisable to
the extent, and only to the extent, the Incentive Stock Option in
which it is included is exercisable and shall be exercisable only for
such period as the Board may determine (which period may expire prior
to, but not later than, the expiration date of such Incentive Stock
Option). Notwithstanding the preceding sentence, a Stock Appreciation
Right is exercisable only when the fair market value of a share of
Common Stock exceeds the option price specified in such Incentive
Stock Option.
(ii) Surrender or Exchange. A Stock Appreciation Right shall entitle
the optionee to surrender to the Company unexercised the Incentive
Stock Option, or portion thereof, to which it is related, or any
portion thereof, and to receive from the Company in exchange therefor
that number of shares of Common Stock having an aggregate fair market
value equal to the excess of the fair market value on the date of
exercise of one share of Common Stock over the option price per share
specified in such Incentive Stock Option multiplied by the number of
shares of Common Stock subject to the Incentive Stock Option, or
portion thereof, which is so surrendered. The Board shall be entitled
to elect to settle any part or all of the Company's obligation arising
out of the exercise of a Stock Appreciation Right by the payment of
cash or by check equal to the aggregate fair market value on the date
on which the Stock Appreciation Right is exercised of that part or all
of the shares of Common Stock the Company would otherwise be obligated
to deliver.
(c) Cash Settlement Restriction.
----------------------------
(i) Notwithstanding Section 6(b), so long as the grantee of a Stock
Appreciation Right is an officer of the Company, the Company's right
to elect to settle any part or all of its obligation arising out of
the exercise of a Stock Appreciation Right by the payment of cash or
by check shall not apply unless such exercise occurs no less than six
months after date of grant of the Right and either: (1) pursuant to
the provisions of subsection (ii) below, or (2) during the period
beginning on the third business day following the date of release by
the Company for publication of its quarterly or annual summary
statements of sales and earnings and ending on the twelfth business
day following such date.
(ii) In the event that, pursuant to Section 9, the Company shall
cancel all unexercised Incentive
21
<PAGE>
Stock Options as of the effective date of a merger or other
transaction provided therein, or in the case of dissolution of the
Company, then each Stock Appreciation Right held by an executive
officer or director of the Company shall be automatically exercised
for cash on such date within 90 days prior to the effective date of
such transaction or dissolution as the Board shall determine and, in
the absence of such determination, on the last business day
immediately prior to such effective date.
7. Transferability
---------------
No Incentive Stock Option or Stock Appreciation Right may be transferred,
assigned, pledged or hypothecated (whether by operation of law or
otherwise), except as provided by will or the applicable laws of descent or
distribution, and no Incentive Stock Option or Stock Appreciation Right
shall be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of an
Incentive Stock Option or Stock Appreciation Right, or levy of attachment
or similar process upon the Incentive Stock Option or Stock Appreciation
Right not specifically permitted herein shall be null and void and without
effect. An Incentive Stock Option or Stock Appreciation Right may be
exercised only by a key employee during his or her lifetime, or pursuant to
Section I I (c), by her/his or estate or the person who acquires the right
to exercise such Incentive Stock Option or Stock Appreciation Right upon
his or her death by bequest or inheritance.
8. Adjustment Provisions
---------------------
The aggregate number of shares of Common Stock with respect to which
Incentive Stock Options and Stock Appreciation Rights may be granted, the
aggregate number of shares of Common Stock subject to each outstanding
Incentive Stock Option and Stock Appreciation Right, and the option price
per share of each such Incentive Stock Option, may all be appropriately
adjusted as the Board may determine for any increase or decrease in the
number of shares of issued Common Stock resulting from a subdivision or
consolidation of shares, whether through reorganization, recapitalization,
stock split-up, stock distribution or combination of shares, or the payment
of a share dividend or other increase or decrease in the number of such
shares outstanding effected without receipt of consideration by the
Company. Adjustments under this Section 8 shall be made according to the
sole discretion of the Board, and its decisions shall be binding and
conclusive.
9. Dissolution, Merger and Consolidation
-------------------------------------
Except as otherwise provided in Section 6(c)(ii), upon the dissolution or
liquidation of the Company, or upon a merger or consolidation of the
Company in which the Company is not the surviving corporation, each
Incentive Stock Option and Stock Appreciation Right granted hereunder shall
expire as of the ninetieth (90th) day following the effective date of such
event.
10. Effective Date and Conditions Subsequent to Effective Date
----------------------------------------------------------
The Plan shall become effective on the date of the approval of the Plan by
the holders of a majority of the shares of Common Stock of the Company;
provided, however, that the adoption of the Plan is subject to such
shareholder approval within twelve (12) months before or after the date of
adoption of the Plan by the Board. The Plan shall be null and void and of
no effect if the foregoing condition is not fulfilled, and in such event
each Incentive Stock Option or Stock Appreciation Right granted hereunder
shall, notwithstanding any of the preceding provisions of the Plan, be null
and void and of no effect.
No grant or award shall be made under the Plan more than ten years from the
earlier of the date of adoption of the Plan by the Board and shareholder
approval hereof; provided, however, that the Plan and all Incentive Stock
Options and Stock Appreciation Rights granted under the Plan prior to such
date shall remain in effect and subject to adjustment and amendment as
herein provided until they have been satisfied or terminated in accordance
with the terms of the respective grants or awards and the related
agreements.
11. Termination of Employment
-------------------------
(a) Each Incentive Stock Option and Stock Appreciation Right shall, unless
sooner expired pursuant to
22
<PAGE>
Section 11(b) or (c) below, expire on the first to occur of the tenth
anniversary of the date of grant thereof and the expiration date set forth
in the applicable option agreement,
(b) The nonvested portion (if any) of an Incentive Stock Option and Stock
Appreciation Right shall expire on the first to occur of the applicable
date set forth in paragraph (a) of this Section 11 and the date that the
employment of the key employee with the Company terminates for any reason
other than death or disability. Notwithstanding the preceding provisions of
this paragraph, the Board, in its sole discretion, may, by written notice
given to an ex-employee, permit the ex-employee to exercise Incentive Stock
Options or Stock Appreciation Rights during a period following his or her
termination of employment, which period shall not exceed three months. In
no event, however, may the Board permit an ex-employee to exercise an
Incentive Stock Option or Stock Appreciation Right after the expiration
date contained in the agreement evidencing such Incentive Stock Option or
Stock Appreciation Right. Notwithstanding the preceding provision of this
paragraph, if the Board permits an ex-employee to exercise Incentive Stock
Options or Stock Appreciation Rights during a period following his or her
termination of employment pursuant to such preceding provisions, such
Incentive Stock Options or Stock Appreciation Rights shall, to the extent
unexercised, expire on the date that such ex- employee violates (as
determined by the Board) any covenant not to compete in effect between the
Company and the ex-employee.
(c) If the employment of a key employee with the Company terminates by
reason of disability (as defined in Section 422(c)(9) of the Code as
determined by the Board) or by reason of death, his or her Incentive Stock
Options and Stock Appreciation Rights, if any, shall expire on the first to
occur of the date set forth in paragraph (a) of this Section 11 and the
first anniversary of such termination of employment.
12. Miscellaneous
--------------
(a) Legal and Other Requirements. The obligation of the Company to sell and
----------------------------
deliver Common Stock under the Plan shall be subject to all applicable
laws, regulations, rules and approvals, including, but not by way of
limitation, the effectiveness of a registration statement under the
Securities Act of 1933 if deemed necessary or appropriate by the Company.
Certificates for shares of Common Stock issued hereunder may be legended as
the Board shall deem appropriate.
(b) No Obligation to Exercise Options. The granting of an Incentive Stock
---------------------------------
Option shall impose no obligation upon an optionee to exercise such
Incentive Stock Option.
(c) Termination and Amendment of Plan. The Board, without further action on
---------------------------------
the part of the shareholders of the Company, may from time to time alter,
amend or suspend the Plan or any Incentive Stock Option or Stock
Appreciation Right granted hereunder or may at any time terminate the Plan,
except that it may not, without the approval of the shareholders of the
Company (except to the extent provided in Section 8 hereof):
(i) Materially increase the total number of shares of Common
Stock available for grant under the Plan except as provided
in Section 8;
(ii) Materially modify the class of eligible employees under the
Plan;
(iii) Materially increase benefits to any key employee who is
subject to the restrictions of Section 16 of the Securities
Exchange Act of 1934; or
(iv) Effect a change relating to Incentive Stock Options granted
hereunder which is inconsistent with Section 422 of the Code
or regulations issued thereunder.
No action taken by the Board under this Section, either with or without the
approval of the shareholders of the Company, may materially and adversely
affect any outstanding Incentive Stock Option or Stock Appreciation Right
without the consent of the holder hereof.
(d) Application of Funds. The proceeds received by the Company from the
----------------------
sale of Common Stock pursuant to Incentive Stock Options will be used for
general corporate purposes.
23
<PAGE>
(e) Withholding Taxes. Upon the exercise of any Incentive Stock Option or
------------------
Stock Appreciation Right, the Company shall have the right to require the
optionee to remit to the Company an amount sufficient to satisfy all
federal, state and local withholding tax requirements prior to the delivery
of any certificate or certificates for shares of Common Stock.
Upon the disposition of any Common Stock acquired by the exercise of an
Incentive Stock Option, the Company shall have the right to require the
optionee to remit to the Company an amount sufficient to satisfy all
federal, state and local withholding tax requirements as a condition to the
registration of the transfer of such Common Stock on its books. Whenever
under the Plan payments are to be made by the Company in cash or by check,
such payments shall be net of any amounts sufficient to satisfy all
federal, state and local withholding tax requirements.
(f) Right to Terminate Employment. Nothing in the Plan or any agreement
-------------------------------
entered into pursuant to the Plan shall confer upon any key employee or
other optionee the right to continue in the employment of the Company or
affect any right which the Company may have to terminate the employment of
such key employee or other optionee.
(g) Rights as a Shareholder. No optionee shall have any right as a
-------------------------
shareholder unless and until certificates for shares of Common Stock are
issued to him or her.
(h) Leaves of Absence and Disability. The Board shall be entitled to make
---------------------------------
such rules, regulations and determinations as it deems appropriate under
the Plan in respect of any leave of absence taken by or disability of any
key employee. Without limiting the generality of the foregoing, the Board
shall be entitled to determine (i) whether or not any such leave of absence
shall constitute a termination of employment within the meaning of the
Plan, and (ii) the impact, if any of any such leave of absence on awards
under the Plan theretofore made to any key employee who takes such leave of
absence.
(i) Fair Market Value. Whenever the fair market value of Common Stock is
------------------
to be determined under the Plan as of a given date, such fair market value
shall be:
(i) If the Common Stock is actively traded on the
over-the-counter market, the average of the bid and the
asked price for the Common Stock at the close of trading for
the ten consecutive trading days immediately preceding such
given date;
(ii) If the Common Stock is listed on a national securities
exchange, the average of the closing prices of the Common
Stock on the Composite Tape for the 10 consecutive trading
days immediately preceding such given date; and
(iii) If the Common Stock is neither actively traded on the
over-the-counter market nor listed on a national securities
exchange, such value as the Board, in good faith, shall
determine.
Notwithstanding any provision of the Plan to the contrary, no determination
made with respect to the fair market value of Common Stock subject to an
Incentive Stock Option shall be inconsistent with Section 422 of the Code
or regulations thereunder.
(j) Notices. Every direction, revocation or notice authorized or required
-------
by the Plan shall be deemed delivered to the Company (1) on the date it is
personally delivered to the Secretary of the Company at its principal
executive offices, or (2) three business days after it is sent by
registered or certified mail, postage prepaid, addressed to the Secretary
at such offices, and shall be deemed delivered to an optionee (1) on the
date it is personally delivered to him or her, or (2) three business days
after it is sent by registered or certified mail, postage prepaid,
addressed to him or her at the last address shown for him or her on the
records of the Company.
24
<PAGE>
(k) Applicable Law. All questions pertaining to the validity, construction
--------------
and administration of the Plan and Stock Options and Stock Appreciation
Rights granted hereunder shall be determined in conformity with the laws of
Delaware, to the extent not inconsistent with Section 422 of the Code and
regulations thereunder.
(1) Elimination of Fractional Shares. If under any provision of the Plan
---------------------------------
which requires a computation of the number of shares of Common Stock
subject to an Incentive Stock Option or Stock Appreciation Right, the
number so computed is not a whole number of shares of Common Stock, such
number of shares of Common Stock shall be rounded down to the next whole
number.
This plan is adopted this day _______ by Abigail Adams National Bancorp, Inc.
25
EXHIBIT B
ABIGAIL ADAMS NATIONAL BANCORP, INC.
DIRECTORS STOCK OPTION PLAN
1. Purpose
----------
The purpose of the Stock Option Plan (the "Plan") is to give directors
("Directors") of Abigail Adams National Bancorp, Inc. (the "Company") and
The Adams National Bank (the "Bank"), an opportunity to acquire shares of
the common stock of the Company, $10.00 par value ("Common Stock"), to
provide an incentive for such Directors to continue to promote the best
interests of the Company and enhance its long-term performance, and to
provide an incentive for Directors to join or remain with the Company.
2. Awards Under the Plan
---------------------
(a) Form
----
Awards under the Plan shall be granted in the form of nonstatutory stock
options ("Stock Options"), as described in Section 3.
(b) Maximum Limitations
-------------------
The aggregate number of shares of Common Stock available for grant under
the Plan is 2,143 shares, subject to adjustment pursuant to Section 7.
Stock Options for 2,143 shares shall be allocated to each director who
holds such position on the date of the grant based upon the total months of
1995 board service performed by each director prior to the date of this
plan. Shares of Common Stock issued pursuant to the Plan may be either
authorized but unissued shares or shares now or hereafter held in the
treasury of the Company. In the event that, prior to the end of the period
during which Stock Options may be granted under the Plan, any Stock Option
under the Plan expires unexercised or is terminated, surrendered or
canceled without being exercised, in whole or in part, for any reason, the
number of shares theretofore subject to such Stock Option or the
unexercised, terminated, forfeited or unearned portion thereof, shall be
added to the remaining number of shares of Common Stock available for grant
as a Stock Option under the Plan, including a grant to a former holder of
such Stock Option, upon such terms and conditions of this Plan.
(c) Adjustment Provisions
---------------------
The aggregate number of shares of Common Stock with respect to which Stock
Options may be granted, the aggregate number of shares of Common Stock
subject to each outstanding Stock Option, and the exercise price per share
of each such Stock Option, may all be appropriately adjusted as the Board
may determine for any increase or decrease in the number of shares of
issued Common Stock resulting from a subdivision or consolidation of
shares, whether through reorganization, recapitalization, stock split-up,
stock distribution or combination of shares, or the payment of a share
dividend or other increase or decrease in the number of such shares
outstanding effected without receipt of consideration by the Company.
Adjustments under this Section 2(c) shall be made according to the sole
discretion of the Board, and its decisions shall be binding and conclusive.
3. Stock Options
-------------
Stock Options may be granted under the Plan for the purchase of shares of
Common Stock. Stock Options shall be in such form and upon such terms and
conditions as follows:
(a) Exercise
--------
Stock Options shall be subject to such terms and conditions, shall be
exercisable at such time or times, and shall be evidenced by such form of
written option agreement ("Option Agreement") between the Director and the
Company, pursuant to this plan.
(b) Exercise Price
--------------
The per share exercise price of each Stock Option shall be fixed by the
Board of Directors in the Option Agreement, but shall not be less than
eighty-five percent (85%) of the fair market value of the Common Stock
26
<PAGE>
subject to such Stock Option on the date of grant.
(c) Term of Stock Options
---------------------
Each Stock Option shall become exercisable at the time, and for the number
of shares of Common Stock, fixed by the Stock Option Agreement. Each Stock
Option shall expire and all rights to purchase Common Stock thereunder
shall cease on the date fixed on the Option Agreement, which shall not be
later than the date ten (10) years from the date such Stock Option is
granted.
(d) Any Stock Option granted under the Plan may be exercised by the
Director, by a legatee or legatees of such Stock Option under the
Director's last will or by his or her executors, personal representatives
or distributees, or by his or her assignees as shown in Section 4 below,
(I) by delivering to the Secretary of the Company written notice of the
number of shares of Common Stock with respect to which the Stock Option is
being exercised, or (ii) by delivering such notice to broker-dealer with a
copy to the Secretary of the Company. Except as otherwise provided in the
Plan or in any Option Agreement the purchase price of Common Stock upon
exercise of any Stock Option by a Director shall be paid in full (I) in
cash or certified check by the Director, (ii) by a broker dealer to whom
the Director has submitted an exercise notice consisting of a fully
endorsed Stock Option, (iii) in Common Stock valued at its fair market
value on the date of exercise, (iv) by agreeing to surrender Stock Options
then exercisable by him or her valued at the excess of the aggregate fair
market value of the Common Stock subject to such Stock Options on the date
of exercise over the aggregate option exercise price of such Common Stock,
(v) by directing the company to withhold such number of shares of Common
Stock otherwise issuable upon exercise of such Stock Option having an
aggregate fair market value on the date of exercise equal to the exercise
price of the Stock Option, or by any combination of (I), (ii), (iii), (iv),
(v) and (vi). In the case of payments pursuant to (ii), (iii), (iv), (v) or
(vi) above, the Director's election must be made on or prior to the date of
exercise of the Stock Option and must be irrevocable. In the case of a
Director who is an insider subject to Section 16 of the Securities Exchange
Act of 1934 ("Section 16 Insider") and who elects payment pursuant to (v)
above, the election must be made in writing either (A) within ten (10)
business days beginning on the third business day following such day, or
(B) at least six (6) months prior to the date of exercise of such Stock
Option. The Company shall issue, in the name of the Director, Stock
Certificates representing the total number of shares of Common Stock
issuable pursuant to the exercise of any Stock Option as soon as reasonably
practicable after such exercise.
(e) Whenever the Company proposes or is required to issue or transfer
shares of Common Stock to a Director under the Plan, the Company shall have
the right to require the Director to remit to the Company an amount
sufficient to satisfy all federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for
such shares, If such certificates have been delivered prior to the time a
withholding obligation arises, the Company shall have the right to require
Director to remit to the Company an amount sufficient to satisfy all
federal, state or local withholding tax requirements at the time such
obligation arises and to withhold from other amounts payable to the
director, as compensation or otherwise, as necessary, Whenever payments
under the Plan are to be made to a Director in cash, such payments shall be
net of any amounts sufficient to satisfy all federal, state and local
withholding tax requirements. In lieu of requiring a Director to make a
payment to the Company in an amount related to the withholding tax
requirement, the Company may, in its discretion, provide that the
Director's election, the tax withholding obligation shall be satisfied by
the Company's withholding a portion of the shares otherwise distributable
to the Director, such shares being valued at their fair market value at the
date of exercise, or by the Director's delivering to the Company a portion
of the shares previously delivered by the Company, such shares being valued
at their fair market value as the date of delivery of such shares by the
Director to the Company.
Notwithstanding any provision of the Plan to the contrary, (I) a Section 16
Insider's election pursuant to the preceding sentence must be made in
writing either (A) during the period beginning on the third business day
following the date of release of 10 quarterly or annual summary of earnings
and ending on the 12th business day following such day, or (B) at least six
months prior to the date the income is realized.
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4. Transferability
---------------
No Stock Option may be transferred, assigned, pledged or hypothecated
(whether by operation of law or otherwise), except as provided by will or
the applicable laws of descent or distribution, and no Stock Option shall
be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of a Stock
Option, or levy or attachment similar process upon the Stock Option not
specifically permitted herein shall be null and void and without effect. A
Stock Option may be exercised only by a Director during his or her
lifetime, or pursuant to Section 9(c), by his or her estate or the person
who acquires the right to exercise such Stock Option upon his or her death
by bequest or inheritance.
5. Dissolution
------------
Upon the dissolution or liquidation of the Company, each Stock Option
granted hereunder shall expire as of the ninetieth (90th) day following the
effective date of such transaction.
6. Effective Date and Condition Subsequent to Effective Date
----------------------------------------------------------
(a) The Plan shall become effective on the date of the approval of the
Plan by the holders of a majority of the shares of Common Stock of the
Company, and the Plan shall be null and void and of no effect if such
condition is not fulfilled, and in such event each Stock Option granted
hereunder shall, notwithstanding any of the preceding provision of the
Plan, be null and void and of no effect.
(b) No grant or award shall be made under the Plan more than ten (10) years
from the date of adoption of the Plan by the Board, provided, however, that
the Plan and all Stock Options granted under the Plan prior to such date
shall remain in effect and subject to adjustment and amendment as herein
provided until they have been satisfied or terminated in accordance with
the terms of the respective grants or awards and the related Option
Agreements.
7. Termination of Directorship
---------------------------
(a) A Stock Option shall expire on the first to occur of the expiration
date set forth in the applicable Option Agreement.
(b) If the Directors service on the Board of Directors of the Company and
all subsidiaries terminates by reason of disability (as determined by the
Board) or by reason of death, his or her stock Options, if any shall expire
on the first to occur of the expiration date set forth in the applicable
Option Agreement and the second anniversary of such termination of
directorship.
(c) If the Directors service on the Board of Directors of the Company and
all subsidaries terminates by reason other than disability or death, his or
her stock Options, if any shall expire on the first to occur of the
expiration date set forth in the applicable Option Agreement and the second
anniversary of such termination of directorship.
8. Change in Control
-----------------
In the event that:
(i) any person (as such term is used in Section 13 of the Securities and
Exchange Act of 1934 and the rules and regulation thereunder and
including any affiliate or associate of such person, as defined in
Rule 12b-2 under said Act, and any person acting in concert with such
person) directly or indirectly acquires or otherwise become entitled
to vote more than eighty percent (80%) of the voting power entitled to
be cast at election for directors ("Voting Power") of the Company; or
(ii) there occurs any merger or consolidation of the Company, or any sale,
lease or exchange of all or any substantial part of the consolidated
assets of the Company and its subsidiaries to any other person and (A)
in the case of a merger or consolidation, the holders of outstanding
stock of the Company entitled to vote in elections of directors
immediately before such merger or consolidation (excluding for this
purpose any person, including any Affiliate or Associate that directly
or indirectly owns or is entitled to vote twenty percent (20%) or more
of the Voting Power of the Company) hold less than eighty
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<PAGE>
percent (80%) of the Voting Power of the survivor of such merger or
consolidation or its parent; or (B) in the case of any such sale,
lease or exchange, the Company does not own at least eighty percent
(80%) of the Voting Power of the other person; or
(iii)one or more new directors of the company are elected and at such time
five or more directors (or, if less, a majority of the directors) then
holding office were not nominated as candidates by majority of the
directors in office immediately before such election.
The Option will be deemed to apply to the securities to which a holder of
the number of shares of Common Stock subject to the unexercised portion of
the Option would be entitled if he or she actually owned such shares
immediately prior to the record date or other times any such event became
effective. Outstanding and unexercised Stock Options previously granted
shall immediately become fully vested and exercisable.
9. Miscellaneous
-------------
(a) No Obligation to Exercise Options
---------------------------------
The granting of a Stock Option shall impose no obligation upon a Director
to exercise such Stock Option.
(b) Termination and Amendment of Plan
---------------------------------
The Board, without further action on the part of the shareholders of the
company, may from time to time alter, amend or suspend the Plan or any
Stock Option granted hereunder or may at any time terminate the Plan,
except that, unless approved by the shareholders in accordance with Section
8 hereof, it may not (except to the extent provided in Section 2 (c)
hereof); (I) materially increase the total number of shares of Common Stock
available for grant to Section 16 Insiders under the Plan; (ii) materially
increase benefits to Section 16 Insiders under the plan; or (iii)
materially change the class of Section 16 Insiders eligible to be granted
Stock Options under the Plan. No action taken by the Board under this
Section may materially and adversely affect any outstanding Stock Option
without the consent of the holder thereof.
(c) Application of Funds
--------------------
The proceeds received by the Company from the sale of Common Stock pursuant
to Stock Options will be used for general corporate purposes.
(d) Right to Terminate Directorship
-------------------------------
Nothing in the Plan or any agreement entered into pursuant to the plan
shall confer upon any Director the right to continue on the Board of
Directors of the Company or any Subsidiary or affect any right which the
Company or any Subsidiary may have to terminate the board service of such
Director.
(e) Rights As A Shareholder
-----------------------
No Director shall have any right or privileges as a shareholder unless and
until certificates for shares of Common Stock are issuable to him or her.
(f) Fair Market Value
-----------------
Whenever the fair market value of Common Stock is to be determined under
the Plan as of a given date, such fair market value shall be:
(i) If the Common Stock is actively traded on an exchange or market in
which prices are reported on a bid and asked basis, the average of the
mean between the bid and the asked price for the Common Stock at the
close of trading for the ten (10) consecutive days immediately
preceding such given date; and
(ii) If the Common Stock is principally traded listed on a national
securities exchange, the average of the closing prices of the Common
Stock on the Composite Tape for the ten (10) consecutive trading days
immediately preceding such given date; and
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(iii)If the Common Stock is neither actively traded on the over-the-counter
market nor listed on a national securities exchange, such value as the
Board, in good faith shall determine
(g) Notices
-------
Every direction, revocation or notice authorized or required by the Plan
shall be deemed delivered to the Company (a) on the date it is personally
delivered to the Secretary of the Company at its principal executive
offices or (b) three business days after it is sent by registered or
certified mail; postage prepaid, addressed to the Secretary at such
offices; and shall be deemed delivered to an optionee (a) on the date it is
personally delivered to him or her or (b) three business days after it is
sent by registered or certified mail, postage prepaid, addressed to him or
her at the last address shown for him or her on the records of the Company.
(h) Applicable Law
--------------
All questions pertaining to the validity, construction and administration
of the Plan and, Stock Options granted hereunder shall be determined in
conformity with the laws of Delaware.
(i) Elimination of Fractional Shares
--------------------------------
If under any provision of the Plan that requires a computation of the
number of shares of Common Stock subject to a Stock Option, the number so
computed is not a whole number of shares of Common Stock, such number of
shares of Common Stock shall be rounded down to the next whole number.
This plan is adopted this day _________by Abigail Adams National Bancorp, Inc.
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