SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Mercantile Bankshares Corporation
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Mercantile Bankshares Corporation
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PAGE
MERCANTILE BANKSHARES CORPORATION
TWO HOPKINS PLAZA
BALTIMORE, MARYLAND 21201
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Mercantile Bankshares Corporation
("Mercshares") will be held at 10:30 a.m. on April 26, 1995, in the Boardroom of
Mercantile-Safe Deposit and Trust Company, Two Hopkins Plaza, Baltimore,
Maryland, for the following purposes:
1. To elect Directors to serve until the next Annual Meeting of
Stockholders, and until their successors are elected and have qualified.
2. To ratify the appointment of Coopers & Lybrand, L.L.P. as independent
public accountants to audit the financial statements of Mercshares for
1995.
3. To transact such other business as may be properly brought before the
meeting or any adjournments thereof.
Only stockholders of record at the close of business on March 17, 1995,
will be entitled to receive notice of, and vote at, this meeting.
These matters are explained more fully in the enclosed Proxy Statement.
EACH STOCKHOLDER IS CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO MARK, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE.
THE GIVING OF THIS PROXY WILL NOT AFFECT YOUR RIGHT TO REVOKE IT AND TO VOTE IN
PERSON IF YOU ATTEND THE MEETING.
JOHN A. O'CONNOR, JR.
Senior Vice President and Secretary
Dated: March 24, 1995
PAGE
MERCANTILE BANKSHARES CORPORATION
PROXY STATEMENT
This statement is furnished in connection with the solicitation of proxies
by Mercantile Bankshares Corporation ("Mercshares") to be used in voting at the
Annual Meeting of Stockholders on April 26, 1995, and at any adjournments
thereof.
Holders of shares of Common Stock of Mercshares ("Common Stock") of record
at the close of business on March 17, 1995, will be entitled to vote at the
meeting. The number of shares of outstanding Common Stock as of January 31,
1995, entitled to vote is 48,114,138 shares. The Common Stock is entitled to one
vote per share.
Unless otherwise instructed, it is intended that the shares represented by
valid proxies will be voted for the election of the 17 persons named below as
nominees to serve as Directors until the next Annual Meeting of Stockholders,
and until their successors are elected and have qualified, and for the
ratification of the appointment of auditors.
Mercantile-Safe Deposit and Trust Company ("Merc-Safe"), a wholly-owned
affiliate of Mercshares, is a trust company located at Two Hopkins Plaza,
Baltimore, Maryland. Various trusts, estates and other accounts as to which
Merc-Safe acts in some fiduciary capacity hold shares of Common Stock. There is
set forth below certain information with respect to those holdings, as of
January 31, 1995, as to which Merc-Safe may be considered a "beneficial owner"
(for purposes of reports filed pursuant to requirements of certain federal
securities laws), because of its power to vote or direct the voting of, or to
dispose of or direct the disposition of, such shares, even though, in some
instances, it shares those powers with co-fiduciaries and others.
The total number of shares of Common Stock as to which Merc-Safe may be
deemed a "beneficial owner," because of voting power, investment power, or both,
is set forth below:
<TABLE>
<CAPTION>
Shares Percent
------------ -----------
<S> <C> <C>
Number of Shares and Percent of Shares Outstanding........................ 2,184,064 4.54
</TABLE>
As to the shares set forth above, the breakdown of voting and investment
power held by Merc-Safe is indicated below:
<TABLE>
<CAPTION>
Shares Percent
------------ -----------
<S> <C> <C>
Number and Percent of Shares with:
Sole Voting Power (1)..................................................... 726,363 1.51
Shared Voting Power....................................................... 1,019,569 2.12
Sole Investment Power (2)................................................. 553,193 1.51
Shared Investment Power................................................... 1,505,528 3.13
<FN>
---------------
(1) Includes certain revocable accounts where grantors or principals have
delegated full voting rights, but have the right to rescind those
delegations or terminate the accounts.
(2) Includes certain accounts where the sole investment discretion is subject to
court approval or ratification.
</TABLE>
In addition, as of January 31, 1995, various fiduciary accounts
administered by Fredericktown Bank & Trust Company ("Fredericktown") and The
National Bank of Fredericksburg ("Fredericksburg"), wholly-owned affiliates of
Mercshares, held in the aggregate 237,256 shares of Common Stock. Of these
shares, those affiliates have sole voting power as to 61,043 shares, sole
investment power as to 128,829 shares and shared investment power as to 108,427
shares. Together, the foregoing holdings of Merc-Safe, Fredericktown and
Fredericksburg, as fiduciaries, amount to 2,421,320 shares or 5.03 percent of
the outstanding common stock of Mercshares as of January 31, 1995.
PAGE 1
Under law, a corporate fiduciary is entitled to vote shares of stock
outstanding in its name as a fiduciary either in person or by proxy, unless the
instrument appointing the fiduciary directs otherwise.
It is expected that Merc-Safe, Fredericktown and Fredericksburg will vote
those shares with respect to which they have sole voting authority and those
shares with respect to which they vote with a co-fiduciary, where such
co-fiduciary also executes a proxy, for election as Directors the 17 persons
named in this Proxy Statement, and for the ratification of the appointment of
auditors.
Except as indicated above, to the best of the knowledge of the management
of Mercshares, no person owns beneficially more than five percent of its
outstanding shares.
ELECTION OF DIRECTORS
The Bylaws of Mercshares provide that there shall be 17 Directors.
The Board of Directors of Mercshares meets regularly five times each year
and is subject to call for special meetings. The Board met at its five regular
meetings in 1994 and the Executive Committee of the Board of Directors, which is
elected annually by the Board and meets when called, met once in 1994. The
members of this Committee are indicated in the list of nominees below.
Generally, the Directors serve until the annual meeting of stockholders
next following their election. Officers are elected annually by the Board to
serve for such periods of time as the Board determines.
Mercshares has an Audit Committee and a Compensation Committee which are
comprised solely of non-officer Directors and are elected annually by the Board.
The members of these Committees are indicated in the list of nominees below.
Mercshares has no nominating committee.
The Audit Committee recommends to the Board the persons or firms to be
employed as independent public accountants, consults with the independent public
accountants with respect to the scope of their audit, the proposed fee and the
reports to be rendered, reviews such audit reports and evaluates the internal
audit programs of Mercshares and its affiliates. It is authorized to determine
the advisability of engaging the independent public accountants to make and
report on special studies, and to examine and consider such other matters as it
or the Board deems desirable. The Audit Committee held one meeting in 1994.
The Compensation Committee performs those functions as are described in the
Report of the Compensation Committee. It held five meetings in 1994.
It is proposed that the persons listed below be elected Directors of
Mercshares, to serve until the next Annual Meeting of Stockholders, and until
their successors are elected and have qualified. It is not expected that any of
the nominees named herein will be unavailable for election, but if a nominee
should be unable to serve, the shares represented by the enclosed proxy may be
voted for a substitute nominee to be designated by management. Mercshares owns
100% of the capital stock of Merc-Safe. As indicated below, all of the nominees
are Directors of Merc-Safe. All nominees previously have been elected Directors
of Mercshares by the stockholders.
The names of the nominees, their ages as of April 26, 1995, their principal
occupations and business experience for the past five years, the number of
shares of Common Stock deemed under certain federal securities laws to be
"beneficially owned" by each as of January 31, 1995, and certain other
information, are set forth below. In some instances, "beneficial ownership" of
shares may be deemed to exist by reason of voting or investment power even
though other
PAGE 2
persons, such as family members or beneficiaries of trusts, have the economic
interest in the shares, and in certain instances "beneficial ownership" may be
disclaimed by a nominee.
Name Age Information
---------------------------- --- -------------------------------------------
H. Furlong Baldwin 63 Chairman of the Board and Chief Executive
Officer, Mercshares, and Chairman of the
Board and Chief Executive Officer,
Merc-Safe. Mr. Baldwin has been Chairman of
the Board of Mercshares since 1984, and has
been its Chief Executive Officer since
1976. He has been Chairman of the Board and
Chief Executive Officer of Merc-Safe since
1976. Mr. Baldwin is a Director of
Baltimore Gas & Electric Company, Conrail,
Inc., GRC International Inc. and USF&G
Corp. He was elected a Director of
Merc-Safe in 1968.
Elected Director of Mercshares: 1970
Member: Executive Committee
Owns beneficially 173,227 shares of Common
Stock.
Thomas M. Bancroft, Jr. 65 Former Chairman of the Board and Chief
Executive Officer, The New York Racing
Association, Inc. Mr. Bancroft occupied
that position from 1983 until January,
1990. He was elected a Director of
Merc-Safe in 1974.
Elected Director of Mercshares: 1974
Member: Audit Committee
Owns beneficially 7,500 shares of Common
Stock.
Richard O. Berndt (1) 52 Partner, Gallagher, Evelius & Jones, a law
firm engaged in the general practice of
law. Mr. Berndt has been a partner in that
firm since 1972. He was elected a Director
of Merc-Safe in 1976.
Elected Director of Mercshares: 1978
Member: Audit Committee
Owns beneficially 17,773 shares of Common
Stock.
James A. Block, M.D. 54 President and Chief Executive Officer,
Johns Hopkins Health System and The Johns
Hopkins Hospital. Dr. Block has occupied
these positions since July, 1992. Prior
thereto, he was President and Chief
Executive Officer of University Hospitals
of Cleveland. Dr. Block was elected a
Director of Merc-Safe in 1992.
Elected Director of Mercshares: 1992.
Owns beneficially 450 shares of Common
Stock.
PAGE 3
Name Age Information
---------------------------- --- -------------------------------------------
George L. Bunting, Jr. 54 President and Chief Executive Officer,
Bunting Management Group, a private
financial management company. Mr. Bunting
has occupied this position since July,
1991. Prior thereto, he was Chairman of the
Board and Chief Executive Officer of Noxell
Corporation. Mr. Bunting is a Director of
Crown Central Petroleum Corporation, USF&G
Corp. and PHH Corporation. He was elected a
Director of Merc-Safe in 1992.
Elected Director of Mercshares: 1992
Owns beneficially 2,000 shares of Common
Stock.
Douglas W. Dodge 62 Vice Chairman of the Board, Mercshares, and
President Merc-Safe. Mr. Dodge has been
Vice Chairman of the Board of Mercshares
since 1984 and President of Merc-Safe since
1983. He was elected a Director of
Merc-Safe in 1983.
Elected Director of Mercshares: 1984
Member: Executive Committee
Owns beneficially 49,743 shares of Common
Stock.
Edward K. Dunn, Jr. 59 President, Mercshares, and a Vice Chairman
of the Board, Merc-Safe. Mr. Dunn has
served in those capacities since 1991. From
1988 to 1991, he was Chairman of the
Executive Committee, Mercshares and
Merc-Safe. He was elected a Director of
Merc-Safe in 1988.
Elected Director of Mercshares: 1988
Member: Executive Committee
Owns beneficially 108,419 shares of Common
Stock, including 6,606 shares held by a
trust of which he is a co-trustee, and
15,000 shares held by a foundation of which
he is a co-trustee and officer.
B. Larry Jenkins 56 Chairman of the Board, President and Chief
Executive Officer, Monumental Life
Insurance Company, providing individual
life insurance. Mr. Jenkins has served in
this capacity since 1983. Since 1992, he
has been Senior Vice President of Aegon
USA, Inc., of which Monumental Life
Insurance Company is a subsidiary. Prior
thereto, he was Vice President of Aegon
USA, Inc. He was elected a Director of
Merc-Safe in 1983.
Elected Director of Mercshares: 1983
Member: Audit Committee
Owns beneficially 5,100 shares of Common
Stock.
PAGE 4
Name Age Information
---------------------------- --- -------------------------------------------
Robert D. Kunisch 53 Chairman of the Board, President and Chief
Executive Officer, PHH Corporation, a
diversified business services company
engaged primarily in providing integrated
management services, information products
and expense management programs including
vehicle fleet management, relocation and
real estate services and mortgage banking
services. Mr. Kunisch has served in this
capacity since 1989. Prior thereto, he was
President and Chief Executive Officer. Mr.
Kunisch is a Director of CSX Corporation
and GenCorp. He was elected a Director of
Merc-Safe in 1984.
Elected Director of Mercshares: 1984
Member: Executive Committee
Audit Committee
Compensation Committee
Owns beneficially 1,500 shares of Common
Stock.
William J. McCarthy (2) 64 Principal, William J. McCarthy, P.C., which
is a partner in Venable, Baetjer and
Howard, LLP, a law firm engaged in the
general practice of law. Either Mr.
McCarthy or his professional corporation
has been a member of that firm since 1964.
He was elected a Director of Merc-Safe in
1975.
Elected Director of Mercshares: 1975
Member: Executive Committee
Owns beneficially 1,500 shares of Common
Stock.
Morris W. Offit 58 Chairman of the Board and Chief Executive
Officer, OFFITBANK, a private New York
State bank offering integrated investment
management services to individuals,
corporations, pensions, trusts and
not-for-profit institutions. Mr. Offit has
served in this capacity since July, 1990.
Prior thereto, he was President, Offit
Associates, Inc. Mr. Offit is a Director of
Duty Free International, Inc. He was
elected a Director of Merc-Safe in 1984.
Elected Director of Mercshares: 1984
Member: Executive Committee
Compensation Committee
Owns beneficially 92,400 shares of Common
Stock.
PAGE 5
Name Age Information
---------------------------- --- -------------------------------------------
Christian H. Poindexter 56 Chairman of the Board and Chief Executive
Officer, Baltimore Gas & Electric Company,
an investor-owned diversified gas and
electric utility. He has occupied that
position since 1993. Prior thereto, Mr.
Poindexter was Vice Chairman of the Board.
He was elected a Director of Merc-Safe in
1987.
Elected Director of Mercshares: 1987
Member: Executive Committee
Compensation Committee
Owns beneficially 1,050 shares of Common
Stock.
William C. Richardson 54 President, Johns Hopkins University. Dr.
Richardson has served in this capacity
since 1990. Prior thereto, he was Executive
Vice President and Provost, Pennsylvania
State University. Dr. Richardson is a
director of CSX Corporation. He was elected
a Director of Merc-Safe in 1991.
Elected Director of Mercshares: 1991
Owns beneficially 150 shares of Common
Stock.
Bishop L. Robinson 68 Secretary of The Department of Public
Safety and Correctional Services for the
State of Maryland. Mr. Robinson has
occupied that position since 1987. Mr.
Robinson was elected a Director of
Merc-Safe in 1989.
Elected Director of Mercshares: 1989
Member: Audit Committee
Owns beneficially 98 shares of Common
Stock.
Donald J. Shepard 48 Chairman of the Board, President and Chief
Executive Officer, Aegon USA, Inc., a
holding company owning insurance and
insurance related companies. Mr. Shepard
has occupied the position of President and
Chief Executive Officer since 1989. He was
elected Chairman of the Board in 1992. Mr.
Shepard is a member of the Executive Board
of Aegon, nv. He is a Director of PHH
Corporation. Mr. Shepard was elected a
Director of Merc-Safe in 1992.
Elected Director of Mercshares: 1992
Member: Compensation Committee
Owns beneficially 4,500 shares of Common
Stock.
PAGE 6
Name Age Information
---------------------------- --- -------------------------------------------
Brian B. Topping 60 Vice President, Mercshares, and a Vice
Chairman of the Board, Merc-Safe. Mr.
Topping has been Vice President of
Mercshares since 1988. He has served as a
Vice Chairman of the Board of Merc-Safe
since 1984. Mr. Topping was elected a
Director of Merc-Safe in 1983.
Elected Director of Mercshares: 1988
Owns beneficially 54,000 shares of Common
Stock.
Calman J. Zamoiski, Jr. 67 Chairman of the Board, Independent
Distributors, Incorporated, a general
wholesale distributor. Mr. Zamoiski has
occupied that position since April, 1991.
Prior thereto, he was President. He was
elected a Director of Merc-Safe in 1976.
Elected Director of Mercshares: 1978
Member: Executive Committee
Compensation Committee
Owns beneficially 51,800 shares of Common
Stock.
---------------
(1) The firm of Gallagher, Evelius & Jones renders legal services to Merc-Safe
and certain accounts of which it is a fiduciary, and certain other
Mercshares affiliates.
(2) The firm of Venable, Baetjer and Howard, LLP renders legal services to
Mercshares, certain of its affiliates and certain accounts of which
Merc-Safe is a fiduciary. It also leases its Baltimore office space from an
affiliate of Mercshares.
All of the Directors have attended 75% or more of the total number of
meetings of the Board of Directors and Committees of Mercshares on which they
served during 1994 except Mr. Offit who attended four of five Board meetings and
three of six Committee meetings.
PAGE 7
Hugh W. Mohler, an executive officer named in the Summary Compensation
Table, but who is not a Director or a nominee for election as a Director, owned
beneficially on January 31, 1995, 8,263 shares of Common Stock.
No Director, nominee or officer of Mercshares was the "beneficial owner" of
as much as 1.0% of the outstanding shares of Common Stock, as of January 31,
1995. On that date, the Directors, nominees and executive officers of Mercshares
as a group owned beneficially 603,908 shares or 1.3% of the shares of Common
Stock outstanding. As to certain shares, the Directors, nominees and executive
officers had no voting or investment power but the shares were included above
because of ownership by family members or trusts for their benefit. As to the
shares reported above with respect to which the Directors, nominees and
executive officers had or shared voting or investment power, they had sole
voting and investment power as to 553,952 shares of Common Stock and shared
voting and investment power as to 28,668 shares of Common Stock.
REPORT OF THE COMPENSATION COMMITTEE
Overall Policy
The Board of Directors of Mercshares establishes the overall goals and
objectives of Mercshares, and the policies to be followed in pursuing these
goals and objectives, including the selection of necessary key management
personnel, and the auditing of the performance of those personnel. The major
responsibility for assisting in satisfying the compensatory aspect of the
overall supervisory duty of the Board rests with the Compensation Committee. The
membership of the Compensation Committees (collectively the "Committee") of
Mercshares and Merc-Safe, its leading bank affiliate, is identical, composed of
independent non-employee directors of both institutions who do not participate
in any executive compensation plan. All executive officers of Mercshares are
officers of Merc-Safe.
In order to achieve the overall goals and objectives of Mercshares, and
recognizing the interest of the shareholders in that achievement, the Committee,
over a number of years, has developed and maintained an executive compensation
plan based on a philosophy that links executive compensation both to individual
and corporate performance, and return to shareholders. This philosophy enables
Mercshares to attract and retain highly motivated executive personnel of
outstanding ability and initiative, and to create an identity of interests
between executives and Mercshares shareholders. Mercshares' executive
compensation plan consists of basic cash compensation, the opportunity for
annual incentive compensation based on corporate performance, and continuing
stock based compensation, geared to corporate performance. Although Mercshares
is well aware that its stock price is subject to the vagaries of the market, and
is not necessarily reflective of its sound corporate performance, Mercshares
believes that stock based compensation creates another direct link between its
executives and its shareholders since such compensation has value only if there
is appreciation in Mercshares' stock price.
The Committee administers the provisions of Mercshares' incentive cash
bonus plan and its stock based plans, which are applicable to all affiliates of
Mercshares. In addition, the Committee is authorized to make recommendations to
the Boards of Mercshares and its affiliates with respect to basic salaries,
supplemental pension, deferred compensation, employment and similar agreements
affecting their executive officers, and performs such other functions as may be
delegated to it by the Boards.
The Committee takes various factors into consideration when establishing
and reviewing executive compensation. There follows an explanation of annual
incentive compensation which is governed by a pre-existing mathematical formula,
stock based compensation which currently consists of existing awards, and the
factors considered in establishing basic cash compensation.
PAGE 8
Basic Cash Compensation
The Committee, in determining basic cash compensation of the executive
officers of Mercshares, considers corporate profitability, financial condition,
capital adequacy, return on assets and the planned compensation budget for
Mercshares. The Committee also considers the performance and compensation levels
of other banking institutions as more fully set forth under the caption "1994
Compensation". The Committee does not consider these factors by any formula and
does not assign specific weight to any given factor. Instead, the Committee
applies its collective business judgment to reach a consensus on compensation
fair to Mercshares, its shareholders and its executive officers. Under
employment agreements, the basic cash compensation of Messrs. Baldwin, Dodge,
Dunn and Topping for any year may not be less than basic cash compensation for
the prior year.
Annual Incentive Compensation
In addition to basic cash compensation, the Committee, in 1981, developed
an annual incentive compensation plan, which is based on a preset mathematical
formula tied directly to corporate performance and profitability.
Forty-six executives of Mercshares and its affiliates who are considered by
the Committee to have responsibilities that directly affect corporate
performance and profitability currently participate in the incentive
compensation Plan. Participants in the Plan are chosen annually by the
Committee. The Plan has both a long-term and a short-term incentive effect
inasmuch as no annual awards are made unless a compounded rate of growth in
earnings per share of Mercshares, and/or in net operating income of the
affiliate (or unit) employing the participant, in excess of five percent per
annum is maintained from the Base Year of the Plan. The maximum potential annual
award is subject to attaining a 15 percent annual improvement in such earnings
per share or net operating income. As provided in the Plan for 1994, the maximum
potential annual award was generally 33 percent of a participant's salary (65
percent in the case of the Chief Executive Officer and 50 percent in the case of
the next three most highly compensated officers of Mercshares). However, because
Management of Mercshares' affiliates is decentralized, not more than one half of
any potential award is based on improvement in Mercshares' earnings per share,
and not more than one half is based on improvement in net operating income of
the appropriate affiliate (or unit). Incentive cash bonuses attributable to
1992, 1993 and 1994 earnings per share and net operating income were paid to
those officers named in the Summary Compensation Table, as reflected under the
caption "Bonus", and to other participants.
Stock Based Compensation
The Executive Stock Appreciation Rights Plan, approved in 1986, the 1985
Stock Option Plan, and the Omnibus Stock Plan, approved in 1990, are Mercshares'
stock based compensation plans designed to create a common interest between
executives and shareholders on a long-term basis. The purpose of these Plans is
to encourage participants to maintain and increase their proprietary interest as
shareholders in Mercshares and to benefit from the long-term performance of
Mercshares.
Under the Executive Stock Appreciation Rights Plan, stock appreciation
rights, based on the market price of the stock on the date of grant, were
granted by the Committee to key executive officers including Messrs. Baldwin,
Dodge, Dunn, and Topping, and under the 1985 Stock Option Plan, stock options,
based on the market price of the stock on the dates of grant, were issued by the
Committee to Messrs. Dunn and Mohler, and to other key employees. Rights were
last granted under the Executive Stock Appreciation Rights Plan in 1989 and no
rights remain available for issuance. Options under the 1985 Stock Option Plan
were last granted in 1989 and the Committee currently does not intend to issue
additional options under that Plan, although options are available for issuance.
PAGE 9
On February 27, 1991, stock options, without tandem stock appreciation
rights, were granted by the Committee under the Omnibus Stock Plan to 63 key
employees, including the executive officers of Mercshares. Exercisability of
these options was dependent on certain earnings tests being met. All options
granted in 1991 were forfeited because the earnings tests were not met.
1994 Compensation
The Committee, in determining the 1994 basic cash compensation of the
executive officers of Mercshares, considered the factors described in this
report.
H. Furlong Baldwin is Chairman of the Board and Chief Executive Officer of
Mercshares and Merc-Safe and, as such, has the ultimate management
responsibility for the strategic direction, performance, operating results and
financial condition of Mercshares and its affiliates, and the carrying out of
corporate policies and procedures. Since 1970, these duties have included the
primary responsibility for recommending to the Board of Mercshares the
acquisition and establishment of additional affiliates. Douglas W. Dodge, as
Vice Chairman of the Board of Mercshares and President and Chief Operating
Officer of Merc-Safe, Edward K. Dunn, Jr., as President of Mercshares and a Vice
Chairman of the Board of Merc-Safe, Brian B. Topping as Vice President of
Mercshares and a Vice Chairman of the Board of Merc-Safe, and Hugh W. Mohler, as
an Executive Vice President of Mercshares and Merc-Safe, have the responsibility
of assisting in carrying out corporate policies and procedures to assure that
the performance, operating results and financial condition objectives are
attained.
The 1994 basic cash compensation of Messrs. Baldwin, Dodge, Dunn and
Topping was set in February, 1994. The Committee was aware that incentive
compensation payments to the executive officers of Mercshares would be made in
1994 attributable to 1993 performance under the Annual Incentive Compensation
Plan, and that the remainder of the options granted under the Omnibus Stock Plan
in 1991, potentially exercisable in 1994, were forfeited because the earnings
goals established in that Plan were not reached. In addition, no awards were
made in 1993 under the 1985 Stock Option Plan or the Omnibus Stock Plan.
The Committee was aware of 1993 earnings of Mercshares. The Committee
reviewed profitability and capital strength ratios (return on assets, equity to
assets and return on equity) and loan loss performance ratios (year-end
non-performing assets to loans, net charge-offs to average loans, year-end
allowance to loans and year-end allowance to non-performing loans) for the years
1988 through 1992 and the quarter ended September 30, 1993 as compared to
comparable information for nineteen banking companies with assets from $5 to $10
billion, considered by an independent analyst as Mercshares' peer group. The
Committee then compared similar ratios showing profitability, capital adequacy,
reserve strength, and asset quality with those of the fifty largest banking
institutions in the United States as prepared by that financial analyst. The
Committee was aware that, for the second quarter, 1993 (the then most recent
quarter for which the following information was published), Mercshares was rated
"superior", compared to four other Maryland banking institutions, based on
thirty-nine separate financial ratios that depict financial strength and
profitability compiled by IDC Financial Publishing, Inc.
The Committee then compared the compensation of Messrs. Baldwin, Dodge,
Dunn and Topping with an independent study published in 1993 reflecting
compensation information for 1992 of the thirty-three banks participating in the
study and with the compensation of executive officers of five banking
institutions, based on 1991, 1992 and 1993 proxy information (the then most
currently available), selected as generally comparable to Mercshares in terms of
criteria including the nature and quality of operations, or geographic
proximity. This latter group included financial institutions having significant
income generated by trust and investment activities, high returns on assets and
above average return on equity, capital significantly in excess of that required
by current federal regulations, and located within a 400 mile radius of
Baltimore so as to include companies operating in a comparable economic climate.
No target was established in the comparison with this group of institutions.
PAGE 10
The Committee concluded that Mercshares' profitability and capital strength
ratios continued to be strong, and that loan loss ratios were favorable, both
standing alone and in comparison to the nineteen banking companies constituting
the peer group and the fifty largest banking institutions group, and that
Mershares' performance, overall, was satisfactory. The Committee determined,
however, not to recommend any increase in the base compensation of these four
executive officers for the year 1994. The travel allowance for Mr. Baldwin (as
disclosed in the Summary Compensation Table), which has been recommended by the
Committee and approved by the Boards annually since 1990 as an appropriate
corporate expense, was continued. Mr. Mohler, former President and Chief
Executive Officer of Peninsula Bank, a wholly-owned affiliate of Mercshares, was
elected an Executive Vice President of Mercshares and Senior Vice President of
Merc-Safe in March, 1994 at an annual rate of compensation of $232,000 which was
his annual rate of compensation at Peninsula Bank. He was elected an Executive
Vice President of Merc-Safe in September, 1994, at which time his performance
was evaluated and his annual rate of compensation increased to $250,000.
No awards were made in 1994 under the 1985 Stock Option Plan or the Omnibus
Stock Plan.
In February, 1994, the Committee designated Messrs. Baldwin, Dodge, Dunn,
Topping and Mohler as participants for 1994 in the Annual Incentive Compensation
Plan. Under the formula requirements of that Plan, based on 1994 earnings per
share and net operating income and to the extent that mathematical Plan criteria
were met, these five individuals earned incentive cash compensation, paid in
1995, which is included under the caption "Bonus" in the Summary Compensation
Table for 1994.
Mercshares has not adopted a policy with respect to qualifying compensation
paid to its executive officers for deductibility under Section 162(m) of the
Internal Revenue Code since no executive officer currently receives, or has
previously received, taxable compensation in excess of $1,000,000 per year.
However, it should be noted that the Annual Incentive Compensation Plan and all
stock based plans have been approved by Mercshares' stockholders and, in
Mercshares' opinion, comply with the provisions of Section 162(m) and
regulations issued thereunder, so that such plans are qualified performance
based plans under which compensation paid will be deductible.
The Compensation Committee
Robert D. Kunisch Morris W. Offit
Christian H. Poindexter Donald J. Shepard
Calman J. Zamoiski, Jr.
Chairman
The following line graph compares cumulative total shareholder return on
Mercshares Common Stock with the Standard & Poor's 500 Index and the Standard &
Poor's Banks Composite Index for the period beginning December 31, 1989, through
December 31, 1994. The graph assumes $100 invested at the closing price on
December 31, 1989, and the reinvestment of all dividends. Twenty-six of the
fifty largest banking institutions whose performance ratios were reviewed, three
of the five institutions considered for compensation purposes and nine of the
thirty-three institutions participating in the compensation study are included
in the S & P Banks Composite Index. None of the nineteen institutions considered
as peer institutions of Mercshares whose performance ratios were reviewed is so
included. The S & P Banks Composite Index consists, as of December 31, 1994, of
seven "Money Center Banks", and twenty-one "Major Regional Banks", each of which
is substantially larger than Mercshares.
PAGE 11
<TABLE>
PERFORMANCE GRAPH
<CAPTION>
1989 1990 1991 1992 1993 1994
---------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mercshares.......................... $ 100.00 $ 84.29 $ 121.26 $ 146.51 $ 131.62 $ 140.16
S&P Banks Composite
Index............................. 100.00 70.59 114.03 151.49 168.19 159.73
S&P 500............................. 100.00 96.71 126.08 135.68 149.37 151.40
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Merc-Safe has banking and other relationships, in the ordinary course of
business, with a number of its Directors and companies associated with them,
including loans to Mr. Zamoiski and Mr. Poindexter and companies associated with
them and to Mr. Kunisch. Such loans were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with others, and did not involve more than the normal
risk of collectibility or present other unfavorable features. Mr. Baldwin is a
director of Baltimore Gas & Electric Company of which Mr. Poindexter is an
executive officer, and of OFFITBANK of which Mr. Offit is an executive officer,
and Mr. Dunn is a director and member of the compensation committee of Aegon
USA, Inc. of which Mr. Shepard is an executive officer.
PAGE 12
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth certain summary compensation information as
to the Chief Executive Officer of Mercshares, and as to the other four most
highly compensated executive officers of Mercshares, based on total annual
salary and bonus in 1994.
<TABLE>
Summary Compensation Table
<CAPTION>
Annual Compensation
--------------------------------------
Name and Other Annual All Other
Principal Position Year Salary($) Bonus($) Compensation($) Compensation($)(1)
-------------------------------------------------- --------- --------- --------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
H. Furlong Baldwin................................ 1994 650,000 211,250 66,400(2) 39,100
Chairman of the Board 1993 648,900 253,100 55,200(2) 30,200
and Chief Executive Officer 1992 600,000 36,000 53,400(2) 27,700
Douglas W. Dodge.................................. 1994 450,000 112,500 -- 29,200
Vice Chairman of the Board 1993 448,000 133,400 -- 24,400
1992 400,000 12,200 -- 22,600
Edward K. Dunn, Jr................................ 1994 350,000 87,500 -- 71,300
President 1993 348,800 105,200 -- 12,800
1992 300,000 9,000 -- 12,100
Brian B. Topping.................................. 1994 350,000 78,750 -- 20,500
Vice President 1993 348,800 32,400 -- 19,900
1992 300,000 54,900 -- 16,800
Hugh W. Mohler(3)................................. 1994 235,500 41,250 -- 36,600
Executive Vice President
<FN>
---------------
(1) Represents cost of group-term life insurance deemed to be employee income
under the Internal Revenue Code and contributions made on behalf of the
executive officer by Merc-Safe to the Mercshares Thrift Plan and to
supplemental thrift and cash balance pension plan arrangements and, as to
Mr. Mohler, fees for services as a director of two affiliate banks as
follows:
</TABLE>
<TABLE>
<CAPTION>
Supplemental
Year Life Insurance Thrift Plan Plans Fees Total
--------- --------------- ----------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mr. Baldwin.......................... 1994 $ 6,300 $ 4,500 $ 28,300 -- $ 39,100
1993 6,300 7,100 16,800 30,200
1992 6,300 6,900 14,500 27,700
Mr. Dodge............................ 1994 6,300 7,500 15,400 -- 29,200
1993 6,300 10,100 8,000 24,400
1992 6,300 9,900 6,400 22,600
Mr. Dunn............................. 1994 2,700 7,500 61,100 -- 71,300
1993 2,700 10,100 -- 12,800
1992 2,200 9,900 -- 12,100
Mr. Topping.......................... 1994 4,600 7,500 8,400 -- 20,500
1993 4,000 10,100 5,800 19,900
1992 4,100 9,900 2,800 16,800
Mr. Mohler(3)........................ 1994 1,500 7,500 21,100 6,500 36,600
</TABLE>
[FN]
(2) Of these amounts $60,000 in 1994, $47,900 in 1993 and $46,200 in 1992
represent travel expenses incurred by Mr. Baldwin.
(3) Since Mr. Mohler did not become an executive officer of Mercshares until
March 1994, amounts received in 1993 and 1992 are not included.
Aggregate Options/SAR Table
The following table sets forth certain information, on an aggregate basis,
concerning the exercise of stock appreciation rights and stock options during
1994 by an executive officer named in the Summary Compensation Table, and the
December 31, 1994, value of unexercised stock appreciation rights. Stock
appreciation rights have value only to the extent that the market value
PAGE 13
per share of Mercshares Common Stock exceeds, on the date of exercise, the
market value per share on the date of grant.
<TABLE>
Aggregated Option/SAR Exercises in Last
Fiscal Year and FY--End SAR Values
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
SARs In-the-Money SARs
at FY--End (#) at FY-End ($s)(1)
Shares Acquired Value Realized ----------------------- ----------------------
Name On Exercise (#) ($s)(1) Exercisable Exercisable
--------------------------------- ----------------- ---------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
Baldwin.......................... -- $ -- 75,000 $ 397,100
Dodge............................ -- -- 22,500 119,100
Dunn............................. -- -- 30,000 158,900
Topping.......................... -- -- 30,000 158,900
Mohler(2)........................ 2,250 13,039 -- --
</TABLE>
[FN]
---------------
(1) Share values included in the table represent the fair market value of the
shares at the exercise date for exercised options, or at December 31, 1994,
for unexercised SARs, less the exercise price of options or the base price
of SARs. SAR exercises may be settled in stock, cash, or both, in the
discretion of the Compensation Committee.
(2) Mr. Mohler exercised options granted under the 1985 Stock Option Plan for
2,250 shares having an exercise price of $32,242 and a market value of
$45,281.
Stock Plans
Executive Stock Appreciation Rights Plan
The 1985 Executive Stock Appreciation Rights Plan was approved by the
stockholders at a meeting held April 30, 1986. The plan permits the issuance of
stock appreciation rights to senior executives of Mercshares and its affiliates
as determined by the Compensation Committee. Each right gives the holder the
right to receive, subject to the provisions of the plan, an amount of stock,
cash or a combination of stock and cash, equal to any appreciation (between the
time of grant and the time of exercise of the right) in the fair market value of
one share of Common Stock. Thus, if the fair market value per share of Common
Stock is $20.00 on the date the right is issued and, on the date of exercise of
the right, the fair market value per share is $25.00, then the holder of the
right would be entitled to receive appreciation of $5.00 for each right held.
The Compensation Committee determines what, if any, portion of the appreciation
is to be paid in cash. Shares issued in payment are issued at the fair market
value on the date of exercise. SARs held by the named executive officers as of
December 31, 1994, are described in the Aggregated Option/SAR table as
"exercisable" SARs.
1985 Stock Option Plan
The 1985 Stock Option Plan was approved by the stockholders at a meeting
held April 30, 1986. The Plan permits the Compensation Committee to grant to key
employees of Mercshares and its affiliates, as determined by the Committee,
incentive stock options (which provide certain tax advantages for optionees who
comply with applicable holding periods). The exercise price of all options
granted under the 1985 Stock Option Plan is not less than the fair market value
of the Common Stock on the date of grant.
No options under the 1985 Stock Option Plan are outstanding.
PAGE 14
Omnibus Stock Plan
The Omnibus Stock Plan was approved by the stockholders at a meeting held
April 25, 1990. The Omnibus Stock Plan is intended to supplement and ultimately
replace the 1985 Executive Stock Appreciation Rights Plan and the 1985 Stock
Option Plan, since under such plans, the rights issuable are fully depleted and
options issuable have nearly been depleted.
The Omnibus Stock Plan permits the Compensation Committee from time to time
to grant incentive stock options, non-qualified stock options, stock
appreciation rights, restricted stock and phantom stock units ("Stock
Incentives") to key employees of Mercshares and its affiliates as determined by
the Compensation Committee. The Compensation Committee has broad authority to
determine the terms and conditions upon which such Stock Incentives may be
granted, including, among other things, when they may be granted, their duration
and conditions for their exercise and forfeiture.
No Stock Incentives under the Omnibus Stock Plan are outstanding.
Retirement Agreements and Plans
Deferred Compensation and Supplemental Pension Agreements
Messrs. Baldwin, Dodge and Topping have entered into arrangements with
Merc-Safe pursuant to which their rates of salary were reduced. In exchange,
Merc-Safe intends from time to time to invest certain amounts (approximately the
aggregate cumulative salary reduction for the period prior to their respective
retirements) in various life insurance and annuity plans and to make future
payments to them which will approximate the amounts realized from these
investments. The amount and term of future payments to them will vary according
to their age at retirement. Alternate provisions have been made for events such
as termination, resignation, death or disability prior to retirement, but,
assuming retirement at age 65, annual payments for a minimum of fifteen years or
until death would approximate $168,000 to Mr. Baldwin, $126,000 to Mr. Dodge,
and $176,000 to Mr. Topping (all of which are expected to be funded by the
insurance and annuity plan arrangements). In connection with this, they will
participate in supplemental pension and thrift plan arrangements whereby they
will be eligible to receive (1) benefits in the amounts they would have received
had their compensation not been reduced from current levels, and (2) amounts to
which they would have been entitled under the Mercshares cash balance pension
plan and thrift plan but for the maximum salary, benefit and contribution
limitations on defined benefit and contribution plans under the Internal Revenue
Code. The amounts deferred in 1994 are included under the caption "Salary" in
the Summary Compensation Table.
Mercshares has entered into a Supplemental Pension Agreement with Mr. Dunn,
pursuant to which, assuming retirement at age 65, Mr. Dunn will receive $5,000
per month in addition to any pension received under the Mercshares cash balance
pension plan. Alternate provisions are made for events such as termination,
resignation, death or disability prior to retirement at age 65. At the time of
Mr. Mohler's first employment with a Mercshares' affiliate, a Supplemental
Pension Agreement was entered into with him pursuant to which he was granted
credit for years of service for time worked for his prior employer.
Cash Balance Pension Plan
Mercshares is sponsor of an employees' cash balance pension plan which a
majority of its affiliates have adopted. Each plan participant who was employed
on January 1, 1991 (including those individuals named below) was credited under
the cash balance pension plan with a frozen accrued benefit representing the
benefit he had earned under the plan, determined as of December 31, 1990, and
based generally on past service and career average annual compensation. For
service on and after January 1, 1991, the cash balance pension plan is designed
to maintain
PAGE 15
separate participant accounts for each eligible employee. These cash balance
accounts are credited with annual contribution allocations equal to various
percentages of compensation based on years of credited service and age. Interest
allocations, tied to a Treasury Bill rate, are also credited annually to these
cash balance accounts. Plan benefits paid at retirement to those individuals
named below, all of whom were employed on December 31, 1990, will be paid in
annuity form and will consist of the sum of their frozen accrued benefits and
their cash balance accounts. The Plan does not determine benefits primarily by
final average compensation.
At the plan's normal retirement age of 65, the individuals named below
would have the following years of service and estimated annual pension benefits:
Mr. Baldwin, 40 years and $433,000; Mr. Dodge, 27 years and $212,000; Mr. Dunn,
12 years and $109,000; Mr. Topping, 24 years and $183,000 and Mr. Mohler 42
years and $184,000. The amounts shown are the total of estimated payments from
the plan and under the supplemental pension arrangements described above.
Estimated annual pension benefits shown above are presented as straight
life annuities for current compensation (including bonus), based on compensation
paid in 1994, modified for increases in salary through date of normal retirement
based on the plan's internal salary increase assumption. Actual salary increases
may differ from such assumption. In addition, maximum salary benefits and
pension benefits are limited by the provisions of the Internal Revenue Code, and
retirees may elect to receive a form of benefit other than a straight life
annuity. Accordingly, the actual pension benefits at retirement may differ
significantly from the amounts stated above.
All other officers of Mercshares participate in the cash balance pension
plan. Directors who are not also officers of Mercshares or an affiliate do not
participate in the cash balance pension plan.
Supplemental Cash Balance Pension Plan
Mercshares is sponsor of an unfunded, nonqualified, supplemental cash
balance pension plan. All employees of Mercshares and its affiliates having
compensation for a calendar year in excess of $150,000 (as adjusted under the
Internal Revenue Code) and who are approved for participation by the Employee
Benefit Committee of Mercshares are eligible participants under this plan except
individuals who, on or prior to January 1, 1994, entered into individual
deferred compensation agreements under which they may elect to defer a portion
of their current compensation. Messrs. Baldwin, Dodge and Topping are not
participants in the plan. Messrs. Dunn and Mohler, as well as fifteen other
employees of Mercshares and its affiliates, participate in the plan. At the end
of a calendar year, the account of each participant is credited with an amount
equal to the difference between the amount with which the participant's account
under the cash balance pension plan would have been credited but for the
compensation limitation imposed by the Internal Revenue Code and the amount
actually credited to the participant's account under the cash balance pension
plan. In addition, if a participant's benefit under the cash balance pension
plan is limited by Section 415 of the Internal Revenue Code and is not already
provided for under this plan, an amount equal to the shortfall will be added to
the participant's account. At the end of a calendar year (but prior to the above
credit), each participant's account is credited with interest equal to the
average value of interest rates on 52 week U. S. Treasury Bills, determined
pursuant to a fixed formula, but no less than 4% nor more than 12%, until the
participant's account is fully distributed. As of December 31, 1994, Mr. Dunn's
account was credited with $51,900 and Mr. Mohler's with $18,000. These amounts
are included under the caption "All Other Compensation" in the Summary
Compensation Table. Generally, an account is distributed after the participant's
termination or death, either in a single-sum payment, or in equal annual
installments over a period not to exceed ten years.
PAGE 16
Thrift Plan
Mercshares is sponsor of a thrift plan, of the type described in Section
401(k) of the Internal Revenue Code, which a majority of its affiliates have
adopted for the benefit of all eligible employees. Those executive officers of
Mercshares who are also officers of Merc-Safe participate in the plan. The plan
provides that corporate contributions, based on a percentage of an employee's
salary, are paid to the employee's thrift plan account. Additionally, employees
may elect to defer up to 10% of their salaries by redirecting the deferred
amount to their thrift plan accounts, in which case their employers match a
portion of the amount deferred. The corporate contributions for 1994 are
included under the caption "All Other Compensation" in the Summary Compensation
Table. Messrs. Dodge, Dunn, Topping and Mohler elected to defer a percentage of
their salaries during 1994. The amounts so deferred are included under the
caption "Salary" and the matching contributions are included under the caption
"All Other Compensation" in the Summary Compensation Table.
Supplemental Thrift Plan
Mercshares is sponsor of an unfunded, nonqualified supplemental thrift
plan. All vice presidents and above who participate in the thrift plan, who have
compensation for a calendar year in excess of $150,000 (as adjusted under the
Internal Revenue Code) and who are approved for participation by the Employee
Benefit Committee of Mercshares are eligible participants under this plan except
individuals who, on or prior to January 1, 1994, entered into individual
deferred compensation agreements under which they may elect to defer a portion
of their current compensation. Messrs. Baldwin, Dodge and Topping are not
participants in the plan. Messrs. Dunn and Mohler, as well as fifteen other
participants in the thrift plan, participate in this plan. At the end of a
calendar year, the account of each participant is credited with an amount equal
to 3% of the portion of the participant's compensation for that calendar year
that exceeds the above limit. At the end of a calendar year (but prior to the
above credit), each participant's account is credited with interest at the per
annum rate of 5% except that interest is pro-rated for accounts that terminate
in mid-year. As of January 1, 1995, Mr. Dunn's account was credited with $9,200
and Mr. Mohler's with $3,100. These amounts are included under the caption "All
Other Compensation" in the Summary Compensation Table. Generally, an account is
distributed in a lump sum payment after a participant's termination or death.
Medical Reimbursement Plan
Mercshares is sponsor of a medical reimbursement plan, of the type
described in Section 105 of the Internal Revenue Code, which a majority of its
affiliates have adopted for the benefit of all eligible employees. Those
executive officers of Mercshares who are also officers of Merc-Safe, except Mr.
Baldwin, participate in the plan. The plan provides that employees may reduce
their salaries on a pre-tax basis, in amounts determined in advance by them, and
redirect those amounts to a medical reimbursement account (MRA). Funds in the
MRA then become available to reimburse the employee for certain uninsured
medical expenses. Any balance left in an employee's MRA at year end reverts to
his employer. Amounts redirected to the MRA for Messrs. Dodge, Dunn, Topping and
Mr. Mohler are included under the caption "Salary" in the Summary Compensation
Table.
Other Arrangements
Employment Agreements
Mercshares and Merc-Safe have entered into employment agreements with
Messrs. Baldwin, Dodge, Dunn, and Topping. Pursuant to these agreements, Mr.
Baldwin serves as Chairman of the Board and Chief Executive Officer of
Mercshares and Merc-Safe at a base salary of not less than
PAGE 17
$650,000 per year; Mr. Dodge serves as Vice Chairman of the Board of Mercshares
and President and Chief Operating Officer of Merc-Safe at a base salary of not
less than $450,000 per year; Mr. Dunn serves as President of Mercshares and a
Vice Chairman of the Board of Merc-Safe at a base salary of not less than
$350,000 per year, and Mr. Topping serves as Vice President of Mercshares and a
Vice Chairman of the Board of Merc-Safe at a base salary of not less than
$350,000 per year. The agreements provide that these base salaries will not be
less in any year than in the preceding year. The current terms of the agreements
are until February 1, 1997, for Mr. Baldwin, March 31, 1997, for Mr. Dodge,
December 31, 1997, for Mr. Dunn, and March 31, 1997, for Mr. Topping. These
agreements will extend for periods of three years following each annual
anniversary date (but not beyond the normal retirement date of the employee)
unless such extension is declined by Mercshares or Merc-Safe or by Messrs.
Baldwin, Dodge, Dunn or Topping, respectively. Messrs. Baldwin, Dodge, Dunn and
Topping will also be entitled to such other benefits as they may receive under
various employee benefit plans including the plans described in this Proxy
Statement.
Change of Control Termination Agreements
Mercshares has entered into Change of Control Termination Agreements with
Messrs. Baldwin, Dodge, Dunn and Topping and one other executive officer of
Mercshares. In the event that during the effective period of the agreement,
following a "change of control" of Mercshares, the officer is terminated (prior
to his normal retirement date) within three years of a change of control without
"cause" or if the officer resigns for "good reason", then such officer is
entitled to receive certain cash payments from Mercshares. Payments which may be
made under the agreements are limited to the maximum amount (when combined with
amounts otherwise payable upon termination) which is deductible by Mercshares
under Section 280G of the Internal Revenue Code. Generally, the maximum amount
deductible is three times average base annual compensation (including salary,
bonus, fringe benefits and deferred compensation) over the last five years. The
Change of Control Termination Agreements now have a three year effective period
following December 31, 1994, and are renewed automatically each year for an
additional one year period (or until the officer's normal retirement if earlier)
unless Mercshares refuses such extension. For the purposes of the agreements, a
"change of control" means any of the following occurrences: (a) a person or
group becomes the beneficial owner of at least 20% of Mercshares Common Stock;
(b) there occur certain specified changes in the composition of the Mercshares
Board of Directors; (c) Mercshares' stockholders approve a reorganization,
merger, consolidation or statutory share exchange of Mercshares unless after
such transaction, holders of the previously outstanding Mercshares Common Stock
own more than 50% of the combined voting power of the surviving entity, or (d) a
liquidation or dissolution of Mercshares or sale of all or substantially all of
the assets of Mercshares. For purposes of these Agreements, termination by
Mercshares for "cause" means termination upon (i) an act of personal dishonesty
taken by the officer intended to result in substantial personal enrichment of
the officer at the expense of Mercshares, (ii) the officer's willful, deliberate
and continued failure to perform substantially his duties, which is not remedied
after receipt of written notice, or (iii) conviction of a felony. "Good reason"
includes the assignment to the officer of any duties inconsistent with his
status and position as they exist immediately prior to the change of control, a
substantial failure by Mercshares to comply with its obligations to the officer
under its employment arrangement with such officer, relocation of the officer's
place of employment outside of the Mercshares principal office located in the
City of Baltimore, a purported termination of the officer not otherwise
permitted under his employment arrangement with Mercshares or the failure of any
successor to Mercshares to assume expressly the obligations of the agreement.
Director Fees
Directors of Mercshares, who are not also officers of Mercshares or its
affiliates, are paid a retainer at the annual rate of $12,500 in addition to
fees of $750 for each Board meeting and $300
PAGE 18
for each Committee meeting attended. Directors who are also officers of
Mercshares or its affiliates receive no compensation for attendance at Board or
Committee meetings of Mercshares. Mercshares is sponsor of a Directors Deferred
Compensation Plan which gives Directors of Mercshares and participating
affiliates, who are not also officers of Mercshares, the option to defer the
retainer and portions, or all, of their fees. The amount of these fees is
invested by Merc-Safe, as agent, and, together with interest earned through
investment, is credited to the Director's deferred compensation account to be
paid to the Director following the time he ceases to render services as a
Director.
Transactions with Directors and Officers
Certain affiliated banks have had, and expect to have in the future,
banking and trust transactions in the ordinary course of business with many of
the Directors and officers of Mercshares, and certain of their associates and
immediate family members, on substantially the same terms, including interest
rates and collateral on loans, and commissions on fiduciary business, as those
prevailing at the time for comparable transactions with others. Loans to such
persons were made in the ordinary course of business and did not involve more
than the normal risk of collectibility or present other unfavorable features.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors, acting upon the recommendation of the Audit
Committee, has appointed Coopers & Lybrand, L.L.P., certified public
accountants, as the principal auditors for Mercshares for 1995. The stockholders
are asked to ratify that appointment.
A representative of Coopers & Lybrand, L.L.P. is expected to be present at
the Annual Meeting of Stockholders, with the opportunity to make a statement if
the representative desires to do so, and will respond to appropriate questions
from stockholders.
If the stockholders do not ratify the appointment of Coopers & Lybrand,
L.L.P., other independent certified public accountants will be selected by the
Board upon recommendation of the Audit Committee.
The Board of Directors recommends a vote FOR the proposal to ratify the
appointment of Coopers & Lybrand, L.L.P. as independent certified public
accountants to audit the financial statements of Mercshares for 1995.
REPORT OF AMENDMENTS TO BYLAWS
Article XII of the Bylaws provides that the Bylaws may be added to,
altered, amended, repealed or suspended by a majority vote of the entire Board
of Directors at any regular meeting of the Board or at any special meeting
called for that purpose. Any action of the Board of Directors in adding to,
altering, amending, repealing, or suspending the Bylaws must be reported to the
stockholders at the next annual meeting and may be changed or rescinded by
holders of the stock then outstanding and entitled to vote, by a majority of the
votes cast on the question. In no event shall the Board of Directors have any
power to amend Article XII.
Since the last Annual Meeting of Stockholders, the Board of Directors
amended the Bylaws, the net effect of which fixed the number of Directors to be
elected at 17.
The Board of Directors has also amended the Bylaws to provide that no
business shall be conducted at a special meeting of stockholders except that
stated in the notice of meeting and that any stockholder proposing to bring
business, including a nomination for election of a Director, before a meeting of
stockholders must give prior notice thereof to the Secretary of Mercshares.
These provisions, designed to assure advance notice to Mercshares of business to
be conducted at meetings of stockholders, will be effective for meetings
occurring after the 1995 Annual
PAGE 19
Meeting. As to business proposed by any stockholder, written notice must be
given to and received by the Secretary of Mercshares not less than 20 days nor
more than 30 days prior to the meeting (or, with respect to a proposal required
to be included in the Mercshares proxy materials pursuant to Rule 14a-8 under
the Securities Exchange Act of 1934, the earlier date such proposal was
received). If less than 30 days' public notice of the meeting is given, the
stockholder notice must be received by the Secretary within 10 days following
notice or publication of the date of the meeting. The notice must include
certain information concerning the stockholder, the business the stockholder
proposes to bring before the meeting and, in the case of a nomination for
election of a Director, the nominee. Such required information will be specified
in the proxy materials for each such meeting.
The Board of Directors has further amended the Bylaws to change the maximum
period of time by which a record date may precede a meeting of stockholders,
payment of dividend or allotment of other rights from 40 days to 90 days. This
change was made to permit more flexibility in conformity with Maryland law.
The practical effect of Article XII of the Bylaws is to vest in the
Directors the power to amend the Bylaws, subject to the right of the
stockholders upon their own initiative to change or overrule the action of the
Board after receipt of notice. Accordingly, the provisions of the amended Bylaws
are summarized above to provide such notice, and no action is required by the
stockholders unless a motion is made at the meeting to change or overrule the
action of the Board. If such motion were made, a majority of the votes cast on
the question would be required for its approval. It may be expected that the
holders of the proxies would vote to sustain the action of the Directors.
VOTE REQUIRED TO ADOPT RESOLUTIONS
The election of Directors requires a plurality of votes cast at the
meeting.
The ratification of the appointment of Coopers & Lybrand, L.L.P. as the
independent certified public accountants requires the affirmative vote of a
majority of the votes cast at the meeting.
The following principles of Maryland law apply to the voting of shares of
Common Stock at the meeting. The presence in person or by proxy of stockholders
entitled to vote a majority of the outstanding shares of Common Stock will
constitute a quorum. Shares represented by proxy or in person at the meeting,
including shares represented by proxies that reflect abstentions, will be
counted as present in the determination of a quorum. An abstention as to any
particular matter, however, does not constitute a vote "for" or "against" and
will be disregarded in calculating the votes cast as to such matter. "Broker
non-votes" (i.e., where a broker or nominee submits a proxy specifically
indicating the lack of discretionary authority to vote on a matter) will be
treated in the same manner as abstentions.
ANNUAL REPORT OF MERCSHARES
Copies of the Annual Report of Mercshares, for the year ended December 31,
1994, were mailed on or about March 24, 1995, to those persons who were record
holders of stock of Mercshares on March 17, 1995, the record date referred to
above.
STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Any proposals of stockholders to be presented for inclusion in Management's
proxy materials for the 1996 Annual Meeting of Stockholders must be received by
the Secretary of Mercshares at Two Hopkins Plaza, Baltimore, Maryland 21201 on
or before November 25, 1995. Such proposals are subject to and must be made in
accordance with the proxy regulations under the Securities Exchange Act of 1934.
PAGE 20
OTHER MATTERS
Management knows of no other matters which will be presented at the Annual
Meeting. However, if other matters are presented, it is intended that the
persons named in the enclosed proxy will vote the shares represented thereby in
accordance with their best judgment in the interest of Mercshares.
Mercshares will bear the cost of solicitation of proxies and may reimburse
persons holding stock in their names, or in the names of their nominees, or
otherwise, for reasonable expenses incurred in sending proxies and proxy
soliciting materials to their principals. In addition to the solicitation of
proxies by mail, proxies may also be solicited personally, or by telephone, or
telegram, by the officers and employees of Mercshares, without additional
compensation to them.
Mercshares has retained the firm of Hill and Knowlton to assist in the
solicitation activities referred to above for a fee of $5,500 plus expenses.
ANY STOCKHOLDER EXECUTING THE ENCLOSED PROXY MAY REVOKE SUCH PROXY AT ANY
TIME BEFORE IT IS EXERCISED.
JOHN A. O'CONNOR, JR.
Senior Vice President and Secretary
March 24, 1995
PAGE 21
(The information below appears on the front of the Proxy Voting Card.)
MERCANTILE BANKSHARES CORPORATION
P R O X Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints H. Furlong Baldwin, Douglas W. Dodge and
Edward K. Dunn, Jr., and each of them, the proxies of the undersigned, with
several powers of substitution, to act and vote at the Annual Meeting of
Stockholders of Mercantile Bankshares Corporation, Two Hopkins Plaza,
Baltimore, MD 21201 to be held on Wednesday, April 26, 1995, at 10:30 a.m.,
and at any and all adjournments thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF
DIRECTIONS ARE NOT INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND
FOR RATIFICATION OF THE APPOINTMENT OF AUDITORS. If a Director nominee is
unable to serve, the within Proxy may be voted for a substitute nominee.
Receipt of notice of the meeting and Proxy Statement is hereby acknowledged,
and the terms of the notice and statement are hereby incorporated by reference
into this Proxy. The undersigned hereby revokes all proxies heretofore given
for said meeting and any adjournment thereof.
(Continued, and to be signed and dated, on reverse side.)
MERCANTILE BANKSHARES CORPORATION
P.O. BOX 11518
NEW YORK, N.Y. 10203-0518
PAGE
(The information below appears on the back of the Proxy Voting Card.)
/ /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
<TABLE>
<S> <C> <C> <C>
1. Election of Directors FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ]
listed below for all nominees listed below.
</TABLE>
H. Baldwin, T. Bancroft, R. Berndt, J. Block, G. Bunting, D. Dodge, E. Dunn,
B. Jenkins, R. Kunisch, W. McCarthy, M. Offit, C. Poindexter, W. Richardson,
B. Robinson, D. Shepard, B. Topping, C. Zamoiski
*(Instructions: To withhold authority to vote for any individual nominee, mark
the Exceptions box and print that nominee's name on the space provided below.)
------------------------------------------------------------------------------
2. Ratification of appointment of Coopers & Lybrand, L.L.P. as the independent
certified public accountants for Mercshares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Upon such matters as may properly come before the meeting.
Address Change
and/or Comments [ ]
Signature(s) should follow exactly the name(s) on the stock certificate.
All co-owners should sign. Executors and Administrators may sign as
such. Attorneys-in-fact should sign both names. Witness the hand and
seal of the undersigned.
Dated: , 1995
------------------------------
-------------------------------------------
Signature
-------------------------------------------
VOTES MUST BE INDICATED X
[X] IN BLACK OR BLUE INK.
SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
PAGE
(The following two notices are filed pursuant to Rule 14a-6 as possible
additional soliciting material.)
MERCANTILE BANKSHARES CORPORATION
Two Hopkins Plaza
Baltimore, Maryland 21201
To The Stockholders:
AN IMPORTANT REMINDER . . .
The Annual Meeting of Stockholders of Mercantile Bankshares
Corporation will be held on April 26, 1995.
Unless you return a proxy card, or attend the meeting and vote
in person, your shares will not be voted at this meeting. If
your proxy is in the mail, thank you for responding. If not,
would you please take the time now to complete and mail the
enclosed duplicate proxy card. A postage-paid envelope has been
provided for your convenience.
YOUR VOTE IS IMPORTANT!
PLEASE ACT IMMEDIATELY!
PAGE
MERCANTILE BANKSHARES CORPORATION
Two Hopkins Plaza
Baltimore, Maryland 21201
To The Stockholders:
AN IMPORTANT REMINDER . . .
The Annual Meeting of Stockholders of Mercantile Bankshares
Corporation will be held on April 26, 1995.
Your shares are held in the name of a bank or nominee. Unless we
receive a proxy card, your shares will not be voted at this
meeting.
If your proxy is in the mail, thank you for responding. If not,
would you please take the time NOW to sign, date and mail your
proxy in the enclosed postage-paid envelope.
YOUR VOTE IS IMPORTANT!
PLEASE ACT IMMEDIATELY!
