<PAGE>
SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
MERCANTILE BANKSHARES CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
MERCANTILE BANKSHARES CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregrate number of securities to which transaction applies:
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(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
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1
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Preliminary Copy
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 30, 1997, 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 approve an amendment to the Articles of Incorporation to increase the
authorized Common Stock of Mercshares from 67,000,000 shares to
130,000,000 shares.
3. To approve the Omnibus Stock Plan, as amended to continue qualification
under Section 162(m) of the Internal Revenue Code, as more particularly
set forth in the enclosed Proxy Statement and Exhibit A to the Proxy
Statement.
4. To ratify the appointment of Coopers & Lybrand, L.L.P. as independent
public accountants to audit the financial statements of Mercshares for
1997.
5. 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 21, 1997, 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.
ALAN D. YARBRO
GENERAL COUNSEL AND SECRETARY
Dated: March 28, 1997
<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 30, 1997, and at any adjournments
thereof.
Holders of shares of Common Stock of Mercshares ("Common Stock") of record
at the close of business on March 21, 1997, will be entitled to vote at the
meeting. The Common Stock is entitled to one vote per share. The number of
shares of outstanding Common Stock as of January 31, 1997, entitled to vote is
47,419,087 shares. As of that date, to the best of the knowledge of the
management of Mercshares, no person owned beneficially more than five percent of
the outstanding shares of the Common Stock.
Unless otherwise instructed, it is intended that the shares represented by
valid proxies will be voted for the election of the 18 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, for approval of the
amendment to the Articles of Incorporation, for approval of the Omnibus Stock
Plan, as amended, and for the ratification of the appointment of auditors.
ELECTION OF DIRECTORS
The Bylaws of Mercshares provide that there shall be 18 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 and at one special meeting in 1996. The Executive Committee of the
Board of Directors held no meetings in 1996. 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 1996.
The Compensation Committee performs the functions described in the Report of
the Compensation Committee. It held seven meetings in 1996.
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 Mercantile-Safe Deposit and Trust Company
("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 except William R. Brody, Freeman A. Hrabowski, III, and Robert
A. Kinsley, who were elected Directors by the Board on September 10, 1996.
The names of the nominees, their ages as of April 30, 1997, 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, 1997, and certain other
information, are set forth below. In some instances, "beneficial ownership" of
shares may be deemed to exist by reason of
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voting or investment power even though other 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.
<TABLE>
<CAPTION>
NAME AGE INFORMATION
- ---------------------------- --- -------------------------------------------
<S> <C> <C>
H. Furlong Baldwin 65 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 195,639 shares of Common
Stock.
Thomas M. Bancroft, Jr. 67 FORMER CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER, THE NEW YORK RACING
ASSOCIATION, INC. 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) 54 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 is a Director of
Municipal Mortgage and Equity, L.L.C. Mr.
Berndt was elected a Director of Merc-Safe
in 1976.
Elected Director of Mercshares: 1978
Member: Audit Committee
Owns beneficially 19,113 shares of Common
Stock.
James A. Block, M.D. 56 FORMER PRESIDENT AND CHIEF EXECUTIVE
OFFICER, JOHNS HOPKINS HEALTH SYSTEM AND
THE JOHNS HOPKINS HOSPITAL. Dr. Block had
occupied these positions from July, 1992
until September, 1996. Prior thereto, he
was President and Chief Executive Officer
of University Hospitals of Cleveland. Dr.
Block is a Director of MMI Companies, Inc.
He was elected a Director of Merc-Safe in
1992.
Elected Director of Mercshares: 1992.
Owns beneficially 950 shares of Common
Stock.
</TABLE>
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<TABLE>
<CAPTION>
NAME AGE INFORMATION
- ---------------------------- --- -------------------------------------------
<S> <C> <C>
William R. Brody, M.D. 53 PRESIDENT, JOHNS HOPKINS UNIVERSITY. Dr.
Brody has occupied that position since
August, 1996. From September, 1994 through
July, 1996, Dr. Brody was Provost of The
University of Minnesota Academic Health
Center. From 1987 to August, 1994, he was
Martin Donner Professor and Director of
Radiology, Johns Hopkins University. Dr.
Brody is a Director of Alza Corp. He was
elected a Director of Merc-Safe in
September, 1996.
Elected Director of Mercshares: September,
1996
Owns beneficially 100 shares of Common
Stock.
George L. Bunting, Jr. 56 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 Nox-
ell Corporation. Mr. Bunting is a Director
of Crown Central Petroleum Corporation,
Guilford Pharmaceuticals, Inc., USF&G Corp.
and PHH Corporation. He was elected a
Director of Merc-Safe in 1992.
Elected Director of Mercshares: 1992
Owns beneficially 4,700 shares of Common
Stock.
Edward K. Dunn, Jr. 61 PRESIDENT, MERCSHARES, AND PRESIDENT AND
CHIEF OPERATING OFFICER, MERC-SAFE. Mr.
Dunn has served as President of Mercshares
since 1991. He has served as President and
Chief Operating Officer of Merc-Safe since
July, 1995. 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 122,904 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.
Martin L. Grass 43 CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
OFFICER, RITE AID CORPORATION, retail drug
sales. Mr. Grass has occupied this posi-
tion since March, 1995. Prior thereto, he
was its President and Chief Operating
Officer. From 1989 to November, 1995, Mr.
Grass was VICE CHAIRMAN OF THE BOARD, SUPER
RITE CORPORATION, a food wholesaler and
retailer. Mr. Grass is a Director of Tessco
Technologies, Inc. He was elected a
Director of Merc-Safe in 1995.
Elected Director of Mercshares: 1995
Member: Audit Committee
Owns beneficially 1,000 shares of Common
Stock
</TABLE>
3
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<TABLE>
<CAPTION>
NAME AGE INFORMATION
- ---------------------------- --- -------------------------------------------
<S> <C> <C>
Freeman A. Hrabowski, III 46 PRESIDENT, UNIVERSITY OF MARYLAND BALTIMORE
COUNTY. Dr. Hrabowski has served in this
capacity since September, 1993. He was
Acting President from June, 1992 until
September, 1993. Prior thereto, he was Vice
Provost and Executive Vice President. Dr.
Hrabowski is a Director of Baltimore Gas &
Electric Company, McCormick & Company,
Inc., and UNC, Inc. He was elected a
Director of Merc-Safe in September, 1996.
Elected Director of Mercshares: September,
1996
Owns beneficially 125 shares of Common
Stock.
B. Larry Jenkins 58 CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, MONUMENTAL LIFE
INSURANCE COMPANY, a subsidiary of AEGON
USA, Inc. Mr. Jenkins has served in this
capacity since 1983. 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.
Robert A. Kinsley 56 MR. KINSLEY IS CHAIRMAN AND CHIEF EXECUTIVE
OFFICER OF KINSLEY CONSTRUCTION, INC. Mr.
Kinsley has served in this capacity since
March, 1996. Prior thereto, he was its
President. Mr. Kinsley was elected a
Director of Merc-Safe in September, 1996.
Elected Director of Mercshares: September,
1996
Owns benefically 2,615 shares of Common
Stock.
Robert D. Kunisch 55 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. 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.
</TABLE>
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<TABLE>
<CAPTION>
NAME AGE INFORMATION
- ---------------------------- --- -------------------------------------------
<S> <C> <C>
William J. McCarthy (2) 66 PRINCIPAL, WILLIAM J. MCCARTHY, P.C., WHICH
IS A PARTNER IN VENABLE, BAETJER AND
HOWARD, LLP, a law firm engaged in the gen-
eral 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 60 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 1990. He is a
Director of Cantell Industries, Inc., and
Hasbro, Inc. Mr. Offit 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.
Christian H. Poindexter 58 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 56 PRESIDENT AND CHIEF EXECUTIVE OFFICER, W.K.
KELLOGG FOUNDATION, a private grant-making
foundation. Dr. Richardson has served in
this capacity since August, 1995. Prior
thereto, he was President of Johns Hopkins
University. Dr. Richardson is a Director of
CSX Corporation and the Kellogg Company. He
was elected a Director of Merc-Safe in
1991.
Elected Director of Mercshares: 1991
Owns beneficially 150 shares of Common
Stock.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NAME AGE INFORMATION
- ---------------------------- --- -------------------------------------------
<S> <C> <C>
Donald J. Shepard 50 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 N.V. He is a Director of PHH
Corporation. Mr. Shepard was elected a
Director of Merc-Safe in 1992.
Elected Director of Mercshares: 1992
Member: Executive Committee
Owns beneficially 9,000 shares of Common
Stock.
Calman J. Zamoiski, Jr. 69 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.
</TABLE>
- ------------------------
(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 1996 except Dr. Block who attended 67% of such meetings; Dr. Brody
who attended 67% of such meetings; Mr. Grass who attended 71% of such meetings;
and Mr. Offit who attended 65% of such meetings.
Hugh W. Mohler and Jay M. Wilson, executive officers named in the Summary
Compensation Table, but who are not Directors or nominees for election as
Directors, owned beneficially on January 31, 1997, 8,986 shares and 11,252
shares of Common Stock, respectively.
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,
1997. On that date, the Directors, nominees and executive officers of Mercshares
as a group owned beneficially 540,957 shares or 1.1% 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 506,204 shares of Common Stock and shared
voting and investment power as to 30,799 shares of Common Stock.
Brian B. Topping, who had been a Director of Mercshares since 1988, and an
executive officer of Mercshares since 1990, decided to relinquish these
responsibilities effective December 31, 1996. Although he no longer serves as an
officer or Director of Mercshares, he continues as Vice Chairman of the Board of
Directors of Merc-Safe, concentrating on investment services provided by
Merc-Safe. Mr. Topping's 1996 compensation as an executive officer of Mercshares
and Merc-Safe, and pension and other benefits to which he will be entitled for
1997 and thereafter, are described in the appropriate sections of this Proxy
Statement.
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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 stockholders 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 stockholders. 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' stockholders. 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.
The Committee administers the provisions of Mercshares' incentive cash bonus
plan and its stock based plan, 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 general
principles governing basic cash compensation, 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 for 1996.
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 "1996
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 stockholders and its executive officers. Under executive
employment agreements, the basic cash compensation of Messrs. Baldwin, Dunn and
Topping for any year may not be less than basic cash compensation for the prior
year. Mr. Topping's executive employment agreement terminated on December 31,
1996.
ANNUAL INCENTIVE COMPENSATION
In addition to basic cash compensation, the Committee, in 1981, developed an
annual incentive compensation plan, which is based on a pre-established
mathematical formula tied directly to corporate performance and profitability.
Forty-seven 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
because 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
7
<PAGE>
per share or net operating income. As provided in the plan, the maximum
potential annual award for 1996 is 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 four 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 1994, 1995 and 1996 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 Omnibus Stock Plan, approved by the stockholders in 1990, is designed to
create a common interest between key employees and stockholders on a long-term
basis. Its purpose is to encourage participants to maintain and increase their
proprietary interests as stockholders in Mercshares and to benefit from the
long-term performance of Mercshares.
The Committee believes that a close linking of stockholder and key employee
interests through the grant of stock options is important to the continuing
success of Mercshares because stock options have no realizable value unless the
price of Mercshares Common Stock increases.
Accordingly, in March, 1995, and in 1996 the Committee granted, under the
Omnibus Stock Plan, options for a total of 1,169,150 shares of Common Stock
without tandem stock appreciation rights to 315 key employees of Mercshares and
its affiliates. The exercise price of the stock options equals the market price
of the Common Stock on the date of grant and the options have a ten year life.
Of the total granted, options for 867,500 shares ("performance-based
options") were granted to 49 senior executive officers of Mercshares and its
affiliates, including, in 1995, the Chief Executive Officer and the other four
most highly compensated executive officers of Mercshares. Twenty-five percent of
these performance-based options will become exercisable on and after each
anniversary date of the grant, except that if any such senior executive officer
attains his normal retirement date during that four year period, any options
that have not become exercisable and have not been forfeited become exercisable
on the anniversary date following the normal retirement date, subject to the
satisfaction of the corporate earnings tests described in this paragraph for the
year preceding retirement. The portion of the performance-based options that
become exercisable in each of the four years may not be exercised unless
Mercshares' earnings per share increase at a compounded growth rate of at least
five percent over 1994. If this test is met, then up to one-half of the
performance-based options maturing in each of the four years become exercisable
based on a sliding scale (beginning at six percent) of the percent of increase
of earnings per share of Mercshares over the prior year earnings per share. The
remaining one-half may be exercised only if the net operating income of the
affiliate employing the participant increases at a compounded growth rate of at
least five percent over 1994. If this test is met, then up to one-half of the
options maturing in each of the four years become exercisable, based on the same
sliding scale (beginning at six percent), of the percent of increase of the net
operating income of the affiliate over the prior year's net operating income of
that affiliate. To the extent these tests are not met, all or a portion of the
performance-based options maturing each year are forfeited and become available
for further grants.
The remaining options for 301,650 shares were granted to 266 key employees
of the affiliates of Mercshares. These options are not performance-based options
and are fully exercisable as of the date of grant.
1996 COMPENSATION
The Committee, in determining the 1996 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 also included
the primary responsibility for recommending to the
8
<PAGE>
Board of Mercshares the acquisition and establishment of additional affiliates.
Edward K. Dunn, Jr. is President of Mercshares and President and Chief Operating
Officer of Merc-Safe. Mr. Dunn, Brian B. Topping as Vice President of Mercshares
and Vice Chairman of the Board of Merc-Safe, and Hugh W. Mohler and Jay M.
Wilson, as Executive Vice Presidents of Mercshares and Merc-Safe, have exercised
the responsibility of assisting in carrying out corporate policies and
procedures to assure that the performance, operating results and financial
condition objectives are obtained.
The 1996 basic cash compensation of Messrs. Baldwin, Dunn and Topping was
set in February, 1996. The Committee was aware that incentive compensation
payments to the executive officers of Mercshares would be made in 1996
attributable to 1995 performance under the Annual Incentive Compensation Plan,
and that 25% of the outstanding performance-based options granted in March, 1995
under the Omnibus Stock Plan would become exercisable in March, 1996.
The Committee was aware of 1995 earnings of Mercshares. The Committee
further reviewed profitability and capital strength ratios (return on assets,
net interest margin, efficiency ratio, equity to assets and return on equity)
and loan loss performance ratios (year-end non-performing assets to loans and
other real estate owned, net charge-offs to average loans and year-end allowance
for loan losses to non-performing loans) for the years 1990 through 1994 and the
quarter ended September 30, 1995 as compared to comparable information for 23
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 50 largest banking institutions in the United
States as prepared by that financial analyst. The Committee was aware that, for
the second quarter, 1995 (the then most recent quarter for which the following
rating was published), Mercshares was rated "superior", compared to eight
selected banking institutions in Maryland, Delaware, the District of Columbia
and Virginia, based on 39 separate financial ratios that depict financial
strength and profitability compiled by IDC Financial Publishing, Inc.
The Committee then compared the compensation of Messrs. Baldwin, Dunn and
Topping with an independent study published in 1995 reflecting compensation
information for 1994 of the 81 commercial banking institutions participating in
the study and with the compensation of executive officers of five banking
institutions, based on 1993, 1994 and 1995 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,
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.
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 23 banking companies constituting the
peer group and the 50 largest banking institutions group, and that Mershares'
performance, overall, was strong. The Committee determined, however, not to
recommend any increase in the base compensation of Messrs. Baldwin, Dunn and
Topping. 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. The compensation of Mr. Mohler was reviewed in December, 1995 and,
based on his performance, he was awarded an increase. Mr. Wilson served as a
Director of Mercshares and Merc-Safe from 1989 until September, 1994, at which
time he was elected an Executive Vice President of Mercshares and Merc-Safe. His
compensation was negotiated at that time. Mr. Mohler's increase and Mr. Wilson's
compensation are reflected in the Summary Compensation Table under the "Salary"
Caption.
In December, 1995, the Committee designated Messrs. Baldwin, Dunn, Topping,
Mohler and Wilson as participants for 1996 in the Annual Incentive Compensation
Plan. Under the formula requirements of that Plan, based on 1996 earnings per
share and net operating income and to the extent that mathematical Plan criteria
were met, these individuals earned incentive cash compensation, paid in 1997,
which is included under the caption "Bonus" in the Summary Compensation Table
for 1996.
9
<PAGE>
Section 162(m) of the Internal Revenue Code provides for non-deductibility,
in certain cases, of compensation paid to an executive in excess of $1 million
per year. The only Mercshares executive whose compensation has exceeded that
level is Mr. Baldwin. Because various compensation plans have been approved by
Mercshares' stockholders and, in Mercshares' opinion, are qualified
performance-based plans under Section 162(m), the deductibility of Mr. Baldwin's
compensation is not limited by Section 162(m). Mercshares has not adopted a
policy as to whether or under what circumstance it would pay executive
compensation which would not be deductible under Section 162(m) but reserves the
right to make compensation payments that may not qualify for deduction.
THE COMPENSATION COMMITTEE
<TABLE>
<S> <C>
Robert D. Kunisch Morris W. Offit
Christian H. Poindexter Calman J. Zamoiski, Jr., Chairman
</TABLE>
10
<PAGE>
The following line graph compares cumulative total stockholder 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, 1991, through
December 31, 1996. The graph assumes $100 invested at the closing price on
December 31, 1991, and the reinvestment of all dividends. With reference to the
Report of the Compensation Committee, 27 of the 50 largest banking institutions
whose performance ratios were reviewed, two of the five institutions considered
for compensation purposes and 17 of the 81 institutions participating in the
compensation study are included in the S & P Banks Composite Index. None of the
23 institutions considered as peer institutions of Mercshares whose performance
ratios were reviewed is so included. The S & P Banks Composite Index consisted,
as of December 31, 1996, of six "Money Center Banks", and 22 "Major Regional
Banks", each of which is substantially larger than Mercshares.
PERFORMANCE GRAPH
VALUE OF $100 INVESTED
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MERCSHARES S&P BANKS COMPOSITE INDEX S&P500
<S> <C> <C> <C>
1991 $100.00 $100.00 $100.00
1992 $120.82 $132.85 $107.61
1993 $108.54 $147.49 $118.47
1994 $115.58 $140.07 $120.08
1995 $169.91 $223.26 $165.18
1996 $202.04 $316.03 $203.05
</TABLE>
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Mercshares............................. $ 100.00 $ 120.82 $ 108.54 $ 115.58 $ 169.91 $ 202.04
S&P Banks Composite
Index................................ 100.00 132.85 147.49 140.07 223.26 316.03
S&P 500................................ 100.00 107.61 118.47 120.08 165.18 203.05
</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. Kunisch, to Mr. Zamoiski and companies associated with
him and to companies associated with Mr. Poindexter. 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 OFFITBANK, of which Mr. Offit is an
executive officer.
11
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth certain summary compensation information as
to the Chief Executive Officer and the other four most highly compensated
executive officers of Mercshares, based on total annual salary and bonus in
1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------------
AWARDS
ANNUAL COMPENSATION -------------------
------------------------------------------- SECURITIES
NAME AND OTHER ANNUAL UNDERLYING
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS/SARS#
-------------------- --------- ----------- ----------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
H. Furlong Baldwin............................. 1996 750,000 219,400 76,000(2) --
Chairman of the Board 1995 747,300 487,500 63,000(2) 80,000
and Chief Executive Officer 1994 650,000 211,300 66,400(2) --
Edward K. Dunn, Jr............................. 1996 400,000 90,000 -- --
President 1995 398,700 200,000 -- 45,000
1994 350,000 87,500 -- --
Brian B. Topping............................... 1996 380,000 76,000 -- --
Vice President 1995 379,200 95,000 -- 35,000
1994 350,000 78,800 -- --
Hugh W. Mohler................................. 1996 267,800 60,400 -- --
Executive Vice President 1995 250,000 125,000 -- 30,000
1994 235,500 41,300 -- --
Jay M. Wilson.................................. 1996 250,000 50,000 -- --
Executive Vice President 1995 250,000 82,500 -- 30,000
1994 69,200 -- -- --
<CAPTION>
NAME AND ALL OTHER
PRINCIPAL POSITION COMPENSATION($)(1)
-------------------- --------------------
<S> <C>
H. Furlong Baldwin............................. 54,700
Chairman of the Board 44,800
and Chief Executive Officer 39,100
Edward K. Dunn, Jr............................. 102,400
President 78,800
71,300
Brian B. Topping............................... 27,900
Vice President 25,600
20,500
Hugh W. Mohler................................. 59,900
Executive Vice President 46,800
36,600
Jay M. Wilson.................................. 29,200
Executive Vice President 14,200
200
</TABLE>
- ------------------------
(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 an affiliate bank as follows:
<TABLE>
<CAPTION>
SUPPLEMENTAL
YEAR LIFE INSURANCE THRIFT PLAN PLANS FEES TOTAL
--------- --------------- ----------- -------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Mr. Baldwin.............................. 1996 $ 6,300 $ 4,500 $ 43,900 -- $ 54,700
1995 6,300 4,500 34,000 -- 44,800
1994 6,300 4,500 28,300 -- 39,100
Mr. Dunn................................. 1996 4,900 7,500 90,000 -- 102,400
1995 4,100 7,500 67,200 -- 78,800
1994 2,700 7,500 61,100 -- 71,300
Mr. Topping.............................. 1996 6,300 7,500 14,100 -- 27,900
1995 6,300 7,500 11,800 -- 25,600
1994 4,600 7,500 8,400 -- 20,500
Mr. Mohler............................... 1996 2,600 7,500 49,800 -- 59,900
1995 1,800 7,500 29,000 8,500 46,800
1994 1,500 7,500 21,100 6,500 36,600
Mr. Wilson............................... 1996 700 7,500 21,000 -- 29,200
1995 700 3,500 10,000 -- 14,200
1994 200 -- -- -- 200
</TABLE>
(2) Of these amounts, $69,500 in 1996, $57,500 in 1995 and $60,000 in 1994
represent travel expenses incurred by Mr. Baldwin.
12
<PAGE>
AGGREGATE OPTIONS TABLE
The following table sets forth certain information, on an aggregate basis,
concerning the exercise of stock options during 1996 by executive officers named
in the Summary Compensation Table and the December 31, 1996 value of unexercised
stock options. No stock appreciation rights were outstanding in 1996.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FY--END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS
VALUE UNEXERCISED OPTIONS AT FY-END (#) AT FY-END ($S)(1)
SHARES ACQUIRED ON REALIZED ---------------------------------- --------------------------------
NAME EXERCISE (#) ($S)(1) EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE(2)
- ---------------------------- ------------------- ----------- ------------- ------------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Baldwin................. 11,070 35,978 8,930 60,000 90,416 607,500
Mr. Dunn.................... -- -- 11,250 33,750 113,906 341,719
Mr. Topping................. -- -- 8,750 26,250 88,594 265,781
Mr. Mohler.................. -- -- 7,500 22,500 75,938 227,812
Mr. Wilson.................. -- -- 7,500 22,500 75,938 227,812
</TABLE>
- ------------------------
(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, 1996
for unexercised options, less the exercise price of the options.
(2) As explained in the Report of the Compensation Committee, and except for
Messrs. Baldwin and Topping, these options become exercisable in four equal
annual installments following March, 1995, but only if and to the extent
that certain annual corporate earnings tests have been met. For 1995, the
tests were met and 25% of the options became exercisable in March, 1996.
Under the Omnibus Stock Plan, because Mr. Baldwin attained age 65 in
January, 1997, his additional options for 60,000 shares became eligible for
exercise in March, 1997, but only to the extent the tests were met for 1996.
After application of the tests, options for 42,000 shares held by Mr.
Baldwin became exercisable in March, 1997 and his remaining options for
18,000 shares were forfeited. Under arrangements with Mr. Topping described
elsewhere in this Proxy Statement, and based on the tests for 1996, options
for 6,125 shares became exercisable in March, 1997 and his remaining options
for 20,125 shares were forfeited.
13
<PAGE>
RETIREMENT AGREEMENTS AND PLANS
DEFERRED COMPENSATION AND SUPPLEMENTAL PENSION AGREEMENTS
Messrs. Baldwin and Topping entered into arrangements with Merc-Safe
pursuant to which their rates of salary were reduced. In exchange, Merc-Safe
from time to time invests, in life insurance and annuity policies, amounts equal
to the salary reduction amounts and a portion of the cumulative cash surrender
values of those policies. These investments serve as a funding source for the
benefits described below. Alternate provisions have been made for events such as
termination, resignation, death or disability prior to retirement, but, assuming
retirement, annual payments for a minimum of fifteen years or until death (if
later) would approximate $168,000 to Mr. Baldwin. Under Mr. Topping's agreement,
he receives an annual payment of $175,700 to continue for a minimum of eighteen
years or until death (if later). The salaries for 1996 and prior periods
reported under the caption "Salary" in the Summary Compensation Table are the
full salaries before the reductions referred to above.
The executives who are parties to the above arrangements also participate in
supplemental pension and thrift plan arrangements whereby they are 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.
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 plans. 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 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, except Mr. Wilson, 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.
Estimated annual pension benefits shown below are presented as straight life
annuities, even though retirees may elect to receive a form of benefit other
than a straight life annuity. The benefits are based on actual salary and bonus
for 1996 as shown in the Summary Compensation Table. For future years, it is
estimated that the executive officers' salaries will increase through their
dates of retirement at the plan's internal salary increase assumption and that
their bonuses will continue at the same amount through their dates of
retirement. Actual salary increases may differ from the plan's internal salary
increase assumption and actual bonuses may differ significantly from the 1996
bonuses; and in some years it is possible, based on the formula in the Annual
Incentive Compensation Plan, that no bonuses will be earned. Accordingly, the
actual pension benefits at retirement may differ significantly from the amounts
stated below.
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.
Dunn, 12 years and $156,000; Mr. Mohler 42 years and
14
<PAGE>
$313,000; and Mr. Wilson 18 years and $108,000. If Mr. Baldwin were to retire at
age 68, he would have 43 years of service and estimated annual pension benefits
of $675,000. The amounts shown are the total of estimated payments from the plan
and under the supplemental pension arrangements described above and, with
respect to Messrs. Dunn, Mohler and Wilson, under the following section entitled
"Supplemental Cash Balance Pension Plan". Mr. Topping's aggregate annual
payments, under the plan and supplemental pension arrangement described above
are $95,300.
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
for Messrs. Baldwin and Topping. Messrs. Dunn, Mohler and Wilson, as well as 30
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 four percent nor more than 12
percent, until the participant's account is fully distributed. For 1996, Mr.
Dunn's account was credited with $76,500, Mr. Mohler's with $42,500, and Mr.
Wilson's with $15,600. 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 of employment or death, either
in a single-sum payment, or in equal annual installments over a period not to
exceed ten years.
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 ten percent 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 1996 are
included under the caption "All Other Compensation" in the Summary Compensation
Table. Messrs. Dunn, Topping, Mohler and Wilson elected to defer a percentage of
their salaries during 1996. 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
for Messrs. Baldwin and Topping. Messrs. Dunn, Mohler and Wilson, as well as 30
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
15
<PAGE>
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
five percent except that interest is pro-rated for accounts that terminate in
mid-year. For 1996, Mr. Dunn's account was credited with $13,500, Mr. Mohler's
with $7,300 and Mr. Wilson's with $5,500. 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 of employment 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. Messrs. Baldwin, Mohler
and Wilson 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
direct 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 directed to the MRA for Messrs. Baldwin, Mohler and Wilson 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 and Dunn. Pursuant to these agreements, Mr. Baldwin serves as
Chairman of the Board and Chief Executive Officer of Mercshares and Merc-Safe
and Mr. Dunn serves as President of Mercshares and President and Chief Operating
Officer of Merc-Safe. Base salaries for 1996 are disclosed in the Summary
Compensation Table. The agreements provide that base salaries will not be less
in any year than in the preceding year. Mr. Baldwin's agreement continues until
February 1, 1999, and may be extended by Mercshares and Merc-Safe until February
1, 2000. The current term of Mr. Dunn's agreement is until December 31, 1999.
His agreement will extend for periods of three years following each annual
anniversary date (but not beyond his normal retirement date) unless such
extension is declined by Mercshares or Merc-Safe or by Mr. Dunn.
Mr. Topping's Executive Employment Agreement, which was similar to those of
Messrs. Baldwin and Dunn, was terminated by mutual agreement effective December
31, 1996, effectuating Mr. Topping's desire to relinquish his executive
management responsibilities as an officer of Mercshares and Merc-Safe. Pursuant
to a new agreement, for a term of five years from January 1, 1997, Mr. Topping
will remain as Vice Chairman of the Board of Directors of Merc-Safe,
concentrating his work on investment services provided by the Trust Division of
Merc-Safe. For these services, he will receive an annual fee of $125,000. He
will also be eligible for the pension and other benefits described above under
"Deferred Compensation and Supplemental Pension Agreements", "Thrift Plan", and
"Cash Balance Pension Plan".
CHANGE OF CONTROL TERMINATION AGREEMENTS
Mercshares has entered into Change of Control Termination Agreements with
Messrs. Baldwin, Dunn 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 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 five years. Mr. Baldwin's Agreement continues until
February 1, 1999, and may be extended by Mercshares until February 1, 2000. Mr.
Dunn's Agreement now has a
16
<PAGE>
three year effective period following December 31, 1996, and is renewed
automatically each year for an additional one year period (or until his 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 $15,500 in addition to
fees of $750 for each Board meeting and $500 for each Committee meeting
attended. The annual retainer is paid each December. All or a portion of the
annual retainer may be paid in the form of Mercshares Common Stock, valued at
the time the retainer is payable. In 1996, one Director received 115 shares of
Common Stock in lieu of cash retainer fees. Directors who are also officers of
Mercshares or its affiliates receive no retainer or 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 or its affiliates, the option to defer the retainer and other
fees. In March, 1996, Mercshares amended and restated the Directors Deferred
Compensation Plan. Prior to the amendment, deferred amounts were invested by
Merc-Safe, as agent, in various securities. Under the amendment and restatement,
at the close of each calendar quarter the sum of cash deferred in that quarter
by a Director is converted to units by dividing such sum by the closing market
price of Mercshares stock and the units are cumulatively credited to the
Director's account. At the close of each calendar quarter, the sum of the
dividends attributable to the Director's account at the beginning of the quarter
is similarly converted to additional units and cumulatively credited. When a
participating Director ceases to serve as a Director, a cash sum is computed by
multiplying the number of units in his account by the closing market price of
Mercshares stock at a time specified in the Plan. This sum is paid in cash to
the Director (or a designated beneficiary) over the period of years (one to ten)
specified by the Director. Any unpaid balance is credited with interest at five
percent. Any Director having a deferred account at the time of the amendment and
restatement could elect to have such account converted to units as described
above. Failing such election, interest at five percent will be paid on the sum
until fully paid out in accordance with the Director's existing deferral
agreement.
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
17
<PAGE>
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.
PROPOSED AMENDMENT
ARTICLES OF INCORPORATION
Mercshares currently has authorized 67,000,000 shares of Common Stock, $2
par value. At January 31, 1997, 47,419,087 shares of Common Stock were
outstanding.
The Board of Directors deems it advisable and recommends amending the
Articles of Incorporation to increase the authorized number of shares of Common
Stock to 130,000,000 shares to assure that an adequate supply of authorized and
unissued shares is available for general corporate needs, including stock splits
or stock dividends, acquisitions of banks and corporations performing related
services, and issuance of shares pursuant to its Omnibus Stock Plan, Dividend
Reinvestment and Stock Purchase and Employee Stock Purchase Plan. Except for
such purposes, there are no present plans for the issuance of any such shares of
Common Stock.
Mercshares has executed agreements for the acquisition of two banks,
expected to be consummated in 1997, involving the issuance of up to an aggregate
of 590,253 shares of Common Stock. Consummation of these transactions will not
require an increase in the authorized Common Stock. From time to time, however,
Mercshares reviews and considers possible acquisitions of banks and corporations
performing related services and further acquisitions may be made in the future
through use of Common Stock.
Normally, the issuance of Common Stock for purposes described above is
within the discretion of the Board of Directors and does not require stockholder
approval, except where such approval is required by Rules of the Nasdaq National
Market.
Mercshares Common Stock has no preemptive rights.
The Board of Directors recommends a vote FOR the proposal to amend the
Articles of Incorporation.
PROPOSAL TO APPROVE AMENDED OMNIBUS STOCK PLAN
The Board of Directors of Mercshares has adopted an amendment of the Omnibus
Stock Plan, and recommends approval of the amended Plan by the stockholders. The
amendment is designed to continue the qualification of the Omnibus Stock Plan as
a "performance-based" plan under Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"). Section 162(m) limits the amount of compensation
paid to each executive officer named in the Summary Compensation Table that may
be deducted for federal tax purposes in any year to $1 million, unless the
compensation qualifies as "performance-based" compensation.
In accordance with Section 162(m), the amendment adds to Section 2.2 of the
Plan a limitation on the number of shares of Common Stock which may be covered
by grants to any employee in any fiscal year. The selected limit is 300,000
shares. The amendment also adds to Section 3.2 of the Plan a description of
performance criteria which may apply to Plan awards. In contemplation of Section
162(m) and recent changes in Rule 16b-3 under the Securities Exchange Act of
1934, the amendment changes Section 3.3(a) of the Plan to accommodate
administration of the Plan by "outside directors" within the meaning of Section
162(m) and "non-employee" directors under Rule 16b-3.
Additional editorial changes are contained in the amendment in order to
update references to the Nasdaq National Market in the calculation of fair
market value (Section 1.7) and to conform provisions governing amendment of the
Plan to Section 162(m), changes in Rule 16b-3 (Article 7) and certain tax
provisions.
The Omnibus Stock Plan, as amended, is set forth in its entirety as Exhibit
A to this Proxy Statement. The description appearing below pertains to the Plan,
as amended.
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An aggregate of 1,935,000 shares of Mercshares authorized but unissued
Common Stock, par value $2.00 per share, are subject to the Omnibus Stock Plan.
On March 10, 1997, the closing price per share of Mercshares Common Stock was
$ . Should any stock option granted under the Omnibus Stock Plan expire, be
cancelled or otherwise terminate prior to its exercise in full, or should any
restricted stock be forfeited, the shares subject to such stock option or such
forfeited restricted stock shall be available for further grants under the
Omnibus Stock Plan.
The Omnibus Stock Plan is administered by the Compensation Committee of the
Board of Directors of Mercshares. It was approved by the stockholders in 1990.
If not sooner terminated by the Board of Directors, it will terminate on
December 12, 1999. For stock options held by the five most highly compensated
executive officers of Mercshares in 1996, reference is made to the Summary
Compensation Table and the Aggregate Options Table. At December 31, 1996,
options for 278,000 shares were held by 9 executive officers of Mercshares, at
exercise prices ranging from $21.875 to $27.625 per share. Options for a total
of 778,723 shares were then held by 305 additional employees at exercise prices
ranging from $21.875 to $27.625 per share. These options were granted in 1995
and 1996. In each case, the exercise price equals the fair market value at the
date of the grant, and the options have a ten year life. The amount and timing
of future awards under the Omnibus Stock Plan are not now determinable. The
maximum number of shares underlying any stock incentive granted to any employee
in any fiscal year will not exceed 300,000. The only awards currently
outstanding are stock options. At December 31, 1996, 793,473 shares of Common
Stock remained available for grants under the Plan.
The Committee may, from time to time, grant incentive stock options,
non-qualified stock options, stock appreciation rights, restricted stock, and
phantom stock units (hereinafter collectively referred to as "Stock Incentives")
under the Omnibus Stock Plan. Grants of Stock Incentives may be made by the
Committee to employees of Mercshares or its affiliates who are "key employees"
taking into account, among other things, their potential contribution to the
long term success of Mercshares and its affiliates and the services rendered or
to be rendered by such individuals. Subject to restrictions noted herein, the
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.
Stock options give the optionee the right to purchase a number of shares of
Common Stock at future dates and at an established price, all as determined by
the Committee on the date of the grant. The price may be the fair market value
of the stock on the date of grant, or such other price as the Committee may
determine, but, in the case of incentive stock options, the price must not be
less than 100% of such market value (110% in the case of grantees owning more
than 10% of Mercshares Common Stock), and in the case of non-qualified stock
options, the price must not be less than par value. The definition of "fair
market value" under the Omnibus Stock Plan is the closing price per share of
Common Stock on the Nasdaq National Market (or alternative market in which the
stock is then traded) on the date the stock is valued pursuant to the Stock
Incentive being issued.
A stock appreciation right under the Omnibus Stock Plan gives the holder the
right to receive, subject to the terms of the grant, stock, cash, or both stock
and cash, in an amount equal to the 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. The Committee determines what portion of the appreciation is paid
in cash or stock and the fair market value of any shares issued in payment.
Stock appreciation rights may only be granted in tandem with stock options;
provided that no more than one stock appreciation right may be granted for each
share of stock subject to a stock option.
Restricted stock issued under the Omnibus Stock Plan is Common Stock issued
subject to such conditions for forfeiture and transfer restrictions as the
Committee determines. Employees to whom restricted stock is granted are entitled
to all other benefits of stockholders, including the receipt of dividends and
voting rights.
Phantom stock units ("PSUs") are equivalent to but not actual shares of
Common Stock which, upon exercise entitle the holder to receive the fair market
value of the underlying stock as of a date determined by
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the Committee. PSUs may be granted only in tandem with restricted stock and no
more than one PSU may be granted per share of restricted stock granted. The
Committee determines the specific terms of the grant, including any vesting
schedule and any payment to the grantee to parallel dividends on the Common
Stock.
Under the Omnibus Stock Plan, the Committee may permit Stock Incentives to
be exercised with Common Stock, including shares of Common Stock previously
acquired pursuant to a Stock Incentive under the Omnibus Stock Plan or pursuant
to another Mercshares plan, or shares acquired pursuant to the pyramiding of
shares received upon the simultaneous surrender and exercise of a Stock
Incentive.
Stock Incentives, other than restricted stock, may not be transferred other
than by will or the laws of descent and distribution. Restricted stock must be
endorsed in blank and deposited with Mercshares until the lapse of any
forfeiture provisions to which such stock is subject. In the event of a tender
offer for Mercshares stock or any share exchange, merger, consolidation or
similar transaction, the Committee or the Mercshares Board of Directions may
take action to effectuate the purposes of the Omnibus Stock Plan, including,
among other things, acceleration or change of exercise dates.
TAX INFORMATION
Some of the stock options issuable under the Omnibus Stock Plan are intended
to constitute "incentive stock options" within the meaning of Section 422 of the
Code; while other stock options granted under the Omnibus Stock Plan will be
"non-qualified stock options." The aggregate fair market value (as of the grant
date of an incentive stock option) of the stock with respect to which incentive
stock options become exercisable for the first time in any calendar year may not
exceed $100,000. Generally, upon the exercise of an incentive stock option, the
optionee will recognize no income for federal income tax purposes. The
difference between the exercise price of the incentive stock option and the fair
market value of the shares subject to the option at the time of exercise is an
item of tax preference which may require payment of an alternative minimum tax.
On the sale of shares acquired by exercise of an incentive stock option
(assuming that the sale does not occur within two years of the date of grant of
the option or within one year from the date of exercise), any gain will be taxed
to the optionee as long-term capital gain. In contrast, except as noted below,
upon the exercise of a non-qualified option, the optionee recognizes taxable
income (subject to withholding) in an amount equal to the difference between the
then fair market value of the shares on the date of exercise and the exercise
price. Upon any subsequent sale of such shares by the optionee, any difference
between the sale price and the optionee's tax basis in the shares will be
treated generally as capital gain or loss.
Mercshares will not be entitled to a tax deduction upon the grant or
exercise of an incentive stock option, or upon the sale of any shares acquired
pursuant to such exercise, except that a tax deduction may be available to
Mercshares if the employee sells the shares so acquired within two years of the
date the option was granted or one year of the date of exercise. Upon the
exercise of a non-qualified stock option, Mercshares generally is entitled to a
deduction for federal income tax purposes in an amount equal to the income
recognized by the optionee, provided Mercshares complies with applicable tax
withholding requirements.
Upon the exercise of a stock appreciation right, the grantee recognizes
taxable income (subject to withholding) in an amount equal to any cash received
plus an amount equal to the fair market value of any stock received. Mercshares
is entitled to a deduction for federal tax purposes in an amount equal to the
income recognized by the grantee.
At the time restricted stock granted under the Omnibus Stock Plan is either
transferable or no longer subject to a substantial risk of forfeiture, the
grantee recognizes taxable income (subject to withholding) in an amount equal to
the difference between the then fair market value of the stock and the amount
paid for the stock (if any). However, the grantee may make an election to be
taxed as of the date that restricted stock is granted, in which case the grantee
recognizes taxable income (subject to withholding) in an amount equal to the
difference between the fair market value of the stock as of the grant date and
the amount paid for stock (if any).
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The grantee of a PSU recognizes taxable income (subject to withholding) at
the time the PSU becomes exercisable in an amount equal to the then fair market
value of Mercshares Common Stock, unless the terms under which the PSU was
granted require forfeiture of the restricted stock to which it is related upon
exercise of the PSU. If the terms under which the PSU was granted do require
forfeiture of the restricted stock to which it is related, the grantee does not
recognize income until the PSU is actually exercised. Mercshares is entitled to
a deduction for federal tax purposes with respect to a PSU in an amount equal to
the income recognized by the grantee.
The Board of Directors recommends a vote FOR the approval of the amended
Omnibus Stock Plan.
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 1997. 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 1997.
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 18. In addition, the Board of Directors amended the Bylaws to confirm
the pre-existing Mercshares policy and practice that no officer of Mercshares
may serve as a member of the Audit Committee or Compensation Committee of the
Board of Directors.
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.
VOTING INFORMATION
The election of Directors requires a plurality of votes cast at the meeting.
The approval of the amendment to the Articles of Incorporation requires the
affirmative vote of the holders of two-thirds of the outstanding shares of
Common Stock.
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The approval of the amended Omnibus Stock Plan and the ratification of the
appointment of Coopers & Lybrand, L.L.P. as the independent certified public
accountants each 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. With
respect to approval of the amendment of the Articles of Incorporation, however,
which requires a vote of two-thirds of all shares outstanding, an abstention
will have the same effect as a negative vote. "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.
The Bylaws of Mercshares provide that any stockholder proposing to bring
business, including any nomination for election of a Director, before a meeting
of stockholders must give prior written notice thereof. The notice must be given
to and received by the Secretary of Mercshares (at the address set forth in the
notice of meeting accompanying this proxy statement) not less than 20 days nor
more than 30 days prior to the meeting (or, with respect to notice of 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' notice or prior disclosure of the date of
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.
Public disclosure of the date of the 1997 Annual Meeting was given on
February 11, 1997, in the Quarterly Report to stockholders for the period ended
December 31, 1996. There were no proposals submitted for inclusion in the
Mercshares proxy materials for the Annual Meeting. Accordingly, any stockholder
notice of proposed business at the Annual Meeting must be received by the
Secretary between March 30, 1997, and April 10, 1997. Each notice must provide
the name and address of the stockholder and the class and number of shares of
Common Stock of Mercshares which are beneficially owned by the stockholder. For
matters other than proposals to nominate any person for election as a Director,
the notice must include a brief description of the business desired to be
brought before the meeting and any material interest of the stockholder in such
business. With respect to any stockholder proposal to nominate any person for
election as a Director, the notice must include (i) the name, age, business
address and residence address of the nominee, (ii) the nominee's principal
occupation or employment, (iii) the class and number of shares of Common Stock
of Mercshares which are beneficially owned by the nominee, and (iv) any other
information relating to the nominee that is required to be disclosed in
solicitations for proxies for election of directors pursuant to the proxy
regulations under the Securities Exchange Act of 1934.
ANNUAL REPORT OF MERCSHARES
Copies of the Annual Report of Mercshares, for the year ended December 31,
1996, were mailed on or about March 28, 1997, to those persons who were record
holders of stock of Mercshares on March 21, 1997, the record date referred to
above.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any proposals of stockholders to be presented for inclusion in Mercshares
proxy materials for the 1998 Annual Meeting of Stockholders must be received by
the Secretary of Mercshares at Two Hopkins Plaza, Baltimore, Maryland 21201 on
or before November 27, 1997. Such proposals are subject to and must be made in
accordance with the proxy regulations under the Securities Exchange Act of 1934.
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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.
ALAN D. YARBRO
GENERAL COUNSEL AND SECRETARY
March 28, 1997
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EXHIBIT A
MERCANTILE BANKSHARES CORPORATION
OMNIBUS STOCK PLAN
(AS AMENDED)
ARTICLE 1
OMNIBUS STOCK PLAN
For the purposes of this Plan, the definitions set forth in Sections 1.1
through 1.22 shall be applicable.
SECTION 1.1 AFFILIATE. "Affiliate" shall mean: (i) any corporation in
which MBC owns, directly or indirectly, within the meaning of Section424(f) of
the Code, 50% or more of the total combined voting power of all classes of stock
of such corporation on a Grant Date; and (ii) any parent corporation of MBC,
within the meaning of Section424(e) of the Code.
SECTION 1.2 BOARD. "Board" shall mean the Board of Directors of MBC.
SECTION 1.3 CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any regulations issued thereunder.
SECTION 1.4 COMMITTEE. "Committee" shall mean the Committee appointed,
pursuant to Section 3.3 of the Plan, to administer the Plan.
SECTION 1.5 DELIVERY. "Delivery" shall mean the transfer of possession
from MBC to Grantee of certificates for shares of Restricted Stock, at such time
as such shares, in accordance with the provisions of a Restricted Stock
Agreement, are no longer subject to forfeiture.
SECTION 1.6 EXERCISE DATE. "Exercise Date" shall mean the date on which an
Option, SAR, or PSU is exercised, determined in accordance with the provisions
of an Option Agreement, Restricted Stock Agreement, or such rules and
regulations as the Committee may adopt.
SECTION 1.7 FAIR MARKET VALUE. "Fair Market Value" of a share of Stock on
a date shares of Stock are to be valued ("valuation date") in accordance with
the provisions of an Option Agreement or a Restricted Stock Agreement shall
mean: (i) the last reported sale price per share of Stock, regular way, on the
valuation date, or in case no such sale takes place, the average of the closing
bid and asked prices, regular way, on such date, in either case as reported in
the principal consolidated transaction reporting system for securities listed or
admitted to trading on a national securities exchange or included for quotation
on the Nasdaq National Market ("NNM"); or (ii) if the Stock is not so listed or
admitted to trading or included for quotation on the valuation date, the last
quoted price, or if the Stock is not quoted the average of the high bid and low
asked prices, regular way, on such date, in the over-the-counter market, as
reported by the NASD Automated Quotations System, or if such system is no longer
in use, the principal other automated quotation system then in use; or (iii) if
the Stock is not quoted by any such organization, the average of the closing bid
and asked prices, regular way, on the valuation date, as furnished by a
professional market maker making a market in the Stock as selected in good faith
by the Committee; provided, however, that the determination of fair market value
shall be made in good faith in accordance with the Code. If a valuation date is
not a trading day, the determination shall be made as of the next preceding
trading day. "Trading day" shall mean a day on which public trading of
securities occurs and is reported in the principal consolidated reporting system
referred to above, or if the Stock is not listed or admitted to trading on a
national securities exchange or included for quotation on the NNM, any day other
than a Saturday, a Sunday or a day on which banking institutions in the State of
New York are closed.
SECTION 1.8 GRANTEE. "Grantee" shall mean a Key Employee who has been
granted an Option, SAR, PSU, or Restricted Stock pursuant to the provisions of
the Plan.
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SECTION 1.9 GRANT DATE. "Grant Date" means the date on which the Committee
formally acts to grant an Option, SAR, PSU, or Restricted Stock to a Grantee.
SECTION 1.10 ISO. "ISO" shall mean an option to acquire Stock that is an
incentive stock option as defined in Section422(b) of the Code.
SECTION 1.11 KEY EMPLOYEE. "Key Employee" shall mean any employee of MBC
or an Affiliate whom the Committee determines to be a Key Employee, taking into
account the nature of the services rendered or to be rendered by the particular
employee, the employee's potential contribution to the long-term success of MBC
or an Affiliate, and such other factors as the Committee shall deem relevant.
SECTION 1.12 MBC. "MBC" shall mean Mercantile Bankshares Corporation.
SECTION 1.13 NON-ISO. "Non-ISO" shall mean an option to acquire Stock that
is not an ISO.
SECTION 1.14 OPTION. "Option" shall mean an ISO and/or a Non-ISO.
SECTION 1.15 OPTION AGREEMENT. "Option Agreement" shall mean an agreement
between MBC (or an Affiliate) and a Grantee memorializing the terms and
conditions of an Option granted under Section 4.1 of the Plan, and any SAR
granted in tandem therewith.
SECTION 1.16 OPTION PRICE. "Option Price" shall mean the price per share
of Stock at which an option may be exercised.
SECTION 1.17 PLAN. "Plan" shall mean this Mercantile Bankshares
Corporation Omnibus Stock Plan.
SECTION 1.18 PSU. "PSU" shall mean a phantom stock unit, which, upon
exercise thereof, shall entitle Grantee to the Fair Market Value of a share of
Stock determined as of such date as the Committee shall specify.
SECTION 1.19 RESTRICTED STOCK. "Restricted Stock" shall mean Stock granted
to and registered in the name of a Grantee pursuant to Section 5.1 of the Plan,
but that is non-transferable and subject to forfeiture in accordance with the
provisions of Article 5 of the Plan.
SECTION 1.20 RESTRICTED STOCK AGREEMENT. "Restricted Stock Agreement"
shall mean an agreement between MBC (or an Affiliate) and a Grantee
memorializing the terms and conditions imposed on Restricted Stock issued
pursuant to the provisions of Section 5.1 of the Plan, and any PSUs granted in
tandem therewith.
SECTION 1.21 SAR. "SAR" shall mean a stock appreciation right, which, upon
exercise thereof, shall entitle Grantee to the amount by which the Fair Market
Value of a share of Stock on the Exercise Date exceeds the Fair Market Value of
a share of Stock on the Grant Date.
SECTION 1.22 STOCK. "Stock" shall mean shares of MBC's authorized but
unissued common stock, par value of $2.00 per share.
ARTICLE 2
PURPOSE AND SCOPE
SECTION 2.1 PURPOSE. The purpose of the Plan is to promote the long-term
success of MBC and its Affiliates by providing an incentive to Key Employees of
MBC and its Affiliates and by encouraging Key Employees to acquire a proprietary
interest in MBC. The opportunity to acquire a proprietary interest in MBC
through the grant of Options, SARs, Restricted Stock, and PSUs will provide Key
Employees with additional motivation to further the profitable growth of MBC and
its Affiliates and will encourage them to remain in the employ of MBC or its
Affiliates. The Plan applies only to Options, SARs, Restricted Stock, and PSUs
granted under the Plan and shall not apply to any Option, SAR, Restricted Stock,
or PSU granted under any other plan of MBC or its Affiliates.
SECTION 2.2 SCOPE. The aggregate number of shares of Stock that may be
issued under the Plan shall not exceed 1,935,000 shares, unless such number of
shares is adjusted as provided in Section 6.1 hereof. If an Option expires, is
cancelled, or terminates for any reason without having been exercised in full,
or if the
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number of shares of Stock subject to the Option is reduced by reason of the
exercise of a SAR granted in tandem therewith, or Restricted Stock is forfeited,
the shares of Stock as to which the Option was not exercised and the Restricted
Stock forfeited shall become available for issuance under the Plan. No employee
may, in any fiscal year, be awarded grants covering more than an aggregate of
300,000 shares of Stock (the "Limit"), provided, however, that (i) Stock
underlying a tandem grant of Options and SARs, or (ii) Restricted Stock and
tandem PSUs shall, in either case, be counted only once in calculating the
Limit. The Limit shall be adjusted to reflect any adjustment of shares of Stock
under Section 6.1.
SECTION 2.3 ELIGIBILITY AS GRANTEE. Only a Key Employee may be a Grantee;
provided that no member of the Committee may be a Grantee.
SECTION 2.4 EFFECTIVE DATE AND DURATION OF PLAN. The Plan shall become
effective upon its adoption by the Board; provided that no Option, SAR, or PSU
may be exercised, nor may there be any Delivery of share certificates, prior to
the approval of the Plan by the shareholders of MBC. Unless previously
terminated by the Board, the Plan shall terminate on the tenth anniversary of
its adoption by the Board.
ARTICLE 3
ADMINISTRATION OF PLAN
SECTION 3.1 ADMINISTRATION BY COMMITTEE. The Plan shall be administered by
a committee of the Board appointed pursuant to the provisions of Section 3.3 of
the Plan.
SECTION 3.2 POWERS OF COMMITTEE. The Committee shall have full and final
authority, consistent with the exercise of the maximum discretion permitted by
law:
(i) to identify, from time to time, Key Employees;
(ii) to grant Options, SARs, PSUs, and Restricted Stock, from time to
time, to Key Employees;
(iii) to determine the time or times at which Options, SARs, PSUs, and
Restricted Stock shall be granted;
(iv) to determine the duration, terms and provisions of Options, Option
Agreements, SARs, Restricted Stock Agreements, and PSUs, including but not
limited to, any vesting or other restrictions;
(v) to condition the exercise of any Option, SAR, PSU, or the Delivery
of share certificates, on the attainment of specified performance goals by
the Key Employee or by MBC or an Affiliate;
(vi) to restrict the sale or otherwise provide for the repurchase of
Stock acquired pursuant to the exercise of an Option or SAR or in accordance
with the provisions of a Restricted Stock Agreement;
(vii) to determine the Fair Market Value of Stock;
(viii) subject to the provisions of Section 4.2, to determine the Option
Price;
(ix) to interpret the Plan, Options, Option Agreements, SARs, PSUs and
Restricted Stock Agreements;
(x) to prescribe, amend and rescind rules and regulations relating to
the Plan; and
(xi) to make all other determinations, orders and decisions which the
Committee deems necessary or advisable for the administration of the Plan.
With respect to any grant or award under the Plan, the Committee may
condition the grant, award, or the vesting or exercisability of the grant or
award, on one or more pre-established, objective performance goals. Such goals
may include (without limitation) performance criteria such as earnings per
share, return on equity, return on assets, income or net income, operating
income or net operating income, sub-categories or combinations of the foregoing,
and any other performance criteria contemplated by Section 162(m) of the Code
and regulations thereunder.
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All determinations made, interpretations rendered, rules and regulations
adopted, and other actions taken by the Committee, pursuant to this Section 3.2,
shall be conclusively binding upon MBC, an Affiliate, a Grantee, and upon all
other persons for all purposes.
SECTION 3.3 COMMITTEE.
(a) APPOINTMENT OF COMMITTEE. The Board shall appoint a committee consisting
of at least three members of the Board to administer the Plan. The Committee may
be the Compensation Committee of the Board, or a subcommittee of the
Compensation Committee, or such other committee as the Board may designate. The
Board shall designate one member of the Committee to serve as Chairman of the
Committee, and may, from time to time, in its sole and exclusive discretion,
rescind its prior designation of Chairman and designate a different member of
the Committee as Chairman. The Board may require that members of the Committee
be "outside directors" within the meaning of Section 162(m) of the Code and
"non-employee directors" as defined in Rule 16b-3 of the Securities and Exchange
Commission, as amended from time to time. The Board may from time to time remove
members from, or add members to, the Committee. Vacancies on the Committee,
however caused, shall be filled by the Board.
(b) COMMITTEE MEETINGS. The Committee shall hold meetings at such times and
places as it may determine. The acts of a majority of the Committee during a
meeting, at which at least three members of the Board who are members of the
Committee are present, or acts reduced to and approved in writing by a majority
of the members of the Committee (including at least three members of the Board
who are members of the Committee) without a meeting, shall be the valid acts of
the Committee.
(c) MINUTES AND REPORTS OF COMMITTEE. The Committee shall keep minutes of
its proceedings and shall advise the Board of all decisions, actions, and
determinations made by the Committee. The Committee shall file with the Board,
at least annually, a report that shall state the total number of shares of Stock
subject to Options; the total number of SARs and PSUs granted; the total number
of shares of Restricted Stock granted under the Plan; the total number of shares
of Stock issued pursuant to the exercise of any Option or SAR; the total number
of shares of Stock as to which there has been Delivery of share certificates
under the Plan; and the amount of cash paid, if any, upon the exercise of a PSU
or SAR; all from the inception of the Plan and from the date of the last report
of the Committee.
SECTION 3.4 LIABILITY LIMITED. To the maximum extent permitted by law, no
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan and/or any Option,
SAR, or PSU granted, Stock or Restricted Stock issued, or share certificates as
to which there has been Delivery, under the Plan.
SECTION 3.5 INDEMNIFICATION. To the maximum extent permitted by law, the
members of the Board and Committee shall be indemnified by MBC in respect of all
their activities under the Plan.
ARTICLE 4
OPTIONS AND TANDEM SARS
SECTION 4.1 GRANT OF OPTIONS TO KEY EMPLOYEES. The Committee may grant
Options to Key Employees for such number of shares of Stock as the Committee may
determine.
4.2 Option Price.
(a) ISOS GRANTED TO NON-TEN PERCENT OWNERS. The Option of Stock subject to
an ISO shall not be less than the Fair Market Value of the Stock on the Grant
Date.
(b) ISOS GRANTED TO TEN PERCENT OWNERS. If, immediately before an ISO is
granted, a Key Employee owns (within the meaning of Section422(b)(6) of the
Code, after the application of the attribution rules contained in Section 424(d)
of the Code) more than 10% of the total combined voting power of all classes of
stock of either MBC or an Affiliate, the Option Price of Stock subject to an ISO
shall not be less than 110% of the Fair Market Value of the Stock on the Grant
date.
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<PAGE>
(c) NON-ISOS. The Option Price of Stock subject to a Non-ISO shall be
determined by the Committee and may be less than the Fair Market Value of the
Stock on the Grant Date but not less than the par value of the Stock.
SECTION 4.3 GRANT OF TANDEM SARS. For each share of Stock as to which an
Option is granted, the Committee may grant one SAR. All SARs shall be granted in
tandem with either ISOs or Non-ISOs and, if granted in tandem with an ISO, shall
conform to the requirements of Section422 of the Code with respect to the grant
and exercise of alternative rights issued in connection with ISOs.
SECTION 4.4 EXERCISE OF OPTIONS. Except as provided herein, each Option
shall be exercisable in accordance with the provisions of the Option Agreement,
and/or such rules and regulations as the Committee may have prescribed, and /or
such determinations, orders, or decisions as the Committee may have made. If an
Option is not immediately exercisable in full, the Committee may, in its
discretion, accelerate the time when such Option may be exercised. MBC or an
Affiliate may make or guarantee a loan to the Grantee to assist in the payment
of the Option Price.
SECTION 4.5 EXERCISE OF SARS. SARs shall be exercisable only to the extent
the Option to which they relate is exercisable; provided, however, that the
exercise of SARs may be limited to periods specified for the exemption provided
by Rule 16b-3 under the Securities Exchange Act of 1934. A SAR may not be
exercised or be deemed to have been exercised when the Fair Market Value of a
share of Stock on the Grant Date exceeds the current Fair Market Value of the
Stock.
SECTION 4.6 OPTION AGREEMENT. As condition of the grant of an Option, MBC
and the Key Employee shall execute an Option Agreement that shall incorporate
the terms of the Plan, specify the Option Price, the number of shares of Stock
subject to the Option, and the number of any related SARs, and contain such
other terms and conditions as the Committee may determine. If the Option granted
is an ISO, the Option Agreement shall also contain such provisions as are
required by the Code.
ARTICLE 5
RESTRICTED STOCK AND TANDEM PSUS
SECTION 5.1 ISSUANCE OF RESTRICTED STOCK. The Committee may grant such
number of shares of Restricted Stock to a Key Employee as the Committee may
determine. The grant of Restricted Stock shall be subject to the provisions of
the Plan and such other terms and conditions as the Committee may prescribe.
Each certificate for Restricted Stock shall be registered in the name of the
Grantee and deposited by him, together with a stock power endorsed in blank,
with MBC.
SECTION 5.2 GRANT OF TANDEM PSUS. For each share of Restricted Stock
issued, the Committee may grant one PSU. All PSUs shall be granted in tandem
with Restricted Stock.
SECTION 5.3 EXERCISE OF PSUS. PSUs shall be exercisable only as provided
in the Restricted Stock Agreement to which they are subject, and such other
rules and regulations as the Committee may have adopted; provided, however, that
the exercise of PSUs may be limited to periods specified for the exemption
provided by Rule 16b-3 under the Securities Exchange Act of 1934.
SECTION 5.4 RESTRICTED STOCK AGREEMENT. As a condition of the grant of
Restricted Stock or the grant of Restricted Stock and tandem PSUs, the Key
Employee and MBC shall execute a Restricted Stock Agreement that shall
incorporate the provisions of the Plan, specify the number of shares of
Restricted Stock granted and the number of any tandem PSUs, and contain such
other terms and conditions as the Committee may determine. Except for such
restrictions as are imposed by the Restricted Stock Agreement, the Grantee shall
have all the rights of a shareholder of Stock. At such time as shares of
Restricted Stock are no longer subject to forfeiture in accordance with the
provisions of a Restricted Stock Agreement, Grantee may require Delivery by MBC
of share certificates representing the number of shares of Stock that are not
subject to forfeiture; provided that, in lieu of Delivery of all or some of such
share certificates, a Grantee, who is also a Grantee of PSUs related to such
shares, may elect to exercise such PSUs.
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<PAGE>
ARTICLE 6
STOCK ADJUSTMENTS
SECTION 6.1 CHANGES IN CAPITAL STRUCTURE. In the event of a
reclassification, recapitalization, combination, or exchange of stock, stock
split, stock dividend, or other similar event affecting Stock, the number and
class of shares of Stock issued, the number of SARs or PSUs, the number and
class of shares of stock which may be issued upon exercise of Options or SARs
previously granted, and the price per share payable upon exercise of Options,
SARs, or PSUs, or the Delivery of Restricted Stock shall be equitably adjusted
by the Committee to reflect the change. No fractional shares of stock shall be
issued under the Plan on account of such adjustments.
SECTION 6.2 SALE, MERGER OR TENDER OFFER. In the event of any proposed
merger, consolidation, share exchange, or similar transaction to which MBC would
be a party, or in the case of a tender or exchange offer for stock of MBC, the
Committee or the Board may take such action as is deemed appropriate to
effectuate the purposes of this Plan and to protect the Grantees of Options,
SARs, PSUs, and Restricted Stock, which action may include, but without
limitation, any one or more of the following: acceleration or change of the
Exercise Dates of any Option, SAR or PSU, or the date of Delivery of Restricted
Stock; arrangements with Grantees for the payment of appropriate consideration
to them for the cancellation and surrender of any Option, SAR, PSU, or
Restricted Stock; and in any case where equity securities other than Stock of
MBC are proposed to be delivered in exchange for or with respect to Stock of
MBC, arrangements providing that any Option, SAR or PSU shall become one or more
Options, SARs, or PSUs with respect to such other equity securities.
SECTION 6.3 LIQUIDATION OR DISSOLUTION. If MBC dissolves and liquidates
(other than pursuant to a plan of merger or reorganization), then
notwithstanding any restrictions on exercise set forth in this Plan or any
Option Agreement or Restricted Stock Agreement; (i) each Grantee of an Option,
SAR or PSU shall have the right to exercise his Option, SAR, or PSU, and each
Grantee of Restricted Stock shall have the right to require Delivery of share
certificates representing such Stock, at any time up to ten days prior to the
effective date of such liquidation and dissolution; and (ii) the Committee or
the Board may make arrangements with Grantees for the payment of appropriate
consideration to them for the cancellation and surrender of any Option, SAR,
PSU, or Restricted Stock that is so cancelled or surrendered at any time up to
ten days prior to the effective date of such liquidation and dissolution. The
Committee or the Board may establish a different period for such exercise,
Delivery, cancellation, or surrender by notice to the Grantee, and it may
establish limitations on exercise, Delivery, cancellation, or surrender to avoid
subjecting the Grantee to liability under Section 16(b) of the Securities
Exchange Act of 1934. Any Option, SAR, or PSU not so exercised, cancelled, or
surrendered shall terminate on the last day for exercise prior to such effective
date; and any Restricted Stock as to which there has not been such Delivery of
share certificates or that has not been so cancelled or surrendered, shall be
forfeited on the last day prior to such effective date.
SECTION 6.4 LIMITATION ON RIGHTS OF GRANTEE. Except as expressly provided
in Section 5.4, 6.1, 6.2 or 6.3 hereof, the Grantee of an Option, SAR, PSU, or
Restricted Stock shall have no rights by reason of the issuance or grant of (i)
shares of Stock or Restricted Stock of MBC pursuant to the Plan, (ii) additional
shares of stock of MBC (regardless of class or whether issued pursuant to the
Plan), (iii) any other security or debenture convertible into stock of MBC, or
(iv) any other equity security, including issuance pursuant to a plan of merger,
consolidation, or statutory share exchange, and no adjustment by reason thereof
shall be made with respect to the number of shares of Stock subject to an Option
or SAR, or with respect to the number of shares of Restricted Stock or PSUs
granted, or an Option Price or the consideration to be received upon the
exercise of a SAR or PSU.
SECTION 6.5 RIGHTS OF MBC. Neither the grant of an Option, SAR, PSU, or
Restricted Stock, nor the issuance of Stock pursuant to the exercise of an
Option or SAR, nor the Delivery of share certificates pursuant to the Plan shall
affect in any way the right or power of MBC to issue additional shares of Stock;
to make adjustments, reclassifications, reorganizations or changes in its
capital or business structure; to participate in a merger, consolidation, or
share exchange with another corporation; or to dissolve, liquidate, or sell or
transfer all or any part of its business or assets. In making any adjustment or
taking any action under this
A-6
<PAGE>
Article 6, or in determining that no such adjustment or action is appropriate,
the Committee and the Board may rely upon the advice of counsel and accountants
of MBC and the determination shall be conclusive.
ARTICLE 7
AMENDMENT OF THE PLAN
The Board may at any time terminate, suspend, or amend the Plan. The Board
may require any Plan amendments to be submitted for approval by the stockholders
of MBC in its discretion, including but not limited to cases in which such
approval is deemed appropriate for compliance with Section 162(m) or other
provisions of the Code, or to secure exemption from Section 16(b) of the
Securities Exchange Act of 1934.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1 NON-TRANSFERABILITY OF OPTIONS, SARS AND PSUS. No Option, SAR,
or PSU granted hereunder shall be transferable otherwise than by will or the
laws of descent and distribution. During the lifetime of the Grantee, an Option,
SAR, or PSU may be exercised only by him or, during the period he is under a
legal disability, by his guardian or legal representative.
SECTION 8.2 LEGAL RESTRICTIONS. MBC will not be obligated to issue shares
of Stock or to undertake Delivery of share certificates if counsel to MBC
determines that such issuance or Delivery would violate any law or regulation of
any governmental authority or any agreement between MBC and any securities
association or exchange upon which the Stock is traded. In connection with any
Stock issuance or Delivery of share certificates, the person acquiring the
shares shall, if requested by MBC, give assurances satisfactory to counsel to
MBC regarding such matters as MBC may deem desirable to assure compliance with
all legal requirements. MBC shall in no event be obliged to take any action in
order to cause the exercise of any Option, SAR, or PSU.
SECTION 8.3 MODIFICATION, EXTENSION, AND RENEWAL OF RIGHTS. Subject to the
terms and conditions of the Plan and any Option Agreement, the Committee may
modify, extend or renew outstanding Options, SARs, or PSUs, or accept the
surrender of outstanding Options, SARs, and PSUs to the extent not previously
exercised, and authorize the granting of new Options, SARs, and PSUs in
substitution therefor. The Committee may not change the terms or conditions
attached to any outstanding Option, SAR, PSU, or share of Restricted Stock in a
manner that would adversely affect the rights of the Grantee without the express
written consent of the Grantee unless so permitted by the terms of the Option
Agreement or Restricted Stock Agreement.
SECTION 8.4 APPLICATION OF FUNDS. The proceeds received by MBC from the
sale of Stock pursuant to the exercise of Options shall be used for its general
corporate purposes.
SECTION 8.5 COMPLIANCE WITH SECURITIES LAW. MBC may require that a
Grantee, as a condition to exercise of the Option, and as a condition of
Delivery of any share certificate, provide to MBC, at the time of each such
exercise and each such Delivery, a written representation that the shares of
Stock being acquired shall be acquired by the Grantee solely for investment and
will not be sold or transferred without registration or the availability of an
exemption from registration under the Securities Act of 1933 and applicable
state securities laws. MBC may also require that a Grantee submit other written
representations which will permit MBC to comply with federal and applicable
state securities laws in connection with the issuance of the Stock, including
representations as to the knowledge and experience in financial and business
matters of the Grantee and his ability to bear the economic risk of his
investment. MBC may require that the Grantee obtain a "purchaser representative"
as that term is defined in applicable federal and state securities laws. The
stock certificates for any shares of Stock issued pursuant to this Plan may bear
a legend restricting transferability of the shares of Stock unless such shares
are registered or an exemption from registration is available under the
Securities Act of 1933 and applicable state securities laws. MBC may notify its
transfer agent to stop any transfer of shares of Stock not made in compliance
with these restrictions.
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<PAGE>
SECTION 8.6 PLAN SUBJECT TO CHARTER AND BY-LAWS. This plan is subject to
the Charter and By-laws of MBC, and any applicable federal or state laws, rules
or regulations.
SECTION 8.7 GENDER. As used herein the masculine gender shall include the
feminine as the identity of an employee may require.
SECTION 8.8 GOVERNING LAW. The validity, interpretation and administration
of the Plan, Option Agreements, Restricted Stock Agreements, and of any rules,
regulations, determinations or decisions made thereunder, and the rights of any
and all persons having or claiming to have any interest therein or thereunder,
shall be determined exclusively in accordance with the laws of the State of
Maryland, without regard to its conflict of laws rules and principles. Without
limiting the generality of the foregoing, the period within which any action in
connection with the Plan must be commenced shall be governed by the laws of the
State of Maryland without regard to the place where the act or omission
complained of took place, the residence of any party to such action or the place
where the action may be brought.
SECTION 8.9 HEADINGS. The headings in this Plan are for reference purposes
only and shall not affect the meaning or interpretation of the Plan.
SECTION 8.10 NOTICES. All notices and other communications made or given
pursuant to this Plan shall be in writing and shall be sufficiently made or
given if hand delivered or mailed by certified mail, addressed to the employee
at the address contained in the records of MBC or an Affiliate, or to MBC for
the attention of its Secretary at its principal office.
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<PAGE>
The Board of Directors recommends a vote FOR Proposals 1, 2, 3 and 4.
<TABLE>
<S> <C> <C> <C>
1. Election of Directors FOR all nominees [X] WITHHOLD AUTHORITY to vote [X] *EXCEPTIONS [X]
listed below for all nominees listed below
</TABLE>
Nominees: H. Baldwin, T. Bancroft, R. Berndt, J. Block, W. Brody, G. Bunting,
E. Dunn, M. Grass, F. Hrabowski, B. Jenkins, R. Kinsley, R. Kunisch,
W. McCarthy, M. Offit, C. Poindexter, W. Richardson, D. Shepard, C. Zamoiski
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and strike a line through that nominee's name.)
<TABLE>
<CAPTION>
2. Approval of the Amendment to Articles of Incorporation. 3. Approval of the Mercantile Bankshares Corporation Omnibus Stock
Plan as amended.
<S> <C> <C> <C> <C> <C>
FOR [X] AGAINST [X] ABSTAIN [X] FOR [X] AGAINST [X] ABSTAIN [X]
<CAPTION>
4. Ratification of appointment of Coopers & Lybrand, L.L.P. 5. Upon such other matters as may properly come before the
as the independent certified public accountants for meeting.
Mercshares.
<S> <C> <C> <C> <C> <C>
FOR [X] AGAINST [X] ABSTAIN [X] Address Change [X]
and/or Comments
</TABLE>
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:___________________________, 1997
_______________________________________
Signature
_______ _______________________________________
Sign, Date, and Return the Proxy Card Votes MUST be indicated
Promptly Using the Enclosed Envelope. (x) in Black or Blue Ink. [X]
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 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 30, 1997, 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,
for the approval of the amendment to the Articles of Incorporation, for the
approval of the Omnibus Stock Plan, as amended, 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.
MERCANTILE BANKSHARES CORPORATION
P.O. BOX 11023
NEW YORK, N.Y. 10203-0023
<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 30, 1997.
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!
<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 30, 1997.
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!
