SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MERCANTILE BANKSHARES CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
MERCANTILE BANKSHARES CORPORATION
TWO HOPKINS PLAZA
BALTIMORE, MARYLAND 21201
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Mercantile Bankshares Corporation
("Mercshares") will be held at 10:30 a.m. on April 26, 2000, in the Boardroom of
Mercantile-Safe Deposit and Trust Company, Two Hopkins Plaza, Baltimore,
Maryland, for the following purposes:
1.To elect five Class I Directors to serve until the 2003 Annual Meeting of
Stockholders, and until their successors are elected and have qualified.
2.To ratify the appointment of PricewaterhouseCoopers LLP as independent
public accountants to audit the financial statements of Mercshares for
2000.
3. To transact such other business as may be properly brought before the
meeting or any adjournments thereof.
Only stockholders of record at the close of business on March 17, 2000,
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 24, 2000
<PAGE>
MERCANTILE BANKSHARES CORPORATION
PROXY STATEMENT
This statement is furnished in connection with the solicitation of proxies
by Mercantile Bankshares Corporation ("Mercshares") to be used in voting at the
Annual Meeting of Stockholders on April 26, 2000, and at any adjournments
thereof.
Holders of shares of Common Stock of Mercshares ("Common Stock") of record
at the close of business on March 17, 2000, 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, 2000, entitled to vote is
68,608,717 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 five persons named below as
nominees to serve as Class I Directors until the 2003 Annual Meeting of
Stockholders, and until their successors are elected and have qualified, and for
the ratification of the appointment of auditors.
ELECTION OF DIRECTORS
The number of Directors of Mercshares is currently fixed at 13. Pursuant to
Maryland law, the Board of Directors is divided into three classes. Five Class I
Directors are nominated for election at this year's Annual Meeting to serve for
three year terms until the Annual Meeting in 2003 and until their successors are
elected and qualify. Class II and Class III Directors serve initially until,
respectively, the 2001 and 2002 Annual Meetings of Stockholders. Henceforth,
each Class of Directors will be elected to serve for three year terms. Officers
are elected annually by the Board to serve for such periods of time as the Board
determines.
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 for Mr. Friedman,
who was elected a Director by the Board of Directors on September 14, 1999.
The Board of Directors of Mercshares meets regularly five times each year
and is subject to call for special meetings. The Board met at its five regular
meetings in 1999. The Executive Committee of the Board of Directors held no
meetings in 1999. The members of this Committee are indicated in the list of
Directors below.
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 Directors 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 1999. The
Audit Committee members also serve as the audit committee of Merc-Safe (the lead
bank affiliate of Mercshares) which had four meetings in 1999. Recently adopted
rules of the Securities and Exchange Commission and Nasdaq are expected to
affect the scope of the Audit Committee's responsibilities and the frequency of
its meetings in the future.
The Compensation Committee performs the functions described in the Report
of the Compensation Committee. It held three meetings in 1999.
1
<PAGE>
The names of the nominees and Directors, their ages as of April 26, 2000,
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, 2000, and certain other
information, are set forth below. In some instances, "beneficial ownership" of
shares may be deemed to exist by reason of voting or investment power even
though other persons, such as a family trust or family members, have the
economic interest in the shares, and in certain instances "beneficial ownership"
may be disclaimed by a nominee or Director.
NOMINEES FOR ELECTION AS DIRECTORS
TERM EXPIRING 2003 ANNUAL MEETING
<TABLE>
<CAPTION>
NAME AGE INFORMATION
- ------------------------- ----- ---------------------------------------------------------------------
<S> <C> <C>
George L. Bunting, Jr. 59 PRESIDENT AND CHIEF EXECUTIVE OFFICER, BUNTING MANAGEMENT
GROUP, a private financial management company. Mr. Bunting has
occupied this position since 1991. He is a Director of Crown
Central Petroleum Corporation and Guilford Pharmaceuticals, Inc.
Mr. Bunting was elected a Director of Merc-Safe in 1992.
Elected Director of Mercshares: 1992
Member: Compensation Committee
Owns beneficially 11,370 shares of Common Stock.
Darrell D. Friedman 58 PRESIDENT AND CHIEF EXECUTIVE OFFICER, THE ASSOCIATED: JEWISH
COMMUNITY FEDERATION OF BALTIMORE. Mr. Friedman has held this
position since 1986. He was elected a Director of Merc-Safe in
September, 1999.
Elected Director of Mercshares: September, 1999
Owns beneficially 100 shares of Common Stock
Robert A. Kinsley 59 CHAIRMAN AND CHIEF EXECUTIVE OFFICER, KINSLEY CONSTRUCTION, INC., A
GENERAL AND HEAVY CONSTRUCTION FIRM. 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 1996.
Elected Director of Mercshares: 1996
Member: Audit Committee
Executive Committee
Owns beneficially 8,637 shares of Common Stock.
William J. McCarthy (1) 69 PRINCIPAL, WILLIAM J. MCCARTHY, P.C., WHICH IS A PARTNER IN VENABLE,
BAETJER AND HOWARD, LLP, a law firm engaged in the general
practice of law. Either Mr. McCarthy or his professional corporation
has been a member of that firm since 1964. He was elected a
Director of Merc-Safe in 1975.
Elected Director of Mercshares: 1975
Member: Executive Committee
Owns beneficially 2,250 shares of Common Stock.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NAME AGE INFORMATION
- ------------------------- ----- --------------------------------------------------------------------
<S> <C> <C>
Christian H. Poindexter 61 CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
CONSTELLATION ENERGY GROUP, INC., a public utility holding company,
since May, 1999. Mr. Poindexter has been President of Baltimore
Gas & Electric Company since 1998 and its Chairman of the Board
and Chief Executive Officer since 1993. He was elected a Director
of Merc-Safe in 1987.
Elected Director of Mercshares: 1987
Member: Compensation Committee
Executive Committee
Owns beneficially 1,050 shares of Common Stock.
</TABLE>
DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING 2001 ANNUAL MEETING
<TABLE>
<CAPTION>
NAME AGE INFORMATION
- ------------------------ ----- --------------------------------------------------------------------
<S> <C> <C>
Cynthia A. Archer 46 SENIOR VICE PRESIDENT OF DIRECT-TO-CUSTOMER OPERATIONS, WILLIAMS-
SONOMA, INC., a specialty retailer. Ms. Archer has occupied this
position since June, 1999. From May, 1995 until June, 1999, she
was Senior Vice President -- Intermodal Service Group, Conrail,
Inc. and Consolidated Rail Corporation. Ms. Archer was elected a
Director of Merc-Safe in 1997.
Elected Director of Mercshares: 1997
Member: Audit Committee
Owns beneficially 550 shares of Common Stock.
Richard O. Berndt (2) 57 PARTNER, GALLAGHER, EVELIUS & JONES, LLP, 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
Executive Committee
Owns beneficially 31,665 shares of Common Stock.
William R. Brody, M.D. 56 PRESIDENT, JOHNS HOPKINS UNIVERSITY. Dr. Brody has occupied that
position since August, 1996. From September, 1994 through July,
1996, he was Provost of The University of Minnesota Academic
Health Center. Dr. Brody is a Director of Alza Corp and Medtronic,
Inc. He was elected a Director of Merc-Safe in 1996.
Elected Director of Mercshares: 1996
Owns beneficially 1,150 shares of Common Stock.
Morton B. Plant 64 CHAIRMAN, KEYWELL CORPORATION, a recycler of stainless steel and
high temperature alloy scrap metal. He has occupied that position
since 1996. Prior thereto, Mr. Plant was also Chief Executive
Officer. He was elected a Director of Merc-Safe in 1997.
Elected Director of Mercshares: 1997
Owns beneficially 3,350 shares of Common Stock.
</TABLE>
3
<PAGE>
DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING 2002 ANNUAL MEETING
<TABLE>
<CAPTION>
NAME AGE INFORMATION
- --------------------------- ----- --------------------------------------------------------------------
<S> <C> <C>
H. Furlong Baldwin 68 CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
MERCSHARES, AND CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
OFFICER, MERC-SAFE. Mr. Baldwin has been President of Mercshares
since September, 1997, Chairman of the Board since 1984, and
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 Constellation Energy Group, Inc., CSX
Corp., and The St. Paul Companies. He was elected a Director of
Merc-Safe in 1968.
Elected Director of Mercshares: 1970
Member: Executive Committee
Owns beneficially 369,040 shares of Common Stock, including
59,040 shares subject to exercisable options.
Freeman A. Hrabowski, III 49 PRESIDENT, UNIVERSITY OF MARYLAND BALTIMORE COUNTY. Dr. Hrabowski
has served in this capacity since 1993. Dr. Hrabowski is a Director
of Constellation Energy Group, Inc. and McCormick & Company,
Inc. He was elected a Director of Merc-Safe in 1996.
Elected Director of Mercshares: 1996
Owns beneficially 190 shares of Common Stock.
Mary Junck 52 PRESIDENT AND CHIEF OPERATING OFFICER, LEE ENTERPRISES, INC., a
diversified media company. Ms. Junck has served in this capacity
since January, 2000. She was its Executive Vice President and
Chief Operating Officer from July, 1999 until January, 2000.
Ms. Junck was President, Times Mirror Eastern Newspapers and
Executive Vice President, Times Mirror from September, 1997 until
July, 1999. Prior thereto, she was Publisher and Chief Executive
Officer of THE BALTIMORE SUN. She was elected a Director of
Merc-Safe in 1997.
Elected Director of Mercshares: 1997
Member: Audit Committee
Compensation Committee
Owns beneficially 1,600 shares of Common Stock.
Donald J. Shepard 53 PRESIDENT AND CHIEF EXECUTIVE OFFICER, AEGON USA, INC., a holding
company owning insurance and insurance related companies,
since 1989. He also served as its Chairman of the Board from 1992
until July, 1999. He is a member of the Executive Board of AEGON
N.V. Mr. Shepard was elected a Director of Merc-Safe in 1992.
Elected Director of Mercshares: 1992
Member: Compensation Committee
Executive Committee
Owns beneficially 13,500 shares of Common Stock.
</TABLE>
- ----------
(1) 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.
(2) 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.
4
<PAGE>
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 1999 except Ms. Junck.
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,
2000. On that date, the Directors, nominees and executive officers of Mercshares
as a group owned beneficially 624,365 shares (including shares subject to
options exercisable or becoming exercisable within 60 days after January 31,
2000) or 0.91% 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 a family trust
or by family members. 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 587,658 shares of Common
Stock and shared voting and investment power as to 8,190 shares of Common Stock.
Of the foregoing holdings, the executive officers named in the Summary
Compensation Table who are not Directors or nominees for election owned
beneficially on January 31, 2000, the following numbers of shares (including
shares subject to options exercisable or becoming exercisable within 60 days
after January 31, 2000), aggregating less than 1.0% of the outstanding Common
Stock: Mr. Reid, 45,190 shares including 34,625 shares subject to options; Mr.
Steil, 35,236 shares including 33,000 shares subject to options; Mr. Yarbro,
20,250 shares including 5,250 shares subject to options; and Mr. Troupe, 21,000
shares including 15,000 shares subject to options.
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 nonemployee 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 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 plans, which are applicable to all affiliates of
Mercshares. In addition, the Committee is authorized to make recommendations to
the Boards of Mercshares and its affiliates with respect to basic salaries,
supplemental pension, deferred compensation, employment and similar agreements
affecting their executive officers, and performs such other functions as may be
delegated to it by the Boards.
The Committee takes various factors into consideration when establishing
and reviewing executive compensation. There follows an explanation of 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 1999.
5
<PAGE>
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 "1999
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 an
executive employment agreement, the basic cash compensation of Mr. Baldwin for
any year may not be less than basic cash compensation for the prior year.
ANNUAL INCENTIVE COMPENSATION
In addition to basic cash compensation, the Committee, in 1981, developed
an annual incentive compensation plan, which is based on a pre-established
mathematical formula tied directly to corporate performance and profitability.
Forty-eight 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 per share
or net operating income. As provided in the plan, the maximum potential annual
award for 1999 is generally 33 percent of a participant's salary (65 percent in
the case of Mr. Baldwin and 50 percent in the case of three other officers).
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 affiliate (or unit) employing the participant. Incentive
cash bonuses paid to those executive officers named in the Summary Compensation
Table are reflected in the Table under the caption "Bonus."
STOCK BASED COMPENSATION
The 1989 and 1999 Omnibus Stock Plans, previously approved by the
stockholders, are designed to create a common interest between key employees and
stockholders on a long-term basis, encouraging participants to maintain and
increase their proprietary interests as stockholders in Mercshares with the
opportunity 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, from March, 1995 through 1998, the Committee granted, under
the 1989 Omnibus Stock Plan, options for a total of 1,796,725 shares of Common
Stock to 322 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 1,335,750 shares ("performance-based
options") were granted to 51 senior officers of Mercshares and its affiliates,
including the Chief Executive Officer and the executive officers named in the
Summary Compensation Table. Generally, 25% of these performance-based options
could become exercisable on and after each anniversary date of the grant. No
options became exercisable on an anniversary date unless Mercshares' earnings
per share had increased at a compounded growth rate of at least five percent
over 1994. If this test was met, then a portion (up to one-half) of the options
maturing on the anniversary date became exercisable based on a sliding scale to
the extent that the percent of increase of earnings per share of Mercshares over
the prior year earnings per share was in a range of six to ten percent; if the
percent of earnings increase was 10% or more, the entire one-half portion of the
options became
6
<PAGE>
exercisable. The remaining one-half portion could be exercised only if the net
operating income of the affiliate employing the participant had increased at a
compounded growth rate of at least five percent over 1994. If this test was met,
then up to one-half of the options maturing on the anniversary date became
exercisable, based on the same sliding scale, with respect to the percent of
increase of the net operating income of the affiliate over its prior year's net
operating income. To the extent these tests were not met, all or a portion of
the performance-based options maturing each year were forfeited and became
available for further grants.
The remaining options for 460,975 shares were granted to 271 key employees
of the affiliates of Mercshares. These options were not performance-based
options and were fully exercisable as of the date of grant.
No further grants will be made under the 1989 Omnibus Stock Plan. The 1999
Omnibus Stock Plan permits grants for up to 3,000,000 shares of Common Stock.
Under that plan, in March 2000, the Committee granted options for 1,076,550
shares to 369 key employees, including four of the executive officers named in
the Summary Compensation Table, as disclosed under the caption "Aggregate
Options Table." Of the total, options for 766,000 shares to 62 senior officers
of Mercshares and its affiliates are performance-based and are subject to the
same tests, described above, as were applicable to prior options. The remaining
options to other key employees are not performance-based and become exercisable
in equal annual installments over four years. Each option has an exercise price
of $25.344 per share, the market price on the grant date.
1999 COMPENSATION
The Committee, in determining the 1999 basic cash compensation of the
executive officers of Mercshares, considered the factors described in this
Report.
H. Furlong Baldwin is Chairman of the Board, President and Chief Executive
Officer of Mercshares and Chairman of the Board and Chief Executive Officer of
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 Board of Mercshares the acquisition and
establishment of additional affiliates. J. Marshall Reid is President and Chief
Operating Officer of Merc-Safe; Jack E. Steil is Executive Vice President of
Mercshares and Chairman -- Credit Policy of Merc-Safe; Alan D. Yarbro is General
Counsel and Secretary of Mercshares and Merc-Safe, and Terry L. Troupe is Chief
Financial Officer of Mercshares and Merc-Safe. Mr. Reid is designated as an
executive officer of Mercshares because he participates in policy making
activities affecting Mercshares.
The 1999 basic cash compensation of Messrs. Baldwin, Reid, Steil, Yarbro
and Troupe was set in March, 1999. The Committee was aware that incentive
compensation payments to the executive officers of Mercshares would be made in
1999 attributable to 1998 performance under the Annual Incentive Compensation
Plan, and the extent to which outstanding performance-based options under the
1989 Omnibus Stock Plan would become exercisable in 1999.
The Committee was aware of 1998 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 (period-end non-performing assets to loans and
other real estate owned, net charge-offs to average loans and period-end
allowance for loan losses to non-performing loans) for the years 1993 through
1997 and the quarter ended September 30, 1998, as compared to comparable
information for 31 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 third quarter, 1998 (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 Mr. Baldwin with an
independent study published in 1998 reflecting compensation information for 1997
of the 102 commercial banking institutions participating
7
<PAGE>
in the study and with the compensation of executive officers of five banking
institutions, based on proxy information covering the years 1995-1997 (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 31 banking companies constituting the
peer group and the 50 largest banking institutions group, and that Mercshares'
performance, overall, was strong. The Committee determined, however, not to
recommend an increase in the base compensation of Mr. Baldwin. The Committee
agreed to consider a supplemental bonus for Mr. Baldwin based on 1999 operating
results, calculated as if Mr. Baldwin were eligible for a bonus of up to an
additional 15% of his salary, under the same tests used for calculating awards
under the annual incentive compensation plan. The bonus was approved in
December, 1999, and was calculated in 2000 based on final 1999 operating
results, and amounted to 9.7% of Mr. Baldwin's salary. 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 1999 base compensation of
Messrs. Reid, Steil, Yarbro and Troupe as shown in the Summary Compensation
Table under the "Salary" caption, was based on the factors described above and
evaluation of their performance and responsibilities.
In December, 1998, the Committee designated Messrs. Baldwin, Reid, Steil,
Yarbro and Troupe as participants for 1999 in the Annual Incentive Compensation
Plan. Under the formula requirements of that Plan, based on 1999 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 2000,
which is included under the caption "Bonus" in the Summary Compensation Table
for 1999.
Section 162(m) of the Internal Revenue Code provides for non-deductibility,
in certain cases, of compensation paid to certain executives in excess of $1
million per year. Mercshares does not have a policy limiting compensation to
amounts deductible under Section 162(m). The annual incentive plan and the
Omnibus Stock Plans have been approved by the stockholders and are designed to
be qualified performance-based plans so that Section 162(m) limits would not
apply to plan benefits. Section 162(m) limits would apply to salary, bonuses in
excess of bonuses under the annual incentive compensation plan and certain
amounts included under "Other Annual Compensation" and "All Other Compensation"
in the Summary Compensation Table.
Martin L. Grass and Morris W. Offit served on the Committee until their
resignations from the Board of Directors on May 25, 1999, and October 19, 1999,
respectively. George L. Bunting, Jr. did not become a member of the Committee
until October 19, 1999, and therefore did not participate in the determination
of 1999 basic cash compensation for Mr. Baldwin and the other named executive
officers.
THE COMPENSATION COMMITTEE
George L. Bunting, Jr. Christian H. Poindexter
Mary Junck Donald J. Shepard, Chairman
8
<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, 1994, through
December 31, 1999. The graph assumes $100 invested at the closing price on
December 31, 1994, and the reinvestment of all dividends. With reference to the
Report of the Compensation Committee, 29 of the 50 largest banking institutions
whose performance ratios were reviewed, one of the five institutions considered
for compensation purposes and 19 of the 102 institutions participating in the
compensation study are included in the S & P Banks Composite Index. None of the
31 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, 1999, of four "Money Center Banks", and 25 "Major Regional
Banks", each of which is substantially larger than Mercshares.
PERFORMANCE GRAPH
[BAR CHART APPEARS HERE]
VALUE OF $100 INVESTED
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Mercshares $ 100.00 $ 147.00 $ 174.80 $ 328.93 $ 331.91 $ 283.19
S&P 500 100.00 137.59 169.18 225.63 290.11 351.16
S&P Banks Composite Index 100.00 159.39 225.82 326.27 348.76 302.15
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
In 1999, Merc-Safe had banking and other relationships, in the ordinary
course of business, with a number of its Directors and companies associated with
them, including extensions of credit to Ms. Junck, to Martin L. Grass and
companies associated with him, and to companies associated with Mr. Poindexter.
Such extensions of credit 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 Constellation Energy Group, Inc. of which Mr. Poindexter is an executive
officer, and served until October, 1999 as a director and member of the
compensation committee of OFFITBANK Holdings, Inc., then a privately owned
company of which Morris W. Offit was an executive officer.
9
<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, based on total annual salary and bonus for 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------------
NAME AND OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) COMPENSATION($)(1)
- --------------------------------------- ------ ----------- ---------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
H. Furlong Baldwin .................... 1999 850,000 442,000(2) 73,300(2) 67,900
Chairman of the Board, 1998 850,000 510,000(2) 96,600(2) 65,200
President and Chief 1997 878,500 414,400 96,900(2) 57,700
Executive Officer
J. Marshall Reid ...................... 1999 350,000 113,800 -- 49,000
President of Merc-Safe 1998 350,000 131,300 -- 48,000
1997 284,200 116,900 -- 27,400
Jack E. Steil ......................... 1999 300,000 97,500 -- 58,200
Executive Vice President, and 1998 275,000 82,500 -- 57,300
Chairman -- Credit Policy of Merc-Safe 1997 243,000 99,900 -- 34,300
Alan D. Yarbro ........................ 1999 260,000 84,500 -- 29,600
General Counsel and 1998 230,000 86,300 -- 26,100
Secretary 1997 217,700 78,700 -- 20,000
Terry L. Troupe ....................... 1999 200,000 42,900 -- 18,700
Chief Financial Officer 1998 180,000 44,600 -- 16,800
and Treasurer ........................ 1997 166,700 44,600 -- 4,900
- ----------
(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 as follows:
<CAPTION>
SUPPLEMENTAL
YEAR LIFE INSURANCE THRIFT PLAN PLANS TOTAL
------ ---------------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Mr. Baldwin ......... 1999 $ 9,100 $4,800 $54,000 $67,900
1998 11,300 4,800 49,100 65,200
1997 11,000 4,800 41,900 57,700
Mr. Reid ............ 1999 800 9,600 38,600 49,000
1998 1,600 9,600 36,800 48,000
1997 1,200 9,600 16,600 27,400
Mr. Steil ........... 1999 1,900 9,600 46,700 58,200
1998 2,600 9,600 45,100 57,300
1997 2,300 9,600 22,400 34,300
Mr. Yarbro .......... 1999 1,400 9,600 18,600 29,600
1998 1,600 9,600 14,900 26,100
1997 1,400 9,600 9,000 20,000
Mr. Troupe .......... 1999 600 9,600 8,500 18,700
1998 700 9,600 6,500 16,800
1997 600 2,900 1,400 4,900
</TABLE>
- ----------
(2) Mr. Baldwin's bonus amounts include $359,100 for 1999 and $414,000 for 1998
under the annual incentive compensation plan and supplemental bonuses of
$82,900 for 1999 and $95,600 for 1998. Of the other annual compensation
amounts, $64,500 in 1999, $87,800 in 1998, and $88,200 in 1997 represent
travel expenses incurred by Mr. Baldwin.
10
<PAGE>
AGGREGATE OPTIONS TABLE
The following table sets forth certain information, on an aggregate basis,
concerning the exercise of stock options during 1999 by executive officers named
in the Summary Compensation Table and the December 31, 1999, value of
unexercised stock options. No stock appreciation rights were outstanding in
1999.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FY -- END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
VALUE OPTIONS AT FY-END (#) AT FY-END ($S)(1)
SHARES ACQUIRED REALIZED ----------------------------- ----------------------------
NAME ON EXERCISE (#) ($S)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- ----------------- -------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Baldwin ........ -- -- 59,040 -- 1,024,639 --
Mr. Reid ........... 3,500 78,459 34,625 -- 600,918 --
Mr. Steil .......... -- -- 33,000 -- 572,715 --
Mr. Yarbro (2) ..... 9,000 146,250 5,250 7,500 77,112 110,160
Mr. Troupe (2) ..... 5,250 95,592 15,000 7,500 202,810 101,408
</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, 1999,
for unexercised options, less the exercise price of the options. The closing
price of the Common Stock on December 31, 1999 was $31.9375 per share.
(2) Options for 7,500 shares held by Mr. Yarbro will become exercisable in
April, 2000, and options for 7,500 shares held by Mr. Troupe will become
exercisable in September, 2000.
On March 14, 2000, options for 1,076,550 shares of Common Stock were
granted to 369 key employees of Mercshares and affiliates at an exercise price
of $25.344 per share, the market price of the Common Stock on the grant date.
Options for the following numbers of shares, which may become exercisable in
four equal annual installments to the extent certain performance tests are met,
were granted to named executive officers: Mr. Reid, 40,000 shares; Mr. Steil
40,000 shares; Mr. Yarbro, 25,000 shares; and Mr. Troupe, 20,000 shares.
11
<PAGE>
RETIREMENT AGREEMENTS AND PLANS
DEFERRED COMPENSATION AND SUPPLEMENTAL PENSION AGREEMENTS
Mr. Baldwin has an arrangement with Merc-Safe pursuant to which his rate of
salary was 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. The salaries for 1999 and prior periods reported under the
caption "Salary" in the Summary Compensation Table are the full salaries before
the deferred compensation reductions.
Mr. Baldwin also participates in supplemental pension and thrift plan
arrangements whereby he is eligible to receive (1) benefits in the amounts he
would have received had his compensation not been reduced from current levels,
and (2) amounts to which he 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.
CASH BALANCE PENSION PLAN
Mercshares is sponsor of an employees' cash balance pension plan adopted by
a majority of its affiliates. Each plan participant who was employed on January
1, 1991, 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 will be paid in annuity form and will consist of the sum of any
frozen accrued benefits and the 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 base salary and
bonus for 1999. 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 1999 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. Reid, 18 years and $132,000; Mr. Steil 42 years and $273,000; Mr. Yarbro 10
years and $38,000, and Mr. Troupe 16 years and $60,000. If Mr. Baldwin were to
retire at age 69, he would have 45 years of service and estimated annual pension
benefits of $944,000, in addition to the deferred compensation benefit described
above. These amounts are the total of estimated payments from the plan and under
the supplemental pension arrangement described above and, with respect to
Messrs. Reid, Steil, Yarbro and Troupe under the following section entitled
"Supplemental Cash Balance Pension Plan".
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.
12
<PAGE>
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 $160,000 (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 Mr. Baldwin. Messrs. Reid, Steil, Yarbro and Troupe, as well as 39 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 1999, Mr.
Reid's account was credited with $28,900, Mr. Steil's with $40,100, Mr. Yarbro's
with $13,000 and Mr. Troupe's with $5,900. 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 all of its affiliates have adopted
for the benefit of all eligible employees. 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
15% 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 1999 are included under the caption "All Other
Compensation" in the Summary Compensation Table. Messrs. Reid, Steil, Yarbro and
Troupe elected to defer a percentage of their salaries during 1999. 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 $160,000 (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 Mr. Baldwin. Messrs. Reid, Steil, Yarbro and Troupe, as well as 39 other
employees of Mercshares and its affiliates, participate in this plan. At the end
of a calendar year, the account of each participant is credited with an amount
equal to 3% of the portion of the participant's compensation for that calendar
year that exceeds the above limit. At the end of a calendar year (but prior to
the above credit), each participant's account is credited with interest at the
per annum rate of five percent except that interest is pro-rated for accounts
that terminate in midyear. For 1999, Mr. Reid's account was credited with
$9,600, Mr. Steil's with $6,700, Mr. Yarbro's with $5,600 and Mr. Troupe's with
$2,500. 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, Steil and Troupe participated in the plan in 1999. The plan provides
that employees may reduce their salaries on a pre-tax basis, in amounts
determined in advance by them, and direct those
13
<PAGE>
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, Steil and Troupe are included under the
caption "Salary" in the Summary Compensation Table.
OTHER ARRANGEMENTS
EMPLOYMENT AGREEMENTS
Mercshares and Merc-Safe have entered into an employment agreement with Mr.
Baldwin, pursuant to which Mr. Baldwin serves in his executive positions. His
base salary for 1999 is disclosed in the Summary Compensation Table. The
agreement provides that base salary will not be less in any year than in the
preceding year. Mr. Baldwin's agreement has been extended to continue up to
February 1, 2001.
CHANGE OF CONTROL TERMINATION AGREEMENTS
Mercshares has entered into Change of Control Termination Agreements with
Messrs. Baldwin and Yarbro. In the event that during the effective period of the
agreements, 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, 2001. 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 the Common Stock; (b) there occur certain specified changes in the
composition of the 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 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 Common Stock, valued at the time the
retainer is payable. In 1999, two Directors received an aggregate of 1,004
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
14
<PAGE>
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 the Common 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 the Common 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 transactions with others. Loans to such
persons were made in the ordinary course of business and did not involve more
than the normal risk of collectibility or present other unfavorable features.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors, acting upon the recommendation of the Audit
Committee, has appointed PricewaterhouseCoopers LLP, certified public
accountants, as the principal auditors for Mercshares for 2000. The stockholders
are asked to ratify that appointment.
A representative of PricewaterhouseCoopers LLP 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
PricewaterhouseCoopers LLP, 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 PricewaterhouseCoopers LLP as independent certified public
accountants to audit the financial statements of Mercshares for 2000.
VOTING AND PROCEDURAL INFORMATION
The election of Directors requires a plurality of votes cast at the
meeting.
The ratification of the appointment of PricewaterhouseCoopers LLP as the
independent certified public accountants requires the affirmative vote of a
majority of the votes cast at the meeting.
The following principles of Maryland law apply to the voting of shares of
Common Stock at the meeting. The presence in person or by proxy of stockholders
entitled to vote a majority of the outstanding shares of Common Stock will
constitute a quorum. Shares represented by proxy or in person at the meeting,
including shares represented by proxies that reflect abstentions, will be
counted as present in the determination of a quorum. An abstention as to any
particular matter, however, does not constitute a vote "for" or "against" and
will be disregarded in calculating the votes cast as to such matter. "Broker
non-votes" (i.e., where a broker or nominee submits a proxy specifically
indicating the lack of discretionary authority to vote on a matter) will be
treated in the same manner as abstentions.
The Bylaws of Mercshares provide that no business shall be conducted at a
special meeting of stockholders except that stated in the notice of meeting and
that any stockholder proposing to bring business, including any nomination for
election of a Director, before a meeting of stockholders must give prior written
notice thereof. The notice requirements apply to any annual meeting and to any
special meeting as to which
15
<PAGE>
the notice of meeting provides for the election of Directors. 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) no earlier than 90
days (or, with respect to notice of a proposal for inclusion in the Mercshares'
proxy materials pursuant to Rule 14a-8 under the Securities Exchange Act of
1934, the earlier date such proposal is received pursuant to Rule 14a-8) and no
later than 60 days prior to the date of the meeting. If less than 70 days' prior
public disclosure of the meeting date is made by Mercshares, any notice of
business by a stockholder must be received by the Secretary on or before the
10th day following the date of such public disclosure.
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. Article XII further provides that any action of the
Board of Directors in adding to, altering, amending, repealing, or suspending
the Bylaws must be reported to the stockholders and may be changed or rescinded
at the next annual meeting by holders of the stock then outstanding and entitled
to vote, by a majority vote of all the stock then outstanding and entitled to
vote. If the action to be proposed by a stockholder at an annual meeting is to
change or rescind action by the Board of Directors to add to, alter, amend,
repeal or suspend the Bylaws under Article XII, the notice of business by the
stockholder must be received by the Secretary no earlier than the time
prescribed above for stockholder notices and not after the later of the 10th day
following public disclosure by Mercshares of the action of the Board of
Directors or the 60th day prior to the meeting date.
Public disclosure of a meeting date or action by Mercshares may be made by
any general mailing to stockholders of record, by any filing with the Securities
and Exchange Commission, or by public announcement or by other means reasonably
calculated to constitute public disclosure.
Each notice by a stockholder must provide the name and address of the
stockholder and the 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
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.
Public disclosure of the date of the 2000 Annual Meeting was given in the
Report on Form 10-Q filed by Mercshares with the Securities and Exchange
Commission on November 10, 1999, and also was mailed to stockholders on February
14, 2000, in the Quarterly Report to stockholders for the period ended December
31, 1999. There were no notices of business proposed by stockholders for the
Annual Meeting. Accordingly, no such proposals will be entertained at the Annual
Meeting.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
The Bylaws specify that the prior notice requirements described above are
in addition to any other applicable requirements. Certain other requirements are
described below.
Any proposals of stockholders to be presented for inclusion in Mercshares
proxy materials for the 2001 Annual Meeting of Stockholders must be received by
the Secretary of Mercshares at Two Hopkins Plaza, Baltimore, Maryland 21201 on
or before November 24, 2000. Such proposals are subject to and must be made in
accordance with Rule 14a-8 under the Securities Exchange Act of 1934.
Rule 14a-4(c) under the Securities Exchange Act of 1934 would permit
Mercshares to exercise discretionary proxy voting authority on any stockholder
proposal made outside the process of Rule 14a-8 at the 2001 Annual Meeting
unless the stockholder submits a notice of such proposal in compliance with Rule
14a-4(c). Mercshares believes that the Rule would require such a notice to be
received by February 7, 2001.
16
<PAGE>
ANNUAL REPORT OF MERCSHARES
Copies of the Annual Report of Mercshares, for the year ended December 31,
1999, were mailed on or about March 24, 2000, to those persons who were record
holders of stock of Mercshares on March 17, 2000, the record date referred to
above.
OTHER MATTERS
Management knows of no other matters which will be presented at the Annual
Meeting. However, if any other matter requires a vote, it is intended that the
persons named in the enclosed proxy will have discretion to vote the shares
represented thereby pursuant to Rule 14a-4(c) under the Securities Exchange Act
of 1934.
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
solicitation 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 The Altman Group 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 24, 2000
17
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
[ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
<S> <C> <C> <C>
1. Election of Directors FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ]
listed below for all nominees listed below
Nominees: G. Bunting, D. Friedman, R. Kinsley, W. McCarthy, C. Poindexter.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "EXCEPTIONS" BOX AND STRIKE A LINE THROUGH THAT NOMINEE'S NAME.)
2. Ratification of appointment of PricewaterhouseCoopers LLP as the independent
certified public accountants for Mercshares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Upon such other matters as may properly come before the meeting.
ADDRESS CHANGE [ ]
AND/OR COMMENTS
Signature(s) should follow exactly the name(s) on the stock certificate
All co-owners should sign. Executors and Administrators may sign as
such. Attorneys-in-fact should sign both names. Witness the hand and
seal of the undersigned.
DATED:___________________________________,2000
Signature
_________________________________________________
SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. Votes MUST be indicated X
(X) in Black or Blue Ink.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
MERCANTILE BANKSHARES CORPORATION
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints H. Furlong Baldwin and Alan D. Yarbro, and
each of them, the proxies of the undersigned, with several powers of
substitution, to act and vote at the Annual Meeting of Stockholders of
Mercantile Bankshares Corporation. Two Hopkins Plaza, Baltimore, MD 21201 to be
held on Wednesday, April 26, 2000, at 10:30 a.m., and at any and all
adjournments thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF
DIRECTIONS ARE NOT INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND
FOR RATIFICATION OF THE APPOINTMENT OF AUDITORS. If a Director nominee is unable
to serve, the within Proxy may be voted for a substitute nominee.
Receipt of notice of the meeting and Proxy Statement is hereby
acknowledged, and the terms of the notice and statement are hereby incorporated
by reference into this Proxy. The undersigned hereby revokes all proxies
heretofore given for said meeting and any adjournment thereof.
(Continued, and to be signed and dated, on reverse side.)
MERCANTILE BANKSHARES CORPORATION
P.O. BOX 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 26, 2000.
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!
