SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (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 Rule 14a-11c or Rule 14a-12
F&M BANCORP
- ------------------------------------------------------------------
- -------------
(Name of Registrant as Specified in Its Charter)
- ------------------------------------------------------------------
- -------------
(Name of Person(s) Filing Proxy Statement, if other than
Registrant)
Gordon M. Cooley, Corporate Secretary
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11c (1) (ii), 14a-6(I) (1), or
14a-6(I) (2) or
Item 22(a) (2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-
6(i) (3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)
(4) and 0-11.
(1) Title of each class of securities to which translation
applies:
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- --------------
(2) Aggregate number of securities to which translation applies:
- ------------------------------------------------------------------
- --------------
(3) Per unit price or other underlying value of transaction
computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount of which the
filing fee is
calculated and state how it was determined):
- ------------------------------------------------------------------
- --------------
(4) Proposed maximum aggregate value of transaction:
- ------------------------------------------------------------------
- --------------
(5) Total fee paid:
- ------------------------------------------------------------------
- --------------
/ / 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 be registration
statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE>
[F&M BANCORP LOGO]
110 Thomas Johnson Drive
Frederick, Maryland 21702
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of F&M Bancorp ("Bancorp")
will be held
at the Corporate Headquarters, 110 Thomas Johnson Drive,
Frederick, Maryland, on
April 21, 1998, at 10:00 a.m., for the following purposes:
(1) To elect four directors of Bancorp; and
(2) To consider and act upon such other business as may
properly come
before the meeting or any adjournments thereof.
Stockholders of Bancorp of record on January 23, 1998 will be
entitled to
notice of and to vote at the meeting or any adjournments thereof.
By Order of the Board of
Directors,
Gordon M. Cooley
Secretary
Frederick, Maryland
March 20, 1998
IMPORTANT -- YOUR PROXY IS ENCLOSED
Even though you plan to attend the annual meeting, please
complete, date
and sign the enclosed proxy and promptly mail it in the return
envelope
provided. No postage is required if mailed in the United States.
If you attend
the annual meeting and decide that you wish to vote in person, or
for any other
reason desire to revoke your proxy, you may do so at any time
prior to its use.
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished to stockholders of F&M
Bancorp
("Bancorp") in connection with the solicitation of proxies by
Bancorp's Board of
Directors to be used at the annual meeting of stockholders
described in the
accompanying notice and at any adjournments thereof. The purpose
of the meeting
is to elect four directors of Bancorp, whose terms expire at the
1998 Annual
Meeting, and to transact such other business as may properly come
before the
meeting, or any adjournments thereof. The Proxy Statement and the
accompanying
form of proxy are first being sent to stockholders on or about
March 20, 1998.
The record of stockholders entitled to notice of and to vote
at the annual
meeting was taken as of the close of business on January 23, 1998.
At that date
there were outstanding and entitled to vote 6,014,476 shares of
Common Stock,
par value $5.00 per share.
The accompanying proxy is solicited by the Board of Directors
of Bancorp.
The Board of Directors has selected Faye E. Cannon, David R.
Stauffer, and Alice
E. Stonebreaker, or any two of them, to act as proxies with full
power of
substitution. Any stockholder executing a proxy has the power to
revoke the
proxy at any time before it is voted. This right of revocation is
not limited
or subject to compliance with any formal procedure. Any
stockholder may attend
the meeting and vote in person whether or not he has previously
given a proxy.
In the election of directors, each share is entitled to one
vote for each
director to be elected; cumulative voting is not permitted. For
all other
matters each share is entitled to one vote.
The cost of solicitation of proxies and preparation of proxy
materials will
be borne by Bancorp. Bancorp does not expect to compensate anyone
for the
solicitation of proxies but may reimburse brokers and other
persons holding
stock in their names, or in the names of nominees, for expenses
they incur in
sending proxy materials to principals and in obtaining proxies.
In addition to
solicitation of proxies by mail, proxies may be solicited
personally or by
telephone or telegram by directors, officers, and employees of
Bancorp, Farmers
& Mechanics National Bank (the "Bank"), or Home Federal Savings
Bank (the
"Savings Bank") without additional compensation to them.
Security Ownership of Management
The following table sets forth alphabetically, as of January
23, 1998, the
amount of the Company's Common Stock beneficially owned by each of
its directors
and nominees, each executive officer named in the Summary
Compensation Table,
and all directors and executive officers as a group, based upon
information
obtained from such persons:
<TABLE>
<CAPTION>
TOTAL SHARES
PERCENT
NAME OF INDIVIDUAL BENEFICIALLY OWNED
OF CLASS
- ------------------ ------------------ -
- -------
<S> <C>
<C>
R. Carl Benna 10,474 *
Howard B. Bowen 8,766(1)
*
John D. Brunk 15,176(2)
*
Beverly B. Byron 1,030 *
Faye E. Cannon 18,544(3)
*
Martha E. Church 1,532 *
Albert H. Cohen 79,970(4)
1.3
Gordon M. Cooley 17,686(5)
*
Maurice A. Gladhill 46,046(6)
*
Charles W. Hoff, III 15,666(7)
*
James K. Kluttz 620(8)
*
Charles A. Nicodemus 38,204(9)
*
Richard W. Phoebus, Sr. 16,073(10)
*
David R. Stauffer 14,216(11)
*
Alice E. Stonebreaker 15,379(12)
*
H. Deets Warfield, Jr. 10,869(13)
*
John C. Warfield 3,131(14)
*
Thomas R. Winkler 1,198 *
All Executive Officers and
Directors as a group (22 persons) 342,155(15)(16)
5.7
</TABLE>
* Indicates holdings of less than one percent
(1) Includes 924 shares in the form of options exercisable by Mr.
Bowen within
60 days.
(2) Includes 10,554 shares owned by family members and as to
which Mr. Brunk
has voting and disposition powers.
(3) Includes 3,468 shares owned jointly with family members and
as to which Ms.
Cannon has joint voting and disposition powers and 14,833 shares
in the form of
options exercisable by Ms. Cannon within 60 days.
(4) Includes 20,167 shares owned by family members and as to
which Mr. Cohen
has voting and disposition powers.
(5) Includes 7,751 shares owned by family members and 6,818
shares in the form
of options exercisable by Mr. Cooley within 60 days.
(6) Includes 26,889 shares owned by family members and as to
which Mr. Gladhill
has voting and disposition powers and 4,725 shares owned by a
limited
partnership as to which Mr. Gladhill has voting and disposition
powers.
(7) Includes 2,314 shares owned by family members and as to which
Mr. Hoff has
voting and disposition powers and 2,552 shares in the form of
options
exercisable by Mr. Hoff within 60 days.
(8) Includes 305 shares owned jointly with family members and as
to which Mr.
Kluttz has voting and disposition powers
(9) Includes 4,151 shares owned by a family member and as to
which Mr.
Nicodemus has voting and disposition powers. Also includes 17,676
shares owned
by a mutual corporation of which Mr. Nicodemus is Chairman of the
Board of
Directors and as to which Mr. Nicodemus has shared voting and
disposition powers
but disclaims beneficial ownership.
(10) Includes 579 shares owned by family members and as to which
Mr. Phoebus
has disposition and voting powers, and 6,457 shares in the form of
options
exercisable by Mr. Phoebus within 60 days.
(11) Includes 12,131 shares in the form of options exercisable by
Mr. Stauffer
within 60 days.
(12) Includes 12,089 shares in the form of options exercisable by
Ms.
Stonebreaker within 60 days.
(13) Includes 3,141 shares owned by family members and as to
which Mr. H.
Warfield has voting and disposition powers.
(14) Includes 2,106 shares owned by a family member and as to
which Mr. J.
Warfield has voting and disposition powers.
(15) Includes 57,865 shares in the form of options exercisable
within 60 days.
(16) Includes 22,167 shares beneficially owned by Director Robert
K. Moler who
is not standing for re-election because he has reached mandatory
retirement age
for service as a director.
Security Ownership of Certain Beneficial Owners
To the knowledge of Bancorp, no person beneficially owns more
than 5.0% of
the outstanding Common Stock of Bancorp.
ELECTION OF DIRECTORS
The Board of Directors of Bancorp is divided into three
classes (the 1998
class, the 1999 class and the 2000 class, each class designated by
the year in
which the term of office of a director will expire), with each
class elected at
successive annual meetings. The term of office for all 1998 class
directors
expires at this Annual Meeting. Four persons, all of whom are
currently
directors of Bancorp, are nominated as directors. The nominees
have each agreed
to serve if elected.
It is the Board of Directors' intention that proxies not
limited to the
contrary will be voted for the following nominees, or, in the
event that any of
the nominees should be unable or unwilling to serve, for the
election of such
other persons as may be nominated by the Board of Directors. A
plurality of
votes is required to elect directors. Abstentions and broker non-
votes will be
treated as shares not voted and will have no effect in the
election of
directors.
Robert K. Moler, a 1998 class director is retiring from the
Board when his
term expires in April. Having attained age 70, Mr. Moler is not
eligible to
stand for election as a director pursuant to Bancorp's By-Laws.
Bancorp's By-
Laws provide that no person, except for a person who was a
director of Farmers &
Mechanics National Bank on March 11, 1975, shall be eligible to
stand for
election as director after attaining 70 years of age. Directors
Albert H.
Cohen, Charles A. Nicodemus, H. Deets Warfield, Jr. and John C.
Warfield were so
serving on March 11, 1975 and are, therefore, eligible for service
beyond age
70. Bancorp gratefully acknowledges Mr. Moler's service on the
Board.
Information Concerning Nominees
The following table presents information concerning persons
nominated by
the Board of Directors for election as directors of Bancorp and
also concerning
continuing directors. Except as indicated the nominees and
continuing directors
have been officers of the organizations named below as their
principal
occupations or of affiliated organizations for more than five
years.
Information is reported as of January 23, 1998.
<TABLE>
<CAPTION>
Nominees for Director - 2001 Class (terms expire in 2001):
Name of nominee Age, principal occupations, and
directorships with public companies
<S> <C>
Howard B. Bowen Mr. Bowen is 46 years old and has served
as a director
of Bancorp since 1996. He is President,
Ewing Oil Co.,
Inc., a petroleum distributor. (1)
- ------------------------------------------------------------------
- --------------
Martha E. Church Dr. Church is 67 years old and has served
as a director
of Bancorp since 1983. She is President
Emerita of
Hood College, an undergraduate liberal
arts college for
women, with a graduate school, which
meets area
education needs, located in Frederick,
Maryland. (1)
- ------------------------------------------------------------------
- -------------
Albert H. Cohen Mr. Cohen is 75 years old and has served
as a director
of Bancorp since 1983. He is an investor
and building
consultant. (2) (3)
- ------------------------------------------------------------------
- -------------
Charles W. Hoff, III Mr. Hoff is 63 years old and has served
as a director
of Bancorp since 1983. He is Chairman of
the Board of
Bancorp and the Bank. (2) (3)
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- -------------
Continuing Directors - 1999 Class (terms expire in 1999):
- ------------------------------------------------------------------
- -------------
John D. Brunk Mr. Brunk is 60 years old and has served
as a director
of Bancorp since 1983. He is President
of Frederick
Produce Co., Inc., a wholesale food
service
distributor. (4)
- ------------------------------------------------------------------
- -------------
Faye E. Cannon Ms. Cannon is 48 years old and has served
as a director
of Bancorp since 1993. She is President
and Chief
Executive Officer of Bancorp and the
Bank. (2) (3) (5)
- ------------------------------------------------------------------
- -------------
Charles A. Nicodemus Mr. Nicodemus is 68 years old and has
served as a
director of Bancorp since 1983. He is
Chairman of the
Board of Frederick Mutual Insurance
Company, a property
insurance company. (2) (3)
- ------------------------------------------------------------------
- --------------
H. Deets Warfield, Jr. Mr. Warfield is 66 years old and has
served as a
director of Bancorp since 1983. He is
President of the
Damascus Motor Co., Inc., an automobile
dealership. (2)
(3) (6)
- ------------------------------------------------------------------
- --------------
John C. Warfield Mr. Warfield is 68 years old and has
served as a
director of Bancorp since 1983. He is
President of The
Frederick Motor Co., an automobile
dealership. (1) (2)
(4)
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- -------------
Continuing Directors - 2000 Class (terms expire in 2000):
- ------------------------------------------------------------------
- -------------
R. Carl Benna Mr. Benna is 50 years old and has served
as a director
of Bancorp since January 1989. He is
President of the
North American Housing Corp., a modular
housing
manufacturer. (1) (4)
- ------------------------------------------------------------------
- --------------
Beverly B. Byron Ms. Byron is 65 years old and has served
as a director
of Bancorp since 1993. She is a former
member of the
U.S. House of Representatives for the 6th
District of
Maryland. She is a member of the Board of
Director of
the BlueCross/BlueShield of Maryland and
LMI. (1)
- ------------------------------------------------------------------
- -------------
Maurice A. Gladhill Mr. Gladhill is 47 years old and has
served as a
director of Bancorp since 1985. He is
President of
Gladhill Tractor Mart, Inc., a farm
equipment dealership
in Frederick, Maryland. (2) (4)
- ------------------------------------------------------------------
- -------------
James K. Kluttz Mr. Kluttz is 56 years old and has served
as a director
of Bancorp since 1996. He is President
and Chief
Executive Officer of Frederick Memorial
Hospital. (1)
(4)
- ------------------------------------------------------------------
- ------------
Richard W. Phoebus, Sr. Mr. Phoebus is 59 years old and has served
as a director
of Bancorp since 1996. He is President
and Chief
Executive Officer of the Savings Bank and
Vice President
of F&M Bancorp.
- ------------------------------------------------------------------
- ------------
Thomas R. Winkler Mr. Winkler is 55 years old and has
served as a
director of Bancorp since 1992. He is Executive Vice
President and Chief Operating Officer of Bio Whittaker,
Inc. (4)
- ------------------------------------------------------------------
- --------------
</TABLE>
(1) Member of the Audit Committee.
(2) Member of the Executive Committee.
(3) Member of the Nominating Committee.
(4) Member of the Compensation Committee..
(5) Ms. Cannon and Alice E. Stonebreaker, Bancorp's Assistant
Secretary and Assistant Treasurer, are sisters.
(6) The Messrs. Warfield are not related. Mr. H. Warfield is the
father-in-law of Gordon M. Cooley, Bancorp's
Secretary and Legal Officer.
Information Regarding the Board of Directors and Certain
Committees
During 1997, there were 12 meetings of the Board of Directors
of Bancorp.
Each of the directors attended at least 75% of the combined total
number of
meetings of the Board of Directors and board committees of which
he or she is a
member (held during the period for which he or she has been a
director), except
Mr. Brunk who attended 10 of 14 (71%) meetings and Mr. John
Warfield who
attended 15 of 25 (60%) meetings.
The Board of Directors of Bancorp has, among others, a
Nominating
Committee, an Audit Committee, and a Compensation Committee.
The Nominating Committee of Bancorp is responsible for
recommending persons
to serve as new directors and met once during 1997. Members of
the Nominating
Committee are designated by note (3) above. Nominations for
director which are
presented to the Nominating Committee by stockholders are
considered, along with
those developed by the Nominating Committee, in light of the needs
of Bancorp,
as well as the nominee's individual knowledge, experience and
background.
The Audit Committee of Bancorp meets with Bancorp's internal
and
independent auditors to review whether satisfactory accounting
procedures are
being followed by Bancorp and subsidiaries and whether internal
accounting
controls are adequate, to inform itself with regard to non-audit
services
performed by the independent auditors and to review fees charged
by the
independent auditors. The Audit Committee also recommends to the
Board of
Directors the selection of independent auditors. The Audit
Committee met five
times in 1997, and members are designated by note (1) above.
The Compensation Committee of Bancorp establishes the
compensation for
executive officers of Bancorp, the Bank and the Savings Bank and
administers
Bancorp's 1983 and 1995 Stock Option Plans and the Executive
Supplemental Income
Plan. During 1997, the directors designated by note (4) above
were members of
the Compensation Committee of Bancorp. The Compensation Committee
met on two
occasions during 1997.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the
"Committee") has
furnished the following report on executive compensation.
The Committee establishes the compensation for executive
officers of
Bancorp, the Bank and the Savings Bank (collectively, "the
Corporation") and
administers Bancorp's 1983 and 1995 Stock Option Plans and the
Executive
Supplemental Income Plan. Committee objectives include
administration of a
total compensation package that allows the Corporation to attract
and retain
qualified persons to fill key executive positions and to
effectively utilize
incentive compensation programs which are directly related to
executive officers
accomplishing corporate goals and objectives, both operational and
financial,
aimed at achieving lasting improvement in the Corporation's long-
term financial
performance.
The Committee utilizes the Corporation's human resources'
staff, and, as
appropriate, other qualified consultants to review actual
performance of the
Chief Executive Officer and all executive officers and the
Corporation's
compensation practices as they compare to industry norms.
Compensation program components include:
1. Base Salary - Base pay levels are established within a
range for each
position, determined through the assistance of a third party
consultant
specializing in compensation practices for the industry. In
addition, survey
data is routinely updated, comparing similar positions at other
companies, both
financial and non-financial, of like-size and performance located
in the
geographic area in which the Corporation does business and at
other financial
institutions of similar size, business make up and performance
characteristics
located outside the Corporation's market area. Actual salaries
are based on the
individual performance and experience of each executive officer.
2. Annual Incentive Compensation - The Corporation has
adopted an
incentive compensation program for executive and other designated
officers at
the Bank (the "Program"). The Program was designed in conjunction
with an
independent consultant specializing in incentive compensation
practices for the
banking industry and is similar to existing plans of other banks
and financial
service companies. The Program, like these plans in general,
requires a
considerable degree of specificity with regard to performance
measures and
evaluations, which are benchmarked to industry incentive
practices. The Program
allows the Compensation Committee to establish annually the
performance measures
to be used in conjunction with the goals in the Corporation's
strategic plan and
ensures that such performance measures align shareholder
interests. Executives
are eligible for incentive compensation expressed as a percentage
of their base
salaries for meeting established performance measures. Levels of
incentive
compensation increase as executive officers' and the Bank's
performance exceed
established targets. In 1997, the named executive officers
received
compensation under the incentive compensation program as a result
of meeting
performance objectives. Mr. Phoebus' bonus was based on a similar
analysis,
including meeting performance objectives on behalf of the Savings
Bank.
3. Stock Option Program - The Corporation maintains 1983 and
1995 Stock
Option Plans which provide for the grant of options to executive
and other key
officers, in the Committee's discretion, who have substantial
responsibility for
the management and growth of the Corporation. The Committee
believes that
grants of stock options, which allow employees to purchase shares
of the Common
Stock of the Corporation at specified prices in the future, aligns
employees'
interests in corporate performance with the interests of all
stockholders. Each
year the Committee determines the number of options, if any, to be
granted the
recipients of grants in order to achieve these objectives.
Incentive stock
options are granted at the market price of F&M Bancorp stock on
the date of
grant. Non-qualified options are granted at 85% of market price
on the date of
grant. The Committee considers it significant that officers
receiving incentive
stock option awards will profit from those awards only if, and
only to the
extent that, the market price of F&M Bancorp stock appreciates
following the
date of grant.
For 1997, the Compensation Committee established Ms. Cannon's
base salary
with reference to the salary ranges determined with the assistance
of a third
party consultant that provides bank executive compensation data
and information
specific to the banking industry. The Committee considers the
Chief Executive
Officer responsible for overall corporate performance, both
operational and
financial. As such, 100% of the Chief Executive Officer's
potential bonus under
the Bank's incentive compensation program is related to Bank-wide
performance
and shareholder interests. The Committee finds that the total
compensation
package for the Chief Executive Officer in 1997 was justified
based on
competitive market data and overall corporate performance, both
financial and
operational.
The Committee believes that the total compensation awarded to
the Chief
Executive Officer and executives of the Corporation is consistent
with the
Committee's objectives. The amounts paid to individual executives
are
consistent with competition within the market and with banks of
similar size as
reflected by the executive compensation data and information
provided,
individual performance of each executive, and, for incentive
compensation, are
rationally linked with the fulfillment of corporate objectives and
corporate
financial performance.
Compensation Committee of the Board of
Directors:
Thomas R. Winkler, Chairman
R. Carl Benna
John D. Brunk
Maurice Gladhill
James K. Kluttz
John C. Warfield
The following table sets forth compensation information with
respect to the
Chief Executive Officer and the four next highest paid executive
officers in
1997 (the "Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation
Compensation(1) Awards
------------- ------------
Options All
Other
Bonus Shares
Compensation
Name and Principal Position Year Salary (2) (3) (4)
- ------------------------------------------------------------------
- -----------
<S> <C> <C> <C> <C> <C>
Faye E. Cannon 1997 220,000 88,000 4,488 --
President and CEO of 1996 173,700 72,560 3,150
14,522
Bancorp and of the Bank 1995 161,700 41,719 3,582
10,712
David R. Stauffer 1997 164,120 54,365 2,572 --
Vice President of Bancorp 1996 153,000 50,689 2,625
14,522
and Executive Vice 1995 148,000 32,977 2,976
10,712
President of the Bank
Richard W. Phoebus, Sr. 1997 124,000 44,485 2,520 --
Vice President of Bancorp 1996 111,000 17,295 -0-
12,201
and President and CEO of
the Savings Bank(5)
Alice E. Stonebreaker 1997 112,637 37,564 1,785 --
Assistant Secretary and 1996 90,000 29,817 2,310
7,654
Assistant Treasurer of 1995 85,000 18,626 2,646
6,789
Bancorp and Senior Vice
President of the Bank
Gordon M. Cooley 1997 115,344 21,627 918 --
Secretary of Bancorp and 1996 106,100 19,894 945
9,497
Senior Vice President of 1995 97,933 19,613 1,212
7,574
the Bank
(1) No Named Executive Officer received any perquisites in 1995,
1996 or 1997
the aggregate amount of which exceeded 10% of the officer's salary
and bonus.
(2) Included in 1996 and 1997 bonus paid under Bank's Incentive
Compensation
Plan and in 1995 both annual bonus paid to substantially all
employees
and merit bonuses.
(3) Adjusted to reflect 5% stock dividends paid on May 22, 1995
and August 8,
1997.
(4) Includes Bancorp contribution to the account of each Named
Executive
Officer, except Mr. Phoebus, in Bancorp's defined contribution
Employee Benefit
Plan (the "Plan") qualified under Section 401(k) of the Internal
Revenue Code
for both profit-sharing portion and corporate match of Named
Executive Officer's
individual contributions to the Plan with a salary cap of
$150,000. For Mr.
Phoebus, includes the Savings Bank's contribution to Mr. Phoebus'
account in
Savings Bank's defined contribution Employee Benefit Plan (the
"Savings Bank
Plan") qualified under Section 401(k) of the Internal Revenue Code
for both
profit sharing portion and corporate match of Mr. Phoebus'
individual
contribution to the Savings Bank Plan. Dollar values of each
contribution for
1997 will not be finally calculated until after mailing date of
the Proxy
Statement but will be included in the 1999 Proxy Statement.
(5) In 1996, Mr. Phoebus' compensation was established by the
Savings Bank and
its former parent prior to completion of the merger with Bancorp.
</TABLE>
The following table sets forth information with respect to
stock option
grants to the Chief Executive Officer and the Named Executive
Officers for the
fiscal year ended December 31, 1997. Bancorp does not grant stock
appreciation
rights.
<TABLE>
<CAPTION>
OPTIONS GRANTED IN 1997
-----------------------
Potential
Realizable Value
at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants For Option
Term
- ----------------------------------------------------- ------------
- --------------
% of
Total Market
Options Price
Granted to on Date
Options Employees Exercise of grant
Granted in Fiscal Price (per(per Expire
Name (1)(shares)1997 share) share) Date 0% 5%
10%
- ------------ ------- --------- ----------- -------- ----- --- --
- ---
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
Faye E.
Cannon 4,488 14.09% $25.60 $25.60 2/11/07 -0-
$72,067 $182,531
David R.
Stauffer 2,572 8.07 25.60 25.60 2/11/07 -0-
41,300 104,606
Richard W.
Phoebus, Sr.2,520 7.91 25.60 25.60 2/11/07 -0-
40,465 102,491
Alice C.
Stonebreaker1,785 5.60 25.60 25.60 2/11/07 -0-
28,663 72,598
Gordon M.
Cooley 918 2.88 25.60 25.60 2/11/07 -0-
14,741 37,336
(1) All options granted on February 11, 1997. Options exercisable
to the
extent of 25%, 50% , 75%, and 100% on February 11, 1998, 1999,
2000, 2001
respectively.
</TABLE>
The following table sets forth information with respect to
the value of all
options exercised during the fiscal year ended December 31, 1997
and the value
of all options held on December 31, 1997 by the Chief Executive
Officer and the
Named Executive Officers.
<TABLE>
<CAPTION>
AGGRAGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
OPTION VALUES AT DECEMBER 31, 1997
----------------------------------
Number Number of Shares Value of
Unexercised
Of Underlying Unexercised In-the-
Money
Shares Options at 12/31/97(2) Options at
12/31/97(3)
Acquired Value ------------------------- --------------
- -----------
on Realized
Name Exercise (1) Exercisable Unexercisable Exercisable
Unexercisable
- ------- -------- --------- ----------- ------------- ----------- -
- ------------
<S> <C> <C> <C> <C>
Faye E.
Cannon 1,050 11,873 11,159 9,510 $217,432
<C>
$115,219
David
R.
Stauffer 525 8,999 9,364 6,753 183,749
81,486
Richard
W.
Phoebus,
Sr. -0- -0- 5,827 2,520 130,448
31,260
Alice E.
Stone-
Breaker 2,384 46,703 10,114 5,132 208,820
59,795
Gordon
M.
Cooley -0- -0- 5,759 2,522 118,996
30,531
(1) Based on the difference between aggregate fair market value on
date of
exercise and aggregate exercise price.
(2) Adjusted to reflect stock dividends paid between dates of
grant and
December 31, 1997.
(3) Based on the difference between aggregate fair market value at
December
31, 1997 and aggregate exercise price.
</TABLE>
Termination of Employment and Change in Control Arrangements
Bancorp provides an Executive Supplemental Income Plan (the
"Supplemental
Plan") in which Executive Officers Cannon and Stauffer
participate. The
Supplemental Plan provides certain benefits which are integrated
with the
benefits provided Executive Officers Cannon and Stauffer under
Bancorp's defined
contribution employee benefit plan qualifying under Section 401(k)
of the
Internal Revenue Code. The Supplemental Plan provides for
retirement benefits
to Executive Officers Cannon and Stauffer based on 65% of their
compensation
(salary and bonus) as measured by the greater of (a) compensation
paid during
the 12 months immediately preceding retirement or (b) the average
compensation
paid during the three consecutive years of employment that yield
the highest
average.
The Supplemental Plan also provides for benefits upon
termination of
employment following a change in control of the Bank or Bancorp.
A change in
control is defined as the acquisition of 25% or more of the
combined voting
power of the Bank or Bancorp, or a change in the majority of the
members of the
Board of Directors of the Bank or Bancorp during any two-year
period. In the
event of a termination of employment after a change in control,
full
compensation benefits will be paid to a participant in the
Supplemental Plan
until the third anniversary of the change in control. Thereafter,
benefits will
be based on a fraction of final compensation as detailed above.
Assuming
current compensation practices continue to retirement, in
conjunction with
current assumptions relating to contributions to and performance
of Bancorp's
401(k) Plan and current assumptions relating to future levels of
Social Security
benefits, Executive Officers Cannon and Stauffer would have
estimated annual
benefits under the Supplemental Plan of $186,642 and $131,758,
respectively.
The Supplemental Plan also provides for a death benefit equal
to 50% of a
participant's cash compensation if the participant dies while
still employed.
Executive Officer Phoebus has an employment agreement with
Bancorp
providing for annual compensation of at least $111,000 and
employment through
November 15, 1999. The employment agreement also provides for
payments of three
times Mr. Phoebus' compensation if he is terminated following a
change in
control of the Savings Bank or Bancorp and compensation if Mr.
Phoebus is
terminated without cause before May 15, 1998, not involving a
change in control.
Compensation in this latter event will be equal to 2.0 times his
annual
compensation multiplied by a fraction the numerator of which is
the number of
months remaining in the employment period and the denominator of
which is 24.
Finally, Mr. Phoebus is also entitled to receive 1.5 times his
annual
compensation if he is terminated without cause after May 15, 1998
and also if he
remains employed by Bancorp and the Savings Bank for the entire
term of his
employment agreement and is terminated thereafter.
Executive Officers Cooley and Stonebreaker have change in
control
employment agreements, which provide for payments of three times
their
compensation if terminated or their reporting, responsibilities,
title or
compensation are materially adversely changed following a change
in control of
Bancorp or the Bank.
Directors' Fees and Deferred Compensation Plan
During 1997, each director of Bancorp received a quarterly
director's fee
of $250 plus $50 for each board meeting attended. Each director
of Bancorp who
also served as a director of the Bank received a quarterly fee of
$1,500 plus
$400 for each Bank board meeting attended. Each director of
Bancorp who also
served as a director of the Savings Bank received a fee of $200
for each Savings
Bank board meeting attended. Fees for attendance at each
committee meeting of
Bancorp, the Bank, and the Savings Bank are $100 for each director
except full-
time officers. Each director who is not also an officer of
Bancorp, the Bank, or
the Savings Bank may elect to defer all or part of these fees
until he or she
ceases to be a director. Interest is earned on the deferred amount
at a floating
rate equal to the "prime rate" as published in the Wall Street
Journal's Money
Rates Table on December 15th of each year for the next calendar
year, currently
8.50%. Payment of the deferred amount may be made to the director
or his or her
beneficiary in a lump sum or in equal monthly installments over 10
years, as the
director elects.
Certain Transactions with Directors and Officers
During the past year Bancorp and its subsidiaries have had,
and expect to
have in the future, banking transactions in the ordinary course of
their
businesses with directors and officers of Bancorp, the Bank, the
Savings Bank
and with their affiliates on substantially the same terms,
including interest
rates, collateral, and repayment terms on loans, as those
prevailing at the same
time for comparable transactions with others. The extensions of
credit did not
involve and do not currently involve more than the normal risk of
collectibility
or present other unfavorable features.
Stockholder Return Performance Graph
The following graph compares the cumulative total return of
Bancorp's
Common Stock with that of a broad market index (NASDAQ Stock
Market, U.S.
Companies only) and an industry peer group index (NASDAQ Bank
Stocks).
Information is provided for the five-year period ending December
31, 1997. The
graph assumes that the value of the investment in Bancorp's Common
Stock and
each index was $100 on December 31, 1992 and that all dividends
were reinvested.
COMPARISON OF FIVE-YEAR
CUMULATIVE RETURN
[GRAPH]
<TABLE>
<CAPTION>
DECEMBER 31,
- ------------------------------------------------------------------
- --------------
1992 1993 1994 1995 1996 1997
- ------------------------------------------------------------------
- --------------
<S> <C> <C> <C> <C> <C> <C>
F&M BANCORP 100 128 171 185 154 264
- ------------------------------------------------------------------
- --------------
NASDAQ US COMPANIES 100 115 112 159 195 240
- ------------------------------------------------------------------
- --------------
NASDAQ BANK STOCKS 100 114 114 169 223 377
- ------------------------------------------------------------------
- --------------
</TABLE>
AUDIT COMMITTEE AND INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Arthur Anderson LLP ("AA") has acted
as Bancorp's
independent public accountants for the year ended December 31,
1997 and has been
recommended by the Audit Committee and selected by the Board of
Directors to act
as such for the current fiscal year. A partner of AA is expected
to be present
at the annual meeting and will have an opportunity to make a
statement if he
desires and to respond to appropriate questions.
On July 9, 1996, Bancorp engaged AA in place of its
independent public
accountant, Keller Bruner & Company, LLC ("KB"), on the
recommendation and
approval of the Audit Committee, which action was ratified by the
full Board
after an extensive review and analysis of proposals submitted by
nine accounting
firms, including KB. KB was not dismissed as the result of any
disagreement.
The reports of KB on the financial statements of the Registrant
for each of the
two fiscal years in the period ended December 31, 1995 did not
contain any
adverse opinion or disclaimer of opinion and were not qualified or
modified as
to uncertainty, auditing scope or accounting principles. During
the two fiscal
years in the period ended December 31, 1995 and the subsequent
interim periods
preceding such dismissal, there were no disagreements on any
matter of
accounting principles or practices, financial statement
disclosure, or auditing
scope or procedure or any reportable event.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon review of Forms 3, 4, and 5 and amendments thereto
furnished to
the Corporation and inquiry to directors and executive officers,
all required
reports of securities activities were timely filed. An amendment
to Form 4
originally filed in June 1994 was filed by director Winkler to
clarify
beneficial ownership of shares received as the result of a stock
dividend.
OTHER MATTERS
The management of Bancorp knows of no matters to be presented
for action at
the annual meeting other than those mentioned above; however, if
any other
matters properly come before the annual meeting, or any
adjournments thereof, it
is intended that the persons named in the accompanying proxy will
vote on such
other matters in accordance with their judgment of the best
interests of
Bancorp. Each such matter generally requires the affirmative vote
of a majority
of the shares voted on the matter. Abstentions and broker non-
votes generally
will be treated as shares not voted and will have no effect.
STOCKHOLDER PROPOSALS
Stockholders' proposals intended to be presented at the 1999
Annual Meeting
must be received by Bancorp for inclusion in Bancorp's Proxy
Statement and form
of proxy relating to that meeting by November 20, 1998.
ANNUAL REPORT ON FORM 10-K
A copy of the Annual Report on Form 10-K, as filed with the
Securities and
Exchange Commission, is available without charge upon written
request to F&M
Bancorp, Investor Relations, 110 Thomas Johnson Drive, P.O. Box
518, Frederick,
Maryland 21705.
By Order of the Board of
Directors,
Gordon M. Cooley
Secretary
Frederick, Maryland
March 20, 1998
<PAGE>
F&M BANCORP
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED STOCKHOLDER of F&M Bancorp hereby appoints Faye E.
Cannon, Alice
E. Stonebreaker, and David R. Stauffer, or any two of them, the
lawful attorneys
and proxies of the undersigned with full power of substitution to
vote, as
designated below, all shares of Common Stock of the Corporation
which the
undersigned is entitled to vote at the Annual Meeting of
Stockholders called to
convene at 10:00 a.m. on April 21, 1998, and at any and all
adjournments
thereof, with respect to the matters set forth below and described
in the Notice
of Annual Meeting and Proxy Statement dated March 20, 1998,
receipt of which is
hereby acknowledged.
1. ELECTION OF 4 DIRECTORS
/ / FOR all nominees listed below as / / WITHHOLD
AUTHORITY
recommended by the Board of Directors to vote
for all
(except as marked to the contrary) nominees
listed below
H. Bowen, M. Church, A. Cohen and C. Hoff
(INSTRUCTION: To withhold authority for any individual
nominee, strike a
line through the nominee's name in the list above)
2. IN THEIR DISCRETION, on such other business as may properly
come before
the meeting.
Shares represented by all properly executed proxies will be voted
(or the vote
on such matters will be withheld on specific matters) in
accordance with
instructions appearing on the proxy. In the absence of specific
instructions,
proxies will be voted FOR proposal 1 and in the best discretion of
the proxy
holders as to any other matters.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOREGOING
NOMINEES FOR
DIRECTOR.
Dated ---------------------------
- ----, 1998
---------------------------------
- ----------
(Signature)
---------------------------------
- ----------
(Signature)
Please date and sign exactly as
name(s) appears
at left. If joint account, both
owners should
sign.
I plan to attend the Annual
Meeting. / /
(Proxy information appears on the
reverse side.
Please mark, date, sign, and
return the proxy
Card promptly using the enclosed
envelope.)
F&M BANCORP
ANNUAL MEETING
Corporate Headquarters
110 Thomas Johnson Drive
Frederick, Maryland 21702
APRIL 21, 1998
10:00 a.m.
