<PAGE>
[LOGO]
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 20, 1999, at 10:00 a.m., for the following purposes:
(1) To elect five directors of Bancorp;
(2) To consider and act upon the proposed F&M Bancorp 1999 Employee Stock
Option Plan;
(3) To consider and act upon the proposed F&M Bancorp 1999 Stock Option Plan
for Non-Employee Directors; and
(4) 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 February 12, 1999 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 22, 1999
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.
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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 1999 annual meeting of stockholders (the "1999 Annual
Meeting") described in the accompanying notice and at any adjournments thereof.
The purpose of the meeting is to elect five directors of Bancorp, whose terms
expire at the 1999 Annual Meeting, to consider and act upon the proposed F&M
Bancorp 1999 Employee Stock Option Plan, to consider and act upon the proposed
F&M Bancorp 1999 Stock Option Plan for Non-Employee Directors, 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 22, 1999.
The record of stockholders entitled to notice of and to vote at the annual
meeting was taken as of the close of business on February 12, 1999. At that date
there were outstanding and entitled to vote 8,705,867 shares of common stock,
par value $5.00 per share, of Bancorp (the "Common Stock").
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 February 12, 1999, the
amount of the Company's Common Stock beneficially owned by each of its directors
and nominees, each executive officer named in
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<PAGE>
the Summary Compensation Table, and all directors and executive officers as a
group, based upon information obtained from such persons:
<TABLE>
<CAPTION>
TOTAL SHARES
BENEFICIALLY PERCENT
NAME OF INDIVIDUAL OWNED OF CLASS
- -------------------------------------------------------------- ----------------- -----------
<S> <C> <C>
R. Carl Benna................................................. 10,997 *
Howard B. Bowen............................................... 9,204(1) *
John D. Brunk................................................. 16,529(2) *
Beverly B. Byron.............................................. 1,081 *
Faye E. Cannon................................................ 21,198(3) *
Martha E. Church.............................................. 1,667 *
Albert H. Cohen............................................... 85,777(4) *
Maurice A. Gladhill........................................... 52,562(5) *
Eric E. Glass................................................. 155,165(6) 1.8
Charles W. Hoff, III.......................................... 18,216(7) *
Donald R. Hull................................................ 73,099(8) *
James K. Kluttz............................................... 950(9) *
Richard W. Phoebus, Sr........................................ 18,071(10) *
David L. Spilman.............................................. 1,071(11) *
David R. Stauffer............................................. 17,669(12) *
H. Deets Warfield, Jr......................................... 11,777(13) *
Thomas R. Winkler............................................. 1,263 *
All Executive Officers and Directors as a group
(19 persons)................................................ 594,538(14) 15) 6.8
</TABLE>
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* Indicates holdings of less than one percent
(1) Includes 970 shares in the form of options exercisable by Mr. Bowen within
60 days.
(2) Includes 11,502 shares owned by family members and as to which Mr. Brunk has
voting and disposition powers.
(3) Includes 5,318 shares owned jointly with family members and as to which Ms.
Cannon has joint voting and disposition powers and 15,825 shares in the form
of options exercisable by Ms. Cannon within 60 days.
(4) Includes 21,560 shares owned by family members and as to which Mr. Cohen has
voting and disposition powers.
(5) Includes 31,188 shares owned by family members and as to which Mr. Gladhill
has voting and disposition powers and 4,956 shares owned by a limited
partnership as to which Mr. Gladhill has voting and disposition powers.
(6) Includes 2,938 shares owned by family members and as to which Mr. Glass has
voting and disposition powers, 6,995 shares owed by a trust and as to which
Mr. Glass has voting and disposition powers, and 6,880 shares in the form of
options exercisable by Mr. Glass within 60 days.
(7) Includes 2,428 shares owned by family members and as to which Mr. Hoff has
voting and disposition powers and 4,448 shares in the form of options
exercisable by Mr. Hoff within 60 days.
(8) Includes 138 shares owned by family members and as to which Mr. Hull has
voting and disposition powers and 6,880 shares in the form of options
exercisable by Mr. Hull within 60 days.
(9) Includes 320 shares owned jointly with family members and as to which Mr.
Kluttz has voting and disposition powers.
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(10) Includes 607 shares owned by family members and as to which Mr. Phoebus has
disposition and voting powers, and 7,225 shares in the form of options
exercisable by Mr. Phoebus within 60 days.
(11) Includes 367 shares in the form of options exercisable by Mr. Spilman
within 60 days.
(12) Includes 15,398 shares in the form of options exercisable by Mr. Stauffer
within 60 days.
(13) Includes 3,348 shares owned by family members and as to which Mr. H.
Warfield has voting and disposition powers.
(14) Includes 57,993 shares in the form of options exercisable within 60 days.
(15) Includes 36,962 shares beneficially owned by Director Charles A. Nicodemus
(15,409 of which are 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) and 3,287
shares beneficially owned by Director John C. Warfield, whose terms are
expiring and who are retiring.
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.
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ELECTION OF DIRECTORS
The Board of Directors of Bancorp is divided into three classes (the 1999
class, the 2000 class and the 2001 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 1999 class directors
expires at the 1999 Annual Meeting. Five 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.
Charles A. Nicodemus and John C. Warfield, 1999 class directors, are
retiring from the Board when their terms expire in April. Bancorp gratefully
acknowledges their service.
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 February 12, 1999.
A. NOMINEES FOR DIRECTOR--2002 CLASS (TERMS EXPIRE IN 2002):
<TABLE>
<CAPTION>
AGE, PRINCIPAL OCCUPATIONS, AND
NAME OF NOMINEE DIRECTORSHIPS WITH PUBLIC COMPANIES
- --------------------------------------------- ------------------------------------------------------------------
<S> <C>
John D. Brunk Mr. Brunk is 61 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 49 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)
Eric E. Glass Mr. Glass is 59 years old and has served as a director of Bancorp
since 1998. He is chairman of the Board and CEO of The Taney
Corporation, a national manufacturer and distributor of wood
stairs and wood stair parts. He is a member of the Board of
Directors of US Foodservice, Inc. (formerly, JP Foodservice).
Donald R. Hull Mr. Hull is 60 years old and has served as a director of Bancorp
since 1998. He is President of Hull Company Accountants, Inc. (1)
H. Deets Warfield, Jr. Mr. Warfield is 67 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)
</TABLE>
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B. CONTINUING DIRECTORS--2000 CLASS (TERMS EXPIRE IN 2000):
<TABLE>
<S> <C>
R. Carl Benna Mr. Benna is 51 years old and has served as a
director of Bancorp since 1989. He is President of
North American Housing Corp., a modular housing
manufacturer. (1) (4)
Beverly B. Byron Ms. Byron is 66 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 Directors of CareFirst, LMI, and Baltimore
Gas and Electric Company. (1)
Maurice A. Gladhill Mr. Gladhill is 48 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, Md. (2) (3) (4)
James K. Kluttz Mr. Kluttz is 57 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 60 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 Bancorp.
Thomas R. Winkler Mr. Winkler is 55 years old and has served as a
director of Bancorp since 1992. He is currently a
biopharmaceutical consultant and was formerly
Executive Vice President and Chief Operating Officer
of Bio Whittaker, Inc. (4)
</TABLE>
C. CONTINUING DIRECTORS--2001 CLASS (TERMS EXPIRE IN 2001):
<TABLE>
<S> <C>
Howard B. Bowen Mr. Bowen is 47 years old and has served as a
director of Bancorp since 1996. He is President of
Ewing Oil Co., Inc., a petroleum distributor. (1)
Martha E. Church Dr. Church is 68 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 76 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 64 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)
</TABLE>
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(1) Member of the Audit Committee.
(2) Member of the Executive Committee.
5
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(3) Member of the Nominating Committee.
(4) Member of the Compensation Committee.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
During 1998, there were 13 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. Bowen who attended 12 of 18 (67%) meetings, Dr. Church who attended 13 of 18
(72%) meetings, Mr. Nicodemus who attended 12 of 17 meetings (70%) and Mr. John
Warfield who attended 19 of 32 (59%) 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. 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 Nominations Committee did
not meet in 1998.
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 5 times in 1998, 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 1998, the directors designated by note (4) above were members of
the Compensation Committee of Bancorp. The Compensation Committee met on 10
occasions during 1998.
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 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.
6
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2. SHORT TERM INCENTIVE COMPENSATION--The Corporation has adopted an annual
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 with stockholder 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 1998, 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. LONG TERM INCENTIVE COMPENSATION--The Corporation maintains 1983 and 1995
Stock Option Plans which provide long term incentive compensation through 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
may be granted at no less than 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 1998, 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 stockholder interests. The Committee finds that the total compensation
package for the Chief Executive Officer in 1998 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 A. Gladhill
James K. Kluttz
John C. Warfield
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The following table sets forth compensation information with respect to the
Chief Executive Officer and the other executive officers in 1998 (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION(1) ---------------
------------------------------- OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SHARES(2) COMPENSATION(3)
- ---------------------------------------------------- --------- --------- --------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Faye E. Cannon 1998 1997 242,000 58,080 3,806 4,712 -- 16,765 14,522
President and CEO of Bancorp and of the Bank 1996 220,000 88,000 3,307
173,700 72,560
David R. Stauffer 1998 1997 170,685 27,312 2,073 2,700 -- 16,765 14,522
Vice President of Bancorp and Senior Executive Vice 1996 164,120 54,365 2,756
President and COO of the Bank 153,000 50,689
Richard W. Phoebus, Sr. 1998 1997 136,400 38,363 2,152 2,646 -0- -- 15,565 12,201
Vice President of Bancorp and President and CEO of 1996 124,000 44,485
the Savings Bank(4) 111,000 17,295
David L. Spilman 1998 1997 120,000 19,200 1,470 -0- --
Treasurer of Bancorp and Senior Vice President of 75,856 25,396 -0-
the Bank(5)
</TABLE>
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(1) No Named Executive Officer received any perquisites in 1996, 1997 or 1998
the aggregate amount of which exceeded 10% of the officer's salary and
bonus.
(2) Adjusted to reflect 5% stock dividends paid on August 8, 1997 and July 29,
1998.
(3) 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 $160,000. 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 1998 will not be finally calculated until after
mailing date of the Proxy Statement but will be included in the 2000 Proxy
Statement.
(4) In 1996, Mr. Phoebus' compensation was established by the Savings Bank and
its former parent prior to completion of the merger with Bancorp.
(5) Mr. Spilman was designated an executive officer on May 5, 1997.
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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, 1998. Bancorp does not grant stock appreciation
rights.
OPTIONS GRANTED IN 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
INDIVIDUAL GRANTS AT ASSUMED ANNUAL
- ----------------------------------------------------------------------------------------------------- RATES
% OF TOTAL MARKET OF STOCK PRICE
OPTIONS PRICE APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE ON DATE OPTION TERM
GRANTED(1) EMPLOYEES IN PRICE OF GRANT EXPIRATION --------------------
NAME (SHARES) FISCAL 1998 (PER SHARE) (PER SHARE) DATE 0% 5%
- ------------------------------ ------------- --------------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Faye E. Cannon................ 3,806 8.40% $ 33.69 $ 33.69 1/23/08 -0- $ 80,641
David R. Stauffer............. 2,073 4.57 33.69 33.69 1/23/08 -0- 43,922
Richard W. Phoebus, Sr. ...... 2,152 4.75 33.69 33.69 1/23/08 -0- 45,596
David L. Spilman.............. 1,470 3.24 33.69 33.69 1/23/08 -0- 31,146
<CAPTION>
- ------------------------------
NAME 10%
- ------------------------------ ----------
<S> <C>
Faye E. Cannon................ $ 204,359
David R. Stauffer............. 111,308
Richard W. Phoebus, Sr. ...... 115,549
David L. Spilman.............. 78,930
</TABLE>
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(1) All options granted on January 23, 1998. Options exercisable to the extent
of 25%, 50%, 75%, and 100% on January 23, 1999, 2000, 2001, 2002,
respectively.
The following table sets forth information with respect to the value of all
options exercised during the fiscal year ended December 31, 1998 and the value
of all options held on December 31, 1998 by the Chief Executive Officer and the
Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
OPTION VALUES AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBERS OF SHARES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT 12/31/98(2) OPTIONS AT 12/31/98(3)
ACQUIRED ON VALUE ---------------------------- --------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------ ------------- ----------- ----------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Faye E. Cannon............................ -0- -0- 15,572 9,934 $ 190,720 $ 38,754
David R. Stauffer......................... -0- -0- 12,735 6,257 158,972 25,783
Richard W. Phoebus, Sr. .................. 751 11,339 6,026 4,137 96,116 14,016
David L. Spilman.......................... -0- -0- -0- 1,470 -0- -0-
</TABLE>
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(1) Based on the differences 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, 1998.
(3) Based on the difference between aggregate fair market value at December 31,
1998 and aggregate exercise price.
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<PAGE>
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 by a single person of 25% or more of the
combined voting power of the Bank and Bancorp, a majority of the members of the
Board of Directors of the Bank or Bancorp is composed of persons not elected or
recommended by 2/3 of the then current directors, or a sale of assets to or
merger with another corporation whose voting securities are not at least 60%
controlled by Bancorp's then current stockholders in substantially the share
proportions as their ownership to the Bank and Bancorp immediately prior to the
sale or merger. 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 $204,415 and
$151,863 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. Mr. Phoebus is also entitled to receive 1.5 times his annual compensation
if he is terminated without cause or if he remains employed by Bancorp and the
Savings Bank for the entire term of his employment agreement and is terminated
thereafter. The employment agreement also provides for payments of three times
Mr. Phoebus' annual compensation if he is terminated following a change in
control of Bancorp or the Savings Bank.
Executive officer Spilman has a change in control employment agreement,
which provides for payment of three times his compensation if terminated or his
reporting, responsibilities, title or compensation are materially adversely
changed following a change in control of Bancorp or the Bank.
10
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DIRECTORS' FEES AND DEFERRED COMPENSATION PLAN
During 1998, each director of Bancorp (other than employee directors)
received a quarterly director's fee of $1,250 plus $200 for each board meeting
and board committee meeting attended. Each director of Bancorp who also served
as a director of the Bank received a quarterly fee of $500 plus $200 for each
Bank board meeting and board committee meeting attended. Bancorp and Bank board
committee chairs received $300 for each committee 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 and $100 for each board
committee meeting attended. Each Bancorp director 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 15(th) of each year for the
next calendar year, currently 7.75%. 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.
11
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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, 1998. The graph assumes
that the value of the investment in Bancorp's Common Stock and each index was
$100 on December 31, 1993 and that all dividends were reinvested.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
F&M BANCORP NASDAQ US COMPANIES NASDAQ BANK STOCKS
<S> <C> <C> <C>
December 31, 1993 $100 $100 $100
December 31, 1994 $134 $98 $100
December 31, 1995 $145 $138 $148
December 31, 1996 $121 $170 $196
December 31, 1997 $207 $209 $328
December 31, 1998 $192 $293 $325
</TABLE>
12
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PROPOSAL TO ADOPT THE 1999 EMPLOYEE STOCK OPTION PLAN
The Board of Directors proposes and recommends that the stockholders of
Bancorp approve the 1999 Employee Stock Option Plan (the "Plan"). The Plan is
designed to attract and retain well-qualified individuals to serve as employees
and motivate them to exert their best efforts on behalf of the Corporation and
its subsidiaries. Adoption of the Plan requires approval by a majority of the
votes cast at the meeting (assuming a quorum is present). Accordingly,
abstentions and broker non-votes will have no effect on the outcome of the vote.
The Plan will succeed Bancorp's 1983 Stock Option Plan (the "1983 Plan") which
has expired and Bancorp's 1995 Stock Option Plan (the "1995 Plan") which,
although it will not expire until December, 2000, has only 86,195 shares
available for grant of the 670,138 shares reserved for issuance. Bancorp may
continue to make stock option awards under the 1995 Plan so long as shares
remain available for grant. The Board of Directors believes that stock option
awards made under the 1983 and 1995 Plans have been an effective and efficient
means of attracting, retaining and motivating officers and other key employees.
The following summary description of the Plan is qualified in its entirety by
reference to the full text of the Plan, which is attached to this Proxy
Statement as Exhibit A.
GENERAL
ADMINISTRATION: The Plan operates pursuant to procedures and guidelines set
forth in the Plan itself. The Plan is administered by a committee (the
"Committee") consisting of not less that two directors of Bancorp to be
appointed by and to serve during the pleasure of the Board of Directors. The
Committee consists only of "disinterested persons" as that term is defined in
Rule 16b-3 of the Securities Exchange Act of 1934. None of the Committee members
is eligible to participate in the Plan.
ELIGIBILITY: The individuals who shall be eligible to participate in the
Plan shall be key employees (including officers and directors who are employees)
of Bancorp, or of any subsidiary. Currently, approximately eighty (80)
individuals are eligible for participation. Options may also be granted under
the Plan from time to time in substitution for stock options held by employees
who become or are about to become key employees of Bancorp or a subsidiary of
Bancorp in connection with certain mergers and acquisitions.
SHARES AVAILABLE UNDER THE PLAN: The Plan authorizes the issuance of up to
400,000 shares of Bancorp's Common Stock, par value $5.00 per share (the
"Stock"). In addition, any shares of Stock remaining available for grant under
Bancorp's 1983 Plan or 1995 Plan or that become available for grant under either
such plan shall be available for grant under the Plan. The number of shares
issuable under the Plan will be adjusted by the Board of Directors in the event
of a stock dividend, stock split, combination, reclassification,
recapitalization or other capital adjustment of shares of Stock.
STOCK OPTION GRANTS
NUMBER OF OPTIONS AND PRICE PER SHARE: No employee may be granted options
for more than 25,000 shares of stock in any one year. In addition, in compliance
with the Internal Revenue Code, there are certain dollar value limits for grants
of incentive stock options. The option price per share will be not less than:
(i) for incentive stock options, 100% of the fair market value of the Stock on
the date the option is granted; and (ii) for non-qualified stock options, 85% of
the fair market value of the Stock on the date the option is granted.
VESTING: No option may be exercised during the first year from the date of
grant. Thereafter, options for 200 shares or less are exercisable in full.
Options for more than 200 shares are exercisable to the extent of 25% after the
expiration of one year from the date of grant, to the extent of 50% after the
expiration of two years from the date of grant, to the extent of 75% after the
expiration of three years from the date of grant, and to the extent of 100%
after the expiration of four years from the date of grant. All options will
become fully vested and exercisable upon a "Change in Control" (as defined in
the Plan) of Bancorp. The Committee may impose resale restrictions on all or a
portion of the shares delivered upon exercise of any option.
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<PAGE>
TERMINATION OF EMPLOYMENT: If any option holder's employment with Bancorp is
terminated, each option that has not been exercised within 90 days following
such termination of employment shall terminate.
SURRENDER: Options may include a right to surrender to Bancorp up to 50% of
the option to the extent then exercisable and receive in exchange a cash payment
equal to the excess of the fair market value of the shares covered by the option
or portion thereof surrendered over the aggregate option price of such shares.
TERMINATION AND AMENDMENT OF PLAN
Unless sooner terminated by the Board of Directors, no stock options may be
granted under the Plan after December 31, 2005, although options granted before
the termination date may extend beyond that date. The Board of Directors may
terminate, suspend or amend the Plan, provided that certain material amendments
may be submitted for stockholder approval to the extent necessary for the Plan
to satisfy the requirements of the exemption from the short-swing profits rules
under Section 16 of the Securities Exchange Act of 1934 or, with respect to
incentive stock options, to satisfy applicable provisions of the Internal
Revenue Code of 1986, as amended (the "Code").
NEW PLAN BENEFITS
As options under the Plan are granted at the discretion of the Committee,
and as no such options have yet been granted, neither the options to be granted
in 1999 nor the options that would have been granted in 1998 had the Plan been
in effect are reasonably ascertainable.
TAX CONSEQUENCES
The following is a brief summary of the significant aspects of current
federal income tax treatment of the stock options that may be granted under the
Plan. Options granted under the Plan may be incentive stock options within the
meaning of Section 422 of the Code or options that do not qualify as incentive
stock options ("non-qualified options"), as the Committee may determine in its
discretion.
An employee will recognize no income when a stock option is granted. Upon
the exercise of an option and the transfer to the employee of Stock, the tax
treatment depends on whether the option qualifies as an incentive stock option
or is a non-qualified option. If a non-qualified option is exercised, the
employee will recognize ordinary income equal to the difference between the
option price and the fair market value of the Stock on the date of exercise, and
Bancorp will have a deductible expense equal to the amount of such ordinary
income. No amount other than the price paid under the option shall be considered
as received by Bancorp for the Stock so transferred. When the employee disposes
of Stock acquired by the exercise of a non-qualified stock option, any amount
received in excess of the fair market value of the Stock on the date of exercise
will be treated as long- or short-term capital gain, depending upon the holding
period of the Stock. If the amount received is less than the fair market value
of the Stock on the date of exercise, the loss will be treated as a long- or
short-term capital loss, depending upon the holding period of the Stock.
If an incentive stock option is exercised, the employee will recognize
income only upon sale of the Stock that was received as a result of exercising
the option if certain conditions regarding the employee's period of employment
with Bancorp and the holding period of the option and the Stock are met. The
resulting gain or loss, measured by the difference between the sale price and
the option exercise price, is treated as a long- or short-term capital gain or
loss, depending upon the holding period of the Stock. No business expense
deduction will be allowed to Bancorp. If the above-mentioned conditions are not
met, the employee is taxed as if he or she had exercised a non-qualified option,
and Bancorp will have a deductible expense in an equivalent amount. Depending
upon individual circumstances, the alternative minimum tax may apply to the
exercise of an incentive stock option.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE PLAN.
14
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PROPOSAL TO ADOPT THE 1999 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
The Board of Directors proposes and recommends that the stockholders of
Bancorp approve the 1999 Stock Option Plan for Non-Employee Directors (the
"Director Plan"). The Director Plan is designed to attract and retain
well-qualified persons to serve as directors, to encourage stock ownership by
directors, and to more closely align the personal interests of directors with
the interests of the stockholders. Adoption of the Director Plan requires
approval by a majority of the votes cast at the meeting (assuming a quorum is
present). Accordingly, abstentions and broker non-votes will have no effect on
the outcome of the vote. The following summary description of the Director Plan
is qualified in its entirety by reference to the full text of the Director Plan,
which is attached to this Proxy Statement as Exhibit B.
GENERAL
ADMINISTRATION: The Director Plan operates pursuant to procedures and
guidelines set forth in the Director Plan itself. The Director Plan is
administered by a committee (the "Committee") consisting of not less that two
directors of Bancorp to be appointed by and to serve during the pleasure of the
Board of Directors.
ELIGIBILITY: The individuals who shall be eligible to participate in the
Director Plan shall be directors of Bancorp, or of any subsidiary, who are not
also employees. Currently, approximately twelve (12) such directors are eligible
to participate. The Committee will determine annually how many stock option
awards will be made to directors.
SHARES AVAILABLE UNDER THE DIRECTOR PLAN: The Director Plan authorizes the
issuance of up to 60,000 shares of Bancorp's Common Stock, par value $5.00 per
share (the "Stock"). The number of shares issuable under the Director Plan will
be adjusted by the Board of Directors in the event of a stock dividend, stock
split, combination, reclassification, recapitalization or other capital
adjustment of shares of Stock.
STOCK OPTION GRANTS
NUMBER OF OPTIONS AND PRICE PER SHARE: Each director will be granted options
for not more than 2,000 shares of stock each year on the day following the
annual stockholders meeting. The option price per share will be not less than
100% of the fair market value of the Stock on the date the option is granted.
VESTING: No option may be exercised during the first 6 months from the date
of grant. Thereafter, options are exercisable in full. All options will become
fully vested and exercisable upon a "Change in Control" (as defined in the
Director Plan) of Bancorp. The Committee may impose resale restrictions on all
or a portion of the shares delivered upon exercise of any option.
TERMINATION OF SERVICE: If any option holder's service as a director with
Bancorp or a subsidiary is terminated, each option that has not been exercised
within 90 days following such termination of service shall terminate.
SURRENDER: Options may include a right to surrender to Bancorp up to 50% of
the option to the extent then exercisable and receive in exchange a cash payment
equal to the excess of the fair market value of the shares covered by the option
or portion thereof surrendered over the aggregate option price of such shares.
TERMINATION AND AMENDMENT OF DIRECTOR PLAN
Unless sooner terminated by the Board of Directors, no stock options may be
granted under the Director Plan after December 31, 2005, although options
granted before the termination date may extend beyond that date. The Board of
Directors may terminate, suspend or amend the Director Plan, provided
15
<PAGE>
that certain material amendments may be submitted for stockholder approval to
the extent necessary for the Director Plan to satisfy the requirements of the
exemption from the short-swing profits rules under Section 16 of the Securities
Exchange Act of 1934.
NEW DIRECTOR PLAN BENEFITS
As the size of each option grant under the Director Plan is determined in
the sole discretion of the Committee, and as no such grants have yet been made,
neither the grants to be made in 1999 nor the grants that would have been made
in 1998 had the Director Plan been in effect are reasonably ascertainable.
TAX CONSEQUENCES
The following is a brief summary of the significant aspects of current
federal income tax treatment of the stock options that may be granted under the
Director Plan. Options granted under the Director Plan will be options that do
not qualify as incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") ("non-qualified
options").
A director will recognize no income when a stock option is granted. Upon the
exercise of an option and the transfer to the director of Stock, the director
will recognize ordinary income equal to the difference between the option price
and the fair market value of the Stock on the date of exercise, and Bancorp will
have a deductible expense equal to the amount of such ordinary income. No amount
other than the price paid under the option shall be considered as received by
Bancorp for the Stock so transferred. When the director disposes of Stock
acquired by the exercise of a non-qualified stock option, any amount received in
excess of the fair market value of the Stock on the date of exercise will be
treated as a long- or short-term capital gain, depending upon the holding period
of the Stock. If the amount received is less than the fair market value of the
Stock on the date of exercise, the loss will be treated as a long- or short-term
capital loss, depending upon the holding period of the Stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
DIRECTOR PLAN.
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AUDIT COMMITTEE AND INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Arthur Andersen LLP ("AA") has acted as Bancorp's
independent public accountants for the year ended December 31, 1998 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.
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, except Director Eric Glass'
initial Form 3 which was filed on January 4, 1999, 10 days late.
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
Stockholder proposals are eligible for consideration for inclusion in the
proxy materials for the 2000 Annual Meeting of Stockholders in accordance with
Rule 14a-8 under the Securities Exchange Act of 1934, as amended, if they are
received by Bancorp on or before November 23, 1999. Any proposal should be
directed to the attention of the Corporate Secretary, F&M Bancorp, 110 Thomas
Johnson Drive, Frederick, Maryland, 21702. In order for a stockholder proposal
submitted outside Rule 14a-8 to be considered "timely" within the meaning of
Rule 14a-4(c), such proposal must be received by Bancorp on or prior to February
6, 2000 and in order for a proposal to be timely under Bancorp's By-Laws, it
must be received on or prior to January 21, 2000, but no earlier than December
22, 1999.
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 22, 1999
17
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EXHIBIT A
F&M BANCORP
1999 EMPLOYEE STOCK OPTION PLAN
1. PURPOSES OF THE PLAN:
To advance the interests of F&M Bancorp (the "Corporation") and its
subsidiaries by assisting in attracting and retaining qualified employees and
providing them with increased motivation to exert their best efforts on behalf
of the Corporation and its subsidiaries.
2. ADMINISTRATION:
The Plan shall be administered by a committee (the "Committee") consisting
of not less than two directors of the Corporation to be appointed by and to
serve during the pleasure of the Board of Directors. The Committee shall consist
only of "disinterested persons" as that term is defined in Rule 16b-3 of the
Securities Exchange Act of 1934 (the "Exchange Act"). None of the Committee
members shall be eligible to participate in the Plan nor, during one year prior
to service as a member of the Committee, shall have been granted or awarded
equity securities pursuant to the Plan or any other plan of the Corporation or
any of its affiliates except as permitted by Rule 16b-3 under the Exchange Act.
The Committee shall select the particular employees to receive options from
among the senior management of the Corporation and its subsidiaries and shall
make all decisions concerning the timing, pricing and amount of options to be
granted. The Committee shall have full power to construe and interpret the Plan
and to promulgate such regulations with respect to the Plan as it may deem
desirable. The Committee shall report its deliberations to the Board of
Directors.
3. STOCK SUBJECT TO OPTION:
The shares to be issued upon exercise of options to be granted under the
Plan shall be 400,000 shares of the Common Stock (par value $5.00 per share) of
the Corporation (the "Common Stock") to be authorized by stockholders for
issuance under the Plan. In addition, any shares of Common Stock remaining
available for grant under the Corporation's Restated 1983 Stock Option Plan or
the Corporation's 1995 Stock Option Plan, or that become available for grant
under either such plan shall be available for grant under this Plan. If any
unexercised option terminates for any reason, the shares covered thereby shall
become available for grant of an option again.
4. ELIGIBILITY:
The individuals who shall be eligible to participate in the Plan shall be
such key employees (including officers and directors who are employees) of the
Corporation, or of any corporation (a "Subsidiary") in an unbroken chain of
corporations including the Corporation if, at the time of the granting of the
option, each of the corporations other than the last corporation in the unbroken
chain owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one or more of the other corporations in such chain.
5. TERMS AND CONDITIONS OF OPTIONS:
Options under this Plan are intended to be either incentive options
qualifying under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") or non-statutory options not qualifying under any section of the
Code as the Committee may recommend in its discretion from time to time. All
options granted under this Plan shall be issued upon such terms and conditions
as the Committee may
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recommend and the Board of Directors may approve from time to time, subject to
the following provisions (which shall apply to both incentive and non-qualified
stock options unless otherwise indicated):
(a) OPTION PRICE. The option price per share with respect to each option
shall be not less than: (i) for incentive stock options, 100% of the fair
market value of the Common Stock on the date the option is granted; and
(ii) for non-qualified stock options, 85% of the fair market value of the
Common Stock on the date the option is granted.
(b) NUMBER OF OPTIONS. The Corporation can grant an employee incentive stock
options to acquire Common Stock of any value, provided that the fair
market value (determined at the date of grant) of the stock subject to
one or more incentive stock options (under this Plan and all other plans
of the Corporation and its subsidiaries) first exercisable in any one
calendar year does not exceed $100,000 (determined at the date of grant).
If any incentive stock option granted under this Plan would cause such
dollar limit to be exceeded, then the excess portion of the incentive
stock option shall become exercisable in the next or succeeding calendar
year in which its exercisability would not violate the dollar limitation.
No options may be granted to any person who directly or indirectly owns
immediately prior to or immediately after the grant, in excess of 10% of
the Corporation's outstanding Common Stock. No option shall be an
incentive stock option unless so designated by the Committee at the time
of grant. Notwithstanding the foregoing, no employee shall be granted
options for more than 25,000 shares of Common Stock in any one calendar
year.
(c) EXERCISE OF OPTIONS.
(i) Except as provided in paragraph (ii) below, full payment for
shares acquired shall be made in cash or by certified check at or prior
to the time that an option, or any part thereof, is exercised. The
participant will have no rights as a stockholder until the certificate
for those shares as to which the option is exercised has been issued by
the Corporation. No option may be exercised during the first year from
the date of grant. Thereafter, options for 200 shares or less shall be
exercisable in full. Options for more than 200 shares shall be
exercisable to the extent of 25% after the expiration of one year from
the date of grant, to the extent of 50% after the expiration of two years
from the date of grant, to the extent of 75% after the expiration of
three years from the date of grant, and to the extent of 100% after the
expiration of four years from the date of grant. The Committee may impose
resale restrictions on all or a portion of the shares delivered upon
exercise of any option. All options will, however, vest and become fully
exercisable in the event of a change-in-control.
Change-in-Control of the Corporation. Change-in-Control shall be
deemed to have occurred if the event set forth in any one of the
following paragraphs shall have occurred:
(i) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Corporation (not including in
the securities beneficially owned by such Person any securities
acquired directly from the Corporation or its Affiliates)
representing 25% or more of the combined voting power of the
Corporation's then outstanding securities, excluding any Person
who becomes such a Beneficial Owner in connection with a
transaction described in clause (A) of paragraph (iii) below; or
(ii) the following individuals cease for any reason to constitute a
majority of the number of directors then serving on the Board;
individuals who, on the date hereof, constitute the Board and
any new director (other than a director whose initial
assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
the Corporation) whose appointment or election by the Board or
nomination for election by the Corporation's shareholders was
approved or recommended by a vote of at least two-thirds ( 2/3)
of the
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directors then still in office who either were directors on the
date hereof or whose appointment, election or nomination for
election was previously so approved or recommended; or
(iii) there is consummated a merger or consolidation of the
Corporation or any direct or indirect subsidiary of the
Corporation with any other corporation, other than (A) a merger
or consolidation which would result in the voting securities of
the Corporation outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity or any parent thereof), in combination with
the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation or
any subsidiary of the Corporation, at least 60% of the combined
voting power of the securities of the Corporation or such
surviving entity or any parent thereof outstanding immediately
after such merger or consolidation, or (B) a merger or
consolidation effected to implement a recapitalization of the
Corporation (or similar transaction) in which no Person is or
becomes the Beneficial Owner, directly or indirectly, of
securities of the Corporation (not including in the securities
Beneficially Owned by such Person any securities acquired
directly from the Corporation or its Affiliates) representing
25% or more of the combined voting power of the Corporation
then outstanding securities.
(iv) the shareholders of the Corporation approve a plan of complete
liquidation or dissolution of the Corporation or there is
consummated an agreement for the sale or disposition by the
Corporation of all or substantially all of the Corporation's
assets, other than a sale or disposition by the Corporation of
all or substantially all of the Corporations' assets to an
entity, at least 60% of the combined voting power of the voting
securities of which are owned by shareholders of the
Corporation in substantially the same proportions as their
ownership of the Corporation immediately prior to such sale;
(v) the Corporation ceases to own, directly or indirectly,
securities of any subsidiary representing 50% or more of the
combined voting power of the subsidiary's then outstanding
securities; or
(vi) there is consummated an agreement for the sale or disposition
by the Corporation of all or substantially all of a
subsidiary's assets, other than a sale or disposition by the
Corporation of all or substantially all of the subsidiary's
assets to an entity, at least 60% of the combined voting power
of the voting securities of which are owned by shareholders of
the Corporation in substantially the same proportions as their
ownership of the subsidiary immediately prior to such sale;
provided however, that such a sale or disposition should only
be effective for those Option holders, if any, employed by the
subsidiary whose assets are so sold or otherwise disposed of,
and not all participating Option holders.
"Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
"Beneficial Owner" shall have the meaning set forth in Rule 13d-3
under the Exchange Act.
"Board" shall mean the board of directors of the Corporation.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
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"Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (i) the
Corporation or any of their subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of
the Corporation or any of their Affiliates, (iii) an underwriter
temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly,
by the shareholders of the Corporation in substantially the same
proportions as their ownership of stock of the Corporation.
(ii) In the discretion of the Committee, the option price of an option may
be payable through the delivery of shares of Common Stock with a value equal to
the option price or in a combination of cash and Common Stock with a value equal
to the option price.
(d) TERM OF OPTION.
(i) No incentive stock option shall be granted for a term of more than 10
years from the date such option is granted.
(ii) No non-qualified stock option shall be granted for a term of more than
10 years from the date such option is granted.
(e) TERMINATION OF EMPLOYMENT. Each option, to the extent that it shall not
have been exercised, shall terminate 90 days after the employment of the
participant by the Corporation terminates. Nothing in this paragraph
shall operate to extend the term of the option beyond the term stated in
the agreement granting the option or to accelerate the period during
which portions of the option may be exercised.
(f) OPTION NONASSIGNABLE AND NONTRANSFERABLE. Each option and all rights
thereunder, including the right to surrender the option, shall be
nonassignable and nontransferable other than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder. The designation of a beneficiary
by a participant in the Plan does not constitute a transfer. Options
shall be exercisable during the optionee's lifetime only by the optionee
or his or her guardian or legal representative. Upon death, options shall
be exercisable by the Option holder's personal representative.
Notwithstanding the foregoing restrictions, in the event that Rule 16b-3
promulgated under the Securities Exchange Act of 1934 is amended to
permit further assignment or transfer of options, such assignments or
transfers shall be permissible under the Plan.
6. SURRENDER OF OPTIONS FOR CASH:
Any option granted under the Plan, with the express statement in the option
grant recognizing this paragraph, may include a right to surrender to the
corporation up to 50% of the option to the extent then exercisable and receive
in exchange a cash payment equal to the excess of the fair market value of the
shares covered by the option or portion thereof surrendered over the aggregate
option price of such shares. For the purposes of this paragraph, fair market
value shall be determined by the Committee. Such right may be granted by the
Board of Directors upon recommendation of the Committee concurrently with the
option or thereafter by amendment upon such terms and conditions as the
Committee may recommend. Shares subject to an option or portion thereof that
have been so surrendered shall not thereafter be available for option grants
under the Plan. The Committee may from time to time recommend to the Board of
Directors the maximum amount of cash that may be paid upon surrender of options
in any year, may determine that, if the amount to be received by any optionee is
reduced in any year because of such limitation, all or a portion of the amount
not paid may be paid in any subsequent year or years, and may limit the right of
surrender to certain periods during the year.
A-4
<PAGE>
7. PAYROLL DEDUCTIONS:
In the discretion of the Committee, there may be made available to optionees
an election for the payroll deduction each pay period over the term of the
option of amounts equal to the aggregate exercise price of any or all of such
options (and estimated federal income taxes thereon). Interest will be paid on
payroll deductions at rates prescribed from time to time by the Board of
Directors upon recommendation of the Committee.
8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION:
If the outstanding shares of the Common Stock are increased, decreased, or
changed into, or exchanged for a different number or kind of shares or
securities of the Corporation, without receipt of consideration by the
Corporation, through reorganization, merger, statutory share exchange,
recapitalization, reclassification, stock split-up, stock dividend, stock
consolidation, or otherwise, an appropriate and proportionate adjustment shall
be made in the number and kind of shares as to which options may be granted. A
corresponding adjustment in the price per share and number and kind of shares
allocated to unexercised options, or portions thereof, which shall have been
granted prior to any such change shall likewise be made. Any such adjustment,
however, in an outstanding option shall be made without change in the total
price applicable to the unexercised portion of the option but with a
corresponding adjustment in the price for each share subject to the option.
Adjustments under this section shall be made by the Board of Directors, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final and conclusive. No fractional shares of Common Stock shall be
issued under the Plan on account of any such adjustment.
9. OPTIONS IN SUBSTITUTION FOR STOCK OPTIONS GRANTED BY OTHER CORPORATIONS:
Options may be granted under the Plan from time to time in substitution for
stock options held by employees of corporations who become or are about to
become key employees of the Corporation or a subsidiary of the Corporation as
the result of a merger or consolidation of the employing corporation with the
Corporation or a subsidiary, or the acquisition by the Corporation or a
subsidiary of the assets of the employing corporation, or the acquisition by the
Corporation or a subsidiary of stock of the employing corporation as the result
of which it becomes a subsidiary of the Corporation. The terms and conditions of
the substitute options so granted may vary from the terms and conditions set
forth in paragraph 5 of this Plan to such extent as the Board of Directors at
the time of grant may deem appropriate to conform, in whole or in part, to the
provisions of the options in substitution for which they are granted.
10. EFFECTIVE DATE OF THE PLAN:
The Plan shall become effective upon approval by the Board of Directors,
subject to approval by the stockholders of the Corporation.
11. TERMINATION DATE:
No options may be granted under the Plan after December 31, 2005. Subject to
Section 5(d), options granted before the termination date for the Plan may
extend beyond that date.
12. STOCK OPTION AGREEMENTS AND COMMON STOCK RECEIVED UPON EXERCISE:
(a) STOCK OPTION AGREEMENT. Options awarded to participants under the Plan
shall be evidenced by a stock option agreement (the "Agreement"). Each
Agreement shall designate the number of shares of Common Stock to be
acquired by the participant upon exercise of the stock option and the
price per share at which the option may be exercised, subject to any
adjustment as provided
A-5
<PAGE>
herein. Each Agreement shall be executed by the Corporation and by the
participant, shall be binding upon each of them, and may be executed in
separate counterparts, each of which shall be deemed to be an original
and all of which taken together constitute one and the same agreement.
(b) RESTRICTION ON EXERCISE: The stock options granted hereunder may not be
exercised if the issuance of the Common Stock upon such exercise or the
method of payment of consideration for such Common Stock would constitute
a violation of any applicable federal or state securities or other law or
regulation. As a condition to the exercise of any stock option granted
hereunder, the Corporation may require the participant to make any
representation and warranty to the Corporation as may be required or
advisable under any applicable law or regulation.
(c) RESTRICTED STOCK. If the shares of Common Stock that will be received
upon the exercise of stock options granted under the Plan have not been
registered under the Securities Act of 1933 or any applicable state securities
laws they will be restricted stock. The certificates representing such shares of
Common Stock will bear the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE (THE "SHARES")
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") AND HAVE BEEN ISSUED PURSUANT TO EXCEPTIONS UNDER THE ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SHARES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE ACT OR UNDER APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
AND IN COMPLIANCE WITH RULE 144 OF SUCH ACT.
13. COMPLIANCE WITH LAWS AND REGULATIONS:
The grant, holding and vesting of all options under the Plan shall be
subject to any and all requirements and restrictions that may, in the opinion of
the Committee, be necessary or advisable for the purposes of complying with any
statute, rule or regulation of any governmental authority, or any agreement,
policy or rule of any stock exchange or other regulatory organization governing
any market on which the Common Stock is traded. The Corporation may withhold or
require payment for income and/or employment taxes as required by law.
14. AMENDMENT OF THE PLAN:
The Plan may be amended by the Board of Directors; however, no amendment to
the Plan materially increasing the benefits accruing to participants or
materially increasing the number of shares of Common Stock that may be issued
upon the exercise or surrender of stock options under the Plan (except
adjustments pursuant to Section 8) or materially modifying any requirements as
to eligibility for participation in the Plan shall be effective unless approved
by the stockholders of the Corporation. No amendment shall become effective
without the prior approval of the stockholders of the Corporation if stockholder
approval would be required for continued compliance with Rule 16b-3 of the
Exchange Act or, with respect to incentive stock options, with applicable
provisions of the Code.
15. MISCELLANEOUS:
(a) EXPENSES. The Corporation shall bear all expenses and costs in
connection with the administration of the Plan.
(b) DESIGNATION OF BENEFICIARIES. A participant may designate a beneficiary
to receive any distribution under the Plan upon his or her death.
A-6
<PAGE>
(c) APPLICABLE LAW. The validity, interpretation and administration of this
Plan and any rules, regulations, determinations or decisions made hereunder, and
the rights of any and all persons having or claiming to have any interest herein
or hereunder, shall be determined exclusively in accordance with the laws of the
State of Maryland, without regard to the choice of laws provisions thereof.
(d) HEADINGS. The headings herein are for reference purposes only and shall
not affect the meaning or interpretation of the Plan.
(e) NOTICES. All notices or other communications made or given pursuant to
this Plan shall be in writing and shall be sufficiently made or given if
hand-delivered or mailed by certified mail, addressed to any participant at the
address contained in the records of the Corporation or to the Corporation at its
principal office.
(f) FEDERAL SECURITIES LAW REQUIREMENT. Awards granted hereunder shall be
subject to all conditions required under Rule 16b-3 to qualify the award for any
exception from the provisions of Section 16(b) of the Securities Exchange Act of
1934 available under that Rule.
A-7
<PAGE>
EXHIBIT B
F&M BANCORP
1999 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. PURPOSES OF THE PLAN:
To advance the interests of F&M Bancorp (the "Corporation") and its
subsidiaries by assisting in attracting and retaining qualified persons to serve
as directors of the Corporation and its subsidiaries, encouraging stock
ownership by directors, and more closely aligning the personal interests of
directors with the interests of stockholders.
2. ADMINISTRATION:
The Plan shall be administered by a committee (the "Committee") consisting
of not less than two directors of the Corporation to be appointed by and to
serve during the pleasure of the Board of Directors. The Committee shall have
full power to construe and interpret the Plan and to promulgate such regulations
with respect to the Plan as it may deem desirable. The Committee shall report
its deliberations to the Board of Directors. Notwithstanding the above, the
selection of the Directors to whom stock options are to be granted, the timing
of such grants, the number of shares subject to any stock option, the exercise
price of any stock option, the periods during which any stock option may be
exercised and the term of any stock option shall be as hereinafter provided, and
the Committee shall have no discretion as to such matters.
3. STOCK SUBJECT TO OPTION:
The shares to be issued upon exercise of options to be granted under the
Plan shall be 60,000 shares of the Common Stock (par value $5.00 per share) of
the Corporation (the "Common Stock") to be authorized by stockholders for
issuance under the Plan. If any unexercised option terminates for any reason,
the shares covered thereby shall become available for grant of an option again.
4. TERMS AND CONDITIONS OF OPTIONS:
Options under this Plan are intended to be non-statutory options not
qualifying under any section of the Internal Revenue Code of 1986, as amended
(the "Code"), (commonly referred to as non-qualified options). All options
granted under this Plan shall be issued upon the following terms and conditions:
(a) OPTION PRICE. The option price per share with respect to each option
shall be not less than: (i) 100% of the fair market value of the Common
Stock on the date the option is granted.
(b) NUMBER OF OPTIONS. Each year each person who shall be elected to serve
as a director of the Corporation or whose term shall continue shall be
awarded not more than 2000 shares in option form on the day following the
annual stockholders meeting.
(c) EXERCISE OF OPTIONS.
(i) Except as provided in paragraph (ii) below, full payment for
shares acquired shall be made in cash or by certified check at or prior
to the time that an option, or any part thereof, is exercised. The
participant will have no rights as a stockholder until the certificate
for those shares as to which the option is exercised has been issued by
the Corporation. No option may be exercised during the first 6 months
from the date of grant. Thereafter, options shall be exercisable in full.
The Committee may impose resale restrictions on all or a portion of the
shares delivered
B-1
<PAGE>
upon exercise of any option. All options will, however, vest and become
fully exercisable in the event of a change-in-control.
Change-in-Control of the Corporation. Change-in-Control shall be deemed to
have occurred if the event set forth in any one of the following paragraphs
shall have occurred:
(i) any Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Corporation (not including in the securities
beneficially owned by such Person any securities acquired directly from
the Corporation or its Affiliates) representing 25% or more of the
combined voting power of the Corporation's then outstanding securities,
excluding any Person who becomes such a Beneficial Owner in connection
with a transaction described in clause (A) of paragraph (iii) below; or
(ii) the following individuals cease for any reason to constitute a majority
of the number of directors then serving on the Board; individuals who,
on the date hereof, constitute the Board and any new director (other
than a director whose initial assumption of office is in connection
with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of
directors of the Corporation) whose appointment or election by the
Board or nomination for election by the Corporation's shareholders was
approved or recommended by a vote of at least two-thirds ( 2/3) of the
directors then still in office who either were directors on the date
hereof or whose appointment, election or nomination for election was
previously so approved or recommended; or
(iii) there is consummated a merger or consolidation of the Corporation or
any direct or indirect subsidiary of the Corporation with any other
corporation, other than (A) a merger or consolidation which would
result in the voting securities of the Corporation outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent thereof), in
combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation or
any subsidiary of the Corporation, at least 60% of the combined voting
power of the securities of the Corporation or such surviving entity or
any parent thereof outstanding immediately after such merger or
consolidation, or (B) a merger or consolidation effected to implement a
recapitalization of the Corporation (or similar transaction) in which
no Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Corporation (not including in the securities
Beneficially Owned by such Person any securities acquired directly from
the Corporation or its Affiliates) representing 25% or more of the
combined voting power of the Corporation then outstanding securities.
(iv) the shareholders of the Corporation approve a plan of complete
liquidation or dissolution of the Corporation or there is consummated
an agreement for the sale or disposition by the Corporation of all or
substantially all of the Corporation's assets, other than a sale or
disposition by the Corporation of all or substantially all of the
Corporation's assets to an entity, at least 60% of the combined voting
power of the voting securities of which are owned by shareholders of
the Corporation in substantially the same proportions as their
ownership of the Corporation immediately prior to such sale;
(v) the Corporation ceases to own, directly or indirectly, securities of any
subsidiary representing 50% or more of the combined voting power of the
subsidiary's then outstanding securities; or
(vi) there is consummated an agreement for the sale or disposition by the
Corporation of all or substantially all of a subsidiary's assets, other
than a sale or disposition by the Corporation of all or substantially
all of the subsidiary's assets to an entity, at least 60% of the
combined voting power of the voting securities of which are owned by
shareholders of the Corporation in substantially the same proportions
as their ownership of the subsidiary immediately prior to such
B-2
<PAGE>
sale; provided however, that such a sale or disposition should only be
effective for those option holders, if any, employed by the subsidiary
whose assets are so sold or otherwise disposed of, and not all
participating option holders.
"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
under Section 12 of the Exchange Act.
"Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under
the Exchange Act.
"Board" shall mean the board of directors of the Corporation.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Person" shall have the meaning given in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d) thereof, except that
such term shall not include (i) the Corporation or any of their
subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation or any of their Affiliates, (iii)
an underwriter temporarily holding securities pursuant to an offering of
such securities, or (iv) a corporation owned, directly or indirectly, by the
shareholders of the Corporation in substantially the same proportions as
their ownership of stock of the Corporation.
(ii) In the discretion of the Committee, the option price of an
option may be payable through the delivery of shares of Common Stock with a
value equal to the option price or in a combination of cash and Common Stock
with a value equal to the option price.
(d) TERM OF OPTION.
No option shall be granted for a term of more than 10 years from the date
such option is granted.
(e) TERMINATION OF EMPLOYMENT. Each option, to the extent that it shall not
have been exercised, shall terminate 90 days after the date on which the
participant ceases to serve as a director of the Corporation. Nothing in
this paragraph shall operate to extend the term of the option beyond the
term stated in the agreement granting the option or to accelerate the
period during which portions of the option may be exercised.
(f) OPTION NONASSIGNABLE AND NONTRANSFERABLE. Each option and all rights
thereunder, including the right to surrender the option, shall be
nonassignable and nontransferable other than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder. The designation of a beneficiary
by a participant in the Plan does not constitute a transfer. Options
shall be exercisable during the optionee's lifetime only by the optionee
or his or her guardian or legal representative. Upon death, options shall
be exercisable by the option holder's personal representative.
Notwithstanding the foregoing restrictions, in the event that Rule 16b-3
promulgated under the Securities Exchange Act of 1934 is amended to
permit further assignment or transfer of options, such assignments or
transfers shall be permissible under the Plan.
5. SURRENDER OF OPTIONS FOR CASH:
Any option granted under the Plan, with the express statement in the option
grant recognizing this paragraph, may include a right to surrender to the
corporation up to 50% of the option to the extent then exercisable and receive
in exchange a cash payment equal to the excess of the fair market value of the
shares covered by the option or portion thereof surrendered over the aggregate
option price of such shares. For the purposes of this paragraph, fair market
value shall be determined by the Committee. Such right may be granted by the
Board of Directors upon recommendation of the Committee concurrently with the
option or thereafter by amendment upon such terms and conditions as the
Committee may recommend. Shares subject to an option or portion thereof that
have been so surrendered shall not thereafter be
B-3
<PAGE>
available for option grants under the Plan. The Committee may from time to time
recommend to the Board of Directors the maximum amount of cash that may be paid
upon surrender of options in any year, may determine that, if the amount to be
received by any optionee is reduced in any year because of such limitation, all
or a portion of the amount not paid may be paid in any subsequent year or years,
and may limit the right of surrender to certain periods during the year.
6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION:
If the outstanding shares of the Common Stock are increased, decreased, or
changed into, or exchanged for a different number or kind of shares or
securities of the Corporation, without receipt of consideration by the
Corporation, through reorganization, merger, statutory share exchange,
recapitalization, reclassification, stock split-up, stock dividend, stock
consolidation, or otherwise, an appropriate and proportionate adjustment shall
be made in the number and kind of shares as to which options may be granted. A
corresponding adjustment in the price per share and number and kind of shares
allocated to unexercised options, or portions thereof, which shall have been
granted prior to any such change shall likewise be made. Any such adjustment,
however, in an outstanding option shall be made without change in the total
price applicable to the unexercised portion of the option but with a
corresponding adjustment in the price for each share subject to the option.
Adjustments under this section shall be made by the Board of Directors, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final and conclusive. No fractional shares of Common Stock shall be
issued under the Plan on account of any such adjustment.
7. EFFECTIVE DATE OF THE PLAN:
The Plan shall become effective upon approval by the Board of Directors,
subject to approval by the stockholders of the Corporation.
8. TERMINATION DATE:
No options may be granted under the Plan after December 31, 2005. Subject to
Section 4(d), options granted before the termination date for the Plan may
extend beyond that date.
9. STOCK OPTION AGREEMENTS AND COMMON STOCK RECEIVED UPON EXERCISE:
(a) STOCK OPTION AGREEMENT. Options awarded to participants under the Plan
shall be evidenced by a stock option agreement (the "Agreement"). Each
Agreement shall designate the number of shares of Common Stock to be
acquired by the participant upon exercise of the stock option and the
price per share at which the option may be exercised, subject to any
adjustment as provided herein. Each Agreement shall be executed by the
Corporation and by the participant, shall be binding upon each of them,
and may be executed in separate counterparts, each of which shall be
deemed to be an original and all of which taken together constitute one
and the same agreement.
(b) RESTRICTION ON EXERCISE: The stock options granted hereunder may not be
exercised if the issuance of the Common Stock upon such exercise or the
method of payment of consideration for such Common Stock would constitute
a violation of any applicable federal or state securities or other law or
regulation. As a condition to the exercise of any stock option granted
hereunder, the Corporation may require the participant to make any
representation and warranty to the Corporation as may be required or
advisable under any applicable law or regulation.
(c) RESTRICTED STOCK. If the shares of Common Stock that will be received
upon the exercise of stock options granted under the Plan have not been
registered under the Securities Act of 1933 or any
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<PAGE>
applicable state securities laws they will be restricted stock. The
certificates representing such shares of Common Stock will bear the
following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE (THE "SHARES")
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") AND HAVE BEEN ISSUED PURSUANT TO EXCEPTIONS UNDER THE ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SHARES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE ACT OR UNDER APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
AND IN COMPLIANCE WITH RULE 144 OF SUCH ACT.
10. COMPLIANCE WITH LAWS AND REGULATIONS:
The grant, holding and vesting of all options under the Plan shall be
subject to any and all requirements and restrictions that may, in the opinion of
the Committee, be necessary or advisable for the purposes of complying with any
statute, rule or regulation of any governmental authority, or any agreement,
policy or rule of any stock exchange or other regulatory organization governing
any market on which the Common Stock is traded. The Corporation may withhold or
require payment for income and/or employment taxes as required by law.
11. AMENDMENT OF THE PLAN:
The Plan may be amended by the Board of Directors; however, no amendment to
the Plan materially increasing the benefits accruing to participants or
materially increasing the number of shares of Common Stock that may be issued
upon the exercise or surrender of stock options under the Plan (except
adjustments pursuant to Section 6) or materially modifying any requirements as
to eligibility for participation in the Plan shall be effective unless approved
by the stockholders of the Corporation. No amendment shall become effective
without the prior approval of the stockholders of the Corporation if stockholder
approval would be required for continued compliance with Rule 16b-3 of the
Exchange Act.
12. MISCELLANEOUS:
(a) EXPENSES. The Corporation shall bear all expenses and costs in
connection with the administration of the Plan.
(b) DESIGNATION OF BENEFICIARIES. A participant may designate a beneficiary
to receive any distribution under the Plan upon his or her death.
(c) APPLICABLE LAW. The validity, interpretation and administration of this
Plan and any rules, regulations, determinations or decisions made hereunder, and
the rights of any and all persons having or claiming to have any interest herein
or hereunder, shall be determined exclusively in accordance with the laws of the
State of Maryland, without regard to the choice of laws provisions thereof.
(d) HEADINGS. The headings herein are for reference purposes only and shall
not affect the meaning or interpretation of the Plan.
(e) NOTICES. All notices or other communications made or given pursuant to
this Plan shall be in writing and shall be sufficiently made or given if
hand-delivered or mailed by certified mail, addressed to any participant at the
address contained in the records of the Corporation or to the Corporation at its
principal office.
(f) FEDERAL SECURITIES LAW REQUIREMENT. Awards granted hereunder shall be
subject to all conditions required under Rule 16b-3 to qualify the award for any
exception from the provisions of Section 16(b) of the Securities Exchange Act of
1934 available under that Rule.
B-5
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
F&M BANCORP
ANNUAL MEETING OF STOCKHOLDERS
Tuesday, April 20, 1999
10:00 a.m.
Corporate Headquarters
110 Thomas Johnson Drive
Frederick, MD 21702
[LOGO] F&M Bancorp
110 Thomas Johnson Drive
Frederick, MD 21702 proxy
- ----------------------------------------------------------------------------
This proxy is solicited by the Board of Directors for use at the Annual
Meeting on April 20, 1999 at 10:00 a.m.
The shares of stock you hold will be voted as you specify below.
If no choice is specified, the proxy will be voted "FOR" Items 1, 2, and 3.
By signing the proxy, you revoke all prior proxies and appoint Faye E. Cannon,
David R. Stauffer, and Alice E. Stonebreaker, or any two of them, with full
power of substitution, to vote your shares on the matters shown on the
reverse side and any other matters which may come before the Annual Meeting
and all adjournments.
SEE REVERSE FOR VOTING INSTRUCTIONS.
<PAGE>
[LOGO]
Please detach here
The Board of Directors Recommends a Vote FOR Items 1, 2 AND 3.
<TABLE>
<S> <C> <C> <C> <C>
1. Election of directors: 01 John D. Brunk 04 Donald R. Hull / / Vote FOR / / Vote WITHHELD
02 Faye E. Cannon 05 H. Deets Warfield, Jr. all nominees from all nominees
03 Eric E. Glass
-----------------------------------------
(Instructions: To withhold authority to vote for any indicated nominee,
write the name(s) of the nominee(s) in the box provided to the right.)
-----------------------------------------
2. Proposed F&M Bancorp 1999 Employee Stock Option Plan / / For / / Against / / Abstain
3. Proposed F&M Bancorp 1999 Stock Option Plan for Non-Employee Directors / / For / / Against / / Abstain
</TABLE>
THE PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL AND IN THE BEST DISCRETION OF THE
PROXY HOLDERS AS TO ANY OTHER MATTERS.
ADDRESS CHANGE? Check Box / / Date ______________________________
Indicate changes below:
---------------------------------------
---------------------------------------
Signature(s) in Box
Please sign exactly as your name(s)
appear on Proxy. If held in joint
tenancy, all persons must sign.
Trustees, administrators, etc. should
include title and authority.
Corporations should provide full name
of corporation and title of authorized
officer signing the proxy.
