<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Baltimore Bancorp
(Name of Registrant as Specified In Its Charter)
Baltimore Bancorp
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
[FN]
- ------------------
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE>
BALTIMORE BANCORP [LOGO]
March 30, 1994
To the Stockholders of Baltimore Bancorp:
You are cordially invited to attend the 1994 annual meeting of
stockholders (the "Annual Meeting") of Baltimore Bancorp (the "Company")
to be held at 9:00 a.m. on Wednesday, April 27, 1994, at the Omni
Inner Harbor Hotel, 101 West Fayette Street, Baltimore, Maryland 21201.
At the Annual Meeting, the Company's stockholders will be asked:
(i) to elect five directors for three-year terms; (ii) to approve an
amendment to the Company's 1992 Stock Option Plan as to a grant of
options on October 13, 1993 to each nonemployee director; and (iii) to
transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
Your Board of Directors unanimously recommends that you
vote "FOR" the election of the Board's nominees for election as
directors and "FOR" the amendment to the 1992 Stock Option Plan.
You are urged to read the accompanying proxy statement, which
contains information regarding the matters to be voted on at the Annual
Meeting. A copy of our 1993 Annual Report to Stockholders, containing
information regarding the Company and its performance during the past
year, is also enclosed, unless a copy has previously been mailed to
you.
It is important that your shares be represented at the Annual
Meeting. Whether or not you plan to attend the Annual Meeting, you are
requested to complete, date, sign and return the proxy card in the
enclosed postage paid envelope.
Thank you for returning your proxy card. We appreciate the support
you have given the Company and look forward to your continued support.
Sincerely,
/s/ Edwin F. Hale
- ---------------------
Edwin F. Hale, Sr.
Chairman of the Board
120 East Baltimore Street * Baltimore, Maryland 21202
Telephone 410-244-3360
<PAGE>
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON
APRIL 27, 1994
NOTICE IS HEREBY GIVEN that the 1994 annual meeting of
stockholders (the "Annual Meeting") of Baltimore Bancorp (the
"Company") will be held on Wednesday, April 27, 1994, at 9:00
a.m. at the Omni Inner Harbor Hotel, 101 West Fayette Street,
Baltimore, Maryland 21201, for the following purposes:
(1) To elect five directors for three-year terms (Proposal 1);
(2) To approve a proposal to amend the Company's 1992 Stock Option
Plan as to a grant of an option on October 13, 1993 to each nonemployee
director of the Company to purchase 5,000 shares of Common Stock
(Proposal 2); and
(3) To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on March 18,
1994 as the record date for the determination of stockholders entitled
to notice of and to vote at the Annual Meeting. Only holders of Common
Stock of record at the close of business on that date will be entitled
to notice of and to vote at the Annual Meeting or any adjournments
thereof.
In the event that there are not sufficient votes to approve the
amendment to the 1992 Stock Option Plan at the time of the Annual
Meeting, the Annual Meeting may be adjourned in order to permit further
solicitation of proxies by the Company.
By Order of the Board of Directors
/s/ Edwin F. Hale
- ---------------------
Edwin F. Hale, Sr.
Chairman of the Board
Baltimore, Maryland
March 30, 1994
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
THEREFORE, WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE
ANNUAL MEETING, PLEASE SIGN, DATE AND COMPLETE THE PROXY CARD AND
RETURN IT IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED
IN THE UNITED STATES.
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 27, 1994
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished to stockholders of Baltimore
Bancorp ("Baltimore Bancorp" or the "Company") in connection with the
solicitation by its Board of Directors (the "Board") of proxies to be
used at the Company's 1994 annual meeting of stockholders (the "1994
Annual Meeting" or the "Annual Meeting"), to be held on Wednesday, April
27, 1994, at 9:00 a.m., at the Omni Inner Harbor Hotel, 101 West Fayette
Street, Baltimore, Maryland 21201, and at any adjournments thereof.
If the enclosed form of proxy is properly executed and returned to
the Company in time to be voted at the Annual Meeting, the shares
represented thereby will be voted in accordance with the instructions
marked thereon. Executed but unmarked proxies will be voted (1)
FOR Proposal 1 to elect the five nominees of the Board for three-year
terms; and (2) FOR Proposal 2 to approve the proposed amendment to the
1992 Stock Option Plan. The Board is not aware of any other matters
that are to come before the Annual Meeting. If any other matters are
properly brought before the Annual Meeting, the persons named in the
accompanying proxy will vote the shares represented by the proxies on
such matters as determined by a majority of the Board.
The presence of a stockholder at the Annual Meeting will not
automatically revoke such stockholder's proxy. However, stockholders
may revoke a proxy at any time prior to its exercise by filing with
James A. Gast, Corporate Secretary, Baltimore Bancorp, 120 East
Baltimore Street, Baltimore, Maryland 21202 a written notice of
revocation, by delivering to the Company a duly executed proxy bearing
a later date, or by attending the Annual Meeting and voting in person.
The cost of soliciting proxies in the form enclosed herewith will be
borne by the Company. In addition to the solicitation of proxies by
mail, the Company, through its directors, officers and regular
employees, as well as the directors, officers and regular employees of
its principal subsidiary, The Bank of Baltimore (the "Bank"), may
also solicit proxies personally or by telephone or telegraph. The
Company will also request persons, firms and corporations holding
shares in their names or in the names of their nominees, which are
beneficially owned by others, to send proxy material to and obtain
proxies from the beneficial owners and will reimburse the holders for
their reasonable expenses in doing so. The Company has retained
MacKenzie Partners, Inc., a proxy soliciting firm, to assist in the
solicitation of proxies at a fee of $7,500, plus reimbursement of
certain out-of-pocket expenses.
The securities which can be voted at the Annual Meeting consist
of shares of Common Stock of the Company, with each share entitling its
owner to one vote on all matters. There is no cumulative voting in the
election of directors. The close of business on March 18, 1994 has been
fixed by the Board as the record date for the determination of
stockholders entitled to vote at the Annual Meeting. The number of
shares outstanding and entitled to vote as of that date was 16,683,931.
The presence, in person or by proxy, of at least a majority of the
outstanding shares of Common Stock of the Company entitled to vote is
necessary to constitute a quorum at the Annual Meeting. Stockholders'
votes will be tabulated by the persons appointed by the Board to act as
inspectors of election for the Annual Meeting. Abstentions will be
treated as shares that are present and entitled to vote for purposes of
determining the presence of a quorum at the Annual Meeting but will not
be counted as a vote cast.
For purposes of Proposal 1, directors will be elected by a plurality
of all votes cast on the proposal at the Annual Meeting. In the case of
Proposal 2, an affirmative vote of a majority of shares represented in
person or by proxy and entitled to vote on the proposal is required to
approve the amendment to the 1992 Stock Option Plan. While abstentions
on shares represented at the Annual Meeting will not affect Proposal 1,
they will have the same effect as a negative vote on Proposal 2.
It is anticipated that this Proxy Statement will be mailed to
stockholders on or about March 30, 1994. A copy of the Annual Report to
Stockholders for the year ended December 31, 1993 accompanies this
Proxy Statement, unless previously mailed to stockholders. The Company
is required to file an Annual Report on Form 10-K for the year ended
December 31, 1993 with the Securities and Exchange Commission ("SEC").
Stockholders may obtain, free of charge, a copy of the Annual Report on
Form 10-K by writing to or telephoning David L. Spilman, Treasurer and
Director of Investor Relations, Baltimore Bancorp, 120 East Baltimore
Street, Baltimore, Maryland 21202; (800) 722-8823.
ELECTION OF DIRECTORS (Proposal 1)
The number of directors of the Company is being increased from 12 to
13 effective at the 1994 Annual Meeting. Directors are customarily elected
for three-year terms (except to the extent a director has filled a vacancy
or would serve beyond the annual meeting following the age of 75) with the
Board being divided into three classes, two of which are composed of four
directors and one of which is being increased from four to five directors.
The term of office of only one class of directors expires in each year.
The Board's nominees for election to three-year terms at the 1994 Annual
Meeting are Rose M. Cernak, Edwin F. Hale, Sr., R. Andrew Larkin, Jr.,
Robert A. Pascal and G. Gregory Russell. Ms. Cernak is the director nominee
to fill the position on the Board created by the increase in the size of
the Board from 12 to 13 directors effective at the 1994 Annual Meeting.
Unless otherwise specified on the proxy, it is the intention of the
persons named in the proxy to vote the shares represented by each
properly executed proxy FOR the election as directors of the Board's
nominees listed below. The Board believes that each such nominee will
stand for election and will serve if elected as a director. However, if
any such person fails to stand for election or is unable to accept
election, proxies will be voted by the proxyholders for the election of
such other person or persons as the Board may recommend. Pursuant to
the Company's By-Laws, directors will be elected by a plurality of all
the votes cast on the proposal at the Annual Meeting. The rules of the
New York Stock Exchange permit member organizations to give proxies to
vote on Proposal 1 whether or not instructions have been received from
beneficial owners.
Information as to Nominees and Continuing Directors
The following table sets forth the names of the Board's nominees
for election as directors and of those directors who will continue to
serve as such after the 1994 Annual Meeting. Also set forth is certain
other information with respect to each such person's principal occupation
or employment during the past five years, his or her age at December 31,
1993, the period during which he served as a director and positions
currently held with the Company.
<TABLE>
<CAPTION>
Director For Term
Age Since Expiring Position(s) held with the Company
Nominees for 3-year terms:
(Class of 1997)
<S> <C> <C> <C> <C>
Rose M. Cernak 63 - 1997 None
Edwin F. Hale, Sr. 47 1991 1997 Chairman of the Board and
Chief Executive Officer
R. Andrew Larkin, Jr. 41 1991 1997 Director
Robert A. Pascal 59 1991 1997 Director
G. Gregory Russell 38 1991 1997 Director
Continuing Directors:
(Class of 1995)
Barry B. Bondroff 45 1991 1995 Director
Conrad H.C. Everhard 63 1992 1995 Director
Melvin S. Kabik 69 1991 1995 Director
Alan M. Leberknight 52 1992 1995 Director and President
Continuing Directors:
(Class of 1996)
Joseph A. Cicero 49 1993 1996 Executive Vice President, Chief
Financial Officer and Director
Bruce H. Hoffman 46 1993 1996 Director
James P. O'Conor 64 1993 1996 Director
Dennis F. Rasmussen 46 1991 1996 Director
</TABLE>
Barry B. Bondroff is the President and Managing Director
of Grabush, Newman & Company, P.A., an accounting and management
consulting firm based in Baltimore, Maryland. Mr. Bondroff joined this
firm in 1970. In addition, Mr. Bondroff is President and a director of
the Edward A. Meyerberg Northwest Senior Center, Inc., a non-profit
organization offering services and programs for senior citizens, a
director of Camtour, Inc., a non-profit organization which sponsors
cycling marathons in Maryland to benefit educational and safety
programs, and a director of the Levindale Hebrew Geriatric Center and
Hospital. Mr. Bondroff is also a Board member and Treasurer of the
International Group of Accounting Firms.
Rose M. Cernak is co-owner and general manager of Olde
Obrycki's Crab House, Inc., a landmark Baltimore restaurant, which
positions she has held since 1976. From 1972 to 1976, Ms. Cernak was
Vice President of The Richard Cernak Corporation, a general
construction company. Ms. Cernak has also been active with United
Cerebral Palsy of Central Maryland since 1986.
Joseph A. Cicero is Executive Vice President and Chief
Financial Officer of the Company and the Bank, which positions he has
held since January 1992. He previously served as Executive Vice
President and Chief Financial Officer of Perpetual Savings Bank, FSB,
Vienna, Virginia, from 1985 until January 1992. Prior to that, Mr.
Cicero served as Senior Vice President and Chief Financial Officer of
Equitable Bank in Baltimore.
Conrad H.C. Everhard is Chairman of Cho Yang Line (U.S.A.) Inc.,
an international shipping company based in New York City, which position
he has held since October 1990. Prior thereto, he was Chairman of Orient
Overseas Container Lines (U.S.A.) Inc., another international shipping
company. Mr. Everhard was also National Vice President for Ocean Shipping
of the National Defense Transportation Association, Washington, D.C. and
served on the Presidential Advisory Commission on Conferences in Ocean
Shipping. Mr. Everhard is a member of the Board of World Explorer Cruises.
He previously served in Brussels as the Director General of Europe and
Africa for the Massachusetts Port Authority and was knighted by royal
decree in the Order of the Crown (Belgium) for his services in developing
trade and goodwill relations between Belgium and the United States. From
1978 to 1986, Mr. Everhard served on the Board of Global Union Bank in
New York City.
Edwin F. Hale, Sr. is Chairman of the Board and Chief Executive Officer
of the Company and Chairman of the Board of the Bank. He has served as
Chairman of the Board of the Company and the Bank since September 1991 and
as Chief Executive Officer of the Company since September 1992. Mr. Hale is
also the Chairman of the Board and principal stockholder of Hale Intermodal
Transport Company, a Baltimore-based transportation company. Prior to
becoming Chairman of the Board of the Company and the Bank, such company or
its predecessors were Mr. Hale's principal occupation since 1975.
Bruce H. Hoffman has served as Executive Director of the
Maryland Stadium Authority since February 1989, with responsibility for
overseeing the design, financing and construction of Orioles Park at
Camden Yards, the new stadium facility for the Baltimore Orioles. Mr.
Hoffman is currently responsible for the $151 million expansion of the
Baltimore Convention Center. From 1983 to 1989, he served as Director
of Design and Construction of the New York State Facilities Development
Corporation, a quasi-public agency responsible for speeding the
construction of state hospitals and prisons. Mr. Hoffman has served as
Campaign Chairman of the United Negro College Fund and is the current
President of the Cystic Fibrosis Foundation.
Melvin S. Kabik is a retired supermarket executive. Since
1966, Mr. Kabik has been a real estate investor. He is on the Board of
Hebrew Free Loan, an organization that makes interest-free loans to
deserving applicants. He also has previously served on the Board of
Associated Jewish Charities.
R. Andrew Larkin, Jr. is the President of Maryland Realty
Investment Corporation, a Baltimore-based real estate investment
company, which position he has held since 1985. Mr. Larkin is also a
member of Washington College's Visiting Committee, a director of the
Better Business Bureau of Baltimore, a director of the Anne Arundel
Community College Foundation, and a director of the American Red Cross,
Chesapeake Chapter.
Alan M. Leberknight is President of the Company and is
President and Chief Executive Officer of the Bank. He has served as
President of the Company and the Bank since November 1991 and also
became Chief Executive Officer of the Bank in September 1992. Prior to
joining the Company and the Bank, Mr. Leberknight served for over 10
years with Signet Bank of Maryland (or its predecessor, Union Trust
Bank of Maryland), including as Executive Vice President since 1989.
Mr. Leberknight also currently serves as President of the Baltimore
County Board of Education and Trustee of the Neighborhood Housing
Services of Baltimore, among other civic activities.
James P. O'Conor is Chairman of the Board and Chief
Executive Officer of O'Conor, Piper & Flynn, a Maryland-based realty
company. He has been the executive officer of that firm or its
predecessor since 1960. Mr. O'Conor is involved in numerous community
and professional organizations in the Baltimore, Maryland area. His
service includes: President of the Baltimore County Chamber of
Commerce, a member of the Board of Regents of The Catholic University
of America, a member of the Baltimore County Economic Development
Commission, Chairman of the Board of the Maryland Health Systems, a
director of the Maryland General Hospital, a member of the President's
Advisory Board of Loyola College, and a director and past President of
the Maryland Association of Realtors.
Robert A. Pascal is the Chairman of the Board of United
Propane, Inc., a privately held company engaged in marketing, sales and
distribution of propane gas. He has held this position since 1961. Mr.
Pascal is also the Appointments Secretary for the Governor of Maryland
and has held this position since 1988. Mr. Pascal was a two-term County
Executive of Anne Arundel County from 1974 to 1982. In addition, Mr.
Pascal served as a Maryland State Senator from 1970 to 1974 and was the
Republican candidate for Governor of Maryland in 1982.
Dennis F. Rasmussen is a principal of Maryland Public Affairs
Associates, a public relations and government affairs consulting firm
with offices in Baltimore, Annapolis and Towson, Maryland and is
President of R.A.F. Group, a general public policy consulting firm
based in Towson, Maryland. From December 1986 to December 1990, Mr.
Rasmussen served as Baltimore County Executive and was Chairman of the
Baltimore Regional Council of Governments. From 1981 until 1985, Mr.
Rasmussen was the President of Rasmussen & Associates, a Maryland-based
consulting and real estate firm. In addition, Mr. Rasmussen served as
State Senator for the Sixth Legislative District in Maryland from 1978
through 1986 and was Chairman of the Finance Committee from 1984 to 1986.
Mr. Rasmussen was a member of the Maryland House of Delegates from 1974
through 1977. Mr. Rasmussen also serves on numerous boards and commissions,
including the Disabled American Veterans, Maryland Department, the
Business Advisory Board and the Baltimore Leadership Foundation.
G. Gregory Russell is a certified public accountant and
has served since 1989 as Director of Finance of the Maryland Port
Administration. Prior thereto, he served as a senior audit manager with
the accounting firm of Arthur Andersen & Co. Mr. Russell also formerly
served as a director of the Maryland Higher Education Supplemental Loan
Authority. Mr. Russell is a member of the Morgan State University Board
of Regents, a former director of the Norfolk State University School of
Business Advisory Board, and a member of the Board of the Grandville
Academy (Baltimore Chapter). Mr. Russell is the past President of the
District of Columbia Chapter of the National Association of Black
Accountants.
Section 32 of the Federal Deposit Insurance Act, as amended (the
"FDIA"), requires certain insured depository institutions or
depository institution holding companies to notify their respective
regulatory agencies of the proposed addition of any new director or
senior executive officer at least 30 days before such addition becomes
effective ("Section 32 notice"). An insured depository
institution or depository institution holding company that is subject
to the requirements of Section 32 of the FDIA may not add any
individual to its Board or employ any individual as a senior executive
officer if the appropriate regulatory agency issues a notice of
disapproval within 30 days after receipt of such individual's Section
32 notice. While the Company has been subject to the Section 32 notice
requirements since January 1, 1992 and has filed the required Section
32 notices with the Federal Reserve Bank of Richmond, the Company will
no longer be subject to the Section 32 notice requirements upon the
termination of the written agreement (the "Agreement"), which the
Company entered into with the Federal Reserve Bank of Richmond and the
Maryland Bank Commissioner in July 1992, and the Bank will no longer be
subject to the Section 32 notice requirements upon the termination of
the cease and desist order (the "Order"), which the Bank entered
into with the Federal Deposit Insurance Corporation ("FDIC") and
the Maryland Bank Commissioner in July 1992. The Company has recently
been informed that the Federal Reserve Bank of Richmond and the
Maryland Bank Commissioner expect to terminate the Agreement and that
the FDIC and the Maryland Bank Commissioner expect to terminate the
Order. Accordingly, no Section 32 notice has been filed on behalf of
Ms. Cernak, who will not become a member of the Board until the Company
has been notified that the termination of the Agreement is effective,
or become a member of the board of directors of the Bank until the Bank
has been notified that the termination of the Order is effective, or in
either case until she has satisfied the Section 32 notice requirements.
Nominations by Stockholders
The Company's By-Laws require that stockholder nominations for
directors be made pursuant to timely notice in writing to the Secretary
of the Company. To be timely, notice must be delivered to, or mailed to
and received at, the principal executive offices of the Company not
less than 45 days nor more than 90 days prior to the date of the
meeting, provided that at least 60 days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders.
Public disclosure of the date of the 1994 Annual Meeting was made by
the issuance of a press release on February 18, 1994 and by
concurrently filing a Current Report on Form 8-K under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), with the SEC
and the New York Stock Exchange. A stockholder's notice of nomination
must also set forth certain information specified in Article II,
Section 2.13, of the Company's By-Laws concerning the nominating
stockholder and each person the stockholder proposes to nominate for
election. Stockholder nominations may be made by any stockholder
eligible to vote at the Annual Meeting, provided the notice of nomination
complies with the informational requirements of the By-Laws, and is
received by the Corporate Secretary of the Company no later than March
14, 1994. No stockholder nominations had been received by that date.
Board of Directors' Committees
The Board has appointed various committees, including an Executive
Committee, Audit Committee, Community and Public Affairs Committee,
Compensation Committee, Compliance Committee, Loan Portfolio Review
Committee, Nominating Committee, Retirement Committee and Shareholders'
Liaison Committee.
The Executive Committee held 26 meetings during 1993. Its current
members are Messrs. Hale (Chairman), Bondroff, Leberknight, Larkin,
Pascal, Rasmussen and an additional member of the Board, which position
rotates on a quarterly basis. The Executive Committee reviews all
significant loans and generally has all powers of the Board, except for
powers specifically reserved to the Board.
The Audit Committee conducted seven meetings during 1993. Its
current members are Messrs. Russell (Chairman), Bondroff and Hoffman.
Only nonemployee directors are eligible to serve on the Audit
Committee. The duties of the Audit Committee include reviewing the
annual financial statements of the Company and the scope of the
independent annual audit and internal audits. It also reviews the
independent accountants' letter to management concerning the
effectiveness of the Company's internal financial and accounting
controls and management's response to that letter. In addition, the
Committee reviews and recommends to the Board the firm to be engaged as
the Company's independent accountants. The Committee may also examine
and consider other matters relating to the financial affairs of the
Company as it determines appropriate.
The Community and Public Affairs Committee reviews proposed and
ongoing community projects and makes recommendations to the Board for
donations or other levels of support to worthy organizations and their
activities. The current members of the Committee are Messrs. Hale
(Chairman), Hoffman, Kabik and O'Conor. The Committee met five times
during 1993.
The Compensation Committee reviews and recommends the level of
compensation for executive officers and directors. This Committee also
functions as the Stock Option Committee, administering the Company's
stock option plans and making grants of options thereunder. The current
members of this Committee are Messrs. Pascal (Chairman), Bondroff and
Kabik. This Committee met nine times during 1993. Only nonemployee
directors are eligible to serve on the Compensation Committee.
The Compliance Committee was formed to monitor compliance by the
Company with the Agreement, which the Company entered into with the
Federal Reserve Bank of Richmond and the Maryland Bank Commissioner in
July 1992. The Compliance Committee also monitors compliance by the
Bank with the Order, which the Bank entered into with the FDIC and the
Maryland Bank Commissioner in July 1992. The Agreement and the Order
relate to problems created prior to September 11, 1991 (the date of the
first board meeting following a proxy contest, which resulted in a new
Board and management for the Company and the Bank). The Compliance
Committee has advised the Board that the Company and the Bank are
respectively in compliance with the Agreement and the Order. The
Compliance Committee held six meetings during 1993. The current members
of the Compliance Committee are Messrs. Bondroff (Chairman), Larkin,
Pascal, Rasmussen and Russell.
The Loan Portfolio Review Committee reviews and provides advice to
management regarding the lending activities and policies of the Company
and its subsidiaries with particular reference to loan quality
considerations. Its current members are Messrs. Larkin (Chairman),
Leberknight, Rasmussen and Russell. The Loan Portfolio Review Committee
met nine times during 1993.
The Nominating Committee makes recommendations to the Board as to
the Board's nominees for election as directors. The current members of
the Nominating Committee are Messrs. Hale (Chairman), Pascal and
Rasmussen. The Nominating Committee met three times during 1993.
Nominations for director may be submitted to the Nominating Committee
by written statement in care of the Company. Such nominations will be
considered, along with those developed by the Nominating Committee, in
light of the needs of the Company, as well as the nominee's individual
knowledge, experience and background.
The Retirement Committee oversees the administration of the
Company's and the Bank's retirement plans and benefits and reviews
the performance of the investment portfolios and establishes investment
criteria with respect to such plans and benefits. The current members
of the Committee are Messrs. Kabik (Chairman), Everhard and O'Conor.
The Committee met four times during 1993.
The Shareholders' Liaison Committee met four times during 1993. It
interacts with the Stockholders' Advisory Committee, which consists of
representatives of certain larger stockholders who meet with the Board
quarterly to advise the Board on the views and interests of the
stockholders. Current members of the Shareholders' Liaison Committee
are Messrs. Larkin (Chairman) and Russell.
During 1993, the Board held 13 meetings. No incumbent director who
served during 1993 attended less than 75% of the aggregate of the
total number of meetings of the Board and the total number of meetings
held by all committees of the Board on which he served during the
period that he served.
Compensation of Directors
Each director of the Company or the Bank, who is not an executive
officer, receives an annual retainer of $17,000 (payable semi-annually)
and fees of $875 for attendance at regular or special meetings of the
Boards of the Company and the Bank and $725 ($800 in the case of a
committee chairman) for attendance at meetings of committees of the
Boards of the Company and the Bank. A single fee is paid if Board or
committee meetings for the Company and the Bank are held on the same
day. The Board has adopted a resolution encouraging directors to apply
at least one-half of the annual retainer received for serving as a
director toward the purchase of the Company's Common Stock.
In June 1992, the Board adopted the 1992 Stock Option Plan (the
"Plan") for the benefit of directors and full-time employees of
the Company and its subsidiaries, which Plan was approved by the
Company's stockholders at the 1993 annual meeting. Under the terms of
the 1992 Stock Option Plan, each nonemployee director of the Company
who was serving on the Board on June 10, 1992, the effective date of
the Plan, was granted a ten-year nonqualified option to purchase 2,500
shares of the Company's Common Stock. In addition, the Plan provided
for an additional nonqualified option grant of 2,500 shares to each
nonemployee director of the Company serving on the Board on October 26,
1992. The per share option exercise prices of these options equaled the
fair market value of a share of Common Stock on the respective dates of
grant, as determined in accordance with the Plan. Each nonemployee
director who is first elected to the Board of the Company receives a
ten-year nonqualified option on the date he or she becomes a member of
the Board to purchase 2,500 shares of the Company's Common Stock. In
addition, each nonemployee director of the Company who is serving on
the Board at the time of the first meeting of the Board following an
annual meeting of the stockholders of the Company receives an option on
the date of such meeting of the Board to purchase 2,500 shares of the
Company's Common Stock. In connection with the 1994 Annual Meeting,
Ms. Cernak has waived her right to receive the option grant of 2,500
shares she would otherwise be entitled to receive upon her initial
election to the Board, and Ms. Cernak and the other nonemployee
directors have waived their rights to receive the annual option grant
of 2,500 shares they would otherwise be entitled to receive at the
first Board meeting following the 1994 Annual Meeting. On October 13,
1993, the Plan was amended to provide for an additional nonqualified
option grant of 5,000 shares to each nonemployee director of the
Company then serving on the Board, subject to stockholder approval of
the amendment. See "Proposed Amendment to 1992 Stock Option Plan
(Proposal 2)."
The Company and the Bank have adopted unfunded deferred compensation
plans for their nonemployee directors. Each nonemployee director may
elect to defer all or part of the director's fees until he or she
either retires from his or her principal occupation or reaches an age
(between 62 and 72 years of age) specified by the director. Interest is
earned on the deferred amount at a rate established from time to time
by management. Payment of the deferred amount may be made to the
director or his or her beneficiary in up to 10 annual installments. No
director deferred fees in 1993. One director, Dennis F. Rasmussen, is
covered by the Bank's health insurance plan, and in connection
therewith, the Bank paid an aggregate of approximately $2,200 during
1993.
EXECUTIVE COMPENSATION
Cash Compensation
The following table sets forth the compensation paid by the Company
and its subsidiaries for services rendered in all capacities during
fiscal years 1993, 1992 and 1991 to the Chief Executive Officer and
each of the four most highly compensated executive officers of the
Company serving at December 31, 1993.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Annual Compensation Compensation Awards
Number of
Securities All Other
Name and Prinicipal Position(s) Year Salary Bonus Underlying Options Compensation
<S> <C> <C> <C> <C> <C>
Edwin F. Hale, Sr. 1993 $450,000 $350,000 75,000 $102,328(b)(c)
Chairman of the Board of 1992 342,954 - 325,000 -
the Company and the 1991 100,598(a) - - -
Bank; Chief Executive
Officer of the Company
Alan M. Leberknight 1993 240,000 - 20,000 54,761(b)(c)(d)
President and a Director 1992 206,330 - 50,000 40,205
of the Company and the 1991 21,538 - - -
Bank; Chief Executive
Officer of the Bank
Joseph A. Cicero 1993 240,000 - 20,000 52,714(b)(c)
Executive Vice President 1992 178,142 - 50,000 -
of the Company and the Bank 1991 - - - -
E. Wayne Edwards 1993 132,692 35,000 17,500 1,218(c)
Executive Vice President 1992 98,206 - 10,000 -
of the Company and the Bank 1991 - - - -
Larry D. Unger 1993 148,769 - 6,000 2,661(b)(c)
Executive Vice President 1992 147,461 - 14,000 31,587
of the Company and the Bank 1991 140,500 - 10,500 -
<FN>
(a) Includes $44,444 paid to Mr. Hale in June 1992 as a salary adjustment for 1991 to reflect his service as a full
time executive officer of the Company and the Bank after his election as Chairman of the Board of both on September
11, 1991.
(b) Effective December 31, 1993, the Bank's supplemental employee retirement plan (''SERP'') was terminated. The Company
paid Messrs. Hale and Cicero $100,000 and $50,000, respectively, in lieu of maintaining the SERP and making
contributions on behalf of such executive officers. Messrs. Leberknight and Unger received $40,000 and $1,000,
respectively, in connection with the termination of the SERP and their waiver and release of all rights thereunder.
(c) Effective July 1, 1993, the Company adopted a 401(k) Plan (the ''401(k) Plan''). For 1993, matching contributions
made by the Company to the 401(k) Plan on behalf of Messrs. Hale, Leberknight, Cicero, Edwards and Unger were
$2,328, $2,704, $2,714, $1,218, and $1,661, respectively.
(d) Includes $12,057 which reflects the value of the benefits accrued during 1993, calculated on an actuarial basis,
with respect to Mr. Leberknight's split-dollar insurance coverage. Mr. Leberknight paid the amount of the premium
with respect to the term life component of his split-dollar insurance coverage.
</TABLE>
Option Grants
The following table contains information with respect to grants of stock
options to each of the named executive officers during the fiscal year ended
December 31, 1993.
<TABLE>
<CAPTION>
Option Grants in 1993 Fiscal Year
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants (a) Option Term (d)
Number % of Total
of Securities Options Granted
Underlying to Employees Exercise Expiration
Name Options Granted in Fiscal Year Price Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Edwin F. Hale, Sr. 75,000 (b) 24.39 $12 7/8 Oct. 12, 2003 $607,275 $1,538,925
Alan M. Leberknight 10,000 (c) 3.25 9 1/2 July 13, 2003 59,740 151,410
10,000 (b) 3.25 12 7/8 Oct. 12, 2003 80,970 205,190
Joseph A. Cicero 10,000 (c) 3.25 9 1/2 July 13, 2003 59,740 151,410
10,000 (b) 3.25 12 7/8 Oct. 12, 2003 80,970 205,190
E. Wayne Edwards 7,500 (c) 2.44 9 1/2 July 13, 2003 44,805 113,558
10,000 (b) 3.25 12 7/8 Oct. 12, 2003 80,970 205,190
Larry D. Unger 6,000 (c) 1.95 9 1/2 July 13, 2003 35,844 90,846
<FN>
(a) All option grants were made at 100% of the fair market value of the Common Stock on the date of grant. Options not
immediately exercisable in full become so if there is a change in control of the Company or the Bank.
(b) Option will become exercisable in full on October 13, 1994.
(c) These options will become exercisable to the extent of 20% of the shares covered by the option on the first
anniversary thereof and an additional 20% each anniversary thereafter.
(d) Based on exercise price.
</TABLE>
Option Exercises and Holdings
The following table sets forth information with respect to each of the
named executive officers concerning the exercise of stock options during the
fiscal year ended December 31, 1993, and the value of all unexercised options
held by such individuals at such date.
<TABLE>
<CAPTION>
Aggregated Option Exercises in 1993 Fiscal Year
and Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Shares Options at Fiscal Year-End Fiscal Year-End (a)
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Edwin F. Hale, Sr. - - 325,000 75,000 $2,193,750 $103,125
Alan M. Leberknight - - 30,000 40,000 230,000 218,750
Joseph A. Cicero - - 30,000 40,000 230,000 218,750
E. Wayne Edwards - - 2,000 25,500 15,750 112,375
Larry D. Unger - - 29,924 20,700 109,659 136,169
<FN>
(a) Based on the $14 1/4 closing price of the Company's Common Stock on December 31, 1993, minus the exercise price.
</TABLE>
Retirement Plans
The following table illustrates current annual pension benefits
under the Company's retirement plan for retirement in 1994 at age 65
under the most advantageous provisions available for various levels of
compensation, years of service, and full Social Security benefits.
Pension benefits are currently subject to a statutory maximum of
$118,800, subject to cost-of-living adjustments. Additionally,
effective January 1, 1994, annual compensation in excess of $150,000
(subject to cost of living increases) may not be used in calculation of
retirement benefits.
<TABLE>
<CAPTION>
Pension Plan Table
Annual Years of Service
Compensation 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$125,000 $32,002 $42,412 $ 51,787 $ 61,162 $ 70,537
150,000 38,565 51,099 62,349 73,599 84,849
175,000 45,128 59,787 72,912 86,037 99,162
200,000 51,690 68,474 83,474 98,474 113,474
225,000 56,174 75,125 91,560 107,995 118,800
250,000 56,736 75,154 91,596 108,038 118,800
300,000 56,736 75,154 91,596 108,038 118,800
400,000 56,736 76,959 99,377 118,800 118,800
450,000 58,307 86,673 111,893 118,800 118,800
500,000 64,845 96,388 118,800 118,800 118,800
</TABLE>
Benefits under the retirement plan are based on a formula computed
with respect to base salary (excluding incentive compensation) for an
employee's final five years of credited plan service prior to
retirement. The plan generally provides for payments to or on behalf of
each vested employee upon such employee's retirement at age 55 or
later in the form of a straight-life annuity. Normal retirement age
under the plan is 65; a reduced benefit is payable to vested employees
who retire between age 55 and age 65. Death benefits are payable to the
surviving spouse of a vested employee. Messrs. Hale, Leberknight,
Cicero and Edwards each have two years of credited service under the
retirement plan and Mr. Unger has 10 years of credited service under
the retirement plan. The base salary with respect to the covered
compensation of each of Messrs. Hale, Leberknight, Cicero, Edwards and
Unger is set forth in the annual compensation column (salary) of the
Summary Compensation Table. See "Executive Compensation."
Effective December 31, 1993, the SERP, which had been adopted in
1984 to provide certain senior employees with nonqualified retirement
benefits payable from the general assets of the Company, was
terminated. The Company paid Messrs. Hale and Cicero $100,000 and
$50,000, respectively, in lieu of maintaining the SERP and making
contributions on behalf of such executive officers. Messrs. Leberknight
and Unger received $40,000 and $1,000, respectively, in connection with
the termination of the SERP and their waiver and release of all rights
thereunder.
Employment and Severance Agreements
The Company and the Bank have no employment agreements with any
executive officer. The Company and the Bank have entered into a
severance payment agreement with Mr. Hale, dated as of October 26,
1992, as amended, pursuant to which he would be entitled to receive a
lump sum cash severance payment equal to two and one-half years'
salary, present valued to the date of payment, if, during the term of
the agreement, there is a sale of the Company or the Bank and (i) at
the time of closing of such sale, the person who acquires the stock or
assets of the Company or the Bank has not made a written commitment to
Mr. Hale to continue his employment for a period of at least one year
in positions having the same or greater authority, responsibilities,
duties, scope, and salary as existed before the closing or (ii) if Mr.
Hale's employment is terminated involuntarily, or voluntarily with
Good Reason, in connection with or within 18 months after the sale of
the Company or the Bank, unless such termination is "for cause."
As defined in the agreement, a sale of the Company or the Bank would be
deemed to occur if: (i) any person becomes the beneficial owner of more
than 50% of the total number of voting shares of the Company, (ii)
there is a sale or other transfer of all or substantially all of the
assets of the Company or the Bank, or (iii) the Company's beneficial
ownership of the total voting shares of the Bank is reduced to less
than 50%. "Good Reason" is defined to include a material
reduction in the authority, responsibilities, duties or scope of Mr.
Hale's position from those that existed before the sale, a reduction
in his salary from the rate that existed before the sale, or
requirement that Mr. Hale relocate more than 50 miles from the City of
Baltimore. Pursuant to his agreement, Mr. Hale would also be entitled
to receive continued health care and life and disability insurance
coverage for a period of one year or, if earlier, until he became
employed full time by another employer. If requested, the Bank would
also be required to furnish Mr. Hale with outplacement services for up
to one year. The initial term of Mr. Hale's agreement was for one
year, and is automatically renewed for one additional year on each
anniversary date of the agreement, unless the Company or the Bank gives
contrary written notice before such renewal date. The Bank has entered
into similar severance payment agreements, dated as of October 26,
1992, as amended, with each of Messrs. Leberknight, Cicero, Edwards and
Unger. The agreements with Messrs. Leberknight, Cicero, Edwards and
Unger provide for cash severance payments of one year's salary,
present valued to the date of payment. Consummation of the acquisition
of the Company by First Fidelity Bancorporation would constitute a sale
of the Company for purposes of these agreements. See "Changes in
Control."
Compensation Committee Report on Executive Compensation
The objectives of the Company's management compensation policy are:
to attract and retain the best available executive officers; to
motivate them to achieve the goals set forth in the Company's business
plan; to link executive and stockholder interests through equity-based
compensation; and to provide a compensation package of current and
deferred benefits that recognizes the executive's contribution, as
well as the Company's performance, measured by both short-term and
long-term achievements.
The management compensation policy and the general compensation
policies of the Company are established by the Compensation Committee
of the Board (the "Committee"). The Committee formulates the
compensation policy and specific compensation levels for executive
officers and administers the Company's stock option plans. The
Committee is currently composed of three nonemployee directors who have
no interlocking relationships or insider participation as defined by
the SEC.
The Committee believes that the compensation of the Chief Executive
Officer, Edwin F. Hale, Sr., should be based upon corporate performance
relative to the Company's operating and regulatory environment. In
setting Mr. Hale's salary, the Committee considered the salaries of
chief executive officers of 25 other financial institutions, located
primarily in the Company's principal market (from Virginia to
Pennsylvania) with assets between $1.7 and $13.2 billion and an average
asset size of $4.2 billion according to data obtained from outside
consultants, and gave special consideration to the economic environment
and the existence of regulatory oversight related to the Company's
financial condition. The Committee believes that because of the
challenges faced by management in restoring the financial strength of
the Company and enhancing stockholder value, base salaries of key
management personnel should be set at the upper end of the competitive
salary structure.
Mr. Hale became Chairman of the Board in September 1991 after
considerable personal effort and expense in mounting a successful proxy
contest against the then-incumbent Board. The contest bore a high risk
of failure which could have resulted in substantial financial loss to
Mr. Hale personally, but was undertaken as an opportunity to improve
the Company's financial condition and increase stockholder value.
After taking office in September 1991, the new Board determined that
the financial condition of the Company was more serious than previously
believed. Several weeks later, federal and state bank regulators began
an extensive four-month joint examination. As a result of the
examination, the Company entered into the Agreement with the Federal
Reserve Bank of Richmond and the Maryland Bank Commissioner, and the
Bank entered into the Order with the FDIC and the Maryland Bank
Commissioner. The Agreement and the Order placed the new Board,
including Mr. Hale and other executive officers, at risk of substantial
personal liability if the serious problems identified by the regulators
were not corrected within the time frames specified by the Agreement
and the Order.
In determining an appropriate salary, bonus, and long-term incentive
compensation for Mr. Hale, the Committee considered the Company's
previous financial condition, which had deteriorated severely under
prior management, and that the continued independent operation of the
Bank could not be assured unless corrective actions were promptly
undertaken. To increase stockholder value through improved financial
performance, the Board initially elected Mr. Hale as Chairman, and
later as Chief Executive Officer, charging him with increased
responsibility for overseeing the direction of the Company and
restructuring the Bank's operations. Responding to this added
responsibility, Mr. Hale resigned as chief executive officer of his
other business interest, Hale Intermodal Transport Company.
The Committee and the Board established the following objectives for
Mr. Hale in 1992, which were reinforced in 1993: assemble an
experienced management team and improve the operations of the Company,
restore the Company to and improve its profitability, increase the
capital levels of the Company and the Bank, reduce the level of problem
assets, improve relations with the bank regulators, promote the
termination of the Agreement and the Order, and enhance stockholder
value. Mr. Hale achieved all of these objectives in 1993.
<TABLE>
<CAPTION>
BALTIMORE BANCORP
Key Performance Indicators
1993 1992 1991
<S> <C> <C> <C>
Earnings
Net income (millions) $ 10.30 $ 14.50 $(126.50)
Capital (year-end)
Leverage ratio 7.08% 5.10% 3.34%
Total risk-based ratio 10.99% 8.39% 5.42%
Asset Quality (year-end)
Nonperforming assets (millions) $ 81.80 $208.10 $ 237.30
Coverage ratio 114% 54% 46%
Market Value (year-end)
Price per share $ 14.25 $ 6.875 $ 5.25
Market value (millions) 237.60 92.70 66.90
</TABLE>
During 1992 and 1993, an experienced management team was assembled,
and the operating environment was changed significantly to encourage
and reward high performance. The Company was profitable in both 1993
and 1992, compared with a net loss of $126.5 million in 1991. The
Bank's adjusted Tier 1 Leverage capital ratio increased by 39% to
7.08% at December 31, 1993, from 5.10% at December 31, 1992. Over the
two-year period with Mr. Hale as Chairman, the Bank's adjusted Tier 1
Leverage capital ratio increased by 112% from 3.34% at December 31,
1991. The Bank's Total risk-based capital ratio increased by 31% to
10.99% at December 31, 1993, from 8.39% at December 31, 1992. Over
the two-year period, the Bank's Total risk-based capital ratio
increased by 103% from 5.42% at December 31, 1991. The Bank meets the
capital ratios of the FDIC required for a "well-capitalized"
institution as compared to being "under-capitalized" in 1991.
Nonperforming assets were reduced by 61% in 1993, under the
direction of experienced workout specialists organized to dispose of
nonperforming assets as quickly as possible while minimizing the
financial impact on the Company. This was accomplished while increasing
the allowance to nonperforming loans ratio (coverage ratio) by 111%,
to 114% of nonperforming loans at December 31, 1993 from 54% at
December 31, 1992, significantly improving the Company's ability to
absorb future loan losses without impairing capital.
The Company believes its relationship with the Federal Reserve Bank
of Richmond, the FDIC, and the Maryland Bank Commissioner have greatly
improved over the past two years. The Company has been informed that
the FDIC and the Maryland Bank Commissioner, following their recent
joint annual examination, expect to terminate the Order. In addition,
the Federal Reserve Bank of Richmond and the Maryland Bank Commissioner
expect to terminate the Agreement. The Company expects to receive
written confirmation of the terminations when effective.
The most important factor used by the Committee in evaluating Mr.
Hale's performance was enhancement of stockholder value. During 1993,
the Company's stock price increased by 107% to $14.25 per share from
$6.875 per share at the end of 1992, and increased by 171% over the
past two years, from $5.25 per share at December 31, 1991. The
Company's share price appreciation for 1993 was the highest of the 163
commercial banks and thrifts covered by Keefe, Bruyette & Woods, Inc.
("KBW"). In addition, according to a survey published in
Fortune in January 1994, the Company had the highest 1993
share price appreciation of all bank holding companies listed on the
New York Stock Exchange ("NYSE"), and in the same survey, ranked
31st for 1993 among all companies listed on the NYSE. The Company's
cumulative total return significantly exceeded the KBW 50 Index and the
S&P 500 Index over the past two years, the period attributable to Mr.
Hale, the new Board and management. See "Comparative Company
Performance." The market value of the Company, based on the per
share price multiplied by the number of shares outstanding, increased
by 156% in 1993 to $237.6 million at December 31, 1993, compared with
$92.7 million at December 31, 1992, and increased by 255% over two
years, from $66.9 million at December 31, 1991.
The bonus program for Mr. Hale included specific bonus levels for
improvement in financial performance as measured by: profitability,
asset quality, capital ratios, restoration of cash dividends (restored
in the fourth quarter of 1993 with regulatory approval), improvements
in ratings by the regulatory authorities, and enhanced stockholder
value. The Committee, in establishing the program, concluded that no
bonus was to be paid to Mr. Hale in 1992, even though he accomplished
the Committee's objectives, because of the financial condition of the
Company at that time and the need to improve capital ratios. With this
in mind, the bonuses paid to Mr. Hale for 1993 were intended to
recognize his performance over that year and the fact that he did not
receive a bonus in 1992 notwithstanding strong performance. Messrs.
Hale, Leberknight, Cicero and Unger also received certain payments in
connection with the termination of the Bank's SERP. No SERP currently
exists for the Company's executive officers and the Company has no
plans to establish a new SERP. Such payments were made in lieu of
maintaining the Company's SERP and making annual contributions
thereunder on behalf of participating officers. See "Retirement
Plans."
The Committee has adopted similar policies with respect to
compensation of other executive officers of the Company. Using salary
data supplied by outside consultants, the Committee sets base salaries
that are within the range of salaries for persons holding similarly
responsible positions at other financial institutions. In addition, the
Committee considers corporate performance, as well as past performance
and future potential, of each executive officer.
Stock options granted to Mr. Hale and other Company executives were
based upon their responsibility for, and contribution to, the
Company's long-term goals, financial condition, profitability, and
stockholder value. Current outstanding options were considered in
determining the level of new option grants. All options were granted at
the fair market value on the date of grant as determined under the
plan. Since the value of an option bears a direct relationship to the
Company's stock price, it serves as an effective long-term incentive
which is highly compatible with the interests of stockholders, and is
therefore an important element of the Company's compensation policy.
Under a 1993 amendment to the Internal Revenue Code and proposed new
federal tax regulations, publicly traded companies are prohibited from
receiving a tax deduction for compensation in excess of $1 million paid
to the chief executive officer or any of its four other most highly
compensated officers for any fiscal year. The deductibility limit does
not apply to compensation payable under a written binding contract that
was in effect on February 17, 1993. In addition, the Company believes
that the 1992 Stock Option Plan has been structured in such a way that
option grants under the plan after February 17, 1993 will be treated as
performance-based compensation which may be excluded from the
deductibility limit. The Committee will take into consideration the
deductibility limit for compensation in excess of $1 million
in determining compensation of the Company's executive officers.
Compensation Committee
Robert A. Pascal, Chairman
Barry B. Bondroff
Melvin S. Kabik
Comparative Company Performance
The following chart sets forth comparative information regarding the
Company's cumulative stockholder return on its Common Stock over the
last five calendar years. Total stockholder return is measured by
dividing total dividends (assuming dividend reinvestment) plus share
price change for a period by the share price at the beginning of the
measurement period. The Company's cumulative stockholder return over
the five-year period is based on an investment of $100 on December 31,
1988 and is compared to the cumulative total return of the S&P 500
Index and the KBW 50 Index.
The KBW 50 is a relatively new index developed by KBW, a widely
recognized New York securities firm that specializes in the banking and
thrift industries. The index is composed of 50 of the largest banking
companies in the United States, largely money center, regional and
super-regional institutions, and is representative of price and
dividend performance of the major banks in the country. The KBW 50 is a
market capitalization weighted index and assumes quarterly reinvestment
of dividends.
The decline in the Company's stockholder return index in 1990 was
related in part to the prior Board's rejection of an offer to acquire
the Company, made in April 1990 by First Maryland Bancorp, to
industry-wide problems in the real estate and banking markets, and to
the Company's increase in loan reserves which resulted in a reported
net loss for the fourth quarter of 1990. Subsequently, in early 1991, a
proxy contest ensued, and the Company's stockholders, in effect,
elected a new Board as of September 1991. The new Board called for a
review of the Company's loan portfolio, which led to the
identification of a substantial amount of additional nonperforming
assets and a requirement for significant additional provisions for
possible loan losses. These actions, in addition to a write-off of
goodwill, led to a reported net loss of $126.5 million in 1991, which
accounted for the continued under-performance of the Company's Common
Stock.
[INSERT OF PERFORMANCE LINE GRAPH APPEARS HERE]
S&P 500 Index KBW 50 Index Baltimore Bancorp
1988 100 100 100
1989 131.68 118.91 108.12
1990 127.58 85.39 37.89
1991 166.47 135.15 49.02
1992 179.14 172.21 64.19
1993 197.20 181.75 133.52
The following chart shows that the Company's two year
stockholder return under the new Board outperformed both the S&P 500
Index and the KBW 50 Index in 1992 and 1993 following a period of
substantial progress in restoring the Company's profits, increasing
capital ratios and reducing nonperforming assets.
[INSERT OF PERFORMANCE LINE GRAPH APPEARS HERE]
S&P 500 Index KBW 50 Index Baltimore Bancorp
1991 100 100 100
1992 107.61 127.42 130.95
1993 118.46 134.48 272.38
Certain Transactions
From time to time the Bank makes loans to its directors and
executive officers for the financing of their homes, as well as home
improvement and consumer loans. It is the belief of management that
these loans are made in the ordinary course of business, are made on
substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with other
persons, and neither involve more than normal risk of collectibility
nor present other unfavorable features. At March 18, 1994, loans (other
than credit cards and a $5,000 check reserve) to directors, executive
officers and members of their immediate families and affiliates totaled
$1,002,551.
In addition, Mr. O'Conor is Chairman of the Board and Chief
Executive Officer of O'Conor, Piper & Flynn, which from time to time
is retained by the Bank as a real estate broker in connection with
foreclosure and other real estate transactions. For 1993, the aggregate
amount of payments made to the firm for its services was approximately
$70,249, which is less than five percent of the Company's or the
firm's consolidated gross revenues for its last fiscal year.
Section 16(a) Compliance
Section 16(a) of the 1934 Act requires the Company's directors and
officers to file with the SEC initial reports of ownership of the
Company's equity securities and to file subsequent reports when there
are changes in such ownership. Based on a review of reports submitted
to the Company, the Company believes that, during the year ended
December 31, 1993, all Section 16(a) filing requirements applicable to
the Company's directors and officers were complied with on a timely
basis, except one officer, John P. Hollerbach, filed one late report
covering one transaction, and one director, R. Andrew Larkin, Jr.,
filed one late report covering one transaction relating to a gift of
shares to certain of his children.
PROPOSED AMENDMENT TO 1992 STOCK OPTION PLAN
(Proposal 2)
The Board approved an amendment on October 13, 1993 to the 1992
Stock Option Plan (the "1992 Option Plan" or the "Plan"),
subject to stockholder approval at the Annual Meeting, to provide for
the grant of a ten-year nonqualified option to purchase 5,000 shares of
Common Stock to each nonemployee director of the Company then serving
on the Board. The per share exercise price of such nonemployee director
options is $12 7/8, which was the fair market value of a share of
the Common Stock on October 13, 1993 (the date the options were
granted), as determined in accordance with the Plan. A total of nine
nonemployee directors (consisting of Messrs. Bondroff, Everhard,
Hoffman, Kabik, Larkin, O'Conor, Pascal, Rasmussen and Russell) will
receive such options. A copy of the text of the proposed amendment to
the 1992 Option Plan is attached hereto as Exhibit A and is
incorporated herein by reference.
Reasons for Amendment to 1992 Option Plan
On October 13, 1993, in connection with the earnings report of the
Company for the quarter ended September 30, 1993, the Board, in
addition to approving option grants to certain executive officers of
the Company, also approved the amendment to the Plan providing for the
grant of the option to purchase 5,000 shares to each nonemployee
director in recognition of such directors' contribution to the
improved condition of the Company. The approval of such grant was in
part due to the fact that as of September 30, 1993, the Company had
attained all capital and classified asset ratio requirements under the
Order ahead of schedule, exceeded the capital ratios of the FDIC
required for a "well-capitalized" bank, and was in a position to
seek regulatory approval for the resumption of quarterly dividends
based on its substantially improved financial condition. The Board also
approved the amendment providing for the grant as it believes that
stock options are important to increase the incentive and encourage the
continued service of directors by facilitating their purchase of a
stock interest in the Company. During the third quarter, the
nonperforming assets of the Company declined by 25% to $132.6 million
at September 30, 1993 from $177.6 million at June 30, 1993. The
reduction in nonperforming assets also included a reduction in
classified assets to 74% of capital and reserves, thereby exceeding
the final requirement of 75% by January 26, 1994 established under the
Order. The Bank's adjusted Tier 1 Leverage capital ratio was 7.13% at
September 30, 1993, which exceeded the final requirement of 6.50% by
June 30, 1994 under the Order. The Bank's Tier 1 risk-based and Total
risk-based capital ratios were 9.24% and 10.51%, respectively, at
September 30, 1993, which exceeded the capital ratios of the FDIC
required for a "well-capitalized" bank of 6.00% and 10.00%, respectively.
As with the executive officers of the Company, the Board was at risk
of substantial personal liability if the serious problems identified
by the regulators were not corrected within the time frames specified
by the Agreement and the Order, and the option grant in part is in
recognition of those substantial risks assumed by the Board. For these
reasons, the Board believes that it is in the best interest of the
Company and its stockholders to amend the Plan to provide an additional
one-time grant of an option for 5,000 shares to each nonemployee
director of the Company serving on the Board on October 13, 1993.
Description of the 1992 Option Plan
The 1992 Option Plan was adopted by the Board for the benefit of
directors and full-time employees of the Company and its subsidiaries
on June 10, 1992 and was approved by the stockholders of the Company on
May 19, 1993. As of March 18, 1994, there were nine nonemployee
directors and approximately 50 key officers of the Company and its
subsidiaries who were eligible to participate in the 1992 Option Plan.
The 1992 Option Plan provides for the grant of options that are
intended to qualify as "incentive stock options" under Section
422 of the Code as well as nonqualified options.
Under the terms of the 1992 Option Plan, 635,000 shares of Common
Stock of the Company were reserved for issuance. The 1992 Option Plan
is administered by the Compensation Committee of the Board. The
Compensation Committee selects the employees and nonemployee directors
of subsidiaries to whom options may be granted. As described below,
option grants to nonemployee directors of the Company are fixed
pursuant to the terms of the Plan.
Under the terms of the 1992 Option Plan, each nonemployee director
of the Company who was serving on the Board on June 10, 1992, the
effective date of the Plan, was granted a ten-year nonqualified option
to purchase 2,500 shares of the Company's Common Stock. The Plan also
provided for an additional nonqualified option grant of 2,500 shares to
each nonemployee director of the Company serving on the Board on
October 26, 1992. On October 13, 1993, the Plan was amended, subject to
stockholder approval, to provide for the grant to each nonemployee
director then serving on the Board of an additional nonqualified option
to purchase 5,000 shares of Common Stock. The per share option exercise
prices of these options were $7 7/8, $7, and $12 7/8, respectively, which
equaled the fair market value of a share of Common Stock on the respective
dates of grant, as determined in accordance with the Plan. Each nonemployee
director who is first elected to the Board of the Company receives a
ten-year nonqualified option on the date he or she becomes a member of
the Board to purchase 2,500 shares of the Company's Common Stock. In
addition, each nonemployee director of the Company who is serving on
the Board at the time of the first meeting of the Board following an
annual meeting of the stockholders of the Company receives an option on
the date of such meeting of the Board to purchase 2,500 shares of the
Company's Common Stock.
The option exercise price of options granted under the 1992 Option
Plan may not be less than 100% of the fair market value of the Common
Stock on the date of grant of the option, as determined in accordance
with the Plan. The maximum option term is 10 years. Except as otherwise
provided in the option agreement or as waived by the Compensation
Committee, options granted to persons other than nonemployee directors
of the Company will be exercisable to the extent of 20% of the shares
covered by the option on the first anniversary of the date of grant and
to the extent of an additional 20% of the shares on each of the four
subsequent anniversary dates, provided the optionee remains
continuously employed by the Company or a subsidiary from the date of
grant to such anniversary date. Options granted to nonemployee
directors of the Company are exercisable after the later of (i) the
date on which the optionee completes one year of service on the Board
or (ii) the date of grant. An option will become exercisable in full
upon the death of a nonemployee director while a member of the Board.
An option granted to a nonemployee director of the Company will also
become exercisable in full if there is a "change in control" of
the Company or of the Bank (as defined in the Plan).
No person may receive any incentive stock option if, at the time of
grant, such person owns directly or indirectly more than 10% of the
total combined voting power of the Company unless the option price is
at least 110% of the fair market value of the Common Stock and the
exercise period of such incentive option is by its terms limited to
five years. There is also a $100,000 limit on the value of stock
(determined at the time of grant) covered by incentive stock options
that first become exercisable by an optionee in any calendar year. No
option may be granted more than 10 years after the effective date of
the Plan.
Payment for shares purchased under the 1992 Option Plan may be made
either in cash or cash equivalents, by exchanging shares of Common
Stock of the Company with a fair market value equal to or less than the
total option price plus cash for any difference, or by a combination of
the foregoing. Options may be exercised by the optionee directing that
certificates for the shares purchased be delivered to a licensed broker
acceptable to the Company as agent for the optionee, provided that the
broker tenders to the Company cash or cash equivalents equal to the
option exercise price plus the amount of any taxes that the Company may
be required to withhold in connection with the exercise of the option.
If an employee's employment with the Company or a subsidiary
terminates by reason of death or permanent and total disability, his or
her options, whether or not then exercisable, may be exercised within
one year after such death or disability unless otherwise provided in
the option agreement (but not later than the date the option would
otherwise expire). If the optionee's employment terminates for any
reason other than death or disability, options held by such optionee
terminate three months after the date of such termination unless
otherwise provided in the option agreement (but not later than the date
the option would otherwise expire). The Compensation Committee may
extend the period during which the option may be exercised (but not
later than the date the option would otherwise expire) by so providing
in the option agreement. Similar rules apply to options granted to
nonemployee directors of subsidiaries. Options granted to nonemployee
directors of the Company terminate upon the expiration of one year
following the date on which the nonemployee director ceases to be a
member of the Board by reason of death or permanent and total
disability and three months following the date on which the nonemployee
director ceases to be a member of the Board for any other reason.
If the outstanding shares of Common Stock are increased or decreased
or changed into or exchanged for a different number or kind of shares
or securities of the Company, by reason of any recapitalization,
reclassification, stock split-up, combination of shares, exchange of
shares, stock dividend or other distribution payable in capital stock,
or other increase or decrease in such shares without receipt of
consideration by the Company, an appropriate and proportionate
adjustment will be made in the number and kinds of shares subject to
the 1992 Option Plan, and in the number, kinds, and per share exercise
price of shares subject to the unexercised portion of options granted
prior to any such change. Any such adjustment in an outstanding option,
however, will be made without a change in the total price applicable to
the unexercised portion of the option but with a corresponding
adjustment in the per share option price.
Upon any dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation in which the Company is not the
surviving corporation, or upon the sale of substantially all of the
assets of the Company to another corporation, or upon any transaction
(including, without limitation, a merger or reorganization in which the
Company is the surviving corporation) approved by the Board which
results in any person or entity owning 80% or more of the total
combined voting power of all classes of stock of the Company, the 1992
Option Plan and the options issued thereunder will terminate, unless
provision is made in connection with such transaction for the
continuation of the Plan and/or the assumption of the options or for
the substitution for such options of new options covering the stock of
a successor corporation or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kinds of shares and the
per share exercise price. In the event of such termination, all
outstanding options shall be exercisable in full during such period
immediately prior to the occurrence of such termination as the
Compensation Committee in its discretion shall determine.
The Board may amend the 1992 Option Plan with respect to shares of
Common Stock as to which options have not been granted. However, the
Company's stockholders must approve any amendment that would (1)
materially change the requirements as to eligibility to receive
options; (2) increase the maximum number of shares in the aggregate for
which options may be granted (except for adjustments upon changes in
capitalization); (3) change the minimum option price; (4) increase the
maximum period during which options may be exercised beyond 10 years
from the date of grant; (5) extend the term of the Plan; or (6)
materially increase the benefits accruing to eligible individuals under
the Plan.
The Board at any time may terminate or suspend the 1992 Option Plan.
Unless previously terminated, the Plan will terminate automatically on
June 10, 2002, the tenth anniversary of the effective date of the Plan.
No termination, suspension or amendment of the Plan may, without the
consent of the optionee to whom an option has been granted, adversely
affect the rights of the holder of the option.
Plan Benefits
As of March 18, 1994, options to purchase 517,500 shares of Common
Stock (all of which were nonqualifying options) were outstanding under
the 1992 Option Plan. The option exercise price of options granted
under the Plan is not less than fair market value of a share of the
Company's Common Stock on the date of grant, as determined in
accordance with the Plan. The table below provides certain information
regarding stock options granted to date under the 1992 Option Plan to
the Chief Executive Officer and each of the four most highly
compensated executive officers of the Company serving at December 31,
1993, to each nominee for election as a director, to all executive
officers of the Company as a group, to all nonemployee directors as a
group, and to all employees of the Company as a group (including all
officers who are not executive officers).
<TABLE>
<CAPTION>
Plan Benefits
1992 Stock Option Plan
Name and Position Exercise Price Number of Options
<S> <C> <C>
Rose M. Cernak - -
Director Nominee
Edwin F. Hale $12.875 75,000(a)
Chairman of the Board 7.875 125,000(b)
and Chief Executive Officer
(and Director Nominee)
R. Andrew Larkin, Jr. 12.875 5,000(c)
Director (and Director Nominee) 7.250 2,500(b)
7.000 2,500(b)
7.875 2,500(b)
Robert A. Pascal 12.875 5,000(c)
Director (and Director Nominee) 7.250 2,500(b)
7.000 2,500(b)
7.875 2,500(b)
G. Gregory Russell 12.875 5,000(c)
Director (and Director Nominee) 7.250 2,500(b)
7.000 2,500(b)
7.875 2,500(b)
Alan M. Leberknight 9.500 10,000(d)
President and Director 12.875 10,000(a)
6.625 25,000(b)
Joseph A. Cicero 9.500 10,000(d)
Executive Vice President, 12.875 10,000(a)
Chief Financial Officer and Director 6.625 25,000(b)
E. Wayne Edwards 9.500 7,500(d)
Executive Vice President 12.875 10,000(a)
Larry D. Unger 9.500 6,000(d)
Executive Vice President
Executive Officer Group, including the 9.584(e) 331,500
five executive officers named above (8 persons)
Nonemployee Director Group (9 persons) 9.666(f) 107,500
Nonexecutive Officer Employee Group (22 persons) 10.532(g) 78,500
<FN>
(a) These options will become exercisable in full on October 13, 1994.
(b) These options are presently exercisable.
(c) These options become exercisable upon stockholder approval of the amendment to the Plan.
(d) These options will become exercisable to the extent of 20% of the shares covered by the option on the first
anniversary thereof and an additional 20% each anniversary thereafter.
(e) Represents the weighted average exercise price of the options granted to executive officers.
(f) Represents the weighted average exercise price of the options granted to nonemployee directors.
(g) Represents the weighted average exercise price of the options granted to employees.
</TABLE>
In connection with the 1994 Annual Meeting, Ms. Cernak has
waived her right to receive a ten-year nonqualified option grant for
2,500 shares of the Company's Common Stock she would otherwise be
entitled to receive upon her initial election to the Board, and Ms.
Cernak and the other nonemployee directors have waived their rights to
receive the annual option grant of 2,500 shares they would otherwise be
entitled to receive at the first Board meeting following the 1994
Annual Meeting.
Based on the closing sale price of the Company's Common Stock on
March 18, 1994 of $18.00, the aggregate market value of the remaining
625,000 shares currently reserved under the 1992 Option Plan is
$11,250,000.
Federal Income Tax Consequences of the 1992 Option Plan
The grant of an option will not be a taxable event for the optionee
or the Company.
An optionee will not recognize taxable income upon exercise of an
incentive option, and any gain realized upon a disposition of shares of
stock received pursuant to the exercise of an incentive option will be
taxed as long-term capital gain if the optionee holds the shares for at
least two years after the date of grant and for one year after the date
of exercise. However, the excess of the fair market value of stock
subject to an incentive option on the exercise date over the option
exercise price will be included in the optionee's alternative minimum
taxable income in the year of exercise (except that, if the optionee is
subject to certain securities law restrictions, determination of the
amount included in alternative minimum taxable income and the year of
such inclusion may be delayed, unless the optionee elects within 30
days following exercise to have income determined without regard to
such restrictions) for purposes of the alternative minimum tax. An
optionee may be entitled to a credit against regular tax liability in
future years for minimum taxes paid with respect to the exercise of
incentive options. The Company will not be entitled to any business
expense deduction with respect to the grant or exercise of an incentive
option, except as discussed below.
To qualify for the foregoing tax treatment, the optionee generally
must be an employee of the Company or a subsidiary from the date the
option is granted through a date within three months before the date of
exercise of the option. In the case of an optionee who is disabled, the
three-month period for exercise following termination of employment is
extended to one year. In the case of an employee who dies, the time for
exercising incentive stock options after termination of employment and
the holding period for stock received pursuant to the exercise of the
option are waived.
If all of the foregoing requirements are met except for the one-year
or two-year holding periods mentioned above, the optionee will
recognize ordinary income upon the disposition of the stock in an
amount equal to the excess of the fair market value of the stock at the
time the option was exercised over the option exercise price. The
balance of the realized gain, if any, will be capital gain. If the
optionee sells the stock prior to the satisfaction of the holding
period rules at a price below the fair market value of the stock at the
time the option was exercised, the amount of ordinary income (and the
amount included in alternative minimum taxable income, if the sale
occurs during the same year as the option was exercised) will be
limited to the excess of the amount realized on the sale over the
option exercise price. The employer corporation will be allowed a
business expense deduction to the extent the optionee recognizes
ordinary income.
If an optionee exercises an incentive option by tendering shares of
Common Stock with a fair market value equal to part or all of the
option exercise price, the exchange of shares generally will be treated
as a nontaxable exchange (except that this treatment would not apply if
the optionee had acquired the shares being transferred pursuant to the
exercise of an incentive option and had not satisfied the special
holding period requirements summarized above). If the exercise is
treated as a tax free exchange, the optionee would have no taxable
income from the exchange and exercise (other than minimum taxable
income as discussed above). If the optionee used shares received
pursuant to the exercise of an incentive option (or another statutory
option) as to which the optionee had not satisfied the applicable
holding period requirement, the exchange would be treated as a taxable
disqualifying disposition of the exchanged shares.
Upon exercising a nonqualified option, an optionee will recognize
ordinary income in an amount equal to the difference between the
exercise price and the fair market value of the stock on the date of
exercise (except that, if the optionee is subject to certain
restrictions imposed by the securities laws, the measurement date may
be delayed, unless the optionee makes a special tax election within 30
days after exercise to have income determined without regard to the
restrictions). If the employer corporation complies with applicable
withholding requirements, it will be entitled to a business expense
deduction in the same amount and at the same time as the optionee
recognizes ordinary income. Upon a subsequent sale or exchange of
shares acquired pursuant to the exercise of a nonqualified option, the
optionee will have taxable gain or loss, measured by the difference
between the amount realized on the disposition and the tax basis of the
shares (generally, the amount paid for the shares plus the amount
treated as ordinary income at the time the option was exercised).
If the optionee surrenders shares of Common Stock in payment of part
or all of the exercise price for nonqualified options, no gain or loss
will be recognized with respect to the shares surrendered (regardless
of whether the shares were acquired pursuant to the exercise of an
incentive option) and the optionee will be treated as receiving an
equivalent number of shares pursuant to the exercise of the option in a
nontaxable exchange. The difference between the aggregate option
exercise price and the aggregate fair market value of the shares
received pursuant to the exercise of the option will be taxed as
ordinary income.
Under current federal income tax law, the highest tax rate on
ordinary income is 39.6%, and long-term capital gains are subject to a
maximum tax rate of 28%. Because of certain provisions in the law
relating to the "phase out" of personal exemptions and certain
limitations on itemized deductions, the federal income tax consequences
to a particular taxpayer of receiving additional amounts of ordinary
income or capital gain may be greater than would be indicated by
application of the foregoing tax rates to the additional amount of
income or gain.
Required Vote
The approval by the affirmative vote of a majority of the shares
represented in person or by proxy and entitled to vote is required to
approve the amendment to the 1992 Option Plan. Abstentions on shares
represented at the Annual Meeting will have the same effect as a
negative vote. The rules of the New York Stock Exchange permit member
organizations to give proxies to vote on Proposal 2 whether or not
instructions have been received from beneficial owners. The Board
recommends a vote FOR approval of the amendment to the 1992 Option
Plan.
STOCK OWNED BY MANAGEMENT
The following table sets forth information as of March 18, 1994 with
respect to the amount of the Company's Common Stock beneficially owned
by each director of the Company, each nominee for election as a
director, the Chief Executive Officer and each of the four most highly
compensated executive officers of the Company serving at December 31,
1993 and by all directors and executive officers of the Company as a
group.
<TABLE>
<CAPTION>
Number of Shares and Percentage of
Nature of Beneficial Common Stock
Name and Position(s) with the Company Ownership (a) Outstanding
<S> <C> <C>
Barry B. Bondroff (b)(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 19,984 *
Director
Rose M. Cernak . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - *
Director Nominee
Joseph A. Cicero (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,251 *
Executive Vice President,
Chief Financial Officer and Director
Conrad H.C. Everhard (b) . . . . . . . . . . . . . . . . . . . . . . . . . . 22,655 *
Director
Edwin F. Hale, Sr. (e) . . . . . . . . . . . . . . . . . . . . . . . . . . 397,405 2.3%
Chairman of the Board and Chief Executive Officer
(and Director Nominee)
Bruce H. Hoffman (f). . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,629 *
Director
Melvin S. Kabik (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,601 *
Director
R. Andrew Larkin, Jr. (b)(g) . . . . . . . . . . . . . . . . . . . . . . . . 52,150 *
Director (and Director Nominee)
Alan M. Leberknight (h). . . . . . . . . . . . . . . . . . . . . . . . . . . 33,586 *
President and Director
James P. O'Conor (i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,216 *
Director
Robert A. Pascal (b)(j) . . . . . . . . . . . . . . . . . . . . . . . . . . 56,100 *
Director (and Director Nominee)
Dennis F. Rasmussen (b). . . . . . . . . . . . . . . . . . . . . . . . . . . 14,979 *
Director
G. Gregory Russell (b). . . . . . . . . . . . . . . . . . . . . . . . . . . 38,146 *
Director (and Director Nominee)
E. Wayne Edwards (k). . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,578 *
Executive Vice President
Larry D. Unger (l) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,217 *
Executive Vice President
All directors and executive officers as a group
(18 persons) (m) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 779,245 4.5
<FN>
(a) All persons shown in the table have sole investment and voting power except as otherwise indicated.
(b) Includes options for 7,500 shares that are currently exercisable and 5,000 shares granted under the amendment to
the 1992 Option Plan that will become exercisable on April 27, 1994, provided such amendment is approved by
stockholders. See Proposal 2.
(c) Includes 3,584 shares held jointly by Mr. Bondroff and his wife and 3,900 shares held in an IRA.
(d) Includes 227 shares held under the 401(k) Plan and options for 30,000 shares that are currently exercisable.
(e) Includes 224 shares held under the 401(k) Plan and options for 325,000 shares that are currently exercisable.
(f) Includes options for 5,000 shares that are currently exercisable and 5,000 shares granted under the amendment to
the 1992 Option Plan that will become exercisable on April 27, 1994, provided such amendment is approved by
stockholders. See Proposal 2. Also includes 1,200 shares held jointly by Mr. Hoffman and his wife.
(g) Includes 32,550 shares held jointly by Mr. Larkin and his wife, 3,000 shares in a self-directed IRA, and an
aggregate of 4,100 shares held by his children. Excludes 19,400 shares owned by Mr. Larkin's mother and 500 shares
owned by his wife, as to which he disclaims beneficial ownership.
(h) Includes 226 shares held under the 401(k) Plan and options for 30,000 shares that are currently exercisable.
(i) Includes options for 5,000 shares that are currently exercisable and 5,000 shares granted under the amendment to
the 1992 Option Plan that will become exercisable on April 27, 1994, provided such amendment is approved by
stockholders. See Proposal 2.
(j) Includes 20,000 shares held by the United Propane, Inc. Profit Sharing Plan and Trust, of which Mr. Pascal is the
trustee.
(k) Includes 106 shares held under the 401(k) Plan, options for 2,000 shares that are currently exercisable and 1,472
shares held jointly by Mr. Edwards and his wife.
(l) Includes 139 shares held under the 401(k) Plan and options for 33,424 shares that are currently exercisable.
(m) Includes a total of 24,748 shares (including 358 shares held under the 401(k) Plan and options for 18,750 shares
that are currently exercisable) held by three additional executive officers of the Company.
</TABLE>
* Less than one percent.
<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information as of March 18, 1994 with
respect to the ownership of shares of Common Stock of the Company by
each person believed by management to be the beneficial owner of more
than five percent of the Company's outstanding Common Stock. The
historical information set forth below is based on the most recent
Schedule 13D or Schedule 13G filed on behalf of each such person with
the SEC.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percentage of Common
of Beneficial Owner of Beneficial Ownership Stock Outstanding
<S> <C> <C>
Keefe Managers, Inc. 1,576,800(a) 9.45%
375 Park Avenue
31st Floor
New York, New York 10152
T. Rowe Price Associates, Inc. 987,154(b) 5.92
100 East Pratt Street
Baltimore, Maryland 21202
Leon G. Cooperman 838,100(c) 5.02
86 Pine Street
Wall Street Plaza
31st Floor
New York, New York 10005
<FN>
(a) A Schedule 13G dated February 15, 1994 states that Keefe Managers, Inc., an investment adviser registered under the
Investment Advisers Act of 1940, has sole dispositive power and sole voting power over such shares. The Company has
been informed in a telephone conversation with Keefe Managers, Inc. that substantially all of such shares have been
disposed of.
(b) A Schedule 13G dated February 14, 1994 states that T. Rowe Price Associates, Inc., an investment adviser registered
under the Investment Advisers Act of 1940, has sole dispositive power over the 987,154 shares and sole voting power
over 48,500 of these shares.
(c) A Schedule 13D dated February 28, 1994 states that Mr. Cooperman has sole voting and dispositive power over 715,800
shares and shared voting and dispositive power over 122,300 shares. The Schedule 13D states that Mr. Cooperman is
the sole general partner of two Delaware limited partnerships engaged in the purchase and sale of securities for
investment for their own accounts: Omega Capital Partners, L.P. and Omega Institutional Partners, L.P., which
purchased 242,600 shares and 255,200 shares, respectively. The Schedule 13D further states that Mr. Cooperman is the
president and majority stockholder of Omega Advisors, Inc. and that he further controls Omega Overseas Partners,
Ltd. Omega Advisors, Inc. also serves with discretionary power as investment manager to unrelated third parties
(the ''Managed Account''). The Schedule 13D states that 218,000 shares were purchased on behalf of Omega Overseas
Partners, Ltd. and 122,300 shares were purchased on behalf of the Managed Account.
</TABLE>
CHANGES IN CONTROL
On March 23, 1994, the Company filed a Current Report on Form 8-K
under the 1934 Act stating that the Company had announced on March 21,
1994 the execution of a definitive Agreement and Plan of Merger (the
"Agreement and Plan of Merger") with First Fidelity Bancorporation
("FFB") and Annabel Lee Corporation, a wholly owned subsidiary of FFB
(the "Merger Sub"), pursuant to which FFB will pay approximately $346
million in cash for all of the outstanding shares of the Company's
Common Stock in a merger of Merger Sub into the Company, which will
thereby become a wholly owned subsidiary of FFB. Under the terms of
the Agreement and Plan of Merger, holders of the Company's Common Stock
will receive $20.75 in cash for each of their shares.
In connection with the acquisition, the Company on March 22, 1994
granted FFB an option to purchase 3,300,000 shares of the Company's
Common Stock (subject to adjustment in certain events), or
approximately 19.9% of the Company's outstanding Common Stock, at
$19.31 per share (the average of the high and low sales prices on March
22, 1994). The option is exercisable in the event of (i) the
acquisition by any person other than FFB or any of its subsidiaries of
ownership, control or the right to vote 25% or more of the Company's
outstanding Common Stock, or (ii) the Company or any of its
subsidiaries entering into, or the Board recommending for stockholder
approval, certain acquisition transactions with any person other than
FFB or any of its subsidiaries.
The acquisition of the Company by FFB is subject to various closing
conditions, including the merger of the Bank (the Company's principal
subsidiary) into a newly formed federal savings bank subsidiary of FFB,
the receipt of all regulatory approvals required for the transaction,
and the approval of the transaction by the Company's stockholders at a
special meeting which is expected to be held after June 15, 1994. The
acquisition is expected to close on the later of October 31, 1994 or
within ten days after the receipt of all required regulatory approvals
and expiration of applicable waiting periods, subject to satisfaction
of closing conditions.
INDEPENDENT AUDITORS
The Company has appointed Coopers & Lybrand, independent certified
public accountants, to act as its independent auditors for the year
ended December 31, 1994. A representative of Coopers & Lybrand is
expected to be present at the Annual Meeting and will be given an
opportunity to make a statement if he or she desires to do so and will
be available to respond to questions.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
TO BE PRESENTED AT 1995 ANNUAL MEETING OF STOCKHOLDERS
Any stockholder of the Company who intends to present a proposal for
action at the 1995 annual meeting expected to be held on or about April
26, 1995 must file a copy thereof with the Corporate Secretary of the
Company not less than 45 days nor more than 90 days prior to the date
of the annual meeting (i.e., no later than March 13, 1995 and no
earlier than January 26, 1995), unless notice or public disclosure of
the meeting occurs less than 60 days prior to the date of the meeting,
in which event stockholders may deliver such notice not later than the
15th day following the day on which notice of the meeting was mailed
or public disclosure thereof was made. If the proposal or proposals are
to be included in the Company's proxy statement and form of proxy
relating to the 1995 annual meeting, they must be received by December
13, 1994 pursuant to the proxy soliciting rules of the SEC. Nothing in
this paragraph shall be deemed to require the Company to include in its
proxy statement and form of proxy relating to the 1995 annual meeting
any stockholder proposal which may be excluded under SEC regulations
in effect at the time such proposals are received.
OTHER MATTERS
As of the date of this Proxy Statement, the Board does not know of
any other matters to be presented for action by the stockholders at the
Annual Meeting. If, however, any other matters are properly brought
before the Meeting, the persons named in the accompanying proxy will
vote such proxy in accordance with the determination of a majority of
the Board.
By Order of the Board
/s/ Edwin F. Hale
- ----------------------
Edwin F. Hale, Sr.
Chairman of the Board
Baltimore, Maryland
March 30, 1994
<PAGE>
Exhibit A
AMENDMENT TO
1992 STOCK OPTION PLAN
Section 4(b) of the 1992 Stock Option Plan (the "Plan") is amended
to add an additional sentence after the existing fourth sentence and
before the existing fifth sentence of such Section to read as follows:
Each Non-Employee Director who is serving on the Board on October
13, 1993 shall be granted an Option on that date to purchase 5,000 shares
of the Stock.
The Plan shall otherwise be unchanged by this Amendment.
---------------------
This Amendment to the Plan was duly adopted and approved by the
Board of Directors of Baltimore Bancorp by resolution at a meeting held
on the 13th day of October, 1993.
<PAGE>
REVOCABLE PROXY
BALTIMORE BANCORP
THIS PROXY IS SOLICITED BY THE BOARD
The undersigned stockholder of Baltimore Bancorp (the "Company")
hereby authorizes Barry B. Bondroff, Bruce H. Hoffman, Dennis F. Rasmussen,
and each of them, with full power of substitution, to vote and otherwise
represent all the shares of Common Stock of the Company held of record by
the undersigned at the 1994 Annual Meeting of Stockholders of the Company
(the "Annual Meeting") to be held at the Omni Inner Harbor Hotel, 101
West Fayette Street, Baltimore, Maryland 21201, on April 27, 1994 at
9:00 a.m., and any adjournments thereof.
This proxy, when properly completed, will be voted in the manner
directed herein by the undersigned stockholder. UNLESS CONTRARY DIRECTION
IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION AS DIRECTORS OF THE
BOARD'S NOMINEES NAMED IN PROPOSAL 1, FOR THE AMENDMENT TO THE 1992 STOCK
OPTION PLAN DESCRIBED IN PROPOSAL 2, AND IN ACCORDANCE WITH THE
DETERMINATION OF A MAJORITY OF THE BOARD AS TO OTHER MATTERS.
1. Election of directors.
For three-year terms: Rose M. Cernak, Edwin F. Hale, Sr.,
R. Andrew Larkin, Jr., Robert A. Pascal and G. Gregory Russell.
-- FOR all nominees listed above -- WITHHOLD AUTHORITY to vote for
(except as marked to the contrary all nominees listed above.
below).
(INSTRUCTION: To withhold authority to vote for any individual nominee,
print that nominee's name on the space provided below.)
2. Amendment to 1992 Stock Option Plan as to a grant on October 13, 1993
of an option to purchase 5,000 shares of Common Stock to each
nonemployee director of the Company.
-- FOR -- AGAINST -- ABSTAIN
(continued and to be dated and signed on the reverse side)
(Continued from other side)
3. Upon such other business as may properly come before the Annual
Meeting or any adjournments thereof, as determined by a majority of
the Company's Board.
The undersigned stockholder may revoke this Proxy at any time before
it is voted by filing with the Corporate Secretary of the Company a written
notice of revocation, by delivering to the Company a duly executed proxy
bearing a later date, or by attending the Annual Meeting and voting in
person. The undersigned stockholder hereby acknowledges receipt of the
Notice of Annual Meeting of Stockholders and Proxy Statement and hereby
revokes any proxy or proxies heretofore given.
Signature(s) of Stockholder or
Authorized Representative
Date:_________________________
Please date and sign exactly as name
appears hereon. Each executor,
administrator, trustee, guardian,
attorney-in-fact and other fiduciary
should sign and indicate his or her
full title. When stock has been issued
in the name of two or more persons,
all should sign.
If you receive more than one proxy card, please sign and
return all cards in the accompanying envelope.
<PAGE>
AMENDMENT TO
1992 STOCK OPTION PLAN
Section 4(b) of the 1992 Stock Option Plan (the "Plan") is amended
to add an additional sentence after the existing fourth sentence and
before the existing fifth sentence of such Section to read as follows:
Each Non-Employee Director who is serving on the Board on October
13, 1993 shall be granted an Option on that date to purchase 5,000 shares
of the Stock.
The Plan shall otherwise be unchanged by this Amendment.
---------------------
This Amendment to the Plan was duly adopted and approved by the
Board of Directors of Baltimore Bancorp by resolution at a meeting held
on the 13th day of October, 1993.
<PAGE>
