<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 Rule 14a-11(c) or Rule 14a-12
Suburban Bancshares, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
X $125 per Exchange Act Rule 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:
- --------------------------------------------------------------------------------
- ----------------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
SUBURBAN BANCSHARES, INC.
7505 GREENWAY CENTER DRIVE
P. O. BOX 298
GREENBELT, MARYLAND 20768
------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 9, 1996
To the Shareholders of
Suburban Bancshares, Inc.:
In connection with the annual meeting of shareholders of Suburban
Bancshares, Inc. (the "Company") to be held on May 9, 1996, we enclose a notice
of meeting and proxy statement containing information concerning those matters
which will be considered at the meeting.
Financial and other information concerning the Company's activities and
operations during 1995 is contained in our annual report, a copy of which is
enclosed herewith.
You are cordially invited to attend the annual meeting in person. However,
we would appreciate your completing, signing and dating the enclosed proxy card
and returning it in the enclosed postage prepaid envelope so that your shares
can be voted if you do not attend the meeting. If you do attend the meeting, you
may revoke your proxy and vote in person.
Sincerely,
/s/ WINFIELD M. KELLY, JR.
Winfield M. Kelly, Jr.
Chairman of the Board of Directors
Whether or not you expect to attend the meeting, please promptly complete,
sign and date the enclosed proxy card and return it in the return envelope
furnished for that purpose.
<PAGE> 3
SUBURBAN BANCSHARES, INC.
7505 GREENWAY CENTER DRIVE
P. O. BOX 298
GREENBELT, MARYLAND 20768
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 9, 1996
------------------
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders (the
"Meeting") of Suburban Bancshares, Inc., a Delaware corporation (the "Company"),
will be held on May 9, 1996 at 10:00 a.m., E.D.T., at The Holiday Inn at 9100
Basil Court, Landover, Maryland 20785, to consider and vote upon the following
matters:
1. The election of three directors to fill the vacancies in and serve as
member of the class of directors whose term expires at the 1999
annual meeting of shareholders or until their successors are elected
and qualify.
2. The approval of Stegman & Company as the Company's independent public
accountants for 1996.
3. The approval of an amendment to the Incentive Stock Option Plan to
extend the term of the plan to January 1, 2007.
4. The transaction of such other business as may properly come before
the Meeting or any adjournment thereof.
Shareholders of record at the close of business on March 15, 1996 are
entitled to notice of, and to vote at, the Meeting.
By Order of the Board of Directors,
/s/ SUSAN JANE HANSEN
SUSAN JANE HANSEN, Secretary
April 5, 1996
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE, SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD SO THAT YOUR SHARES MAY BE REPRESENTED
AT THE MEETING. IF YOU DO ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE
IN PERSON.
<PAGE> 4
SUBURBAN BANCSHARES, INC.
7505 GREENWAY CENTER DRIVE
P. O. BOX 298
GREENBELT, MARYLAND 20768
------------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 9, 1996
------------------
INTRODUCTION
This proxy statement is being furnished to the holders of common stock of
Suburban Bancshares, Inc., a Delaware corporation (the "Company"), in connection
with the solicitation of proxies by the Company's board of directors (the "Board
of Directors") for use at the annual meeting of shareholders to be held on May
9, 1996, at 10:00 a.m., E.D.T., at The Holiday Inn at 9100 Basil Court,
Landover, Maryland 20785, and at any adjournment thereof (the "Meeting"). The
purpose of the Meeting is to (i) elect three directors to fill the vacancies in
and serve as members of the class of directors whose term expires at the 1999
annual meeting of shareholders, (ii) approve of Stegman & Company as the
Company's independent public accountants for 1996, (iii) approve an amendment to
the Incentive Stock Option Plan to extend the term of the Plan to January 1,
2007, and (iv) transact such other business as may properly come before the
Meeting. See "Election of Directors," "Selection of Independent Auditors,"
"Incentive Stock Option Plan" and "Other Matters."
Holders of a majority of the Company's outstanding common stock, par value
$.01 per share (the "Common Stock"), must be present at the Meeting, either in
person or represented by proxy, to constitute a quorum for the transaction of
business. Abstentions and broker non-votes will be counted to determine whether
a quorum is present. Shareholders of record at the close of business on March
15, 1996 are entitled to notice of, and to vote at, the Meeting. As of the close
of business on March 15, 1996, there were approximately 1,061 holders of record
of the Common Stock ("shareholders") and 10,951,218 shares of Common Stock
outstanding of record. In the election of directors, each shareholder is
entitled to cast one vote for each director to be elected; cumulative voting is
not permitted. Directors are elected by a plurality of votes by the holders of
shares of Common Stock of the Company in person or represented by proxy at the
meeting, with a quorum. For purposes of election of directors, abstentions and
broker non-votes are not considered to be votes cast and do not offset the
plurality vote required for election of Directors.
The mailing address of the Company's offices is P.O. Box 298, Greenbelt,
Maryland 20768. The Company's telephone number is (301) 474-6694. This proxy
statement and the accompanying notice of Meeting and proxy card are first being
provided to shareholders on or about April 8, 1996.
The cost of soliciting proxies and preparing the proxy materials will be
borne by the Company. In addition, the Company will request securities brokers,
custodians, nominees, and fiduciaries to forward solicitation material to the
beneficial owners of stock held of record and will reimburse them for their
reasonable out-of-pocket expenses in forwarding such solicitation material.
Proxies may be solicited personally or by telephone or telegram by directors,
officers, and employees of the Company or its subsidiaries without additional
compensation to them.
The Board of Directors has selected Elizabeth J. Buck and Vincent D.
Palumbo, or either one of them, to act as proxies with full powers of
substitution. Any shareholder executing a proxy has the power to revoke the
proxy at any time before it is voted. This right of revocation is not limited or
subject to compliance with any formal procedure. Any shareholder may attend the
meeting and vote in person whether or not he has previously given a proxy. No
dissenter's rights exist for shareholders who withhold approval as to any of the
matters being presented at the Meeting.
Unless revoked at or before the Meeting, a properly executed proxy received
by the Company in time for the Meeting will be voted in accordance with the
shareholder's specified instructions on the proxy. If a signed
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<PAGE> 5
proxy is returned without specific instructions on it, the shareholder's Common
Stock will be voted "for" the election of each of the nominated directors, "for"
the extension of the Incentive Stock Option Plan, and "for" the approval of the
independent accountants. If any other business is brought before the Meeting
(which the Board of Directors does not expect to occur), Common Stock
represented by proxies will be voted in accordance with the judgment of the
proxies voting them. See "Election of Directors," "Selection of Independent
Auditors," "Incentive Stock Option Plan" and "Other Matters."
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Shareholders' proposals intended to be presented at the 1997 annual meeting
must be received by the Company for inclusion in the Company's proxy statement
and proxy relating to that meeting by December 9, 1996.
ELECTION OF DIRECTORS
The Board of Directors has established, by resolution, the number of
directors at eleven: four directors each in the classes whose terms expire in
1998 and 1999 and three directors in the class whose term expires in 1997. After
the election of directors at the Meeting, two vacancies will remain to be filled
to the class whose term expires at the 1998 annual meeting, and one vacancy will
remain to be filled to the class whose term expires at the 1999 annual meeting.
It is intended that the persons named on the accompanying proxy card will
vote for the election of the nominee described below. The Board of Directors
believes that all of the nominees will be available and able to serve as
directors, but if any of these persons should not be available or able to serve,
the proxies may exercise discretionary authority to vote for substitutes
proposed by the Board of Directors.
The following table sets forth the names of the nominees for election as
directors in the class whose term will expire at the 1999 annual meeting of
shareholders and the current directors in the 1997 and 1998 classes. The age of
each nominee and/or current director, the year each became a director of the
Company (if applicable), his or her principal occupation during the last five
years, and certain other affiliations are also disclosed. Information relating
to the approximate number of shares of Common Stock beneficially owned by each
nominee and director is shown below under the heading "Beneficial Ownership of
Common Stock."
<TABLE>
<CAPTION>
SERVED AS A POSITIONS WITH THE COMPANY AND
NAME AND AGE DIRECTOR SINCE ITS SUBSIDIARY, AND PRINCIPAL OCCUPATIONS
- ------------------------------ -------------- ---------------------------------------------------
<S> <C> <C> <C>
1999 CLASS (nominees)
1. Barbara M. DiNenna (58) 1993 Director, April 1993 -- present; Chairman of the
Audit Committee, June 1993 -- present; Director,
Suburban Bank of Maryland, September
1993 -- present; Accountant, DiNenna & Associates,
CPA, P.A. 1973 -- present; Director and Chairman of
the Board, Prince George's Hospital Foundation,
Inc., 1991 -- present
2. Marlin K. Husted (66) 1993 Director and Vice Chairman of the Board, July
1993 -- present; Director, Suburban Bank of
Maryland, August 1993 -- present; Chairman of the
Board, First American Bank of Maryland,
1984 -- June 1993
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
SERVED AS A POSITIONS WITH THE COMPANY AND
NAME AND AGE DIRECTOR SINCE ITS SUBSIDIARY, AND PRINCIPAL OCCUPATIONS
- ------------------------------ -------------- ---------------------------------------------------
<S> <C> <C>
3. Raymond G. LaPlaca (59) 1990 Director, 1990 -- present; Chairman of the
Executive Committee, 1990 -- March 1993; Chairman
of the Board, Suburban Bank of Maryland,
1983 -- July 1993; Vice Chairman of the Board,
Suburban Bank of Maryland, July 1993 -- present;
Partner, Reichelt, Nussbaum, LaPlaca & Miller, a
law firm, 1995 -- present
1998 CLASS
1. Winfield M. Kelly, Jr. 1993 Chairman of the Board and Chief Executive Officer,
(60) March 1993 -- present; Chairman of the Compensation
Committee, April 1994 -- present; Chairman of the
Board, Suburban Bank of Maryland, July
1993 -- present; Chairman of the Board, Dimensions
Health Corporation, 1985 -- April 1993; President
and Chief Executive Officer, Dimensions Health
Corporation, health care, April 1993 -- present;
Chairman of the Board WMK, Inc., 1984 -- present;
Secretary of State, State of Maryland, 1987 --
March 1993
2. Kenneth H. Michael (57) 1995 Director, May 1995 -- present; Former Director,
1990 -- March 1993; Director, Suburban Bank of
Maryland, 1980 -- present; Chairman, The Michael
Companies, Inc., real estate development,
1987 -- present
1997 CLASS
1. Glen H. Ballowe (71) 1993 Director, June 1993 -- present; Director, Suburban
Bank of Maryland, October 1993 -- present;
President and Chief Executive Officer, Ballowe
Corporation, construction and development,
1984 -- present
2. Elizabeth J. Buck (39) 1993 Director, April 1993 -- present; Director, Suburban
Bank of Maryland, September 1993 -- present;
President, Buck Distributing Company, beverage
distribution, 1985 -- present; Commissioner, WSSC
bi-county water & sewer, 1990 -- present
3. Vincent D. Palumbo (61) 1990 Director, 1990 -- present; Chairman of the CRA
Committee, June 1993 -- present; Co-Vice Chairman
of the Board of Directors, 1990 -- March 1993;
Director, Suburban Bank of Maryland,
1985 -- present; President V. D. Palumbo, P.A., an
oral and maxillofacial surgeon, 1965 -- present
</TABLE>
RECOMMENDATION AND VOTE: The individuals listed above as nominees will be
elected to the 1999 Class of the Company's Board of Directors upon a plurality
vote by the shareholders of the Company present by proxy or in person at the
Meeting, with a quorum.
The Board of Directors recommends a vote "FOR" each of the nominated
individuals.
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<PAGE> 7
DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
In addition to Winfield M. Kelly, Jr. and Marlin K. Husted, included in the
director listing above, the following are the executive officers of the Company:
William R. Johnson, 56, was Executive Vice President of the Company from
June 1991 through March 1993 and has been Chief Operating Officer of the Company
since June 1991. Mr. Johnson became President of the Company in April 1993 and
has served as an ex-officio member of the Company's Board of Directors since May
1990. Mr. Johnson has been President, Chief Executive Officer and a director of
Suburban Bank of Maryland ("Suburban Maryland" or the "Bank") since 1987.
Sibyl S. Malatras, 52, was appointed Senior Vice President and Treasurer of
the Company effective April 1994. Ms. Malatras has been Senior Vice President
and Treasurer of Suburban Maryland since April 1988.
BOARD AND COMMITTEE INFORMATION
During 1995, the Board of Directors held a total of seventeen meetings,
twelve regular meetings, one organizational meeting and four special meetings.
Two directors, Marlin K. Husted and Kenneth H. Michael attended fewer than 75%
of the total number of meetings of the Board of Directors and the committees on
which they served during 1995. The Board of Directors of the Company currently
has a Community Reinvestment Act ("CRA") Committee, a Compensation Committee and
an Audit Committee. During 1995, the Board of Directors of the Company did not
have a standing Nominating Committee.
The CRA Committee's functions include recommendations on policies and
procedures relating to the Company's and the Bank's community reinvestment
efforts, and monitoring the CRA activities of the Bank. The Committee, includes
three current directors, Messrs. Palumbo (Chairman), Ballowe and Husted. One
member from the board of directors and four employees of the Bank also served on
the Committee, which held four meetings during 1995.
The Audit Committee meets at least quarterly with management
representatives and the internal auditor. The Committee recommends to the Board
of Directors the appointment of independent auditors; approves the continuing
scope of both internal and external audits and of internal loan reviews; and
reviews the results of the audits and loan reviews. The independent and internal
auditors have unrestricted access to the Audit Committee and vice versa. Current
directors serving on the Audit Committee include Mrs. DiNenna (Chairman) and Mr.
Husted; three members of from the Bank's board of directors also serve on this
Committee. During 1995, the Audit Committee held twelve meetings.
The Compensation Committee was formed in 1994 to review the Company's
compensation policy and programs, including executive salary administration and
incentive compensation plans and to make recommendations to the Board of
Directors concerning these programs. The Committee, which includes Mrs. DiNenna
and Messrs. Kelly (Chairman), Husted and LaPlaca held two meetings in 1995.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(SEC). Specific due dates for these reports have been established, and the
Company is required to report in this Proxy Statement any known failure to file
such ownership reports by these dates during or with respect to transactions in
1995. One Form 4 filed at the end of 1995 omitted three (3) transactions for Mr.
Husted; the form was subsequently amended to reflect his correct status, but did
not meet the required due date. To the Company's knowledge, all other filing
requirements were satisfied by the Company's executive officers and directors.
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<PAGE> 8
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION FOR THE YEARS ENDED 1995, 1994 AND 1993
The following table sets forth the annual and long-term compensation for
service in all capacities to the Company for the years ended December 31, 1995,
1994 and 1993 of (i) the Chief Executive Officer and (ii) the other highly
compensated executive officers of the Company and its subsidiary whose salaries
and bonuses exceeded $100,000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION (1) ------------------
--------------------- NUMBER OF SHARES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (3) SUBJECT TO OPTIONS COMPENSATION (2)
- ------------------------------------ ---- -------- --------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Winfield M. Kelly, Jr. (4) 1995 $100,000 $10,000 0 $ 0
Chairman & Chief Executive Officer 1994 100,000 0 0 0
1993 42,011 0 300,000(5) 0
William R. Johnson 1995 $133,030 $29,947 0 $5,321
President & Chief Operating Officer; 1994 130,135 0 0 5,001
President & Chief Executive 1993 121,000 0 0 4,468
Officer of Suburban Maryland
Sibyl S. Malatras 1995 $ 84,800 $21,293 0 $3,392
Senior Vice President & Treasurer; 1994 83,055 0 0 3,188
Senior Vice President & Treasurer 1993 74,255 0 0 2,720
of Suburban Maryland
</TABLE>
- ---------------
(1) Salary amounts include base salary earned and paid in cash during the fiscal
year. No Named Executive Officer received any perquisites and other
personal benefits the aggregate amount of which exceeded the lesser of
either $50,000 or 10% of the total annual salary and bonus reported for
1995 in the Summary Compensation Table.
(2) Included in other compensation are tax deferred contributions for Mr.
Johnson and Ms. Malatras to the 401(k) Plan. The amounts reflect only
contributions made during each of the calendar years that vested during the
year.
(3) No bonuses were awarded in 1994 or 1993. Of the bonus earned in 1995,
$11,305 for Mr. Johnson and $7,560 for Ms. Malatras were awarded in lieu of
merit increases, and $10,000 for Mr. Kelly, $10,642 for Mr. Johnson, and
$7,632 for Ms. Malatras were paid in 1996.
(4) Under the terms of Mr. Kelly's employment agreement with the Company, he
received an aggregate of $30,000 annually as director's fees until October
1993, when, upon the successful completion of a public stock offering made
by the Company in September 1993 (the "Stock Offering"), his director's fee
was adjusted to $100,000 annually. See "Employment Agreements."
(5) Under the terms of the Plan of Reorganization and Recapitalization (the
"Plan"), as amended, Mr. Kelly received 300,000 Management Stock Options
upon the successful completion of the Stock Offering.
OPTION/STOCK APPRECIATION RIGHTS GRANTS
No stock options were granted pursuant to the Management Stock Option Plan
or the Incentive Stock Option Plan in 1995. The Company has never granted any
stock appreciation rights.
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YEAR-END VALUE OF OPTIONS
Shown below is information with respect to the unexercised options to
purchase the Company's Common Stock. Neither the Chief Executive Officer nor the
other Named Executive Officers exercised any stock options during 1995.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT DECEMBER 31, IN-THE-MONEY OPTIONS
1995 AT DECEMBER 31, 1995 (1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Winfield M. Kelly, Jr.......................... 300,000 -0- $ 438,750 -0-
William R. Johnson............................. -- -- -- --
Sibyl S. Malatras.............................. -- -- -- --
</TABLE>
- ---------------
(1) Value is considered to be the difference between the exercise price of $0.10
and the market price of $1.5625 at December 31, 1995.
COMPENSATION OF DIRECTORS
During 1995, the Company paid its directors a fee of $100 for attending
meetings of the Board of Directors and/or committees of the Board of Directors.
Mr. Kelly, Chairman of the Boards of the Company and the Bank, receives $100,000
annually for his services as Chairman; Mr. Husted, Vice Chairman of the Board of
the Company, is paid $10,800 annually and, by agreement, will receive a
severance benefit of $9,000 per year served until January 1, 2000.
EMPLOYMENT AGREEMENTS
Pursuant to an agreement that became effective on March 10, 1993, between
the Company and Winfield M. Kelly, Jr., Mr. Kelly is employed as the Chairman of
the Board of Directors and Chief Executive Officer of the Company and as
Chairman of the board of directors of the Bank. Under the terms of his
employment agreement, the initial term of Mr. Kelly's employment will expire as
of the date of the Meeting, subject to automatic renewal with the reelection of
Mr. Kelly as Chairman of the Board of Directors at the Board of Directors
meeting immediately following the Meeting. The agreement provides that Mr. Kelly
receives (i) annual director's fees of $100,000 (payable by the Bank), and (ii)
certain employee benefits including health, life and disability insurance. If
Mr. Kelly terminates the agreement for cause (as defined) or if his employment
is terminated by the Company without cause or is terminated or not renewed as a
result of any sale or exchange of stock resulting in a change in a controlling
interest of the Company or the Bank, Mr. Kelly will be entitled to the sum of
$150,000. If Mr. Kelly's employment is terminated by the Company for cause (as
defined), he will be entitled only to compensation earned prior to such
termination.
Pursuant to an agreement between Suburban Maryland and William R. Johnson,
Mr. Johnson has been employed as the Bank's President and Chief Executive
Officer on a year-to-year basis since March 31, 1990. Under the current terms of
his employment, Mr. Johnson receives an annual base salary of $140,347 and
certain employee benefits, including life insurance and the use of an
automobile. Mr. Johnson is also entitled to deferred compensation, the agreement
for which has yet to be established. If Mr. Johnson were terminated without
cause, he would receive six months base salary and any earned incentive pay,
plus continued employee benefits during such period. In the event of termination
for cause (as defined), Mr. Johnson would be entitled only to compensation
earned prior to termination.
LIFE INSURANCE
William R. Johnson currently has a split-dollar life insurance policy
arrangement with Suburban Maryland. The policy, which is owned by Mr. Johnson,
was obtained in 1988 and provides for an initial death benefit of $550,000.
Suburban Maryland advances the premium payments made under the policy, which
represent approximately 15% of Mr. Johnson's base salary, and Mr. Johnson has
assigned the policy to
6
<PAGE> 10
Suburban Maryland to secure the repayment of the advances. In 1995, Suburban
Maryland made aggregate premium payments of $21,461 for the policy.
INCENTIVE STOCK OPTION PLAN
Pursuant to the Incentive Stock Option ("ISO") Plan, there are reserved for
issuance to officers and key employees of the Company and the Bank 404,235
shares of Common Stock, which have been registered under the Securities Act of
1933, as amended. No options to purchase shares were granted under the ISO Plan
in 1993, 1994 or 1995. In 1993, options to purchase 53,790 shares expired, and
options to purchase 61,770 shares were cancelled; these expired and cancelled
options are currently available for issuance under the terms of the ISO Plan. No
options expired or were cancelled in 1994 or 1995. Of the 404,235 shares of
Common Stock reserved and available for issuance under the ISO Plan, there are
outstanding options to purchase 80,000 shares of Common Stock at an average
weighted exercise price of $5.625 per share. These outstanding options are held
by a former employee of the Company. Based on the closing bid price on March 1,
1996, the market value of the securities underlying the options available for
issuance was $656,882.
The ISO Plan, which is intended to qualify as an incentive stock option
plan within the meaning of Section 422A of the Code, is currently administered
by the Company's Compensation Committee. Only officers and key employees of the
Company and its subsidiary (50% owned or greater) are eligible to receive
options under the ISO Plan. No member of the Committee is, or was at any time
within one year prior to his appointment to the Committee, eligible to
participate in the ISO Plan. The Committee has the authority to determine who
among the eligible participants will be granted options, whether or not an
option to be granted will be designated an incentive stock option within the
meaning of Section 422A of the Code ("Qualified Option"), the number of shares
to be covered by each option, the time or times at which the options may be
granted or exercised, and the terms and provisions of the options which are not
otherwise stated in the ISO Plan.
Under the ISO Plan, options may not be granted at a price that is less than
the fair market value of the Common Stock on the date the option is granted.
While the terms of the options granted pursuant to the ISO Plan may vary,
Qualified Options generally may not be exercisable until one year of continuous
service has elapsed and may not have a term of more than ten years while options
which are not Qualified Options may not have a term of more than eleven years.
RECOMMENDATION AND VOTE: The Incentive Stock Option Plan expires on
January 1, 1997. An amendment to the ISO Plan is proposed to extend the term of
the plan for another ten-year period to January 1, 2007.
The Board of Directors recommends a vote "FOR" approval of this amendment.
MANAGEMENT STOCK OPTIONS
Under the terms of the Plan, on September 27, 1993, upon the successful
completion of the Company's Stock Offering, options to purchase an aggregate of
350,000 shares of Common Stock were granted to Winfield M. Kelly, Jr. and other
persons designated by him. These options became exercisable at a purchase price
of $0.10 per share in 1995 and have a term of five years from the effective date
of the Plan. Upon Mr. Kelly's designation, Mr. Husted and Mr. Albert W. Turner,
a principal shareholder of the Company, were each granted 25,000 of the
Management Options; Mr. Kelly received the remaining 300,000 options.
QUALIFIED EMPLOYEE BENEFIT PLAN
The Company has in effect a qualified employee benefit plan pursuant to
Section 401(k) of the Code. All fulltime employees of the Company and its
subsidiaries who have reached the age of 21 and have completed at least six
months of service (as defined) are eligible to participate in this plan.
Participants may elect to defer a portion of their salary up to certain
statutory maximums on a pre-tax basis. The Company (and/or the
subsidiary/employer of the employee, if such is the case) contributes on a
participant's behalf on an annual basis, (i) an amount equal to 100% of the
first 1% of the participant's compensation contributed by the
7
<PAGE> 11
participant and (ii) 60% of the next 5% of the participant's compensation that
he or she contributes. A participant's right to the contributions made on his or
her behalf by the Company and/or the applicable subsidiary/employer (with
interest earnings) vests on a five-year rolling schedule, with 100% vesting
after the fifth year of service.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1995, the Compensation Committee was composed of the following members:
Winfield M. Kelly, Jr., Chairman of the Committee and Chairman of the Board of
Directors and Chief Executive Officer of the Company; Marlin K. Husted, Vice
Chairman of the Board of Directors; Barbara M. DiNenna; and Raymond G. LaPlaca.
No current or former officers or employees of the Company or the Bank, with the
exception of Mr. Kelly participated in deliberations of and/or actions taken by
the Compensation Committee concerning executive compensation; deliberations and
actions taken concerning compensation for Mr. Kelly were conducted by the
Committee in his absence.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for reviewing and making
recommendations to the Board of Directors concerning the Company's compensation
policy and programs, including executive salary administration and incentive
compensation plans. Directors appointed to this Committee include Mrs. DiNenna
and Messrs. Husted, Kelly and LaPlaca. The Chief Executive Officer does not
participate in discussions or recommendations of any program which will directly
affect his compensation.
The Company's executive compensation policies are intended to provide
competitive levels of compensation that reflect the Company's annual and
long-term performance goals, reward superior corporate performance and assist
the Company in attracting and retaining qualified executives. Total compensation
for each of the Named Executive Officers as well as other senior executives may
be comprised of three principal components: base salary or directors fees,
incentive compensation and grants of options to purchase the Company's Common
Stock.
Bonus and/or incentive stock option awards are based on individual and
company-wide performance. The Compensation Committee has established specific
criteria for bonuses or options which may be awarded in the future, and intends
that specific bonus awards will be determined principally in relation to
attainment by the Company of its earnings targets, with other measures of
financial and non-financial performance also taken into account.
The compensation of the Chief Executive Officer was determined pursuant to
the Plan of Reorganization and Recapitalization and the employment agreement
between the Company and Mr. Kelly, both of which were approved by the Board of
Directors in the first quarter of 1993.
The relative levels of the base salary for the senior officers of the
Company are designed to reflect each officer's scope of responsibility and
accountability within the Company. Base salaries are fixed at levels which the
Board believes are comparable to those executives of similar status in the
financial services industry in the Company's market area and are reflective of
the fact that each of the senior officers have broad Company-wide
responsibilities.
Winfield M. Kelly, Jr. (Chairman)
Marlin K. Husted
Barbara M. DiNenna
Raymond G. LaPlaca
8
<PAGE> 12
STOCK PERFORMANCE GRAPH
The following chart compares the yearly percentage change in the cumulative
total shareholder return on the Company's Common Stock during the five years
ended December 31, 1995, with the cumulative total return on the Center for
Research in Securities Prices ("CRSP") Total Return Index for the NASDAQ Stock
Market (U.S. Companies) and the CRSP Total Return Index for NASDAQ Financial
Stocks. The comparison assumes $100 was invested on December 31, 1990 in the
Company's Common Stock and in each of the foregoing indices and the reinvestment
of dividends.
There can be no assurance as to future trends in the cumulative total
return of the Company's Common Stock or of the following indices. The Company
does not make nor does it endorse any predictions as to future stock
performance.
<TABLE>
<CAPTION>
CRSP Total
Return Index
for the NAS- CRSP Total
DAQ Stock Return Index
Suburban Market (U .S. for NASDAQ
Measurement Period Bancshares, Compa- Financial
(Fiscal Year Covered) Inc. nies)(*) Stocks (*)
<S> <C> <C> <C>
1990 100 100 100
1991 39 161 155
1992 45 187 221
1993 77 215 257
1994 66 210 258
1995 82 296 376
</TABLE>
- ---------------
(*) The CRSP Total Return Index for the NASDAQ Stock Market (U.S. Companies) is
an index comprising all domestic common shares traded on the NASDAQ National
Market and the NASDAQ Small-Cap Market. The CRSP Total Return Index for
NASDAQ Financial Stocks is an index comprising all financial company
American Depository Receipts, domestic common shares and foreign common
shares traded on the NASDAQ National Market and the NASDAQ Small-Cap Market.
These indices were prepared for NASDAQ by the Center for Research in
Securities Prices ("CRSP") at the University of Chicago and distributed to
NASDAQ-listed companies to assist them in complying with the proxy
disclosure requirements. The Company has not independently verified the
computation of these total return indices.
9
<PAGE> 13
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of March 1, 1996 with
respect to the beneficial ownership of the Company's Common Stock of each person
who is known to own beneficially more than 5% of the outstanding shares of
Common Stock, each director, each Named Executive Officer, and all directors and
executive officers as a group. All persons listed have sole voting and
investment power with respect to their shares unless otherwise indicated.
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK
BENEFICIALLY PERCENTAGE
NAME OWNED OF CLASS
- ------------------------------------------------------------- ---------------- ----------
<S> <C> <C>
Albert W. Turner(1).......................................... 906,436 8.02%
c/o Carrollton Enterprises, Ltd.
11720 Beltsville Drive, Suite 1000
Beltsville, Maryland 20705
Winfield M. Kelly, Jr.(1).................................... 570,500 5.05%
Marlin K. Husted (nominee)(1)................................ 74,970 *
Glen H. Ballowe(2)........................................... 47,250 *
Elizabeth J. Buck............................................ 20,250 *
Barbara M. DiNenna (nominee)................................. 128,000 1.13%
Raymond G. LaPlaca (nominee)(3).............................. 54,883 *
Kenneth H. Michael........................................... 181,104 1.60%
Vincent D. Palumbo(4)........................................ 229,046 2.03%
William R. Johnson........................................... 19,190 *
Sibyl S. Malatras............................................ 4,050 *
All executive officers and directors as a group.............. 1,329,273 11.76%
</TABLE>
- ---------------
(1) Includes 25,000, 300,000 and 25,000 currently exercisable management stock
options for Messrs. Turner, Kelly and Husted, respectively.
(2) Includes 46,575 shares as to which Mr. Ballowe shares voting and investment
power with his wife.
(3) Includes 40,659 shares as to which Mr. LaPlaca shares voting and investment
power with his wife.
(4) Includes 113,058 shares as to which Dr. Palumbo shares voting and investment
power with his wife.
* Indicates less than one percent (1%).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Bank has had, and expects to have in the future, banking transactions
in the ordinary course of business with some of its directors, officers and
employees, and their associates. In the past, substantially all of such
transactions have been on the same terms, including interest rates, maturities
and collateral requirements as those prevailing at the time for comparable
transactions with unaffiliated parties and did not involve more than the normal
risk of collectibility or present other unfavorable features.
At December 31, 1995, loans to officers and directors of the Company and
the Bank, including loans to their related interests, totaled approximately
$779,000. During 1995, $980,000 of new loans and principal advances on existing
loans were made, repayments totaled $1,024,000 and resignations accounted for a
reduction in loans to officers and directors of the Company of $23,000. In the
opinion of the Company's Board of Directors, the terms of the foregoing loans
are no less favorable to the Bank than terms of loans to unaffiliated parties.
Frank Lucente, a director of the Company until March 23, 1993, and a
current director of Suburban Maryland, is a general partner in a partnership
which leases a branch facility to Suburban Maryland. The initial five year lease
term expired June 30, 1992, and the lease was renewed under the first of three
renewal options at a minimum annual rental of approximately $75,600. Kenneth H.
Michael, a director of the Company and the Bank, is the Chairman of the Board of
a company that provided services associated with the
10
<PAGE> 14
management and disposition of certain properties obtained through foreclosure.
Fees and commissions for these services were approximately $84,000 in 1995 and
$12,000 in 1994. The Company may, from time-to-time, engage this company for
similar services in the future. In the opinion of the Company's Board of
Directors, the services provided and the terms of the foregoing lease are no
more and no less favorable to the Company than those which could have been
received from unaffiliated parties.
SELECTION OF INDEPENDENT AUDITORS
Stegman & Company has served as the Company's independent public auditor
since 1994. Representatives of Stegman & Company are expected to attend the
Meeting and will have an opportunity to make a statement if they so desire. They
will be available to respond to appropriate questions regarding the Company's
consolidated financial statements for 1995.
KPMG Peat Marwick LLP served as the Company's independent public auditor
from 1989 through 1993. In 1994, KPMG Peat Marwick LLP performed various
professional services for the Company, including completion of the audit of
financial statements of the Company for 1993 and preparation of corporate tax
returns.
On April 20, 1994, the Board of Directors, upon the recommendation of the
Audit Committee, selected Stegman & Company, effective April 29, 1994, to audit
the books of the Company and its subsidiaries for the year ending December 31,
1994, to report on the consolidated statements of financial position and related
statements of earnings of the Company and its subsidiaries, and to perform such
other accounting services as may be required by the Board. Stegman & Company was
also selected at the 1995 Annual Meeting as the Company's independent
accountants for the year ending December 31, 1995. The Company has been advised
by Stegman & Company that the firm did not have any direct financial interest or
any material indirect financial interest in the Company and its subsidiaries in
1993, 1994 or 1995.
There were no disagreements with KPMG Peat Marwick LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures, which disagreements if not resolved to their satisfaction
would have caused them to make reference in connection with their opinion to the
subject matter of the disagreement. For the year ended December 31, 1993, the
audit report of KPMG Peat Marwick LLP did not contain any adverse opinion or
disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit
scope, or accounting principles.
The Board of Directors recommends a vote "FOR" ratifying the selection of
Stegman & Company as the Company's independent public accountants for 1996.
ANNUAL REPORT ON FORM 10-K
Upon request, any shareholder of the Company can obtain the Company's
Annual Report on Form 10-K for the Year ended December 31, 1995, at no charge.
11
<PAGE> 15
OTHER MATTERS
The Meeting is called for the purposes set forth in the accompanying notice
of the Meeting. Other than the proposals set forth in the accompanying notice,
the Company's management is not aware of any matter to be brought before the
Meeting. However, should any other matter properly come before the Meeting, the
persons named in the accompanying proxy card or their duly authorized
substitutes acting at the Meeting will vote or otherwise act on such matter in
accordance with their best judgment.
By Order of the Board of Directors,
/s/ WINFIELD M. KELLY, JR.
Winfield M. Kelly, Jr.
Chairman of the Board of Directors
April 5, 1996
12
<PAGE> 16
SUBURBAN BANCSHARES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AS TO ALL MATTERS
THE UNDERSIGNED STOCKHOLDER of Suburban Bancshares, Inc. hereby
appoints Elizabeth J. Buck and Vincent D. Palumbo the lawful proxies of the
undersigned with full power of substitution to vote, as designated on the
reverse side of this proxy card, all shares of Common Stock of the Suburban
Bancshares, Inc. which the undersigned is entitled to vote at the Annual
Meeting of Shareholders to be held on Thursday, May 9, 1996 at 10:00 a.m. at
the Holiday Inn at 9100 Basil Court in Landover, Maryland 20785, and at any and
all adjournments thereof with respect to the matters set forth on the reverse
and described in the Notice of Annual Meeting and Proxy Statement dated April 5,
1996, receipt of which is hereby acknowledged.
Shares represented by all properly executed proxies will be voted (or
the vote on such matters will be withheld on specific matters) in accordance
with instructions appearing on the proxy. IN THE ABSENCE OF SPECIFIC
INSTRUCTIONS, PROXIES WILL BE VOTED FOR THE ABOVE MATTERS. IF ANY OTHER
BUSINESS ARISES AT THE MEETING, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
DIRECTORS' RECOMMENDATIONS.
(Continued and to be dated and signed on the reverse side.)
<PAGE> 17
1. ELECTION OF DIRECTORS:
FOR all nominees WITHHOLD AUTHORITY to
listed below vote for all nominees listed below
Three Directors to the class of Directors whose term expires in 1999:
Barbara M. DiNenna, Marlin K. Husted, and Raymond G. LaPlaca
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL
NOMINEE, WRITE THAT NOMINEE'S NAME IN THE
SPACE PROVIDED BELOW.
--------------------------------------------------------
2. APPROVAL OF STEGMAN & COMPANY AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR 1996.
FOR AGAINST ABSTAIN
3. APPROVAL OF AN AMENDMENT TO THE INCENTIVE STOCK OPTION PLAN TO EXTEND THE
TERM OF THE PLAN TO JANUARY 1, 2007.
FOR AGAINST ABSTAIN
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
Change of address and/or
comments, Mark Here
Please date and sign exactly as your
name appears above. All joint owners
should sign. When signing as a
fiduciary, representative or corporate
officer, give full title as such. If
you receive more than one proxy card,
please sign and return all cards
received.
DATED: , 1996
-----------------------------
-----------------------------------------
Signature
-----------------------------------------
Signature if held jointly
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE. VOTES MUST BE INDICATED (X) IN BLACK OR BLUE INK.
