<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 [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(Set forth the amount on which
the filing fee is calculated and state how it was determined.)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] 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:
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<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 20, 1998
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 20, 1998, 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 1997 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,
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 20, 1998
-------------------------
TO THE SHAREHOLDERS:
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 20, 1998 at 10:00 a.m., E.D.T., at the Club
Hotel by Doubletree at 9100 Basil Court, Landover, Maryland 20785, to consider
and vote upon the following matters:
1. The election of four directors to serve as members of the
class of directors whose term expires at the annual meeting of
shareholders in the year 2001 or until their successors are
elected and qualify.
2. The approval of Stegman & Company as the Company's independent
public accountants for 1998.
3. 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 23, 1998 are
entitled to notice of, and to vote at, the Meeting.
By Order of the Board of Directors,
SUSAN JANE HANSEN, Secretary
April 20, 1998
- --------------------------------------------------------------------------------
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. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES. 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 20, 1998
-------------------------
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 20, 1998, at 10:00 a.m., E.D.T., at the Club Hotel by Doubletree at
9100 Basil Court, Landover, Maryland 20785, and at any adjournment thereof (the
"Meeting"). The purpose of the Meeting is to (i) elect four directors to serve
as members of the class of directors whose term expires at the annual meeting
of shareholders in the year 2001 or until their successors have been elected
and qualified, (ii) approve Stegman & Company as the Company's independent
public accountants for 1998, and (iii) transact such other business as may
properly come before the Meeting. See "Election of Directors," "Selection of
Independent Auditors," 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 23, 1998 are entitled to notice of, and to vote at, the
Meeting. As of the close of business on March 23, 1998, there were
approximately 936 holders of record of the Common Stock ("shareholders") and
10,951,218 shares of Common Stock outstanding. In the election of directors,
each shareholder is entitled to cast one vote for each director to be elected;
cumulative voting is not permitted. Shareholders are entitled to one vote for
each share held in respect of each other matter presented at the Meeting.
Directors are elected by a plurality of votes by the holders of shares of
Common Stock of the Company present in person or represented by proxy at the
Meeting. Abstentions and broker non-votes are considered to be present and
entitled to vote, but not as votes cast.
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 20, 1998.
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 by directors,
officers, and employees of the Company or its subsidiaries without additional
compensation to them.
The Board of Directors has selected Barbara M. DiNenna-Corboy and
Marlin K. Husted, 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, including by granting and delivering a
later dated proxy, by written notice to the Company prior to the exercise of
the proxy, or by attending the Meeting and voting in person. Attendance at the
Meeting, in and of itself, will not revoke a proxy. 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 prior to its exercise, a properly executed proxy
received by the Company in time for the Meeting will be voted in accordance
with the shareholder's instructions specified on the proxy. If a signed 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, and "FOR"
the approval of the
1
<PAGE> 5
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 Directors'
recommendations. See "Election of Directors," "Selection of Independent
Auditors," and "Other Matters."
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Shareholders' proposals intended to be presented at the 1999 annual
meeting and included in the Company's proxy statement and proxy relating to
that meeting must be received by the Company by December 11, 1998.
PROPOSAL 1 -- 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
1999 and 2001 and three directors in the class whose term expires in 2000.
After the election of directors at the Meeting, one vacancy will remain to be
filled to the class whose term expires at the annual meeting in the year 2000.
It is intended that the persons named on the accompanying proxy card
will vote for the election of the nominees 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 annual meeting of
shareholders in the year 2001 and the current directors in the 1999 and 2000
classes. The age of each nominee and/or current director, the year each became
a director of the Company (if applicable), his or her position with the
subsidiary, Suburban Bank of Maryland (the "Bank"), 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>
2001 CLASS (nominees)
1. Samuel Y. Botts (51) 1996 Director, June 1996 - present; Director, Suburban Bank of Maryland,
July 1995 - present; Partner, Jessamy, Fort & Botts, a law firm, 1986 -
present
2. Stephen A. Horvath (48) 1997 Director and President and Chief Operating Officer, January 1997 -
present; Director and President and Chief Executive Officer, Suburban
Bank of Maryland, January 1997 - present; Vice President, Crestar Bank,
January 1995 - December 1996; Senior Vice President, First Union
National Bank, June 1992 - December 1994
3. Winfield M. Kelly, Jr. (61) 1993 Chairman of the Board and Chief Executive Officer, 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., a consulting and management services corporation, 1984 -
present; Secretary of State, State of Maryland, 1987 - March 1993
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C> <C>
2001 CLASS (nominees) (continued)
4. Kenneth H. Michael (58) 1995 Director, May 1995 - present; Former Director, 1990 - March 1993;
Director, Suburban Bank of Maryland, 1980 - present; Chairman of the
Board, The Michael Companies, Inc., a real estate development and
management firm, 1987 - present
2000 CLASS
1. Vincent D. Palumbo (62) 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
2. Albert W. Turner (81) 1997 Director, February 1997 - present; Director, Suburban Bank of Maryland,
February 1997 - present; Director, Citizens Bank of Maryland, 1956 -
1996; Senior Partner, Carrollton Enterprises, Ltd., a real estate
development and management firm, 1955 - present
1999 CLASS
1. Barbara M. DiNenna-Corboy (60) 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 (68) 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
3. Raymond G. LaPlaca (61) 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, 1985 - present
4. Lawrence A. Shulman (55) 1997 Director, January 1997 - present; Director, Suburban Bank of Maryland,
January 1997 - present; President, Shulman, Rogers, Gandal, Pordy &
Ecker, P.A., a law firm, 1972 - present
</TABLE>
Recommendation and Vote Required: The individuals listed above as
nominees will be elected to the 2001 Class of the Company's Board of Directors
upon the vote of a plurality of the shares of Common Stock present by proxy or
in person at the Meeting.
The Board of Directors recommends a vote "FOR" each of the nominated
individuals.
DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
In addition to Winfield M. Kelly, Jr., Marlin K. Husted and Stephen A.
Horvath, included in the director listing above, the following individuals are
named executive officers:
3
<PAGE> 7
Ms. Malatras, 54, was appointed Senior Vice President and Treasurer of
the Company effective April 1994, and was appointed Chief Financial Officer in
May 1996. Ms. Malatras has been Senior Vice President and Treasurer of
Suburban Maryland since April 1988.
Mr. Burnett, 52, was appointed Senior Vice President and Chief Lending
Officer of the Bank in April 1988.
Mr. Koch, 50, was named Senior Vice President of the Bank in October
1987.
BOARD AND COMMITTEE INFORMATION
During 1997, the Board of Directors held a total of thirteen meetings,
twelve regular meetings and one organizational meeting. Two directors, Vincent
D. Palumbo 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 1997. The Board of Directors of the Company currently has a Community
Reinvestment Act ("CRA") Committee, a Compensation Committee and an Audit
Committee. During 1997, the Board of Directors of the Company did not have a
standing Nominating Committee.
The CRA Committee's functions include making 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 two current directors, Messrs. Palumbo (Chairman) and
Horvath. Two members from the board of directors of the Bank and four
employees of the Bank also serve on the Committee, which held four meetings
during 1997.
The Compensation Committee reviews the Company's compensation policy
and programs, including executive salary administration and incentive
compensation plans and makes recommendations to the Board of Directors
concerning these programs. The Committee, currently composed of Mrs.
DiNenna-Corboy and Messrs. Kelly (Chairman), Husted and LaPlaca, held two
meetings in 1997.
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 of the Company serving on the
Audit Committee are Mrs. DiNenna-Corboy (Chairman) and Mr. Husted. Three
members of the Bank's board of directors also serve on this Committee. During
1997, the Audit Committee held eleven meetings.
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) and the Company. 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 on a timely basis. Based
solely upon the copies of reports of ownership and changes in ownership
received by the Company during 1997 and with respect to transactions in 1997
and upon written representations of the directors, executive officers and
holders of more than ten percent of the Common Stock, the Company is not aware
of any late filings or any failure to file a required report, except that Mr.
Botts failed to meet the required deadlines for the timely filing of one Form 4
in 1997, reflecting one transaction. The form was subsequently filed.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION FOR THE YEARS ENDED 1997, 1996 AND 1995
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,
1997, 1996 and 1995 of (i) the Chief Executive Officer and (ii) each other
executive officer of the Company and its subsidiary whose salary and bonus
exceeded $100,000 (the "Named Executive Officers").
4
<PAGE> 8
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long-term Compensation All Other
Compensation (1) Awards Compensation (3)
- ------------------------------------------------------------------------------------------------------------------------------------
Securities Underlying
Name and Principal Position Year Salary Bonus (2) Options
--------------------------- ---- ------ ---------
<S> <C> <C> <C> <C> <C>
Winfield M. Kelly, Jr. 1997 $110,000 $ 0 0 $0
Chairman & Chief Executive Officer 1996 100,000 0 0 0
1995 100,000 10,000 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen A. Horvath (4) 1997 $145,800(5) $11,155 0 $274
President and Chief Operating Officer, 1996 0 0 0 0
President and Chief Executive Officer of 1995 0 0 0 0
the Bank
- ------------------------------------------------------------------------------------------------------------------------------------
Sibyl S. Malatras 1997 $93,459 $7,676 2,400 $3,523
Senior Vice President and Chief 1996 89,489 7,533 0 3,579
Financial Officer; Senior Vice President 1995 84,800 21,293 0 3,392
and Treasurer of the Bank
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph E. Burnett 1997 $93,016 $7,491 2,400 $3,570
Senior Vice President of the Bank 1996 89,040 7,592 0 3,561
1995 84,800 5,936 0 3,372
- ------------------------------------------------------------------------------------------------------------------------------------
Harold J. Koch 1997 $92,897 $7,259 0 $3,639
Senior Vice President of the Bank 1996 89,040 7,307 0 3,027
1995 84,800 5,936 0 2,883
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Except as otherwise noted, salary amounts represent 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 1997 in the Summary
Compensation Table.
(2) The bonus earned in each year indicated was paid in the following
year.
(3) Included in other compensation are tax deferred contributions for
Messrs. Horvath, Burnett and Koch 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.
(4) Mr. Horvath joined the Company on January 1, 1997.
(5) Includes $10,800 of compensation earned in 1997, payment of which has
been deferred in accordance with Mr. Horvath's employment and deferred
compensation agreements.
OPTION/STOCK APPRECIATION RIGHTS GRANTS
The table below reflects information with respect to options granted
in 1997 to the Named Executive Officers. The Company has never granted any
stock appreciation rights.
5
<PAGE> 9
<TABLE>
<CAPTION>
Number of Securities % of Total Options Exercise of Potential Realizable Value at Assumed
Underlying Options Granted to Base Price Annual Rates of Stock Price Appreciation
Name Granted (#) Employees in 1997 ($/share) for Option Term
- ------------------------------------------------------------------------------------------------------------------------------------
Expiration 5% 10%
Date ($) ($)
---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Winfield M. Kelly, Jr. -- -- -- -- -- --
Stephen A. Horvath -- -- -- -- -- --
Sibyl S. Malatras 2,400 19.05% $2.625 1/22/07 $3,962 $10,041
Joseph E. Burnett 2,400 19.05% $2.625 1/22/07 $3,962 $10,041
Harold J. Koch -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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 1997.
<TABLE>
<CAPTION>
Number of Securities Underlying Unexercised Value of Unexercised
Options In-the-Money Options
Name Held at December 31, 1997 at December 31, 1997 (1)
- ------------------------------------------------------------------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Winfield M. Kelly, Jr. 300,000 -0- $1,113,750 -0-
Stephen A. Horvath -- -- -- --
Sibyl S. Malatras 2,400 -0- $2,850 -0-
Joseph E. Burnett 2,400 -0- $2,850 -0-
Harold J. Koch -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Value is considered to be the difference between the exercise price
($0.10 for Mr. Kelly's options and $2.625 for the options held by Ms.
Malatras and Mr. Burnett) and the closing bid price of $3.8125 at
December 31, 1997.
COMPENSATION OF DIRECTORS
During 1997, the Company paid its directors a fee of $200 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,
received $110,000 for his services as Chairman; Mr. Husted, Vice Chairman of
the Board of the Company, was paid $12,600 in 1997 and, by agreement, will
receive a severance benefit of $9,000 per year served until January 1, 2000.
EMPLOYMENT AGREEMENTS
Pursuant to an agreement between the Company and Winfield M. Kelly,
Jr., amended and revised effective as of January 1, 1997, Mr. Kelly serves 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
agreement Mr. Kelly receives (i) annual director's fees of $110,000 (payable by
the Bank), and (ii)
6
<PAGE> 10
certain employee benefits. The initial term of the amended agreement will
expire upon the expiration of Mr. Kelly's current term as a director of the
Company and is subject to automatic renewal upon his reelection as Chairman of
the Board by the Board of Directors. If the agreement is terminated by the
Company without cause, or if Mr. Kelly terminates the agreement for cause (as
defined), the Company will immediately pay to Mr. Kelly the sum of $110,000 as
severance compensation. In the event the agreement 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 $200,000. If Mr. Kelly's agreement 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 the Company, the Bank and Stephen A.
Horvath, Mr. Horvath has been employed as the Company's President and Chief
Operating Officer and the Bank's President and Chief Executive Officer since
January 1, 1997. Under the terms of his agreement, Mr. Horvath receives an
annual base salary of $140,400, subject to annual review and increase, and
certain employee benefits, including life insurance and the use of an
automobile. Mr. Horvath is also entitled to deferred compensation equal to 10%
of his annual base compensation reduced by the Company's contribution to his
401(k) account. The initial term of this agreement will expire on December 31,
1998 and is subject to automatic renewal for successive one-year terms. If
Mr. Horvath's agreement were terminated without cause in the initial two-year
term, he would receive his base salary for the remainder of the term then in
effect (but not less than 12 months compensation) or after the first two-year
term, he would receive his base salary for the remainder of the term plus an
additional one-year salary. If the termination were the result of a merger or
buy out or coincident with any change of control of the Company (as defined),
the severance for termination without cause would be increased by $100,000. In
the event of termination without cause, Mr. Horvath will receive a lump sum
payment of $12,000 in lieu of continuation of employee benefits. If Mr.
Horvath's agreement is terminated for cause (as defined), he will be entitled
only to compensation earned prior to such termination.
Pursuant to individual agreements between the Bank and Ms. Malatras
and Messrs. Burnett and Koch, who are employed as Senior Vice Presidents, the
Bank will continue to pay each employee his or her base compensation (exclusive
of bonus or incentive compensation and benefits) for a period of six (6)
months, if the termination occurs as a result of any merger or buy-out or
change in control of the employer. If the employee (1) accepts new or
continued employment with the successor entity, (2) rejects continued
employment with the successor entity at an equivalent level of compensation and
at a location within fifty (50) miles of the employer's current address, or (3)
violates any term or provision of the covenants of the agreement, the employee
will be disqualified from receiving such severance. Such covenants include
non-disparagement, non-disclosure, non-solicitation and non-disclosure or use
of proprietary information, records, or creations of the employer.
DEFERRED COMPENSATION PLAN
Members of the Board of Directors of the Company and the Bank and
executive officers may elect to defer their compensation or a portion thereof.
The deferred amounts are placed in a trust, managed by a trustee and invested
in any of several mutual fund options, which constitutes an unfunded
arrangement for purposes of Title 1 of the Employee Retirement Income Security
Act of 1974. Payment of the balance in a participant's deferred compensation
account will occur, or commence, as soon as practicable upon retirement or
death, either in a lump sum or, at the election of the participant, in annual
installments not to exceed fifteen.
At present, Messrs. Horvath, Botts, Burnett and Ms. Malatras and a
member of the Bank's Board of Directors are participants in the Plan.
STOCK OPTION PLAN
Pursuant to the Incentive Stock Option ("ISO") Plan in place at the
beginning of 1997, there were reserved for issuance to officers and key
employees of the Company and the Bank 311,635 shares of Common Stock, which had
been registered under the Securities Act of 1933, as amended. No options to
purchase shares were granted under the ISO Plan in 1995 or 1996. In January
1997, a total of 12,600 options at an exercise price of $2.625, the market
price on the date of grant, were awarded to seven officers and key employees of
the Bank for performance in 1996. In addition to the options granted in 1997,
there are outstanding options to purchase 80,000 shares of Common Stock at an
average weighted exercise price of $5.625 per share, which are held by a former
employee of the Company. No options expired or were canceled in 1995, 1996 or
1997.
7
<PAGE> 11
At the 1997 Annual Shareholders' Meeting, a new combined stock option
plan for both employees and directors was approved to replace the ISO Plan,
with a total of 500,000 shares of common stock available for grant. Awards
under the 1997 Stock Option Plan (the "1997 Plan") may be granted in the form
of incentive stock options, as defined by Section 422 of the Internal Revenue
Code of 1986, for employees or non-incentive stock options for employees or
directors, and have a maximum duration of ten (10) years from the date of
grant. The exercise price of any option granted under the plan may not be less
than the market price of the optioned shares on the date of grant.
The 1997 Plan is administered by the Compensation Committee which has
the authority and discretion to select participants and grant awards, to
determine the form and content of awards, to interpret the plan, to prescribe,
amend, and rescind rules and regulations of the plan, and to delegate
administrative tasks to one or more members of the Committee. In selecting the
eligible participants and in determining the number of shares to be granted,
the Committee may consider the nature of services rendered by the participant,
the participant's current and potential contribution to the Company and other
relevant factors.
In January 1998, 178,000 options were granted under the 1997 Plan to
directors of the Company and the Bank, and 207,950 incentive stock options,
which vest at 20% per year over a five-year period, were granted to employees.
The market price of the underlying common stock on the date of grant was
$3.625.
On March 23, 1998, the closing bid and asked price for the common
stock, as reported by the NASDAQ stock market, were $3.625 and $3.75,
respectively, and the market value of the securities underlying the options
available for issuance was $79,097, based on the average bid/asked price.
MANAGEMENT STOCK OPTIONS
Under the terms of the Plan of Reorganization and Recapitalization
(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 expire in March of 2001. Upon Mr. Kelly's
designation, Mr. Husted and Mr. Albert W. Turner 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 full-time employees of the Company and its
subsidiary 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 quarterly basis, (i) an amount equal to 100% of the
first 1% of the participant's compensation contributed by the 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 1997, 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-Corboy; and
Raymond G. LaPlaca. No current or former officers or employees of the Company
or the Bank, with the exception of Mr. Kelly and Mr. Husted, participated in
deliberations of and/or actions taken by the Compensation Committee concerning
executive compensation; deliberations and actions taken concerning compensation
for Mr. Kelly and Mr. Husted were conducted by the Committee in the officer's
absence.
8
<PAGE> 12
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, incentive
compensation plans , and stock option awards. Directors of the Company
appointed to this Committee are Mrs. DiNenna-Corboy and Messrs. Husted, Kelly
and LaPlaca. No officer participates 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 and directors.
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 director's fees, incentive compensation and grants of options to purchase
the Company's Common Stock.
Bonus and/or 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, 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 service
agreement between the Company and Mr. Kelly, both of which were approved by the
Board of Directors in the first quarter of 1993. Mr. Kelly's agreement was
revised and approved by the Board of Directors in January of 1997.
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-Corboy
Raymond G. LaPlaca
9
<PAGE> 13
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, 1997, 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,
1992 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.
[Performance Graph]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
______ Suburban Bancshares, Inc. $100 $171 $146 $182 $264 $429
- ------------------------------------------------------------------------------------------------------------------------------------
...... CRSP Total Return Index for the NASDAQ Stock Market 100 $115 $112 $159 $195 $240
(U.S. Companies)(*)
- ------------------------------------------------------------------------------------------------------------------------------------
------ CRSP Total Return Index for NASDAQ Financial Stocks(*) 100 $116 $117 $170 $218 $334
- ------------------------------------------------------------------------------------------------------------------------------------
</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.
10
<PAGE> 14
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of March 23,
1998, 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 Percent
Name Beneficially Owned of Class(1)
---- ------------------ -----------
<S> <C> <C>
Albert W. Turner (2)(3)(6) 908,936 8.28%
c/o Carrollton Enterprises
11785 Beltsville Drive, Suite 1600
Beltsville, Maryland 20705
Winfield M. Kelly, Jr. (nominee)(2)(3) 622,580 5.51%
c/o Dimensions Health Corporation
9200 Basil Court, Suite 500
Landover, Maryland 20785
Marlin K. Husted (2)(3) 140,000 1.27%
Stephen A. Horvath (nominee) 1,265 *
Samuel Y. Botts (nominee)(3) 4,500 *
Barbara M. DiNenna-Corboy (3) 138,000 1.26%
Raymond G. LaPlaca (3)(4) 76,383 *
Kenneth H. Michael (nominee) (3) 191,104 1.74%
Vincent D. Palumbo (3)(5) 244,100 2.23%
Lawrence A. Shulman (3) 10,513 *
Sibyl S. Malatras (7) 6,715 *
Joseph E. Burnett (7)(8) 6,597 *
Harold J. Koch (9) 1,856 *
All executive officers and directors as a group (13 persons) 2,352,549 20.60%
</TABLE>
* Indicates less than one percent (1%).
(1) Based on 10,951,218 shares outstanding as of March 23, 1998, except
with respect to individuals holding options to acquire Common Stock
exercisable within sixty days of March 23, 1998, in which event
represents percentage of shares issued and outstanding as of March
23, 1998 plus the number of such options held by such person, and all
directors and officers as a group, which represents percentage of
shares outstanding as of March 23, 1998 plus the number of such
options or warrants held by all such persons as a group.
(2) Includes 25,000, 300,000 and 25,000 currently exercisable management
stock options for Messrs. Turner, Kelly and Husted, respectively.
11
<PAGE> 15
(3) Includes non-incentive stock options awarded under the 1997 Stock
Option Plan in January 1998 as follows: Mr. Turner - 2,500; Mr.
Kelly - 50,000; Mr. Husted - 15,000; Mr. Botts - 3,500; Mrs.
DiNenna-Corboy and Messrs. LaPlaca, Michael and Palumbo - 10,000; and
Mr. Shulman - 2,500.
(4) Includes 40,659 shares as to which Mr. LaPlaca shares voting and
investment power with his spouse, and 13,500 shares owned by the law
firm of which Mr. LaPlaca is a partner.
(5) Includes 113,058 shares as to which Dr. Palumbo shares voting and
investment power with his spouse.
(6) Includes 355,725 shares as to which Mr. Turner shares voting and
investment power with his spouse.
(7) Includes 2,400 currently exercisable options for Ms. Malatras and Mr.
Burnett.
(8) Includes 1,350 shares as to which Mr. Burnett shares voting and
investment power with his spouse.
(9) Includes 1,350 shares as to which Mr. Koch shares voting and
investment power with his spouse.
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, 1997, loans to officers and directors of the Company
and the Bank, including loans to their related interests, totaled approximately
$962,000. During 1997, $524,000 of new loans and principal advances on
existing loans were made and repayments totaled $432,000. 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 the Bank, is a general partner in a partnership which
leases a branch facility to the Bank. The lease term expired June 30, 1997,
and the lease was renewed under the second of three five-year 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 to the Bank associated with the management and
disposition of certain properties obtained through foreclosure. Fees and
commissions for these services were approximately $62,000 in 1996; and no fees
were paid in 1997. 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.
PROPOSAL 2 -- SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Stegman & Company, independent
auditors, to examine the financial statements of the Company for the year 1998.
In 1997, Stegman & Company performed various professional services for the
Company, including completion of the examination of financial statements of the
Company for 1996, preliminary work on the examination for 1997, and preparation
of corporate tax returns.
Stegman & Company has served as the Company's independent 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 1997.
12
<PAGE> 16
The Board of Directors recommends a vote "FOR" ratifying the selection
of Stegman & Company as the Company's independent public accountants for 1998.
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, 1997, AT NO CHARGE.
REQUESTS SHOULD BE DIRECTED TO THE CORPORATE SECRETARY AT P. O. BOX 298,
GREENBELT, MARYLAND 20768-0298
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,
Winfield M. Kelly, Jr.
Chairman of the Board of Directors
April 20, 1998
13
<PAGE> 17
SUBURBAN BANCSHARES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AS TO ALL MATTERS
THE UNDERSIGNED SHAREHOLDER of Suburban Bancshares, Inc. hereby
appoints Barbara M. DiNenna-Corboy and Marlin K. Husted 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 Wednesday, May 20, 1998 at 10:00 a.m. at
the Club Hotel by Doubletree 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 20, 1998, 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 EACH OF THE MATTERS IDENTIFIED HEREIN
TO BE PRESENTED AT THE ANNUAL MEETING . 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> 18
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS:
FOR all nominees WITHHOLD AUTHORITY to
listed below vote for all nominees listed below
Four Directors to the class of Directors whose term expires in 2001:
Samuel Y. Botts, Stephen A. Horvath, Winfield M. Kelly, Jr. and Kenneth H. Michael
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 1998.
FOR AGAINST ABSTAIN
3. 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 complete, sign, date and return this Proxy Card promptly, using
the enclosed envelope. Votes must be indicated (X) in black or blue ink.
, 1998
- -------------- ------------------------------- -----------------------------
Signature Signature if held jointly Date
</TABLE>
NOTE: 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 DISTRIBUTED ON BEHALF OF THE BOARD OF DIRECTORS, PLEASE
SIGN AND RETURN ALL CARDS RECEIVED.
