<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:
- -------------------------------------------------------------------------------
<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 19, 1999
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 19, 1999, 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 1998 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 19, 1999
------------------
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 19, 1999 at 10:00 a.m., E.D.T., at the Greenbelt Marriott,
6411 Ivy Lane, Greenbelt, Maryland 20770, 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 2002 or until their successors are elected and qualify.
2. The approval of Stegman & Company as the Company's independent public
accountants for 1999.
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 22, 1999 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 22, 1999
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 19, 1999
------------------
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
19, 1999, at 10:00 a.m., E.D.T., at the Greenbelt Marriott, 6411 Ivy Lane,
Greenbelt, Maryland 20770, 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 2002 or until their successors have been elected and qualified, (ii)
approve Stegman & Company as the Company's independent public accountants for
1999, 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
22, 1999 are entitled to notice of, and to vote at, the Meeting. As of the close
of business on March 22, 1999, there were approximately 877 holders of record of
the Common Stock ("shareholders") and 11,301,218 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 22, 1999.
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 Stephen A. Horvath 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, 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
1
<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 nominees for election as
director, 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 Directors' recommendations. See "Election of Directors,"
"Selection of Independent Auditors," and "Other Matters."
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Shareholder proposals intended to be presented at the 2000 annual meeting
and included in the Company's proxy statement and proxy relating to that meeting
must be received by the Company by December 24, 1999.
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
2001 and 2002 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 2002 and the current directors in the 2000 and 2001
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> <C>
2002 CLASS (nominees)
1. Barbara M. DiNenna-Corboy (61) 1993 Director, April 1993 - present; Chairman of
the Audit Committee, June 1993 - present;
Director, Suburban Bank of Maryland,
September 1993 - present; Retired Chairman,
DiNenna & Associates, CPA, P.A. 1973 - 1998;
Director and Chairman of the Board, Prince
George's Hospital Foundation, Inc.,
1991 - present
2. Marlin K. Husted (69) 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 (62) 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, Knight, Manzi,
Nussbaum & LaPlaca, a law firm,
1985 - present
</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> <C>
4. Lawrence A. Shulman (56) 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
2001 CLASS
1. Samuel Y. Botts(52) 1996 Director, June 1996 - present; Director,
Suburban Bank of Maryland, July
1995 - present; Partner, Jordan, Keys,
Jessamy & Botts, a law firm, 1986 - present
2. Stephen A. Horvath (49) 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. (62) 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
4. Kenneth H. Michael (59) 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(63) 1990 Director, 1990 - present; Chairman of the
Investment Committee, May 1998 - 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 (82) 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
</TABLE>
3
<PAGE> 7
RECOMMENDATION AND VOTE REQUIRED: The individuals listed above as nominees
will be elected to the 2002 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:
Sibyl S. Malatras, 55, 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, and was appointed Senior Vice President and Chief
Operating Officer in January 1999.
Joseph E. Burnett, 53, was appointed Senior Vice President and Senior
Lending Officer of the Bank in April 1988.
Harold J. Koch, 51, was named Senior Vice President of the Bank in October
1987, and was appointed Senior Credit Officer in January 1999.
BOARD AND COMMITTEE INFORMATION
During 1998, the Board of Directors held a total of thirteen meetings,
twelve regular meetings and one organizational meeting. Two directors, Albert W.
Turner 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 1998. The Board of Directors of the Company currently has a Compensation
Committee, an Audit Committee and an Investment Committee. During 1998, the
Board of Directors of the Company did not have a standing Nominating Committee.
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 one meeting in 1998.
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 1998, the Audit Committee held eight meetings.
The Investment Committee reviews investment portfolio policy and strategy
with management representatives, with the primary goal of minimizing safety
concerns while optimizing liquidity and return on investments. The Committee
analyzes and recommends alternative investment vehicles and broker/dealers to
the Board. Composed of Messrs. Palumbo (Chairman), Horvath, Husted, Kelly, and
Shulman, the Investment Committee held three meetings during 1998.
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
4
<PAGE> 8
during 1998 and with respect to transactions in 1998 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 transaction on Form 5 for 1998,
and Mr. Palumbo filed one Form 4 for a single transaction after the required due
date.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION FOR THE YEARS ENDED 1998, 1997 AND 1996
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, 1998,
1997 and 1996 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").
5
<PAGE> 9
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION (1) SECURITIES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (2) OPTIONS COMPENSATION (3)
--------------------------- ---- ------ --------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Winfield M. Kelly, Jr. 1998 $110,000 $ 0 50,000 $ 0
Chairman & Chief Executive Officer 1997 110,000 0 0 0
1996 100,000 0 0 0
Stephen A. Horvath (4) 1998 $151,196(5) $10,191 100,000(6) $5,595
President and Chief Operating 1997 145,800(5) 11,155 0 2,742
Officer, President and Chief 1996 0 0 0 0
Executive Officer of the Bank
Sibyl S. Malatras 1998 $ 96,863 $ 7,467 25,000(6) $3,480
Senior Vice President and Chief 1997 93,459 7,676 2,400 3,523
Financial Officer; Senior Vice 1996 89,489 7,533 0 3,579
President and Chief Operating
Officer of the Bank
Joseph E. Burnett 1998 $ 95,716 $ 6,872 25,000(6) $3,446
Senior Vice President of the Bank 1997 93,016 7,491 2,400 3,570
1996 89,040 7,592 0 3,561
Harold J. Koch 1998 $ 94,770 $ 6,810 25,000(6) $3,023
Senior Vice President of the Bank 1997 92,897 7,259 0 3,639
1996 89,040 7,307 0 3,027
</TABLE>
- ---------------
(1) Except as otherwise noted, salary amounts represent base salary earned and
either paid in cash or deferred in accordance with the deferred
compensation plan 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. For
Ms. Malatras and Mr. Burnett, the bonus includes 100 shares of stock
awarded in 1998 at a fair market value of $426.
(3) Included in other compensation are tax deferred contributions for Messrs.
Horvath, Burnett and Koch and Ms. Malatras to the 401(k) Plan.
(4) Mr. Horvath joined the Company on January 1, 1997.
(5) Includes compensation of $8,399 earned in 1998, and $10,800 of compensation
earned in 1997, payment of which has been deferred in accordance with Mr.
Horvath's employment and deferred compensation agreements.
(6) Incentive stock options awarded under the 1997 Stock Option Plan which vest
at 20% per year over a five-year period.
6
<PAGE> 10
OPTION/STOCK APPRECIATION RIGHTS GRANTS
The table below reflects information with respect to options granted in
1998 to the Named Executive Officers. The Company has never granted any stock
appreciation rights.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
NUMBER OF % OF TOTAL PRICE APPRECIATION FOR OPTION
SECURITIES OPTIONS TERM
UNDERLYING GRANTED TO EXERCISE OF --------------------------------
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION 5% 10%
NAME GRANTED (#) 1998 ($/SHARE) DATE ($) ($)
---- ----------- ------------ ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Winfield M. Kelly, Jr. ............ 50,000 19.38% $3.625 1/21/08 114,000 288,850
Stephen A. Horvath................. 100,000 38.77% $3.625 1/21/08 228,000 577,700
Sibyl S. Malatras.................. 25,000 9.69% $3.625 1/21/08 57,000 144,425
Joseph E. Burnett.................. 25,000 9.69% $3.625 1/21/08 57,000 144,425
Harold J. Koch..................... 25,000 9.69% $3.625 1/21/08 57,000 144,425
</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 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1998 AT DECEMBER 31, 1998 (1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Winfield M. Kelly, Jr. ........................ 350,000 -0- $720,000 -0-
Stephen A. Horvath............................. -0- 100,000 -0- -0-
Sibyl S. Malatras.............................. 2,400 25,000 -0- -0-
Joseph E. Burnett.............................. 2,400 25,000 -0- -0-
Harold J. Koch................................. -0- 25,000 -0- -0-
</TABLE>
- ---------------
(1) Value is considered to be the difference between the exercise price ($0.10
for 300,000 of Mr. Kelly's options) and the closing bid of $2.50 at
December 31, 1998. The exercise price for the other options shown exceeded
the closing bid price at December 31, 1998.
COMPENSATION OF DIRECTORS
During 1998, 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 1998 and, by agreement, will receive a severance
benefit of $9,000 for each year served until January 1, 2000, payable on that
date.
EMPLOYMENT AGREEMENTS
Pursuant to an agreement between the Company and Winfield M. Kelly, Jr.,
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) 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.
7
<PAGE> 11
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 expired on December 31, 1998
and is automatically renewed for successive one-year terms. If Mr. Horvath's
agreement is terminated without cause, he will be entitled to 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. Kelly, Horvath, Botts, Burnett and Ms. Malatras 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 1996, 1997 or 1998.
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.
8
<PAGE> 12
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.
In January 1999, 16,868 incentive stock options, which vest at 20% per year over
a five-year period, were granted to employees of the Bank.
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 had an expiration date 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. In January and
February 1999, all of the Management Stock Options were exercised.
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 1998, 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.
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
9
<PAGE> 13
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
10
<PAGE> 14
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, 1998, 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, 1993 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.
[LINE GRAPH]
<TABLE>
<CAPTION>
CRSP TOTAL RETURN INDEX
FOR THE NASDAQ STOCK CRSP TOTAL RETURN INDEX
MARKET (U.S. COMPANIES) FOR THE NASDAQ FINANCIAL
SUBURBAN BANCSHARES, INC. (*) STOCKS (*)
------------------------- ----------------------- ------------------------
<S> <C> <C> <C>
1993 $ 100.00 $ 100.00 $ 100.00
1994 $ 85.00 $ 98.00 $ 100.00
1995 $ 106.00 $ 138.00 $ 146.00
1996 $ 154.00 $ 170.00 $ 187.00
1997 $ 250.00 $ 209.00 $ 286.00
1998 $ 171.00 $ 293.00 $ 277.00
</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.
11
<PAGE> 15
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of March 22, 1999,
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 PERCENT
NAME OWNED OF CLASS (1)
---- ------------------ ------------
<S> <C> <C>
Albert W. Turner (2)(5)..................................... 908,936 8.04%
c/o Carrollton Enterprises
11785 Beltsville Drive, Suite 1600
Beltsville, Maryland 20705
Winfield M. Kelly, Jr. (2).................................. 632,580 5.57%
c/o Dimensions Health Corporation
9200 Basil Court, Suite 500
Landover, Maryland 20785
Marlin K. Husted (nominee) (2).............................. 150,000 1.33%
Stephen A. Horvath (9)...................................... 22,038 *
Samuel Y. Botts (2)......................................... 4,500 *
Barbara M. DiNenna-Corboy (nominee) (2)..................... 138,000 1.22%
Raymond G. LaPlaca (nominee) (2)(3)......................... 66,811 *
Kenneth H. Michael (2)...................................... 191,104 1.69%
Vincent D. Palumbo (2)(4)................................... 257,000 2.27%
Lawrence A. Shulman (nominee) (2)........................... 12,785 *
Sibyl S. Malatras (6)(9).................................... 12,588 *
Joseph E. Burnett (6)(7)(9)................................. 16,139 *
Harold J. Koch (8)(9)....................................... 6,856 *
All executive officers and directors as a group (13
persons).................................................. 2,419,337 21.12%
</TABLE>
- ---------------
* Indicates less than one percent (1%).
(1) Based on 11,301,218 shares outstanding as of March 22, 1999, except with
respect to individuals holding options to acquire Common Stock exercisable
within sixty days of March 22, 1999, in which event represents percentage
of shares issued and outstanding as of March 22, 1999 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 22,
1999 plus the number of such options or warrants held by all such persons
as a group.
(2) 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.
(3) Includes 40,659 shares as to which Mr. LaPlaca shares voting and investment
power with his spouse.
(4) Includes 113,058 shares as to which Dr. Palumbo shares voting and investment
power with his spouse.
(5) Includes 355,725 shares as to which Mr. Turner shares voting and investment
power with his spouse.
(6) Includes 2,400 currently exercisable options for Ms. Malatras and Mr.
Burnett.
(7) Includes 1,350 shares as to which Mr. Burnett shares voting and investment
power with his spouse.
(8) Includes 1,350 shares as to which Mr. Koch shares voting and investment
power with his spouse.
(9) Includes the vested portion of incentive stock options awarded under the
1997 Stock Option Plan in January 1998, which vest 20% per year over a
five-year period, as follows: Mr. Horvath -- 20,000; Ms. Malatras and
Messrs. Burnett and Koch -- 5,000.
12
<PAGE> 16
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, 1998, loans to officers and directors of the Company and
the Bank, including loans to their related interests, totaled approximately
$2,031,000. During 1998, $1,968,000 of new loans and principal advances on
existing loans were made and repayments totaled $899,000. 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 and a 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 $85,000 in 1998; 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 1999.
In 1998, Stegman & Company performed various professional services for the
Company, including completion of the examination of financial statements of the
Company for 1997, preliminary work on the examination for 1998, 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 1998.
The Board of Directors recommends a vote "FOR" ratifying the selection of
Stegman & Company as the Company's independent public accountants for 1999.
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, 1998, at no charge.
Requests should be directed to the Corporate Secretary at P. O. Box 298,
Greenbelt, Maryland 20768-0298.
13
<PAGE> 17
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 22, 1999
14
<PAGE> 18
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 Stephen A. Horath 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 Wednesday, May 19, 1999 at 10:00 a.m. at the
Greenbelt Marriott, 6411 Ivy Lane in Greenbelt, Maryland 20770, 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
22, 1999, 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> 19
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 2002:
Barbara M. DiNenna-Corboy, Marlin K. Husted, Raymond G. LaPlaca
and Lawrence A. Shulman
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 1999.
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.
- ----------------- ------------------------------- ------------------, 1999
Signature Signature if held jointly DATE
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.
