<PAGE>
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT / /
FILED BY A PARTY OTHER THAN THE REGISTRANT /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.-14a-11(c) or 240.14a-12
- ----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter) FCNB Corp
- ----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement) FCNB Corp
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
$125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
/ / 14a-6(j)(2).
$500 per each party to the controversy pursuant to Exchange Act Rule
/ / 14a-6(i)(3).
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
/ / 0-11.
(1) Title of each class of securities to which transaction applies:
- ----------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- ----------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: /
- ----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ----------------------------------------------------------------------------
/ Set forth the amount on which the filing fee is calculated and state
how it was determined.
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>
POST OFFICE 240
FREDERICK, MARYLAND 21705-0240
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 21, 1998
Notice is hereby given that the Annual Meeting of Shareholders of FCNB Corp
(the "Company") will be held at 7200 FCNB COURT, FREDERICK, MARYLAND 21703 on
Tuesday, April 21, 1998 at 7:00 p.m. for the following purposes:
1. To elect six directors of the Company to hold office until the expiration of
their terms or until their respective successors have been duly elected and
qualified.
2. To consider and vote upon the adoption of the Company's 1997 Director Stock
Option Plan.
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
February 6, 1998 was fixed by the Board of Directors as the record date for
determining shareholders entitled to receive notice of and to vote at the Annual
Meeting. A plurality of votes cast by the shareholders of the Company's
outstanding Common Stock represented in person or by proxy at the Annual Meeting
is necessary to elect the directors.
BY ORDER OF THE BOARD OF DIRECTORS
Helen G. Hahn
Vice President and Secretary
Frederick, Maryland
March 20, 1998
You are urged to complete, sign, date and return the enclosed proxy
promptly. If you attend the Annual Meeting and decide that you wish to vote in
person, you may revoke your proxy at any time prior to its use.
1
<PAGE>
PROXY STATEMENT
This Proxy Statement is furnished to shareholders of FCNB Corp, a Maryland
corporation (the "Company"), in connection with the solicitation of proxies by
the Board of Directors of the Company to be used at the Annual Meeting of
Shareholders to be held on Tuesday, April 21, 1998 at 7:00 p.m., local time, at
the Company's headquarters, located at 7200 FCNB Court, Frederick, Maryland
21703, and at any adjournment or postponement thereof. The Company is the
holding company for its wholly-owned bank subsidiary FCNB Bank, Frederick,
Maryland (the "Bank"). This proxy material is being mailed to shareholders on or
about March 20, 1998. The Company's mailing address is P.O. Box 240, Frederick,
Maryland 21705-0240.
PROXIES AND VOTING
Shareholders of record at the close of business on February 6, 1998 are
entitled to notice of and to vote at the Annual Meeting. At that date there were
outstanding and entitled to vote 5,915,468 shares of Common Stock which were
held by approximately 3,491 holders of record. Each share is entitled to one
vote on all matters.
The cost of solicitation of proxies will be borne by the Company. The
solicitation of proxies generally will be by mail and by directors, officers,
and employees of the Company or its subsidiary, without additional compensation
to them. In some instances solicitation may be made by telephone, the costs of
which will be borne by the Company. The Company may also reimburse brokers,
custodians, nominees, and other fiduciaries for reasonable out-of-pocket and
clerical expenses for forwarding proxy materials to their principals.
All shares entitled to vote and represented by a properly executed and
unrevoked proxy received in time for the Annual Meeting will be voted at the
Annual Meeting in accordance with the instructions given thereon. In the absence
of instructions to the contrary, such shares will be voted FOR (i) the election
of the designated nominees for directors and (ii) the adoption of the Company's
1997 Director Stock Option Plan. Persons appointed as proxies will also be
entitled to vote in their discretion on other matters that may properly come
before the Annual Meeting and any adjournment or postponement thereof.
Any proxy given by a shareholder may be revoked by the holder at any time
before it is voted at the Annual Meeting by (i) attending the Annual Meeting and
voting in person, (ii) filing a written notice of revocation with the Secretary
of the Company prior to the Annual Meeting, or (iii) duly executing a proxy
bearing a later date and delivering same to the Secretary of the Company prior
to the exercise of the proxy. Written notices of revocation of a proxy should be
addressed to Helen G. Hahn, Vice President and Secretary, FCNB Corp, P.O. Box
240, Frederick, Maryland 21705-0240.
The presence, in person or by proxy, of a majority of the outstanding shares
of the Company's Common Stock will constitute a quorum for the transaction of
business at the Annual Meeting. In the event that less than a majority of the
outstanding shares are present at the Annual Meeting, either in person or by
proxy, a majority of the shares so represented may vote to adjourn the Annual
Meeting from time to time without further notice. Directors receiving a
plurality of the votes cast will be elected in the order of the number of votes
received. The inspectors of election appointed for the meeting will determine
the existence of a quorum and will tabulate the votes cast at the Annual
Meeting. Abstentions will be treated as shares that are present and entitled to
vote for purposes of determining the presence of a quorum but as unvoted for
purposes of determining the approval of any matter submitted for a vote of
shareholders. If a broker indicates that he or she does not have discretionary
authority to vote on a particular matter as to certain shares, those shares will
be counted as present for general quorum purposes but will not be considered as
present and entitled to vote with respect to that matter.
2
<PAGE>
PROPOSAL I: ELECTION OF DIRECTORS
The Board of Directors has set the number of directors that constitute the
Board of Directors at fourteen. The Articles of Incorporation of the Company
provide that the directors shall be classified with respect to the time for
which they severally hold office into three classes. Each year all of the
directors in one class are elected to serve for a term of three years. The
shareholders will vote at this Annual Meeting for the election of five directors
for a three year term expiring at the Annual Meeting of Shareholders in 2001 and
the election of one director, appointed by the Board of Directors in October
1997 to fill a vacancy, for a one year term expiring at the Annual Meeting of
Shareholders in 1999, or at such time as their respective successors have been
elected and qualified.
Unless otherwise directed in the enclosed form of proxy, the persons named
in such proxy intend to vote FOR the election of each of the following nominees
for the terms indicated, or until their respective successors have been duly
elected and have qualified. In the event that any nominee is unable to serve,
the persons named in the proxy will vote for such substitute nominee or nominees
as the Board of Directors, in their discretion, shall determine. At this time,
the Board knows of no reason why any nominee might be unavailable to serve.
Messrs. Circo, Grimes, Guyton, Linton and Ramsburg are currently serving as
Directors of the 1998 class of directors and have been nominated by the Board of
Directors for election as directors to serve for a three year term to expire in
2001 (Class 2001). Ms. Collier was appointed by the Board of Directors in
October 1997 to fill a vacancy until the Annual Meeting of Shareholders in 1998.
Ms. Collier will serve a one year term to expire in 1999 (Class 1999).
The following table sets forth as to each nominee and director continuing in
office, his or her name, age, the year he or she first became a director of the
Company and the number of shares of Common Stock beneficially owned at February
6, 1998.
<TABLE>
<CAPTION>
YEAR SHARES OF
FIRST YEAR COMMON STOCK PERCENT
ELECTED TERM BENEFICIALLY OF
NAME AGE(1) DIRECTOR EXPIRES OWNED(2) CLASS
- ------------------------------------------------------------ ----------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
BOARD NOMINEES
Shirley D. Collier.......................................... 44 1997 1999 938(3) .02
Miles M. Circo.............................................. 51 1986 2001 6,257(4) .11
James S. Grimes............................................. 58 1989 2001 7,773(5) .13
Gail T. Guyton.............................................. 57 1986 2001 61,005(6) 1.03
A. Patrick Linton........................................... 48 1991 2001 97,818(7) 1.65
Jacob R. Ramsburg, Jr....................................... 61 1986 2001 93,747(8) 1.58
DIRECTORS CONTINUING IN OFFICE
Bernard L. Grove, Jr........................................ 64 1988 1999 9,034(9) .15
Ramona C. Remsberg.......................................... 69 1987 1999 54,550(10) .92
Kenneth W. Rice............................................. 54 1988 1999 14,436(11) .24
Rand D. Weinberg............................................ 41 1996 1999 8,540(12) .14
George B. Callan Jr......................................... 66 1986 2000 12,924(13) 0.22
Clyde C. Crum............................................... 62 1986 2000 50,495(14) 0.85
Frank L. Hewitt, III........................................ 56 1996 2000 138,043(15) 2.33
DeWalt J. Willard, Jr....................................... 66 1986 2000 50,450(16) 0.85
</TABLE>
- ------------------------
(1) At February 6, 1998.
(2) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed to
be the beneficial owner, for purposes of this table, of any shares of
Common Stock with respect to which he or she has sole or shared voting
and/or investment. The table includes shares owned by spouses, other
immediate family members in trust, shares held in retirement accounts or
funds for the benefit of the named
3
<PAGE>
individuals, and other forms of ownership, over which shares the persons
named in the table possess voting and investment power. Except as otherwise
noted, each person has sole voting and investment power with respect to all
shares beneficially owned.
(3) Included in the total shares owned by Ms. Collier are options, currently
exercisable, to purchase 438 shares of the Company's Common Stock.
(4) Included in the total shares owned by Mr. Circo are options, currently
exercisable, to purchase 1,750 shares of the Company's Common Stock.
(5) Included in the total shares owned by Mr. Grimes are options, currently
exercisable, to purchase 1,750 shares of the Company's Common Stock.
(6) The shares attributed to Mr. Guyton include 2,772 shares owned by Mr.
Guyton's wife, as to which Mr. Guyton disclaims beneficial ownership. Also,
included in the total shares owned are options, currently exercisable, to
purchase 1,750 shares of the Company's Common Stock.
(7) The shares attributed to Mr. Linton include 33,337 shares as to which he
shares voting and investment power with his wife, 2,035 shares owned by Mr.
Linton's children, as to which he has voting and investment power and 440
shares owned by Mr. Linton's wife. Also, included in the total shares owned
are options, currently exercisable, to purchase 39,198 shares of the
Company's Common Stock and 5,786 shares of restricted stock to be received
when the underlying stock options are exercised. Mr. Linton also has been
granted the right to receive Reload Options to purchase an additional
10,271 shares of the Company's Common Stock, if the 1997 stock options are
exercised within three years.
(8) The shares attributed to Mr. Ramsburg include 5,396 shares owned by Mr.
Ramsburg's wife, and 5,316 shares owned jointly by Mr. Ramsburg's wife and
son, as to which Mr. Ramsburg disclaims beneficial ownership, and 17,292
shares owned by two corporations controlled by Mr. Ramsburg, as to which he
holds voting and investment power. Also, included in the total shares owned
are options, currently exercisable, to purchase 1,750 shares of the
Company's Common Stock.
(9) The shares attributed to Mr. Grove include 1,619 shares owned by Mr.
Grove's daughter, as to which Mr. Grove disclaims beneficial ownership.
Also, included in the total shares owned are options, currently
exercisable, to purchase 1,750 shares of the Company's Common Stock.
(10) The shares attributed to Ms. Remsberg include 2,310 shares held in a trust
as to which she has shared voting and investment power. Also, included in
the total shares owned are options, currently exercisable, to purchase
1,750 shares of the Company's Common Stock.
(11) The shares attributed to Mr. Rice include 1,615 shares as to which Mr. Rice
shares voting and investment power with his wife and 22 shares owned in
custody for his goddaughter over which he has voting and investment power.
Also, included in the total shares owned are options, currently
exercisable, to purchase 1,750 shares of the Company's Common Stock.
(12) The shares attributed to Mr. Weinberg include 2,225 shares as to which Mr.
Weinberg shares voting and investment power with his wife, 3,850 shares
invested in a pension trust as to which he has voting and investment power
and 440 shares held in custody by Mr. Weinberg and his wife for their
children which he shares voting and investment powers. Also, included in
the total shares owned are options, currently exercisable, to purchase
1,750 shares of the Company's Common Stock.
(13) Included in the total shares owned by Mr. Callan are options, currently
exercisable, to purchase 1,750 shares of the Company's Common Stock.
(14) The shares attributed to Mr. Crum include 8,836 shares owned by Mr. Crum's
wife, as to which Mr. Crum disclaims beneficial ownership. Also, included
in the total shares owned are options, currently exercisable, to purchase
1,750 shares of the Company's Common Stock.
4
<PAGE>
(15) The shares attributed to Mr. Hewitt include 24,368 shares as to which he
shares voting and investment power with his wife, 12,498 shares owned by
Mr. Hewitt's children, as to which he has voting and investment power,
1,684 shares held in trust as to which he has shared voting and investment
power and 2,966 shares owned by Mr. Hewitt's wife. Also, included in the
total shares owned are options, currently exercisable, to purchase 1,750
shares of the Company's Common Stock.
(16) The shares attributed to Mr. Willard include 8,647 shares owned by a
corporation controlled by Mr. Willard, as to which he holds voting and
investment powers, and 340 shares held in trust over which he has voting
and investment power. Also, included in the total shares owned are options,
currently exercisable, to purchase 1,750 shares of the Company's Common
Stock.
5
<PAGE>
Set forth below is certain information with respect to the nominees for
director and the continuing directors of the Company. Unless otherwise
indicated, the principal occupation listed for each person below has been his or
her occupation for the past five years.
SHIRLEY D. COLLIER is president of Paragon Computer Services, Inc., a
computer consulting firm.
MILES M. CIRCO is general manager of Patapsco Designs, Inc., an electronic
design and manufacturing firm.
JAMES S. GRIMES has been Mayor of the City of Frederick, Maryland since 1994
and is president of James S. Grimes, Inc., a full service truck transportation
service operation.
GAIL T. GUYTON, vice chairman of the board of both the Bank and the Company
since January 1995, is chairman of the board of Morgan-Keller, Inc., a
commercial/industrial construction firm.
A. PATRICK LINTON is president and chief executive officer of the Bank and
the Company.
JACOB R. RAMSBURG, JR. is president of Frederick Underwriters, Inc., a
general insurance agency.
BERNARD L. GROVE, JR. is an advisor to Genstar Stone Products, Inc.
RAMONA C. REMSBERG is the former vice chairman of the board of both the Bank
and of the Company, having retired from the Bank and the Company in September
1993.
KENNETH W. RICE is president of Donald B. Rice Tire Co., Inc., a tire
distribution firm.
RAND D. WEINBERG is a partner with Weinberg & Weinberg, a law firm in
Frederick, Maryland.
GEORGE B. CALLAN, JR. is president of Associates in Management, a company
that specializes in historic preservation, museum management and automotive
parts sales.
CLYDE C. CRUM, chairman of the board of the Bank and the Company since
January 1995, is president of Clyde C. Crum and Son, Inc., a dairy farm
operation.
FRANK L. HEWITT, III is president of the Frank L. Hewitt Company. Mr. Hewitt
was president of Laurel Bancorp, Inc. ("Laurel") and its subsidiary Laurel
Federal Savings Bank until the merger of Laurel with and into the Company in
January 1996.
DEWALT J. WILLARD, JR. is president of Ideal Buick-GMC, an automobile
dealership.
BOARD AND COMMITTEE MEETINGS
The Board of Directors of the Company has standing audit and Human Resources
Committees, but does not have a standing nominating committee.
The Audit Committee, comprised of Directors Circo, Collier, Grimes, Ramsburg
and Willard, assists the Board of Directors of the Bank in exercising its
fiduciary responsibilities for oversight of audit and related matters, including
corporate accounting, internal controls and regulatory compliance. Its duties
include: monitoring the Bank's internal controls and procedures; meeting with
the internal auditors and reviewing their reports; recommending the selection of
independent auditors; reviewing the scope of audits conducted by the independent
auditors, as well as the results of their audits; and reviewing policies
relating to compliance with applicable banking and other laws.
The Human Resources Committee, comprised of Directors Callan, Grove, Rice
and Weinberg, reviews and recommends to the Board of Directors the overall
compensation policy for the Company. The Board of Directors of the Bank follows
this policy specifically related to the salaries and other benefits for senior
management thereof.
The Board of Directors of the Company held seventeen meetings, the Audit
Committee held eight meetings and the Human Resources Committees held nine
meetings during 1997. Each of the directors of
6
<PAGE>
the Company attended at least 75% of the meetings of the Board of Directors and
all committees on which they served during 1997.
COMPENSATION OF DIRECTORS
During 1997, the directors of the Company received an annual retainer of
$2,000 for attending Board of Directors meetings of the Company. Members of the
Board of Directors of the Company who were members of the Board of Directors of
the Bank received an additional fee of $200 for each meeting attended. Members
of the Board of Directors of the Company who also served as members of the Board
of Directors of the Bank received an annual retainer of $5,000 and a fee of $200
for each bi-weekly Board of Directors and committee meeting of the Bank
attended.
Clyde C. Crum received a $35,000 annual fee for his services as Chairman of
the Board of both the Company and the Bank, along with the bi-weekly Board of
Directors meeting fees during 1997. However, he did not receive any committee
meeting fees. Mr. Crum also received a cash bonus of $25,000 in January 1998.
Effective in January 1998, the annual fee for the Chairman of the Board of the
Company and the Bank was increased to $50,000.
Directors who agree to defer receipt of at least four years of their annual
retainers may participate in an unfunded deferred compensation plan maintained
by the Bank. Under this plan, deferred amounts earn interest at the rate of 10%
per annum until the director attains age sixty-five, dies or becomes disabled.
Upon any such event, the deferred amount plus credited interest thereon will be
paid to the participant or his beneficiary over a period of up to ten years,
with interest continuing to accrue on the unpaid balance at the rate of 10% per
annum.
The Company and the Bank paid a total of $127,000 in director and committee
fees for the fiscal year ended December 31, 1997.
PROPOSAL II: APPROVAL OF THE COMPANY'S DIRECTORS STOCK OPTION PLAN
The Board of Directors has proposed for the approval of the shareholders,
the 1997 Nonqualified Stock Option Plan for Directors of the Company (the
"Directors Plan"), pursuant to which nonqualified stock options ("Options") to
purchase an aggregate of up to 250,000 shares of Common Stock (subject to
adjustment for any stock split, stock dividend, reverse stock split, other
subdivision or combination of the Common Stock, or any reorganization,
recapitalization, merger or consolidation pursuant to which the Common Stock is
exchanged for or converted into a different number or class of securities) may
be issued to directors of the Company who are not employees of the Company, the
Bank or any affiliate thereof. The Board of Directors approved the Directors
Plan on December 23, 1997, and has proposed the approval of the Directors Plan
as a means of compensating the non-employee directors for their services to the
Company and its shareholders. The Company desires to reward the non-employee
directors for their service, provide them with additional incentive to work for
the growth and profitability of the Company, and to further align the interests
of the Board of Directors with those of the shareholders. The full text of the
Directors Plan is attached hereto as Exhibit A.
While not required to submit the Directors Plan to the vote of shareholders
under the Company's Charter, Maryland law or federal regulatory provisions, the
Directors Plan is being submitted to shareholders in accordance with the rules
governing the listing of the Common Stock on the NASDAQ National Market.
Shareholder approval of the Plan will also enable transactions pursuant to the
plan to be exempted from the short swing profit recovery provisions of Section
16 of the Securities Exchange Act of 1934, as amended.
The Directors Plan is subject to administration by a committee consisting of
not less than two non-employee directors, or by the full Board of Directors. The
Committee has the authority to determine the recipients of discretionary awards
under the Directors Plan, to interpret the plan, determine the size and
7
<PAGE>
characteristics of discretionary awards, and make such rules as are required for
the administration of the Directors Plan. Under the Directors Plan, each of the
thirteen non-employee directors of the Company received a grant, on December 23,
1997, of nonqualified options to purchase 1,750 shares of Common Stock at an
exercise price of $28.50 per share, except Ms. Collier, who joined the Board of
Directors in October 1997, who received a nonqualified option to purchase 438
shares, for an aggregate grant of Options to purchase 21,438 shares of Common
Stock. Each non-employee members of the Board of Directors of the Company will
receive automatic grants of Options to purchase 1,750 additional shares on the
day following each annual meeting of shareholders, commencing with the 1998
annual meeting. The Committee also has the authority to make additional grants
of Options in its discretion. Assuming approval by shareholders, no Options may
be granted pursuant to the Directors Plan after December 23, 2007.
Each of the Option grants made prior to the effectiveness of the Directors
Plan, which will occur upon receipt of shareholder approval, is subject to the
receipt of the affirmative vote of a majority of the votes cast on the proposal
at the Meeting. If shareholders do not approve the Directors Plan at the
Meeting, all grants will be void and of no effect. All Options granted under the
Directors Plan will be immediately exercisable and, subject to earlier
termination as provided in the plan, will have a term of ten years. All Options
have an exercise price equal to the fair market value of the shares of Common
Stock subject to the Option as of the date of grant. Except as otherwise
provided with respect to any grant, an Option may be exercised by a recipient
provided such recipient has maintained continuous service on the Board of
Directors since the date of grant of such Option (subject only to certain
permitted breaks in service) or within two years of termination of such
continuous service. Shares received upon the exercise of an Option may not be
sold within six months of the date of grant of the Option with respect to which
they were received. If an Option is exercised within three years of its date of
grant, the recipient of that Option will automatically receive a reload option
to purchase, at an exercise price per share equal to the fair market value of
the Common Stock as of that date, a number of shares of Common Stock equal to
the number of shares subject to the exercised Option ("Reload Options"). Options
granted pursuant to the Directors Plan are not transferable except by will or
pursuant to the laws of descent and distribution, or to the grantee's spouse,
lineal ascendants and lineal descendants.
The Directors Plan may be amended, suspended or terminated by the Board of
Directors, except that no amendment shall be made which alters or impairs any
right or obligation under any outstanding Option.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE DIRECTORS PLAN.
A director receiving Options under the Directors Plan will not recognize
taxable income at the time of grant if the Option does not have a readily
ascertainable fair market value at the time of grant. A director will recognize
ordinary income upon the exercise of an Option equal to the excess of the fair
market value of the shares received upon exercise over the exercise price of the
Option. Subject to certain limits, the Company will be entitled to a deduction
equal to the amount of ordinary income recognized by the director at the time of
such recognition.
Upon exercise of the Option, when the Company receives a tax deduction equal
to the difference between the fair value of the underlying stock over the
exercise price, there is no additional effect on the income statement. The
Company's tax expense as shown on the income statement would not be reduced by
the net effect of the deduction, which would be reflected as an adjustment to
capital surplus.
VOTE REQUIRED. The affirmative vote of a majority of the total number of
votes cast on the proposal at the Meeting is required to approve the Directors
Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS. THE BOARD OF DIRECTORS RECOMMENDS
THAT SHAREHOLDERS VOTE FOR ADOPTION OF THE DIRECTOR PLAN.
8
<PAGE>
VOTING SECURITIES
All voting rights are vested exclusively in the holders of the Common Stock
of the Company. Each shareholder is entitled to one vote for each share of
Common Stock owned on all matters brought to a vote of the shareholders. The
Company had 5,915,468 shares of Common Stock outstanding on the record date for
the Annual Meeting. The Company has no other class of equity securities
outstanding.
Persons and groups beneficially owning in excess of 5% of the Common Stock
are required to file certain reports disclosing such ownership pursuant to the
Securities Exchange Act of 1934, as amended (hereinafter called the "Exchange
Act"). The following table sets forth, as of February 6, 1998, certain
information as to the shares of Common Stock beneficially owned by certain
officers of the Company who are not also directors of the Company, and all
officers and directors of the Company as a group. Management knows of no persons
who beneficially owned more than 5% of the outstanding shares of Common Stock at
February 6, 1998.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENTAGE
NAME OWNERSHIP(1)(2) OF CLASS
- --------------------------------------------------------------------------- ------------------------- -----------
<S> <C> <C>
Martin S. Lapera........................................................... 35,285(3) 0.60%
Mark A. Severson........................................................... 17,674(4) 0.30
Charles E. Weller.......................................................... 10,319(5) 0.17
All Officers and Directors as a Group (19 persons)......................... 731,338(6) 12.36
</TABLE>
- ------------------------
(1) Unless otherwise indicated, all shares are owned directly by the named
individual or by the individual indirectly through a trust, corporation or
association, or by the individual or his/her spouse as custodian or trustee
for the shares of minor children. Except as otherwise indicated, the named
individual exercises sole voting and investment power over such shares.
(2) Restricted stock to be received by officers of the Company or Bank is based
on the formula of one (1) restricted share for every five (5) shares of
Common Stock purchased pursuant to the exercise of stock options. The
restriction period is for three (3) years from the date of receipt, and if
the shares purchased pursuant to the exercise of stock options are sold
within this time period, a pro rata percentage of the restricted shares are
forfeited and must be returned to the Company.
(3) Mr. Lapera is executive vice president of the Company and is executive vice
president, chief operating officer and chief lending officer of the Bank.
The shares attributed to Mr. Lapera include 16,782 shares as to which Mr.
Lapera shares voting and investment power with his wife. Also, included in
the total shares owned are options, currently exercisable, to purchase
15,768 shares of the Company's Common Stock and 2,247 shares of restricted
stock to be received when the underlying stock options are exercised. Mr.
Lapera also has been granted the right to receive Reload Options to purchase
an additional 4,541 shares of the Company's Common Stock, if the stock
options granted in 1997 are exercised within three years.
(4) Mr. Severson is senior vice president and treasurer of the Company and is
senior vice president and chief financial officer of the Bank. The shares
attributed to Mr. Severson include 4,701 shares held in trust as to which
Mr. Severson has voting and investment powers. Also, included in the total
shares owned are options, currently exercisable, to purchase 9,631 shares of
the Company's Common Stock and 1,378 shares of restricted stock to be
received when the underlying stock options are exercised. Mr. Severson also
has been granted the right to receive Reload Options to purchase an
additional 2,751 shares of the Company's Common Stock, if the stock options
granted in 1997 are exercised within three years.
(5) Mr. Weller is senior vice president of the Company and senior vice president
of the Bank, having served as President of Elkridge Bank. The shares
attributed to Mr. Weller include 176 shares owned
9
<PAGE>
by Mr. Weller's wife, as to which Mr. Weller disclaims beneficial ownership
and 319 shares held in joint ownership with Mr. Weller's daughter. Also,
included in the total shares owned are options, currently exercisable, to
purchase 8,097 shares of the Company's Common Stock and 1,067 shares of
restricted stock to be received when the underlying stock options are
exercised. Mr. Weller also has been granted the right to receive Reload
Options to purchase additional 1,309 shares of the Company's Common Stock,
if the 1997 stock options are exercised within three years.
(6) Includes an aggregate of 82,856 shares, which may currently be acquired by
certain of such executive officers upon the exercise of stock options and
entitling such officers to receive an aggregate of 12,510 shares of
restricted stock to be received when the underlying stock options are
exercised. This group also has been granted the right to receive Reload
Options to purchase additional 42,189 shares of the Company's Common Stock,
if the 1997 stock options are exercised within three years.
10
<PAGE>
EXECUTIVE OFFICERS' COMPENSATION AND CERTAIN TRANSACTIONS
COMPENSATION--OVERVIEW
Set forth below are summarized tables of all compensation awarded to, earned
by, or paid to certain executive officers. It should be noted that no cash
compensation was paid to any executive officer of the Company in his or her
capacity as such. Each of the executive officers of the Company received
compensation from the Bank for services rendered in their capacities as
executive officers of the Bank.
The following table sets forth a comprehensive overview of the compensation
for the Company's Chief Executive Officer and the most highly compensated
executive officers for the year ended December 31, 1997. Comparative data is
also provided for the previous two fiscal years, in selected categories. Except
as disclosed below, no other executive officer of the Company or the Bank
received salary and bonus in excess of $100,000 during the year ended December
31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION ----------------------------
RESTRICTED SECURITIES
----------------------- STOCK AWARDS UNDER- LYING
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY(1) BONUS (2) (3)(4) OPTIONS(4)
- ------------------------------------------------------- ----------- ---------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
A. Patrick Linton,.....................................
Director, President and Chief 1997 $ 220,787 $ 78,750 -- 10,271
Executive Officer of the 1996 198,222 46,930 1,529 7,646
Company and the Bank 1995 186,352 66,516 1,385 6,927
Martin S. Lapera,......................................
Executive Vice President of the Company
and Executive Vice President, 1997 $ 140,628 $ 39,000 -- 4,541
Chief Operating Officer and 1996 119,797 23,733 601 3,005
Chief Lending Officer of the Bank 1995 112,091 30,513 547 2,734
Charles E. Weller,..................................... 1997 $ 114,296 $ 13,971 262 1,309
Senior Vice President of the Company and Senior Vice 1996 112,579 14,925 398 1,991
President of the Bank (6) 1995 100,836 12,909 407 2,037
Mark A. Severson,......................................
Senior Vice President and Treasurer of the Company 1997 $ 113,416 $ 23,625 -- 2,751
and Senior Vice President and Chief Financial 1996 101,194 15,169 359 1,792
Officer of the Bank 1995 94,677 19,620 328 1,640
<CAPTION>
ALL OTHER
COMPEN-
NAME AND PRINCIPAL POSITION SATION(5)
- ------------------------------------------------------- ---------
<S> <C>
A. Patrick Linton,.....................................
Director, President and Chief $ 89,037
Executive Officer of the 10,442
Company and the Bank 7,747
Martin S. Lapera,......................................
Executive Vice President of the Company
and Executive Vice President, --
Chief Operating Officer and --
Chief Lending Officer of the Bank --
Charles E. Weller,..................................... $ 55,204
Senior Vice President of the Company and Senior Vice 1,427
President of the Bank (6) --
Mark A. Severson,......................................
Senior Vice President and Treasurer of the Company $ 20,912
and Senior Vice President and Chief Financial --
Officer of the Bank --
</TABLE>
- ------------------------
(1) Includes contributions made by the Bank under its 401(k) Profit Sharing
Plan. Contributions made by the Bank in 1997, 1996, and 1995, respectively,
amounted to $10,787, $8,222 and $8,977 for Mr. Linton, $10,628, $7,797 and
$7,091 for Mr. Lapera, and $8,416, $5,794, and $4,677 for Mr. Severson. Mr.
Weller's contributions for 1997 and 1996 were $7,236 and $6,579,
respectively.
(2) Annual bonuses accrued as of December 31, 1997, 1996 and 1995 were paid in
January 1998, 1997 and 1996, respectively.
(3) The awards of restricted stock received are based on the formula of a grant
of one (1) restricted share for every five (5) shares of Common Stock
purchased pursuant to the exercise of stock options. The restriction period
is for three (3) years from the date of receipt, and if the shares purchased
pursuant to the exercise of stock options are sold within this time period,
a pro rata percentage of the restricted shares are forfeited and must be
returned to the Company.
11
<PAGE>
(4) The amounts for 1996 and 1995 have been restated to show the effect of a 10%
stock dividend declared and paid in October 1997.
(5) Includes payments for vacation pay taken in lieu of vacation for Mr. Linton
in 1997, 1996 and 1995 in the amounts of $2,423, $2,192 and $2,047,
respectively and $1,427 for Mr. Weller in 1996. Included in the 1997, 1996
and 1995 amounts for Mr. Linton are $850, $8,250 and $5,700, respectively,
of Elkridge Bank directors fees. Also included in 1997 is the value realized
from the exercise of stock options in the amounts of $85,764 for Mr. Linton,
$55,204 for Mr. Weller and $20,912 for Mr. Severson.
(6) Mr. Weller became an executive officer of the Company on March 24, 1995, as
a result of the merger of ENB Financial Corporation with and into the
Company. Until the merger of Elkridge Bank into the Bank on March 7, 1997,
Mr. Weller served as President at Elkridge Bank.
STOCK OPTION PLAN. The following table sets forth as to the executive
officers whose compensation is reported in the SUMMARY COMPENSATION TABLE
certain information relating to options to purchase Common Stock of the Company
granted during fiscal 1997 under the 1992 Employee Stock Option Plan.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO EXERCISE APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM(3)
OPTIONS IN FISCAL PRICE ($/ EXPIRATION ----------------------
NAME GRANTED (#)(1) YEAR SHARE) DATE 5%($) 10%($)
- ---------------------------------------------- -------------- --------------- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
A. Patrick Linton............................. 10,271 33% $ 28.625 12/31/07 $ 184,900 $ 468,572
Martin S. Lapera.............................. 4,541 14% $ 28.625 12/31/07 $ 81,748 $ 207,164
Charles E. Weller............................. 1,309(2) 4% $ 28.625 12/31/07 $ 23,565 $ 59,718
Mark A. Severson.............................. 2,751 9% $ 28.625 12/31/07 $ 49,524 $ 125,503
</TABLE>
- ------------------------
(1) All options granted are immediately exercisable. Each of the above named
executives are entitled to Reload Options to purchase an equal number of
shares of the Company's Common Stock, if the original options are exercised
within three years from the date of grant.
(2) The options granted to Mr. Weller to purchase 1,309 shares entitle Mr.
Weller to receive an aggregate of 262 shares of restricted stock when the
underlying stock options are exercised. The awards of restricted stock
received are based on the formula of one (1) restricted share for every five
(5) shares of Common Stock purchased pursuant to the exercise of stock
options. The restriction period is for three (3) years from the date of
receipt, and if the shares purchased pursuant to the exercise of stock
options are sold within this time period, a pro rata percentage of the
restricted shares are forfeited and must be returned to the Company.
(3) The assumed annual rates of appreciation in the table are shown for
illustrative purposes only pursuant to applicable SEC requirements. Actual
values realized on stock options are dependent on actual future performance
of the Company's stock, among other factors. Accordingly, the amounts shown
may not necessarily be realized. Does not include the value of restricted
stock awards in conjunction with the grant of options to Mr. Weller.
12
<PAGE>
The table set forth below presents the amount and potential value of options
held by each named executive at the end of fiscal 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES VALUE FY-END(#) FY-END ($)
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (1) UNEXERCISABLE UNEXERCISABLE(1)
- ------------------------------------------------------- ----------- ----------- ------------- ---------------
<S> <C> <C> <C> <C>
A. Patrick Linton...................................... 10,052 $ 85,764 39,198/-- $ 326,037/--
Martin S. Lapera....................................... -- -- 15,768/-- $ 126,151/--
Charles E. Weller...................................... 4,400 $ 55,204 11,121/-- $ 152,096/--
Mark A. Severson....................................... 2,451 $ 20,912 9,631/-- $ 77,623/--
</TABLE>
- ------------------------
(1) Does not include the value of restricted stock awards in conjunction with
the grant of options.
PROFIT SHARING PLAN. The Company has a Section 401 (k) profit sharing plan
(the "Plan") covering employees meeting certain eligibility requirements as to
minimum age and years of service. Employees may make voluntary contributions to
the Plan through payroll deductions on a pre-tax basis. The Company makes
contributions to the Plan at its discretion, based on the Company's performance.
The Company's contributions are subject to a periodic vesting schedule (20% per
year), requiring the completion of five years of service with the Company,
before these benefits are fully vested. A participant's account under the Plan,
together with investment earnings thereon, is normally distributable, following
retirement, death, disability or other termination of employment, in a single
lump-sum payment.
The Company's annual contribution to the Plan totaled $466,000 in 1997,
including an aggregate of $37,067 of contributions for the executive officers
named in the SUMMARY COMPENSATION TABLE.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Bank maintains a Supplemental
Executive Retirement Plan in order to provide retirement benefits and long-term
compensation to a select group of executives, determined by the Board of
Directors. Each Participant may elect to make contributions from his or her
salary or bonus (if any), on a pre-tax basis. Each Participant shall be entitled
to have his or her Account receive the credit for a particular Plan Year only if
the Participant is both credited with a Year of Service during the Plan Year and
is employed on the last day of the Plan Year or terminates employment during the
Plan Year due to his or her (i) death, disability, retirement, or (ii)
acquisition or merger of the Bank. If the Participant satisfies the requirements
for a Plan Year, the Bank shall credit the Participant's Account, with an amount
equal to (i) sixty percent (60%) of the Eligible Executive's Final Average
Compensation commencing at age 65, or if later, actual retirement with 15 Years
of Service, reduced by (ii) the combined value of the following: (a) the
Participant's estimated primary insurance amount ("PIA") at age 65 from Social
Security, assuming the Participant is entitled to the maximum PIA; and (b) the
age 65 retirement income from the Executive Compensation Plan; and (c) the age
65 projected value of the Participant's accrued benefits under the Bank's
terminated defined benefit pension plan ; and (d) the age 65 projected value of
the Participant's profit-sharing contribution account under the Company's 401(k)
Retirement and Savings Plan; and (e) the age 65 projected value of the
Participant's matching contribution account under the Company's 401(k)
Retirement and Savings Plan. The benefits related to this plan will be paid out
of the general assets of the Bank.
EXECUTIVE COMPENSATION PLAN. The Bank maintains an Executive Compensation
Plan, which is intended to provide supplemental retirement benefits to executive
officers designated by the Human Resources Committee of the Bank's Board of
Directors. Under this plan, an amount determined by the
13
<PAGE>
Committee will be paid to a participant annually (in twelve monthly payments)
for up to ten years commencing upon the earliest of (a) his or her attaining
sixty-five years of age (or such later date as the participant and the Bank
agree), (b) his or her death or (c) his or her disability. The payments will be
made to a participant or his or her beneficiaries from the general funds of the
Bank. Periodically, the Human Resources Committee will approve a change to the
amount of annual benefits payable under the Executive Compensation Plan. Under
the plan, the current annual benefits at normal retirement age established by
the Human Resources Committee for Messrs. Linton and Lapera are $20,000 and
$10,000, respectively. Messrs. Severson and Weller have no benefits under this
plan.
HUMAN RESOURCES COMMITTEE REPORT
The Human Resources Committee of the Company is composed of four outside
directors, Messrs. George B. Callan, Jr., Bernard L. Grove, Jr., Kenneth W. Rice
and Rand D. Weinberg. None of the committee members has ever been an employee of
the Company or its subsidiary. The Committee makes recommendations to the full
Board of Directors regarding the adoption, extension, amendment and termination
of the Company's compensation plans. In conjunction with the Company's Chairman
and President/Chief Executive Officer ("CEO"), it reviews the performance of
senior management, recommends annual salary revisions and administers the
Company's compensation plans.
The Committee is guided by the following executive compensation philosophy
of the Company:
1. Enable the Company to attract and retain superior management by
providing a very competitive total compensation package.
2. Align the interests of shareholders and management by providing stock
options as a portion of the executive's total compensation package.
3. Base a portion of the executive's total compensation package upon the
attainment of defined performance goals that support the growth and
appreciation of the Company's value over time.
4. Balance objectives of short-term performance and long-term growth and
appreciation of the Company through a combination of an annual incentive
compensation program using annual cash bonuses, and the stock option plan
that rewards the executives through long-term growth and appreciation of
the Company.
Executive compensation consists primarily of three components: Base Salary,
Annual Bonus, and Stock Options.
BASE SALARY
The Company's policy is to set base salaries for each executive officer
position, including that of the CEO, in a range commensurate for equivalent
banking jobs in the Mid-Atlantic region. The Company utilizes outside
consultants to monitor the Company's competitive compensation status. The Board
of Directors based upon the Human Resources Committee's recommendations sets the
base salaries of executive officers.
Executive officers, other than the CEO, are reviewed annually by their
superiors. The CEO is reviewed by the Executive Committee of the Board of
Directors of the Company, which evaluation is forwarded to the Human Resources
Committee. The quality of their individual performances and the relationship of
their salary to their established salary range determine salary adjustments for
executive officers.
Adjustments to the base salary of the CEO are governed by the same factors
as other executive officers, but also specifically take into account the
Company's current financial performance as measured by earnings, asset growth,
and overall financial soundness. The Committee also considers the CEO's
leadership in setting high standards for financial performance, motivating his
management colleagues, and representing the Company and its values to internal
and external constituencies.
14
<PAGE>
ANNUAL BONUS
The Company has an Employee Performance Bonus Plan (the "Bonus Plan").
Annual bonuses are accrued as of the end of the fiscal year and are paid in
January. The Company's Bonus Plan has several components related to the
Company's performance. For 1997, these components consisted of the Company
achieving pre-determined return on average shareholder's equity, asset growth,
stock price appreciation and earnings per share growth. The CEO's, Chief
Operating Officer's and the Chief Financial Officer's annual cash bonuses are
strictly related to the Company's performance goals while the other named
executive officer's annual cash bonus was related 50% to the Company's
performance goals and 50% to the Bank's performance goals. The Human Resources
Committee approves goals for each component of the Bonus Plan at the beginning
of each year. Annual cash bonuses tied to Bank performance goals and/or the
Company's performance goals are evaluated on a point system. Points are awarded
for equaling or exceeding the predetermined base for each component. Target
goals are determined that exceed the threshold level, as well as maximum goals.
For each specific component, if the threshold level is not achieved, no bonus is
awarded for that component. The maximum potential annual bonus award for the
four named executive officers is 15.0% to 37.5% of base salary, depending on the
executive's position.
In 1997, the Company exceeded its maximum performance goals. Based on these
results, the CEO was awarded a bonus of $78,750 which constituted 37.5% of his
1997 base salary. This annual bonus amount was accrued as of December 31, 1997
and paid in January 1998.
For the other named executive officers, Bank performance goals were exceeded
in addition to substantially meeting the Company's target performance goals.
As of December 31, 1997, the total accrued annual bonus for the four named
executive officers in the Bonus Plan was $155,346, which was paid in January
1998.
STOCK OPTIONS
The Company maintains a 1992 Stock Option Plan currently covering 454,782
shares of the Company's Common Stock. This Stock Option Plan provides for grants
by the Human Resources Committee of non-qualified stock options, as well as
incentive stock options, thus tying a portion of the executive's compensation
directly to the performance of the Company's stock price. The exercise price of
the option to purchase stock under the plan may not be less than 100% of the
fair market value of the Company's stock on the date of grant. Stock options are
immediately exercisable from the date of grant and expire five and ten years
from the date of the grant. Stock options for the four named executive officers
typically are granted each year for a number of shares, the aggregate market
value of which is in a range of 35% to 140% of the executive officer's base
salary as of the date of grant. The Stock Option Plan also provides that the
Company may grant one (1) share of restricted stock for every five (5) shares of
Common Stock purchased pursuant to the exercise of options under the plan. The
Common Stock purchased pursuant to the exercise of such options must be held for
a period of three years before the restricted stock granted by the Company will
fully vest to the recipient thereof. Stock options must be exercised in the
sequence in which they were granted. This Plan also allows the Company to grant
Reload Options, which allows the recipient to receive an Option to purchase, at
an exercise price per share equal to the fair market value of the Common Stock
as of that date, a number of shares of Common Stock equal to the number of
shares subject to the exercised Option, if the original Option is exercised
within three years of its date of grant.
In 1997, the CEO received options to purchase 10,271 shares with an exercise
price of $28.625 per share. The CEO now owns 58,620 shares of the Company's
Common Stock and holds options to purchase an additional 39,198 shares, all of
which are presently exercisable. In 1997, the other named executive officers
received options to purchase an aggregate of 8,601 shares of the Company's
Common Stock with an exercise price of $28.625 per share. The Human Resources
Committee believes that significant equity interests in the Company held by the
Company's management align the interests of shareholders and management.
15
<PAGE>
Stock options are designed to align the interests of executives with those
of the shareholders. This approach is designed to provide incentives for the
creation of shareholder value over the long term since the full benefit of the
compensation package cannot be realized unless stock price appreciation occurs
over a number of years.
CONCLUSION
Through the programs described above, a moderate portion of the Company's
executive compensation is linked directly to individual and corporate
performance and stock price appreciation. In the case of the CEO, approximately
26% of his total 1997 compensation, including the accrued annual bonus as of
December 31, 1997, consisted of performance-based variable elements. The Human
Resources Committee intends to continue the policy of linking executive
compensation to corporate performance and returns to shareholders, recognizing
that ups and downs of the business cycle from time to time may result in an
imbalance for a particular period.
The Human Resources Committee of the Company has prepared this report.
George B. Callan, Jr., Bernard L. Grove, Jr., Kenneth W. Rice, Rand D.
Weinberg.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
cumulative total shareholder return on the Company's Common Stock from January
1, 1992 to December 31, 1997. The Company's yearly percentage change in
cumulative total shareholder return as shown below is compared to the NASDAQ
Market Index and the published Industry Peer Group Index consisting of 123
middle Atlantic banks published by Media General Financial Services.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FCNB PEER GROUP NASDAQ
<S> <C> <C> <C>
1992 $100.00 $100.00 $100.00
1993 136.25 124.23 119.95
1994 184.99 117.94 125.94
1995 190.11 179.10 163.35
1996 197.90 253.66 202.99
1997 310.81 375.28 248.30
</TABLE>
Notes: 1. Total return assumes reinvestment of dividends.
2. Fiscal Year Ending December 31.
3. Return based on $100 dollars investment on January 1, 1993 in FCNB
Corp Common Stock, an index for NASDAQ Stock Market (U.S. Companies),
and Bank peer group.
16
<PAGE>
TRANSACTIONS WITH DIRECTORS, EXECUTIVE OFFICERS, AND ASSOCIATES
During the past year the Bank has had, and the Bank expects to have in the
future, banking transactions in the ordinary course of business with its
directors and officers as well as with their associates. These transactions have
been made on substantially the same terms, including injc* erest rates,
collateral, and repayment terms, as those prevailing at the same time for
comparable transactions with unaffiliated parties. The extensions of credit to
these persons have not and do not currently involve more than the normal risk of
collectability or present other unfavorable features. At December 31, 1997,
loans to directors and officers and their respective associates, including loans
guaranteed by such persons, aggregated $9.2 million, which represented
approximately 11.9% of consolidated shareholders' equity.
Gail T. Guyton, a director of the Company and the Bank, is chairman of the
board and a principal shareholder of Morgan-Keller, Inc., a construction firm.
During 1997, the Company paid Morgan-Keller, Inc. a total of $160,000 in
construction payments, which related to various construction projects.
Jacob R. Ramsburg, Jr., a director of the Company and the Bank, is president
and a principal shareholder of Frederick Underwriters, Inc., a general insurance
agency which received $340,000 in premiums during 1997 in connection with the
Company's purchase of certain types of insurance coverage.
Rand D. Weinberg, a director of the Company and the Bank, is a partner with
Weinberg & Weinberg, a law firm in Frederick which received $15,000 in legal
fees during 1997 for legal representation of various legal matters.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission, and
to provide the Company with copies of all Forms 3, 4, and 5 they file.
Based solely upon the Company's review of the copies of the forms which it
has received in 1997 and written representations from the Company's directors
and executive officers, the Company is not aware of any failure to comply with
the requirements of Section 16(a) in 1997 or any prior year, except that Bernard
L. Grove, Jr. and Rand D. Weinberg each failed to file one report required by
Section 16(a) on a timely basis during 1997. Each late report related to one
transaction each.
17
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has selected Keller Bruner and
Company, L.L.C., independent public accountants, to audit the Company's
financial statements for the year ending December 31, 1998. The Company has been
advised by Keller Bruner and Company, L.L.C. that neither that firm nor any of
its associates has any relationship with the Company or the Bank, other than the
usual relationship that exists between independent public accountants and
clients. That firm audited the Company's financial statements for 1997.
Representatives of Keller Bruner and Company, L.L.C. are expected to be present
at the Annual Meeting and will have an opportunity to make a statement if they
so desire and to respond to appropriate questions.
OTHER MATTERS
SHAREHOLDER PROPOSALS
All shareholder proposals intended to be presented at the 1999 Annual
Meeting of Shareholders must be received by the Company at the Company's
principal office in writing not later than November 21, 1998 for inclusion in
the Company's proxy statement and form of proxy relating to that meeting. Any
such proposals shall be subject to the requirements of the proxy rules adopted
under the Securities Exchange Act of 1934. The Company must receive written
notice of any shareholder proposal or nomination to be acted upon at the next
annual meeting, for which inclusion in the Company's proxy materials is not
sought, not less than 30 days nor more than 60 days prior to the 1999 Annual
Meeting of Shareholders, which will be held on or about April 20, 1999.
OTHER BUSINESS
The Board of Directors of the Company knows of no matters to be presented
for action at the meeting other than those mentioned above; however, if any
other matters properly come before the meeting, it is intended that the persons
named in the accompanying proxy will vote on such other matters in accordance
with their best judgment.
FINANCIAL STATEMENTS
The Company's Annual Report to Shareholders, including audited financial
statements, has been mailed to all shareholders of record as of the close of
business on February 6, 1998. Any shareholder who has not received a copy of
such Annual Report may obtain a copy by writing to the Secretary of the Company.
Such Annual Report is not to be treated as part of the proxy solicitation
material or as having been incorporated herein by reference.
FORM 10-K
UPON RECEIPT OF A WRITTEN REQUEST, THE COMPANY WILL DELIVER, WITHOUT CHARGE,
TO ANY SHAREHOLDER OF RECORD ENTITLED TO VOTE AT THE ANNUAL MEETING OR TO ANY
BENEFICIAL OWNER OF COMMON STOCK, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION UNDER THE EXCHANGE ACT. SUCH WRITTEN REQUESTS SHOULD BE
DIRECTED TO MARK A. SEVERSON, SENIOR VICE PRESIDENT AND TREASURER, FCNB CORP,
7200 FCNB COURT, P.O. BOX 240, FREDERICK, MARYLAND 21705-0240.
BY ORDER OF THE BOARD OF DIRECTORS
Helen G. Hahn
Senior Vice President & Secretary
Frederick, Maryland
March 20, 1998
18
<PAGE>
EXHIBIT A
FCNB CORP
1997 STOCK OPTION PLAN FOR DIRECTORS
1. PURPOSE OF THE PLAN.
The purpose of this Plan is to advance the interests of the Company through
providing its Directors with the opportunity to acquire Shares. By encouraging
such stock ownership, the Company seeks to attract, retain and motivate the best
available Directors and to provide additional incentives to Directors of the
Company to promote the success of the business.
2. DEFINITIONS.
As used herein, the following definitions shall apply.
(a) "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Company, as such terms are defined in Section 424(e) and
(f), respectively, of the Code.
(b) "Agreement" shall mean a written agreement entered into in accordance
with Paragraph 5(c).
(c) "Bank" shall mean FCNB Bank.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) "Committee" shall mean not only the Human Resources Committee consisting
of at least two Non-Employee Directors appointed by the Board in accordance with
Paragraph 5(a) hereof, but also the Board.
(g) "Common Stock" shall mean the common stock of the Company.
(h) "Company" shall mean FCNB Corp.
(i) "Continuous Service" shall mean the absence of any interruption or
termination of service as a Director of the Company or an Affiliate. Continuous
Service shall not be considered interrupted in the case of sick leave, military
leave or any other leave of absence approved by the Company, in the case of
transfers between payroll locations of the Company or between the Company, an
Affiliate or a successor, or in the case of a Director's performance of services
in an emeritus or advisory capacity.
(j) "Director" shall mean any member of the Board who is not an Employee.
(k) "Effective Date" shall mean the date specified in Paragraph 12 hereof.
(l) "Employee" shall mean any person employed by the Company, the Bank, or
an Affiliate.
(m) "Exercise Price" shall mean the price per Optioned Share at which an
Option may be exercised.
(n) "Market Value" shall mean the fair market value of the Common Stock, as
determined under Paragraph 7(b) hereof.
1
<PAGE>
(o) "Non-Employee Director" shall have the meaning provided in Rule 16b-3.
(p) "Option" means a stock option or Reload Option granted pursuant to the
Plan. Options granted pursuant to the Plan are not intended to be "incentive
stock options" within the meaning of Section 422 of the Code.
(q) "Optioned Shares" shall mean Shares purchased pursuant to the exercise
of an Option.
(r) "Participant" shall mean any Director who at the time receives an Option
grant pursuant to Paragraph 6.
(s) "Reload Option" shall mean an Option granted pursuant to Paragraph 6(d).
(t) "Plan" shall mean this FCNB Corp 1997 Stock Option Plan.
(u) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended.
(v) "Share" shall mean one share of Common Stock.
3. TERM OF THE PLAN AND OPTIONS.
(a) Term of the Plan. The Plan shall continue in effect for a term of ten
years from the Effective Date, unless sooner terminated pursuant to Paragraph 14
hereof. No Option shall be granted under the Plan after ten years from the
Effective Date.
(b) Term of Options. The term of each Option granted under the Plan shall be
established by the Committee, but shall not exceed 10 years.
4. SHARES SUBJECT TO THE PLAN.
Subject to the adjustments required under Paragraph 9, the aggregate number
of Shares deliverable pursuant to Options shall not exceed 250,000 Shares. Such
Shares may either be authorized but unissued Shares, Shares held in treasury, or
Shares held in a grantor trust created by the Company. If any Options should
expire, become unexercisable, or be forfeited for any reason without having been
exercised, the Optioned Shares shall, unless the Plan shall have been
terminated, be available for the grant of additional Options under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) Composition of the Committee. The Plan shall be administered by the
Committee, which shall consist of not less than two (2) members of the Board who
are Non-Employee Directors. Members of the Committee shall serve at the pleasure
of the Board. In the absence at any time of a duly appointed Committee, the Plan
shall be administered by the Board.
(b) Powers of the Committee. Except as limited by the express provisions of
the Plan or by resolutions adopted by the Board, the Committee shall have sole
and complete authority and discretion (i) to select Participants and grant
Options, (ii) to determine the form and content of Options to be issued in the
form of Agreements under the Plan, (iii) to interpret the Plan, (iv) to
prescribe, amend and rescind rules and regulations relating to the Plan, and (v)
to make other determinations necessary or advisable for the administration of
the Plan. The Committee shall have and may exercise such other power and
authority as may be delegated to it by the Board from time to time. A majority
of the entire Committee shall constitute a quorum and the action of a majority
of the members present at any meeting at which a
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quorum is present, or acts approved in writing by a majority of the Committee
without a meeting, shall be deemed the action of the Committee.
(c) Agreement. Each Option shall be evidenced by a written agreement
containing such provisions as may be approved by the Committee. Each such
Agreement shall constitute a binding contract between the Company and the
Participant, and every Participant, upon acceptance of such Agreement, shall be
bound by the terms and restrictions of the Plan and of such Agreement. The terms
of each such Agreement shall be in accordance with the Plan, but each Agreement
may include such additional provisions and restrictions determined by the
Committee, in its discretion, provided that such additional provisions and
restrictions are not inconsistent with the terms of the Plan. In particular, the
Committee shall set forth in each Agreement (i) the Exercise Price of an Option,
(ii) the number of Shares subject to the Option, and its expiration date, (iii)
the manner, time, and rate (cumulative or otherwise) of exercise or vesting of
such Option, and (iv) the restrictions, if any, to be placed upon such Option,
or upon Shares which may be issued upon exercise of such Option. The Chairman of
the Committee and such other Directors and officers as shall be designated by
the Committee are hereby authorized to execute Agreements on behalf of the
Company and to cause them to be delivered to the recipients of Options.
(d) Effect of the Committee's Decisions. All decisions, determinations and
interpretations of the Committee shall be final and conclusive on all persons
affected thereby.
(e) Indemnification. In addition to such other rights of indemnification as
they may have, the members of the Committee shall be indemnified by the Company
in connection with any claim, action, suit or proceeding relating to any action
taken or failure to act under or in connection with the Plan or any Option,
granted hereunder to the full extent provided for under the Company's governing
instruments with respect to the indemnification of Directors.
6. GRANT OF OPTIONS.
(a) General Rule. Subject to Paragraph 12 hereof, the Committee shall have
the discretion to grant Options to Directors (including members of the
Committee).
(b) Automatic Grants. Subject to Paragraph 12 hereof, each Participant who
is a non-Employee Director on the Effective Date will receive an Option to
purchase 1,750 Shares. On the day after each annual meeting of the Company's
stockholders (beginning with 1998), each Participant who is then a non-Employee
Director will receive an Option to purchase 1,750 Shares.
(c) Terms of Grants. With respect to each of the above-named Participants,
the Option granted to the Participant hereunder (i) have an Exercise Price
determined in Paragraph 7 of the Plan, (ii) shall be immediately exercisable, in
accordance with Paragraph 8, (iii) shall have a term of ten years from the
Effective Date, and (iv) shall be subject to the general rule set forth in
Paragraph 8(c) with respect to the effect of a Participant's termination of
Continuous Service on the Participant's right to exercise his or her Options.
(d) Reload of Options. If a Participant exercises an Option at any time and
from time to time within three years of its grant date, the Participant will
receive a Reload Option to purchase a number of Shares equal to the number of
Shares purchased upon exercise of the Option; provided the Participant is a non-
Employee Director when the Option is exercised; and provided further that grants
of Reload Options shall be made only to the extent there are still Shares
remaining from total number of Shares authorized under Paragraph 4. On the day
on which the Shares authorized under the Plan in Paragraph 4 are fully depleted,
any Participants exercising Options and determined to be entitled to a grant of
Reload Options will have their Reload Options reduced pro rata based on the
number of Optioned Shares purchased on that day.
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The Exercise Price for the Reload Option will be the Market Value of the
underlying Shares on the grant date of the Reload Option. The exercise of a
Reload Option will not trigger another Option grant.
7. EXERCISE PRICE FOR OPTIONS.
(a) Limits on Committee Discretion. The Exercise Price as to any particular
Option shall equal 100% of the Market Value of the Optioned Shares on the date
of grant.
(b) Standards for Determining Exercise Price. If the Common Stock is listed
on a national securities exchange (including the NASDAQ National Market System)
on the date in question, then the Market Value per Share shall be the average of
the highest and lowest selling price on such exchange on such date, or if there
were no sales on such date, then the Market Value shall be the mean between the
bid and asked price on such date. If the Common Stock is traded otherwise than
on a national securities exchange on the date in question, then the Market Value
per Share shall be the mean between the bid and asked price on such date, or, if
there is no bid and asked price on such date, then on the next prior business
day on which there was a bid and asked price. If no such bid and asked price is
available, then the Market Value per Share shall be its fair market value as
determined by the Committee, in its sole and absolute discretion.
8. EXERCISE OF OPTIONS AND RELOAD OPTIONS.
(a) Generally. Subject to Paragraph 12 hereof, each Option shall become
fully (100%) exercisable immediately upon the date of its grant. An Option may
not be exercised for a fractional Share. A Reload Option becomes exercisable one
year after its grant date, provided that a Participant shall forfeit a Reload
Option upon selling any Optioned Shares that triggered its grant within one year
of the date of grant of the Reload Option.
(b) Procedure for Exercise. A Participant may exercise Options, subject to
provisions relative to its termination and limitations on its exercise, only by
(1) written notice of intent to exercise the Option with respect to a specified
number of Shares, and (2) payment to the Company (contemporaneously with
delivery of such notice) in cash, in Common Stock, or a combination of cash and
Common Stock, of the amount of the Exercise Price for the number of Shares with
respect to which the Option is then being exercised. Each such notice (and
payment where required) shall be delivered, or mailed by prepaid registered or
certified mail, addressed to the Treasurer of the Company at its executive
offices. Common Stock utilized in full or partial payment of the Exercise Price
for Options shall be valued at its Market Value at the date of exercise, and may
consist of Shares subject to the Option being exercised.
(c) Period of Exercisability. Except to the extent otherwise provided in the
terms of an Agreement, an Option may be exercised by a Participant only while he
is a Director and has maintained Continuous Service from the date of the grant
of the Option, or within two years after termination of such Continuous Service
(but not later than the date on which the Option would otherwise expire).
(d) Mandatory Six-Month Holding Period. Notwithstanding any other provision
of this Plan to the contrary, Optioned Shares may not be sold within the
six-month period following the grant of that Option, provided that such
six-month holding period shall not apply in the event of a transaction described
in Paragraph 9(b) hereof.
9. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.
(a) Recapitalizations; Stock Splits, Etc. The number and kind of shares
reserved for issuance under the Plan, and the number and kind of shares subject
to outstanding Options, and the Exercise Price thereof, shall be proportionately
adjusted for any increase, decrease, change or exchange of Shares for a
different number or kind of shares or other securities of the Company which
results from a merger, consolidation, recapitalization, reorganization,
reclassification, stock dividend, split-up, combination of
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shares, or similar event in which the number or kind of shares is changed
without the receipt or payment of consideration by the Company.
(b) Transactions in which the Company is Not the Surviving Entity. In the
event of (i) the liquidation or dissolution of the Company, (ii) a merger or
consolidation in which the Company is not the surviving entity, or (iii) the
sale or disposition of all or substantially all of the Company's assets (any of
the foregoing to be referred to herein as a "Transaction"), all outstanding
Options, together with the Exercise Price thereof, shall be equitably adjusted
for any change or exchange of Shares for a different number or kind of shares or
other securities which results from the Transaction.
(c) Conditions and Restrictions on New, Additional, or Different Shares or
Securities. If, by reason of any adjustment made pursuant to this Paragraph, a
Participant becomes entitled to new, additional, or different shares of stock or
securities, such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and restrictions which were
applicable to the Shares pursuant to the Option before the adjustment was made.
(d) Other Issuances. Except as expressly provided in this Paragraph, the
issuance by the Company or an Affiliate of shares of stock of any class, or of
securities convertible into Shares or stock of another class, for cash or
property or for labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, shall not affect, and no adjustment
shall be made with respect to, the number, class, or Exercise Price of Shares
then subject to Options or reserved for issuance under the Plan.
10. NON-TRANSFERABILITY OF OPTIONS.
Options may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution. Notwithstanding the foregoing, or any other provision of this
Plan, a Participant who holds Options may transfer such Options to his or her
spouse, lineal ascendants, lineal descendants, or to a duly established trust
for the benefit of one or more of these individuals. Options so transferred may
thereafter be transferred only to the Participant who originally received the
grant or to an individual or trust to whom the Participant could have initially
transferred the Options pursuant to this Paragraph 10. Options which are
transferred pursuant to this Paragraph 10 shall be exercisable by the transferee
according to the same terms and conditions as applied to the Participant.
11. TIME OF GRANTING OPTIONS.
The date of grant of an Option shall, for all purposes, be the date on which
the Committee makes the determination of granting such Option. Notice of the
determination shall be given to each Participant to whom an Option is so granted
within a reasonable time after the date of such grant.
12. EFFECTIVE DATE.
The Plan shall become effective upon its adoption by the Board, subject to
approval of the Plan by a favorable vote of stockholders owning at least a
majority of the total votes cast at a duly called meeting of the Company's
stockholders held in accordance with applicable laws. Any Options granted prior
to approval of the Plan by the stockholders of the Company shall be contingent
on such approval, and shall not be exercisable prior thereto.
13. MODIFICATION OF OPTIONS.
At any time, and from time to time, the Committee may direct execution of an
instrument providing for the modification of any outstanding Option, provided no
such modification shall confer on the holder of said Option any right or benefit
which could not be conferred on him by the grant of a new Option at such time,
or impair the Option without the consent of the holder of the Option.
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14. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend the terms of the Plan and, with
respect to any Shares at the time not subject to Options, suspend or terminate
the Plan. No amendment, suspension or termination of the Plan shall, without the
consent of any affected holders of an Option, alter or impair any rights or
obligations under any Option theretofore granted.
15. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Compliance with Securities Laws. Shares of Common Stock shall not be
issued with respect to any Option unless the issuance and delivery of such
Shares shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law, and the
requirements of any stock exchange upon which the Shares may then be listed.
(b) Special Circumstances. The inability of the Company to obtain approval
from any regulatory body or authority deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder shall relieve
the Company of any liability in respect of the non-issuance or sale of such
Shares. As a condition to the exercise of an Option, the Company may require the
person exercising the Option to make such representations and warranties as may
be necessary to assure the availability of an exemption from the registration
requirements of federal or state securities law.
(c) Committee Discretion. The Committee shall have the discretionary
authority to impose in Agreements such restrictions on Shares as it may deem
appropriate or desirable, including but not limited to the authority to impose a
right of first refusal or to establish repurchase rights or both of these
restrictions.
16. RESERVATION OF SHARES.
The Company, during the term of the Plan, will reserve and keep available a
number of Shares sufficient to satisfy the requirements of the Plan.
17. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall a Director's eligibility to participate or participation
in the Plan create or be deemed to create any legal or equitable right of the
Director to continue service as a Director with the Company, the Bank, or any
Affiliate of such corporations. No Director shall have a right to be granted an
Option or, having received an Option, the right to again be granted an Option.
However, a Director who has been granted an Option may, if otherwise eligible,
be granted an additional Option or Options.
18. GOVERNING LAW.
The Plan shall be governed by and construed in accordance with the laws of
the State of Maryland, except to the extent that federal law shall be deemed to
apply.
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FCNB CORP
FORM OF PROXY
FRONT
FCNB CORP
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of FCNB Corp hereby appoints Kenneth E. Fogle and
Edwin J. Reading, and each of them, the lawful attorneys and proxies of the
undersigned, with full power of substitution, to vote as designated below all
shares of Common Stock of FCNB Corp which the undersigned is entitled to vote
at the Annual Meeting of Shareholders to be held on April 21, 1998, and at
any and all adjournments or postponements thereof:
(1) ELECTION OF DIRECTORS:
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to [ ] ABSTAIN
below (except as marked vote for all nominees
to the contrary) listed below
Shirley D. Collier, Miles M. Circo, James S. Grimes, Gail T. Guyton,
A. Patrick Linton, Jacob R. Ramsburg, Jr.
(INSTRUCTION: To withhold authority for any individual nominee strike a line
through the nominee's name in the list above.)
(2) THE ADOPTION OF THE COMPANY'S 1997 DIRECTOR STOCK OPTION PLAN
[ ] FOR adoption [ ] AGAINST adoption [ ] ABSTAIN
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE ON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING.
(Continued and to be signed on other side)
<PAGE>
BACK
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
to the contrary, proxies will be voted FOR the Election of Directors and FOR
the Adoption of the Company's 1997 Directors Stock Option Plan.
Dated 1998
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(Signature)
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(Signature)
(PLEASE SIGN AS NAME(S) APPEARS AT RIGHT. IF JOINT ACCOUNT, BOTH JOINT
OWNERS MUST SIGN.)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE
REVOKED BY THE PERSON(S) GRANTING IT PRIOR TO ITS EXERCISE.
