<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / x /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ x / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
SANDY SPRING BANCORP
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
SANDY SPRING BANCORP
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ X / $125 per Exchange Act Rules 0-11(c)(1)(iii), 14a-6(i)(1), or
14a-6(i)(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:
----------------------------------------------------------------
/ / 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>
- -------------------------------------------------------------------------------
SANDY SPRING BANCORP
17801 GEORGIA AVENUE
OLNEY, MARYLAND 20832
(301) 774-6400
March 27, 1995
Dear Shareholder:
We invite you to attend the 1995 Annual Meeting of Shareholders of Sandy
Spring Bancorp to be held at the Manor Country Club, 14901 Carrolton Road,
Rockville, Maryland on Wednesday, April 19, 1995 at 3:00 p.m..
The enclosed Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the Annual Meeting. Also enclosed is the
Annual Report showing the results of 1994.
YOUR VOTE IS IMPORTANT. On behalf of the Board of Directors, we urge you
to sign, date and return the enclosed proxy as soon as possible, even if you
currently plan to attend the Annual Meeting. This will not prevent you from
voting in person, but will assure that your vote is counted if you are unable to
attend the Annual Meeting.
If you have any questions, please call Marjorie S. Cook, Corporate
Secretary, or me at (301) 774-6400.
Thank you for the cooperation and continuing support you have given this
institution.
Sincerely,
/s/ Willard H. Derrick
Willard H. Derrick
Chairman of the Board
- -------------------------------------------------------------------------------
<PAGE>
SANDY SPRING BANCORP
17801 GEORGIA AVENUE
OLNEY, MARYLAND 20832
(301) 774-6400
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 19, 1995
NOTICE IS HEREBY GIVEN that the 1995 Annual Meeting of Shareholders (the
"Annual Meeting") of Sandy Spring Bancorp ("Bancorp") will be held on Wednesday,
April 19, 1995, at 3:00 p.m. Eastern Time at the Manor Country Club, 14901
Carrolton Road, Rockville, Maryland.
A Proxy and a Proxy Statement for the Annual Meeting and the 1994 Annual
Report to Shareholders are enclosed.
The Annual Meeting is for the purpose of considering and acting upon:
(1) The election of five directors of Bancorp; and
(2) Such other business as may properly come before the Annual Meeting or
any adjournments thereof.
NOTE: The Board of Directors is not aware of any other business to come
before the Annual Meeting.
Pursuant to the Bylaws, the Board of Directors has fixed the close of
business on March 24, 1995 as the record date for determination of the
shareholders entitled to vote at the Annual Meeting. Only holders of record of
Bancorp's Common Stock at the close of business on that date will be entitled to
notice of and to vote at the Annual Meeting or any adjournments thereof.
In the event that there are not sufficient votes to conduct the election of
directors or to approve such other business as may properly come before the
Annual Meeting, the Annual Meeting may be adjourned in order to permit further
solicitation of proxies by Bancorp.
You are requested to fill in and sign the enclosed form of proxy which is
solicited by the Board of Directors and to mail it in the enclosed envelope.
The proxy will not be used if you attend and choose to vote in person at the
Annual Meeting.
By Order of the Board of Directors
/s/ Marjorie S. Cook
Marjorie S. Cook
CORPORATE SECRETARY
Olney, Maryland
March 27, 1995
- -------------------------------------------------------------------------------
IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR
NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN, DATE
AND COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE THAT IS ENCLOSED
FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF THIS ENVELOPE IS MAILED IN THE
UNITED STATES.
- -------------------------------------------------------------------------------
<PAGE>
SANDY SPRING BANCORP
17801 GEORGIA AVENUE
OLNEY, MARYLAND 20832
(301) 774-6400
---------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 19, 1995
------------------
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Sandy Spring Bancorp ("Bancorp"") to be
used at the 1995 Annual Meeting of Shareholders (the "Annual Meeting"), to be
held on Wednesday, April 19, 1995, at 3:00 p.m. Eastern Time at the Manor
Country Club, 14901 Carrolton Road, Rockville, Maryland. The accompanying
Notice of Annual Meeting and form of proxy and this Proxy Statement are being
first mailed on or about March 27, 1995 to shareholders of record as of the
close of business on March 24, 1995.
If the enclosed form of proxy is properly executed and returned to Bancorp
in time to be voted at the Annual Meeting, the shares represented thereby will
be voted in accordance with the instructions marked thereon. EXECUTED BUT
UNMARKED PROXIES WILL BE VOTED FOR PROPOSAL I TO ELECT THE FIVE NOMINEES OF
BANCORP'S BOARD OF DIRECTORS AS DIRECTORS. Proxies marked as abstentions and
shares held in street name which have been designated by brokers on proxies as
not voted will not be counted as votes cast. Such proxies will be counted for
purposes of determining a quorum at the Annual Meeting. Except for procedural
matters incident to the conduct of the Annual Meeting, Bancorp does not know of
any other matters that are to come before the Annual Meeting. If any other
matters are properly brought before the Annual Meeting, the persons named in the
accompanying proxy will vote the shares represented by each such proxy on such
matters as determined by a majority of the Board of Directors.
The presence of a shareholder at the Annual Meeting will not automatically
revoke such shareholder's proxy. However, shareholders may revoke a proxy at
any time prior to its exercise by filing with the Corporate Secretary of
Bancorp, Marjorie S. Cook, a written notice of revocation, by delivering to
Bancorp a duly executed proxy bearing a later date or by attending the Annual
Meeting and voting in person.
The cost of soliciting proxies will be borne by Bancorp. In addition to
the solicitation of proxies by mail, Bancorp through its directors, officers and
regular employees, may also solicit proxies personally or by telephone or
telegraph. Bancorp also will request persons, firms and corporations holding
shares in their names or in the name of their nominees, which are beneficially
owned by others, to send proxy materials to and obtain proxies from such
beneficial owners and will reimburse such holders for their reasonable expenses
in doing so.
The securities which can be voted at the Annual Meeting consist of shares
of common stock, par value $1.00 per share (the "Common Stock"), of Bancorp.
Each share entitles its owner to one vote on all matters. The close of business
on March 24, 1995 has been fixed by the Board of Directors as the record date
for determination of shareholders entitled to vote at the Annual Meeting; there
were approximately 1,900 record holders of the Common Stock as of such date.
The number of shares outstanding on March 24, 1995 was 2,149,163. The presence,
in person or by proxy, of at least a majority of the total number of outstanding
shares of Common Stock is necessary to constitute a quorum at the Annual
Meeting.
<PAGE>
A copy of the Annual Report to Shareholders for the year ended December 31,
1994 accompanies this Proxy Statement. BANCORP IS REQUIRED TO FILE AN ANNUAL
REPORT ON FORM 10-K FOR ITS YEAR ENDED DECEMBER 31, 1994 WITH THE SECURITIES AND
EXCHANGE COMMISSION ("SEC"). SHAREHOLDERS MAY OBTAIN, FREE OF CHARGE, A COPY OF
SUCH ANNUAL REPORT ON FORM 10-K BY WRITING MARJORIE S. COOK, CORPORATE
SECRETARY, AT SANDY SPRING BANCORP, 17801 GEORGIA AVENUE, OLNEY, MARYLAND 20832.
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information as of March 24, 1995 with
respect to the shares of Common Stock beneficially owned by each director
continuing in office (1) and nominee for director of Bancorp, by certain
executive officers of Bancorp and by all directors and executive officers of
Bancorp as a group. This information is based on information furnished to
Bancorp by such persons. To the knowledge of management, no person owns
beneficially more than 5% of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF BENEFICIAL COMMON STOCK
NAME OWNERSHIP(2)(3)(4) OUTSTANDING
- ---- ------------------ -----------
<S> <C> <C>
Andrew N. Adams, Jr. 8,100 *
John Chirtea 4,165 *
Willard H. Derrick 38,481 1.78%
Susan D. Goff 101 *
Solomon Graham, Jr. 100 *
Hunter R. Hollar 7,013 *
Charles F. Mess 1,887 *
Robert L. Mitchell 2,000 *
Robert L. Orndorff, Jr. 18,148 *
Louisa W. Riggs 9,397 *
Lewis R. Schumann 1,525 *
Francis Snowden 12,276 *
W. Drew Stabler 8,614 *
Thomas O. Keech 22,312 1.03%
All directors and executive
officers as a group
(18 persons) 142,944 6.54%
<FN>
- ------------
*Less than 1% of Bancorp's outstanding Common Stock.
(1) Francis Snowden and Louisa W. Riggs who currently serve on the board
of directors will be leaving the board as of this annual meeting since
they have reached the mandatory retirement age of 70 specified in
Bancorp's Bylaws.
(2) Under the rules of the SEC, an individual is considered to
"beneficially own" any share of Common Stock which he or she, directly
or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise, has or shares: (1) voting power, which
includes the power to vote, or to direct the voting of, such security;
and/or (2) investment power, which includes the power to dispose, or
to direct the disposition, of such security. In addition, an
individual is deemed to be the beneficial owner of any share of Common
Stock of which he or she has the right to acquire voting or investment
power within 60 days of March 24, 1995. Includes 34,900 shares of
Common Stock subject to outstanding options which are exercisable
within 60 days of March 24, 1995, of which Willard H. Derrick, Hunter
R. Hollar and Thomas O. Keech hold options to purchase 13,000 shares,
6,500 shares and 9,900 shares of Common Stock, respectively. Also
includes 4,781 shares and 2,462 shares of Common Stock owned by
Messrs. Derrick and Keech, respectively, and 1,675 shares of Common
Stock owned by other executive officers, as participants in Bancorp's
Cash and Deferred Profit Sharing Plan and Trust.
(3) Includes shares owned directly by directors and executive officers of
Bancorp as well as shares held by their spouses and minor children and
trusts of which certain directors are trustees.
(4) Fractional shares resulting from participation in the dividend
reinvestment plan have been rounded to the nearest whole share.
</TABLE>
2
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL 1)
Pursuant to Bancorp's Bylaws, the directors are divided into three classes,
as nearly equal in number as possible, with the number of directors as specified
in the Bylaws. In general, the term of office of only one class of directors
expires in each year, and their successors are elected for terms of three years
and until their successors are elected and qualified. During 1994, a valued
director died -- William M. Canby -- and three new directors were appointed by
the Board of Directors -- Susan D. Goff, Solomon Graham, Jr. and Lewis R.
Schumann. At the Annual Meeting a total of four director-nominees will be
elected for three-year terms, and one director -- nominee to a two-year term. *
With respect to the election of directors, each shareholder of record on the
record date is entitled to one vote for each share of Common Stock held. A
plurality of all the votes cast at the Annual Meeting will be sufficient to
elect a nominee as a director.
INFORMATION AS TO NOMINEES AND CONTINUING DIRECTORS
The following table sets forth the names of the Board of Directors' five
nominees for election as directors. Also set forth is certain other
information, some of which has been obtained from Bancorp's records and some of
which has been supplied by the nominees and continuing directors with respect to
each such person's principal occupation and employment during the past five
years, his or her age at December 31, 1994, the periods during which he or she
has served as a director and his or her positions currently held with Bancorp.
It is the intention of the persons named in the proxy to vote the shares
represented by each properly executed proxy for the election as directors of the
four nominees listed below for terms of three years and one nominee for a two
year term, unless otherwise directed by the shareholder. The Board of Directors
believes that each of the nominees will stand for election and will serve if
elected as director. If any person nominated by the Board of Directors fails to
stand for election or is unable to accept election, the proxies will be voted
for the election of such other person or persons as the Board of Directors may
recommend.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES NAMED
BELOW AS A DIRECTOR OF BANCORP.
- -------------------------------
* Current directors Francis Snowden and Louisa W. Riggs are not standing for
re-election to the Board of Directors since they have reached the mandatory
retirement age of 70 specified in Bancorp's Bylaws.
3
<PAGE>
<TABLE>
<CAPTION>
MEMBER TERM
POSITION(S) HELD OF BOARD CURRENTLY
NAME AGE WITH BANCORP SINCE(1) EXPIRES
- ---- --- ---------------- -------- -------
DIRECTOR-NOMINEE FOR A TERM TO EXPIRE AT
THE 1997 ANNUAL MEETING
<S> <C> <C> <C> <C>
Susan D. Goff 49 Director 1994 1995
DIRECTOR-NOMINEES FOR TERMS TO EXPIRE AT
THE 1998 ANNUAL MEETING
Solomon Graham, Jr. 51 Director 1994 1995
Charles F. Mess 56 Director 1987 1995
Lewis R. Schumann 51 Director 1994 1995
W. Drew Stabler 57 Director 1986 1995
CONTINUING DIRECTORS
John Chirtea 57 Director 1990 1996
Willard H. Derrick 68 Chairman of the Board 1970 1996
Hunter R. Hollar 46 President, Chief 1990 1996
Executive Officer and
Director
Andrew N. Adams, Jr. 68 Director 1968 1997
Robert L. Mitchell 58 Director 1991 1997
Robert L. Orndorff, Jr. 38 Director 1991 1997
<FN>
- -----------------
(1) The Boards of Directors of Bancorp and its principal subsidiary, Sandy
Spring National Bank (the "Bank"), are composed of the same persons.
Includes term of office as a director of the Bank prior to the formation
of Bancorp as the holding company for the Bank in January 1988.
</TABLE>
The principal occupation(s) and business experience of each nominee and
director of Bancorp for the last five years are set forth below.
DIRECTOR-NOMINEES:
SUSAN D. GOFF is President of M.D. IPA, Inc., a vice president of Optimum
Choice, Inc., and a senior vice president of their parent holding company, Mid-
Atlantic Medical Services, Inc., a health maintenance organization.
SOLOMON GRAHAM, JR. is founder, President and Chief Executive Officer of
Quality Biological, Inc., a medical technology firm providing reagents to
research facilities.
CHARLES F. MESS, M.D. is in the practice of general orthopedics.
4
<PAGE>
LEWIS R. SCHUMANN is a partner in the law firm of Miller, Miller and Canby,
Chtd.
W. DREW STABLER is a partner in Pleasant Valley Farm, a crop and livestock
operation.
CONTINUING DIRECTORS:
JOHN CHIRTEA is retired from LCOR, a national real estate development
company. In prior years, Mr. Chirtea was a partner in the Linpro Co., the
predecessor company of LCOR.
WILLARD H. DERRICK is Chairman of the Board of Bancorp and the Bank. From
1991 through 1993, Mr. Derrick was Chairman of the Board and Chief Executive
Officer of Bancorp and the Bank. Prior to 1991, Mr. Derrick served as President
and Chief Executive Officer of Bancorp and the Bank. Mr. Derrick joined the
Bank in 1952.
HUNTER R. HOLLAR is President and Chief Executive Officer of Bancorp and
the Bank. From 1990 through 1993, Mr. Hollar served as President of Bancorp and
President and Chief Operating Officer of the Bank.
ANDREW N. ADAMS, JR. retired in 1989 as President of Ten Oaks Nursery and
Gardens, Inc.
ROBERT L. MITCHELL is President and Chief Executive Officer of C-I/Mitchell
and Best Company which is engaged in homebuilding and real estate development.
ROBERT L. ORNDORFF, JR. is President of RLO Contractors, Inc., an
excavating contractor.
CORPORATE GOVERNANCE AND OTHER MATTERS
During 1994, each of the Company's and the Bank's Boards of Directors held
12 regular meetings.
The average attendance was 93% for meetings of Bancorp's and the Bank's
Boards of Directors. All incumbent directors attended 75% or more of the
aggregate of (a) the total number of meetings of the Boards of Directors and (b)
the total number of meetings held by all committees on which they served.
Bank directors who are not employed by the Bank receive an annual retainer
of $2,000 and fees of $350 for attendance at each meeting of the Board of
Directors, $350 for each Executive Committee meeting, and $250 for other
committee meetings ($150 if held immediately before or after a meeting of the
Board of Directors or another committee). Bancorp directors who are not
employed by Bancorp do not receive any additional compensation except for fees
of $350 for attendance at each meeting of the Board of Directors not held in
conjunction with a meeting of the Bank's Board of Directors and except for fees
of $250 or $150, paid on the same basis as for Bank committee meetings (I.E.,
$250 or $150), for each meeting of the Nominating Committee.
Bancorp's Board of Directors has standing Audit and Nominating Committees.
The Bank has a standing Compensation Committee. The functions, composition and
frequency of meeting for these committees in 1994 were as follows:
AUDIT COMMITTEE - The Audit Committee is composed of Mrs. Louisa W. Riggs,
Chairman, and Messrs. John Chirtea, Charles F. Mess, Robert L. Mitchell and
Robert L. Orndorff, Jr. The Audit Committee, whose members are neither
officers nor employees of Bancorp or the Bank, provides general oversight of the
internal audit function, reviews the findings of external audits and
examinations, evaluates the adequacy of the Bank's insurance coverage, reviews
the activities of the Bank's Compliance Council, reviews the annual report to
shareholders and Form 10-K on behalf of the Board and monitors internal controls
for financial reporting. During 1994, four meetings were held.
5
<PAGE>
NOMINATING COMMITTEE - The Nominating Committee is composed of Messrs.
Willard H. Derrick, Chairman, Andrew N. Adams, Jr., Hunter R. Hollar, W. Drew
Stabler and Charles F. Mess. The Nominating Committee makes recommendations to
the Board of Directors with respect to nominees for election as directors.
While the Nominating Committee will consider nominees recommended by
shareholders, it has not actively solicited recommendations by Bancorp's
shareholders for nominees nor has it established any procedures for this purpose
other than as set forth in the Bylaws. See "Shareholder Proposals." During
1994, eight meetings were held.
COMPENSATION COMMITTEE - The Compensation Committee is composed of Messrs.
W. Drew Stabler, Chairman, John Chirtea, Charles F. Mess, Robert L. Mitchell and
Robert L. Orndorff, Jr. The Compensation Committee recommends salaries and
other compensation for executive officers, conducts an annual review of the
salary budget, considers other compensation plans and makes recommendations to
the Board, deals with matters of personnel policy and, with the Stock Option
Committee, administers the 1992 and 1982 Stock Option Plans. During 1994, five
meetings were held.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
--------------------------
The following table sets forth the cash and noncash compensation for each
of the last three years awarded to or earned by (i) the Chief Executive Officer,
and (ii) each other executive officer of Bancorp whose salary and bonus earned
in 1994 exceeded $100,000 for services rendered in all capacities to Bancorp
and its subsidiaries.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation ----------------------
Name and Principal ------------------- Stock Option All Other
Position in 1994 Year Salary Bonus Grants (Shares) Compensation(1)
- ---------------- ---- ------ ----- -------------- --------------
<S> <C> <C> <C> <C> <C>
Willard H. Derrick 1994 $180,000 $20,000 -- $ 7,500
Chairman of the Board 1993 180,845 30,000 -- 11,540
of Bancorp and the Bank 1992 173,000 25,000 -- 12,810
Hunter R. Hollar 1994 162,000 20,000 1,500 7,500 (2)
President and Chief Executive 1993 149,600 20,000 1,500 9,714
Officer of Bancorp and the 1992 140,000 20,000 1,500 10,500
Bank
Thomas O. Keech 1994 116,600 12,000 1,000 6,748
Vice President and Treasurer of 1993 112,390 15,000 900 7,049
Bancorp and Executive Vice 1992 106,000 14,000 900 7,980
President and Chief Financial
Officer of the Bank
<FN>
- ------------------------
(1) Amounts shown in this column pertain to compensation under Bancorp's
Cash and Deferred Profit Sharing Plan and Trust.
(2) Includes $2,500 paid in cash.
</TABLE>
Certain executive officers of Bancorp and the Bank receive indirect
compensation in the form of personal benefits. The amount of such indirect
compensation received in 1994 by each named executive officer did not exceed 10%
of the cash compensation paid to or accrued for each such executive officer.
6
<PAGE>
STOCK OPTION PLANS. Bancorp maintains two stock option plans, the purposes
of which are to attract, retain and motivate key officers of Bancorp and the
Bank by providing key officers with a stake in the success of Bancorp as
measured by the value of its shares.
The 1992 Stock Option Plan (the "1992 Option Plan"), which was approved by
the shareholders at the 1992 Annual Meeting of Shareholders, authorizes the
issuance of up to 135,000 shares of Common Stock, subject to certain adjustments
for changes in Bancorp's capital structure. The 1992 Option Plan has a term of
10 years from its effective date (January 1, 1992) after which date no stock
options may be granted. As of March 24, 1995, options for 11,800 shares were
outstanding under the 1992 Option Plan. The 1982 Stock Option Plan (the "1982
Option Plan") has been terminated, except with respect to options which were
outstanding on the 1982 Option Plan's termination date. As of March 24, 1995,
options for 23,100 shares were outstanding under the 1982 Option Plan. The 1992
Option Plan and the 1982 Option Plan are referred to collectively as the "Option
Plans."
The Option Plans provide for the grant of "incentive options" as defined in
Section 422 of the Code. The 1992 Option Plan also provides for the grant of
"non-incentive options" to officers and other employees on terms and conditions
consistent with the 1992 Option Plan as the Stock Option Committee, which
administers the Option Plans, may determine. The Stock Option Committee is
comprised of all disinterested (outside) directors (I.E., all directors other
than Messrs. Derrick and Hollar).
Options have been granted under the Option Plans and may continue to be
granted under the 1992 Option Plan only to key employees of Bancorp and its
subsidiaries. Under the Option Plans, the maximum option term is 10 years from
the date of grant. Options which have been granted under the Option Plans are
immediately exercisable upon grant. The exercise price of a stock option may
not be less than 100% of the fair market value of the Common Stock on the date
of grant. The exercise price of stock options must be paid for in full in cash
or shares of Common Stock, or a combination of both. The Stock Option Committee
has the discretion when making a grant of stock options under the 1992 Option
Plan to impose restrictions on the shares to be purchased in exercise of such
options.
The Committee also has the authority to cancel stock options outstanding
under the 1992 Option Plan with the consent of the optionee and to grant new
options at a lower exercise price in the event that the fair market value of the
Common Stock at any time prior to the exercise of the outstanding stock options
falls below the exercise price of such option. Consistent with Company policy,
however, the Committee does not intend to use this authority to cancel and
reissue stock options at a lower exercise price, whether or not any decline in
the market price of Bancorp's shares is the result of general economic
conditions.
7
<PAGE>
OPTION GRANTS IN 1994
The following table contains information concerning the grant of stock
options under the Option Plans to the Chief Executive Officer and each of the
other executive officers named in the Summary Compensation Table above. The
Option Plans do not provide for the grant of stock appreciation rights.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
----------------------------------- ---------------------
% of Total Exercise
Options Options or Base
Granted Granted to Price
(Number Employees ($ per Expiration
Name of Shares) in Year Share) Date 5% 10%
- ---- --------- --------- -------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Willard H. Derrick -- -- % $ -- -- $ -- $ --
Hunter R. Hollar 1,500 27.3 49.00 12/30/2004 46,230 117,135
Thomas O. Keech 1,000 18.2 49.00 12/30/2004 30,820 78,090
</TABLE>
AGGREGATED OPTION EXERCISES IN
1994 AND YEAR END OPTION VALUES
The following table sets forth information concerning the exercise of
options by the Chief Executive Officer and the other named executive officers
during the last year, as well as the value of such options held by such persons
at the end of the year.
<TABLE>
<CAPTION>
Number of Value of
Unexercised Unexercised
Options In-the-Money
at Year End Options
----------- at Year End
Shares Acquired Immediately --------------
on Exercise Value Exercisable Immediately
Name (Number of Shares) Realized (1) (Number of Shares) Exercisable
- ------------ ---------------- ----------- ---------------- -------------
<S> <C> <C> <C> <C>
Willard H. Derrick 3,000 115,500 13,000 $327,990
Hunter R. Hollar -- -- 6,500 54,990
Thomas O. Keech 2,000 75,000 9,900 188,199
<FN>
- --------------------------
(1) Difference between fair market value of underlying securities at exercise
or year-end and the exercise or base price.
</TABLE>
8
<PAGE>
PENSION PLAN TABLE
The table below shows estimated annual benefits payable upon retirement to
persons in the specified remuneration and years-of-service categories if such
retirement had occurred on December 31, 1994. The benefits listed are provided
on a 10 year certain-and-life basis and are not subject to deduction for Social
Security or other offset amounts.
<TABLE>
<CAPTION>
Years of Credited Service at Retirement
Highest 5-Year ----------------------------------------------------------------------
Average Earnings 15 20 25 30 35 40 and above
- ---------------- ------ ------- ------- ------- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
$25,000 $ 5,625 $ 7,500 $ 9,375 $11,250 $ 13,125 $ 15,000
75,000 16,875 22,500 28,125 33,750 39,275 45,000
125,000 28,125 37,500 46,875 56,250 65,625 75,000
150,000 33,750 45,000 56,250 67,500 78,750 90,000
175,000 39,375 52,500 65,625 78,750 91,875 105,000
200,000 45,000 60,000 75,000 90,000 105,000 120,000
220,000 49,500 66,000 82,500 99,000 115,000 132,000
250,000 56,250 75,000 93,750 112,500 131,250 150,000
300,000 67,500 90,000 112,500 135,000 157,500 180,000
</TABLE>
Earnings covered by the Pension Plan are total wages, including elective
pre-tax contributions under Section 401(k) of the Code, overtime pay, bonuses,
and other cash compensation which for the named executives correspond, in
general, to the total of the amounts in the "Salary" and "Bonus" columns in the
Summary Compensation Table. Benefits are computed on a monthly basis at the
rate of 1.5% of highest five-year average monthly earnings multiplied by years
of service up to 40 years for eligible persons retiring at age 65. Early
retirement is also permitted by the Pension Plan at age 55 after at least 10
years of service. As of February 18, 1995, Bancorp's executive officers shown
in the compensation table had accumulated the following years of credited
service toward retirement: Mr. Derrick - 42 years; Mr. Hollar - 4 years; and
Mr. Keech - 14 years.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. In December 1990, the Board of
Directors of the Bank, upon the recommendation of the Compensation Committee,
approved the adoption of a Supplemental Executive Retirement Plan ("SERP") for
certain selected executives of the Bank. In February 1992, Bancorp agreed to
become a party to the SERP. The SERP is designed to provide certain post-
retirement benefits to enable a targeted level of retirement income to be met
and to provide certain pre-retirement death benefits should the covered
executive die prior to retirement age.
BENEFITS. The SERP provides two forms of benefits to participating
executives. An annual pre-retirement death benefit equal to a specified
percentage of the participating executive's date of death annual salary is
provided. The annual pre-retirement death benefit is payable for a 10-year
period commencing in the year of the executive's death. An annual post-
retirement deferred compensation benefit is also provided. The amount of the
post-retirement benefit is calculated to replace a specified percentage of the
participating executive's final average income. The post-retirement benefit is
payable over a 10-year period commencing at the executive's age 65 (or later
retirement date).
REQUIREMENT FOR BENEFITS. The SERP requires that an individual contractual
agreement be entered into between each participating executive and the Bank.
The amount of benefits payable to the participating executive (or his
beneficiary upon his death) will depend on a number of factors. The executive's
post-retirement deferred compensation benefits vest over a 15-year period, with
such vesting period commencing from the executive's initial date of employment
with Bancorp or the Bank. Payment of the executive's post-retirement deferred
compensation
9
<PAGE>
benefit commences at age 65 or the executive's later retirement date. With
approval of the Board of Directors of the Bank, the participating executive may
retire early (on or after age 55) and receive (at age 65) payment of the vested
portion of his post-retirement deferred compensation benefit. With no approval
of the Board of Directors, the executive may retire early and receive (at age
65) payment of his vested accrued benefit (which is the portion of such
participant's future deferred compensation benefit which has been currently
accrued and expensed for financial accounting purposes). The Bank has the
option to begin payment of benefits on or after the executive's early retirement
or termination from service. If the payments begin on or after the early
retirement date (and prior to age 65), then the executive's benefit will be
discounted from that at the normal retirement date by an interest factor equal
to the Pension Benefit Guaranty Corporation's interest rate used to value
deferred and immediate annuities in effect at the date payments are to commence.
TERMINATION OF EMPLOYMENT. Upon a voluntary termination of employment
(prior to early retirement), the participating executive will receive an amount
equal to his vested accrued benefit, payable as a monthly annuity over a 10-year
period commencing at age 65. Upon a "just cause" termination of employment by
Bancorp or the Bank, the executive will lose all rights to benefits under the
SERP. Upon a termination of employment without just cause, the executive will
automatically become 100% vested in the full post-retirement deferred
compensation benefit, and will begin to receive such benefit (payable over a 10-
year period) at age 65. A just cause termination of a participating executive
is a termination for reasons of theft, fraud, embezzlement, willful misconduct
(causing significant property damage or personal injury), or willful malfeasance
or gross negligence on the part of the executive.
CHANGE-IN-CONTROL. Upon a change-in-control of Bancorp, if the
participating executive is terminated without just cause or terminates
voluntarily for good cause within three years after the change-in-control, then
the executive becomes 100% vested in his post-retirement deferred compensation
benefit. If the change-in-control has not been approved by the Board of
Directors, a lump-sum payment will be made within 30 days after termination of
employment; otherwise, payments begin when the participating executive reaches
normal retirement age. A "Change-in-Control" of Bancorp is defined as (a) the
acquisition of 20% or more of Bancorp's stock, (other than through a Bank-
sponsored tax-qualified retirement plan), (b) a change in a majority of
directors as a result of a merger or, (c) a sale of substantially all of the
assets of Bancorp.
AMENDMENT OR TERMINATION. The Bank may amend or terminate the SERP at any
time. However, the participating executive's vested accrued benefit at the date
of termination of the SERP cannot be revoked or caused to be forfeited.
LOSS OF BENEFITS. If the participating executive competes, directly or
indirectly, with Bancorp or the Bank while covered under the SERP, all rights
the executive (or his beneficiary) may have in benefits under the SERP shall
terminate.
PARTICIPANTS. The following executive officers participate in the SERP:
Willard H. Derrick, Hunter R. Hollar, and Thomas O. Keech. The annual pre-
retirement death benefits payable to such executives' named beneficiaries equals
the following percentages of such executive's date of death annual salary: Year
1 (100%), Years 2 through 5 (75%), and Years 6 through 10 (50%). These
percentages are slightly lower under Mr. Derrick's Agreement. The annual post-
retirement deferred compensation benefit is designed, in conjunction with the
Bank's pension plan and Social Security retirement benefits, to replace between
65% and 70% of such participating executive's projected final average income at
retirement date. Using a 70% income replacement target for Mr. Derrick and Mr.
Hollar, and a 65% target for Mr. Keech, the following amounts are projected to
be paid annually over a 10-year period at age 65: Mr. Derrick ($15,749), Mr.
Hollar ($109,420), and Mr. Keech ($31,022).
10
<PAGE>
EMPLOYMENT AGREEMENT. In December 1990, Bancorp and the Bank
(collectively, the "Company") entered into an Employment Agreement ("Agreement")
with Hunter R. Hollar (the "Executive"). The Agreement, after its initial
three-year and one month term which expired on December 31, 1993, provides for
automatic one-year extensions of such term on each January 1; provided neither
party has given written notice to the other party at least 90 days prior to the
renewal date of its intention not to renew the Agreement. Such automatic
renewal has occurred for the year ending December 31, 1995. The Boards of
Directors of Bancorp and the Bank believe that the Agreement assures fair
treatment of the Executive in relation to his career with the Company by
assuring him of some financial security. The Agreement also protects the
shareholders by encouraging the Executive to continue his attention to his
duties without distraction in a potential merger or takeover circumstance and by
helping to maintain the Executive's objectivity in considering any proposals to
acquire the Company.
SALARY AND BONUS. The Agreement provides for the payment of cash and other
benefits to the Executive. During its term, the Executive will receive a fixed
salary (currently $162,000 per year), reviewed annually and subject to increase
at the Board of Directors' discretion. The Agreement also provides that, at the
discretion of the Board of Directors, additional or special compensation based
on the Executive's performance may be paid as deemed appropriate.
EXPENSE REIMBURSEMENT. In addition to the above items, the Agreement
provides for the reimbursement of reasonable business expenses, the use of an
automobile (with reimbursement for expenses), and membership dues at a country
club located in the Olney, Maryland area.
TERMINATION. The Agreement also provides for special separation payment
benefits in the event of termination of the Executive's employment under certain
circumstances. In the event that the Executive is permanently disabled, the
Executive's fixed annual salary shall continue during the then remaining term of
the Agreement, reduced by any payments received by the Executive under a Company
sponsored long-term disability plan. If the Executive's employment with the
Company is terminated (a) by reason of voluntary termination prior to age 65
retirement age, (b) by reason of retirement on or after age 65 retirement age,
(c) by reason of the Executive's death, or (d) for cause, then all obligations
of the Company under the Agreement automatically terminate. Termination for
"cause" shall be deemed to exist if (a) the Executive willfully and wrongfully
refuses to perform services specified under the Agreement, (b) the Executive
materially breaches certain restrictive covenants and nondisclosure requirements
under the Agreement, (c) the Executive engages in acts of dishonesty or fraud in
connection with his services under the Agreement, or (d) the Executive engages
in other serious misconduct of a nature that the continued employment of the
Executive may reasonably be expected to adversely affect the business or
properties of the Company.
If termination of employment occurs for any reason other than those
indicated in the previous paragraph, the Executive shall be entitled to
severance pay equal to the Executive's then fixed salary for a six-month period.
CHANGE-IN-CONTROL. In the event of a Change-in-Control of the Company, the
Executive may be entitled to payment of certain benefits. If within two years
after a change-in-control, the Company shall terminate the Executive's
employment without good cause, or the Executive shall voluntarily terminate
employment for good reason, then the Company shall make a lump-sum cash payment
to the Executive equal to 2.99 times the Executive's then 12-month's annual
salary at the greater of the Executive's salary rate in effect on the date of
the Change-in-Control or the Executive's salary rate in effect on the date his
employment terminated. The Executive shall also be entitled to continue
participation for a three-year period in certain Company-sponsored health and
welfare plans. In no event, however, shall such payments and benefits exceed
the amount allowable as a deduction under Section 280G of the Code. Finally,
the Executive shall not be required to mitigate such payments under the
Agreement and future employment compensation after termination shall not be used
to reduce such payments. The Agreement also contains provisions for the payment
of legal expenses which are related to the enforcement of the Agreement incurred
by the Executive as a result of any termination of employment after a change-in-
control.
11
<PAGE>
DEFINITION OF CHANGE-IN-CONTROL. The Agreement defines a "Change-in-
Control" as (a) the acquisition by any entity, person, or group (other than the
acquisition by a Company-sponsored tax-qualified retirement plan) of beneficial
ownership, as that term is defined in Rule 13d-3 under the Securities Exchange
Act of 1934, of more than 25% of the outstanding capital stock of the Company,
(b) the commencement by any entity, person, or group (other than the Company,
its subsidiaries or tax-qualified plans) of a tender offer or an exchange offer
for more than 20% of outstanding voting stock of the Company, (c) a merger or
consolidation of the Company in which Company shareholders after the merger or
consolidation own less than 80% of the voting stock of the surviving or
resulting corporation, (d) a transfer of substantially all of the property of
the Company other than to an entity to which the Company owns at least 80% of
the voting stock, or (e) the election of the Board of Directors of the Company,
without the recommendation or approval of a majority of the incumbent Board of
Directors of the Company, of the lesser of three directors or directors
constituting a majority of the number of directors of the Company then in
office.
DEFINITION OF GOOD REASON AND GOOD CAUSE. The term "Good Reason" is
generally defined by the Agreement to mean any unfavorable change in the
Executive's position, duties, compensation or benefits. The term "Good Cause"
is generally defined by the Agreement to mean the Executive's conviction of
certain criminal violations, his willful engagement in certain misconduct and
his willful, wrongful and substantial nonperformance of certain assigned duties.
BENEFITS. As of December 31, 1994, if a Change-in-Control had occurred and
the Executive had terminated employment with Good Reason or had been terminated
from employment without Good Cause, then $484,380 would have been payable to the
Executive under the Change-in-Control provisions of the Agreement, subject to
the limitations of Section 280G of the Code. Bancorp does not believe that
payment of these amounts would have a material adverse affect on the financial
or operating condition of Bancorp or the Bank.
EXECUTIVE SEVERANCE AGREEMENTS. In December 1990, pursuant to the
recommendation of the Compensation Committee, the Board of Directors of the Bank
voted to adopt Severance Agreements for two executive officers (collectively,
the "Executives") of Bancorp and the Bank (collectively, the "Company"). In
February 1992, Bancorp agreed to become a party to the Severance Agreements.
Each Severance Agreement becomes operative only upon a "Change-in-Control" that
occurs while the Executives are employed by the Company.
BENEFITS. In the event of a Change-in-Control of the Company, the
Executives may be entitled to payment of certain benefits. If within two years
after a Change-in-Control, the Company shall terminate any of the Executives'
employment without good cause, or the Executives shall voluntarily terminate
employment for good reason, then the Company shall make a lump sum cash payment
to each of the Executives equal to 2.99 times the Executive's then 12-month's
annual salary. In no event, however, shall such payments and benefits exceed
the amount allowable as a deduction under Section 280G of the Code. The
Executives shall also be entitled to continue participation for a three-year
period in certain Company-sponsored health and welfare plans. Finally, the
Executives shall not be required to mitigate such payments under the Severance
Agreements and future employment compensation after termination shall not be
used to reduce such payments. The Severance Agreements also contain provisions
for the payment of legal expenses which are related to the enforcement of the
Severance Agreements incurred by the Executives as a result of any termination
of employment after a Change-in-Control.
DEFINITION OF CHANGE-IN-CONTROL. The Severance Agreements define a
"Change-in-Control" as (a) the acquisition by any entity, person, or group
(other than the acquisition by a Company-sponsored tax-qualified retirement
plan) of beneficial ownership, as that term is defined in Rule 13d-3 under the
Securities Exchange Act of 1934, of more than 25% of the outstanding capital
stock of the Company, (b) the commencement by any entity, person, or group
(other than the Company, any of its subsidiaries or tax qualified plans) of a
tender offer or an exchange offer for more than 20% of the outstanding voting
stock of the Company, (c) a merger or consolidation of the Company in which the
Company's shareholders after the merger or consolidation own less than 80% of
the voting stock of the surviving or resulting corporation, (d) a transfer of
substantially all of the property of the Company other than to an entity of
which the Company owns at least 80% of the voting stock, or (e) the election
12
<PAGE>
to the Board of Directors of the Company, without the recommendation or approval
of a majority of the incumbent Board of Directors of the Company, of the lesser
of three directors or directors constituting a majority of the number of
directors of the Company then in office.
DEFINITION OF GOOD REASON AND GOOD CAUSE. The term "Good Reason" is
generally defined by the Severance Agreements to mean any unfavorable change in
any of the Executives' position, duties, compensation or benefits. The term
"Good Cause" is generally defined by the Severance Agreements to mean any of the
Executives' conviction of certain criminal violations, his willful engagement in
certain misconduct and his willful, wrongful and substantial nonperformance of
certain assigned duties.
PARTICIPATION. As of December 31, 1994, the Board of Directors had voted
to provide Severance Agreements for following Executives: Willard H. Derrick and
Thomas O. Keech. In addition, Hunter R. Hollar's Employment Agreement contains
severance provisions similar to those provided the Executives. As of December
31, 1994, if a Change-in-Control had occurred and the Executives had terminated
employment with Good Reason or had been terminated from employment without Good
Cause, then the following severance payments would have been payable to the
Executives (subject, however, to the limitations of Section 280G of the Code):
Willard H. Derrick ($538,200); Thomas O. Keech ($348,634). Bancorp does not
believe that payment of these amounts would have a material adverse affect on
the financial or operating condition of Bancorp or the Bank.
REPORT OF THE COMPENSATION COMMITTEE
As members of the Compensation Committee, it is our duty to review
compensation policies applicable to executive officers; to consider the
relationship of corporate performance to that compensation; to recommend salary
and bonus levels and stock option grants for executive officers for
consideration by the Boards of Directors of Bancorp and the Bank or their
committees, as appropriate; and to administer various incentive plans of Bancorp
and the Bank.
Under the compensation policy of Bancorp, which is endorsed by the
Compensation Committee, compensation is paid based both on the executive
officer's performance and the performance of the entire company. In assessing
the performance of Bancorp and the Bank for purposes of compensation decisions,
the Compensation Committee considers a number of factors, including profits of
Bancorp and the Bank during the past year relative to their profit plans,
changes in the value of Bancorp's stock, reports of federal regulatory
examinations of Bancorp and the Bank, growth, business plans for future periods,
and regulatory capital levels. The Compensation Committee assesses individual
executive performance based upon the executive's responsibilities and the
Committee's determination of the executive's contributions to the performance of
Bancorp and the accomplishment of Bancorp's strategic goals, such as the
completion of Bancorp's offering of Common Stock in 1992, and the completion of
Bancorp's acquisition of First Montgomery Bank of Maryland and the opening of
the Air Park branch office in 1993. In assessing performance, the members of the
Committee do not make use of a mechanical formula, but instead weigh the factors
described above as they deem appropriate in the circumstances. The 1994 salary
levels of Bancorp's executive officers were established in 1993 consistent with
this compensation policy.
Mr. Hollar became Chief Executive Officer of Bancorp and the Bank effective
January 1, 1994. Mr. Willard H. Derrick, who served as Chairman of the Boards
and Chief Executive Officer of Bancorp and the Bank until January 1, 19994,
continues to be Chairman of the Boards and an officer of Bancorp and the Bank
with responsibility for key corporate functions.
The level of Mr. Hollar's annual salary is subject to the terms of an
Agreement with Bancorp and the Bank entered in 1990. This Agreement was renewed
effective January 1, 1995 for an additional one-year term, and is renewable for
successive one-year terms thereafter. Under this Agreement, Mr. Hollar's annual
salary is reviewed annually and subject to increase at the discretion of the
Board of Directors.
13
<PAGE>
In its 1993 review of base compensation to be paid in 1994, the Committee
determined that the performance of Mr. Derrick and Mr. Hollar was excellent,
based upon the 1993 financial performance of Bancorp, including the growth in
assets, income, and capitalization during 1993; the financial performance trends
for 1993 and the preceding four years, which include growth in assets, net
operating income, and stockholders equity in each year; the results of
confidential regulatory examinations; Bancorp's planned levels of financial
performance for 1994; the acquisition of First Montgomery Bank of Maryland; the
opening of the Air Park branch office; the continued involvement of these
officers in community affairs in the communities served by Bancorp; and a
general level of satisfaction with the management of Bancorp and its
subsidiaries. As a result of this review and in consideration of Mr. Hollar's
expanded responsibilities, Mr. Hollar's salary was increased by 8.00% effective
January 1, 1994, to $162,000. Based upon this review and Mr. Derrick's
continuing responsibilities, Mr. Derrick's salary was maintained at its 1993
level of $180,000 per year.
Bonuses for 1994 were awarded in December 1994 based on the executive
officer's performance and the performance of Bancorp and the Bank for the year
1994 consistent with Bancorp policy described above. Bonuses of $20,000,
$20,000,and $12,000 were awarded to Mr. Derrick, Mr.Hollar, and Mr. Keech,
respectively, in 1994.
Executive officers of Bancorp and the Bank have been granted incentive
stock options under Bancorp's Stock Option Plans. The purposes of the Stock
Option Plans are to attract, retain and motivate key officers of Bancorp and the
Bank by providing key officers with a stake in the success of Bancorp as
measured by the value of its shares. Options are granted at exercise prices
equal to the fair market value of the shares on the dates of grant. The Stock
Option Committee of the disinterested directors of Bancorp has general
responsibility for granting stock options to key employees and administering the
plans. The Compensation Committee recommends to the Stock Option Committee the
recipients and the amounts and other terms of options to be granted. During
1994, incentive stock options for 5,500 shares were granted at an exercise price
of $49.00 per share, including options for 1,500 shares granted to Mr. Hollar.
At the request of Mr. Derrick, the Compensation Committee did not consider
granting additional options to him.
The Compensation Committee recommends to the Board of Directors the amount
to be contributed each year to the Bank's Cash and Deferred Profit Sharing Plan
and Trust. Under this Plan, each participant receives an allocation based upon
the participant's compensation for the year as a percentage of the total
compensation of all eligible participants. Each executive officer of Bancorp
participates in the Plan. In general, the Compensation Committee determines the
amount of the aggregate contribution to the Deferred Profit Sharing Plan based
upon the annual profits of the Bank, its regulatory capital levels, and other
performance factors. For 1994, the Compensation Committee recommended and the
Board of Directors of the Bank approved, an aggregate contribution of
approximately $297,000, or 5.0% of annual compensation of eligible participants.
No member of the Compensation Committee is a former or current officer or
employee of Bancorp or the Bank.
March 9, 1995 COMPENSATION COMMITTEE
W. Drew Stabler, Chairman
John Chirtea
Charles F. Mess
Robert L. Mitchell
Robert L. Orndorff, Jr.
14
<PAGE>
STOCK PERFORMANCE COMPARISONS
The graph and table on the following page show the cumulative total return
on the Common Stock of Bancorp over the last five years, compared with the
cumulative total return of the NASDAQ Stock Market Index (U.S. Companies) and
the NASDAQ Bank Stock Index of banks and bank holding companies over the same
period. Cumulative total return on the stock or the index equals the total
increase in value since December 31, 1989 assuming reinvestment of all dividends
paid into the stock or the index, respectively. The graph and table were
prepared assuming that $100 was invested on December 31, 1989 in the Common
Stock and the securities included in the indexes.
CUMULATIVE TOTAL SHAREHOLDER RETURN
COMPARED WITH PERFORMANCE OF SELECTED INDEXES
DECEMBER 31, 1989 THROUGH DECEMBER 31, 1994
[GRAPH]
CUMULATIVE TOTAL SHAREHOLDER RETURN
COMPARED WITH PERFORMANCE OF SELECTED INDEXES
December 31, 1989 through December 31, 1994
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Bancorp $100.0 $113.9 $124.5 $151.5 $187.8 $204.6
NASDAQ Stock Market Index 100.0 84.9 136.3 158.6 180.9 176.9
(U.S. Companies)
NASDAQ Bank Stock Index 100.0 73.2 120.2 174.9 199.3 198.7
</TABLE>
15
<PAGE>
TRANSACTIONS AND RELATIONSHIPS WITH MANAGEMENT
Bancorp and the Bank have had in the past, and expect to have in the
future, banking transactions in the ordinary course of business with directors
and executive officers on substantially the same terms, including interest rates
and collateral on loans, as those prevailing at the same time for comparable
transactions with other persons; and, in the opinion of management, these
transactions do not and will not involve more than the normal risk of
collectibility or present other unfavorable features.
Director-nominee Susan D. Goff is President of M.D. IPA, one of three
health insurance providers which employees of the Bank and Bancorp may select
under the Company's health insurance plan.
Director-nominee Lewis R. Schumann is a partner in the law firm of Miller,
Miller and Canby, Chtd., which Bancorp and the Bank have retained during 1994
and expect to retain during the current year as corporate counsel. The law firm
provides legal services on matters such as routine litigation, personnel
policies and practices, customer account forms and issues and Bank properties.
SHAREHOLDER PROPOSALS
From time to time, individual shareholders may wish to submit proposals
which they believe should be voted upon by the shareholders. The Securities and
Exchange Commission has adopted regulations which govern the inclusion of such
proposals in Bancorp's annual proxy materials. Shareholder proposals intended
to be presented at the 1996 Annual Meeting of Shareholders must be received by
Bancorp at its executive offices not later than November 28, 1995 in order to be
eligible for inclusion in Bancorp's proxy materials for that Annual Meeting.
In addition, Bancorp's Bylaws require that to be properly brought before an
annual meeting, shareholder proposals for new business must be delivered to or
mailed and received by Bancorp not less than 30 nor more than 90 days prior to
the date of the meeting; provided, however, that if less than 45 days notice of
the date of the meeting is given to shareholders, such notice by a shareholder
must be received not later than the 15th day following the date on which notice
of the date of the meeting was mailed to shareholders or two days before the
date of the meeting, whichever is earlier. Each such notice given by a
shareholder must set forth certain information specified in the Bylaws
concerning the shareholder and the business proposed to be brought before the
meeting.
Shareholders may also nominate candidates for directors, provided that such
nominations are made in writing and received by Bancorp at its executive offices
not later than December 28, 1995. The nomination should be sent to the
attention of Bancorp's Corporate Secretary and must include, concerning the
director nominee, the following information: full name, age, date of birth,
educational background and business experience, including positions held for at
least the preceding five years. The nomination must also include home and
office addresses and telephone numbers and include a signed representation by
the nominee to timely provide all information requested by Bancorp as part of
its disclosure in regard to the solicitation of proxies for election of
directors. The name of each such candidate for director must be placed in
nomination at the Annual Meeting by a shareholder present in person. The
nominee must also be present in person at the Annual Meeting. A vote for a
person who has not been duly nominated pursuant to these requirements will be
deemed to be void.
COMPLIANCE WITH SECTION 16(A) OF SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires Bancorp's
executive officers and directors, and persons who own more than ten percent of a
registered class of Bancorp's equity securities, to file reports of ownership
and changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange
Commission. Executive officers, directors and greater than ten percent
stockholders are required by applicable regulations to furnish Bancorp with
copies of all Forms 3, 4 and 5 they file.
16
<PAGE>
Based solely on Bancorp's review of the copies of such forms it has
received and written representations from certain reporting persons, Bancorp
believes that all its executive officers and directors complied with all filing
requirements applicable to them with respect to transactions during 1994, and
that there are no stockholders that own beneficially more than 10% of the shares
of Bancorp's Common Stock.
INDEPENDENT AUDITORS
The Board of Directors anticipates the selection of Stegman & Company,
certified public accountants, to audit the books and accounts of Bancorp for the
year ending December 31, 1995. Stegman & Company has served as independent
auditors for Bancorp and its subsidiary and predecessor, Sandy Spring National
Bank of Maryland, without interruption for many years. Stegman & Company has
advised Bancorp that neither the accounting firm nor any of its members or
associates has any direct financial interest in or any connection with Bancorp
and its subsidiaries other than as independent public auditors. A
representative of Stegman & Company will be present at the Annual Meeting, will
have the opportunity to make a statement, and will also be available
to respond to appropriate questions.
ACTION WITH RESPECT TO REPORTS
Action taken at the Annual Meeting to approve the minutes of the 1994
Annual Meeting of Shareholders does not constitute approval or disapproval of
any of the matters referred to in such minutes.
By order of the Board of Directors
/s/ Marjorie S. Cook
Marjorie S. Cook
Corporate Secretary
Dated: March 27, 1995
17
<PAGE>
REVOCABLE PROXY
SANDY SPRING BANCORP
------------------------------
ANNUAL MEETING OF SHAREHOLDERS
APRIL 19, 1995
------------------------------
The undersigned hereby constitutes and appoints Francis Snowden and
Louisa W. Riggs and each of them, the proxies of the undersigned, with full
power of substitution, to attend the annual meeting of shareholders (the "Annual
Meeting") of Sandy Spring Bancorp ("Bancorp") to be held at the Manor Country
Club, 14901 Carrolton Road, Rockville, Maryland on Wednesday, April 19, 1995 at
3:00 p.m. Eastern Time, or at any adjournment thereof, and to vote all the
shares of stock of Bancorp which the undersigned may be entitled to vote, upon
the following matters:
FOR WITHHOLD
I. The election as directors of all nominees
listed below (except as marked to the / / / /
contrary below).
Susan D. Goff
Solomon Graham, Jr.
Lewis R. Schumann
Charles F. Mess
W. Drew Stabler
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, PRINT THE NOMINEE'S NAME ON THE LINE BELOW.
------------------------------------------------
II. The transaction of such other business as may properly come before the
Annual Meeting or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL DIRECTOR
NOMINEES AS SHOWN IN ITEM I.
- -------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS MARKED HEREIN. IF
NO INSTRUCTIONS TO THE CONTRARY ARE MARKED HEREIN, THIS PROXY WILL BE VOTED FOR
THE ELECTION OF DIRECTORS, AND AS DETERMINED BY A MAJORITY OF THE BOARD OF
DIRECTORS AS TO OTHER MATTERS.
- -------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned shareholder hereby acknowledges receipt of a copy of the
accompanying Notice of Annual Meeting of Shareholders and Proxy Statement and
hereby revokes any proxy or proxies heretofore given. This proxy may be revoked
at any time prior to its exercise.
--------------------------------------
Signature Date
--------------------------------------
Signature Date
--------------------------------------
Signature Date
Please sign exactly as your name appears above. When signing as attorney,
executor, administrator, trustee or guardian, etc., please give your full title.
If the signer is a corporation, please sign the full name by duly appointed
officer. If shares are held jointly, each holder should sign.
- ------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
- ------------------------------------------------------------------------
