<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:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
[ ] Definitive Proxy Statement by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SANDY SPRING BANCORP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
SANDY SPRING BANCORP, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(iii), 14a-6(i)(1), 14a-6(i)(2), or
Item 22(a)(2) of Schedule 14A.
[ ] $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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4. Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5. Total Fee Paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
[ ] 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, INC.
17801 GEORGIA AVENUE
OLNEY, MARYLAND 20832
(301) 774-6400
March 21, 1996
Dear Shareholder:
We invite you to attend the 1996 Annual Meeting of Shareholders of Sandy
Spring Bancorp, Inc. to be held at the Manor Country Club, 14901 Carrolton Road,
Rockville, Maryland on Wednesday, April 17, 1996 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 1995.
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,
[INSERT SIGNATURE HERE]
Willard H. Derrick
Chairman of the Board
- --------------------------------------------------------------------------------
<PAGE>
SANDY SPRING BANCORP, INC.
17801 GEORGIA AVENUE
OLNEY, MARYLAND 20832
(301) 774-6400
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 17, 1996
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of Shareholders (the
"Annual Meeting") of Sandy Spring Bancorp, Inc. ("Bancorp") will be held on
Wednesday, April 17, 1996, 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 1995 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;
(2) An amendment to the Articles of Incorporation of Bancorp to increase
the number of shares of capital stock authorized to be issued by
Bancorp from 6,000,000 shares to 15,000,000 shares; and
(3) 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 11, 1996 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
[INSERT SIGNATURE HERE]
Marjorie S. Cook
Corporate Secretary
Olney, Maryland
March 21, 1996
- --------------------------------------------------------------------------------
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, INC.
17801 GEORGIA AVENUE
OLNEY, MARYLAND 20832
(301) 774-6400
____________________
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 17, 1996
____________________
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, Inc. ("Bancorp")
to be used at the 1996 Annual Meeting of Shareholders (the "Annual Meeting"), to
be held on Wednesday, April 17, 1996, 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 21, 1996 to shareholders of record as of the
close of business on March 11, 1996.
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 AND FOR PROPOSAL II TO
AMEND THE ARTICLES OF INCORPORATION OF BANCORP TO INCREASE THE NUMBER OF SHARES
OF CAPITAL STOCK THAT BANCORP IS AUTHORIZED TO ISSUE FROM 6,000,000 SHARES TO
15,000,000 SHARES. 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 11, 1996 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 2,000 record holders of the Common Stock as of
such date. The number of shares outstanding on [FEBRUARY 15, 1996] was
[4,329,828]. 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, 1995 accompanies this Proxy Statement. BANCORP IS REQUIRED TO FILE
AN ANNUAL REPORT ON FORM 10-K FOR ITS YEAR ENDED DECEMBER 31, 1995 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, INC., 17801 GEORGIA AVENUE, OLNEY,
MARYLAND 20832.
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information as of February 15, 1996
with respect to the shares of Common Stock beneficially owned by each director
continuing in office 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 upon the most recent report of beneficial
ownership of securities filed with the Securities and Exchange Commission. 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(1)(2)(3)(4) OUTSTANDING
---- --------------------- -------------
<S> <C> <C>
Andrew N. Adams, Jr. 16,200 *
John Chirtea 8,668 *
Willard H. Derrick (5) 77,181 1.77%
Susan D. Goff 205 *
Solomon Graham, Jr. 759 *
Joyce R. Hawkins 15,208 *
Hunter R. Hollar 15,544 *
Thomas O. Keech (5) 36,612 *
Charles F. Mess 4,040 *
Robert L. Mitchell 4,495 *
Robert L. Orndorff, Jr. 43,159 *
Lewis R. Schumann 3,050 *
W. Drew Stabler 17,275 *
James H. Langmead 2,928 *
All directors and executive officers
as a group (18 persons) 266,024 6.06%
- -------------------
</TABLE>
* Less than 1% of Bancorp's outstanding Common Stock.
(1) 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 February 15,
1996. Includes 69,800 shares of Common Stock subject to outstanding
options which are exercisable within 60 days of February 15, 1996, of which
Willard H. Derrick, Hunter R. Hollar, Thomas O. Keech and James H. Langmead
hold options to purchase 22,000 shares, 14,500 shares, 17,800 shares and
2,500 shares of Common Stock, respectively. Also includes 9,781 shares and
5,036 shares of Common Stock owned by Messrs. Derrick and Keech,
respectively, and 18,189 shares of Common Stock owned by other executive
officers, as participants in Bancorp's Cash and Deferred Profit Sharing
Plan and Trust.
(2) 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.
(3) Fractional shares resulting from participation in the dividend reinvestment
plan have been rounded to the nearest whole share.
(4) Share amounts have been retroactively adjusted to reflect the 2-for-1 stock
split declared on March 29, 1995.
(5) Retired as an executive officer of Bancorp effective December 31, 1995, but
will continue on the Board of Directors assuming election at the Annual
Meeting.
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 1995, two former
directors -- Francis Snowden and Louise W. Riggs -- retired from the Board of
Directors because they reached the mandatory retirement age of 70 specified in
Bancorp's Bylaws, and two new directors -- Joyce R. Hawkins and Thomas O. Keech
- -- were appointed by the Board of Directors. At the Annual Meeting a total of
five director-nominees will be elected for three-year terms. 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 Director's 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, 1995, 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
five nominees listed below for terms of three years, 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.
<TABLE>
<CAPTION>
MEMBER TERM
POSITION(S) HELD OF BOARD CURRENTLY
NAME AGE WITH BANCORP SINCE (1) EXPIRES
- ---- --- ---------------- --------- ---------
DIRECTOR-NOMINEES FOR TERMS TO EXPIRE AT
THE 1999 ANNUAL MEETING
<S> <C> <C> <C> <C>
John Chirtea 58 Director 1990 1996
Willard H. Derrick 69 Chairman of the Board 1970 1996
Joyce R. Hawkins 62 Director 1995 1996
Hunter R. Hollar 47 President, Chief 1990 1996
Executive Officer and
Director
Thomas O. Keech 62 Director 1995 1996
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
MEMBER TERM
POSITION(S) HELD OF BOARD CURRENTLY
NAME AGE WITH BANCORP SINCE (1) EXPIRES
- ---- --- ---------------- --------- ---------
CONTINUING DIRECTORS
<S> <C> <C> <C> <C>
Andrew N. Adams, Jr. 69 Director 1968 1997
Robert L. Mitchell 59 Director 1991 1997
Robert L. Orndorff, Jr. 39 Director 1991 1997
Susan D. Goff 50 Director 1994 1997
Solomon Graham, Jr. 52 Director 1994 1998
Charles F. Mess 57 Director 1987 1998
Lewis R. Schumann 52 Director 1994 1998
W. Drew Stabler 58 Director 1986 1998
- --------------------
</TABLE>
(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.
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:
JOYCE R. HAWKINS is a realtor with Weichert Realtors.
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.
THOMAS O. KEECH retired as Vice President of Bancorp and Executive Vice
President of the Bank effective December 31, 1995. Until recently, Mr. Keech
had served as Vice President and Treasurer of Bancorp and Executive Vice
President and Chief Financial Officer of the Bank. He has been employed by the
Company since 1980. Mr. Keech is a Certified Public Accountant.
4
<PAGE>
CONTINUING DIRECTORS:
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.
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.
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.
CORPORATE GOVERNANCE AND OTHER MATTERS
During 1995, each of the Company's and the Bank's Boards of Directors held
12 regular meetings.
The average attendance was 94% 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 during
the period of their service during the year.
Bank directors who are not employed by the Bank receive an annual retainer
of $3,000 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 1995 were as follows:
AUDIT COMMITTEE - The Audit Committee is composed of John Chirtea,
Chairman, Susan D. Goff, Solomon Graham, Jr., Charles F. Mess, and Robert L.
Mitchell. 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 1995, four meetings were held.
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.
5
<PAGE>
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
1995, two 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 1995, four
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 1995 exceeded $100,000 for services rendered in all capacities to Bancorp and
its subsidiaries.
<TABLE>
<CAPTION>
Long-Term
Compensation
---------------
Annual Compensation Stock Option All Other
Name and Principal -------------------
Position in 1995 Year Salary Bonus Grants (Shares) Compensation(1)
- ----------------------------------- ---- ---------- ------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Willard H. Derrick (2) 1995 $121,538 $ 7,500 -- $46,222
Chairman of the Board 1994 180,000 20,000 -- 7,500
of Bancorp and the Bank 1993 180,845 30,000 -- 11,540
Hunter R. Hollar 1995 167,335 15,000 1,500 7,425
President and Chief Executive 1994 162,000 20,000 3,000 7,500
Officer of Bancorp and the Bank 1993 149,600 20,000 3,000 9,714
Thomas O. Keech (3) 1995 120,631 9,000 -- 6,635
Vice President of Bancorp 1994 116,600 12,000 2,000 6,748
and Executive Vice President 1993 112,390 15,000 1,800 7,049
of the Bank
James H. Langmead 1995 95,115 7,500 1,000 5,079
Vice President and Treasurer 1994 85,000 7,500 1,500 4,500
of Bancorp and Senior Vice 1993 75,753 5,000 -- 3,104
President and Chief Financial
Officer of the Bank
- --------------------
</TABLE>
(1) The amount shown in this column for Mr. Derrick includes $26,237, the
cost of an automobile given to him in connection with his retirement,
compensation of $7,425 under Bancorp's Cash and Deferred Profit Sharing
Plan and Trust, and other compensation of $12,560. Amounts shown in this
column for the other executive officers pertain to compensation under
Bancorp's Cash and Deferred Profit Sharing Plan and Trust. The amount of
indirect compensation in the form of personal benefits received in 1995 by
Messrs. Hollar, Keech and Langmead did not exceed 10% of the cash
compensation paid to or accrued for each such executive officer.
(2) Mr. Derrick retired as an officer of Bancorp and the Bank effective
December 31, 1995. Mr. Derrick will remain Chairman of the Board of
Bancorp and the Bank assuming re-election at the Annual Meeting.
(3) Mr. Keech retired as Vice President of Bancorp and Executive Vice President
of the Bank effective December 31, 1995. In April 1995, Mr. Keech was
appointed to the Boards of Directors of Bancorp and the Bank.
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 270,000 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 1, 1996, options for 24,000 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 1, 1996,
options for 28,000 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 Mr. Hollar, Mr. Derrick and Mr. Keech.
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 1995
---------------------
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>
Individual Grants Potential Realizable
-------------------------- Value at Assumed
% of Total Annual Rates of Stock
Options Options Exercise Price Appreciation
Granted Granted to or for Option Term
(Number Employees Base Price Expiration ---------------------
Name of Shares)(1) in Year ($ per Share) Date 5% 10%
- -------------------- ------------- ---------- ------------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Willard H. Derrick -- --% $ -- -- $ - $ --
Hunter R. Hollar 1,500 28.6 37.00 12/20/05 34,905 88,455
Thomas O. Keech -- -- -- -- -- --
James H. Langmead 1,000 19.0 37.00 12/20/05 23,270 58,970
- --------------------
</TABLE>
(1) In each case, the exercise price was equal to the fair market value of the
Common Stock on the date of grant. All options granted were exercisable
immediately.
AGGREGATED OPTION EXERCISES IN
1995 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(1)
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 4,000 $122,000 22,000 $487,000
Hunter R. Hollar -- -- 14,500 188,500
Thomas O. Keech 2,000 61,000 17,800 339,100
James H. Langmead -- -- 2,500 13,750
- --------------------
</TABLE>
(1) Difference between fair market value of underlying securities at exercise
or year-end and the exercise or base price.
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, 1995. 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>
Highest 5-Year Years of Credited Service at Retirement
------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Average Earnings 15 20 25 30 35 40 and above
- ------------------ ------- ------- -------- -------- -------- ------------
$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, 1996, Bancorp's executive officers shown
in the compensation table had accumulated the following years of credited
service toward retirement: Mr. Hollar - 5 years and Mr. Langmead - 4 years. Mr.
Derrick and Mr. Keech retired on December 31, 1995.
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 participated in the SERP
during 1995: Willard H. Derrick, Hunter R. Hollar, and Thomas O. Keech. Mr.
Derrick and Mr. Keech retired on December 31, 1995, and in 1996 received lump-
sum payments of $132,233 and $116,741, respectively, in lieu of future payouts
under the SERP. 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%). 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. Hollar, an annual amount of
$109,420 is projected to be paid over a 10-year period at age 65.
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
10
<PAGE>
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 $167,335 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.
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
11
<PAGE>
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, 1995, 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 $500,332 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.
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. 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 1995 salary levels of Bancorp's executive officers
were established consistent with this compensation policy.
Mr. Hollar became Chief Executive Officer of Bancorp and the Bank effective
January 1, 1994. Mr. Willard H. Derrick served as Chairman of the Boards and
Chief Executive Officer of Bancorp and the Bank until January 1, 1994. During
1995, Mr. Derrick served as Chairman of the Boards and an officer of Bancorp and
the Bank with management responsibilities relating to capital and expansion
planning, lending and trust management, and shareholder relations, among
others. Mr. Derrick retired as an officer of Bancorp and the Bank effective
December 31, 1995, but continues to be Chairman of the Boards of Bancorp and the
Bank.
12
<PAGE>
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.
The Committee conducted a review of executive officer base compensation in
March 1995. Changes in base compensation for 1995 were effective on April 1. In
its review, the Committee determined that the performance of Mr. Hollar was
excellent, based upon the 1994 financial performance of Bancorp, including the
growth in assets, income, and capitalization during 1994; the financial
performance trends for 1994 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 1995; Mr. Hollar's continued involvement 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, Mr. Hollar's salary was increased by 4.5% effective April 1, 1995,
to $169,300.
Bonuses for 1995 were awarded in December 1995 based on the executive
officer's performance and the performance of Bancorp and the Bank for the year
1995 consistent with Bancorp policy described above. Bonuses of $7,500,
$15,000, $9,000, and $7,500 were awarded to Mr. Derrick, Mr. Hollar, Mr. Keech,
and Mr. Langmead respectively, in 1995.
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 1995, incentive
stock options for 5,250 shares were granted at an exercise price of $37.00 per
share, including options for 1,500 shares granted to Mr. Hollar and 1,000
granted to Mr. Langmead.
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 1995, the Compensation committee adopted a formula
to establish the amount of aggregate contribution to the plan based upon
measures of loan and deposit growth, profitability, asset quality, and
productivity ratios compared with those measures for the prior year and target
levels established for the Company in connection with its financial planning
process. The Compensation Committee determined the amount of the aggregate
contribution to the Deferred Profit Sharing Plan for years before 1995 based
upon the annual profits of the Bank, its regulatory capital levels, and other
performance factors, but did not employ a set formula for these determinations.
For 1995, the Compensation Committee recommended and the Board of Directors of
the Bank approved, an aggregate contribution of approximately $400,000 or 5.0%
of annual compensation of eligible participants, based upon the results of the
formula adopted in 1995.
No member of the Compensation Committee is a former or current officer or
employee of Bancorp or the Bank.
March ___, 1996 COMPENSATION COMMITTEE
W. Drew Stabler, Chairman
John Chirtea
Charles F. Mess
Robert L. Mitchell
Robert L. Orndorff, Jr.
13
<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, 1990 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, 1990 in the Common
Stock and the securities included in the indexes.
CUMULATIVE TOTAL SHAREHOLDER RETURN
COMPARED WITH PERFORMANCE OF SELECTED INDEXES
DECEMBER 31, 1990 THROUGH DECEMBER 31, 1995
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Bancorp $100.0 $109.3 $133.0 $164.8 $179.6 $273.1
NASDAQ Stock Market Index 100.0 160.6 186.9 214.5 209.7 296.3
(U.S. Companies)
NASDAQ Bank Stock Index 100.0 164.1 238.9 272.4 271.4 404.4
- ---------------------------------------------------------------------------
</TABLE>
14
<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 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 Lewis R. Schumann is a partner in the law firm of Miller, Miller
and Canby, Chtd., which Bancorp and the Bank have retained during 1995 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.
AMENDMENT TO ARTICLES OF INCORPORATION
TO INCREASE AUTHORIZED CAPITAL STOCK
FROM 6,000,000 SHARES TO 15,000,000 SHARES
(PROPOSAL II)
The Board of Directors is seeking shareholder approval of an amendment to
Bancorp's Articles of Incorporation to increase the authorized capital stock
from 6,000,000 shares to 15,000,000 shares. The Board of Directors is proposing
the amendment to ensure that a sufficient amount of capital stock is available
for issuance in the future by the Board of Directors. The Board of Directors
believes that the proposed increase in the authorized capital stock is in the
best interest of Bancorp and unanimously recommends a vote FOR the proposed
amendment.
DESCRIPTION OF THE AMENDMENT
The Board of Directors proposes to amend the first sentence of Article V of
the Articles of Incorporation to read in its entirety as follows:
The aggregate number of shares of all classes of capital stock which
the corporation has authority to issue is 15,000,000 shares of capital
stock, $1.00 par value per share, amounting in aggregate par value to
$15,000,000.
PURPOSE OF AMENDMENT
The Certificate of Incorporation currently authorizes the issuance of up to
6,000,000 shares of capital stock. All of the authorized shares are initially
classified as common stock. As of the record date, the Company had 4,339,855
shares of Common Stock outstanding and 392,410 shares of Common Stock reserved
for issuance to directors, officers and employees under various compensation and
benefit plans, which left only 1,267,735 authorized, unissued and unreserved
shares available for stock dividends, stock splits or for other corporate
purposes. In the future, Bancorp may issue capital stock in connection with,
among other things, corporate acquisitions and other transactions, stock splits,
stock dividends, and under existing and future benefit plans. While Bancorp
currently does not have any plans to issue additional capital stock (other than
pursuant to various compensation and benefit plans currently in existence), the
Board of Directors may determine that the issuance of additional stock in the
future, either in connection with a corporate acquisition or otherwise, is in
the best interests of Bancorp. In that event, Bancorp could need a substantial
amount of capital stock available for issuance, and the 1,267,735 shares
available as of the record date could be insufficient. As a result, the Board
is proposing an amendment of the Articles of Incorporation
15
<PAGE>
to increase the authorized capital stock from 6,000,000 to 15,000,000 shares,
which would increase the authorized, unissued and unreserved capital stock
available for issuance from 1,267,735 to 10,267,735 shares. Authorized,
unissued and unreserved capital stock may be issued from time to time for any
proper purpose without further action of the shareholders, except as required by
the Articles of Incorporation and applicable law. Although the newly authorized
shares will initially be classified as common stock, Bancorp's Articles of
Incorporation authorizes the Board of Directors to reclassify any unissued
shares of capital stock by setting or changing in any one or more respects the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to distributions and dividends, qualifications or terms or
conditions of redemption of such stock.
Each share of Common Stock authorized for issuance has the same rights as,
and is identical in all respects to, each other share of Common Stock. The
newly authorized shares of capital stock will not affect the rights, such as
voting and liquidation rights, of the shares of Common Stock currently
outstanding. Shareholders will not have preemptive rights to purchase any
subsequently issued shares of capital stock. Bancorp has no current plans to
issue the newly authorized shares of capital stock.
The ability of the Board of Directors to issue additional shares of capital
stock without additional shareholder approval may be deemed to have an anti-
takeover effect, since unissued and unreserved shares of capital stock could be
issued by the Board of Directors in circumstances that may have the effect of
deterring takeover bids. The Board of Directors does not intend to issue any
additional shares of capital stock except on terms which it deems in the best
interests of Bancorp and its shareholders.
VOTE REQUIRED AND RECOMMENDATION OF BOARD OF DIRECTORS
In accordance with the Maryland General Corporation Law and the Articles of
Incorporation, the proposed amendment to the Articles of Incorporation must be
approved by two-thirds of the outstanding stock entitled to vote thereon. It is
expected that substantially all of the 204,399 shares, or 4.71%, of the Common
Stock outstanding as of the record date over which directors and executive
officers of Bancorp exercise voting power will be voted for the proposed
amendment. The Board of Directors unanimously recommends that shareholders vote
FOR the proposed amendment.
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 1997 Annual Meeting of Shareholders must be received by
Bancorp at its executive offices not later than November 21, 1996 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 director, provided that such
nominations are made in writing and received by Bancorp at its executive offices
not later than December 23, 1996. 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
16
<PAGE>
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.
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 1995, 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, 1996. 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 1995
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
[INSERT SIGNATURE HERE]
Marjorie S. Cook
Corporate Secretary
Dated: March __, 1996
17
<PAGE>
REVOCABLE PROXY
SANDY SPRING BANCORP, INC.
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ANNUAL MEETING OF SHAREHOLDERS
APRIL 17, 1996
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The undersigned hereby constitutes and appoints _________________ and
_______________ 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, Inc. ("Bancorp") to be held at the Manor
Country Club, 14901 Carrolton Road, Rockville, Maryland on Wednesday, April 17,
1996 at __:__ _.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
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I. The election as directors of all nominees
listed below (except as marked to the [ ] [ ]
contrary below).
John Chirtea Hunter R. Hollar
Willard H. Derrick Thomas O. Keech
Joyce R. Hawkins
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
PRINT THE NOMINEE'S NAME ON THE LINE BELOW.
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FOR AGAINST ABSTAIN
--- ------- -------
II. Approval of an amendment to Bancorp's Articles
of Incorporation to increase the number of shares
of capital stock authorized to be issued by
Bancorp from 6,000,000 to 15,000,000 shares. [ ] [ ] [ ]
III. 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 AND A VOTE "FOR" APPROVAL OF THE AMENDMENT TO
BANCORP'S ARTICLES OF INCORPORATION AS SHOWN IN ITEM II.
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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.
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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.
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Signature Date
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Signature Date
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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.
________________________________________________________________________________
