<PAGE>
<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. ___)
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of
[x] Definitive Proxy Statement the Commission Only (as
[ ] Definitive Additional Materials permitted by Rule
[ ] Soliciting Material Pursuant 14a-6(e)(2))
to Rule 14a-11(c) or Rule 14a-12
TRI-COUNTY FINANCIAL CORPORATION
- ----------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- ----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) 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 trans-
action 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>
April 12, 1999
Dear Stockholder:
I am pleased to invite you to attend the Annual Meeting of
the Stockholders of Tri-County Financial Corporation (the
"Corporation") to be held in the second floor Board Room at the
main office of Community Bank of Tri-County, 3035 Leonardtown
Road, Waldorf, Maryland on Wednesday, May 12, 1999 at 10:00 a.m.
The attached Notice and Proxy Statement describe the formal
business to be transacted at the meeting. Directors and
officers of the Corporation as well as a representative of
Stegman & Company will be present to respond to any questions
the stockholders may have.
Your vote is important, regardless of the number of shares
you own. ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD 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 meeting.
Sincerely,
/s/ Michael L. Middleton
Michael L. Middleton
President
<PAGE>
<PAGE>
TRI-COUNTY FINANCIAL CORPORATION
3035 LEONARDTOWN ROAD
WALDORF, MARYLAND 20601
(301) 645-5601
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stock-
holders (the "Meeting") of Tri-County Financial Corporation (the
"Corporation") will be held in the second floor Board Room at
the main office of Community Bank of Tri-County, 3035
Leonardtown Road, Waldorf, Maryland on Wednesday, May 12, 1999,
at 10:00 a.m.
A Proxy Card and a Proxy Statement for the Meeting are
enclosed.
The Meeting is for the purpose of considering and acting
upon:
1. The election of two directors of the Corporation;
2. An amendment to the Corporation's 1995 Stock Option
and Incentive Plan to increase the number of shares
reserved for issuance thereunder; and
3. Such other matters as may properly come before the
Meeting or any adjournments thereof.
The Board of Directors is not aware of any other business to
come before the Meeting.
Any action may be taken on any one of the foregoing propo-
sals at the Meeting on the date specified above, or on any date
or dates to which, by original or later adjournment, the Meeting
may be adjourned. The Board of Directors has fixed the close of
business on March 17, 1999, as the record date for determination
of the stockholders entitled to vote at the Meeting and any
adjournments thereof.
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 promptly in the enclosed envelope. The proxy will not be
used if you attend and vote at the Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ H. Beaman Smith
H. BEAMAN SMITH
SECRETARY
Waldorf, Maryland
April 12, 1999
- ----------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE CORPORA-
TION THE EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER TO
ENSURE A QUORUM. AN ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
- ----------------------------------------------------------------<PAGE>
<PAGE>
PROXY STATEMENT
OF
TRI-COUNTY FINANCIAL CORPORATION
3035 LEONARDTOWN ROAD
WALDORF, MARYLAND 20601
(301) 645-5601
- ----------------------------------------------------------------
- ----------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 12, 1999
- ----------------------------------------------------------------
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Tri-County
Financial Corporation ("Tri-County Financial" or the
"Corporation") to be used at the Annual Meeting of Stockholders
of the Corporation (the "Meeting"), which will be held in the
second floor Board Room at the main office of Community Bank of
Tri-County, 3035 Leonardtown Road, Waldorf, Maryland on
Wednesday, May 12, 1999 at 10:00 a.m. The accompanying notice
of meeting and this Proxy Statement are being first mailed to
stockholders on or about April 12, 1999.
- ----------------------------------------------------------------
REVOCATION OF PROXIES
- ----------------------------------------------------------------
Stockholders who execute proxies retain the right to revoke
them at any time. Unless so revoked, the shares represented by
such proxies will be voted at the Meeting and all adjournments
thereof. Proxies may be revoked by written notice delivered in
person or mailed to the Secretary of the Corporation at the
address shown above or by the filing of a later proxy prior to a
vote being taken on a particular proposal at the Meeting. A
proxy will not be voted if a stockholder attends the Meeting and
votes in person. Proxies solicited by the Board of Directors of
the Corporation will be voted in accordance with the directions
given therein. Where no instructions are indicated, proxies
will be voted for the nominees for director set forth below and
in favor of each of the other proposals set forth in this Proxy
Statement for consideration at the Meeting.
- ----------------------------------------------------------------
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
- ----------------------------------------------------------------
Stockholders of record as of the close of business on March
17, 1999 are entitled to one vote for each share then held. As
of March 17, 1999, the Corporation had 793,563 shares of common
stock par value $.01 (the "Common Stock") issued and outstand-
ing.
The following table sets forth, as of April 2, 1999, certain
information as to those persons who were beneficial owners of
more than 5% of the Corporation's outstanding shares of Common
Stock and as to the shares of Common Stock beneficially owned by
each director, each officer named in the summary compensation
table and by all executive officers and directors of the
Corporation as a group. Persons and groups owning in excess of
5% of the Common Stock are required to file certain reports
regarding such ownership with the Corporation and the Securities
and Exchange Commission pursuant to the Securities Exchange Act
of 1934, as amended. Based upon such reports, management knows
of no person, other than those set forth in the table below, who
owned more than 5% of the Corporation's outstanding shares of
Common Stock at April 2, 1999. All beneficial owners listed in
the table have the same address as the Corporation.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF SHARES OF
NAME OF BENEFICIAL BENEFICIAL COMMON STOCK
OWNERS OWNERSHIP (1) OUTSTANDING
- ----------------- ------------- ------------
<S> <C> <C>
Community Bank of Tri-County 60,035 (2) 7.6%
Employee Stock Ownership Plan
("ESOP")
Michael L. Middleton 86,260 (3) 10.5%
C. Marie Brown 28,799 (4) 3.6%
Herbert N. Redmond, Jr. 13,201 (5)(6) 1.7%
Henry A. Shorter, Jr. 28,443 (5) 3.6%
Gordon A. O'Neill 42,670 (5)(6) 5.3%
W. Edelen Gough, Jr. 14,121 (5) 1.8%
H. Beaman Smith 31,051 (5) 3.9%
All Executive Officers and 274,579 (7) 31.0%
Directors as a Group
(9 persons)
<FN>
____________________
(1) Includes certain shares owned by spouses, or as custodian or
trustee for minor children over which shares all officers and
directors as a group effectively exercise sole or shared voting
and investment power, unless otherwise indicated.
(2) 10,461 of these shares are currently held in a suspense account
for future allocation and/or distribution among participants as
the loan used to purchase the shares is repaid. The ESOP trustees
vote all allocated shares in accordance with the instructions of
the participating employees. Unallocated shares and shares for
which no instructions have been received are voted by the trustees
in the manner directed by the ESOP committee.
(3) Includes 29,348 shares of Common Stock which may be received upon
the exercise of stock options. Also includes 7,728 shares of
Common Stock allocated to Mr. Middleton under the ESOP.
(4) Includes 13,344 shares of Common Stock which may be received upon
the exercise of stock options and 4,857 shares of Common Stock
allocated to Ms. Brown under the ESOP.
(5) Includes 2,200, 8,056, 10,056, 4,205 and 7,364 shares that may be
received upon the exercise of options by Directors Redmond,
Shorter, O'Neill, Gough and Smith, respectively.
(6) Includes 10,461 shares of Common Stock held by the ESOP which have
not been allocated to the accounts of participants; these shares
are deemed to be under the control of the Director in connection
with his service as Trustee of the ESOP.
(7) Includes 91,035 shares of Common Stock which may be received upon
the exercise of stock options. Also includes 17,567 shares of
Common Stock allocated to all executive officers and directors as
a group under the ESOP and 10,461 shares held by the ESOP that are
not allocated to the accounts of participants and are deemed to be
under the control of two Directors in connection with their service
as Trustees of the ESOP.
</FN>
</TABLE>
- ----------------------------------------------------------------
PROPOSAL I - ELECTION OF DIRECTORS
- ----------------------------------------------------------------
Tri-County Financial's Board of Directors currently consists
of seven members. The Corporation's Articles of Incorporation
provide that directors are to be elected for terms of three
years, approximately one-third of whom are to be elected
annually.
2<PAGE>
<PAGE>
The Board of Directors has nominated for election as
directors W. Edelen Gough, Jr. and Beaman Smith to serve for
three year terms and until their successors are elected and
qualified. It is intended that the persons named in the proxies
solicited by the Board will vote for the election of the named
nominees. The Corporation's Articles of Incorporation provide
that stockholders may not cumulate their votes for the election
of directors.
If any nominee is unable to serve, the shares represented by
all valid proxies will be voted for the election of such
substitute as the Board of Directors may recommend. At this
time, the Board knows of no reason why any nominee might be
unavailable to serve.
Under the Corporation's Bylaws, directors shall be elected
by a majority of those votes cast by stockholders at the
Meeting. Votes which are not cast at the Meeting, either
because of abstentions or broker non-votes, are not considered
in determining the number of votes which have been cast for or
against the election of a nominee.
The following table sets forth certain information for each
nominee and director continuing in office.
<TABLE>
<CAPTION>
AGE AT FIRST YEAR
DECEMBER ELECTED TERM TO
NAME 31, 1998 DIRECTOR(1) EXPIRE
---- -------- ----------- --------
<S> <C> <C> <C>
BOARD NOMINEES:
W. Edelen Gough, Jr. 70 1970 2002 (2)
H. Beaman Smith 53 1986 2002 (2)
DIRECTORS CONTINUING IN OFFICE:
Herbert N. Redmond, Jr. 58 1997 2000
Henry A. Shorter, Jr. 68 1966 2000
Michael L. Middleton 51 1979 2001
Gordon A. O'Neill 73 1968 2001
C. Marie Brown 56 1991 2001
<FN>
- --------------
(1) Reflects the year first elected as a director of Community
Bank of Tri-County (the "Bank"). With the exception of
Ms. Brown, who was appointed in October 1991, and
Mr. Redmond, who was appointed in May 1997, each director
became a director of the Corporation on the date of its
incorporation in September 1989.
(2) Assuming the individual is elected.
</FN>
</TABLE>
The principal occupation of each director of Tri-County
Financial is set forth below. Unless otherwise noted, all
directors have held the position described below for at least
the past five years and reside in southern Maryland.
W. EDELEN GOUGH, JR. retired from his position as senior
vice president in charge of administration of the Corporation
and the Bank in May 1994. He had served in this capacity with
the Bank since 1970. He is a member and director of the Rotary
Club of Leonardtown, Maryland and a member and Vice President of
the Literary Council of St. Mary's County.
3<PAGE>
<PAGE>
H. BEAMAN SMITH is the Secretary/Treasurer of the Corpora-
tion, President of Accosystems, Inc., a computer software
Company, and Vice President of Fry Plumbing Company of
Washington, D.C. Mr. Smith is a Trustee of the Ferguson
Foundation, a member of the Bryans Road Sports Council and the
Treasurer of the Mayaone Association.
HERBERT N. REDMOND, JR. is the Senior Vice President and
Manager of the St. Mary's County office of the D.H. Steffens
Company, which provides civil engineering, land planning and
land surveying services. He is a member and director of the
Leonardtown Rotary, serves as a director on the Health Share of
St. Mary's County and the St. Mary's County Building Officials
and Code Administrators Appeals Boards, participates in the St.
Mary's County Development Review Forum and is a member of the
St. Mary's County Historical Society.
HENRY A. SHORTER, JR. is a member of the American Legion and
is a retired restaurant owner.
MICHAEL L. MIDDLETON is President and Chief Executive
Officer of the Corporation and the Bank. Mr. Middleton joined
the Bank in 1973 and served in various management positions
until 1979 when he became President of the Bank. Mr. Middleton
is a Certified Public Accountant and holds a Masters of Business
Administration. As President and Chief Executive Officer of the
Bank, Mr. Middleton is responsible for the overall operation of
the Bank pursuant to the policies and procedures established by
the Board of Directors. Mr. Middleton is a member of the Rotary
Club of Waldorf and is a Paul Harris Fellow. Since December
1995, Mr. Middleton has served on the Board of Directors of the
Federal Home Loan Bank of Atlanta and also serves as its Board
Representative to the Council of Federal Home Loan Banks.
GORDON A. O'NEILL is a partner in the insurance agency of
Alger & O'Neill located in La Plata, Maryland. He is a member
of the Charles County Chamber of Commerce and the La Plata
Business Association.
C. MARIE BROWN has been associated with the Bank for 21
years and serves as its Chief Operating Officer. Ms. Brown is
an alumnus of Charles County Community College with an
associates of arts degree in management development. She is a
supporter of the Handicapped and Retarded Citizens of Charles
County, of Zonta and of various administrative committees of the
Hughesville Baptist Church.
- ----------------------------------------------------------------
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
- ----------------------------------------------------------------
The Board of Directors conducts its business through
meetings of the Board and through activities of its committees.
No director of the Corporation attended fewer than 75% of the
total meetings of the Board of Directors and committees on which
such Board member served during this period.
The Corporation's audit committee, consisting of the full
Board of Directors of the Corporation, meets with the
Corporation's independent auditors in connection with its annual
audit and to review the Corporation's accounting and financial
reporting policies and practices. The Board of Directors did
not meet in its capacity as audit committee during 1998.
The Corporation's full Board of Directors acts as a
nominating committee for the annual selection of its nominees
for election as directors. While the Board of Directors will
consider nominees recommended by stockholders, it has not
actively solicited recommendations from the Corporation's
stockholders for nominees nor established any procedures for
this purpose. The Board of Directors met once in its capacity
as nominating committee during 1998.
4
<PAGE>
<PAGE>
- ----------------------------------------------------------------
EXECUTIVE COMPENSATION
- ----------------------------------------------------------------
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash
compensation awarded to or earned in the last three years by the
chief executive officer of the Corporation and the other
executive officers who earned in excess of $100,000 in salary
and bonus in 1998.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
NAME AND ------------------- SECURITIES ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) UNDERLYING OPTIONS COMPENSATION
- ------------------ ---- ------ -------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Michael L. Middleton 1998 $141,979 $93,053 5,024 $ 28,245 (2)
President 1997 138,867 78,540 -- 39,196
1996 134,588 79,945 -- 25,328
C. Marie Brown 1998 $ 94,085 $49,331 3,945 $ 25,074 (3)
Senior Vice President 1997 86,154 38,982 -- 30,008
1996 83,500 39,679 -- 22,202
Gregory C. Cockerham 1998 84,731 41,650 3,755 $ 12,832 (4)
Senior Vice President 1997 76,959 32,645 -- 14,914
1996 73,446 21,812 -- 8,908
<FN>
_________________
(1) Represents bonuses paid pursuant to the Bank's Executive Incentive
Compensation Plan (the "Incentive Plan"). Pursuant to the Incentive Plan,
the Bank, for each year in which the Incentive Plan is in effect, pays each
participant a year-end bonus equal to a percentage of his compensation times
the "Multiplier," as defined below. The percentage of compensation taken
into account for Mr. Middleton, Ms. Brown and Mr. Cockerham for this purpose
is 10%, 8% and 7.5%, respectively. For fiscal 1998, the multiplier was (i)
the sum of (a) 80% of the percentage by which the Corporation's return on
average equity ("ROE") exceeded the median ROE of other members of a peer
group comprised of all other savings associations headquartered in the State
of Maryland, and (b) 20% of the percentage by which the Corporation's ROE
exceeded the median ROE of other members of a peer group comprised of all
other Federal Reserve member banks headquartered in the State of Maryland,
plus (ii) the sum of (a) 80% of the percentage by which the Bank's
nonperforming loans (loans over 90 days delinquent and other real estate
owned) as a percentage of gross loans ("NPL") bettered the median NPL of
other members of the Maryland savings association peer group, and (b) 20%
of the percentage by which the Bank's NPL bettered the median NPL of other
members of the Federal Reserve member bank peer group.
(2) Consists of $10,100 in directors' fees, $12,195 in contributions under the
ESOP, matching contributions under the 401(k) Plan of $4,800 and split-
dollar life insurance premiums of $1,150.
(3) Consists of $10,100 in directors' fees, $10,142 in contributions under the
Bank's ESOP, matching contributions under the 401(k) Plan of $3,992 and
split-dollar life insurance premiums of $840.
(4) Consists of $8,946 in contributions under the Bank's ESOP, matching
contributions under the 401(k) Plan of $3,521 and split-dollar life
insurance premiums of $365.
</FN>
</TABLE>
5<PAGE>
<PAGE>
OPTION GRANTS IN FISCAL YEAR 1998
The following table contains information concerning the
grant of stock options during the year ended December 31, 1998
to the executive officers named in the Summary Compensation
Table set forth above.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES PERCENT OF TOTAL ANNUAL RATES OF
UNDERLYING OPTIONS GRANTED STOCK PRICE
OPTIONS TO EMPLOYEES EXERCISE EXPIRATION APPRECIATION FOR
NAME GRANTED IN FISCAL YEAR PRICE DATE OPTION TERM (1)
- ---- --------- --------------- -------- ----------- -------------------
5% 10%
---- -----
<S> <C> <C> <C> <C> <C> <C>
Michael L. Middleton 2,728 16.01% $24.31 October 30, 2008 $108,029 $172,000
2,296 13.47 24.31 December 31, 2008 90,921 144,763
C. Marie Brown 2,728 16.01 24.31 October 30, 2008 108,029 172,000
1,217 7.14 24.31 December 31, 2008 48,193 76,732
Gregory C. Cockerham 2,728 16.01 24.31 October 30, 2008 108,029 172,000
1,027 6.03 24.31 December 31, 2008 40,669 64,753
<FN>
_________________
(1) Represents the difference between the aggregate exercise price of the options and the aggregate value of
the underlying Common Stock at the expiration date assuming the indicated annual rate of appreciation in
the value of the Common Stock as of the dates of grant, October 30, 1998 and December 31, 1998.
</FN>
</TABLE>
AGGREGATED OPTION SAA EXERCISES IN 1998 AND YEAR-END OPTION/SAA
VALUES
The following table sets forth information concerning
exercises of stock options by the named executive officers
during the year ended December 31, 1998, as well as the value of
options held by such persons at the end of the fiscal year.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FISCAL YEAR-END FISCAL YEAR-END
ACQUIRED VALUE (ALL IMMEDIATELY (ALL IMMEDIATELY
NAME ON EXERCISE REALIZED EXERCISABLE) EXERCISABLE)
---- ----------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Michael L. Middleton 1,836 $29,156 29,602 $386,682
C. Marie Brown 167 1,952 13,127 145,898
Gregory C. Cockerham -- -- 10,782 118,513
</TABLE>
EMPLOYMENT AGREEMENTS
The Bank maintains an employment agreement with Michael L.
Middleton which currently provides for an annual salary of
$160,000. The agreement provides for Mr. Middleton's employment
for a period of five years, subject to annual one-year exten-
ions. The agreement provides for termination for cause or upon
certain events specified in the agreement. The agreement is
also terminable by the Bank without cause, in which case Mr.
Middleton would be entitled to compensation as in effect on the
date of termination up to the expiration date of the agreement
payable in a
6<PAGE>
<PAGE>
lump sum or in periodic payments (at the option of Mr.
Middleton), plus full life, health, disability and other
benefits as in effect on the date of termination up to the
expiration date of the agreement. If, following a change in
control of the Corporation or the Bank, the Bank terminates Mr.
Middleton's employment for any reason other than (i) just cause,
as defined in the agreement or (ii) if the Bank otherwise
changes the capacity or circumstances in which Mr. Middleton is
employed or causes a reduction in his responsibilities,
authority, compensation or other benefits provided under the
agreement without Mr. Middleton's consent, then Mr. Middleton
shall be entitled to receive an amount equal to 2.99 times the
average annual compensation payable by the Bank and includable
in Mr. Middleton's gross income for the most recent five taxable
years. Control refers to certain enumerated events, including
the ownership of 25% or more of the Bank's or Corporation's
Common Stock by any person or group. The agreement provides,
among other things, for annual review of compensation, for
participation in an equitable manner in any stock option plan or
incentive plan to the extent authorized by the Bank's Board of
Directors for its key management employees and for participation
in pension, group life insurance, medical coverage and in other
employee benefits applicable to executive personnel.
The Bank maintains a similar employment agreement with C.
Marie Brown, Senior Vice President of Human Resources and Data
Processing. Ms. Brown's agreement has a three-year term and
provides for a current annual salary of $101,760 and a change in
control payment equal to 2.00 times Ms. Brown's five-year
average annual compensation.
The Bank maintains a similar employment agreement with
Gregory C. Cockerham, Senior Vice President of Lending. Mr.
Cockerham's agreement has a three year term and provides for a
current annual salary of $92,248 and a change in control payment
equal to 2.00 times Mr. Cockerham's five-year average annual
compensation.
The aggregate payment that would be made to Mr. Middleton,
Ms. Brown and Mr. Cockerham assuming the termination of their
employment under the foregoing circumstances at December 31,
1998 would be approximately $422,000, $178,000 and $159,000,
respectively.
- ----------------------------------------------------------------
DIRECTORS' COMPENSATION
- ----------------------------------------------------------------
BOARD FEES
Directors of the Corporation receive fees of $300 per
meeting attended. Members of the Bank's Board of Directors
currently receive fees of $375 per meeting attended and an
annual retainer of $3,500. Members of the Bank's executive
committee receive a fee of $375 per meeting attended. Members
of the Bank's audit committee receive fees of $375 per meeting
attended.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The Corporation maintains a stock option plan for
non-employee directors, adopted by the Board of Directors in
December 1995. Under that plan, the Corporation granted to
non-employee directors options to purchase an aggregate
of 8,750 shares of the Common Stock during 1995. In October,
1998, the Board of Directors approved an amendment to the plan
to reserve an additional 11,000 shares under the plan. Options
to purchase all of these 11,000 shares were granted to directors
during 1998.
DIRECTOR RETIREMENT PLAN
The Bank's Board of Directors has adopted a retirement plan
for members of the Board of Directors of the Bank (the
"Directors' Plan"), effective January 1, 1995. Under the
Directors' Plan, each non-employee director of the Bank will
receive an annual retirement benefit for ten years following his
termination of service on the Bank's Board in an amount equal to
the product of his "Benefit Percentage," his "Vested Percen-
tage," and $3,500. A participant's "Benefit Percentage" is
based on his overall years of service as a non-employee director
of the Bank, and increases in increments of 33-1/3% from 0% for
less than five years of service, to 33-1/3% for five to nine
years of service, to 66-2/3% for 10 to 14 years of service, and
to 100% for 15 or more years of service. A participant's
"Vested Percentage" equals 33-1/3%
7<PAGE>
<PAGE>
if the participant was serving on the Board on January 1, 1995
(the "Effective Date"), increases to 66-2/3% if the participant
completes one year of service after the Effective Date, and
becomes 100% if the participant completes a second year of
service after the Effective Date. However, in the event a
participant retires from service on the Board due to
"disability" (as determined by the Board of Directors of the
Bank) or for any reason after attaining age 65, the partici-
pant's Vested Percentage will become 100% regardless of his
years of service. A participant's vested percentage will also
become 100% in the event of a "change in control" (as defined in
the Directors' Plan). This provision may have the effect of
deferring a hostile change in control by increasing the costs of
acquiring control.
If a participant terminates service on the Board due to
disability, the Bank will pay the participant each year for ten
years an amount equal to the product of his Benefit Percentage
and $3,500. The Directors' Plan also provides death benefits to
a participant's surviving spouse under certain conditions.
The Directors' Plan also establishes a deferred compensation
program for members of the Board of Directors of the Bank.
Under the Directors' Plan, directors of the Bank may elect to
defer all or any portion of the fees and/or salary otherwise
payable to him or her in cash for any calendar year in which the
Directors' Plan is in effect. Deferred amounts will be credited
to a bookkeeping account in the participant's name, which will
also be credited annually with: (a) the investment return which
would have resulted if such deferred amounts had been invested
in savings accounts having a return equal to the highest
interest rate which the Bank pays on certificates of deposit,
regardless of their term, and (b) a deemed matching contribution
by the Bank in an amount equal to the product of the
"Multiplier" (as defined below) for the calendar year, and 1.5%
of the participant's aggregate fee deferrals for the year. The
multiplier equals (i) the sum of (a) 80% of the percentage by
which the Corporation's return on average equity ("ROE") exceeds
the median ROE of other members of a peer group comprised of all
other savings associations headquartered in the State of
Maryland, and (b) 20% of the percentage by which the
Corporation's ROE exceeds the median ROE of other members of a
peer group comprised of all other Federal Reserve member banks
headquartered in the State of Maryland, plus (ii) the sum of (a)
80% of the percentage by which the Bank's nonperforming loans
(loans over 90 days delinquent and other real estate owned) as a
percentage of gross loans ("NPL") betters the median NPL of
other members of the Maryland savings association peer group,
and (b) 20% of the percentage by which the Bank's NPL betters
the median NPL of other members of the Federal Reserve member
bank peer group. Participants may determine the time and form
of benefit payments and may cease future deferrals any time.
Changes in participant elections generally become effective only
as of the following January 1st, except that (i) elections
designating a beneficiary or ceasing future contributions will
be given immediate effect, and (ii) participants may change
elections as to the timing or form of distributions only with
respect to subsequently deferred compensation.
- ----------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- ----------------------------------------------------------------
Pursuant to regulations promulgated under the Securities
Exchange Act of 1934, the Corporation's officers, directors and
persons who own more than 10% of the outstanding Common Stock
are required to file reports detailing their ownership and
changes of ownership in such Common Stock, and to furnish the
Corporation with copies of all such reports. Based solely on
its review of the copies of such reports received during the
past fiscal year or with respect to the last fiscal year, the
Corporation believes that during 1998, all of its officers,
directors and all of its stockholders owning in excess of 10% of
the outstanding Common Stock have complied with the reporting
requirements except for Officers Middleton and Brown, each of
whom inadvertently failed to timely file a single report
covering one transaction.
- ----------------------------------------------------------------
TRANSACTIONS WITH THE CORPORATION AND THE BANK
- ----------------------------------------------------------------
The Bank has followed a policy of offering loans to its
officers, directors and employees for the financing and
improvement of their personal residences as well as consumer
loans. These loans are made in the ordinary course of business
and upon substantially the same terms, including collateral,
interest rate and origination fees, as those prevailing at the
time for comparable transactions, and do not involve more than
the normal risk of collectibility or present any unfavorable
features.
8<PAGE>
<PAGE>
- ----------------------------------------------------------------
PROPOSAL II -- OPTION PLAN AMENDMENT
- ----------------------------------------------------------------
GENERAL. At the 1995 Annual Meeting of Stockholders of the
Corporation, stockholders approved the Tri-County Financial
Corporation 1995 Stock Option and Incentive Plan (the "Option
Plan"). The Board of Directors is seeking stockholder approval
of an amendment to the Option Plan, previously approved by the
Board in October 30, 1998, to increase the number of shares
available for grant thereunder. Stockholder approval of the
amendment is necessary in order to provide employees who receive
options with certain tax advantages under the Internal Revenue
Code. See "Federal Income Tax Consequences."
PURPOSE OF THE AMENDMENT. The amendment was required
because all of the shares initially reserved for issuance under
the Option Plan had been granted. The purpose of the Option
Plan is to advance the interests of the Corporation by providing
select key employees of the Corporation and the Bank with an
opportunity to acquire shares of Common Stock. By encouraging
such stock ownership, the Corporation seeks to attract, retain
and motivate the best available personnel and to provide addi-
tional incentives for such individuals to promote the success of
the Corporation.
DESCRIPTION OF THE OPTION PLAN
EFFECTIVE DATE. The Option Plan became effective on May 3,
1995, the date of approval by the Corporation's stockholders
(the "Effective Date"). The amendment increasing the number of
shares reserved under the Option Plan was effective on October
30, 1998.
ADMINISTRATION. The Option Plan is administered by a
committee (the "Committee"), appointed by the Board of
Directors, consisting of at least three non-employee directors
(within the meaning of applicable provisions of the Securities
Exchange Act of 1934) of the Corporation. The Committee has
discretionary authority to select participants and grant awards,
to determine the form and content of any awards made under the
Option Plan, to interpret the Option Plan, and to make other
decisions necessary or advisable in connection with
administering the Option Plan. All decisions, determinations,
and interpretations of the Committee are final and conclusive on
all persons affected thereby. Members of the Committee will be
indemnified to the full extent permissible under the Corpora-
tion's governing instruments in connection with any claims or
other actions relating to any action taken under the Option
Plan.
ELIGIBLE PERSONS; TYPES OF AWARDS. Under the Option Plan,
the Committee may grant stock options ("Options") and stock
appreciation rights ("SARs") (collectively, "Awards") to
employees whom the Committee designates. As of April 2, 1999,
the Corporation and its affiliates had 16 employees who were
eligible to participate in the Option Plan. At the Committee's
discretion, Options may be awarded pursuant to the Bank's
Incentive Plan, which makes awards of Options based on a formula
that compares certain indicators of the Corporation's perfor-
mance to those of a peer group. See "Executive Compensation --
Summary Compensation Table."
SHARES AVAILABLE FOR GRANTS. Until the amendment was
approved by the Board in October 30, 1998, the Option Plan
authorized the issuance of up to 32,375 shares of Common Stock
upon the exercise of stock options. The amendment increased the
number of shares available for grant thereunder to 111,775
shares. Such shares may either be newly issued shares, treasury
shares or shares held in a grantor trust created by the Corpora-
tion. As of April 2, 1999, options to purchase 49,662 shares of
Common Stock had been granted under the Option Plan. The Common
Stock is not regularly and actively traded in any established
market and there are no regularly quoted bid and asked prices
for the Common Stock. The Corporation believes that the
approximate market value of the Common Stock was $24.31 per
share at December 31, 1998. This value was determined based on
actual sales occurring in the most recent quarter in which 1,000
or more shares were traded.
In the event of any merger, consolidation, recapitalization,
reorganization, reclassification, stock dividend, split-up,
combination of shares, or similar event in which the number or
kind of shares is changed without receipt or payment of
consideration by the Corporation, the Committee will adjust
the number and kind of shares reserved for issuance under the
Option Plan, the number and kind of shares subject to
outstanding Awards and the exercise prices of such
9
<PAGE>
<PAGE>
Awards. Generally, the number of shares as to which SARs are
granted is charged against the aggregate number of shares
available for grant under the Option Plan, provided that, in the
case of an SAR granted in conjunction with an Option, under
circumstances in which the exercise of the SAR results in
termination of the Option and vice versa, only the number of
shares of Common Stock subject to the Option shall be charged
against the aggregate number of shares of Common Stock remaining
available under the Option Plan. If Awards expire, become
unexercisable, or are forfeited for any reason without having
been exercised, the shares of Common Stock subject to such
Awards shall, unless the Option Plan has been terminated, be
available for the grant of additional Awards under the Option
Plan.
OPTIONS. Options may be either incentive stock options
("ISOs") as defined in Section 422 of the Internal Revenue Code,
or options that are not ISOs ("Non-ISOs"). The exercise price
as to any ISO may not be less than the fair market value
(determined under the Option Plan) of the optioned shares on the
date of grant. In the case of a participant who owns more than
10% of the outstanding Common Stock on the date of grant, such
exercise price may not be less than 110% of fair market value of
the shares. As required by federal tax laws, to the extent that
the aggregate fair market value (determined when an ISO is
granted) of the Common Stock with respect to which ISOs are
exercisable by an optionee for the first time during any
calendar year (under all plans of the Corporation and of any
subsidiary) exceeds $100,000, the Options granted in excess of
$100,000 will be treated as Non-ISOs, and not as ISOs. In the
event that the fair market value per share of the Common Stock
falls below the exercise price of previously granted Options (or
SARs), the Committee will have the authority, with the consent
of the optionee, to cancel outstanding Options (and SARs) and to
issue new Options (or SARs) with an exercise price equal to the
then current fair market price per share of the Common Stock.
SARs. An SAR may be granted in tandem with all or part of
any Option granted under the Option Plan, or without any rela-
tionship to any Option. An SAR granted in tandem with an ISO
must expire no later than the ISO, must have the same exercise
price as the ISO and may be exercised only when the ISO is
exercisable and when the fair market value of the shares subject
to the ISO exceeds the exercise price of the ISO. An SAR
granted in tandem with an Option is an alternative right
whereby the exercise of the SAR cancels the participant's right
to exercise the Option to the extent of the number of shares
with respect to which the SAR is exercised and, correspondingly,
the exercise of the Option terminates the SAR to the extent of
the number of shares purchased upon exercise of the Option.
Regardless of whether an SAR is granted in tandem with an
Option, exercise of the SAR will entitle the optionee to
receive, as the Committee prescribes in the grant, all or a
percentage of the difference between (i) the fair market value
of the shares of Common Stock subject to the SAR at the time of
its exercise, and (ii) the fair market value of such shares at
the time the SAR was granted (or, in the case of SARs granted in
tandem with Options, the exercise price). The exercise price as
to any particular SAR may not be less than the fair market value
of the optioned shares on the date of grant.
EXERCISE OF OPTIONS AND SARs. The exercise of Options and
SARs is subject to such terms and conditions as are established
by the Committee in a written agreement between the Committee
and the optionee. In the absence of Committee action to the
contrary, an otherwise unexpired Option shall cease to be
exercisable upon (i) an optionee's termination of employment for
"just cause" (as defined in the Option Plan), (ii) the date
three months after an optionee terminates service for a reason
other than just cause, death, or disability, (iii) the date one
year after an optionee terminates service due to disability,
or (iv) the date two years after an optionee terminates service
due to death. Notwithstanding the provisions of any Option
which provides for its exercise in installments or based on an
optionee's continuous service, such Option shall become
immediately exercisable upon the optionee's death or disability.
An optionee may exercise Options or SARs, subject to provi-
sions relative to their termination and limitations on their
exercise, only by (i) written notice of intent to exercise the
Option or SAR with respect to a specified number of shares of
Common Stock, and (ii) in the case of Options, payment to the
Corporation (contemporaneously with delivery of such notice) in
cash, in Common Stock, or a combination of cash and Common
Stock, of the amount of the exercise price for the number of
shares with respect to which the Option is then being exercised.
Common Stock utilized in full or partial payment of the exercise
price for Options shall be valued at its market value at the
date of exercise, and may consist of shares subject to the
Option being exercised.
10
<PAGE>
<PAGE>
CHANGE IN CONTROL. Notwithstanding the provisions of any
Award which provide for its exercise or vesting in installments
for a period of 60 days beginning on the date of a "change in
control" or an "imminent change in control," all Options and
SARs shall be immediately exercisable and fully vested. With
respect to Options, at the time of a change in control, the
optionee shall, at the discretion of the Committee, be entitled
to receive cash in an amount equal to the excess of the fair
market value of the Common Stock subject to such Option over the
exercise price of such shares, in exchange for the cancellation
of such Options by the optionee.
For the purposes of these provisions, "change in control"
means: (i) the execution of an agreement for the sale of all, or
a material portion, of the assets of the Corporation; (ii) the
execution of an agreement for a merger or recapitalization of
the Corporation or any merger or recapitalization whereby the
Corporation is not the surviving entity; (iii) a change of
control of the Corporation, as otherwise defined or determined
by the Office of Thrift Supervision or regulations promulgated
by it; or (iv) the acquisition, directly or indirectly, of the
beneficial ownership (within the meaning of that term as it is
used in Section 13(d) of the Securities Act of 1934 and the
rules promulgated thereunder) of twenty-five percent (25%) or
more of the outstanding voting securities of the Corporation by
any person, trust entity or group. "Imminent change in control"
refers to any offer or announcement, oral or written, by any
person or persons acting as a group, to acquire control of the
Corporation.
Although these provisions are included in the Option Plan
primarily for the protection of an employee-optionee in the
event of a change in control of the Corporation, they may also
be regarded as having a takeover defensive effect, which may
reduce the Corporation's vulnerability to hostile takeover
attempts and certain other transactions which have not been
negotiated with and approved by the Board of Directors.
CONDITIONS ON ISSUANCE OF SHARES. The Committee has the
discretionary authority to impose, in agreements, such restric-
tions on shares of Common Stock issued pursuant to the Option
Plan as it may deem appropriate or desirable, including but not
limited to the authority to impose a right of first refusal or
to establish repurchase rights or both of these restrictions.
In addition, the Committee may not issue shares unless the
issuance complies with applicable securities laws, and to that
end may require that a participant make certain representations
or warranties.
NONTRANSFERABILITY. Awards may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the laws of descent and distribution,
or pursuant to the terms of a "qualified domestic relations
order" (within the meaning of Section 414(p) of the Code and
the regulations and rulings thereunder).
EFFECT OF DISSOLUTION AND RELATED TRANSACTIONS. In the
event of (i) the liquidation or dissolution of the Corporation,
(ii) a merger or consolidation in which the Corporation is not
the surviving entity, or (iii) the sale or disposition of all or
substantially all of the Corporation's assets (any of the
foregoing to be referred to herein as a "Transaction"), all
outstanding Awards, together with the exercise prices thereof,
will be equitably adjusted for any change or exchange of shares
for a different number or kind of shares which results from the
Transaction. However, any such adjustment will be made in such
a manner as to not constitute a modification, within the meaning
of Section 424(h) of the Internal Revenue Code, of outstanding
ISOs.
DURATION OF THE OPTION PLAN AND GRANTS. The Option Plan has
a term of 10 years from the Effective Date, after which date no
Awards may be granted. The maximum term for an Award is 10
years from the date of grant, except that the maximum term of an
ISO (and an SAR granted in tandem with an ISO) may not exceed
five years if the optionee owns more than 10% of the Common
Stock on the date of grant. The expiration of the Option Plan,
or its termination by the Committee, will not affect any Award
previously granted.
AMENDMENT AND TERMINATION OF THE OPTION PLAN. The Board of
Directors of the Corporation may from time to time amend the
terms of the Option Plan and, with respect to any shares at the
time not subject to Awards, suspend or terminate the Option
Plan. No amendment, suspension, or termination of the Option
Plan will, without the consent of any affected holders of an
Award, alter or impair any rights or obligations under any Award
previously granted.
11
<PAGE>
<PAGE>
NEW PLAN BENEFITS
The following table sets forth certain information regarding
the options received under the Option Plan by the persons named
during 1998. Future benefits under the Option Plan are not
currently determinable.
<TABLE>
<CAPTION>
NUMBER OF SHARES
PARTICIPANT SUBJECT TO
(OR GROUP) EXERCISE PRICE OPTIONS GRANTED
------------ -------------- ----------------
<S> <C> <C>
Michael L. Middleton $ 24.31 5,024
President and Chief Executive Officer
C. Marie Brown $ 24.31 3,945
Chief Operating Officer
Gregory C. Cockerham $ 24.31 3,755
Chief Lending Officer
All Executive Officers as a group (3 persons) $ 24.31 12,724
All Current Employees as a group, excluding $ 24.31 4,316
Mr. Middleton, Ms. Brown and Mr. Cockerham
(13 persons)
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES
ISOs. An optionee recognizes no taxable income upon the
grant of ISOs. If the optionee holds the Option shares for at
least two years from the date the ISO is granted, and for one
year from the date the ISO is exercised, any gain realized on
the sale of the shares received upon exercise of such ISO is
taxed as long-term capital gain. However, the difference
between the fair market value of the Common Stock at the date of
exercise and the exercise price of the ISO will be treated by
the optionee as an item of tax preference in the year of
exercise for purposes of the alternative minimum tax. If an
optionee disposes of the shares before the expiration of either
of the two special holding periods noted above, the disposition
is a "disqualifying disposition." In this event, the optionee
will be required, at the time of the disposition of the Common
Stock, to treat the lesser of the gain realized or the dif-
ference between the exercise price and the fair market value of
the Common Stock at the date of exercise as ordinary income and
the excess, if any, as capital gain.
The Corporation will not be entitled to any deduction for
federal income tax purposes as a result of the grant or exercise
of an ISO, regardless of whether or not the exercise of the ISO
results in liability to the optionee for alternative minimum
tax. However, if an optionee has ordinary income taxable as
compensation as a result of a disqualifying disposition, the
Corporation will be entitled to deduct an equivalent amount.
NON-ISOs. An optionee will not recognize taxable income
upon the grant of a Non-ISO. In the case of such a Non-ISO, an
optionee will recognize ordinary income upon the exercise of the
Non-ISO in an amount equal to the difference between the fair
market value of the shares on the date of exercise and the
option price (or, if the optionee is subject to certain restric-
tions imposed by federal securities laws, upon the lapse of
those restrictions unless the optionee makes a special tax
election within 30 days after the date of exercise to have
the general rule apply). Upon a subsequent disposition of such
shares, any amount received by the optionee in excess of the
fair market value of the shares as of the exercise will be taxed
as capital gain. The Corporation will be entitled to a deduc-
tion for federal income tax purposes at the same time and in the
same amount as the ordinary income recognized by the optionee in
connection
12<PAGE>
<PAGE>
with the exercise of a Non-ISO. Although no assurances can be
given, discounted Non-ISOs are expected to be treated in the
same manner as Non-ISOs for federal income tax purposes.
SARs. The grant of an SAR has no tax effect on the
optionee or the Corporation. Upon exercise of the SARs, how-
ever, any cash or Common Stock received by the optionee in con-
nection with the surrender of his or her SAR will be treated as
compensation income to the optionee, and the Corporation will be
entitled to a business expense deduction for tax purposes for
the amounts treated as compensation income.
RECOMMENDATION; VOTE REQUIRED
In approving the amendment, the Board of Directors deter-
mined that the amendment was necessary to provide future grants
under the Option Plan. The Board of Directors believes the
Option Plan is desirable, cost effective, and produces incen-
tives which will benefit the Corporation and its stockholders.
The Board of Directors is seeking stockholder approval of the
Option Plan amendment in order to satisfy the requirements of
the Code for favorable tax treatment of ISOs. Stockholder
approval of the Option Plan amendment requires the affirmative
vote of the holders of a majority of the shares of the Common
Stock present or represented entitled to vote at the Annual
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE PROPOSAL TO AMEND THE OPTION PLAN TO INCREASE THE NUMBER
OF SHARES OF COMMON STOCK RESERVED FOR AWARDS UNDER THE OPTION
PLAN.
- ----------------------------------------------------------------
RELATIONSHIP WITH INDEPENDENT AUDITORS
---------------------------------------------------------------
Effective on September 19, 1997, the Corporation's Board of
Directors, acting as the Audit Committee, voted to replace the
Corporation's former independent auditors, Deloitte & Touche
LLP, with the Corporation's current independent auditors,
Stegman & Company. In connection with their audit of the
fiscal year ended December 31, 1996 and through the date of
their dismissal, there were no disagreements with Deloitte &
Touche LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure
which, if not resolved to the satisfaction of Deloitte & Touche
LLP, would have caused them to make reference to the subject of
such disagreement in connection with their reports. In
addition, during this period there was no adverse opinion or
disclaimer of opinion or any opinion qualified or modified as to
uncertainty, audit scope or accounting principles.
The Board of Directors presently intends to renew the
Company's arrangements with Stegman & Company to be its
independent auditors for the fiscal year ending December 31,
1999. A representative of Stegman & Company is expected to be
present at the Meeting to respond to appropriate questions and
to make a statement, if so desired.
- ----------------------------------------------------------------
OTHER MATTERS
- ----------------------------------------------------------------
The Board of Directors is not aware of any business to come
before the Meeting other than those matters described above in
this Proxy Statement. However, if any other matters should
properly come before the Meeting, it is intended that proxies in
the accompanying form will be voted in respect thereof by the
person or persons voting the proxies as directed by the Board of
Directors.
- ----------------------------------------------------------------
MISCELLANEOUS
- ----------------------------------------------------------------
The cost of solicitation of proxies will be borne by the
Corporation. In addition to conducting solicitations by mail,
directors, officers, and regular employees of the Corporation
may solicit proxies personally or by telegraph or telephone
without additional compensation.
13<PAGE>
<PAGE>
The Corporation's Annual Report to Stockholders, including
financial statements, accompanies this proxy statement. Such
Annual Report is not to be treated as a part of the proxy
solicitation material nor as having been incorporated herein by
reference.
- ----------------------------------------------------------------
STOCKHOLDER PROPOSALS
- ----------------------------------------------------------------
To be eligible for inclusion in the Corporation's proxy
materials for next year's Annual Meeting of Stockholders, any
stockholder proposal to take action at such meeting must be
received at the Corporation's main office at 3035 Leonardtown
Road, Waldorf, Maryland 20601 no later than December 12, 1999.
Any such proposals shall be subject to the requirements of the
proxy rules adopted under the Securities Exchange Act of 1934,
as amended.
Stockholder proposals, other than those submitted pursuant
to the Exchange Act, must be submitted in writing, delivered or
mailed by first class United States mail, postage prepaid, to
the secretary of the Corporation not fewer than 30 days nor more
than 60 days prior to any such meeting; provided, however, that
if notice or public disclosure of the meeting is given fewer
than 40 days before the meeting, such written notice shall be
delivered or mailed to the secretary of the Corporation not
later than the close of the 10th day following the day on which
notice of the meeting was mailed to shareholders.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ H. Beaman Smith
H. BEAMAN SMITH
SECRETARY
Waldorf, Maryland
April 12, 1999
- ----------------------------------------------------------------
FORM 10-K
- ----------------------------------------------------------------
A COPY OF THE CORPORATION'S FORM 10-K AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION WILL BE FURNISHED WITHOUT
CHARGE TO STOCKHOLDERS AS OF MARCH 17, 1999, UPON WRITTEN
REQUEST TO THE SECRETARY, TRI-COUNTY FINANCIAL CORPORATION, 3035
LEONARDTOWN ROAD, WALDORF, MARYLAND 20601
- ----------------------------------------------------------------
14
<PAGE>
<PAGE>
REVOCABLE PROXY
TRI-COUNTY FINANCIAL CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
MAY 12, 1999
The undersigned hereby appoints Michael L. Middleton and
Herbert N. Redmond, Jr., with full powers of substitution, to
act as attorneys and proxies for the undersigned to vote all
shares of Common Stock of Tri-County Financial Corporation (the
"Corporation") that the undersigned is entitled to vote at the
Annual Meeting of Stockholders (the "Meeting") to be held in the
second floor Board Room at the main office of Community Bank of
Tri-County, 3035 Leonardtown Road, Waldorf, Maryland on
Wednesday, May 12, 1999 at 10:00 a.m. and at any and all
adjournments thereof, as follows:
VOTE
FOR WITHHELD
--- --------
1. The election as directors of all [ ] [ ]
nominees listed below (except as
marked to the contrary).
W. Edelen Gough, Jr.
H. Beaman Smith
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY
NOMINEE, WRITE THAT NOMINEE'S NAME ON THE
LINE BELOW.
--------------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
2. An amendment to the
Corporation's 1995 Stock
Option and Incentive Plan
to increase the number of
shares reserved for
issuance thereunder. [ ] [ ] [ ]
The Board of Directors recommends a vote "FOR" the listed
propositions.
- ----------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSITIONS STATED.
IF ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY
WILL BE VOTED BY THOSE NAMED IN THIS PROXY AS DIRECTED BY THE
BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING. THIS
PROXY ALSO CONFERS DISCRETIONARY AUTHORITY ON THE PROXY HOLDERS
TO VOTE WITH RESPECT TO APPROVAL OF THE MINUTES OF THE PRIOR
MEETING OF STOCKHOLDERS, THE ELECTION OF ANY PERSON AS DIRECTOR
WHERE THE NOMINEE IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT
SERVE, AND MATTERS INCIDENT TO THE CONDUCT OF THE 1998 ANNUAL
MEETING.
- ----------------------------------------------------------------<PAGE>
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the
Meeting or at any adjournment thereof and after notification to
the Secretary of the Corporation at the Meeting of the
stockholder's decision to terminate this proxy, then the power
of said attorneys and proxies shall be deemed terminated and of
no further force and effect.
The undersigned acknowledges receipt from the Corporation
prior to the execution of this proxy of notice of the Meeting, a
proxy statement dated April 12, 1999, and an annual report.
Dated: _______________________, 1999
____________________________ ____________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
____________________________ ____________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on the enclosed card.
When signing as attorney, executor, administrator, trustee or
guardian, please give your full title. If shares are held
jointly, each holder should sign.
- ----------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE
ENCLOSED POSTAGE-PREPAID ENVELOPE.
- ----------------------------------------------------------------
