<PAGE>
UNION NATIONAL BANCORP, INC.
117 EAST MAIN STREET
WESTMINSTER, MARYLAND 21157
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 20, 1999
THE ANNUAL MEETING OF THE STOCKHOLDERS OF UNION NATIONAL BANCORP, INC. WILL
BE HELD AT COMFORT INN, 451 WMC DRIVE, WESTMINSTER, MARYLAND 21157 ON TUESDAY,
APRIL 20, 1999 AT 10:00 A.M. FOR THE FOLLOWING PURPOSES:
(1) TO ELECT THE BOARD OF DIRECTOR NOMINEES WHOSE TERMS HAVE EXPIRED, AS
MORE FULLY DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT.
(2) TO RATIFY THE APPOINTMENT OF KELLER BRUNER & COMPANY, LLP AS
INDEPENDENT AUDITORS OF UNION NATIONAL BANCORP, INC. FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1999.
(3) TO CONSIDER AND ACT UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE ANNUAL MEETING.
PLEASE SIGN, DATE AND MAIL THE ACCOMPANYING PROXY IN THE ENCLOSED,
SELF-ADDRESSED, STAMPED ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING IN PERSON. YOU MAY WITHDRAW YOUR PROXY AT THE MEETING SHOULD YOU BE
PRESENT AND DESIRE TO VOTE YOUR SHARES IN PERSON. YOUR COOPERATION IS
RESPECTFULLY REQUESTED.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ K. Wayne Lockard
K. WAYNE LOCKARD
Chairman of the Board
March 20, 1999
<PAGE>
UNION NATIONAL BANCORP, INC.
117 EAST MAIN STREET
WESTMINSTER, MARYLAND 21157
PROXY STATEMENT
SOLICITATION OF PROXIES
This Proxy Statement is being mailed on or about March 20, 1999, to the
stockholders of Union National Bancorp, Inc. (the "Company") in connection with
the solicitation of proxies by the Board of Directors to be used at the Annual
Meeting of Stockholders to be held on Tuesday, April 20, 1999, at 10:00 a.m.
local time, and at any adjournments or postponements thereof, at the Comfort
Inn, 451 WMC Drive, Westminster, Maryland 21157 ("Annual Meeting").
The close of business on March 17, 1999 has been fixed as the record date
("Record Date") for the determination of stockholders of the Company entitled to
receive notice of and to vote at the Annual Meeting. On the Record Date there
were 1,853,748 shares of the Company's Common Stock, $.01 par value per share
("Common Stock") outstanding. Each share of Common Stock outstanding on the
Record Date is entitled to one vote upon each matter properly submitted at the
Annual Meeting.
At the Annual Meeting, the holders of Common Stock will be asked to elect
directors and ratify the selection of Keller Bruner & Company, LLP as the
Company's independent auditors for the year ending December 31, 1999.
The Board of Directors has selected William R. Klinger and Ethan A. Seidel,
or either of them, to act as proxies with full power of substitution. If no
instructions are specified in the proxy, it is the intention of the persons
named therein to vote FOR the election of the nominees named herein as directors
of the Company and to vote FOR the ratification of the selection of Keller
Bruner & Company, LLP as independent auditor. Proxies may be revoked by a
stockholder at any time prior to its use by execution of another proxy bearing a
later date, or by written notice delivered to the Secretary at the Company's
address or at the meeting. The cost of the solicitation of proxies will be borne
by the Company. In addition to the use of the mails, proxies may be solicited
personally, or by telephone or telegraph, by officers, directors and regular
employees of the Company or of The Union National Bank of Westminster (the
"Bank"), none of whom will receive additional compensation for such services.
The Company also may arrange for brokerage houses and other custodians, nominees
and fiduciaries to send proxies and proxy materials to their principals at the
expense of the Company.
ELECTION OF DIRECTORS (PROPOSAL NO. 1)
As of the conclusion of the 1998 Annual Meeting of the Company's
Stockholders, the Board of Directors of the Company consisted of 15 directors.
The Company's Articles of Incorporation provide that the Board of Directors is
divided into three classes, as nearly equal in number as possible, with one
class of directors being elected at each Annual Meeting. Consistent with those
articles, the Board of Directors passed a resolution effective as of April 1999
to place Virginia W. Smith in the three year class of directors whose terms
expire in April 2000 subject to the condition of her continued employment as
President and CEO of the Company.
Directors are elected by a plurality of the votes cast by the holders of
shares of Common Stock present in person or represented by proxy at the Annual
Meeting, with a quorum present. For purposes of the election of directors,
abstentions and broker non-votes do not affect the plurality vote. Each nominee
has consented to serve as a director, if elected. The Board of Directors has no
reason to believe that any nominee will be unwilling or unable to serve as a
director but, if for any reason any nominee is not willing or able to serve as a
director, the accompanying proxy will be voted for a substitute nominee chosen
by the Board of Directors. The Board of Directors recommends a vote FOR such
nominees.
<PAGE>
INFORMATION AS TO NOMINEES & INCUMBENT DIRECTORS
<TABLE>
<CAPTION>
AGE DIRECTOR SINCE POSITION(S) HELD
--- ---------------------------------------------
<S> <C> <C>
NOMINEES FOR ELECTION--TERM EXPIRING IN 2002
Wesley D. Blakeslee.......................................... 51 1988 Director
Dean H. Griffin.............................................. 64 1984 Director
Ethan A. Seidel.............................................. 56 1995 Director
Ellen Miller................................................. 51 1995 Director
INCUMBENT DIRECTORS--TERM EXPIRING IN 2000
Virginia W. Smith............................................ 49 1996 Director & Chief Executive Officer
William R. Klinger........................................... 43 1988 Director
Bernard L. Jones, Sr......................................... 57 1991 Director
Robert L. Bullock............................................ 62 1983 Director
David L. Brauning............................................ 61 1988 Director
INCUMBENT DIRECTORS--TERM EXPIRING IN 2001
K. Wayne Lockard............................................. 65 1973 Director & Chairman of the Board
Donald C. Essich............................................. 66 1983 Director & Vice Chairman
Kenneth B. Wright............................................ 56 1986 Director
Robert T. Scott.............................................. 55 1990 Director
Larry A. Van Sant, Sr........................................ 46 1998 Director
</TABLE>
DIRECTOR BIOGRAPHIES
WESLEY D. BLAKESLEE is an attorney in private practice in Westminster,
Maryland. He is a member of the Carroll County and Maryland Bar Associations. He
is also President of Will Plan Corporation.
DAVID L. BRAUNING, SR. is a longtime representative of Nationwide Insurance
located in Finksburg, Maryland. Mr. Brauning is a member of the Board of the
Maryland State Fair. He has been active in local 4H Club activities.
ROBERT L. BULLOCK is the owner of Bullock's Country Meats in Smallwood,
Maryland. He is a longtime director of Hoffman Home in Gettysburg, Pennsylvania.
DONALD C. ESSICH is Vice Chairman of the Board of the Bank and the Company.
He is currently in the business of real estate development, and has in the past
been involved in various agriculture related businesses. He has served as
President of the local and statewide Farm Bureau. He has served on many local
committees involved with agriculture.
DEAN H. GRIFFIN, M.D. is a family practice medical doctor in Westminster,
Maryland.
BERNARD L. JONES, SR. is a senior engineer/systems technologist for Marconi
Systems Technologies, Inc. in Rockville, Maryland. Mr. Jones is the President of
HOPE, Inc., a local developer of low cost housing. Mr. Jones is a director for
the Maryland Affordable Housing Trust.
WILLIAM R. KLINGER is the owner and general manager of Star Vending Service.
Prior to starting his own business, Mr. Klinger was a sales manager for
Mid-Atlantic Coca-Cola Company and Vice President of Westminster Coca-Cola
Bottling Company.
K. WAYNE LOCKARD is the Chairman of the Board of the Bank and the Company.
He is a self employed real estate consultant and partner in "Lockard
Properties", developers and investors of commercial and residential real estate.
He actively serves on numerous Boards, and on committees at Carroll County
General Hospital, and he is a member of the Board of Trustees of Lancaster
Theological Seminary.
2
<PAGE>
ELLEN MILLER is Assistant Secretary for Employment & Training for the
Maryland Department of Labor, Licensing & Regulation. Prior to joining the State
Department, she was the Director of Business and Industry Training at Carroll
Community College in Westminster, and owned and operated her own small business.
Mrs. Miller is active in numerous non-profit organizations.
ROBERT T. SCOTT D.D.S. is an orthodontist practicing as Senior Partner of
Scott-Lawyer Partnership with offices throughout Carroll County.
ETHAN A. SEIDEL is the Vice President of Administration and Finance at
Western Maryland College. Dr. Seidel also teaches economics at the college. He
has received numerous awards for teaching excellence and has been very
instrumental in the success of the Junior Achievement Economics Program.
VIRGINIA W. SMITH was elected President and Chief Executive Officer of the
Company and of the Bank on January 12, 1996. She served as Executive Vice
President of the Bank from August 1995 to January 1996. Prior to joining the
Bank she had 12 years experience as a Senior Executive for Bank of Baltimore and
Signet. She is President of the Carroll County General Hospital Foundation
Board, Vice Chairman of Carroll County United Way Partnership and serves on the
Board of Directors of the Baltimore Branch of the Federal Reserve Bank.
LARRY A. VAN SANT, SR. became a Director on January 13, 1998. Mr. Van Sant
is President and owner of Van Sant Plumbing & Heating, Inc. in Mount Airy,
Maryland. Mr. Van Sant currently serves on the Board of Trustees of Frederick
Memorial Hospital. He is a member of the Mt. Airy Rotary Club and various trade
associations related to his business.
KENNETH B. WRIGHT is the owner and President of Towne Pride Interiors in
Hampstead, Maryland. Mr. Wright has served on the Carroll County Chamber of
Commerce, has been a board member of the Carroll County YMCA, Hampstead Business
Association and various trade associations related to his business.
MANAGEMENT BIOGRAPHIES
Set forth below are the names, ages, current positions and a brief
description of the business experience over the past five years of the principal
officers who are not directors of the Company.
GABRIELLE M. PEREGOY--41--Treasurer of the Company since August 1997 and
Vice President of the Bank since April 1997. Mrs. Peregoy oversees all financial
aspects of the Company: accounting, tax liabilities and investments. Mrs.
Peregoy joined the Bank in 1984 as Administrative Assistant, promoted to
Investment Manager in 1993 and promoted to Funds Manager in 1996.
DENISE L. BAKER--45--Secretary to the Company since 1994 and Vice President
of the Company since April 1997. Cashier and Secretary to the Board of Directors
of the Bank since 1989. Mrs. Baker has held numerous positions with the Bank
since she joined the Bank in 1972.
STEVEN L WANTZ--40--Senior Vice President and Chief Operating Officer of the
Bank since April 1997. Mr. Wantz joined the Bank in 1976 and held the position
of Auditor from 1978 to 1985 when he was promoted to Officer in Charge of
Operations and currently oversees all aspects of operations.
BRADLEY T. DUGGAN--39--Senior Vice President of the Bank since August 1997.
Mr. Duggan joined the Bank in August 1997 as Chief Lending Officer. Mr. Duggan
oversees all areas of lending. For the 12 years prior to joining the Bank, Mr.
Duggan was employed by another community bank as a Commercial Lending Unit
Manager.
BRENDA G. BOUDREAU--44--Vice President of the Bank since April 1998. Mrs.
Boudreau joined the Audit Department of the Bank in 1988. In 1992 she was
appointed Compliance Officer for the Bank, and in 1996 was appointed Risk
Manager. Mrs. Boudreau oversees the Compliance, Audit and Loan Review functions
for the Bank.
3
<PAGE>
MEETINGS OF DIRECTORS
The Company's Board of Directors conducts its business through meetings of
the Board and committees of the Board. During the 1998 fiscal year, the Board of
the Company held nine (9) meetings and the Board of the Bank held twenty-five
(25) meetings. No director attended fewer than 75% of the aggregate of the
regularly scheduled meetings of the Boards of Directors and committee meetings
on which such board member served during this period. The Board of Directors has
a Finance & Control Committee, a Lending Oversight Committee, a Financial
Services & Delivery Committee and a Management Oversight Committee. As of the
date of this Proxy Statement, the Board of Directors does not have a standing
nominating committee.
The Finance & Control (Audit) Committee oversees the business performance
and control functions of the Bank to protect shareholder interest. The committee
monitors risk and provides oversight of the Bank's audit and internal control
structure through periodic review of internal and external audit reports,
schedules and policy. The committee also monitors profitability, asset quality,
liquidity, interest rate risk, investment diversification and financial
reporting to ensure compliance with generally accepted accounting principals and
regulatory reporting requirements. The committee reports its findings to the
Board. During 1998 there were thirteen (13) meetings of this committee. As of
December 31, 1998 the members are: William R. Klinger, Chairman, Wesley D.
Blakeslee, Joseph H. Beaver, Jr., Dean H. Griffin and David L. Brauning.
The Lending Oversight Committee monitors compliance with Bank policy,
treatment of problem loans, other real estate owned, delinquency, and charge
offs. The committee also reviews and recommends policies and standards of
practice concerning loan policy, loan loss reserve adequacy and loan review. The
committee met thirteen (13) times during 1998. As of December 31, 1998 the
members are: Robert L. Bullock, Chairman, Donald C. Essich, Larry A. Van Sant,
Sr. and Kenneth B. Wright.
The Financial Services & Delivery Committee was formed in 1998. It
represents a consolidation of the previous Community Banking and Technology &
Support Services Committees. Its purpose is to oversee current initiatives,
budgetary performance, and strategic plan progress in the areas of branches,
marketing, information technology, investment services, alternative delivery,
insurance services, and operations. It approves related changes of policies,
major capital expenditures, and changes in major vendors. The committee met
fifteen (15) times during 1998. As of December 31, 1998 the members are: Ellen
Miller, Chairman, Robert T. Scott, Bernard L. Jones, Sr., and Ethan A. Seidel.
The Management Oversight Committee is responsible for review of performance
of Senior Management of the Company and the Bank, approves salary
recommendations to the Board, serves as compensation committee, reviews new
initiatives and strategies prior to presentation to the Board and other matters
pertinent to board governance. The committee met eight (8) times during 1998. As
of December 31, 1998 the members are: Kenneth B. Wright, Chairman, Dean H.
Griffin, K. Wayne Lockard, Donald C. Essich, Ethan A. Seidel, David L. Brauning
and Virginia W. Smith.
COMPENSATION OF DIRECTORS
Directors of the Company do not receive compensation in that capacity.
However, as directors of the Bank they receive compensation for serving on the
Board of Directors in the following amounts: $1,000 per month for the Chairman
of the Board, $700 per month for the Vice Chairman of the Board, and $600 per
month for all other directors. In addition, all directors of the Bank receive
$100 for each special meeting of the Board of Directors which they attend.
During 1992 the Bank entered into an agreement with members of its Board of
Directors to allow director fees to be deferred until retirement. The director
may defer a portion or all of his fee until retirement. Those fees deferred will
be paid either in a lump sum or over a pre-determined period of up to fifteen
years at retirement or separation from the Company.
4
<PAGE>
CERTAIN TRANSACTIONS WITH DIRECTORS AND OFFICERS
INDEBTEDNESS OF MANAGEMENT:
During the past year the Company has had, and expects to have in the future,
banking transactions in the ordinary course of its business through the Bank,
its wholly owned banking subsidiary, with its directors and executive officers
and with their associates. Such transactions are on substantially the same
terms, including interest rates, collateral, and repayment terms on loans, as
those prevailing at the same time for comparable transactions with others. The
extensions of credit by the Bank to these persons have not, and do not
currently, involve more than the normal risk of collectibility or present other
unfavorable features. At December 31, 1998, the outstanding principal balance of
loans as well as credit available, but unused under line of credit agreements to
directors and executive officers and their associates, including loans
guaranteed by any such person, aggregated $5,284,446 which represented
approximately 24% of the Bank's equity capital accounts.
LEASE AGREEMENTS:
In 1996, the Bank entered into a lease involving 2,400 square feet of office
space in Hampstead Maryland, at a monthly rental of $3,150, which the Bank uses
as its Hampstead branch office. The lessor of the property is K. Wayne Lockard,
Chairman of the Board, and his wife, Bonnie M. Lockard, both of whom are
stockholders of the Bank. In 1992, the Bank entered into a lease involving 3,076
square feet of office space in Finksburg Maryland, with a current monthly rental
of $1,944.33, which the Bank uses as its Finksburg branch office. The lessor of
the property is Finksburg Shopping Center Partnership of which David L.
Brauning, Director is a 25% partner and stockholder of the Bank.
The leases were negotiated on an arm's-length basis, and are subject to
terms that are generally prevailing in the area for comparable properties. In
the opinion of the Company's Board, the terms of the leases are at least as
favorable to the Bank as could have been obtained from unaffiliated third
parties and the leases are fair and reasonable to the Bank.
CERTAIN BUSINESS RELATIONSHIPS:
The Bank has retained, among others, Wesley D. Blakeslee, P.C., the law firm
of Director Wesley D. Blakeslee, on an at-will basis to perform collection work.
Fees for collection work are assessed on an hourly basis for consumer loans and
on a percentage of the amount collected for residential mortgages and commercial
loans. The Bank paid $26,998.32 in 1998 for these services. The retention of Mr.
Blakeslee's firm was negotiated on an arm's-length basis, and is subject to
terms that are within the range generally prevailing in this area for collection
work. In the opinion of the Company's Board of Directors, the terms are at least
as favorable to the Bank as could have been obtained from unaffiliated third
parties and are fair and reasonable to the Bank.
5
<PAGE>
VOTING STOCK AND PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the ownership of Common
Stock by directors, each executive officer of the Company and the Bank and each
person who was known to own beneficially, directly or indirectly, more than 5%
of the Company's Common Stock outstanding on February 5, 1999. The term
"beneficial ownership" includes common stock that may be acquired within 60 days
upon the exercise of options, warrants, and other rights. The address of each
person below is the address of the Company.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED PERCENT OF CLASS
(1) BENEFICIALLY OWNED
-------------------- ---------------------
<S> <C> <C>
NAME OF DIRECTOR/EXECUTIVE OFFICER
Baker, Denise L......................................................... 8,979 *(2)
Beaver, Joseph H. Jr.................................................... 51,273 2.8(3)
Blakeslee, Wesley D..................................................... 4,497 *(4)
Boudreau, Brenda G...................................................... 699 *(5)
Brauning, David L....................................................... 22,265 1.2(6)
Bullock, Robert L....................................................... 17,618 *(7)
Duggan, Bradley T....................................................... 2,659 *(8)
Essich, Donald C........................................................ 5,453 *
Griffin, Dean H., M.D................................................... 13,213 *(9)
Jones, Bernard L., Sr................................................... 660 *
Klinger, William R...................................................... 848 *
Lockard, K. Wayne....................................................... 11,334 *(10)
Miller, Ellen........................................................... 220 *
Peregoy, Gabrielle M.................................................... 2,643 *(11)
Scott, Robert T., D.D.S................................................. 2,587 *(12)
Seidel, Ethan A......................................................... 1,386 *
Smith, Virginia W....................................................... 62,339 3.4(13)
Van Sant, Larry A., Sr.................................................. 1,375 *(14)
Wantz, Steven L......................................................... 13,185 *(15)
Wright, Kenneth B....................................................... 3,139 *(16)
All directors and executive officers as a group (20 persons)............ 226,372 12.2
NAME OF BENEFICIAL OWNERS
Union National 401(k) plan.............................................. 121,280 6.5(17)
Virginia C. Wantz....................................................... 140,395 7.6(18)
</TABLE>
- ------------------------
* Less than 1% of Company's outstanding Common Stock.
1) Except as otherwise indicated and except for shares held by members of an
individual's family or in trust, all shares are held with sole investment
and voting power. Fractional shares resulting from participation in the
dividend reinvestment plan have been rounded to the nearest whole share.
2) Includes 8,358 shares held in the Union National 401(k) Plan and 396 shares
that may be purchased upon the exercise of stock options.
3) Includes 1,359 shares owned by his wife, Katherine G. Beaver and 1,353
shares owned by his son, Sean P.R. Beaver, as to which Mr. Beaver disclaims
beneficial ownership.
4) Includes 3,506 shares held in an IRA.
5) Includes 477 shares held in the Union National 401(k) Plan and 24 shares
held as custodian for minor child and 198 shares that may be purchased upon
the exercise of stock options.
6
<PAGE>
6) Includes 5,124 shares held in his wife's 401(k) Plan.
7) Includes 1,000 shares in name of a company he controls.
8) Includes 29 shares held in the Union National 401(k) Plan and 2,165 shares
held jointly with his wife and 333 shares held as custodian for minor
children and 132 shares that may be purchased upon the exercise of stock
options.
9) Includes 673 shares owned by John W. Griffin & Dean H. Griffin, Jt. Ten.,
and 424 shares owned by Etta Ray Griffin, as to which Mr. Griffin disclaims
beneficial ownership.
10) Includes 2,684 shares owned by Bonnie M. Lockard, as to which Mr. Lockard
disclaims beneficial ownership
11) Includes 2,082 shares held by the reporting person in the Union National
401(k) Plan and includes 165 shares held jointly by reporting person and
husband and 396 shares that may be purchased upon the exercise of stock
options.
12) Includes 359 shares held jointly by the reporting person and his wife and
880 shares held by reporting person under the Robert T. Scott, DDS PTA
Pension Plan.
13) Includes 304 shares held by the reporting person in the Union National
401(k) Plan and 1,848 shares that may be purchased upon the exercise of
stock options.
14) Includes 773 shares held by the reporting person and his wife.
15) Includes 492 shares held jointly by the reporting person and his wife and
11,505 shares held by the reporting person in the Union National 401(k) Plan
and 660 shares that may be purchased upon the exercise of stock options.
16) Includes 780 shares held jointly by the reporting person and his wife.
17) The Union National 401(k) plan, while owning 6.5% of the outstanding stock
of their Company, does not control the voting of those shares. Participants
are forwarded a proxy statement and cast their vote according to the same
rules as any other stockholder.
18) Includes 70,699 shares held by trustees for the benefit of Virginia C.
Wantz.
7
<PAGE>
CORPORATE COMPENSATION POLICY
The Management Oversight Committee of the Board of Directors sets
compensation guidelines for the Chief Executive Officer and other executive
officers of the Company and the Bank. Such guidelines are intended to provide
suitable rewards for individual performance and to tie such performance to
increased stockholder value. While stock performance may be one indicator of
stockholder value, several factors such as regulatory capital strength, asset
quality, and other factors also represent valid bases on which to judge
management's performance. Total compensation includes base salary, benefits,
short and long term incentives and perquisites.
MANAGEMENT OVERSIGHT COMMITTEE REPORT
The guidelines used by the Committee involve the following factors:
corporate profitability measured by return on assets (ROA), stock price, asset
quality, loss reserve levels, market-share, regulatory capital strength, cost
control, and regulatory examinations.
Annually, at year-end, the Committee reviews the base compensation and
benefit levels of the CEO, and other executive officers. Each officer's
compensation is based on their contribution to the Company and the Bank, and
their meeting of the goals and objectives as set forth in the Strategic Plan. To
verify that the compensation and benefits are reasonable and competitive, they
are compared with those of executive officers of similarly sized financial
services companies in the Mid-Atlantic region. These companies are other banks
and thrift institutions. The objective is to set base pay at a level comparable
to that being paid by other successful community banking organizations. Such
compensation must be maintained at a level sufficient to attract and retain
qualified executives. These surveys are readily available in the marketplace and
are relied upon by the industry.
The individual components of the Company's compensation program include:
(a) BASE SALARY. Base salary levels are established for senior officers
primarily based upon the valuation of historical performance, degree of
responsibility and level of expertise. In addition, the Management Oversight
Committee considers compensation data available through various surveys
including the Sheshunoff Bank Executive & Director Compensation Survey, Bank
Administration Institute Key Executive Compensation Surveys and Starkey &
Beall Regional Financial Industry Salary Survey.
(b) ANNUAL INCENTIVES/BONUSES (SHORT-TERM INCENTIVE). In 1996 the Bank
adopted a Management Incentive Compensation Program ("MIP") for key officers
other than the Chief Executive Officer. The MIP was designed to be similar
to existing plans of other banks and financial service companies. The MIP,
like these plans in general, requires a considerable degree of specificity
with regard to the performance measures and evaluations, which are
benchmarked to industry incentive practices. MIP allows the Management
Oversight Committee to establish annual performance measures to be used in
conjunction with the goals in the Company's strategic plan. Executives are
eligible for incentive compensation expressed as a percentage of their base
salaries for meeting established performance measures. In addition to the
MIP the bank has an annual Profit Sharing Bonus Program which has a targeted
payout of 0 to 5% of profits. The level of payout is determined by the Board
of Directors based on performance versus pre-determined net income targets.
All employees that meet the seniority and performance requirements are
eligible to participate.
(c) STOCK OPTION AWARD (LONG-TERM INCENTIVE). The Management Oversight
Committee believes that the granting of stock options is the most
appropriate form of long-term compensation for key officers, since awards of
equity encourage ownership in the success of the Company. Stock option
grants are discretionary and are limited by the terms and conditions of the
Company's 1997 Stock Option Plan, which was approved by the shareholders at
the 1997 annual meeting. In 1997 a total of 21,890 options were granted as
adjusted for stock splits. In 1998 a total of 18,982 options were granted.
8
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Management Oversight Committee of the Board of Directors serves as
compensation committee of the Company and the Bank. The current members of the
Management Oversight Committee in 1998 were Virginia W. Smith, Donald C. Essich,
K. Wayne Lockard, Ethan A. Seidel, Kenneth B. Wright, David L. Brauning and Dean
H. Griffin. Ms. Smith is the current CEO and President of the Company and the
Bank. While Ms. Smith was specifically excluded from any committee discussion
concerning her own compensation, she did participate in the committee's
discussion concerning other key executive compensation.
EMPLOYMENT CONTRACTS
Virginia W. Smith entered into an employment contract with the Bank
effective August 9, 1995 ("Employment Contract") by which she was made Executive
Vice President of the Bank. Ms. Smith became President of the Bank on January
12, 1996. Under the Employment Contract, her term as President is for one year,
which term and the Employment Contract are automatically renewed each year
unless either party provides 120 days advance notice to the contrary. The
Employment Contract further provides that if Ms. Smith's employment is
terminated for a reason other than for cause, she will be paid her then-current
salary and benefits for 12 months thereafter ("Severance Pay"). In addition, if
following a merger or other corporate reorganization in which the Bank is not
the survivor, Ms. Smith's duties and authorities are diminished or her salary is
decreased or she is forced to relocate, Ms. Smith can make a claim for Severance
Pay. If the Bank disagrees that Severance Pay is owing, the dispute is subject
to binding arbitration.
EXECUTIVE COMPENSATION
The following table provides certain information concerning compensation of
the Company's Chief Executive Officer. None of the Company's other executive
officers earned more than $100,000 in the fiscal year ended December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
---------------------------------------- ------------------------------
NAME & PRINCIPAL POSITION YEAR SALARY OTHER ANNUAL COMPENSATION SECURITIES UNDERLYING OPTIONS
- -------------------------------- --------- ------------ -------------------------- ------------------------------
<S> <C> <C> <C> <C>
Virginia W. Smith............... 1998 144,487.00 18,677.51(1) 825 shares
President and Chief 1997 137,100.00 17,255.00(2) 9,240 shares(3)
Executive Officer 1996 128,576.71 13,831.00(4)
</TABLE>
- ------------------------
(1) Automobile allowance of $7,199.92, deferred director fees of $7,200.00 and
matching contributions by the Bank under the Employee Savings & Benefit
Plan.
(2) Automobile allowance of $7,199.92, deferred director fees of $6,000 and
matching contributions by the Bank under the Employee Savings & Benefit
Plan.
(3) Share amounts have been adjusted to reflect the 2-for-1 stock split effected
in the form of a 100% stock dividend declared on January 27, 1998 and 10%
stock dividend declared on September 22, 1998.
(4) Automobile allowance of $7,199.92, director fees of $6,000 and unused sick
pay.
9
<PAGE>
STOCK OPTIONS
The following table sets forth information regarding stock options to
purchase Company Common Stock granted to the named executive during 1998.
OPTIONS GRANTED IN FISCAL YEAR 1998
INDIVIDUAL GRANTS (1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT
ASSUMED ANNUAL RATES OF
STOCK
PRICE APPRECIATION FOR TEN
YEARS
NUMBER OF PERCENT OF EXERCISE OF --------------------------
NAME OPTIONS GRANTED TOTAL OPTIONS BASE PRICE EXPIRATION DATE 5% 10%
- ---------------------------- ------------------- ----------------- ----------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Virginia W. Smith........... 825 4% 29.50 12-29-08 $ 15,305.61 $ 38,787.65
</TABLE>
- ------------------------
(1) All options granted on December 29, 1998. Options exercisable to the extent
of 20%, 40%, 60%, 80%, 100% on December 29, 1999, 2000, 2001, 2002 and 2003
respectively.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
OPTION VALUES AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY
12-31-98 OPTIONS AT 12-31-98
-------------------------- ----------------------
SHARES ACQUIRED
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------------- --------------- ----------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Virginia W. Smith........... -0- -0- 1848 8217 19,237.68 76,950.72
</TABLE>
KEY EMPLOYEE RETENTION PLANS
In December 1997 the Bank adopted a Key Employee Retention Plan to provide
incentives to attract and retain key employees. The Plan is administered by the
Board of Directors and is subject to the provisions of the Plan and applicable
law. Participation in the Plan is restricted to key employees and approved by
the Board of Directors. The Plan provides severance benefits in the event a
participant's employment is terminated as a result of a Change of Control of the
Company. The Plan generally defines Change of Control as a change of beneficial
ownership of 50% or more of the Company's Common Stock. The Plan provides that
participants may receive from a minimum of 6 months base salary to a maximum of
30 months based on level in the organization and years of service. Severance
payments will be reduced by any amounts granted under any other plan or contract
with the Company. Severance will also be adjusted based on any amount received
from other employment during the severance period.
10
<PAGE>
PENSION PLAN & THRIFT PLAN
The Company does not presently have any employee benefit plans. Employee
benefits are administered through plans sponsored by the Bank. The Bank sponsors
a defined benefit pension plan covering substantially all employees. Benefits
are based on years of service and the employee's compensation. The Bank's
funding strategy has been to contribute the maximum amount deductible for income
tax purposes. Contributions provide not only for benefits attributed to service
to date, but also for those expected to be earned in the future. Net pension
cost for 1998, 1997 and 1996 includes the following components:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
Service cost-benefits earned during the year................................. $ 72,280 $ 83,251 $ 86,195
Interest cost on projected benefit obligation................................ 60,149 65,815 84,964
Actual return on plan assets................................................. (50,921) (93,269) (103,395)
Net amortization and deferral................................................ 10,982 61,321 54,406
---------- ---------- -----------
$ 92,490 $ 117,118 $ 122,170
Additional expense related to settlement of pension obligations.............. -- 88,718 155,612
---------- ---------- -----------
Net pension cost............................................................. $ 92,490 $ 205,836 $ 277,782
</TABLE>
During 1997 and 1996, the Bank's defined benefit pension plan made lump sum
payments to plan participants which met the criteria for a settlement of pension
obligations as defined in SFAS No. 88 "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Plans and for Termination Benefits". This
settlement resulted in additional pension expense of $88,718 for the year ended
December 31, 1997, and $155,612 for the year ended December 31, 1996.
The weighted-average discount rate used in determining the actuarial present
value of the projected benefit obligation was 7.50% for 1998, 1997 and 1996. The
expected long-term rate of return on assets was 7.50% for 1998, 1997 and 1996.
The Bank has an Employee Savings and Investment Plan, 401(k), in which
substantially all employees are eligible to participate. Under the terms of the
Plan, the Bank may match employee contributions up to 6% of compensation. The
Bank's contributions to the Plan were $79,388 for 1998, $62,564 for 1997 and
$56,314 for 1996.
The Bank had also made agreements with certain officers to provide
additional retirement benefits under a Supplemental Executive Retirement Plan
("SERP"). This program was designed to, when combined with Social Security and
the Defined Benefit Plan, give those officers covered approximately 60% of final
salary. The SERP is unfunded so that amounts payable represent unsecured
liabilities of the Bank, subject to claims of secured creditors. At this time
SERP is no longer actively offered and the single remaining participant in the
SERP has retired and begun receiving benefits. The amount included in operating
expenses was $12,884 for 1998, ($9,754) for 1997 and $61,561 for 1996.
FINANCIAL STATEMENTS
The Company is providing to its stockholders, either with this proxy
statement or earlier by separate mailing, an annual report containing audited
consolidated financial statements for the year ended December 31, 1998
(including management's discussion and analysis of financial condition and
results of operations). A COPY OF THE FORM 10-K, AS FILED WITH THE SECURITIES &
EXCHANGE COMMISSION, IS AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO
GABRIELLE M. PEREGOY, VICE PRESIDENT, UNION NATIONAL BANK, P.O. BOX 189,
WESTMINSTER, MARYLAND 21158.
11
<PAGE>
PERFORMANCE GRAPH
The Performance Graph shown below compares the cumulative total return to
Company stockholders over the most recent five year period with both the NASDAQ
Composite Index (reflecting overall stock market performance) and the NASDAQ
Bank Index (reflecting changes in banking industry stocks.) Returns are shown on
a total return basis, assuming the reinvestment of dividends. The NASDAQ Bank
Index reflects performance on a straight appreciation basis, as annual dividend
data was not yet available for this index. It should be noted that Union
National Bancorp, Inc. was not listed on NASDAQ until April 1998 and therefore
during this period the performance of the stock may be more accurately compared
to other non-listed stocks. No such comparable index is available at this time.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
UNION NATIONAL BANCORP, INC. NASDAQ COMPOSITE NASDAQ BANK INDEX
<S> <C> <C> <C>
1993 100 100
1994 126.44 96.81 $101.10
1995 142.93 135.45 146.41
1996 159.94 $166.20 184.71
1997 184.24 202.16 302.16
1998 324.34 282.28 266.59
</TABLE>
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
----- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Union National Bancorp, Inc............................... 100 126.44 142.93 159.94 184.24 324.34
NASDAQ Composite.......................................... 100 96.81 135.45 166.20 202.16 282.28
NASDAQ Bank Index......................................... 100 101.10 146.41 184.71 302.16 266.59
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons who own more than ten percent of the
Company's Common Stock (a "Section 16 Insider") to file monthly and annual
reports of ownership and changes in ownership of such shares with both the
Securities and Exchange Commission (the "SEC") and the National Association of
Securities Dealers, Inc. (the "NASD"). Additionally, Section 16 Insiders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company, all Section 16 filing requirements applicable
to the Company's executive officers, directors and greater than ten percent
beneficial owners were complied with.
12
<PAGE>
RATIFICATION OF AUDITORS (PROPOSAL NO. 2)
The accounting firm of Keller Bruner & Company, LLP ("K.B.") has acted as
the Company's independent public accountants for the year ended December 31,
1998 and has been recommended by the Finance and Control Committee and selected
by the Board of Directors to act as such for the current fiscal year, subject to
the ratification by the stockholders. A partner of K.B. is expected to be
present at the annual meeting and will be available to respond to appropriate
questions.
STOCKHOLDER PROPOSALS
Proposals of stockholders to be presented at the 2000 Annual Meeting of
Union National Bancorp, Inc. pursuant to Rule 14a-8 of the Securities Exchange
Act of 1934 must be received at the Company's principal office by November 21,
1999 in order to be included in the proxy statement for such meeting which is
currently scheduled for April 18, 2000. Proposals for all other matters must be
received by February 3, 2000.
OTHER MATTERS
The management of the Company knows of no matters to be presented for action
at the meeting other than those mentioned above; however, if any other matters
properly come before the meeting or at any adjournment or postponements thereof,
it is intended that the persons named in the accompanying proxy will vote on
such other matters in accordance with their judgment of the best interest of the
Company.
13
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
UNION NATIONAL BANCORP, INC.
April 20, 1999
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
A X Please mark your
votes as in this
example.
<TABLE>
<S> <C> <C> <C>
FOR all the nominees WITHHOLD
listed at right (except AUTHORITY
as marked to the to vote for all the
contrary below) nominees listed at right NOMINEES:
1. Election of Wesley D. Blakeslee
Directors / / / / Dean H. Griffin
Ethan A. Seidel
Ellen Miller
</TABLE>
All nominees are for terms described in the proxy statement.
INSTRUCTION: To withhold authority to vote for any individual
nominee, write the name of that nominee on the line provided
below.
- -------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Ratify the appointment of Keller Bruner & Company, / / / / / /
LLP as independent auditors.
3. To consider and act upon such other business as may properly come before the
Annual Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF THE NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2.
PLEASE SIGN, DATE AND MAIL THE PROXY CARD in the enclosed self-addressed,
stamped envelope, WHETHER OR NOT YOU EXPECT TO ATTEND the meeting in person.
You may withdraw your proxy at the meeting should you be present and desire
to vote your shares in person. Your cooperation is respectfully requested.
I do not
I plan to attend / / plan to / /
attend the
meeting
Comments/Address Change
Note at Left / /
<TABLE>
<S> <C> <C>
Signature of Stockholder ___________________________ Signature of Stockholder ___________________________ Dated __________ ,1999
</TABLE>
Note: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as administrator, executor, trustees and others acting in a
representative capacity, please indicate the capacity in which they sign.
<PAGE>
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
UNION NATIONAL BANCORP, INC.
117 East Main Street
Westminster, Maryland 21157
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 20, 1999
Proxy Solicited on Behalf of the Board of Directors
The undersigned hereby appoints William R. Klinger and Ethan A.
Seidel, or either of them, with full power of substitution, as Proxies and are
authorized to represent and to vote as designated on the reverse the
undersigned+s shares of Union National Bancorp, Inc. common stock at the Annual
Meeting of Stockholders to be held at the Comfort Inn, 451 WMC Drive,
Westminster, Maryland 21157 on Tuesday, April 20, 1999 at 10:00 a.m., and at any
adjournments or postponements thereof for the following purposes.
(Continued and to be signed on other side.)
