SCHEDULE 14A INFORMATION
(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 the
[x]Definitive Proxy Statement Commission Only (as permitted
[ ]Definitive Additional Materials by Rule 14a-6(e)(2))
[ ]Soliciting Material Under Rule 14a-12
TRI-COUNTY FINANCIAL CORPORATION
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(Name of Registrant as Specified in Its Charger)
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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
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computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
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[ ] Fee paid previously with preliminary materials:___________________________
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[Tri-County Financial Corporation Letterhead]
April 9, 2001
Dear Stockholder:
I am pleased to invite you to attend the Annual Meeting of the Stockholders
of Tri-County Financial Corporation (the "Company") 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 9, 2001 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 Company as well as a
representative of Stegman & Company will be present to respond to any questions
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 and Chief Executive Officer
TRI-COUNTY FINANCIAL CORPORATION
3035 LEONARDTOWN ROAD
WALDORF, MARYLAND 20601
(301) 645-5601
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 9, 2001
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Tri-County Financial Corporation (the "Company") 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 9, 2001, at 10:00
a.m.
A Proxy Card and a Proxy Statement for the Annual Meeting are enclosed.
The Annual Meeting is for the purpose of considering and acting upon:
1. The election of four directors of the Company; and
2. Such other matters as may properly come before the Annual Meeting or
any adjournments thereof.
The Board of Directors is not aware of any other business to come before
the Annual Meeting.
Any action may be taken on any one of the foregoing proposals at the Annual
Meeting on the date specified above, or on any date or dates to which, by
original or later adjournment, the Annual Meeting may be adjourned. The Board of
Directors has fixed the close of business on March 26, 2001, as the record date
for determination of the stockholders entitled to vote at the Annual 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 Annual
Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ H. Beaman Smith
H. BEAMAN SMITH
Secretary
Waldorf, Maryland
April 9, 2001
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE CORPORATION 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.
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PROXY STATEMENT
OF
TRI-COUNTY FINANCIAL CORPORATION
3035 LEONARDTOWN ROAD
WALDORF, MARYLAND 20601
(301) 645-5601
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ANNUAL MEETING OF STOCKHOLDERS
MAY 9, 2001
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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 "Company") to be used at the Annual Meeting of
Stockholders of the Company (the "Annual 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 9, 2001 at 10:00 a.m. The
accompanying notice of meeting and this Proxy Statement are being first mailed
to stockholders on or about April 9, 2001.
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VOTING AND REVOCABILITY OF PROXIES
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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 Annual Meeting and all adjournments thereof. Proxies may be revoked by
written notice delivered in person or mailed to the Secretary of the Company at
the address shown above, by the filing of a later dated proxy prior to a vote
being taken on a particular proposal at the Annual Meeting or by attending the
Annual Meeting and voting in person. The mere presence of a stockholder at the
Annual Meeting will not in and of itself revoke such stockholder's proxy.
Proxies solicited by the Board of Directors of the Company 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 Annual Meeting. The proxy confers discretionary
authority on the persons named therein to vote with respect to the election of
any person as a director where the nominee is unable to serve or for good cause
will not serve, and matters incident to the conduct of the Annual Meeting. If
any other business is properly presented at the Annual Meeting, proxies will be
voted by those named therein in accordance with the determination of a majority
of the Board of Directors.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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Stockholders of record as of the close of business on March 26, 2001 (the
"Record Date") are entitled to one vote for each share then held. As of the
Record Date, the Company had 773,053 shares of common stock, par value $.01 per
share (the "Common Stock"), issued and outstanding. The presence, in person or
by proxy, of at least one-third of the total number of shares of Common Stock
outstanding and entitled to vote will be necessary to constitute a quorum at the
Annual Meeting.
The following table sets forth, as of the Record Date, certain information
as to those persons who were beneficial owners of more than 5% of the Company's
outstanding shares of Common Stock and as to the shares of Common Stock
beneficially owned by each director, each executive officer named in the summary
compensation table and by all executive officers and directors of the Company 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 Company and
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). 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 outstanding shares of Common Stock as of the Record Date.
All beneficial owners listed in the table have the same address as the Company.
PERCENT OF SHARES
NAME OF BENEFICIAL AMOUNT AND NATURE OF OF COMMON STOCK
OWNERS BENEFICIAL OWNERSHIP(1) OUTSTANDING (2)
------------------ ----------------------- -----------------
Michael L. Middleton 89,642 (3) 11.14%
Catherine A. Askey 105 0.01%
C. Marie Brown 33,038 (4) 4.07%
W. Edelen Gough, Jr. 14,121 (5) 1.82%
Louis P. Jenkins, Jr. 7,365 (6) 0.95%
Herbert N. Redmond, Jr. 9,605 (5)(6) 1.24%
H. Beaman Smith 30,301 (5) 3.90%
Gregory C. Cockerham 20,404 (7) 2.60%
All Directors, Executive Officers and 205,002 (8) 24.31%
Nominees as a Group (9 persons)
Community Bank of Tri-County 54,042 (9) 6.99%
Employee Stock Ownership Plan ("ESOP")
--------------------
(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) In calculating the percentage ownership of an individual or group, the
number of shares outstanding is deemed to include any shares which the
individual or group may acquire through the exercise of options within
60 days of the Record Date.
(3) Includes 30,894 shares of Common Stock which may be acquired upon the
exercise of stock options. Also includes 9,040 shares of Common Stock
allocated to Mr. Middleton's account in the ESOP.
(4) Includes 14,431 shares of Common Stock which may be acquired upon the
exercise of stock options and 6,010 shares of Common Stock allocated to
Ms. Brown's account in the ESOP.
(5) Includes 2,200, 4,205 and 4,205 shares that may be acquired upon the
exercise of options by Directors Redmond, Gough and Smith,
respectively.
(6) Includes 6,865 shares of Common Stock held by the ESOP which have not
been allocated to the accounts of participants over which shares the
named individual may exercise shared voting power in his capacity as an
ESOP trustee.
(7) Includes 12,347 shares of Common Stock which may be acquired upon the
exercise of stock options and 5,408 shares of Common Stock allocated to
Mr. Cockerham's account in the ESOP.
(8) Includes 69,703 shares of Common Stock which may be acquired upon the
exercise of stock options. Also includes 20,458 shares of Common Stock
allocated to the accounts of all executive officers and directors as a
group in the ESOP and 6,865 shares held by the ESOP that are not
allocated to the accounts of participants over which certain directors
may exercise shared voting power in their capacities as ESOP trustees.
(9) Includes 6,865 shares 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.
2
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PROPOSAL I - ELECTION OF DIRECTORS
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Tri-County Financial's Board of Directors currently consists of seven
members. The Company'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.
In November 2000, the Board of Directors was expanded to nine and Catherine
A. Askey and Louis P. Jenkins, Jr. were appointed to the Board. Effective
December 28, 2000, Gordon A. O'Neill and Henry A. Shorter, Jr. retired from the
Board of Directors after many years of loyal and dedicated service and the size
of the Board of Directors was reduced back to seven. Under the Articles of
Incorporation, directors appointed by the Board of Directors must stand for
election at the next annual meeting.
The Board of Directors has nominated for election as directors Michael L.
Middleton, Louis P. Jenkins and C. Marie Brown to serve for three-year terms and
until their successors are elected and qualified and has nominated Catherine A.
Askey to serve for a two-year term and until her successor is 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 Company'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 Company's Bylaws, directors shall be elected by a majority of
those votes cast by stockholders at the Annual Meeting. Votes which are not cast
at the Annual 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.
YEAR
AGE AT FIRST CURRENT
DECEMBER ELECTED TERM TO
NAME 31, 2000 DIRECTOR(1) EXPIRE
---- -------- ----------- ------
BOARD NOMINEE FOR A TERM TO EXPIRE IN 2003:
Catherine A. Askey 41 2001 2001
BOARD NOMINEES FOR A TERM TO EXPIRE IN 2004:
Michael L. Middleton 53 1979 2001
C. Marie Brown 58 1991 2001
Louis P. Jenkins, Jr. 29 2001 2001
DIRECTORS CONTINUING IN OFFICE:
W. Edelen Gough, Jr. 72 1970 2002
H. Beaman Smith 55 1986 2002
Herbert N. Redmond, Jr. 60 1997 2003
______________
(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, Mr. Redmond, who was appointed in May 1997 and
Ms. Askey and Mr. Jenkins who were appointed in November 2000, each
director became a director of the Company on the date of its incorporation
in September 1989.
3
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.
CATHERINE A. ASKEY is a Certified Public Accountant, and Member/Owner of
Askey, Askey & Associates, CPA, LLC, in Leonardtown, Maryland. She earned her
Bachelor of Science degree from the University of Maryland. For the past 15
years, Ms. Askey has worked with Tri-county businesses, for civic and church
organizations, and as an advisor to non-profits.
MICHAEL L. MIDDLETON is President and Chief Executive Officer of the
Company 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. In January 2000, Mr. Middleton was appointed
to the National Association of Home Builders Mortgage Roundtable.
C. MARIE BROWN has been associated with the Bank for 27 years and serves as
its Chief Operating Officer. Ms. Brown is an alumna 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 and of
Zonta and serves on various administrative committees of the Hughesville Baptist
Church and the board of the Charles County chapter of the American Red Cross.
LOUIS P. JENKINS, JR. is a partner in the law firm of Louis P. Jenkins,
P.A. located in La Plata, Maryland. Prior to entering private practice, Mr.
Jenkins served as an Assistant State's Attorney in Charles County, Maryland from
1997 to 1999. From 1996 to 1997, he clerked for the Honorable Robert C. Nalley
of the Charles County Circuit Court. Mr. Jenkins is involved in a number of
public service organizations which include serving on the Board of Directors for
the Charles County Bar Association and the Charles County Chapter of the
American Red Cross.
W. EDELEN GOUGH, JR. retired from his position as senior vice president in
charge of administration of the Company 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.
H. BEAMAN SMITH is the Secretary/Treasurer of the Company, President of
Accoware, 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.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
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The Board of Directors conducts its business through meetings of the Board
and through activities of its committees. During fiscal year 2000, the Board of
Directors held 12 meetings. No director of the Company
4
attended fewer than 75% of the total meetings of the Board of Directors and
committees on which such Board member served during the period he or she served
on the Board.
The Company's Audit Committee consists of Directors Catherine A. Askey,
Chairman, Louis P. Jenkins and Herbert N. Redmond, Jr. The Audit Committee meets
with the Company's independent auditors in connection with their annual audit
and reviews the Company's accounting and financial reporting policies and
practices. All of the members of the Audit Committee are independent within the
meaning of Rule 4200(a)(15) of the National Association of Securities Dealers,
Inc.'s listing standards. The Company's Audit Committee has adopted a written
charter, a copy of which appears as an appendix to this Proxy Statement. The
Audit Committee met once during 2000.
The Company'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 Company's stockholders for nominees
nor established any procedures for this purpose. The Board of Directors met once
in its capacity as nominating committee during 2000. The Company does not have a
separate compensation committee. Compensation matters are considered by the full
Board of Directors.
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EXECUTIVE COMPENSATION
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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 Company and each other executive officers who earned in
excess of $100,000 in salary and bonus in 2000 (the "Named Executive Officers").
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
NAME AND PRINCIPAL -------------------------- -- SECURITIES ALL OTHER
POSITION YEAR SALARY BONUS(1) UNDERLYING OPTIONS COMPENSATION
------------------ ---- ------ ------- ------------------ ------------
Michael L. Middleton 2000 $ 163,840 $ 82,574 2,239 $ 41,949 (2)
President and Chief 1999 161,413 80,145 1,807 27,799
Executive Officer 1998 141,979 93,053 5,024 28,245
C. Marie Brown 2000 $ 108,266 $ 42,313 1,161 $ 39,619 (3)
Executive Vice President 1999 103,389 41,068 926 25,597
and Chief Operating Officer 1998 94,085 49,331 3,945 25,074
Gregory C. Cockerham 2000 $ 99,198 $ 36,013 1,209 $ 26,192 (4)
Executive Vice President 1999 93,861 34,953 788 13,632
and Chief Lending Officer 1998 84,731 41,650 3,755 12,832
_____________
(1) Represents bonuses paid pursuant to the Bank's Executive Incentive
Compensation Plan (the "Incentive Plan"). For each year in which the
Incentive Plan is in effect, the Bank establishes a bonus pool equal to
10% of net income after taxes (but before deduction of bonuses payable
under the Incentive Plan) multiplied by the "Multiplier," as determined
in accordance with the Incentive Plan. For fiscal 2000, the Multiplier
was the average of (i) the percentage obtained when the Company's
return on equity ("ROE") is divided by 90% of the median ROE of a peer
group comprised of commercial banks in the fifth Federal Reserve
district plus (ii) the percentage obtained when the median percentage
of noncurrent to gross loans of the peer group is divided by the
percentage of the Bank's noncurrent to gross loans; provided that the
Multiplier shall not exceed 1.0. The bonus pool is allocated among
officers in proportion to the ratio a designated percentage of their
base salary (the "Allocation Base") bears to the total Allocation Bases
of all participating officers. In addition, each participant is granted
an option under the 1995 Stock Option and Incentive Plan to acquire
shares having a market value equal to 60% of the bonus to which the
participant is entitled under the Incentive Plan.
(footnotes continued on following page)
5
(2) Consists of $10,000 in directors' fees, the value of the shares
($25,514) allocated to the participant's account in the ESOP, $5,100 in
matching contributions under the 401(k) Plan and split-dollar life
insurance premiums of $1,335.
(3) Consists of $9,600 in directors' fees, the value of the shares
($24,353) allocated to the participant's account in the ESOP, $9,636 in
matching contributions under the 401(k) Plan and split-dollar life
insurance premiums of $1,030.
(4) Consists of the value of the shares ($21,609) allocated to the
participant's account in the ESOP, $4,178 in matching contributions
under the 401(k) Plan and split-dollar life insurance premiums of $405.
OPTION GRANTS IN FISCAL YEAR 2000. The following table contains information
concerning the grants of stock options during the year ended December 31, 2000
to the Named Executive Officers. All such options were granted under the 1995
Stock Option and Incentive Plan and were fully vested at the date of grant. No
stock appreciation rights ("SARs") were granted to the Named Executive Officers
during fiscal year 2000.
PERCENT
OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTS TO
UNDERLYING EMPLOYEES
OPTIONS IN FISCAL EXERCISE EXPIRATION
NAME GRANTED YEAR PRICE DATE
---- --------- ---------- --------- ----------
Michael L. Middleton 193 2.1% $26.60 12/31/2009
2,046 22.3 26.70 12/31/2010
C. Marie Brown 74 0.8 26.60 12/31/2009
1,087 11.8 26.70 12/31/2010
Gregory C. Cockerham 212 2.3 26.60 12/31/2009
1,997 10.9 26.70 12/31/2010
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2000 AND YEAR-END OPTION VALUES.
The following table sets forth information concerning exercises of stock options
by the Named Executive Officers during the year ended December 31, 2000, as well
as the value of options held by such persons at the end of the fiscal year. No
SARs have been granted to any of the Named Executive Officers.
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES ACQUIRED VALUE AT FISCAL YEAR-END AT FISCAL YEAR-END (1)
NAME ON EXERCISE REALIZED(1) (ALL IMMEDIATELY EXERCISABLE) (ALL IMMEDIATELY EXERCISABLE)
---- ----------- ----------- ----------------------------- -----------------------------
Michael L. Middleton 2,500 $41,050 30,894 $370,557
C. Marie Brown 1,000 $16,420 14,431 $147,440
Gregory C. Cockerham -- -- 12,347 $117.365
----------
(1) Based on the difference between the exercise price and the fair market
value of the underlying securities on the date of exercise or at fiscal
year-end, as the case may be.
EMPLOYMENT AGREEMENTS. The Bank maintains an employment agreement with
Michael L. Middleton which currently provides for an annual salary of $169,742.
The agreement provides for Mr. Middleton's employment for a period of five
years, subject to annual one-year extensions. 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 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
Company 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
6
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 Company'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,
Executive Vice President and Chief Operating Officer. Ms. Brown's agreement has
a three-year term and provides for a current annual salary of $122,707 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, Executive Vice President of Lending. Mr. Cockerham's agreement has a
three-year term and provides for a current annual salary of $113,400 and a
change in control payment equal to 2.00 times Mr. Cockerham's five-year average
annual compensation.
The aggregate payments 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, 2000 would be approximately $690,657, $274,707 and
$238,107, respectively.
The Company has entered into Guaranty Agreements with each of Mr.
Middleton, Ms. Brown and Mr. Cockerham pursuant to which it has agreed to be
jointly and severally liable for amounts payable under their employment
agreements.
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DIRECTORS' COMPENSATION
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BOARD FEES. Directors of the Company receive fees of $300 per meeting
attended. Members of the Bank's Board of Directors currently receive fees of
$400 per meeting attended and an annual retainer of $3,500. Members of the
Bank's executive committee receive a fee of $400 per meeting attended. Members
of the Company's audit committee receive fees of $300 per meeting attended.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS. The Company maintains a stock
option plan for non-employee directors, adopted by the Board of Directors in
December 1995. Under that plan, the Company 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 Percentage," 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% 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
participant'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.
7
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 the average of (i) the percentage obtained when the
Company's return on equity ("ROE") is divided by 90% of the median ROE of a peer
group comprised of commercial banks in the fifth Federal Reserve district plus
(ii) the percentage obtained when the median percentage of noncurrent to gross
loans of the peer group is divided by the percentage of the Bank's noncurrent to
gross loans; provided that the Multiplier shall not exceed 1.0. 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.
--------------------------------------------------------------------------------
TRANSACTIONS WITH THE COMPANY 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.
Director Louis P. Jenkins, Jr. is a partner in the law firm of Louis P.
Jenkins, P.A. which performed legal services for the Bank and its borrowers
during fiscal year 2000 and is expected to perform similar services during the
current fiscal year.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
--------------------------------------------------------------------------------
Pursuant to regulations promulgated under the Exchange Act, the Company'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 Company 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 or written
representations from such persons that no annual reports of changes in
beneficial ownership were required, the Company believes that during 2000, 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 William J. Pasenelli who did not timely file his initial report of
beneficial ownership on Form 3.
8
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RELATIONSHIP WITH INDEPENDENT AUDITORS
--------------------------------------------------------------------------------
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, 2001. A representative of Stegman & Company is
expected to be present at the Annual Meeting to respond to appropriate questions
and to make a statement, if so desired.
AUDIT FEES. During the fiscal year ended December 31, 2000, the aggregate
fees billed for professional services rendered for the audit of the Company's
annual financial statements and the reviews of the financial statements included
in the Company's Quarterly Reports on Form 10-Q filed during the fiscal year
ended December 31, 2000 were $38,582.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. The Company
did not engage Stegman & Company to provide advice to the Company regarding
financial information systems design and implementation during the fiscal year
ended December 31, 2000.
ALL OTHER FEES. For the fiscal year ended December 31, 2000, the aggregate
fees paid by the Company to Stegman & Company for all other services (other than
audit services and financial information systems design and implementation
services) were $9,792.
--------------------------------------------------------------------------------
AUDIT COMMITTEE REPORT
--------------------------------------------------------------------------------
The Audit Committee has reviewed and discussed the audited financial
statements of the Company with management and has discussed with Stegman &
Company, the Company's independent auditors, the matters required to be
discussed under Statement of Auditing Standards No. 61 ("SAS 61"). In addition,
the Audit Committee received from Stegman & Company the written disclosures and
the letter required to be delivered by Stegman & Company under Independence
Standards Board Standard No. 1 ("ISB Standard No. 1") and has discussed with
representatives of Stegman & Company their independence.
The Audit Committee has reviewed the non-audit services currently provided
by the Company's independent auditor and has considered whether the provision of
such services is compatible with maintaining the independence of the Company's
independent auditors.
Based on the its review of the financial statements, its discussion with
Stegman & Company regarding SAS 61, and the written materials provided by
Stegman & Company under ISB Standard No. 1 and the related discussion with
Stegman & Company of their independence, the Audit Committee has recommended
that the audited financial statements of the Company be included in its Annual
Report on Form 10-K for the year ended December 31, 2000, for filing with the
Securities and Exchange Commission.
AUDIT COMMITTEE
CATHERINE A. ASKEY
LOUIS P. JENKINS, JR.
HERBERT N. REDMOND, JR.
9
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OTHER MATTERS
--------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Annual Meeting other than those matters described above in this Proxy Statement.
However, if any other matters should properly come before the Annual 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 a majority of
the Board of Directors.
--------------------------------------------------------------------------------
MISCELLANEOUS
--------------------------------------------------------------------------------
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of the Common Stock. In addition to conducting
solicitations by mail, directors, officers, and regular employees of the Company
may solicit proxies personally or by telegraph or telephone without additional
compensation.
The Company'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. A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE FURNISHED
WITHOUT CHARGE TO STOCKHOLDERS AS OF THE RECORD DATE, UPON WRITTEN REQUEST TO
THE SECRETARY, TRI-COUNTY FINANCIAL CORPORATION, 3035 LEONARDTOWN ROAD, WALDORF,
MARYLAND 20601.
--------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
--------------------------------------------------------------------------------
To be eligible for inclusion in the Company'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 Company's main office at 3035
Leonardtown Road, Waldorf, Maryland 20601 no later than December 11, 2001. Any
such proposals shall be subject to the requirements of the proxy rules adopted
under the Exchange Act.
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 Company 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 Company 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 9, 2001
10
APPENDIX A
AUDIT COMMITTEE CHARTER
PURPOSE-AND RESPONSIBILITIES: The primary purpose of the Audit Committee (the
-----------------------------
"Committee") is to assist the Boards of Directors (the "'Board") of the Tri
County Financial Corporation ("Company") and Community Bank of Tri County (the
"Bank") in fulfilling its responsibility to oversee management's conduct of the
Company's financial reporting process, including by overviewing the financial
reports and other financial information provided by the Company to any
governmental or regulatory body, the public or other users thereof, the
Company's systems of internal accounting and financial controls, the annual
independent audit of the Company's financial statements, and the Company's legal
and regulatory compliance as established by management and the Board.
RESPONSIBILITIES OF MANAGEMENT AND INDEPENDENT AUDITORS: While the Committee has
-------------------------------------------------------
the review, oversight, and reporting responsibilities set forth in this charter,
it does not have responsibility for planning or conducting audits or for
determining that the financial statements are complete and accurate and are in
accordance with generally accepted accounting principles. Those are
responsibilities of management and the independent auditors, rather than the
Committee. The Committee also is not responsible for ensuring compliance with
laws or regulations, or for resolving disagreements, if any, between management
and the independent auditor.
The Committee Shall:
ORGANIZATION AND REPORTING
--------------------------
1. Review the adequacy of its Charter each year.
2. Provide regular reports of its activities to the Board.
3. As specifically directed by the Board,, investigate and report to the Board
with respect to matters involving financial reporting, financial
accounting, internal controls, or compliance with laws and regulations.
RELATIONSHIPS WITH INDEPENDENT AUDITORS
---------------------------------------
4. Review and recommend to the Board the engagement of independent auditors
('"auditors") and approve the fees to be paid under such engagements.
5. Each year:
a) Obtain the disclosures and letter from the auditors regarding the
relationships between the auditors and the Company and the
independence of the auditors (as required by Independence Standards
Board Standard No. 1); and
b) Discuss these materials and any relationships or services disclosed in
them that may affect the objectivity and independence of the auditors.
6. Take or recommend to the Board that the Board take appropriate action to
oversee the independence of the outside auditors.
AUDIT SCOPE AND INTERNAL CONTROLS
---------------------------------
7. Review with management and the auditors, the scope of services required by
the audit, major risk factors, significant accounting policies, audit
conclusions regarding significant accounting estimates, and the compliance
of the audit with the audit procedures (required by Section 10A of the
Securities Exchange Act of 1934) relating to detection of illegal acts,
identification of related party transactions, and evaluation of the Company
as a going concern.
8. Review with management and the auditors their assessments of the adequacy
of internal controls, and the resolution of identified material weaknesses
and reportable conditions in internal controls.
9. Discuss with management any significant disagreements between the auditors
or accountants and management, and any significant changes to or
restrictions on the planned scope of the audit.
FINANCIAL STATEMENTS
--------------------
10. Discuss with management and the auditors, issues regarding accounting
principles and practices as well as legal and regulatory matters that could
have a material impact on the financial statements or the adequacy of the
internal control system, including required or suggested changes in
auditing and accounting principles and practices.
11. Review and discuss with management and the auditors, the Company's interim
financial statements included in the quarterly reports on Form 10-Q, using
professional standards and procedures for conducting such reviews.
12. Discuss with the auditors the matters required by Statement of Auditing
Standards No. 61, as amended, which requires auditors to communicate
certain matters to the Committee.
13. Based upon the review and discussions referred to in paragraphs 5, 11 and
12, recommend to the Board whether the financial statements should be
included in the Company's annual report on Form 10-K.
EXTERNAL REPORTS
----------------
14. Issue a report to be included in the Company's annual proxy materials
stating that the Committee has fulfilled the responsibilities set forth in
paragraphs 5, 11, 12 and 13.
LEGAL AND REGULATORY MATTERS
----------------------------
15. Review regulatory examination reports and monitor management's efforts to
comply with its regulatory obligation. Review compliance with laws and
regulations with management and the auditors.
16. Discuss with management and the auditors any illegal acts reported by them,
and take or recommend that the Board take appropriate remedial action.
INTERNAL AUDIT
--------------
17. Approve the appointment of any accounting firm engaged to perform internal
audit functions, and approve the fees to be paid to such firm.
18. Review and approve the scope of internal audits and significant reports by
the internal audit function, and review the effectiveness of the internal
audit function in monitoring the system of internal controls.
REPORTING: The Committee reports to the full Board of Tri County Financial
---------
Corporation and Community Bank of Tri County. The Board establishes the Charter,
membership and duties of the Committee, and, as representatives of the
shareholders, has the ultimate authority and responsibility to select, evaluate,
and where appropriate, replace the auditors (or to nominate the outside auditor
to be proposed for shareholder approval in the annual proxy statement). The
auditors are accountable to the Audit Committee and the Board as representatives
of the shareholders.
MEMBERSHIP: The Committee shall consist of at least three members. All members
----------
shall be outside, independent directors. The membership shall meet the
independence, experience and other requirements of the Nasdaq National Market
and the FDIA. The Board establishes the Chairman and number of membership of the
Committee.
A-2
MEETING FREQUENCY: The Committee shall meet at least annually, and at such other
-----------------
times as are established by the Chairman, the Committee or the Board.
CONDUCT OF MEETINGS; Joint Committee: The Committee shall meet by conference
-------------------
call or in person. Minutes of the Committee are not required, but may be kept.
Meetings of the Company and Committees are held jointly. Each Board has
authority with respect to its Committee. The Committees and the Boards are
referred to in the singular in this Charter from time to time for convenience.
AUTHORITY, SUPPORT AND ADVICE: The Committee's functions shall be supported by
------------------------------
the Chief Financial Officer. The Committee may hold meetings with auditors,
internal audit personnel, outside counsel to the Company, and others as it deems
appropriate. The Committee may rely on advisors regarding the application,
contents, and meaning of auditing and accounting standards, laws, and
regulations. The Committee may rely on the auditors to identify the matters
required to be discussed and disclosed by the auditors.
A-3
REVOCABLE PROXY
TRI-COUNTY FINANCIAL CORPORATION
ANNUAL MEETING OF STOCKHOLDERS MAY 9, 2001
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Herbert N. Redmond and W. Edelen Gough, 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
2001 Annual Meeting of Stockholders (the "Annual 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 9, 2001 at 10:00 a.m. and
at any and all adjournments thereof, as follows:
Should the undersigned be present and elect to vote at the Annual Meeting or at
any adjournment thereof and after notification to the Secretary of the Company
at the Annual 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.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH ANNUAL 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 ANNUAL
MEETING. THIS PROXY ALSO CONFERS DISCRETIONARY AUTHORITY ON THE PROXY HOLDERS TO
VOTE WITH RESPECT TO APPROVAL OF THE MINUTES OF THE PRIOR ANNUAL 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 2001 ANNUAL MEETING.
Continued, and to be signed and dated, on reverse side.
Detach Proxy Card Here
-------------------------------------------------------------------------------------------------------------------
ELECTION OF DIRECTORS FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ]
listed below for all nominees listed below.
Nominees: Michael L. Middleton, C. Marie Brown, Catherine A. Askey and Louis P. Jenkins, Jr.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "EXCEPTIONS" BOX AND WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
*Exceptions _______________________________________________________________________________________________________
The Board of Directors recommends a vote "FOR" all the listed nominees.
The undersigned acknowledges receipt from the Corporation prior
to the execution of this proxy of notice of the Annual
Meeting, a proxy statement for the Annual Meeting.
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.
Dated: ____________________________, 2001
__________________________________________
Print Name of Stockholder
__________________________________________
Signature of Stockholder
__________________________________________
Signature if held jointly
Please Complete, Date, Sign and Mail this Proxy Promptly in
the Enclosed Postage Prepaid Envelope. VOTES MUST BE INDICATED X
(X) IN BLACK OR BLUE INK.
-------------------------------------------------------------------------------------------------------------------
PLEASE DETACH HERE
YOU MUST DETACH THIS PORTION OF THE PROXY CARD
BEFORE RETURNING IT IN THE ENCLOSED ENVELOPE