SCHEDULE 14A INFORMATION
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Essex Bancorp, Inc. Gene D. Ross
Corporate Offices President and
The Koger Center Chief Executive Officer
Building #9
Suite 200
Norfolk, Virginia 23502
(757) 893-1300
ESSEX
BANCORP, INC.
April 14, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders (the
"Meeting") of Essex Bancorp, Inc. (the "Company"), the holding company for Essex
Savings Bank, F.S.B. (the "Bank"), which will be held at The Koger Center,
Building #9, Suite 200, Norfolk, Virginia, on May 29, 1997 at 1:00 p.m.
The attached Notice of the Meeting and the Proxy Statement describe the formal
business to be transacted at the Meeting, which will consist of electing two
directors of the Company. Directors and officers of the Company will be present
at the Meeting to respond to any questions that our stockholders may have.
The Board of Directors of the Company unanimously recommends a vote "FOR" each
person who has been nominated to serve as a director of the Company.
YOUR VOTE IS IMPORTANT. You are urged to sign, date and mail the enclosed Proxy
Card promptly in the postage-paid envelope provided. If you attend the Meeting,
you may vote in person even if you have already mailed in your Proxy Card.
On behalf of the Board of Directors and all of the employees of the Company and
the Bank, I wish to thank you for your continued support. We appreciate your
interest.
Sincerely yours,
/s/ Gene D. Ross
- ----------------
Gene D. Ross
President and Chief Executive Officer
------------------------------
For further information about
the Annual Meeting, please
call 1-757-893-1326.
-----------------------------
BANCORP, INC.
The Koger Center
Building #9
Suite 200
Norfolk, Virginia 23502
(757) 893-1326
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 29, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Essex Bancorp, Inc. (the "Company") will be held at The Koger
Center, Building #9, Suite 200, Norfolk, VA 23502, on May 29, 1997, at 1:00 p.m.
A proxy statement and a proxy card for the Meeting are enclosed. The Meeting
is for the purpose of considering and voting upon the following matters:
1. The election of two directors for terms of three years each; and
2. Such other matters as may properly come before the Meeting or any
adjournment thereof. The Board of Directors is not aware of any
other business to come before the Meeting.
The Board of Directors has established March 31, 1997 as the record
date for the determination of stockholders entitled to notice of and to vote
at the Meeting and at any adjournments thereof. Only record holders of the
common stock of the Company as of the close of business on that date will be
entitled to vote at the Meeting or any adjournment thereof. A list of
stockholders entitled to vote at the Meeting will be available at Essex
Bancorp, Inc., The Koger Center, Building #9, Suite 200, Norfolk, Virginia
23502, for a period of ten days prior to the Meeting and also will be
available for inspection at the Meeting itself.
EACH STOCKHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT DELAY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY A STOCKHOLDER MAY BE
REVOKED AT ANY TIME BEFORE IT IS EXERCISED. A PROXY MAY BE REVOKED BY FILING
WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A DULY EXECUTED
PROXY BEARING A LATER DATE. ANY STOCKHOLDER PRESENT AT THE MEETING MAY REVOKE
HIS OR HER PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE
MEETING. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN
YOUR NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM THE RECORD HOLDER OF
YOUR SHARES TO VOTE PERSONALLY AT THE MEETING.
By Order of the Board of Directors
/s/Jennifer L. DeAngelo
------------------------
Jennifer L. DeAngelo
Corporate Secretary
Essex Bancorp, Inc.
Norfolk, Virginia
April 14, 1997
- -----------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM AT THE MEETING. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
- -----------------------------------------------------------------------------
Essex Bancorp, Inc.
The Koger Center
Building #9
Suite 200
Norfolk, Virginia 23502
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
May 29, 1997
SOLICITATION OF VOTING PROXY
This proxy statement is being furnished to stockholders of Essex Bancorp,
Inc. (the "Company"), in connection with the solicitation by its Board of
Directors of proxies to be used at the Annual Meeting of Stockholders (the
"Meeting") to be held at The Koger Center, Building #9, Suite 200, Norfolk,
Virginia 23502, at 1:00 p.m., and at any adjournments thereof. The 1996
Annual Report to Stockholders, including the consolidated financial
statements for the year ended December 31, 1996, accompanies this proxy
statement, which is first being mailed to stockholders on or about April 14,
1997.
Regardless of the number of shares of common stock owned, it is important
that stockholders be represented by proxy or present in person at the Meeting.
Stockholders are requested to vote by completing the enclosed proxy card and
returning it signed and dated in the enclosed postage-paid envelope.
Stockholders are urged to indicate their vote in the spaces provided on the
proxy card. Proxies solicited by the Board of Directors of the Company will be
voted in accordance with directions given therein. Where no instructions are
indicated, proxies will be voted FOR the election of each of the nominees for
director named in this proxy statement.
The Board of Directors knows of no additional matters that will be presented
for consideration at the Meeting. Execution of a proxy, however, confers on the
designated proxyholders discretionary authority to vote the shares in accordance
with their best judgment on such other business, if any, that may properly come
before the Meeting or any adjournments thereof.
A proxy may be revoked at any time prior to its exercise by filing written
notice of revocation with the Secretary of the Company, by delivering to the
Company a duly executed proxy bearing a later date, or by attending the Meeting,
filing a notice of revocation with the Secretary and voting in person. However,
if you are a stockholder whose shares are not registered in your name, you will
need additional documentation from the record holder of your shares to vote
personally at the Meeting.
The cost of solicitation of proxies in the form enclosed will be borne by
the Company. Proxies may also be solicited personally or by telephone, fax, or
telegraph by directors, officers, and regular employees of the Company or Essex
Savings Bank, F.S.B. (the "Bank"), without additional cost to
1
the Company or the Bank. The Company will also request persons, firms and
corporations holding shares in their names, or in the name of their nominees,
which are beneficially owned by others, to send proxy material to and obtain
proxies from such beneficial owners, and will reimburse such holders for
their reasonable expenses in doing so.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
The securities that may be voted at the meeting consist of shares of Common
Stock of the Company (the "Common Stock"), with each share entitling its owner
to one vote on all matters to be voted on at the Meeting, except as described
below.
The close of business on March 31, 1997 has been established by the Board of
Directors as the record date (the "Record Date") for the determination of
stockholders entitled to notice of and to vote at the Meeting and any
adjournments thereof. The total number of shares of Common Stock outstanding on
the Record Date was 1,054,736.
As provided in the Company's Certificate of Incorporation, record holders of
Common Stock who beneficially own in excess of 10% of the outstanding shares of
Common Stock (the "Limit") are not entitled to any vote in respect of the shares
held in excess of the Limit. A person or entity is deemed to beneficially own
shares owned by an affiliate of, as well as persons acting in concert with, such
person or entity. The Company is not aware of any stockholder that beneficially
owned shares in excess of the Limit at March 31, 1997.
The presence, in person or by proxy, of at least a majority of the total
number of shares of Common Stock entitled to vote (after subtracting any shares
held in excess of the Limit) is necessary to constitute a quorum at the Meeting.
The Meeting may be adjourned in order to permit the further solicitation of
proxies in the event there are not sufficient votes for a quorum at the time of
the Meeting or for such other purposes as may be considered proper. The
affirmative vote of the majority of those shares voting on an action will be
required to take any action at the Meeting other than the election of directors.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the amount of Common Stock of the Company
held by each director, certain executive officers and by all directors and
executive officers of the Company as a group, as of March 31, 1997. No persons
or entities were known to the Company to be the beneficial owners of more than
5% of the outstanding Common Stock on such date.
2
AMOUNT OF
COMMON STOCK
BENEFICIALLY
OWNED PERCENT OF COMMON
BENEFICIAL OWNER AT MARCH 31, 1997 STOCK OUTSTANDING
- -------------------------------------------------------------------------- ----------------- -----------------------
Roscoe D. Lacy, Jr. 250 .02%
Gene D. Ross 696 .07%
All directors and executive officers as a group 1568(1) .15%
- ------------------------
(1) Mr. Ross and other executive officers acquired their shares through the
Company's Employee Stock Purchase Plan
ELECTION OF TWO DIRECTORS FOR A TERM OF THREE YEARS
Pursuant to its bylaws, the number of directors of the Company is set at
four unless otherwise designated by the Board of Directors.
The Board of Directors of the Company is divided into three classes serving
staggered three-year terms. The terms of office of Gene D. Ross and Harry F.
Radcliffe expire in 1997, and the terms of office of Roscoe D. Lacy, Jr. and
Robert G. Hecht expire in 1999.
Mr. John J. Brennan retired June 21, 1996. He was 77 years old at the time.
Mr. Brennan became a director of Bancorp at the time of its organization in 1984
and presently serves as a director of many of the Company's subsidiaries,
including the Bank. He was a founding stockholder, a director, and served as
President of Community Mortgage and Investment Corporation from 1972 through
1984. Mr. Brennan had over 40 years experience in banking, mortgage banking and
consumer finance when he retired.
The nominees proposed for election at the Meeting are Messrs. Ross and
Radcliffe. The nominees are presently directors of the Company and the Bank. The
Board of Directors believes that the nominees will stand for election and will
serve if elected. However, in the event that either nominee is unable to serve
or declines to serve for any reason, it is intended that proxies will be voted
for such other person(s) as may be designated by the present Board of Directors.
Unless authority to vote for the directors is withheld, it is intended that the
shares represented by the enclosed Proxy will be voted FOR the election of the
nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES
NAMED IN THIS PROXY STATEMENT.
3
INFORMATION WITH RESPECT TO NOMINEES AND CONTINUING DIRECTORS
The following table sets forth certain information regarding the Board of
Directors of the Company.
DIRECTOR TERM
NAME AGE(1) POSITION HELD SINCE EXPIRES
- --------------------------------------- ----------- --------------------------------------- ------------- -----------
Nominees
Harry F. Radcliffe 46 Director 1995 1997
Gene D. Ross Continuing Directors 51 Chairman, President and Chief Executive
Officer 1992(2) 1997
Roscoe D. Lacy, Jr. 56 Director 1984(2) 1999
Robert G. Hecht 56 Director 1995 1999
- ------------------------
(1) As of March 31, 1997.
(2) Reflects year in which director became a director of the Company's
predecessor, Essex Bancorp. ("Bancorp"). In January 1995, Bancorp and Essex
Financial Partners, L.P. (the "Partnership") were merged into the Company.
Set forth below is additional information with respect to the directors of
the Company:
Roscoe D. Lacy, Jr. Mr. Lacy is Vice President and General Manager for Miles
Jennings Industrial Supply Co., Inc., an industrial supply company located in
Elizabeth City, North Carolina. Mr. Lacy became a director of the Company in
1984 and has been a director of the Bank and one of its predecessor institutions
since 1980. Mr. Lacy also served as a director of the Partnership's former
Florida savings bank until its merger with and into the Bank in May 1993.
Robert G. Hecht. Mr. Hecht is Chief Executive Officer of Trumbull
Corporation, a highway construction company in Pittsburgh, Pennsylvania and
Executive Vice President of P.J. Dick Contracting, a building construction firm
also located in Pittsburgh, Pennsylvania. He previously served as President of
Century Steel Erectors, a steel erection company in Pittsburgh, Pennsylvania,
until July 1990. Mr. Hecht has served as Director of First Home Bancorp, Inc.
and First Home Savings Bank, F.S.B. located in Pittsburgh, Pennsylvania since
May 1993. He previously served as Director of FirstSouth Savings from September
1990 to December 1993. Mr. Hecht became a director of the Company on September
15, 1995 and also serves as a director of the Bank.
Harry F. Radcliffe. Mr. Radcliffe has been Director, President and Chief
Executive Officer of First Home Bancorp, Inc. in Pittsburgh, Pennsylvania since
March 1993 and became President and Chief Executive Officer of First Home
Savings Bank, F.S.B. in Pittsburgh, Pennsylvania in May 1993. He previously
served as Director and President of FirstSouth Savings from April 1989 to
December 1993, as Chief Executive Officer of FirstSouth Savings from June 1989
to December 1993, and as
4
Director, President and Chief Executive Officer of FirstSouth Savings from
May 1990 to December 1993. He also served as Director of Home Bancorp, Inc.
and Home Savings Bank, F.S.B. in Norfolk, Virginia from October 1994 to
September 1995. Mr. Radcliffe became a director of the Company on September
15, 1995 and also serves as a director of the Bank.
Gene D. Ross. Mr. Ross was President and Chief Executive Officer ("CEO") of
the former general partner of the Partnership and of Bancorp from May 1992
until its merger, and has been the President and CEO of the Company since its
organization in August 1994. Mr. Ross also serves as a director and CEO and
President of the Bank and various other subsidiaries of the Company. Prior to
joining the Partnership in 1992, Mr. Ross was President and CEO of Southern
Federal Savings and Loan Association of Georgia. He was hired in a turnaround
capacity to seek strategies for the recapitalization of the institution. From
October 1990 through November 1991, Mr. Ross served as an independent
consultant and Regional Director of the Ralph Edgar Group, Inc., an RTC asset
management contractor. In March 1988, Mr. Ross joined First Liberty Financial
Corp. in Atlanta, Georgia, a $1.2 billion publicly-traded thrift holding
company, as President and Chief Operating Officer. Mr. Ross played a key role
in negotiating the sale of First Liberty's Atlanta-based thrift franchise.
Prior to March 1988, Mr. Ross was President and CEO of The Empire Savings
Building and Loan Association in Denver, Colorado. During his tenure, Mr.
Ross oversaw the reorganization and repositioning of the $2 billion thrift
until its sale to an out-of-state financial institution. Previously, Mr. Ross
held audit manager positions with two nationally recognized certified public
accounting firms. Mr. Ross is a Certified Public Accountant and has a
Bachelor of Arts and Sciences from Florida State University.
MEETINGS OF THE BOARD AND COMMITTEES OF THE BOARD
During 1996, the Board of Directors of the Company held regular meetings
each month and four special meetings. The Board of Directors of the Bank and the
Company have established various committees, including the Audit, Executive
Compensation, and Strategic Evaluation Committees. Each of the directors of the
Company attended at least 75% of the Company's board meetings and the meetings
of board committees on which such director served.
The Audit Committee is comprised of directors Lacy and Hecht, and is chaired
by Mr. Lacy. This Committee meets periodically with the Bank's internal auditor,
and periodically with the Company's and the Bank's external auditors, and
reports to the Board of Directors and to senior management on the Company's and
the Bank's financial condition and internal auditing practices and procedures.
During the year ended December 31, 1996, the Audit Committee met twice.
The Executive Compensation Committee (the "Compensation Committee") consists
of directors Lacy, Hecht and Radcliffe. The Compensation Committee meets
periodically to evaluate the compensation and fringe benefits of the Company's
and the Bank's directors, officers, and employees. During the year ended
December 31, 1996, the Compensation Committee met three times.
5
The Strategic Evaluation Committee was formed in January 1996 to evaluate
strategic direction as a means to enhance shareholder value. This Committee is
comprised of directors Hecht, Ross and Radcliffe. During the year ended December
31, 1996, the Strategic Evaluation Committee met four times.
DIRECTORS FEES
The directors of the company other than Mr. Ross receive fees of $250 for
each joint board meeting of the Company and the Bank that they attend and
$250 for any separate board committee meeting that they attend.
EXECUTIVE COMPENSATION
The following table sets forth a summary of certain information concerning
the compensation paid by the Company and its subsidiaries for services rendered
in all capacities during the periods indicated to Gene D. Ross, President and
Chief Executive Officer of the Company and the Bank, and Earl C. McPherson,
President and Chief Executive Officer of Essex First Mortgage Corporation, a
wholly-owned subsidiary of the Bank and Mr. Harvard R. Birdsong, II, Executive
Vice President of the Bank. Messrs. Ross, McPherson, and Birdsong were the only
executive officers whose total compensation during 1996 exceeded $100,000.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-----------------------------------------------
AWARDS PAYOUTS
-------------------------------- -------------
SECURITIES
NAME AND PRINCIPAL RESTRICTED UNDERLYING LTIP
POSITION YEAR SALARY BONUS STOCK OPTIONS(2) PAYOUTS
- ------------------------------------------ --------- ---------- --------- --------------- --------------- -------------
Gene D. Ross 1996 $208,750 $20,000 -- -- --
Chief Executive Officer of 1995 $206,154(1) N/A -- 189,175 --
the Company and the Bank 1994 $206,154(1) N/A -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Earl C. McPherson 1996 $121,800 $10,000 -- -- --
President and CEO of 1995 $116,000 N/A -- 64,292 --
Essex First Mortgage 1994 $116,000 N/A -- -- --
Corporation and Executive
Vice President of the Bank
- -----------------------------------------------------------------------------------------------------------------------------
Harvard R. Birdsong, II 1996 $103,722 $6,500 -- -- --
Executive Vice President 1995 98,225 N/A -- 64,292 --
of the Bank 1994 98,225 N/A -- -- --
NAME AND PRINCIPAL ALL OTHER
POSITION COMPENSATION(3)
- ------------------------------------------ ----------------
Gene D. Ross $12,378
Chief Executive Officer of $11,587
the Company and the Bank $11,221
- ------------------------------------------------------------
Earl C. McPherson $6,582
President and CEO of $6,336
Essex First Mortgage $7,336
Corporation and Executive
Vice President of the Bank
- ------------------------------------------------------------
Harvard R. Birdsong, II $6,023
Executive Vice President $5,825
of the Bank $5,825
- ------------------------
(1) Salary includes payouts for unused vacation.
(2) These stock options became exercisable during 1996.
(3) Represents the Company's unvested contribution to the Essex Savings Bank,
F.S.B. Supplemental Executive Retirement Plan ("SERP") and imputed income on
group-term life insurance. SERP contributions vest at 20% per year.
Accordingly, at fiscal year-end 1996 80% had vested. Interest on the SERP
accrues at a return equal to the interest rate on a one-year certificate of
deposit.
6
The following table provides information on stock appreciation rights
("SARs") exercised and the value of unexercised stock options/SARs at December
31, 1996 by Messrs. Ross, McPherson, and Birdsong:
AGGREGATED SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED STOCK UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY STOCK
SARS (#) VALUE ($) END OF FISCAL OPTIONS/SARS AT
NAME EXERCISED REALIZED YEAR(1) END OF FISCAL YEAR
- -------------------------------------------------- ----------- --------- ------------------- ------------------
Gene D. Ross 39,175 $ 41,623 150,000 187,500(2)
Chief Executive Officer
of the Company and the Bank
Earl C. McPherson 64,292 64,292 -0- -0-
President/CEO of
Essex First Mortgage
Corporation and
Executive Vice
President of the Bank
Harvard R. Birdsong, II 30,000 35,625 34,292 42,865(2)(3)
Executive Vice
President of the Bank
- ------------------------
(1) All SARs are exercisable.
(2) The market value of the Company's common stock at December 31, 1996 was
2.1875 per share, and the exercise price is $.9375 per share.
(3) Mr. Birdsong resigned from the Bank effective December 31, 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no known potential conflicts of interest or interlocks involving
Compensation Committee members and executive officers of the Company, the Bank,
or its subsidiaries.
7
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW
The executive compensation program of the Company is administered by the
Compensation Committee, which is composed of the three independent, non-employee
directors listed below. The Compensation Committee reviews management's
compensation and Company benefit plans and makes recommendations regarding such
compensation and benefits plans to the Board of Directors. Review of and
recommendations regarding executive compensation are a significant part of that
responsibility. This report covers the Committee's policies and actions in 1996.
The Company's executive compensation "mission" philosophy is to provide
competitive levels of compensation, integrate management's pay with the
achievement of the Company's strategic and performance goals, reward
above-average corporate performance, recognize individual initiative and
achievement, align management's and stockholders' interests in the enhancement
of stockholder value through stock and stock option awards, and assist the
Company in attracting and retaining qualified management. These factors are
taken into account by the Compensation Committee in assessing executive
compensation generally and the compensation of the Chief Executive Officer in
particular.
For 1996, compensation of the Company's executive officers was composed of
two elements: (1) annual base salary, and (2) bonuses. No long-term performance
incentives (i.e., stock option and related rights awards) were granted in 1996.
All salaries and bonuses paid to the Company's executive officers are received
by them in their capacities as officers of the Company and its subsidiaries.
Each element of the Company's 1996 executive compensation, including the
compensation of the Chief Executive Officer, is discussed separately below.
BASE SALARY
The Compensation Committee recommends to the Board of Directors of the
Company and the Bank the salary level to be paid to each executive officer based
upon corporate and individual performance. Base salary is determined, in part,
on the basis of the position held by the executive and is assessed in comparison
to the salaries of similarly situated executives at selected financial
institutions of comparable size in the Company's geographic market. While
comparable market ranges based upon position and responsibilities are used as
guides, salaries are also based upon a subjective evaluation of the individual
performance of each officer, the overall contribution of the executive to the
attainment of the Company's financial goals, and the executive's record of
achievement in directing the activities for which the executive is responsible.
With respect to executive officers other than the Chief Executive Officer, the
Committee also consulted with the Chief Executive Officer as to the appropriate
salary level.
8
Mr. Ross' base salary for 1996 increased to $210,000 from $200,000 in 1995.
The Compensation Committee approved the $10,000 increase in Mr. Ross' salary in
view of his base salary having been fixed at $200,000 since his employment began
in 1992 and in recognition of his achievements and the Company's accomplishment
of a number of restructuring goals in 1995 and 1996, including the
recapitalization of the Company through its acquisition of Home Bancorp, Inc.
and the completion of strategic branch sales. Mr. Ross also received a bonus of
$20,000 in 1996; the first since his employment began in May 1992. Bonuses were
also paid in 1996 to Mr. McPherson ($10,000) and Mr. Birdsong ($6,500). The
bonuses were in recognition of their past contributions to the Company under
unusually difficult circumstances and as motivation for the anticipated material
down-sizing of the Company through retail branch/deposit sales.
STOCK OPTIONS/LONG-TERM INCENTIVES
The Company's Option Plan is used to motivate key employees and executive
officers to achieve long-term results beneficial to shareholders. The purpose of
the Option Plan is to encourage participants to maintain and increase their
proprietary interest as shareholders in the Company and to benefit from the
long-term performance of the Company. Options are awarded on a case-by-case
basis based upon a subjective determination of a reasonable level for each
officer relative to the officer's responsibilities, performance and prior
grants. The Option Plan is administered by the Compensation Committee, which has
the power to determine those individuals to whom options and rights will be
granted, the number of shares, the types of options and other terms and
conditions of the options and rights.
COMPENSATION COMMITTEE
Roscoe D. Lacy, Jr.
Robert G. Hecht
Harry F. Radcliffe
Neither the Compensation Committee report above nor the stock performance
graph that follows is incorporated by reference in any prior or future
Securities and Exchange Commission (the "SEC") filings, directly or by reference
to the incorporation of Proxy Statements of the Company, unless such filing
specifically incorporates the report or the stock performance graph. SEC rules
provide that the compensation committee report and the stock performance graph
are not deemed to constitute "soliciting material" or to be filed with the SEC,
and are not subject to SEC Regulations 14A or 14C, except as provided in SEC
regulations, or to the liabilities under Section 18 of the Exchange Act.
9
STOCK PERFORMANCE GRAPH
The following graph provides a comparison with the stated indices of the
percentage change in the Company's cumulative total stockholder return on its
Common Stock for the period beginning January 19, 1995, the date the Company's
Common Stock began trading on the American Stock Exchange. The Company's Common
Stock performance is compared to the Total Return Index for the Nasdaq Stock
Market (U.S. Companies) which is a broad market equity index. This index
comprises all domestic common shares traded on the Nasdaq National Market and
the Nasdaq Small Cap Market.
In addition, the Company's Common Stock performance is compared to the
Asset-Size Index of Thrifts, under $250 million in total assets and $250 million
to $500 million in total assets, compiled by SNL Securities, a company providing
broad-based financial information services to banks and thrifts. In view of the
Company's asset base falling under $250 million during the third quarter of
1996, both indices have been provided for comparison purposes.
It should be noted that in light of the extremely short period of time
reflected by this graph, there is no reason to assume that the performance of
the Company's Common Stock for the period shown on the graph will be reflective
of long-term performance. In any event, the following graph is designed to be
only a general depiction of one measure of corporate performance to be used by
stockholders in evaluating the performance of the Company.
[PERFORMANCE GRAPH]
01/19/95 06/30/95 12/31/95 6/30/96 12/31/96
---------- ----------- ----------- ----------- ---------
Essex Bancorp, Inc.............................................. 100.00 18.76 37.50 43.80 43.76
Nasdaq Total US................................................. 100.00 121.82 138.16 156.42 169.95
SNL Thrifts (under $250M) Index................................. 100.00 115.43 137.45 140.36 152.49
SNL Thrifts ($250-500M) Index................................... 100.00 118.04 134.74 141.18 166.04
10
EMPLOYMENT AND OTHER EXECUTIVE SERVICES AGREEMENTS AND PLANS
Employment Agreement.
Gene D. Ross is subject to a restated Employment Agreement (the "Employment
Agreement") with the Company, Essex Mortgage Corporation, and the Bank and its
subsidiaries (the "Employers"). The Employers approved the Employment Agreement
effective January 4, 1996. The Employment Agreement provides for the employment
of Mr. Ross as the President and Chief Executive Officer of each of the
Employers, and is renewable year-to-year by the Boards of Directors of each of
the Employers. The respective Boards of Directors have approved the renewal of
the Employment Agreement through January 4, 1998. Mr. Ross is presently entitled
to base salary at the rate of $210,000 per year, as well as to bonuses
established from time to time by the Board of Directors of the Company based on
standards of financial performance. The Employment Agreement is currently
terminable for cause by the Boards of Directors of the Company or any of the
Company's subsidiaries. For purposes of the Employment Agreement, "cause"
includes personal dishonesty, willful misconduct, breach of fiduciary duties
involving personal profit, intentional failure to perform required duties,
willful violation of any law, rule or regulation (other than non-material
violations) or final cease and desist order, or a material breach of the
provisions of the Employment Agreement. In the event of a termination for cause,
Mr. Ross will be paid only his salary accrued and prorated to the date of
termination. The Employment Agreement is also
terminable without cause by the Board of Directors of the Company or any of its
subsidiaries upon 45 days advance written notice. In the event of a termination
without cause, Mr. Ross will be paid his salary through the date of termination,
plus the severance benefit described below. The Employment Agreement also
provides for the indemnification of Mr. Ross for losses and expenses arising out
of the performance of his duties under the Employment Agreement, to the extent
permitted by applicable corporate law and Federal regulations.
The Employment Agreement provides that upon termination of Mr. Ross without
cause (including non-renewal of his agreement by the Company), Mr. Ross will be
entitled to salary continuation for 18 months. The Employment Agreement also
provides for a lump sum payment equivalent to 24 months of base salary to Mr.
Ross should he resign for "good reason" (such as demotion, relocation or
reduction of salary) or be terminated without cause within twelve months
following a change in control with respect to the Company; provided, however,
that Mr. Ross' 24-month severance benefit will be reduced to the extent
necessary to avoid non-deductibility as a "golden parachute payment" under
Section 280G of the Internal Revenue Code. For this purpose, a change in control
will be deemed to occur when a person or group of persons acting in concert (i)
acquires 20% or more of the Company's voting securities, or (ii) acquires 5% or
more of the Company's voting securities, if within 12 months after such
acquisition a majority of the members of the Board of Directors of the Company
elected at the Company's annual meeting of stockholders consists of persons
nominated other than by or at the direction of the incumbent Board of Directors
of the Company. The Employment Agreement was submitted to the Office of Thrift
Supervision and no objection was taken.
11
OTHER EXECUTIVE SERVICES AGREEMENTS
As of April 1, 1995, the Bank entered into amended executive services
agreements with a number of officers, including Earl C. McPherson. Mr.
McPherson's agreement provides for the payment of nine months severance pay in
the event of the termination of his employment for reasons other than cause and
additional amounts if severance follows a change in control, and is renewable
annually. The agreement with Mr. McPherson extended the term of his personal
service agreement through March 31, 1997. In the case of resignation for "good
reason" (including demotion or removal) following a change in control, Mr.
McPherson would be entitled to salary continuation for 12 months. Resignation
for good reason following a change in control is defined in the same manner as
would apply under Mr. Ross' Employment Agreement, which is discussed above.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Bank maintains the Essex Savings Bank, F.S.B. Supplemental Executive
Retirement Plan ("SERP") for certain of the highly compensated officers of the
Bank and its subsidiaries. The present participants in the Plan include Messrs.
Ross, McPherson and one other officer. The SERP was implemented in 1993 for the
purpose of attracting and retaining key management personnel. The SERP is a
non-qualified deferred compensation plan.
Each SERP participant who is continuously employed by the Bank or its
subsidiaries for an entire calendar year is credited under the SERP for that
calendar year with a pension credit of 5 percent of such participant's
compensation for the year and such profit-sharing credit, if any, as the
Compensation Committee of the Board of Directors of the Bank determines, not in
excess of 5 percent of such participant's compensation for the calendar year.
Amounts credited to the bookkeeping accounts of participants under the SERP
remain general assets of the Bank and are not funded through a separate trust or
other investment vehicle. Each participant's account under the SERP is also
credited annually with a deemed investment rate of return equal to the interest
rate in effect on the last day of the prior plan year on a one-year certificate
of deposit issued by the Bank.
Participants in the SERP fully vest upon death, permanent disability or
retirement at or after age 65 or upon any earlier change in control, as
described in the SERP. In the event of a termination of a participant's
employment prior to death, permanent disability, attainment of age 65 or a
change in control, the participant's vested interest in his account under the
SERP is based upon his completed years of employment with the Bank or its
subsidiaries after 1992. Specifically, vesting occurs at the rate of 20 percent
per year for each such year of service completed after 1992. All amounts payable
under the SERP are payable in a lump sum. Amounts accrued under the SERP are not
taxable to participants, or deductible to the Bank, until paid. During the year
ended December 31, 1996, the Company accrued $38,836 of expense pursuant to the
SERP and all participants had become 80% vested.
12
TRANSACTIONS WITH CERTAIN RELATED PERSONS
In the ordinary course of business, the Bank and its subsidiaries have made
loans, and may continue to make loans in the future, to non-executive officers
and employees. Under the Bank's policy, such loans are made on substantially the
same terms, including collateral, as are available to the general public.
However, the Bank's policy does not permit the Company's or the Bank's directors
or executive officers to borrow from the Bank or its subsidiaries, and no
director or executive officer of the Company or the Bank had any outstanding
indebtedness to the Company or the Bank during 1996.
Since January 1, 1996, no director or executive officer of the Company or
the Bank has engaged in any transaction or series of similar transactions with
the Company, the Bank or the Company's other subsidiaries that involved amounts
exceeding $60,000.
Furthermore, management of the Company does not believe that any director or
officer or affiliate of the Company, or any record or beneficial owner of more
than 5% of the Common Stock of the Company, or any associate of any such
director, officer, affiliate or stockholder, is a party adverse to the Company
or any of its subsidiaries or has a material interest adverse to the Company or
any of its subsidiaries in any material proceeding.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than ten percent of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC and the American Stock Exchange. Executive officers and
directors and greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by it, the
Company is unaware of any executive officer, director, or person who owns more
than ten percent of the Company's Common Stock, or of any executive officer or
director who has failed to file required notices on a timely basis, other than
Mr. Birdsong who filed a Form 4 with respect to December 1996 SAR exercises in
February rather than January 1997, and Mr. Brennan who filed a Form 4 with
respect to August 1996 SAR exercises in October 1996 rather than September 1996.
INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the accounting firm of Price Waterhouse
LLP, independent accountants, to be the Company's independent accountants for
the year ended December 31, 1996. The Board of Directors has not yet made a
determination regarding the selection of independent accountants for the year
ending December 31, 1997. Under the Company's Certificate of Incorporation and
Bylaws, stockholders are not required to ratify or confirm the selection of
independent accountants made by the Board of Directors. It is anticipated that a
13
representative of Price Waterhouse, LLP will be present at the Meeting to answer
questions concerning the financial statements presented and to make a statement
if he so desires.
STOCKHOLDER PARTICIPATION
In the event that a stockholder wishes to submit a proposal for
consideration by the stockholders of the Company at the 1998 Annual Meeting of
Stockholders (the "1998 Annual Meeting"), then in order for the proposal to be
includible in the proxy statement for the 1998 Annual Meeting, such proposal
must be received by the Secretary of the Company no later than December 15,
1997.
The Bylaws of the Company provide a procedure for certain business to be
brought before the annual meetings of the Company's stockholders, and such
proposals may be properly brought before the meeting even if they are not
includible in the proxy statement for the meeting, so long as the proposing
stockholder complies with the advance notice provisions of the Bylaws. The 1998
Annual Meeting is scheduled to be held on May 28, 1998. If written notice of
business proposed to be brought before the 1998 Annual Meeting is given to the
Secretary of the Company, delivered or mailed to and received at the principal
executive offices of the Company not later than February 27, 1998, such business
may be brought before the 1998 Annual Meeting. Information regarding the
contents of the required notice to the Company is to be found in the Company's
Bylaws, which are available from the Company upon request.
Stockholders are also permitted to submit nominations of candidates for the
Board of Directors. If a stockholder wishes to nominate a candidate to stand for
election as a director at the 1998 Annual Meeting, the nomination shall be made
by written notice to the Secretary of the Company, which must be delivered or
mailed to and received at the principal executive offices of the Company not
later than February 27, 1998. The requirements regarding the form and content of
the stockholder nominations for directors are also set forth in the Bylaws.
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING
The Board of Directors knows of no business which will be presented for
consideration at the Meeting other than as stated in the Notice of Annual
Meeting of Stockholders. If, however, other matters are properly brought before
the Meeting, it is the intention of the persons named in the accompanying proxy
to vote the shares represented thereby on such matters in accordance with their
best judgment.
Whether or not you intend to be present at the Meeting, you are urged to
return your proxy promptly. If you are present at the Meeting and wish to vote
your shares in person, your proxy may be revoked by voting at the Meeting.
14
ANNUAL REPORT ON FORM 10-K AND ADDITIONAL INFORMATION
A copy of Form 10-K as filed with the Securities and Exchange Commission is
available upon written request. Requests for this or other financial information
about the Company should be directed to Investor Relations, Essex Bancorp, Inc.,
The Koger Center, Building #9, Suite 200, Norfolk, Virginia 23502, Telephone
(757) 893-1326.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Jennifer L. DeAngelo
Jennifer L. DeAngelo
Corporate Secretary
Essex Bancorp, Inc.
Virginia Beach, Virginia
April 14, 1997
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN AND PROMPTLY RETURN
THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
15
ESSEX BANCORP, INC.
REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ESSEX BANCORP,
INC., FOR USE ONLY AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY
29, 1997 AND ANY ADJOURNMENT THEREOF.
The undersigned hereby acknowledges prior receipt of the Notice of the Annual
Meeting of Stockholders (the "Meeting") and the Proxy Statement describing
the matters set forth below, and indicating the date, time and place of the
Meeting, and hereby appoints the Board of Directors of Essex Bancorp, Inc.
(the "Company"), or any of them, as proxy, each with full power of
substitution to represent the undersigned at the Meeting, and at any
adjournment or adjournments thereof, and thereat to act with respect to all
votes that the undersigned would be entitled to cast, if then personally
present on the matters referred to on the reverse side in the manner
specified.
This Proxy, if executed, will be voted as directed, but, if no instructions
are specified, this Proxy will be voted FOR the proposal lised. Please date
and sign this Proxy on the reverse side and return it in the enclosed
envelope. This Proxy must be received by the Company no later than May 28,
1997.
This Proxy is revocable and the undersigned may revoke it at any time prior
to the Meeting by giving written notice of such revocation to the Secretary
of the Company. Should the undersigned be present and want to vote in person
at the Meeting or any adjournment thereof, the undersigned may revoke this
Proxy by giving written notice of such revocation to the Secretary of the
Company on a form provided at the Meeting.
(Continued and to be signed on reverse side)
- -------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECEOMMENDS A VOTE "FOR" PROPOSAL 1.
1) Election of Directors of nominees listed.
Gene D. Ross; Harry F. Radcliffe / / FOR (except as marked to the contrary / / WITHHOLD AUTHORITY
INSTRUCTION: To withhold your vote for any individual nominee, write that nominee's name on the line provided below:
- -------------------------------------------------------------------------------------------------------------------------------
To vote, in its discretion, upon any other matters that may properly come before the Annual Meeting or any adjournment thereof.
Management is not aware of any other matters that will come before the Annual Meeting.
Date________________________________________, 1997
__________________________________________________
Signature
__________________________________________________
Signature
Please sign your name exactly as it appears hereon.
Joint accounts need only one signature, but all
stockholders should sign if possible. When signing as
administrator, agent, corporation, officer, executor,
trustee, guardian or similar position or under a
power of attorney, please add your full title to
your signature.
PLEASE RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED POSTAGE-PAID ENVELOPE.