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
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ESSEX BANCORP, INC.
------------------------------------------------
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
LOGO
ESSEX
BANCORP, INC.
April 26, 2000
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 Interstate Corporate
Center, Building #5, 1st Floor Conference Room, Norfolk, Virginia, on June 16,
2000 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.
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.
Sincerely,
/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. |
|---------------------------------|
LOGO
ESSEX
BANCORP, INC.
Interstate Corporate Center
Building #9
Suite 200
Norfolk, Virginia 23502
(757) 893-1326
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on Friday, June 16, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Meeting")
of Essex Bancorp, Inc. (the "Company") will be held at Interstate Corporate
Center, Building #5, 1st Floor Conference Room, Norfolk, VA, on Friday, June 16,
2000, 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 proposals:
1. The election of two directors for a term of three years; 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 April 21, 2000 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., Interstate Corporate
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
Norfolk, Virginia Corporate Secretary
April 26, 2000 Essex Bancorp, Inc.
- --------------------------------------------------------------------------------
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.
Interstate Corporate Center
Building #9
Suite 200
Norfolk, Virginia 23502
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
June 16, 2000
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 Interstate Corporate Center, Building #5, 1st Floor Conference Room,
Norfolk, Virginia, at 1:00 p.m. on Friday, June 16, 2000, and at any
adjournments thereof. The 1999 Annual Report to Stockholders, including the
consolidated financial statements for the year ended December 31, 1999,
accompanies this proxy statement, which is first being mailed to stockholders on
or about April 26, 2000.
Regardless of the number of shares of Common Stock of the Company (the "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 the nominees for directors 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 the Company or the
1
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, 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 April 21, 2000 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 1,060,642.
The presence, in person or by proxy, of at least a majority of the total number
of shares of Common Stock entitled to vote 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.
2
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Securities Ownership of Management
The following table sets forth the amount of the Company's Common Stock
beneficially owned by each director, by certain executive officers, and by all
directors and executive officers of the Company as a group as of April 21, 2000.
The indicated number of shares of Common Stock beneficially owned includes
shares that may be acquired through the exercise of stock options or warrants
that are or become exercisable within 60 days of April 21, 2000.
Amount and Nature Percent
Name of Beneficial Owner of Beneficial Ownership of Class
- ------------------------ ----------------------- --------
Robert G. Hecht 146,039(1) 12.10%(2)
Roscoe D. Lacy, Jr. 2,600(3) *
Harry F. Radcliffe 1,339,807(4) 55.81%(2)
Gene D. Ross 2,085(5) *
Earl C. McPherson 963(5) *
All directors and named
executive officers as a group 1,491,494 58.52%(6)
- --------------------
* Less than 1%
(1) Includes 1,800 shares that Mr. Hecht has the right to acquire through
the exercise of stock options and 144,239 shares that he has the right
to acquire through the exercise of warrants directly owned.
(2) The individual percentages are calculated by adding to the actual
number of presently outstanding shares the number of shares that could
be obtained within 60 days by exercising the options and warrants held
by each director, but excluding warrants and options held by all other
persons. If all such warrants and options were included in the
calculation, Mr. Hecht's percentage would be 1.62%, and Mr. Radcliffe's
percentage would be 14.87%.
(3) Includes 2,350 shares that Mr. Lacy has the right to acquire through
the exercise of stock options.
(4) Includes 1,800 shares that Mr. Radcliffe has the right to acquire
through the exercise of stock options; 1,192,604 shares that he has the
right to acquire through the exercise of warrants directly owned;
123,061 shares owned by Fort Pitt Capital Management Corp., over which
Mr. Radcliffe holds sole investment and/or voting power, which that
entity may acquire through the exercise of warrants; and, 24,142 shares
owned by First Home Bancorp Trust, over which Mr. Radcliffe holds
investment and/or voting power, which that entity may acquire through
the exercise of warrants.
(5) Messrs. Ross and McPherson acquired their shares through the Company's
Employee Stock Purchase Plan.
(6) Includes warrants and options held by directors, but excluding warrants
and options held by all other persons. If all warrants and options
exercisable within 60 days were included in the percentage calculation,
the total percentage would be 16.54%.
3
Securities Ownership of Certain Beneficial Owners
Amount and Nature Percent
Name and Address of Beneficial Ownership of Class
- ---------------- ----------------------- --------
Robert G. Hecht 146,039(1) 12.10%(2)
2077 Blairmont Drive
Pittsburgh, PA 15241
Harry F. Radcliffe 1,339,807(3) 55.81%(2)
40 Wiggins Lane
Uniontown, PA 15401
Timothy G. Ewing 1,628,872(4) 60.56%(2)
Value Partners, Ltd.
4514 Cole Avenue, Suite 808
Dallas, TX 75205
- ----------------------
(1) Includes 1,800 shares that Mr. Hecht has the right to acquire through
the exercise of stock options and 144,239 shares that he has the right
to acquire through the exercise of warrants directly owned.
(2) The individual percentages are calculated by adding to the actual
number of presently outstanding shares the number of shares that could
be obtained within 60 days by exercising the options and warrants held
by each named beneficial owner, but excluding warrants and options held
by all other persons. If all such warrants and options were included in
the calculation, Mr. Hecht's percentage would be 1.62%, Mr. Radcliffe's
percentage would be 14.87%, and Mr. Ewing's percentage would be 18.08%.
(3) Includes 1,800 shares that Mr. Radcliffe has the right to acquire
through the exercise of stock options; 1,192,604 shares that he has the
right to acquire through the exercise of warrants directly owned;
123,061 shares owned by Fort Pitt Capital Management Corp. over which
Mr. Radcliffe holds sole investment and/or voting power, which that
entity may acquire through the exercise of warrants; and, 24,142 shares
owned by First Home Bancorp Trust over which Mr. Radcliffe holds
investment and/or voting power, which that entity may acquire through
the exercise of warrants.
(4) Includes 49,939 shares held in a SARASEP IRA of which Mr. Ewing is the
beneficiary and, therefore, has the right to acquire through the
exercise of warrants; and, includes 1,578,933 shares owned by Value
Partners, Ltd. over which Mr. Ewing holds investment and/or voting
power, which that entity may acquire through the exercise of warrants.
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 2000, and the terms of Roscoe D. Lacy, Jr. and Robert G.
Hecht expire in 2002. Each of the staggered terms expire at the annual meetings
of the stockholders of the Company. There are no directors of the Company
presently elected to the Board with a term expiring in 2001.
4
The nominees proposed for election at the Meeting are Messrs. Ross and
Radcliffe. Both 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.
Information with Respect to Nominees and Continuing Directors
The following table sets forth certain information regarding the Board of
Directors of the Company.
Term
Name Age(1) Position Held Director Since Expires
- ---- ------ ------------- -------------- -------
Nominees
Harry F. Radcliffe 49 Director 1995 2000
Gene D. Ross 54 Chairman, President and Chief
Executive Officer 1992(2) 2000
Continuing Directors
Roscoe D. Lacy, Jr. 59 Director 1984(2) 2002
Robert G. Hecht 59 Director 1995 2002
(1) As of April 21, 2000.
(2) Reflects year in which director became a director of the Company's
predecessor entities. All references herein to the Company are deemed
to include the Company's predecessor entities.
Set forth below is additional information with respect to the directors of the
Company:
Harry F. Radcliffe. Mr. Radcliffe became a director of the Company on September
15, 1995 and also serves as a director of the Bank. He has been President and
Chief Executive Officer of Fort Pitt Capital Management, Pittsburgh,
Pennsylvania, a private investment management company, since September 1995 and
was the President and Chief Executive Officer of First Home Bancorp, Inc., a
publicly-held savings institution holding company until its sale in April 1996.
He is a director of Hawthorne Financial Corporation, Los Angeles, California, a
savings institution holding company which is traded on the Nasdaq National
Market, and First Fidelity Bancorp, Irvine, California, a privately held thrift
and loan holding company. He has also been a director of Miami Computer Supply,
Inc. since 1996. From 1989 to 1993, Mr. Radcliffe was the President and Chief
5
Executive Officer of First South Savings Association, a Pennsylvania-chartered
stock savings association located in Pittsburgh, Pennsylvania. Mr. Radcliffe
received his degree in economics from Ohio Wesleyan University.
Gene D. Ross. Mr. Ross was President and Chief Executive Officer ("CEO") of the
Company's predecessors from May 1992 until their merger with the Company in
1995, 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 Company
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., a Resolution Trust Corporation 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.
Robert G. Hecht. Mr. Hecht became a director of the Company on September 15,
1995 and also serves as a director of the Bank. Mr. Hecht is Chief Executive
Officer of Trumbull Corporation, a highway construction company in Pittsburgh,
Pennsylvania, an Executive Vice President of P.J. Dick Incorporated, a building
construction firm also located in Pittsburgh, Pennsylvania, and President of
Allegheny Asphalt Manufacturing, Inc. in Pittsburgh, Pennsylvania. He has also
served as Vice Chairman and a director for Miami Computer Supply, Inc. since
1996. Mr. Hecht served as a director of First Home Bancorp, Inc., a
privately-held savings institution holding company in Pittsburgh, Pennsylvania,
until its sale in April 1996. He previously served as director of First South
Savings from September 1990 to December 1993. Mr. Hecht previously served as
President of Century Steel Erectors, a steel erection company in Pittsburgh,
Pennsylvania, until July 1990.
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 Company's former Florida
savings bank until its merger with and into the Bank in May 1993.
Meetings of the Board and Committees of the Board
During 1999, the Board of Directors of the Company held a total of twelve (12)
regular meetings for the year. The Board of Directors of the Bank and the
Company have established various committees, including the Audit, Executive
6
Compensation, and Strategic Evaluation Committees. Each of the directors of the
Company attended 100% 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, 1999, the Audit Committee met three times.
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, 1999, the Compensation Committee met four times.
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, 1999, meetings of the Strategic Evaluation Committee were held in connection
with regular board meetings and the Company's strategic planning meeting.
Directors Fees
Each non-employee director of the Company receives a fee of $350 for each joint
board meeting of the Company and the Bank that they attend and $350 for any
separate board committee meeting that they attend. Additionally, an annual
retainer fee of $5,500 is paid to non-employee directors in quarterly
increments.
7
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, a division of the Bank.
Messrs. Ross and McPherson were the only executive officers whose salary and
bonus compensation during 1999 exceeded $100,000.
Summary Compensation Table
Long Term Compensation
----------------------
Awards Payouts
---------------------------------------
Securities
Name and Principal Restricted Underlying LTIP All Other
Position Year Salary Bonus Stock Options Payouts Compensation(2)
- -------------------------- ---- -------- ------ ---------- ---------- ------- ---------------
Gene D. Ross 1999 $203,175(1) $9,000 -- 40,000 -- $14,299
Chief Executive Officer of 1998 $194,088(1) N/A -- -- -- $13,933
the Company and the Bank 1997 $204,615(1) N/A -- -- -- $12,355
Earl C. McPherson 1999 $115,100 $5,200 -- 25,000 -- $ 9,045
President and CEO of 1998 $109,620 N/A -- -- -- $ 8,649
Essex First Mortgage, a 1997 $114,695 N/A -- -- -- $ 6,626
division of the Bank and
Executive Vice President
of the Bank
(1) Salary includes payouts for unused vacation.
(2) Represents the Company's accrued expense under the Essex
Savings Bank, F.S.B. Supplemental Executive Retirement Plan
("SERP"), the Company's matching contribution to the Essex
Bancorp, Inc. 401(k) Retirement Savings Plan, and imputed
income on group-term life insurance. As of the fiscal year-end
1997 the contributions and accruals had fully vested. Interest
on the SERP accrues at a return equal to the interest rate on
a one-year certificate of deposit. Effective December 1, 1998,
the SERP was amended to modify the vesting schedule so that
each year's contribution following 1998 (and income thereon)
will be subject to a three year vesting provision. A member
must complete all three years of service to avoid forfeiture
of Company contributions made after December 31, 1998.
However, pursuant to an amendment effective January 1, 1999,
Messrs. Ross and McPherson are fully vested in their SERP
accounts at all times.
8
The following table provides information on stock options and stock appreciation
rights ("SARs") and the value of unexercised stock options/SARs at December 31,
1999 held by Messrs. Ross and McPherson:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term(2)
------------------------------------------------- ------------------------
Number of Percent of
Securities Total Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/sh) Date 5% 10%
---- ----------- ------------ ------- ------ ---- ----
Gene D. Ross 40,000 100% $1.25 09/10/09 $31,445 $79,687
Earl C. McPherson 25,000 100% $1.25 09/10/09 $19,653 $49,804
- ---------------
(1) The stock options and SARs granted to Messrs. Ross and McPherson vest over
a three-year period becoming exercisable on September 10, 2002 and expiring
on September 10, 2009. These options may become exercisable earlier than
such dates upon a "change of control" as defined in the Second Amendment to
the Employee Stock Option Plan, or upon the grantee's retirement,
disability or death. SARs may be issued in tandem with options granted
under the Plan. These SARs entitle the holder to receive, without any
payment to the Company, either cash or shares of Common Stock, or a
combination thereof, in an amount, or having a fair market value determined
as of the date of exercise, equal to the excess of the fair market value
per share on the date of exercise of the SARs over the price of the related
option. SARs become exercisable only in the event of a change in control as
defined in the Second Amendment to the Option Plan.
(2) Represents gain that will be realized assuming the options were held for
the entire 10-year period and the price of Common Stock increased at
compounded rates of 5% and 10% from the exercise price of $1.25 per share.
Potential realizable values per option or per share under these rates of
stock price appreciation would be $0.79 and $1.99, respectively. However,
these amounts represent assumed rates of appreciation only. Actual gains,
if any, on stock option exercises and common stock holdings would be
dependent on overall market conditions and the future performance of the
Company and the Common Stock. There can be no assurance that the amounts
reflected in this table will be achieved.
Compensation Committee Interlocks And Insider Participation
There are no known potential conflicts of interest or interlocks involving
Executive Compensation Committee members and executive officers of the Company,
the Bank, or its subsidiaries.
9
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Essex Bancorp, Inc. Executive Compensation Committee (the "Committee") makes
this report on executive compensation for the fiscal year ended December 31,
1999.
The Committee's "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 Committee in
assessing executive compensation generally and the compensation of the Chief
Executive Officer in particular.
The components of executive compensation are base salary, incentive stock
options and restricted stock, discretionary cash bonus performance awards,
contributions by the Company to its retirement plans, the Essex Bancorp, Inc.
401(k) Retirement Savings Plan ("401(k) Plan") and the Supplemental Executive
Retirement Savings Plan ("SERP"). Since the basis for determining Company
contributions to the 401(k) Plan and the SERP were no different for executive
officers than they were for other participants in those plans during fiscal
1999, such plans will not separately be discussed in this report.
It is our policy to determine the salary components of executive compensation
principally upon the basis of corporate and individual performance. Among the
corporate performance factors which we consider are corporate profitability,
capital levels, and corporate performance relative to such industry standards as
problem asset levels, loan production, regulatory compliance, and
asset-liability management. We do not use a formula to calculate the relative
weight of theses performance factors, but do give significant subjective weight
to the increase in the overall value of the Company from year to year. We also
take into account how the overall level of the Company's executive compensation
compares with the executive compensation levels of similar-sized and
characteristic bank and thrift holding companies 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.
Based upon the performance of the Company in fiscal 1999 both Messrs. Ross and
McPherson received an increase in base compensation of approximately 4.3%
effective January 1, 2000, and a cash bonus award approximating 4.5% of 1999
base salary, which was paid in February 2000. While an objective formula was not
applied, the Committee did take into account the performance factors, among
others, listed below in setting such base compensation and bonus levels.
1. During fiscal 1999, the Company earned $2.2 million.
2. The Company's total assets increased by approximately 20% from fiscal
1998 to fiscal 1999.
3. The Company's non-performing assets declined by approximately 28% to a
ratio to total assets of .48%; the lowest in the Company's history.
4. The Company's regulatory relationship and overall risk profile
strengthened and continued to improve during fiscal 1999.
During fiscal 1999, Mr. Ross and Mr. McPherson were also awarded options and
related rights under the Company's Stock Option Plan in the amounts of 40,000
and 25,000 shares, respectively. Neither were awarded restricted stock under the
Company's Management Recognition Plan. Neither Mr. Ross nor Mr. McPherson
received any compensation from the Company or its subsidiaries in 1999 other
than in their capacities as officers and employees.
ESSEX BANCORP, INC.
EXECUTIVE COMPENSATION COMMITTEE
Robert G. Hecht, Chairman
Roscoe D. Lacy, Jr.
Harry F. Radcliffe
10
Neither the 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.
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 between $250 million and $500 million in total
assets compiled by SNL Securities, LC, a company providing broad-based financial
information services to banks and thrifts. Because the Company's assets now
exceed $250 million, the Company has substituted this index for the index used
in prior years, the Asset-Size Index of Thrifts under $250 million in total
assets. That index is also shown in the graph for comparative purposes.
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.
11
GRAPH
01/19/95 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- -------- --------
Essex Bancorp, Inc. 100.00 37.50 43.76 78.76 28.75 27.50
Nasdaq Total US 100.00 138.15 169.98 208.26 293.66 543.45
SNL Thrift (under $250M) Index 100.00 137.45 152.49 234.61 190.66 179.06
SNL Thrift ($250-$500M) Index 100.00 134.74 166.04 281.37 244.25 287.10
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 Home Mortgage Servicing Corporation, and the
Bank (the "Employers"). The Employers approved the Employment Agreement
effective January 1, 1998 and amended it on October 1, 1999. 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 renewed the
12
Employment Agreement through December 31, 2000. Mr. Ross is presently entitled
to base salary at the rate of $207,000 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, gross incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
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 any provisions of the Employment Agreement. In the event of a termination for
cause, Mr. Ross will be paid only his salary and vacation pay 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 and vacation pay 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 for a lump sum payment within thirty (30) days
of a Change in Control of an amount equal to two hundred percent (200%) of his
highest rate of annual salary in effect during the period commencing on May 1,
1997 and ending on the date of a change in control. Mr. Ross is also a party to
a separate Change in Control Agreement with the Company, which was amended
effective October 1, 1999. Under this Control Agreement, the Company shall pay
Mr. Ross an additional $225,000 if the Change in Control occurs before October
1, 2000. For this purpose, a "Change in Control" shall occur if and only if
after October 1, 1999 a "person" or "group" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934), directly or indirectly,
first becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of securities of the Company representing
twenty-five percent (25%) or more of the combined voting power of the then
outstanding securities of the Company. The Company would also be obligated to
make a "gross-up" payment to Mr. Ross in the amount necessary to pay any excise
taxes imposed on the change in control payments under Section 499 of the
Internal Revenue Code. The Employment Agreement also provides that upon
termination of Mr. Ross without cause prior to a Change in Control (including
non-renewal of his agreement by the Company), Mr. Ross will be entitled to a
lump sum payment within thirty (30) days of termination of an amount equal to
one hundred and fifty percent (150%) of his highest rate of annual salary in
effect during the period commencing on May 1, 1997 and ending on the date of his
termination. In the event of Mr. Ross' termination without cause following a
Change in Control, however, he will only be entitled to the Change in Control
payment. In either event, termination without cause or a Change in Control, Mr.
Ross would be entitled to continuing health and medical insurance, disability
insurance and life insurance coverage for periods not exceeding two (2) years on
the same basis as was in effect immediately prior to the effective date of
termination or Change in Control, as appropriate.
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Other Executive Services Agreement
As of January 1, 1998, the Bank entered into a restated executive services
agreement with Earl C. McPherson. The agreement was amended effective January 1,
1999 and October 1, 1999. Mr. McPherson is also the beneficiary of a Change in
Control Agreement with the Company. Mr. McPherson's agreements are substantially
similar to Mr. Ross's. In the event of termination of his agreement or
employment without cause prior to a Change in Control, Mr. McPherson would be
entitled to a lump sum payment equal to one hundred fifty percent (150%) of his
highest rate of annual salary in effect during the period commencing on May 1,
1997 and ending on the date of his termination. The Employment Agreement also
provides for a lump sum payment within thirty (30) days of a Change in Control
of an amount equal to two hundred percent (200%) of his highest rate of annual
salary in effect during the period commencing on May 1, 1997 and ending on the
date of a Change in Control. In the event a Change in Control occurs before
October 1, 2000, the Company shall pay Mr. McPherson an additional $113,949
under the Change in Control Agreement.
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 three other officers. 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.
Except as described below with respect to Messrs. Ross and McPherson, 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. As of the fiscal year end 1997, all SERP accruals have
fully vested. Effective December 1, 1998, the SERP was amended so that each
year's accrual for plan years after 1998 and the deemed investment rate of
return thereon will vest only if the participant remains an employee of the Bank
through December 31, 2001. However, pursuant to an amendment dated October 27,
1999, Messrs. Ross and McPherson are fully vested on their SERP accounts at all
14
times. 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, 1999, the Company accrued
$33,179 of expense pursuant to the SERP.
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 interest rates and collateral, as are available to the
general public. Other than on an exception basis requiring Board of Directors'
approval, 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.
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 five percent 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.
The Company is aware that during 1999 three of its directors made inadvertent
late filings of required forms. Both Messrs. Robert G. Hecht and Roscoe D. Lacy,
Jr. filed Forms 5 in February 2000, that showed two derivative security
transactions each, which should have been included in prior filings. Harry F.
Radcliffe's February 2000 Form 5 similarly reflected derivative security
holdings (a total of three transactions) that should have been included in prior
filings.
INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the accounting firm of
PricewaterhouseCoopers LLP, independent accountants, to be the Company's
independent accountants for the year ended December 31, 1999. The Board of
Directors has not yet made a determination regarding the selection of
independent accountants for the year ending December 31, 2000. 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
15
of Directors. It is anticipated that a representative of PricewaterhouseCoopers,
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 2001 Annual Meeting of Stockholders (the
"2001 Annual Meeting"), then in order for the proposal to be includible in the
proxy statement for the 2001 Annual Meeting, such proposal must be received by
the Secretary of the Company no later than December 14, 2000.
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 2001 Annual Meeting is
scheduled to be held on May 31, 2001. If written notice of business proposed to
be brought before the 2001 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 March 2, 2001, such business may be brought before
the 2001 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 2001 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 March 2, 2001. The requirements regarding the form and content of the
stockholder nominations for directors are also set forth in the Company's
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.
16
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.,
Interstate Corporate 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.
Norfolk, Virginia
April 26, 2000
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.
17
THE BOARD OF DIRECTORS RECOMMENDS 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
INSTRUCTIONS: To withhold your vote for any individual nominee, write that
nominee's name on the line provided below:
- --------------------------------------------------------------------------------
(2) 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_______________________________, 2000
-----------------------------------------
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
an 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.
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 JUNE 16,
2000 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 listed. 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 June 15, 2000.
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)