SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement Confidential, for Use of the
[x] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2)) [ ]
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
James Monroe Bancorp, Inc.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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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):
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[ ] Fee paid previously with preliminary materials:
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[ ] 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:
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2. Form, Schedule or Registration Statement No.:----------------------
3 Filing Party:
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4. Date Filed:
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JAMES MONROE BANCORP INC.
3033 WILSON BOULEVARD
ARLINGTON, VIRGINIA 22201-3843
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 25, 2002
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TO THE SHAREHOLDERS OF JAMES MONROE BANCORP INC.:
The Annual Meeting of Shareholders (the "Meeting") of James Monroe Bancorp,
Inc. will be held on Thursday, April 25, 2002, at Country Club of Fairfax, 5110
Ox Road, Fairfax, Virginia at 6:30 P.M., for the following purposes:
(1) To elect twelve (12) persons to serve as directors until the next
annual meeting of shareholders and until their successors are duly
elected and qualified;
(2) To transact such other business as may properly come before the
Meeting or any adjournment or postponement thereof.
ONLY SHAREHOLDERS OF RECORD AS OF MARCH 15, 2002 WILL BE ENTITLED TO
VOTE AT THE MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE AS SOON AS POSSIBLE. THIS WILL NOT PREVENT YOU FROM VOTING IN PERSON,
BUT WILL ASSURE THAT YOUR VOTE IS COUNTED IF YOU ARE UNABLE TO ATTEND THE
MEETING.
By order of the Board of Directors
Richard I. Linhart, Secretary
March 18, 2002
JAMES MONROE BANCORP, INC.
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PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 25, 2002
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This proxy statement is being sent to shareholders of James Monroe Bancorp,
Inc., a Virginia corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Shareholders to be held at 6:30 p.m. on April 25, 2002 (the
"Meeting"), and at any adjournment or postponement of the Meeting. The purposes
of the Meeting are:
(1) electing twelve (12) directors to serve until their successors are
duly elected and qualified;
(2) transacting such other business as may properly come before the
Meeting or any adjournment or postponement of the Meeting.
The Meeting will be held at:
Country Club of Fairfax
5110 Ox Road
Fairfax, Virginia
This proxy statement and proxy card are being sent to shareholders of
the Company on or about March 20, 2002. A copy of the Annual Report to
Shareholders of James Monroe Bancorp, Inc. for the year ended December 31, 2001
also accompanies this proxy statement.
VOTING RIGHTS AND PROXIES
VOTING RIGHTS
Only shareholders of record at the close of business on March 15, 2002,
will be entitled to notice of and to vote at the Meeting or any adjournment or
postponement thereof. On that date, the Company had 960,467 shares of common
stock, par value $1.00 per share (the "Common Stock"), outstanding, constituting
the only class of stock outstanding, held by approximately 496 shareholders of
record. Each share of Common Stock is entitled to one vote on all matters
submitted to a vote of the shareholders. Shareholders do not have the right to
cumulate votes in the election of directors. Nominees receiving a plurality of
the votes cast at the Meeting in the election of directors will be elected as
directors in the order of the number of votes received. The presence, in person
or by proxy, of not less than a majority of the total number of outstanding
shares of Common Stock is necessary to constitute a quorum at the Meeting.
PROXIES
Properly executed proxies received by the Company in time to be voted
at the Meeting will be voted as specified by shareholders. In the absence of
specific instructions, proxies received will be voted in favor of the election
of the nominees for election as directors. Management does not know of any
matters that will be brought before the Meeting, other than as described herein.
If other matters are properly brought before the Meeting, the persons named in
the proxy intend to vote such shares to which the proxies relate in accordance
with their best judgment.
Shareholders are requested to sign, date, mark and return promptly the
enclosed proxy in the postage paid envelope provided for this purpose, in order
to assure that their shares are voted. A proxy may be revoked at any time prior
to the exercise of the authority granted thereby by:
o delivering written notice of such revocation to the Company's
Secretary prior to the Meeting.
o by granting and delivering a later dated proxy with respect to
such shares, or
o by attending the Meeting in person and voting the shares.
Attendance at the Meeting will not, in itself, revoke a proxy. If your shares
are not registered in your name, you will need additional documentation from
your recordholder in order to vote in person at the Meeting. Please see the
voting form provided by your recordholder for additional information regarding
the voting of your shares.
Votes cast by proxy or in person at the Meeting will be tabulated by
the election inspectors appointed for the Meeting who will determine whether or
not a quorum is present. Where, as to any matter submitted to shareholders for a
vote, proxies are marked as abstentions (or shareholders appear in person but
abstain from voting), such abstentions will be treated as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum, and shares held in street name by brokers for which no voting
instructions are given ("broker non-votes") will be treated as shares present
and entitled to vote for quorum purposes but as unvoted.
If you hold your shares in street name, please see the voting form
provided by your broker for additional information regarding the voting of your
shares. If your shares are not registered in your name, you will need additional
documentation from your recordholder to vote the shares in person.
The enclosed proxy is being solicited on behalf of the Board of
Directors of the Company, which will pay the entire cost of solicitation. In
addition to solicitation by mail, officers, directors and employees of the
Company may solicit proxies by telecopier, telegram, in person or otherwise.
Such persons will not receive any additional or special remuneration or payment
for such solicitation.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
SECURITIES OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of March 15, 2002
concerning the number and percentage of shares of Common Stock beneficially
owned by its directors, executive officers, and by its directors and all
executive officers as a group, as well as information regarding each other
person known by the Company to own in excess of 5% of the outstanding Common
Stock. Except as otherwise indicated, all shares are owned directly, and the
named person possesses sole voting and sole investment power with respect to all
such shares. Except as set forth below, the Company knows of no other person or
persons who beneficially own in excess of 5% of the Common Stock. Further, the
Company is not aware of any arrangement which at a subsequent date may result in
a change of control of the Company.
Shares Beneficially
Name Age Position Owned(1) Percentage
- ------------------------------------ ------- ---------------------------------- -------------------------- ------------
Directors
Fred A. Burroughs, III 66 Director 10,000 1.04%
Dr. Terry L. Collins 56 Director 51,300(2) 5.31%
12701 Fair Lakes Circle
Fairfax, VA 22033
Norman P. Horn 70 Director 11,400 1.18%
Dr. David C. Karlgaard 55 Director 54,200 5.59%
12750 Fair Lakes Circle
Fairfax, VA 22033
Richard Linhart 58 Director, Executive Vice 14,350 1.47%
President and Chief Operating
Officer
Richard C. Litman 44 Director 13,100 1.35%
John R. Maxwell 41 Director, President & CEO 43,680 4.38%
Dr. Alvin E. Nashman 75 Director 25,600(3) 2.66%
Helen L. Newman 58 Director 26,200(4) 2.73%
Thomas L. Patterson 49 Director 12,869(5) 1.33%
David W. Pijor 49 Chairman of the Board and 18,600(6) 1.91%
Director
Russell E. Sherman 65 Director 11,200 1.16%
Executive Officers and Directors
as a Group (12 individuals) 292,499(1) 27.57%
Principal Shareholders
Nino Vaghi 79,650 8.29%
C/o National Mailing Systems
1749 Old Meadow Road
McLean, VA 22101
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(1) The shares "beneficially owned" by an individual are determined in
accordance with the definitions of "beneficial ownership" set forth in the
General Rules and Regulations of the U.S. Securities and Exchange
Commission and may include shares owned by or for the individual's spouse
and minor children and any other relative of the individual who lives in
the same home, as well as shares to which the individual has, or shares,
voting or investment power, or has the right to acquire beneficial
ownership within sixty (60) days after March 15, 2002. Beneficial ownership
may be disclaimed as to certain of the shares.
Directors and executive officers beneficially own the following stock
options which are exercisable within 60-days following March 15, 2002:
Collins--6,300 shares; Horn--4,400 shares; Karlgaard--8,300 shares;
Linhart--13,600 shares; Litman--8,100 shares; Maxwell--36,880 shares;
Nashman--1,700; Patterson--3,800 shares; Pijor--12,300 shares;
Sherman--5,200 shares.
(2) Includes 1,100 shares of Common Stock held individually by Mr. Collins'
daughter. Mr. Collins disclaims beneficial ownership of the shares of
Common Stock held by his daughter.
(3) Includes 3,500 shares held individually by his spouse.
(Footnotes continued on following page)
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(Footnotes continued from preceding page)
(4) Includes 20,500 shares of Common Stock held individually by Mrs. Newman and
2,000 shares of Common Stock held individually by her spouse.
(5) Includes 2,069 shares held in various trusts which Mr. Patterson has voting
and/or investment power. Does not include 3,379 shares held by Mr.
Patterson's sibling for benefit of Mr. Patterson's son.
(6) Includes 4,550 shares held individually by Mr. Pijor, 1,550 shares held
jointly, and 200 shares held by his minor children which Mr. Pijor claims
beneficial ownership.
ELECTION OF DIRECTORS
Twelve (12) directors will be elected at the Meeting for a one-year
term extending until the next annual meeting of shareholders, or until their
successors shall have been elected and qualified. Each nominee currently serves
as a director of the Company. Unless authority is withheld, proxies received in
response to this solicitation will be voted for the nominees listed below.
Directors are elected by a plurality of the votes cast at the Meeting. Each
nominee has indicated a willingness to serve, however, if any nominee becomes
unavailable to serve, proxies will be voted for a replacement nominee selected
in accordance with the best judgment of the proxy holders named therein.
The Board of Directors recommends that shareholders vote FOR each of
the nominees for election as directors of the Company.
NOMINEES FOR ELECTION AS DIRECTOR
The Board of Directors has fixed the number of persons constituting the
Board of Directors at twelve (12), Each of the following persons currently
serves as a director of Bancorp and the Bank. Directors serve for a one year
term and until their successors have been elected and qualified.
Set forth below is a description of the principal occupation and
business experience of each of the directors and executive officers of Bancorp.
Except as expressly indicated below, each person has been engaged in his
principal occupation for at least five years. Each of the members of the Board
of Directors has served since the organization of the Company in 1999, and has
served as a director of the Bank since its inception in 1997, except Mr.
Burroughs, who joined the Board of the Bank on February 10, 1999, and Mr.
Linhart, who joined the Board of the Company in June 2000 and the Board of the
Bank in May 2000.
Fred A. Burroughs, III. Mr. Burroughs retired in 1997 from his position
as Chairman of the Board and Chief Executive Officer of The Bank of Northern
Virginia.
Dr. Terry L. Collins. Dr. Collins is the Co-Founder and President of
Argon Engineering Associates, founded in 1997 (Systems and Information
Technology Firm). He was also the Vice President and General Manager of the
Falls Church Operation of Raytheon E-Systems from 1989 - 1997.
Norman P. Horn. Mr. Horn retired in 1997 from his position as a
Principal in Homes, Lowry, Horn & Johnson, Ltd. (Accounting Firm).
Dr. David C. Karlgaard. Dr. Karlgaard is the Founder, Chairman and
President of PEC Solutions, Inc (Information Technology Firm) (listed on the
Nasdaq National Market).
Richard I. Linhart. Mr. Linhart has been Executive Vice President and
Chief Operating Officer of the Bank since February 1998 and of Bancorp since its
formation. Prior to that time, Mr. Linhart was President of ALM Associates from
1995 to 1998, Executive Vice President and CFO of Hubco, Inc., Mahwah, New
Jersey from 1994 to 1995 and Executive Vice President and COO of NBT Bancorp,
Norwich, New York from 1991 to 1994.
Richard C. Litman. Mr. Litman is a Registered Patent Attorney;
President of Litman Law Offices, Ltd.
John R. Maxwell. Mr. Maxwell has been President and Chief Executive
Officer of the Bank since April 1997 and of Bancorp since its formation. Prior
to joining James Monroe Bank, he was Senior Vice President -
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Lending of the Bank of Northern Virginia from 1988 to 1996 and Executive Vice
President and Chief Lending Officer of the Bank of Northern Virginia from 1996
to 1997.
Dr. Alvin E. Nashman. Dr. Nashman retired in 1991 from his position of
Head of the Systems Group of Computer Sciences Corporation which he held for
over 27 years. Mr. Nashman is a Director of Micros to Mainframes (publicly
traded on Nasdaq); Director of Andreulis Corporation; Director of Spaceworks;
and Director of Federal Sources, Inc.
Helen L. Newman. Ms. Newman is Vice President of Government Operations
for Gulfstream Aerospace Corporation.
Thomas L. Patterson. Mr. Patterson is an attorney with Linowes and
Blocher, LLP. (Law Firm) since May 2000. From November 1998 until May 2000 he
was an attorney with Venable, Baetjer, Howard & Civiletti (or Tucker, Flyer &
Lewis, which became a part of that firm in 1999). Mr. Patterson was Vice
President - Real Estate Counsel of Federal Realty Investment Trust from March
1997 until September 1998, and prior to that time was an attorney in private
practice.
David W. Pijor. Mr. Pijor has been Chairman of the Bank since February
1997 and Chairman of Bancorp since its formation Mr. Pijor has been an attorney
in private practice for the past 24 years and is currently Of Counsel to the
firm of Sherman & Fromme, P.C. (Law Firm).
Russell E. Sherman. Mr. Sherman is the President of Sherman & Fromme,
P.C. (Law Firm).
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company and the Bank met 15 times in
2001. All members of the Board of Directors attended at least 75% of the
meetings held by the Board of Directors and by all committees on which such
member served during the 2001 fiscal year.
The Board of Directors has a standing Audit Committee. The Audit
Committee is responsible for the review and evaluation of Bancorp's internal
controls and accounting procedures. It also periodically reviews audit reports
with Bancorp's independent auditors, and recommends the annual appointment of
such auditors. The Audit Committee is currently comprised of Messrs. Horn,
Patterson and Pijor. Each of the members of the Audit Committee other than Mr.
Pijor is independent, as determined under the definition of independence adopted
by the National Association of Securities Dealers. The Board of Directors has
adopted a written charter for the Audit Committee, a copy of which is attached
as Appendix A to this proxy statement During the 2001 fiscal year, the Audit
Committee met once.
The Board of Directors does not have a standing Nominating Committee.
The Board has an Executive Compensation Committee that met three times during
2001. The Committee is currently comprised of Messrs. Horn, Pijor, Sherman and
Burroughs. The Compensation Committee is responsible for making recommendations
to the Board of Directors regarding the development and administration of the
Management Stock Option Plan and the Director Option Plan. The Committee also
reviews and recommends executive compensation an incentive compensation awards
and plans.
AUDIT COMMITTEE REPORT
The Audit Committee has been appointed to assist the Board of Directors
in fulfilling the Board's oversight responsibilities by reviewing the financial
information that will be provided to the shareholders and others, the systems of
internal controls establish by management and the Board and the independence and
performance of the Company's audit process.
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The Audit Committee has:
(1) reviewed and discussed with management the audited financial
statements included in the Company's Annual Report and Form 10-KSB;
(2) discussed with Yount, Hyde & Barbour, P.C., the Company's
independent auditors, the matters required to be discussed by statement of
Auditing Standards No. 61, and has received the written disclosures and letter
from Yount, Hyde & Barbour, as required by Independence Standards Board Standard
No. 1; and
(3) discussed with Yount, Hyde & Barbour, its independence.
Based on these reviews and discussions, the Audit Committee has recommended to
the Board of Directors that the audited financial statements be included in the
Company's annual report on Form 10-KSB for the year ended December 31, 2001. The
Audit Committee has also considered whether the amount and nature of non-audit
services provided by Yount, Hyde & Barbour is compatible with the auditor's
independence.
Members of the Audit Committee
David W. Pijor, Chairman
Norman P. Horn
Thomas L. Patterson
DIRECTORS' COMPENSATION
Directors receive $200 for attendance at meetings of the Board of
Directors of the Company or the Bank, and $50 for each committee meeting.
Directors are entitled to receive options under the 1999 Director Option Plan.
In 1999, directors received options to purchase 57,200 shares of Common Stock at
an exercise price of $10.00 per share. The Directors' Option Plan was approved
by stockholders in 1999. Under the Directors' Option Plan, 66,880 shares of
common stock were available for issuance under options granted between 1999 and
2004. The purpose of the Directors' Option Plan is to enable Bancorp to continue
to attract and retain outstanding outside directors, and to further the growth,
development and financial success of Bancorp and the Bank. Only non-employee
directors of Bancorp and any subsidiary are eligible to participate in the Plan.
As of December 31, 2001 9,680 options remained available for issuance.
EXECUTIVE COMPENSATION
The following table sets forth a comprehensive overview of the
compensation for Mr. Maxwell, the President of the Bank and Bancorp, and
executive officers who received total salary and bonuses of $100,000 or more
during the fiscal year ended December 31, 2001.
SUMMARY COMPENSATION TABLE
Long-term
Annual Compensation Compensation Awards
Securities All Other
Name and Principal Position Year Salary Bonus Underlying Options Compensation($)
- ----------------------------- -------- -------------- ---------------- ------------------------ --------------------
John R. Maxwell, President 2001 $145,833 $38,000 -0- Less than $10,000
and Chief Executive Officer
2000 $133,750 $30,000 -0- Less than $10,000
1999 $118,750 $10,000 -0- Less than $10,000
Richard I. Linhart, Executive
Vice President, Chief
Operating Officer 2001 $115,000 $27,000 1,800 Less than $10,000
2000 $102,000 $25,000 1,800 Less than $10,000
1999 $ 90,000 $ 8,000 -0- Less than $10,000
- -------------------------------
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OPTION GRANTS IN LAST FISCAL YEAR
Percent of Total
Number of Securities Options Granted to Exercise
Underlying Options Employees in Fiscal Price Per
Name Granted Year Share Expiration Date
- --------------------- ------------------------ ---------------------- -------------- ------------------
John R. Maxwell -0- N/A N/A N/A
Richard I. Linhart 1,800 28.8% $14.50 January 10, 2011
- ---------------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options at
Shares Acquired Options At December 31, 2001 December 31, 2001
Name On Exercise Value Realized Exercisable/Unexercisable Exercisable/Unexercisable(1)
- ----------------------- ------------------ ------------------ ------------------------------- ----------------------------
John R. Maxwell -0- -0- 36,880/-0- $304,260/$0
Richard I. Linhart -0- -0- 13,000/600 $101,850/$2,250
- -----------------------
(1) Based on $18.25 per share, the last sale price of for the common stock as
of January 31, 2002.
EMPLOYMENT AGREEMENTS
John R. Maxwell. The Bank and Bancorp have entered into an agreement
with Mr. Maxwell, which they have agreed to amend, pursuant to which Mr. Maxwell
serves as President and Chief Executive Officer of each institution. Without
cause or Mr. Maxwell's consent, he may not be removed from these positions, nor
may any executive position higher than Mr. Maxwell's be established. The term of
Mr. Maxwell's agreement as proposed to be amended expires on December 31, 2004,
and is subject to automatic one-year extensions on each January 1 thereafter,
provided that neither the Company nor Mr. Maxwell has given written notice of
intention not to renew at least 90 days prior to the renewal date. The agreement
provides for the payment of cash and other benefits to Mr. Maxwell, including a
current base salary of $170,000 during the period January 1, 2002 to December
31, 2002. Mr. Maxwell's base salary for subsequent periods is subject to annual
review by the Board of Directors. Under the agreement, as proposed to be
amended, Mr. Maxwell is entitled to 28% of the award from the bonus pool
established for employees. The amount of the pool is established by the Board of
Directors, with the actual award based upon the achievement of income and asset
size goals determined by the Board of Directors. Mr. Maxwell is also entitled to
$1,000,000 of Bank paid life insurance (subject to increase based upon the
percentage increase in base salary), use of a Bank owned or leased car and an
automobile allowance, and is entitled to reimbursement of reasonable business
expenses. Mr. Maxwell is entitled to reimbursement of income taxes payable upon
the exercise of 36,880 options previously granted under the agreement, up to the
amount of the tax benefit realized by Bancorp as a result of the exercise, and
under certain circumstances, to registration of the shares under the securities
laws. Mr. Maxwell is entitled to receive supplemental payments upon disability,
in excess of those provided under Bancorp's generally applicable plan, to bring
total payments to 60% of his base salary. Mr. Maxwell is also entitled to
participate in any pension, retirement, profit sharing, stock purchase, stock
option, insurance, deferred compensation and other benefit plans provided to
other executives or employees.
The agreement terminates as of the end of the initial or any renewal
terms if either party gives notice of non-renewal. If Mr. Maxwell elects not to
renew the agreement, he is not entitled to any additional payments, and is
subject to a two year non-competition restriction. If the Bank or Bancorp elects
not to renew the agreement, Mr. Maxwell is entitled to receive continued salary,
bonus and benefits for 18 months, and is subject to the non-competition
restriction for that period. If the agreement is terminated by Mr. Maxwell, at
his option, within six months of a "change in control" (as defined), Mr. Maxwell
shall be entitled to receive continued salary, bonus and benefits for two years,
and is subject to the non-competition restriction for that period. If the
agreement is terminated by the Bank or Bancorp in breach of the agreement, Mr.
Maxwell is entitled to receive continued salary, bonus and benefits for 12
months, and is not subject to the non-competition restriction. If the agreement
is terminated by the Bank or Bancorp due to Mr. Maxwell's breach, he is not
entitled to any additional payments and is subject to the non-competition
restriction for two years. The agreement prohibits conflicts of interests, and
requires
7
that Mr. Maxwell maintain the confidentiality of nonpublic information regarding
the Bank, Bancorp and its customers.
Richard I. Linhart. The employment agreement between the Bank and
Bancorp and Mr. Linhart pursuant to which Mr. Linhart serves as Executive Vice
President and Chief Operating Officer of the Bank expired on December 31, 2001.
Although it is anticipated that a new two year employment agreement will be
executed, no new agreement has been executed as of the date hereof. It is
expected that any new agreement will provides for the payment of cash and other
benefits to Mr. Linhart, including a base salary of $125,000 during the period
January 1, 2002 to December 31, 2002, subject to annual review, provided that
the salary may not be less than his base salary for the prior period, and a car
allowance of $500 per month. Mr. Linhart is entitled to reimbursement of income
taxes payable upon the exercise of the 10,000 options previously granted to him,
up to the amount of the tax benefit realized by Bancorp as a result of the
exercise, and under certain circumstances, to registration of the shares under
the securities laws. Mr. Linhart is entitled to receive supplemental payments
upon disability, in excess of those provided under Bancorp's generally
applicable plan, to bring total payments to 60% of his base salary. Mr. Linhart
is also entitled to participate in any pension, retirement, profit sharing,
stock purchase, stock option, insurance, deferred compensation and other benefit
plans provided to other executives or employees.
It is anticipated that Mr. Linhart's agreement will provide that if the
agreement is terminated by Mr. Linhart, at his option, for "good cause" (as
defined) within six months of a "change in control" (as defined), Mr. Linhart
would be entitled to receive continued salary and benefits for two years. If the
agreement is terminated by the Bank or Bancorp in breach of the agreement, or by
Mr. Linhart as a result of Bank's breach, Mr. Linhart is entitled to receive
continued salary, bonus and benefits for the greater of twelve months or the
remaining term of the agreement, and outplacement assistance from an
organization of Mr. Linhart's choice, at a cost paid by the Bank and Bancorp of
up to 18% of Mr. Linhart's base salary at the time of termination.
401(k) Plan. Bancorp maintains a 401(k) defined contribution plan for
all eligible employees. Employees who are at least 21 years of age, have
completed at least ninety days of continuous service with the Bank and have
completed at least 1,000 hours of work during any plan year are eligible to
participate. Under the plan, a participant may contribute up to 15% of his or
her compensation for the year, subject to certain limitations. The Bank may also
make, but is not required to make, a discretionary contribution for each
participant. The amount of such contribution is determined annually by the Board
of Directors, and is currently 50% of employee contributions up to 6% of salary.
Contributions by the Company totaled $19,000 for the fiscal year ended December
31, 2001.
Stock Option Plan. Bancorp also maintains the 1998 Stock Option Plan
for key employees, pursuant to which options to purchase up to 91,880 shares of
common stock may be issued as either incentive stock options or nonincentive
stock options. As of December 31, 2001, options to purchase 60,880 share of
common stock had been issued.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has had, and expects to have in the future, banking
transactions in the ordinary course of business with some of its directors,
officers, and employees and their associates. In the past, substantially all of
such transactions have been on the same terms, including interest rates,
maturities and collateral requirements as those prevailing at the time for
comparable transactions with non-affiliated persons and did not involve more
than the normal risk of collectibility or present other unfavorable features.
The maximum aggregate amount of loans to officers, directors and
affiliates of the Company during 2001 amounted to $1,535,000 representing
approximately 12.8% of the Company's total shareholders' equity at December 31,
2001. In the opinion of the Board of Directors, the terms of these loans are no
less favorable to Bancorp than terms of the loans from the Company to
unaffiliated parties. On December 31, 2001, $1,481,000 of loans were outstanding
to individuals who, during 2001, were officers, directors or affiliates of the
Company. At the time each loan was made, management believed that the loan
involved no more than the normal risk of collectibility and did not present
other unfavorable features. None of such loans were classified as Substandard,
Doubtful or Loss.
8
David W. Pijor has performed legal services for the Company and the
Bank in the ordinary course of their businesses, and the Company expects that he
will continue to perform services for the Company and the Bank. In 2000 and
2001, the aggregate fees paid to Mr. Pijor by the Company and the Bank were
$33,690 and $32,437, respectively. Fred A. Burroughs, III has a management
consulting agreement with the Bank under which he receives $60,000 annually for
business development services and activities.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Common Stock, to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission, and
to provide the Company with copies of all Forms 3, 4, and 5 they file. The
Company's directors and officers have been subject to the reporting requirements
of Section 16(a) since April 30, 2001.
Based solely upon the Company's review of the copies of the forms which
it has received and written representations from the Company's directors,
executive officers and ten percent shareholder, the Company is not aware of any
failure of any such person to comply with the requirements of Section 16(a).
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has selected the independent certified public
accounting firm of Yount, Hyde & Barbour, P.C. to audit the accounts of the
Company for the fiscal year ended December 31, 2001. Representatives of Yount,
Hyde & Barbour are expected to be present at the Annual Meeting and available to
respond to appropriate questions. The representatives also will be provided with
an opportunity to make a statement, if they desire.
FEES PAID TO INDEPENDENT ACCOUNTING FIRM
Audit fees.
The aggregate amount of fees billed by Yount, Hyde & Barbour for
services provided in connection with the audit of the Company's financial
statements for the year ended December 31, 2001, and for review of the financial
statements included in the Company' quarterly reports on Form 10-QSB filed
during 2001 was $27,720.
All Other Fees.
The aggregate amount of fees billed for all other professional services
provided by Yount, Hyde & Barbour during the year ended December 31, 2001 was
$1,739. No portion of this amount related to fees for the design, implementation
or operation of the Company's financial information systems.
FORM 10-K ANNUAL REPORT
THE COMPANY WILL PROVIDE TO ANY SHAREHOLDER SOLICITED HEREBY, WITHOUT
CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER
31, 2001 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, UPON WRITTEN
REQUEST. REQUESTS SHOULD BE DIRECTED TO THE COMPANY'S CHIEF FINANCIAL OFFICER,
RICHARD I. LINHART, 3003 WILSON BOULEVARD, ARLINGTON, VIRGINIA 22207.
OTHER BUSINESS
Management is not aware of any other matters to be presented for action
by shareholders at the meeting. If, however, any other matters not now known or
any adjournment thereof, the persons named in the accompanying proxy will vote
such proxy in accordance with the judgment on such matters.
9
STOCKHOLDER PROPOSALS
All proposals of shareholders to be presented for
consideration at the next annual meeting and included in the Company's proxy
materials must be received by the Company no later than November 22, 2002.
Shareholder proposals and nominations not sought to be included in the Company's
proxy materials must be received by the Company not later than January 24, 2003.
By Order of the Board of Directors
JAMES MONROE BANCORP INC.
/s/ Richard I. Linhart
March 18, 2002 Richard I. Linhart
Secretary
10
APPENDIX A
JAMES MONROE BANCORP, INC.
AUDIT COMMITTEE CHARTER
STATEMENT OF POLICY
A soundly conceived, effective Audit Committee is essential to the
management, operation and financial reporting process of James Monroe Bancorp,
Inc. and its subsidiaries. The Audit Committee shall provide assistance to the
corporate directors in fulfilling their responsibilities to the shareholders,
potential shareholders and investment community relating to corporate
accounting, reporting practices of the Company and the quality and integrity of
the financial reports of the Company. In so doing, it is the responsibility of
the Audit Committee to maintain free and open means of communication between the
directors, the independent auditors and the financial management of the Company.
ORGANIZATION
MEMBERS
There shall be a committee of the Board of Directors of James Monroe
Bancorp, Inc. known as the Audit Committee. This Committee shall be composed of
at least three (3) directors, a majority of whom are independent of the
management of the Company and are free of any relationship that, in the opinion
of the Board of Directors, would interfere with their exercise of independent
judgment as a committee member.
At the Committee's discretion, management of the Company may attend
meetings of the Audit Committee, but this attendance shall be in a non-voting
capacity.
Committee membership standards will be maintained in accordance with
applicable banking laws and regulations.
MEETINGS
The Audit Committee shall meet at least annually. The Committee
reserves the right to meet at other times as required and/or to meet without
members of corporate management, internal audit or the independent accounting
firm.
MINUTES
Minutes shall be prepared for all meetings of the Audit Committee to
document the Committee's discharge of its responsibilities. The minutes shall
provide an accurate record of the proceedings and shall be read and approved at
the next meeting of the Committee.
AUTHORITY
The authority for the Audit Committee is derived from the full Board of
Directors of James Monroe Bancorp, Inc.
The Audit Committee is appointed by the Board to assist the Board in
monitoring (1) the integrity of the financial statements of the Company; (2) the
compliance by the Company with legal and regulatory requirements; and (3) the
independent and performance of the Company's internal and external auditors.
The Audit Committee shall have the authority to retain special legal,
accounting or other consultants to advise the Committee. The Audit Committee may
request any officer or employee of the Company or the Company's outside counsel
or independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.
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RESPONSIBILITIES
In fulfilling the stated role within the framework of the Audit
Committee's Statement of Policy, the primary, general responsibilities of the
Audit Committee will be as follows:
o to provide for an internal audit function to serve all
subsidiaries of the Company in an examining and advisory capacity
o to provide for external audits of all corporate subsidiaries by
suitable independent accountants
o to serve as a focal point and reporting outlet for communications
among non-committee directors, corporate management, internal
auditors and independent accountants
o to assist the Board of Directors in fulfilling its fiduciary
responsibilities for financial reporting and internal accounting
and operations controls
o to act as an agent for the Board of Directors to help insure the
independence of internal auditors and independent accountants,
the integrity of management and the adequacy of disclosures to
stockholders.
Specific duties of the Audit Committee, within the noted general
responsibilities, will include, but not be limited to, the following items:
1. Review and reassess the adequacy of this Charter annually and
submit it to the Board for approval.
2. Review the annual audited financial statements with management,
including major issues regarding accounting and auditing
principles and practices as well as the adequacy of internal
controls that could significantly affect the Company's financial
statements.
3. Review an analysis prepared by management and the independent
auditor of significant financial reporting issues and
judgments made in connection with the preparation of the
Company's financial statements.
4. Based on the review and discussions noted in nos. 2 and 3 above,
recommend to the Board of Directors that the audited financial
statements be included in the Company's annual report on Form
10-K.
5. Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to
monitor and control such exposures.
6. Review major changes to the Company's auditing and accounting
principles and practices as suggested by the independent auditor,
internal auditors or management.
7. Recommend to the Board the appointment of the independent
auditor, which firm is ultimately accountable to the Audit
Committee and the Board.
8. Approve the fees to be paid to the independent auditor.
9. Receive periodic reports from the independent auditor regarding
the auditor's independence, discuss such reports with the auditor
and, if so determined by the Audit Committee, recommend that the
board take appropriate action to insure the independence of the
auditor.
10. Evaluate the performance of the independent auditor and, if so
determined by the Audit Committee, recommend that the Board
replace the independent auditor.
A-2
11. Review the appointment and replacement of the senior internal
auditing executive, if applicable.
12. Review the significant reports to management prepared by the
internal auditing department and management's responses.
13. Meet with the independent auditor prior to the audit to review
the planning and staffing of the audit.
14. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to
the conduct of the audit.
15. Review with the independent auditor any problems or difficulties
the auditor may have encountered and any management letter
provide by the auditor and the Company's response to that letter.
Such review should include:
a. Any difficulties encountered in the course of the audit
work, including any restrictions on the scope of activities
or access to required information.
b. Any changes required in the planned scope of the internal
audit.
c. The internal audit department responsibilities, budget and
staffing.
16. Review with the Company's General Counsel legal matters that may
have a material impact on the financial statements, the Company's
compliance policies and any material reports or inquiries
received from regulators or governmental agencies.
While the Audit Committee has the responsibilities and powers set forth
in this charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor. Nor is it
the duty of the Audit Committee to conduct investigations to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations.
A-3
REVOCABLE PROXY
JAMES MONROE BANCORP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby makes, constitutes and appoints David W. Pijor
and John R. Maxwell and each of them (with the power of substitution), proxies
for the undersigned to represent and to vote, as designated below, all shares of
common stock of James Monroe Bancorp, Inc. (the "Company") which the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Shareholders of James Monroe Bancorp, Inc. to be held on April 25, 2002 and at
any adjournment or postponement of the meeting.
ELECTION OF DIRECTORS
[ ] FOR all nominees listed below (except as noted to the contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
Nominees: Fred A. Burroughs, III; Dr. Terry L. Collins; Norman P. Horn;
Dr. David C. Karlgaard; Richard I. Linhart; Richard C. Litman;
John R. Maxwell; Dr. Alvin E. Nashman; Helen L. Newman;
Thomas L. Patterson; David W. Pijor; Russell E. Sherman
(Instructions: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
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This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this proxy will be
voted FOR all of the nominees set forth above. In addition, this proxy will be
voted at the discretion of the proxy holder(s) upon any other matter which may
properly come before the Annual Meeting or any adjournment or postponement of
the meeting.
Important: Please date and sign your name as addressed, and return this proxy in
the enclosed envelope. When signing as executor, administrator, trustee,
guardian, etc., please give full title as such. If the shareholder is a
corporation, the proxy should be signed in the full corporate name by a duly
authorized officer whose title is stated.
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Signature of Shareholder
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Signature of Shareholder
Dated: , 2002
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PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
[ ] Please check here if you plan to attend the Annual Meeting.