SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange
Act of 1934 (Amendment No. )
Filed by the Registrant
[X]
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Filed by a Party other than
the Registrant [ ]
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Check the appropriate
box:
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[ ]
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Preliminary Proxy
Statement
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Soliciting Material Under Rule
14a-12
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[ ]
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Confidential, For Use of
the
Commission Only (as permitted
by Rule 14a-6(e)(2))
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[X]
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Definitive Proxy
Statement
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[ ]
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Definitive Additional
Materials
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POTOMAC
BANCSHARES, 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)
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Payment of Filing Fee (Check
the appropriate box):
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[X]
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No fee required.
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[
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Fee computed on
table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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1)
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Title of each class of
securities to which transaction applies:
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2)
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Aggregate number of
securities to which transaction applies:
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3)
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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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4)
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Proposed maximum
aggregate value of transaction:
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5)
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Total fee
paid:
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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.
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1)
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Amount previously
paid:
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2)
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Form, Schedule or Registration
Statement No.:
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Filing Party:
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4)
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Date Filed:
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POTOMAC BANCSHARES,
INC.
Charles Town, West
Virginia
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NOTICE OF
REGULAR ANNUAL MEETING OF SHAREHOLDERS
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TO BE HELD MAY 15,
2012
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To the Shareholders:
The Regular
Annual Meeting of Shareholders of Potomac Bancshares, Inc. ("Potomac") will be
held at the Quality Hotel Conference Center, Harpers Ferry, West Virginia, at
10:30 a.m., on May 15, 2012 for the purposes of considering and voting upon
proposals:
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1.
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To elect a class of directors for
a term of three years;
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2.
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To ratify the selection by the
Board of Directors of Yount, Hyde & Barbour, P.C., as independent
registered public accountants for the year 2012;
and
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To approve
any other business that may properly be brought before the meeting or any
adjournment thereof.
Only those shareholders of record at
the close of business on March 20, 2012, shall be entitled to notice of the
meeting and to vote at the meeting.
By Order of the Board of
Directors
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Robert F. Baronner, Jr.
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President and Chief Executive
Officer
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PLEASE SIGN AND RETURN THE ENCLOSED
PROXY AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN
PERSON. IF YOU DO ATTEND THE
MEETING, YOU
HAVE THE OPTION TO WITHDRAW YOUR PROXY BEFORE IT IS VOTED.
IMPORTANT NOTICE REGARDING THE
AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE
HELD ON MAY 15, 2012 - THE PROXY STATEMENT AND 2011 ANNUAL REPORT ARE AVAILABLE
AT
WWW.PROXYVOTE.COM
.
April
3
, 2012
POTOMAC BANCSHARES, INC.
111 EAST
WASHINGTON STREET
P.O. BOX
906
CHARLES TOWN, WEST VIRGINIA
25414-0906
(304) 725-8431
PROXY
STATEMENT
ANNUAL MEETING OF
SHAREHOLDERS MAY 15, 2012
Potomac
Bancshares, Inc. is furnishing this statement in connection with its
solicitation of proxies for use at the annual meeting of shareholders of Potomac
Bancshares, Inc. to be held on May 15, 2012, at the time and for the purposes
set forth in the accompanying notice of regular annual meeting of shareholders.
Solicitation of Proxies
Potomacs
management, at the direction of Potomacs
Board
of
Directors
, is making this proxy solicitation. These proxies
enable shareholders to vote on all matters scheduled to come before the meeting. If the enclosed proxy is signed and returned,
it will be voted as directed; or if not directed, the proxy will be voted "FOR" all of the various proposals to be submitted to
the vote of shareholders described in the enclosed notice of regular annual meeting and this proxy statement. A shareholder executing
the proxy may revoke it at any time before it is voted by:
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notifying Potomac in person,
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giving written notice to Potomac of the revocation
of the proxy,
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submitting to Potomac a subsequently-dated proxy,
or
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attending the meeting and withdrawing the proxy
before it is voted at the meeting.
Potomac will pay the expenses of
this proxy solicitation. In addition to this solicitation by mail, officers and
regular employees of Potomac and Bank of Charles Town may, to a limited extent,
solicit proxies personally or by telephone or telegraph, although no person will
be engaged specifically for that purpose.
Eligibility of Stock for Voting
Purposes
Under
Potomacs bylaws, the
Board
of
Directors
has fixed March 20, 2012, as the record date for determining the shareholders
entitled to notice of, and to vote at, the meeting or any adjournment thereof. Only shareholders of record at the close of business
on that date are entitled to notice of and to vote at the annual meeting or any adjournment thereof. On that day, there were issued
and outstanding 3,390,178 shares of common stock. The presence, in person, or by properly executed proxy, of the holders of a
majority of the outstanding shares of the companys common stock entitled to vote at the annual meeting is necessary to constitute
a quorum at the annual meeting. Abstentions will be counted as shares present for purposes of determining the presence of a quorum.
Any shares held in street name that are not voted (broker non-votes) in the election of directors will not be included
in determining the number of votes.
As of the record date for the annual
meeting, 3,390,178 shares of the capital stock of Potomac were outstanding and
entitled to vote. The principal holders of Potomac common stock are discussed
under the section of this proxy statement entitled, "Principal Holders of Voting
Securities". As of the record date, Potomac had a total of approximately 1,100
shareholders of record.
1
PURPOSES OF MEETING
1. ELECTION OF DIRECTORS
General
Potomacs articles of incorporation
currently provide for a classified
Board
of
Directors
. There are three classes with each being elected for a three-year
term. There are presently 12 directors on the
Board
, three of whom are nominees for election at the 2012 annual meeting.
Each director (Berkeley, Merson, and Skinner) are being elected for a term of three years. William Harner is retiring from the
Board
of
Directors
and Barbara L. Scott has been nominated as a new director to serve for a three year term. None
of the nominees is an employee director.
Directors are elected by a plurality
of the shares voted. As required by West Virginia law, each share is entitled to
one vote per nominee, unless a shareholder requests cumulative voting for
directors at least 48 hours before the meeting. If a shareholder properly
requests cumulative voting for directors, then each shareholder will have the
right to vote the number of shares owned by that shareholder for as many persons
as there are directors to be elected, or to cumulate such shares and give one
candidate as many votes as the number of directors multiplied by the number of
shares owned shall equal, or to distribute them on the same principle among as
many candidates as the shareholder sees fit. If any shares are voted
cumulatively for the election of directors, the proxies, unless otherwise
directed, shall have full discretion and authority to cumulate their votes and
vote for less than all such nominees. For all other purposes, each share is
entitled to one vote. Because director nominees must receive a plurality of the
votes cast at the meeting, a vote withheld will not affect the outcome of the
election.
The Board of Directors has a
nominating committee tasked with identifying potential Board of Director
members. The nominating committee makes nominations based upon its belief that
candidates for director should have certain minimum qualifications, including:
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Directors should be of the highest ethical
character.
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Directors should have excellent personal and
professional reputations in the companys market area.
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Directors should be accomplished in their
professions or careers.
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Directors should be able to read and understand
financial statements and either have knowledge of, or the ability and
willingness to learn, financial institution law.
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Directors should have relevant experience and
expertise to evaluate financial data and provide direction and advice to the
Chief Executive Officer and the ability to exercise sound business
judgment.
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Directors must be willing and able to expend the time to attend meetings
of the
Board
of
Directors
of the company and the bank and to serve on
Board
committees.
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The
Board
of
Directors
will
consider
whether
a
nominee
is
independent,
as
legally
defined.
In
addition,
directors
should
avoid
the
appearance
of
any
conflict
and
should
be
independent
of
any
particular
constituency
and
be
able
to
serve
all
shareholders
of
the
company.
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Because the directors of the company also serve as
directors of the bank, a majority of directors must be residents of West
Virginia, as required by state banking law.
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Directors must be acceptable to the companys and the banks
regulatory agencies, including the Federal Reserve Board, the Federal Deposit Insurance Corporation and the West Virginia
Division of Banking and must not be under any legal disability which prevents them from serving on the
Board
of
Directors
or participating in the affairs of a financial institution.
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Directors must own or acquire sufficient capital
stock to satisfy the requirements of federal law, state law and the bylaws of
Potomac.
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Directors must be at least 21 years of
age.
2
The
nominating committee reserves the right to modify these minimum qualifications
from time to time, except where the qualifications are required by the laws
relating to financial institutions.
The
process of identifying and evaluating nominees is as follows: In the case of incumbent directors whose terms are set to expire,
the committee considers the directors overall service to the company during their term, including such factors as the number
of meetings attended, the level of participation, quality of performance and any transactions between such directors of the company
and the bank. The
Board
also reviews the payment history of loans, if any, made to such directors of the bank to ensure
that the directors are not chronically delinquent and in default. The committee considers whether any transactions between the
directors and the bank have been criticized by any banking regulatory agency or the banks external auditors and whether
corrective action, if required, has been taken and was sufficient. The nominating committee also confirms that such directors
remain eligible to serve on the
Board
of
Directors
of a financial institution under federal and state law. For new
director candidates, the committee uses its network of contacts in the companys market area to compile a list of potential
candidates. The committee then meets to discuss each candidate and whether he or she meets the criteria set forth above. The committee
then discusses each candidates qualifications and chooses a candidate by majority vote.
The committee will consider director
candidates recommended by shareholders, provided that the recommendations are
received at least 120 days before the next annual meeting of shareholders which
is January 21, 2013 for the 2013 annual meeting. In addition, the procedures set
forth below are to be followed by shareholders submitting nominations. The
committee does not intend to alter the manner in which it evaluates candidates,
regardless of whether or not the candidate was recommended or nominated by a
shareholder.
Potomacs
bylaws provide that nominations for election to the
Board
of
Directors
,
other than those made by or on behalf of Potomacs existing management, must be made by a shareholder in writing delivered
or mailed to the President not less than 14 days nor more than 50 days prior to the meeting called for the election of directors;
provided, however, that if less than 21 days' notice of the meeting is given to shareholders, the nominations must be mailed or
delivered to the President not later than the close of business on the 7th day following the day on which the notice of meeting
was mailed. The notice of nomination must contain the following information, to the extent known:
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name and address of nominee(s);
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principal occupation of
nominee(s);
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total shares to be voted for each
nominee;
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name and address of notifying
shareholder;
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number of shares owned by notifying shareholder;
and
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consent of such nominee(s)
to being named in the proxy statement as a nominee and to serving as such a
director, if elected.
3
Nominations
not made in accordance with these requirements may be disregarded by the
chairman of the meeting and in such case the votes cast for each such nominee
will likewise be disregarded.
Although neither the Board of
Directors of Potomac Bancshares, Inc. nor Bank of Charles Town has a formal
diversity policy, both of the Boards of Directors recognize the need for
diversity on the respective Boards of Potomac Bancshares and Bank of Charles
Town. Accordingly, diversity is considered when nominating Board members. We
view diversity broadly to include differences in race, gender, ethnicity, age,
viewpoint, professional experience, educational background, skills, knowledge of
Potomacs and Bank of Charles Towns market areas, professional contacts and
other personal attributes that can encourage and maintain Board effectiveness.
In selecting a director nominee, we focus on skills, expertise or background
that would complement the existing Board and allow for differing perspectives,
recognizing that Potomacs businesses and operations are centered in the Eastern
Panhandle region of West Virginia.
The table beginning on page 7 of
this proxy statement contains background information on each director nominee.
Committees of the Board
Potomacs
Board
of
Directors
has a standing
audit committee and an asset/liability/investment management committee. Other functions of
Board
committees for Potomac
have been carried out by the
Board
of
Directors
as a whole or through committees of the
Board
of
Directors
of Bank of Charles Town. While there is no such requirement, the
Boards
of
Directors
of the bank and Potomac
are, and have at all times been, identical.
The report of the audit committee is
given on pages 6 and 7 of this proxy statement.
The
audit committee consists of five independent directors: Dr. Keith Berkeley, J. Scott Boyd, Guy Gareth Chicchirichi, Mary Clare
Eros and Barbara H. Pichot. All members of the committee meet the NASDAQ definition for independence. That definition is attached
hereto as Exhibit B. The audit committee is appointed and approved by the
Boards
of Potomac and the bank. The committee
is to assist these
Boards
in monitoring (1) the integrity of the financial statements of the company, (2) the compliance
by the company with legal and regulatory requirements, (3) the independence of the companys internal and external auditors
and (4) the effectiveness of internal controls and procedures. During 2011, the audit committee held seven regular meetings.
The
companys
Board
of
Directors
has determined that Barbara H. Pichot meets the requirements of an audit committee
financial expert for 2011 and 2012 as defined by the Securities and Exchange Commission.
The
asset/liability/investment management committee consists of nine members: Robert F. Baronner, Jr., Guy Gareth Chicchirichi, Dean
Cognetti, William R. Harner, Tim Lewis, Brent Milbourne, Arch A. Moore III, C. Larry Togans and Bernadine Wean. The asset/liability/investment
committee is appointed and approved by the
Boards
of Potomac and the bank. This committee is comprised of
Board
members and officers whose responsibilities are to manage the balance sheet of the bank by maximizing and maintaining the spread
between interest earned and interest paid while assuming acceptable business risks and ensuring adequate liquidity. The committee
recommends investment policies to the
Board
and reviews investments as necessary. This committee held four meetings during
2011.
The bank has a standing compliance
committee, personnel committee, trust committee, trust investment review
committee, merger and acquisition committee, executive committee, information
technology (IT) committee, Sarbanes-Oxley 404 (SOX 404) steering committee and
nominating committee.
4
The compliance committee consists of 13 members: Robert F.
Baronner, Jr., Margaret Cogswell, Kim Desarno, Misty Harder, Kevin Haymaker,
Joshua Householder, Marcia Lerch, Tim Lewis, Susan Myers, David S. (Joe) Smith,
Selene Stevens and Bernadine Wean. The committee is responsible for overseeing
compliance of the bank with all applicable federal and state regulations. This
committee held four meetings in 2011.
The
personnel committee consists of six members: one employee, Diane Armstrong; one employee director, Robert F. Baronner, Jr. (ex-officio);
and four independent directors, Dr. Keith Berkeley, J. Scott Boyd, Guy Gareth Chicchirichi and John C. Skinner, Jr. The independence
definition attached as Exhibit B is also applicable for personnel committee independent members. The committee operates under
the same charter as the company. The personnel committee's responsibilities include evaluating staff performance and requirements,
reviewing salaries, and making necessary recommendations to the
Board
regarding these responsibilities. The committee held
one meeting in 2011. The executive officer who serves on this committee did not make recommendations or participate in meetings
relating to his own salary. See "Personnel Committee Report on Executive Compensation.
The
trust committee consists of eight members: Robert F. Baronner, Jr., John P. Burns, Jr., Leslie Crabill, William R. Harner, John
C. Skinner, Jr., David S. (Joe) Smith, C. Larry Togans and Deborah A. Watts. The trust committee is responsible for the general
supervision of the fiduciary activities performed by One Financial Center in order to ensure proper administration of all aspects
of the bank's fiduciary business. One Financial Center includes the Trust Department and BCT Investments. The committee sets forth
prudent policies and guidelines under which the department can fulfill its fiduciary responsibilities in a timely and efficient
manner and meet state and federal regulatory requirements. The committee makes periodic reports to the
Board
of
Directors
and oversees the activities of the trust investment review committee. The trust committee held six regular meetings in 2011.
This committee is comprised of
Board
members and officers.
The trust investment review
committee, consisting of three trust officers, Leslie Crabill, David S. (Joe)
Smith and Deborah A. Watts, and two directors, William R. Harner and C. Larry
Togans, meets regularly to review investments in trust accounts and to determine
that these investments remain within the guidelines of the account. This
committee held 12 meetings during 2011.
The merger and acquisition committee
consists of five members: Robert F. Baronner, Jr., Guy Gareth Chicchirichi, Mary
Clare Eros, Barbara H. Pichot, and John C. Skinner, Jr. The committee has the
authority to review and recommend merger and acquisition transactions and
investment transactions proposed by management to the full Board of Potomac
Bancshares, Inc. The committee held one meeting in 2011.
The executive committee consists of
nine members: Robert F. Baronner, Jr., Dr. Keith Berkeley, J. Scott Boyd, John
P. Burns, Jr., Mary Clare Eros, William R. Harner, Stanley L. Merson, John C.
Skinner, Jr. and C. Larry Togans. This committee meets on an as needed basis to
review and approve loans that exceed the Chief Executive Officers lending
authority. This committee held eight meetings in 2011.
The IT (Information Technology)
committee consists of 12 members: Robert F. Baronner, Jr., Clara Carroll,
Margaret Cogswell, Kim Desarno, Josh Householder, Tim Lewis, Brent Milbourne,
Susan S. Myers (ex-officio), Selene Stevens, Matt Stickel, Shawn Stotler and
Bernadine Wean. The committees responsibilities are to prioritize major IT
projects, establish IT policies and procedures, identify technology related
opportunities, and set IT standards that insure cost effective and efficient
operations. This committee held eleven meetings in 2011.
The SOX 404 steering committee
consists of ten regular members: Robert F. Baronner, Jr., Arch A. Moore, III,
Dean Cognetti, Tim Lewis, Susan S. Myers, Barbara H. Pichot, David (Joe) Smith,
Selene Stevens, Shawn Stotler and Bernadine Wean. One additional non-voting
committee member attends on an as needed basis Gayla Anderson of Bank of Charles
Town. The SOX 404 steering committee is responsible for assisting with and
reviewing project goals and timelines, reviewing and approving the mapping
process of significant accounts, and reviewing SOX 404 documentation and testing
materials to ensure that the bank will be in compliance with Section 404 of the
Sarbanes-Oxley Act. This committee held no meetings in 2011.
5
The
nominating committee consists of six members: Robert F. Baronner, Jr., J. Scott
Boyd, John P. Burns, Jr., Guy Gareth Chicchirichi, Margaret Cogswell, and John
C. Skinner, Jr. This committees responsibility is to recommend candidates for
positions on the Boards of Potomac and the bank. This committee held three
meetings during 2011.
The
Boards
of
Directors
of Potomac and the bank have regular monthly meetings the second Tuesday of each month and a
regular organizational meeting each May. The Potomac and bank
Boards
each met for 13 regular meetings in 2011. Special
meetings are held by each
Board
from time to time as required. There were no special meetings held by either
Board
in 2011. During the year, each of the directors attended at least 75% of all meetings of the
Boards
of Potomac and the
bank and all committees of the
Boards
on which they served.
Audit Committee Report
The members of the
audit committee are all independent in accordance with the requirements of
NASDAQ.
The
audit committee oversees Potomacs financial reporting process on behalf of the
Board
of
Directors
. Management
has the primary responsibility for the financial statements and the reporting process including the systems of internal controls.
The audit committee has reviewed and
discussed the audited financial statements with management, discussed with the
independent auditor the matters required by SAS 61 as amended, received
communications from the independent auditor as to its independence, and
discussed independence with the auditor.
The audit committee has received the
written disclosures and the letter from the independent accountant required by
Independence Standards Board No. 1, Independence Discussions with Audit
Committees, and has discussed with the independent accountant the independent
accountants independence.
Based
on its review and discussions with management and the independent auditor, the audit committee recommended to the
Board
of
Directors
that the audited financial statements be included in the Annual Report on Form 10-K filed by the company.
The
audit committee and the
Board
of
Directors
have adopted a written charter for the audit committee which is included
as Exhibit A at the end of this proxy statement.
The following fees were paid to
Yount, Hyde & Barbour, P.C., Potomac Bancshares, Inc.s independent
registered accounting firm, for services provided to the company for the fiscal
years ending December 31, 2011 and 2010.
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2011
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2010
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Fees
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Percentage
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Fees
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Percentage
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Audit fees
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$
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55,500
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49.5
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%
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$
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52,725
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49.1
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%
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Audit-related fees
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50,612
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45.1
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%
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48,863
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45.5
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%
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Tax fees
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6,000
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5.4
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%
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5,800
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5.4
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%
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$
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112,112
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100.0
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%
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$
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107,388
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100.0
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%
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A description of these fees is as follows:
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Audit fees consist of audit and review services
and review of documents filed with SEC.
-
Audit-related fees consist of agreed upon
procedures related to the Trust Departments Regulation 9 examination, ACH and
vulnerability assessment, audit of the pension plan, information technology
attestation, and consultation concerning financial accounting and reporting
standards.
-
Tax fees consist of preparation of federal and
state tax returns and consultation regarding tax compliance issues.
6
The audit committee of the
Board
believes that the non-audit services provided by Yount, Hyde & Barbour are compatible with maintaining the auditors
independence. The audit committee charter requires that the audit committee pre-approve all services performed by the independent
auditors. However, the pre-approval requirement is waived for non-audit services if the amount of the non-audit service is not
more than 5% of the total amount paid to the independent auditors during the fiscal year in which the services are provided and
such services were not recognized at the time of the engagement to be non-audit services and such services are promptly brought
to the committees attention and approved prior to the completion of the audit. All of the services described above for which
Yount, Hyde & Barbour, P.C., billed the company for the fiscal year ended December 31, 2011, were pre-approved by the companys
audit committee. For the fiscal year ended December 31, 2011, the companys audit committee did not waive the pre-approval
requirement of any non-audit services to be provided to the company by Yount, Hyde & Barbour, P.C.
This report should not
be deemed incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities Act of 1933
or the Securities Exchange Act of 1934, except to the extent that Potomac
specifically incorporates this report by reference, and shall not otherwise be
filed with such Acts.
Barbara H. Pichot, CPA,
Chairperson
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Dr. Keith Berkeley
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J. Scott Boyd
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Guy Gareth Chicchirichi
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Mary Clare
Eros
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March 19, 2012
Management Nominees to the Board of
Potomac
Nominees
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Age
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Served
As
Director
of
Potomac
Since
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Family
Relationship
With
Other
Nominees
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Year
in
Which
Term
Expires
|
|
Principal Occupation
or
Employment Last Five Years
|
Dr.
Keith Berkeley
|
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53
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2008
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None
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2012
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Veterinarian, President of Valley Equine Associates,
Jefferson County, W.V.
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Stanley L. Merson
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55
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2010
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None
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2012
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Vice President and CFO of RLO Contractors, Inc.,
2007-Present, President, Sandy Spring Mortgage Corporation,
1997-2007.
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Barbara L. Scott
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63
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None
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-
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President of Summit Point Raceway Associates, Inc. and
BSR, Inc., 2009-Present. Managing Member of Summit Point Automotive
Research Center, LLC.
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John C. Skinner, Jr.
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70
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1994
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None
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2012
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Chairman of the Board, Potomac Bancshares, Inc. and Bank
of Charles Town; Attorney, Skinner Law firm, Jefferson County, West
Virginia; bank Attorney since 1986; Potomac attorney since
1994.
|
The Board of Directors recommends that
shareholders vote For all the nominees listed above.
7
Directors Continuing to Serve Unexpired
Terms
Directors
|
|
Age
|
|
Served
As
Director
of
Potomac
Since
|
|
Family
Relationship
With
Other
Nominees
|
|
Year
in
Which
Term
Expires
|
|
Principal
Occupation or
Employment Last Five Years
|
Robert F. Baronner, Jr.
|
|
53
|
|
2001
|
|
None
|
|
2014
|
|
Employed by bank as of 1/1/01 as President and Chief
Executive Officer.
|
|
J.
Scott Boyd
|
|
55
|
|
1999
|
|
None
|
|
2013
|
|
Pharmacist, owner Jefferson Pharmacy, Inc., Jefferson
County, West Virginia since 1982; Pharmacist, owner JSB Enterprises, Inc.
Dba South Berkeley Pharmacy, Berkeley County, West Virginia since 2006;
President and Chairman of Board of Directors of In Home Medications
West Virginia, Inc; President Mountain Spring Properties,
LLC.
|
|
John P. Burns, Jr.
|
|
70
|
|
1994
|
|
None
|
|
2013
|
|
Owner/operator of a beef and grain farm in Jefferson
County, West Virginia; Director Emeritus, Jefferson County Fair
Association; past President, Jefferson County Fair Association; past
Director and past Chairman, Valley Farm Credit.
|
|
Guy
Gareth Chicchirichi
|
|
70
|
|
1994
|
|
None
|
|
2014
|
|
Executive Manager, Guys Buick-Pontiac-GMC, Inc.,
Jefferson County, West Virginia; charter member of Charles Town Rotary
Club.
|
|
Margaret Cogswell
|
|
53
|
|
2003
|
|
None
|
|
2014
|
|
Chief Executive Officer, Hospice of the Panhandle,
Berkeley, Hampshire, Jefferson and Morgan Counties, West Virginia since
1987.
|
|
Mary Clare Eros
|
|
65
|
|
2008
|
|
None
|
|
2014
|
|
Retired and Of Counsel, Jackson Kelly PLLC; Employed at
Jackson Kelly PLLC from 1981 to 2007.
|
|
Barbara H. Pichot
|
|
64
|
|
2004
|
|
None
|
|
2013
|
|
Controller, Potomac Construction Industries, Inc. March
1, 2009 to 2011. Certified public accountant, retired partner CoxHollida
LLP, a public accounting firm in Berkeley County, West Virginia,
1981-2006; past President, Hospice of the Panhandle; past Chair Board of
Governors, Shepherd University.
|
|
C.
Larry Togans
|
|
65
|
|
2004
|
|
None
|
|
2013
|
|
Retired Deputy, Branch of Human Resources, U. S.
Geological Survey, employed 1973 to 2001.
|
|
Directors retiring at the end of their
term.
|
|
|
|
|
|
William R. Harner
|
|
71
|
|
1994
|
|
None
|
|
2012
|
|
Employed at bank 1967 to 2004; Senior Vice President and
Cashier 1988 to 2004 (retired); Senior Vice President and Secretary of
Potomac 1994 to 2004; Member Board of Governors of Shriners Hospital for
Children, Philadelphia, PA since 2004.
|
8
Mr. John C.
Skinner, Jr. is the Chairman of the Board of Directors of Potomac and the bank.
Mr. Skinner was chosen as a director for his personal and professional
reputation in the community of Jefferson County, West Virginia where he has been
an attorney for 44 years. Mr. Skinner is a graduate of West Virginia University
and the West Virginia University Law School. In addition to his professional
experience and perspective, Mr. Skinner brings knowledge of the companys market
area through his business experience. For his role as Chairman of the Board, Mr.
Skinner provides strong leadership and organizational skills which he obtained
through his experiences as an attorney, as a businessman and as a member of
several non-profit and civic organizations. His legal knowledge is valuable when
dealing with the legal and ethical issues that arise from time to time.
Mr. Robert F. Baronner, Jr. was
elected to the Board of Directors after being named President and Chief
Executive Officer of Potomac and Bank of Charles Town in 2001. Mr. Baronner was
chosen to represent managements perspective on the Board of Directors. Mr.
Baronner has worked in the banking industry for almost 25 years. In addition, he
is currently on the FDIC Community Bankers Advisory Committee, Board of
Directors of West Virginia University Hospitals-East in Martinsburg, West
Virginia, and is the past President of the West Virginia Community Bankers
Association. Mr. Baronner should continue on the Board of Directors due to his
continued service as President and CEO, his extensive experience and expertise
in managing financial institutions and his extensive knowledge of Potomacs and
Bank of Charles Towns operations.
Dr.
Keith Berkeley has served on the Board of Directors since July 2008. He has been a veterinarian and business owner in the Eastern
Panhandle of West Virginia for approximately 20 years. Dr. Berkeley earned his Doctor of Veterinary Medicine from the Tuskegee
Institute. Dr. Berkeley was elected to the Board for his business experience and his knowledge of Potomacs and Bank of Charles
Towns market areas by virtue of his relationship with the community through his veterinary practice. Dr. Berkeley should
remain on the
Board
because of his track record as a successful businessman and for his relationship with a large portion
of the community. In addition, Dr. Berkeley has attended the West Virginia Community Bankers Directors College to further his
own knowledge of the banking industry and his responsibilities as a Director.
J.
Scott Boyd is a pharmacist and owner of one pharmacy in both Berkeley and Jefferson Counties. Mr. Boyd is a graduate of the West
Virginia University School of Pharmacy. Mr. Boyd was chosen for his experience as a business owner and his knowledge of the market
areas of Potomac and Bank of Charles Town in both Berkeley and Jefferson Counties. He should remain on the
Board
of
Directors
because of his 29 years of business experience as well as his contacts with an array of persons from the communities the bank
serves.
John P. Burns, Jr. is a lifelong
resident of Jefferson County. He has made his living in the farming industry for
over 52 years. Mr. Burns was originally elected to the Board at a time when
agriculture was the largest industry in the banks market area. He is a valuable
member of the Board because of his understanding of the members of the farming
community and the farming industry. As a result of his experience in operating a
beef and grain farm, Mr. Burns has significant management abilities. He should
remain on the Board to continue to represent the perspective of the farming
industry and his management experience. Although farming is no longer the
largest industry in the Eastern Panhandle of West Virginia, it remains an
integral part of the local economy.
Guy Gareth Chicchirichi is a
lifelong resident of Jefferson County, West Virginia and the owner of a local
automobile dealership for over 43 years. Mr. Chicchirichi was elected to the
Board of Directors for both his professional background and personal attributes.
Mr. Chicchirichi has taken college level courses in accounting, finance and
management, and has also participated in educational workshops through General
Motors Corporation dealing with accounting, finance and management in the
automotive industry. Mr. Chicchirichi is also involved in various community
organizations such as the Rotary Club of Charles Town, West Virginia, of which
he is a charter member. He should continue as a director for his unique
perspective of the automotive industry. Additionally, through his involvement in
community organizations, he has knowledge of Potomacs and the banks market
areas, as well as knowledge of the Jefferson County, West Virginia economy and
its local leaders.
9
Margaret
Cogswell is Chief Executive Officer of Hospice of the Panhandle. She has an Associate of Science degree in Nursing from Shepherd
College. Ms. Cogswell brings a unique perspective of someone that has been involved in non-profit organizations most of her adult
life and as a result, has a number of contacts within the companys and the banks market area in Jefferson and Berkeley
Counties, West Virginia. Her duties as CEO include management of a $13 million budget and a paid staff of 130 people. Ms. Cogswell
should remain on the
Board
because she is and has been involved with the non-profit community and her management experience
is a valuable asset to the
Board
of
Directors
. She has attended the West Virginia Community Bankers Directors College
to further her knowledge of the banking industry and her responsibilities as a Director.
Mary Clare Eros is a retired
attorney. Ms. Eros was chosen as a Board member due to her specific experience
in representing financial institutions during her 25 years of law practice. Ms.
Eros received her doctor of jurisprudence degree (law) from Georgetown
University Law School in Washington, D.C. Her area of expertise in her law
practice involved advising banks with regard to consumer protection laws and
representing banks and lending institutions in large commercial transactions. In
addition, Ms. Eros was the Managing Member of the Martinsburg, West Virginia
office of Jackson Kelly PLLC (Attorneys at Law), and as part of her duties
routinely reviewed financial information. Ms. Eros should continue as a Board
member due to her extensive legal experience in representing financial
institutions.
Stanley
L. Merson has over 25 years of banking experience with Sandy Spring Bank in Maryland. He was instrumental in establishing the
commercial lending division and eventually worked his way up to the position of President of Sandy Spring Mortgage Corporation.
Mr. Merson is a graduate of the Stonier School of Banking and the American Bankers Association Graduate Commercial Lending School.
Mr. Merson was appointed to the
Board
because of his extensive knowledge of banking and, in particular, commercial lending.
Mr. Merson should remain on the
Board
due to his knowledge of banking, his accounting background and his experience within
the business community.
Barbara H. Pichot is a Certified
Public Accountant, and retired partner with CoxHollida LLP. Ms. Pichot has over
25 years of experience in public accounting and as the controller of a concrete
manufacturing facility. She is a graduate of Shepherd College with a degree in
accounting and was elected to the Board for her financial and accounting
expertise. She currently serves as the companys Audit Committee financial
expert. Ms. Pichot should continue to serve on the Board of Directors because of
her knowledge of accounting and audit procedures and her business acumen. She
has attended the West Virginia Community Bankers Directors College to further
her knowledge of the banking industry and her responsibilities as a
Director.
The
director nominee Barbara L. Scott is President of Summit Point Raceway Associates Inc. (SPRA) and BSR Inc. These are the operating
entities for the 785 acre Summit Point Motorsports Park located in Summit Point, West Virginia. SPRA hosts motorsport events to
include amateur road racing for sports cars, motorcycles and karts. BSR Inc. provides specialty and anti-terrorist driver training
programs for government agencies and the U.S. military. The facility has four European style road racing circuits and a 282 acre
industrial park that houses a U.S. State Department training facility. Ms. Scott is a graduate of Southern Methodist University
with a degree in Biology and English. Ms. Scott began her employment at Summit Point in 1987 and has extensive experience in all
facets of the business. She should be elected to the
Board
based upon the business acumen she has gained in managing and
operating a multi-faceted and highly successful company with nearly 200 employees. Additionally, Ms. Scott has gained experience
working and negotiating with governmental entities which are becoming more and more prevalent in the banks local market
area. Ms. Scott currently resides near Middleburg, Virginia and would provide good perspective on the Northern Virginia banking
market should the company choose to expand into that area.
10
C.
Larry Togans is retired from the U. S. Geological Survey in Reston, VA where he served as the Deputy Branch Chief of Human Resources
and Management Support. In his position, Mr. Togans served as special advisor to the Senior Executive Staff (SES) who manages
more than 5000 geoscientists and technical support staff members. Mr. Togans received his Bachelors degree from Shepherd College.
Mr. Togans should remain on the Board of Directors because he provides expertise in the human resources field that no other current
Board member can provide. In addition to his professional background, he has served as
Board
member in a number of positions
including serving on the Shepherd University Foundation and Jefferson County Board of Education. Mr. Togans has taken the time
to advance his knowledge of banking and directorship by attending the West Virginia Community Bankers Directors College.
Ownership of Securities by Nominees,
Directors and Officers
The following table shows the amount
of Potomac's outstanding common stock beneficially owned by nominees, directors
and principal officers of Potomac individually and as a group. Beneficial
ownership has been determined in accordance with the provisions of Rule 13d-3 of
the Securities Exchange Act of 1934 under which a person is deemed to be the
beneficial owner of a security if he or she has or shares the power to vote or
direct the voting of the security or the power to dispose of or direct the
disposition of the security or if he or she has the right to acquire beneficial
ownership of the security within sixty days. The information is furnished as of
March 1, 2012, on which date 3,390,178 shares were outstanding.
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
Amount and
Nature of
|
|
Shares
Subject to a
|
|
Percent
of
|
Nominees
|
|
of Beneficial
Ownership
|
|
Right to
Acquire **
|
|
Common
Stock
|
Dr. Keith Berkeley
|
|
|
|
|
|
|
|
|
|
|
|
Ranson, WV 25438
|
|
5,686 shares
|
|
D
|
|
|
- -
|
|
|
.1677
|
|
|
|
Stanley L. Merson
|
|
|
|
|
|
|
|
|
|
|
|
Laurel, MD 20723
|
|
1,000 shares
|
|
D
|
|
|
- -
|
|
|
.0295
|
|
|
|
Barbara L. Scott
|
|
|
|
|
|
|
|
|
|
|
|
Marshall, VA 20115
|
2,656 shares
|
|
D
|
|
|
- -
|
|
|
.0783
|
|
|
|
John C. Skinner, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
Charles Town, WV 25414
|
|
31,484 shares
|
|
D
|
|
|
5,250
|
|
|
.9287
|
|
|
|
Non-Nominees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert F. Baronner, Jr.
|
32,315 shares
|
|
D
|
|
|
|
|
|
|
|
Charles Town, WV 25414
|
|
858 shares
|
|
I
|
|
|
18,280
|
|
|
.9785
|
|
|
|
J. Scott Boyd
|
|
9,559 shares
|
|
D
|
|
|
|
|
|
|
|
Ranson, WV 25438
|
|
867 shares
|
|
I
|
|
|
5,250
|
|
|
.3075
|
|
|
|
John P. Burns, Jr.
|
|
40,288 shares
|
|
D
|
|
|
|
|
|
|
|
Charles Town, WV 25414
|
|
2,040 shares
|
|
I
|
|
|
5,250
|
|
|
1.2486
|
|
|
|
Guy Gareth Chicchirichi
|
|
|
|
|
|
|
|
|
|
|
Charles Town, WV 25414
|
|
34,045 shares
|
|
D
|
|
|
5,250
|
|
|
1.0043
|
|
|
|
Margaret Cogswell
|
|
|
|
|
|
|
|
|
|
|
|
Martinsburg, WV 25403
|
6,906 shares
|
|
D
|
|
|
5,250
|
|
|
.2037
|
|
|
|
Mary Clare Eros
|
|
|
|
|
|
|
|
|
|
|
|
Shepherdstown, WV 25443
|
|
50 shares
|
|
D
|
|
|
- -
|
|
|
.0015
|
|
|
|
William R. Harner
|
|
|
|
|
|
|
|
|
|
|
|
Charles Town, WV
|
|
13,818 shares
|
|
D
|
|
|
5,250
|
|
|
.4076
|
|
|
|
Barbara H. Pichot
|
|
|
|
|
|
|
|
|
|
|
|
Kearneysville, WV 25430
|
|
7,790 shares
|
|
D
|
|
|
3,892
|
|
|
.2298
|
|
|
|
C. Larry Togans
|
|
|
|
|
|
|
|
|
|
|
|
Charles Town, WV 25414
|
|
4,296 shares
|
|
D
|
|
|
3,892
|
|
|
.1267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officers
(Non-Nominees)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dean Cognetti
|
|
|
|
|
|
|
|
|
|
|
|
Charles Town WV 25414
|
|
500 shares
|
|
D
|
|
|
- -
|
|
|
.0147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arch A. Moore, III
|
|
|
|
|
|
|
|
|
|
|
|
Charles Town WV 25414
|
|
4,300 shares
|
|
D
|
|
|
- -
|
|
|
.1268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All nominees, directors and
|
|
|
|
|
|
|
|
|
|
|
|
principal officers as a group
|
|
|
|
|
|
|
|
|
|
|
|
(14 persons)
|
|
198,458
shares
|
|
|
|
|
|
|
|
5.8539
|
|
D
|
|
Direct ownership
|
I
|
|
Indirect ownership
|
** Consists of options exercisable
within 60 days of January 31, 2012.
|
11
Although there is no formal written
policy, the company expects all directors to attend the annual meeting of
shareholders. Each of the twelve directors attended the annual meeting held on
May 17, 2011.
The
Board
of
Directors
hired a consultant in 2007 with the specific goal of evaluating the
Board
structure and
function. It was decided that the Board Chairman should be a non-employee director of the company. There are several reasons for
the decision.
The
CEO in a small community bank generally has more day-to-day activities to perform than an executive at larger institutions. Adding
the responsibility of chairing the
Board
puts unnecessary demands on the CEO. Having a non-employee chairman allows for
a more objective view of the operations of the company. Board members may feel uncomfortable reporting to the CEO considering
he is hired by the
Board
members. Having a non-employee chairman has the added benefit of allowing concerns with the CEO
to be reported to someone independent of the operations of the company. The consultant and the
Board
agreed that the separation
provided better corporate governance. It is also considered a best practice in the banking industry.
The
Board
of
Directors
is involved in the risk management of the company. All policies are approved by the
Board
on an annual basis. Risk oversight is further exhibited by the activities of the committees of the
Board
as described
beginning on page 4 under the topic, Committees of the Board. Reports of these committees are given to the full
Board
on a regular basis.
Executive Compensation
The
company does not have a paid compensation consultant for the purpose of determining the compensation level of executive officers,
directors or employees. We do have a human resources consultant that provides survey results and research information for the
purpose of determining salary levels of all levels of employees. The use of this information is at the discretion of management.
Neither the compensation committee nor the
Board
of
Directors
has hired an independent compensation consultant.
Potomac's officers did not receive
compensation as such during 2011. The Summary Compensation Table sets forth the
annual and long-term compensation for services in all capacities to the bank for
the fiscal years ended December 31, 2011, 2010 and 2009 of the named executive
officers. Neither Potomac nor the bank has any stock option plans, employee
stock ownership plans or other employee benefit plans except for the pension
plan, 401(k) plan and stock incentive plan described in this proxy statement. No
options were granted in 2011, 2010 and 2009.
12
SUMMARY COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
Incentive
Plan
|
|
Compensation
|
|
All
Other
|
|
|
Name
and
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Compensation
|
|
Earnings
|
|
Compensation
|
|
Total
|
Principal Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
**
|
|
($)
|
|
($)
|
Robert F. Baronner, Jr.
|
|
2009
|
|
207,593
|
|
-
-
|
|
-
-
|
|
-
-
|
|
(2,127
|
)
|
|
21,882
|
|
227,348
|
President and
|
|
2010
|
|
207,693
|
|
-
-
|
|
-
-
|
|
-
-
|
|
28
467
|
|
|
28,341
|
|
264,501
|
Chief Executive Officer
|
|
2011
|
|
207,693
|
|
- -
|
|
- -
|
|
- -
|
|
60,768
|
|
|
31,624
|
|
300,085
|
Gayle Marshall
Johnson *
|
|
2009
|
|
90,790
|
|
- -
|
|
- -
|
|
- -
|
|
109,482
|
|
|
4,325
|
|
204,597
|
Senior Vice
President
|
|
2010
|
|
90,890
|
|
- -
|
|
- -
|
|
- -
|
|
57,308
|
|
|
7,664
|
|
155,862
|
and Chief Financial Officer
|
|
2011
|
|
68,768
|
|
- -
|
|
- -
|
|
- -
|
|
145,489
|
|
|
7,726
|
|
221,983
|
Dean
Cognetti
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Chief Financial Officer
|
|
2011
|
|
63,712
|
|
- -
|
|
- -
|
|
- -
|
|
- -
|
|
|
9,283
|
|
72,995
|
Arch A. Moore,
III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice
President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Chief Lending Officer
|
|
2011
|
|
150,104
|
|
- -
|
|
- -
|
|
- -
|
|
- -
|
|
|
702
|
|
150,806
|
** This is a non-cash actuarial assumption
that can go up or down based upon the rate of return on the pension’s investments and mortality rates as specified by the
Third Party Administrator of the Bank of Charles Town Defined Benefit Plan. The Plan was “frozen” October 31, 2009
which means after that date, no new participants were admitted to the plan. Also as of that date, existing enrollees receive no
further credit for the number of years employed at Bank of Charles Town. Most Bank of Charles Town employees now rely on the
bank’s
401-k plan to fund their retirement.
Each officer
receives option awards, incentive and other compensation. Option awards are
calculated by multiplying the grant date fair value by the number of options
granted. The grant date fair value is calculated under the provisions set forth
by FASB Accounting Standards Codification Topic 718. Non-equity incentive plan
compensation is the incentives paid in cash as opposed to stock
options.
The All Other Compensation total in
the Summary Compensation Table for each named executive officer can differ
depending on their position. The table below provides the 2011 detail for this
amount.
Components of All Other Compensation
|
|
|
|
Company
|
|
|
|
|
|
Use of
|
|
Temporary
|
|
|
|
|
|
|
|
|
Contributions
|
|
Director
|
|
Life
|
|
Company
|
|
Housing
|
|
|
|
|
|
|
|
|
to 401 (k)
Plan
|
|
Fees
|
|
Insurance
|
|
Vehicle
|
|
Allowance
|
|
|
|
Total
|
Name
|
|
Year
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
Consulting
|
|
($)
|
Robert F. Baronner,
Jr.
|
|
2011
|
|
16,595
|
|
10,800
|
|
946
|
|
3,283
|
|
-
|
|
-
|
|
31,624
|
Gayle Marshall Johnson *
|
|
2011
|
|
7,200
|
|
-
|
|
526
|
|
-
|
|
-
|
|
-
|
|
7,726
|
Dean Cognetti
|
|
2011
|
|
-
|
|
-
|
|
314
|
|
-
|
|
6,153
|
|
2,816
|
|
9,283
|
Arch A. Moore, III
|
|
2011
|
|
-
|
|
-
|
|
702
|
|
-
|
|
-
|
|
-
|
|
702
|
* Ms. Johnson retired as of August 31,
2011
During 2003, the Potomac
Board
and
the shareholders adopted and approved the 2003 Stock Incentive Plan which
reserves 433,600 (183,600 original and 250,000 additional shares approved by
shareholders in 2007) shares of common stock that may be granted as incentive
stock options (ISO) and nonqualified or non-statutory stock options. No
options were granted in 2009, 2010 and 2011.
13
The
following table provides detail of the outstanding stock options for each named
executive officer. No options have been exercised as of December 31,
2011.
OUTSTANDING EQUITY AWARDS AT FISCAL
YEAR END
|
Option
Awards
|
|
Number of
|
Number of
|
|
|
|
Securities
Underlying
|
Securities
Underlying
|
Options
|
|
|
Unexercised
Options
|
Unexercised
Options
|
Exercise
|
Options
|
|
(#)
|
(#)
|
Price
|
Expiration
|
Name
|
Exercisable
|
Unexercisable
|
($)
|
Date
|
Robert
F. Baronner, Jr.
|
3,200
|
800
|
15.60
|
1/09/2017
|
|
5,100
|
-
-
|
17.25
|
1/10/2016
|
|
5,100
|
-
-
|
14.00
|
1/11/2015
|
|
4,080
|
-
-
|
11.28
|
2/10/2014
|
Gayle
Marshall Johnson
|
1,632
|
408
|
15.60
|
1/09/2017
|
|
2,652
|
-
-
|
17.25
|
1/10/2016
|
|
2,652
|
-
-
|
14.00
|
1/11/2015
|
|
2,040
|
-
-
|
11.28
|
2/10/2014
|
For each
named executive officer above, an additional 20% of options granted for each
year became exercisable on the anniversary of the grant dates in January 2012
and February 2012.
Stock options vest 20%
per year for a five year period. Fully vested options are eligible to be
exercised for a period of 10 years after the grant date. Exercisable options
represent 100% of the 2004 grant, 100% of the 2005 grant, 100% of the 2006 grant
and 80% of the 2007 grant for each named executive officer.
Employee Benefit Plans
Potomacs defined benefit pension
plan was frozen as of October 31, 2009. Employees were eligible to participate
in the plan upon completion of at least one year of service and attainment of
age 21. An employee included any person (but not including a person acting only
as a director) who was regularly employed on a full-time basis. Benefits will be
based on average compensation for the five consecutive full calendar years of
service which produces the highest average as of October 31, 2009. No additional
participants may enter the plan, and there will be no further increases in
benefits due to increases in salaries and years of service.
Normal retirement is at age 65 with
the accrued monthly benefit determined on actual date of retirement. An employee
may take early retirement from age 60 and the accrued monthly benefit as of the
normal retirement date is actuarially reduced. There is no reduction if an
employee is 62 years of age and has 30 years service.
Compensation covered by the pension
plan is based upon total pay. Effective for plan years beginning in 2009,
Internal Revenue Code Section 401(a) (17) prohibits taking into account
compensation in excess of $245,000 in determining ones pension benefit. This
amount remained unchanged for 2010 and 2011.
During 2002, the company established
a 401(k) profit sharing plan available initially to all full-time employees. In
2007, the plan was expanded to include part time employees. After initiation of
the plan, employees become eligible to participate in the plan upon reaching age
21 and completing one year of service. Employees can make a salary deferral
election authorizing the employer to withhold up to the amount allowed by law
each calendar year. In conjunction with the freezing of the pension plan as
described above, the company has increased the match for the 401(k) plan
effective November 1, 2009. The employer may make a discretionary matching
contribution each plan year. The employer may also make other discretionary
contributions to the plan. Part time employees are not eligible to receive
matching contributions under the current plan.
14
Personnel Committee Report on Executive
Compensation
The
personnel committee is comprised of six members: one employee, Diane Armstrong
(Human Resources Director); one employee director, Robert F. Baronner, Jr.
(ex-officio); and four independent directors, Dr. Keith Berkeley, J. Scott Boyd,
Guy Gareth Chicchirichi and John C. Skinner, Jr. The personnel committee reviews
and recommends to the
Board
changes to the compensation levels of all executive
officers of the bank. The committee seeks to attract and retain highly capable
and well-qualified executives and to compensate executives at levels
commensurate with their amount of service to the bank. The committee met
November 22, 2011 to review and approve the bank's 2012 compensation levels. The
bank's Chief Executive Officer reviews each executive officer's compensation and
makes recommendations to the committee. The committee reviews these
recommendations and independently evaluates each executive's job performance and
contribution to the bank. The committee also considers the inflation rate and
the compensation levels of executive officers holding similar positions with the
bank's competitors. Compensation levels for executives of the bank are
competitive when compared to these institutions.
The Chief Executive Officer's salary
is tied to the performance of the bank and is based on comparable salaries of
Chief Executives of similar sized banking institutions. Robert F. Baronner, Jr.
served on the committee and was the bank's Chief Executive Officer; however, he
did not make any recommendations relating to his salary and was not present at
committee meetings when his compensation was being discussed. Mr. Baronner did
not receive an increase in salary during 2011, nor did he receive a bonus.
In 2001 Potomac and the bank entered
into a written employment agreement with Mr. Baronner. The first years base
salary for 2001 for Mr. Baronner as stated in the employment agreement was set
after discussions with a professional executive recruiter as well as research
regarding market rates for similar positions for candidates with equivalent
education and experience. The salary is set each year as the agreement renews
and is based on performance goals of the bank and the banks profitability as
discussed above.
This report should not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that Potomac specifically
incorporates this report by reference, and shall not otherwise be filed under
such Acts.
This report is submitted by:
|
|
|
|
Robert F. Baronner, Jr.
(ex-officio)
|
|
Dr. Keith Berkeley
|
|
J. Scott Boyd
|
|
Guy Gareth Chicchirichi
|
|
John C. Skinner,
Jr.
|
November 22, 2011
15
Employment Agreement
Potomac and
the bank have a written employment agreement with Robert F. Baronner, Jr.,
President and Chief Executive Officer of Potomac and the bank. The agreement is
for a one-year term with automatic renewals for one year each, unless terminated
by one of the parties. The agreement provided for an annual salary of $110,000
plus directors fees in 2001. The subsequent annual salaries are set each year
as the agreement renews. The personnel committee set the annual salary at
$207,442 for 2012. Under the agreement, if Mr. Baronners employment is
terminated (other than for cause), he is entitled to one years salary and
benefits. In the event of an actual or constructive termination of Mr.
Baronners employment after a change in control of Potomac or the bank, Mr.
Baronner would receive two years compensation and benefits for 18 months.
Compensation of Directors
Directors of Potomac were not
compensated for their services as directors for 2011. Directors of the bank were
compensated at the rate of $900 for each regular and each special
Board
meeting
attended in 2011. The Chairman of the Board was paid $500 per month in addition
to director and committee fees. Directors were compensated $110 for each
committee meeting attended in 2011. Directors that serve on the audit committee
were compensated $220 for each audit committee meeting attended in 2011. The
audit committee member that is deemed the financial expert was compensated $330
dollars for each audit committee meeting attended in 2011. Directors who are
operating officers of the bank are not compensated for committee meetings
attended.
DIRECTOR COMPENSATION
|
Fees Earned or
Paid
|
|
All Other
|
|
|
in Cash
|
Option Awards
|
Compensation
|
Total
|
Name
|
($)
|
($)
|
($)
|
($)
|
Dr.
Keith Berkeley
|
13,220
|
-
-
|
-
-
|
13,220
|
J.
Scott Boyd
|
13,540
|
-
-
|
-
-
|
13,540
|
John P.
Burns, Jr.
|
12,550
|
-
-
|
-
-
|
12,550
|
Guy
Gareth Chicchirichi
|
13,210
|
-
-
|
-
-
|
13,210
|
Margaret Cogswell
|
12,550
|
-
-
|
-
-
|
12,550
|
Mary
Clare Eros
|
13,320
|
-
-
|
-
-
|
13,320
|
William
R. Harner
|
12,990
|
-
-
|
-
-
|
12,990
|
Stanley
L. Merson
|
12,660
|
-
-
|
-
-
|
12,660
|
Barbara
H. Pichot
|
13,320
|
-
-
|
-
-
|
13,320
|
John C.
Skinner, Jr.
|
19,760
|
-
-
|
-
-
|
19,760
|
C.
Larry Togans
|
13,980
|
-
-
|
-
-
|
13,980
|
Certain Transactions with Directors,
Officers and Their Associates
Potomac and the bank have had, and
expect to have in the future, transactions in the ordinary course of business
with directors, officers, principal shareholders and their associates. All of
these transactions remain on substantially the same terms, including interest
rates, collateral and repayment terms on the extension of credit, as those
prevailing at the same time for comparable transactions with unaffiliated
persons, and in the opinion of management of Potomac and the bank, did not
involve more than the normal risk of collectibility or present other unfavorable
features.
The company does not have a policy
on related transactions. As stated in the previous paragraph, transactions with
directors are on the same terms and require the same documentation as those
transactions with unaffiliated persons. These transactions are voted on by the
Board of Directors with the particular director absent for the discussion and
voting. The transactions and voting are recorded in the minutes. These
transactions are designated so the information is accessible as needed for
reporting purposes.
16
2. RATIFICATION OF SELECTION OF
AUDITORS
The
Board
of
Directors
has selected
the firm of Yount, Hyde & Barbour, P.C. to serve as independent auditors for
Potomac for the calendar year 2012. If the shareholders do not ratify the
appointment of Yount, Hyde & Barbour, P.C., the
Board
will consider the
appointment of other auditors. Potomac is advised that no member of this
accounting firm has any direct or indirect material interest in Potomac, or any
of its subsidiaries.
A representative of Yount, Hyde
& Barbour, P.C., will be present at the annual meeting to respond to
appropriate questions and to make a statement if he or she so desires. The
enclosed proxy will be voted "FOR" the ratification of the selection of Yount,
Hyde & Barbour, P.C., unless otherwise directed. The affirmative vote of a
majority of the shares of Potomac's common stock represented at the annual
meeting of shareholders is required to ratify the appointment of Yount, Hyde
& Barbour, P.C. Because a majority of the votes cast will be sufficient for
the ratification of the appointment of Yount, Hyde & Barbour, P. C., neither
broker non-votes nor abstentions will affect the outcome of the proposal. Any
shares held in street name that are not voted (broker non-votes) will not be
included in determining the number of votes cast.
The Audit Committee and the
Board of Directors unanimously recommend that shareholders vote For such
ratification.
FORM 10-K ANNUAL REPORT TO THE
SECURITIES AND EXCHANGE COMMISSION
Upon written request by any
shareholder to Dean Cognetti, Sr. Vice President and Chief Financial Officer,
Potomac Bancshares, Inc., 111 East Washington Street, PO Box 906, Charles Town,
West Virginia 25414-0906, a copy of Potomac's 2011 Annual Report on Form 10-K
will be provided without charge.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities
Exchange Act of 1934 requires Potomac's directors and executive officers, and
persons who own more than ten percent of a registered class of Potomac's equity
securities, to file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of common stock and other
equity securities of Potomac. Officers, directors and shareholders owning more
than ten percent are required by SEC regulation to furnish Potomac with copies
of all Section 16(a) forms which they file.
To Potomac's knowledge, based solely
upon review of the copies of such reports furnished to Potomac and written
representations that no other reports were required, during the two fiscal years
ended December 31, 2011, all Section 16(a) filing requirements applicable to its
officers, directors and persons owning more than ten percent were complied with
except as follows: the late filings by Directors J. Scott Boyd, John P. Burns,
Jr. and Margaret Cogswell for one transaction, each, in 2011. Form 4s for these
transaction were filed in December 2011.
OTHER MATTERS
If any of the nominees for election
as directors should be unable to serve as a director by reason of death or other
unexpected occurrence, a proxy will be voted for a substitute nominee or
nominees designated by the
Board
of Potomac unless the
Board
of
Directors
adopts
a resolution pursuant to the bylaws reducing the number of directors.
The
Board
of
Directors
is unaware of
any other matters to be considered at the meeting but, if any other matters properly come before the meeting, persons named in the
proxy will vote such proxy in accordance with their judgment on such matters.
17
SHAREHOLDER COMMUNICATIONS WITH THE
BOARD
Any
shareholder desiring to contact the Board of Directors or any individual
director serving on the Board may do so by written communication mailed to:
Board of Directors, Attention: (name of director(s), as applicable), c/o
Corporate Secretary Dean Cognetti, Potomac Bancshares, Inc., PO Box 906, Charles
Town WV 25414. Any proper communication so received will be processed by the
Corporate Secretary as agent for the Board. Unless, in the judgment of the
Corporate Secretary, the matter is not intended or appropriate for the Board
(and subject to any applicable regulatory requirements), the Corporate Secretary
will prepare a summary of the communication for prompt delivery to each member
of the Board or, as appropriate, to the member(s) of the Board named in the
communication. Any director may request the Corporate Secretary to produce for
his or her review the original of the shareholder communication.
SHAREHOLDER PROPOSALS FOR 2013
Any shareholder who wishes to have a
proposal included in the companys proxy statement for the next Annual Meeting
of Shareholders pursuant to Securities Exchange Act Regulation 14a - 8 must
submit the proposal to Robert F. Baronner, Jr., President and Chief Executive
Officer of Potomac, at its executive offices, no later than December 3, 2012, to
have it considered for inclusion in the proxy statement of the annual meeting in
2013. SEC rules establish a different deadline for submission of shareholder
proposals that are not intended to be included in our proxy statement with
respect to discretionary voting. The deadline for these proposals is March 15,
2013 for the 2013 annual meeting. If a stockholder gives notice of such a
proposal after this deadline, our proxies will be allowed to use their
discretionary voting authority to vote against the stockholder proposal when and
if it is raised at the annual meeting.
DIRECTIONS TO THE 2010 REGULAR ANNUAL
MEETING OF SHAREHOLDERS
From the Charles Town
Branch:
Start on Washington Street
proceeding east. Washington Street becomes U S Route 340 north. Proceed on U S
Route 340 north approximately 4 miles to the entrance of the Quality Hotel
Conference Center. Should you reach the traffic light at the entrance to the
Town of Bolivar and/or the Harpers Ferry National Park, you have gone too far.
From Martinsburg, WV:
Take Route 9 east to the U S Route 340
exit toward Charles Town/Harpers Ferry. Proceed to the traffic light. Make a
left turn onto U S Route 340 north. Proceed on U S Route 340 north approximately
4 miles to the entrance of the Quality Hotel Conference Center. Should you reach
the traffic light at the entrance to the Town of Bolivar and/or the Harpers
Ferry National Park, you have gone too far.
From Winchester, VA:
Take Route 7 east approximately 8 miles
to U S Route 340 toward Berryville/Charles Town. Upon exiting Route 7 make a
left turn onto U S Route 340 north at the traffic light at the end of the exit.
Proceed approximately 15 miles to Charles Town, WV and merge onto U S Route 340
north. Proceed on U S Route 340 north approximately 4 miles to the entrance of
the Quality Hotel Conference Center. Should you reach the traffic light at the
entrance to the Town of Bolivar and/or the Harpers Ferry National Park, you have
gone too far.
From Frederick, MD:
Take U S Route 340 south approximately
20 miles to the entrance of the Quality Hotel Conference Center. Should you
reach the traffic light at the intersection of Route 230, you have gone too far.
Robert F. Baronner, Jr.
|
President and Chief Executive
Officer
|
Charles Town, West Virginia
April
3
,
2012
18
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