F&M Chief Executive Officer Faye Cannon denied Hershey's charges and said that the proposed changes are simply a prudent attempt to update the company's charter.
Cannon said the amendment wouldn't prevent takeovers. "Clearly, depending on the offer that was made, the board would have a fiduciary responsibility to act on that offer. We recognize our paramount responsibility to shareholders."
The Hersheys disagree.
"In my opinion what the management of the F&M Bank in Frederick is making an effort to do is the most flagrant abuse of stockholders' rights that I've seen in my 47 years in the industry," Jack Hershey said.
"In effect what this does is it locks in management regardless of their performance," he said.
F&M owns Farmers and Mechanics National Bank in Frederick and Home Federal Savings Bank in Hagerstown. It is not connected to the Farmers and Merchants Bank and Trust in Hagerstown.
A vote on the changes is scheduled for May 20. The Hersheys said they are considering seeking a temporary injunction delaying the vote, which would give them time to lobby stockholders against it. The Hersheys have been denied a list of stockholders because they don't hold 5 percent of the outstanding shares, Cannon said.
The Hershey family owns about 18,000 shares of F&M stock and have been shareholders since 1981, and their clients own about 600,000 shares, they said.
"We aren't Johnny-come-latelys," Jack Hershey said.
About 5.7 million shares are outstanding.
The Hersheys said F&M's financial performance hasn't kept up with other banks.
"They haven't performed up to their peers at the same time that Frederick County is bursting at the seams," Jack Hershey said.
The investors are the owners of the company, he said. "The owners should have the right to make a decision if there is an offer to buy that business," he said.
Cannon said no offers have been made to buy the company.
Jack Hershey, an expert in spotting bank takeovers, said that he knows of several major bank companies that would be interested in buying F&M. Hershey said a fair takeover price for the company would be at least $40 a share, or about $13.75 more than its current value. A $40-a-share takeover would put an additional $78 million in shareholders' pockets.
The Hersheys estimated that 20 percent of the bank's stock is owned by people in Washington County.
Jack Hershey said the banks that tend to be ripe for takeovers are in an attractive market but have had below-par performance - a scenario that fits F&M, he said.
Hershey said Pennsylvania banks and Virginia banks and a couple of large Maryland banks want to move into Frederick County, and would likely do so by taking over other banks.