UNITED
STATES
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SECURITIES AND EXCHANGE COMMISSION
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WASHINGTON, DC 20549
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SCHEDULE 14A INFORMATION
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Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the
Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for
Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to
Rule 14a-11(c) or
Rule 14a-12
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Eagle
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)
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Payment of Filing Fee (Check the
appropriate box):
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No fee required.
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Fee computed on table below per
Exchange Act Rules
14a-6(i)(4)
and 0-11.
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Title of each class of securities to
which transaction applies:
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Aggregate number of securities to
which transaction applies:
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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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Proposed maximum aggregate value of
transaction:
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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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Amount Previously Paid:
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Form, Schedule or Registration
Statement No.:
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Date Filed:
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EAGLE BANCORP, INC.
7815 Woodmont Avenue
Bethesda, Maryland 20814
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
To be held May 21, 2009
TO THE SHAREHOLDERS OF EAGLE BANCORP, INC.:
The Annual Meeting of Shareholders of Eagle Bancorp, Inc. (the Company),
will be held at
The Bethesda
Marriott Hotel
5151 Pooks Hill Road
Bethesda, Maryland
on
Thursday, May 21, 2009 at 10:00 A.M.
for
the following purposes:
1.
To elect ten (10) directors
to serve until the next Annual Meeting of Shareholders and until their
successors are duly elected and qualified;
2.
To consider and approve an
amendment to the Companys 2006 Stock Plan to increase the number of shares of
common stock subject to the plan by 500,000;
3.
To consider and approve an
amendment to the Companys 2006 Stock Plan to broaden the authority to grant
restricted stock to enable the Company to make restricted stock grants in
compliance with the American Recovery and Reinvestment Act of 2009;
4.
To vote on a non-binding
advisory resolution approving the compensation of our executive officers; and
5.
To transact any other
business that may properly come before the meeting or any adjournment or
postponement of the meeting.
Shareholders of record as of the close of business on,
March 27, 2009 are entitled to notice of and to vote at the meeting or any
adjournment or postponement of the meeting.
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By Order of the
Board of Directors
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Jane E. Cornett,
Corporate Secretary
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April 10,
2009
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Please sign, date and return your proxy promptly,
whether or not you plan to attend the meeting in person. No postage is required if mailed in the
United States in the enclosed envelope.
If you attend the meeting, you may, if you desire, revoke your proxy and
vote in person.
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.
EAGLE BANCORP, INC.
7815 Woodmont Avenue
Bethesda, Maryland
20814
ANNUAL MEETING OF SHAREHOLDERS
Proxy Statement
INTRODUCTION
This Proxy Statement is being sent to shareholders of Eagle Bancorp, Inc.,
a Maryland 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 10:00 A.M. on Thursday, May 21, 2009,
and at any adjournment or postponement of the meeting. The purposes of the meeting are:
1.
electing ten (10) directors to serve until the
next Annual Meeting of Shareholders and until their successors are duly elected
and qualified;
2.
voting on an amendment to the Companys 2006 Stock
Plan to increase the number of shares of common stock subject to the plan by
500,000;
3.
voting on an amendment to the Companys 2006 Stock
Plan to broaden the authority to enable the Company to make restricted stock
grants in compliance with the American Recovery and Reinvestment Act of 2009;
4.
voting on a non-binding
advisory resolution approving the compensation of our executive officers; and
5.
transacting any other
business that may properly come before the meeting or any adjournment or
postponement of the meeting.
The meeting will be held at:
The Bethesda
Marriott Hotel
5151 Pooks Hill Road
Bethesda, Maryland
This proxy statement and proxy card are being sent to shareholders of
the Company on or about April 10, 2009. A copy of the Companys Annual
Report on Form 10-K for the year ended December 31, 2008, which
includes our audited financial statements, also accompanies this proxy
statement.
The cost of this proxy solicitation is being paid by the Company. In addition to the use of the mail, proxies
may be solicited personally or by telephone by officers, regular employees or
directors of the Company or its subsidiary, EagleBank (the Bank), who will
not receive any special compensation for their services. The Company may also reimburse brokers,
custodians, nominees and other fiduciaries for their reasonable out-of-pocket
and clerical costs for forwarding proxy materials to their principals. The Company has not engaged a paid proxy
solicitation firm to assist it in connection with the meeting, although it
reserves the right to do so if deemed appropriate.
VOTING RIGHTS AND PROXIES
Voting Rights
Only shareholders of record at the close of business on March 27,
2009, will be entitled to notice of and to vote at the meeting or any
adjournment or postponement of the meeting.
On that date, the Company had 12,745,118 shares of common stock, par
value $0.01 per share (the common stock) outstanding, held by approximately 2,900
total
shareholders,
including approximately 1,083 shareholders of record. The common stock is the
only class of the Companys stock entitled to vote in the election of directors
generally, of which shares are outstanding. 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. 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
FOR
the
election of the nominees for election as directors,
FOR
each of the amendments to the 2006 Stock Plan and
FOR
the non-binding advisory resolution approving our executive compensation.
Management does not know of any matters that will be brought before the
meeting, other than as described in this proxy statement. If other matters are properly brought before
the meeting, the persons named in the proxy intend to vote the shares to which
the proxies relate in accordance with their best judgment.
The judges of election appointed by the Board of Directors for the
meeting will determine the presence of a quorum and will tabulate the votes
cast at the meeting. Abstentions will be treated as present for purposes of
determining a quorum, but as unvoted for purposes of determining the approval
of any matter submitted to the vote of shareholders. If a broker indicates that
it does not have discretionary authority to vote any shares of common stock on
a particular matter, such shares will be treated as present for general quorum
purposes, but will not be considered as present or voted with respect to that
matter.
Please sign, date, mark and return promptly the enclosed proxy in the
postage paid envelope provided for this purpose in order to assure that your
shares are voted. You may revoke your proxy at any time before it is voted at
the meeting:
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by granting a later proxy
with respect to the same shares;
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by sending written notice to
Jane E. Cornett, Corporate Secretary of the Company, at the address noted
above, at any time prior to the proxy being voted; or
·
by voting in person at the
meeting.
Attendance at the meeting will not, in itself, revoke a proxy. If your shares are held in the name of your
bank or broker, you will need additional documentation to vote in person at the
meeting. Please see the voting form
provided by your bank or broker for additional information regarding the voting
of your shares.
Many
shareholders whose shares are held in an account at a brokerage firm or bank
will have the option to submit their proxies or voting instructions
electronically through the Internet or by telephone. Shareholders should check
the voting form or instructions provided by their bank or broker to see which
options are available. Shareholders submitting proxies or voting instructions
electronically should understand that there may be costs associated with
electronic access, such as usage charges from Internet access providers and
telephone companies that would be borne by the shareholder. To revoke a proxy
previously submitted electronically, a shareholder may simply submit a new
proxy at a later date before the submission deadline indicated by your bank or
broker, in which case, the later submitted proxy will be recorded and the
earlier proxy will be revoked.
Important Notice Regarding the Availability of
Proxy materials for the Annual Meeting of Shareholders to be held on May 21,
2009.
The proxy
statement for the Annual Meeting is attached.
A copy of the proxy statement and our Annual Report on Form 10-K
for the year ended December 31, 2008 is available online at
http://materials.proxyvote.com/268948.
2
VOTING SECURITIES AND PRINCIPAL
SHAREHOLDERS
Securities Ownership of Directors, Nominees,
Officers and Certain Beneficial Owners
The following table sets forth certain information
concerning the number and percentage of whole shares of the Companys common
stock beneficially owned by its directors, executive officers whose
compensation is disclosed in this proxy statement, and by its directors and all
executive officers as a group, as of March 27, 2009. Except as otherwise
indicated, all shares are owned directly, the named person possesses sole
voting and sole investment power with respect to all such shares, and none of
such shares are pledged as security.
Except as set forth below, the Company knows of no other person or
persons who beneficially own in excess of five percent of the Companys 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.
Name
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Position
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Number of Shares
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Percentage(1)
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Leonard L. Abel
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Director of Company and Bank
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329,278
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(2)
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2.58
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%
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Leslie M.
Alperstein, Ph.D.
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Director of Company
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71,783
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(3)
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0.56
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%
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Dudley C.
Dworken
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Director of Company and Bank
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239,521
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(4)
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1.88
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%
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Harvey M.
Goodman
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Director of Company and Bank
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111,105
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(5)
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0.87
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%
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Neal R. Gross
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Director of Company and Bank
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733,685
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(6)
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5.77
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%
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Philip N.
Margolius
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Director of Company and Bank
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232,278
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(7)
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1.82
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%
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Ronald D. Paul
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Chairman, President and Chief Executive Officer of
Company; Chairman and Chief Executive Officer of Bank
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869,334
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(8)
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6.77
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%
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Robert P. Pincus
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Director of Company and Bank
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75,075
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(9)
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0.59
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%
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Norman R. Pozez
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Director of Company and Bank
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119,862
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(10)
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0.94
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%
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Donald R. Rogers
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Director of Company and Bank
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54,846
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(11)
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0.43
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%
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Leland M.
Weinstein
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Director of Company and Bank
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119,601
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(12)
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0.94
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%
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Martha
Foulon-Tonat
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Executive Vice President, Chief Lending Officer of
Bank
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94,696
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(13)
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0.74
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%
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James H.
Langmead
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Executive Vice President, Chief Financial Officer of
Company and Bank
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14,380
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(14)
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0.11
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%
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Thomas D. Murphy
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Executive Vice President, President Montgomery
County Division of Bank
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70,860
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(15)
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0.55
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%
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Susan G. Riel
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Executive Vice President, Chief Operating Officer of
Bank
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68,431
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(16)
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0.53
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%
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All directors
and executive officers of Company as a group (18 persons)
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3,300,766
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(17)
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25.03
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%
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(1)
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Represents
percentage of 12,745,118 shares issued and outstanding as of March 27,
2009, except with respect to individuals holding options exercisable within
60 days of that date, in which event, represents percentage of shares issued
and outstanding plus the number of shares for which that person holds options
exercisable within 60 days of March 27, 2009, and except with respect to
all directors and executive officers of the Company as a group, in which case
represents percentage of shares issued and outstanding plus the number of
shares for which those persons hold such options. Certain shares beneficially
owned by the Companys directors and executive officers may be held in
accounts with third party firms, where such shares may from time to time be
subject to a security interest for margin credit provided in accordance with
such firms policies.
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(2)
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Includes options
and warrants to purchase 11,154 shares of common stock, 222,242 shares of
common stock held jointly and 14,638 shares held by his spouse.
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(3)
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Includes 59,116
shares of common stock held jointly and options to purchase 2,209 shares of
common stock.
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(4)
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Includes options
to purchase 2,382 shares of common stock, 67,692 shares held in a trust of
which Mr. Dworken is beneficiary, 30,996 shares held jointly, 26,369
shares held by his spouse and 101,998 shares held in trusts for the benefit
of members of his family.
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(Footnotes continued on following page)
3
(Footnotes continued from prior page)
(5)
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Includes options
and warrants to purchase 7,040 shares of common stock, 73,275 shares held
jointly with Mr. Goodmans spouse and 14,338 shares held by or in trust
for members of his family.
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(6)
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Includes options
to purchase 2,427 shares of common stock, 54,928 shares held by his souse and
322,148 held by a family partnership. Mr. Gross business address is c/o
Neal R. Gross & Co., Inc., 1323 Rhode Island Avenue, NW,
Washington, D.C. 20005.
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(7)
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Includes options
to purchase 5,303 shares of common stock, 180,253 shares in trust accounts
for which Mr. Margolius has voting rights, 7,456 shares held by his
spouse and 25,788 held in a profit sharing account for which
Mr. Margolius is the beneficiary.
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(8)
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Includes options
to purchase 91,986 shares of common stock and 290,142 shares held in trust
for his children. Includes 82,257 shares held by a third party trustee in a
trust for the benefit of family members of Mr. Paul, as to which he
disclaims beneficial ownership. Mr. Pauls business address is c/o Ronald
D. Paul Companies, 4416 East West Highway, Bethesda, Maryland 20814.
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(9)
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Includes options
to purchase 39,045 shares of common stock; 5,568 shares held by his spouse;
and 2,141 shares held by his child.
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(10)
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Includes 18,187
shares held jointly and 8,566 shares held by relatives, over which
Mr. Pozez has voting authority.
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(11)
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Includes options
to purchase 3,125 shares of common stock, 20,783s hares held by his spouse
and 22,308 shares held for the benefit of his children.
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(12)
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Includes 56,650
shares held jointly and options to purchase 21,037 shares of common stock.
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(13)
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Includes options
to purchase 47,262 shares of common stock, and 3,082 shares held in trust for
minor children. Also includes 28,042 shares held by Ms. Foulon-Tonats
spouse, as to which she disclaims beneficial ownership.
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(14)
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Includes options
to purchase 12,961 shares of common stock and 1,419 shares held jointly with
Mr. Langmeads spouse.
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(15)
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Includes options
to purchase 58,514 shares of common stock and 836 shares held by his spouse
for their minor child.
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(16)
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Includes options
to purchase 47,630 shares of common stock and 20,801 shares held jointly with
her spouse.
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(17)
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Includes options
to purchase 441,941 shares of common stock.
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PROPOSAL 1 - ELECTION OF
DIRECTORS
The Board of Directors has nominated ten (10) persons for election
as director at the meeting, for a one-year period until the 2010 Annual Meeting
of Shareholders and until their successors have been elected and qualified.
Each of the nominees for election as a director currently serves as a member of
the Board of Directors. Unless authority
is withheld, all proxies in response to this solicitation will be voted for the
election of the nominees listed below.
Each nominee has indicated a willingness to serve if elected. However, if any nominee becomes unable to
serve, the proxies received in response to this solicitation will be voted for
a replacement nominee selected in accordance with the best judgment of the
persons named as proxies. The Board of Directors has determined that each
director and nominee for election as director, other than Mr. Paul, is an independent
director as that term is defined in Rule 4200(a)(15) of The NASDAQ Stock
Market (NASDAQ). In making this determination, the Board of
Directors was aware of and considered the loan and deposit relationships with
directors and their related interests which the Company enters into in the
ordinary course of its business, and the arrangements which are disclosed under
Certain Relationships and Related Transactions in this proxy statement.
Vote Required and Board Recommendation.
Nominees receiving a plurality of the votes
cast at the meeting in the election of directors will be elected as director,
in the order of the number of votes received.
The Board of
Directors recommends that shareholders vote FOR each of the nominees to the
Companys Board of Directors.
Directors and Nominees for Election as Directors
Set forth below is certain information concerning the directors of the
Company and the nominees for election as director of the Company. Except as
otherwise indicated, the occupation listed has been such persons principal
occupation for at least the last five years. Each of the nominees for election
as a director of the Company, other than Mr. Alperstein, also currently
serves as a director of the Bank. Except
as noted below, each nominee has served as a director of the Company since its
organization.
Leonard L. Abel.
Mr. Abel, 82, served as the Chairman of
the Board of Directors of the Company from the
organization of the Company until the 2008 Annual Meeting of
Shareholders. Until retiring in 1993, Mr. Abel
was partner-in-charge of the certified public accounting firm of Kershenbaum,
Abel, Kernus and Wychulis, Rockville, Maryland with which he served for
forty-five years. From October 1996,
until resigning in September 1997, Mr. Abel was a member of the Board
of Directors of F&M National Corporation (NYSE) and its wholly owned
subsidiary, F&M Bank - Allegiance, Bethesda, Maryland, and prior to that
time was Chairman of the Board of Allegiance Bank, N.A. (collectively with
F&M Bank - Allegiance, Allegiance) and its holding company Allegiance
Banc Corporation, from their organization until their acquisition by F&M
National Corporation, which was subsequently acquired by BB&T Corporation (F&M). Mr. Abel was also Chairman of the Board
of Directors of Central National Bank of Maryland
4
from 1968 until
its acquisition in 1986 by Citizens Bank of Maryland (now SunTrust Banks, Inc.). Mr. Abel is not standing for reelection
at the meeting.
Leslie M. Alperstein, Ph.D.
Mr. Alperstein,
66, has been President of Washington Analysis Corp. and its predecessor firm,
Washington Analysis LLC, a leading governmental policy investment research
group in Washington, D.C., since its inception in 1973. He has served as Executive Managing Director
and Director of Research of HSBC Securities, Inc., Director of Economic
and Investment Research for NatWest Securities, Prudential Securities, Shields
Model Roland, Inc. and Legg Mason & Co. His professional
memberships include the National Association of Business Economists, the
National Economists Club, and the Washington Society of Investment Analysts. Mr. Alperstein
was appointed to the Board of Directors in September 2003.
Dudley C. Dworken.
Mr. Dworken, 59, has served as a
director of the Company since August 1999.
Mr. Dworken is a private investor and real estate developer. Mr. Dworken
was the owner of Curtis Chevrolet, an automobile dealership in Washington,
D.C. Mr. Dworken was a Director of
Allegiance from 1987 until October 1997, and a director of Allegiance Banc
Corporation from 1988 until its acquisition by F&M. Mr. Dworken is an active member of
numerous community, business, charitable and educational institutions in the
Washington, D.C./Montgomery County area.
Harvey M. Goodman.
Mr. Goodman, 53, has been with The
Goodman, Gable, Gould Company, the Maryland based public insurance adjusting
firm where he serves as President, since 1977.
He is a director and past president of the National Association of
Public Insurance Adjusters, and is a director and principal of Adjusters
International, a national public adjusting firm. Mr. Goodman has served as a director of the
Bank since its organization, and was appointed to the Board of Directors of the
Company in January 2007.
Neal R. Gross
. Mr. Gross, 66, is founder, Chairman and
Chief Executive Officer of Neal R. Gross & Co. which provides court
reporting services to attorneys, the federal government, private organizations
and individuals since 1977. Mr. Gross
previously served as a director of Century Bancshares, Inc., from 1995
until its acquisition by United Bankshares, Inc. in 2001. Mr. Gross has been a director of the
Company since October 2008, and a director of the Bank since 2001.
Philip N. Margolius.
Mr. Margolius, 69, a
graduate of Dartmouth College and Yale Law School, is a partner in The
Margolius Firm, a law firm in Washington, D.C., and until 2003 was a principal
in the law firm of Margolius, Mallios and Rider, LLP. He specializes in estate planning, probate,
real estate, non-profit organizations. Mr. Margolius has been an adjunct
professor at the Washington College of Law at American University and lectures
to professional groups in the community on estate planning.
Washingtonian Magazine
named
him one of the areas leading real estate attorneys
.
Mr. Margolius has served on the Board of the Bank since June 2000
and was appointed to the Board of Directors of the Company in September 2003.
Ronald D. Paul.
Mr. Paul, 53, is President, Chief
Executive Officer and Chairman of the Board of Directors of the Company. He has served as Chairman since May 2008,
and prior to that time was Vice Chairman and Chief Executive Officer since the
organization of the Company. He also has
served as Chairman of the Board of Directors of the Bank since the organization
of the Bank. Since June 2006, he
has served as Chief Executive Officer of the Bank, and he served as Interim
President of the Bank from November 3, 2003 until January 26,
2004. Mr. Paul is President of
Ronald D. Paul Companies and RDP Management, which are engaged in the business
of real estate development and management activities. He is active in private
investments, including as Chairman of Bethesda Investments, Inc., a
private venture capital fund. Mr. Paul
was a director of Allegiance from 1990 until September 1997, and a
director of Allegiance Banc Corporation from 1990 until its acquisition by
F&M, including serving as Vice Chairman of the Board of Directors from
1995. Mr. Paul is also active in
various charitable organizations, including serving as Vice Chairman of the
Board of Directors of the National Kidney Foundation from 1996 to 1997, and its
Chairman from 2002 to 2003.
Robert P. Pincus.
Mr. Pincus, 62, serves as Vice Chairman of the
Board of Directors of the Company and the Bank. Prior to joining the Company in
August 2008 upon the acquisition of Fidelity & Trust Financial
Corporation (Fidelity) and its wholly owned subsidiary, Fidelity &
Trust Bank (F&T Bank), Mr. Pincus served as Chairman of F&T Bank
from 2005. He presently serves as
Chairman of the Board of Blackstreet Capital Partners, L.P. and Chairman of
Milestone Merchant Partners, LLC. He was
Chairman of the Board of BB&T, DC Metro Region and was
5
Regional President
from 1998 to 2002. From 1991 to 1998, Mr. Pincus
was President and Chief Executive Officer of Franklin National Bank of
Washington, D.C. From 1986 to 1991, Mr. Pincus
was the regional president of the DC metropolitan region of Sovran Bank. From 1971 to 1986, Mr. Pincus was with
DC National Bancorp, Inc., where he eventually rose to be President and
Chief Executive Officer, prior to its merger with Sovran Bank. Mr. Pincus is a Trustee of the
University of Maryland Foundation, Inc. and is a member of the board of
directors of Comstock Homebuilding Companies, Inc.
Norman R. Pozez
. Mr. Pozez,
54, is the Chairman of Uniwest Group, LLC; Uniwest Construction, Inc.; and
Uniwest Commercial Realty, Inc. Mr. Pozez
has been in the real estate development field for over twenty years.
Previously, Mr. Pozez was Chief Operating Officer of The Hair Cuttery of
Falls Church, Virginia and is currently on the firms Board of Directors. Mr. Pozez has also served as a Regional
Director of Real Estate and Construction for Payless ShoeSource. During his tenure at Payless and for some
years thereafter, Mr. Pozez served on the Board of Directors of Bookstop, Inc.
which sold to Barnes and Noble in 1989. Mr. Pozez
is a licensed Real Estate Broker in Washington, D.C., Maryland and
Virginia. Since 1979, Mr. Pozez has
been an active member of the International Council of Shopping Centers and is a
Board member of five not-for-profit organizations serving community needs in
and around the Washington, D.C. metropolitan area. Mr. Pozez served as Chairman of the
Board of Fidelity from April 2004 until February 2005, and as a
director of Fidelity from September 2007 until August 2008, when
Fidelity was acquired by the Company and he became a director of the Company.
Donald R. Rogers.
Mr. Rogers, 64, has been engaged in the
private practice of law since 1972 with the Rockville, Maryland based firm Shulman,
Rogers, Gandal, Pordy & Ecker, P.A., of which he is a partner. Mr. Rogers was a member of the Board of
Directors of Allegiance from 1987 until October 1997. Mr. Rogers has
served as a director of the Bank since its organization, and was appointed to
the Board of Directors of the Company in January 2007.
Leland M. Weinstein.
Mr. Weinstein, 47, has served as
President of Syscom Services, Inc., a technology consulting and
integration firm, since 1997. Previously, he spent thirteen years with Automated
Digital Systems (ADS), an integrator of duplication and fax technologies, where
he rose to president and owner of the company (he sold ADS to Alco Standard
Corporation, which became Ikon Office Solutions). Mr. Weinstein has been
appointed to advisory councils for Xerox, Intel/Dialogic, Sharp Electronics,
Captaris/Rightfax, Murata Business Systems, Brooktrout Technologies, Panasonic
Electronics and the technology council of the American Society of Association
Executives (ASAE). He sits on the Board of Governors of the University of
Maryland Alumni Association and is involved in numerous charities. Mr. Weinstein
has served on the Board of the Bank since 1998 and as a director of the Company
since May 2005.
Election of Directors of the Bank
If
elected, the nominees for election as directors intend to vote for Mr. Dworken,
Mr. Goodman, Mr. Gross, Mr. Margolius, Mr. Paul, Mr. Pincus,
Mr. Pozez, Mr. Rogers, Mr. Weinstein and the following persons
to serve as directors of the Bank, each of whom currently serves as a director
of the Bank.
Arthur H. Blitz.
Mr. Blitz, 68, an attorney engaged in
private practice since 1971, is a partner in the Bethesda, Maryland law firm of
Paley, Rothman, Goldstein, Eig, Rosenberg & Cooper, Chartered. Mr. Blitz was a director of Allegiance
at various times from 1987 to October 1997.
Steven L. Fanaroff.
Mr. Fanaroff, 49, is Vice President -
Chief Financial Officer of Magruder Holdings, Inc., a regional supermarket
chain, with which he has served since 1981.
Mr. Fanaroff served on the Board of Directors of Allegiance from
1990 until October 1997.
Benson Klein.
Mr. Klein, 64, has been an attorney in
Montgomery County since 1970, and a principal with Ward & Klein,
Chartered, since 1978. Mr. Klein is
also engaged in real estate investment activities in Montgomery County. He served as a director of F&M Bank -
Allegiance from 1996 to 1997 and previously served as a director of Lincoln
National Bank. Mr. Klein is
currently, and has been, a member of a variety of community, business and
charitable institutions in the Washington, D.C./Montgomery County area.
6
Susan Lacz.
Ms. Lacz,
48, is a principal of Ridgewell Caterers.
Prior to joining the Board of Directors of the Bank upon the acquisition
of Fidelity, Ms. Lacz served as a director of F&T Bank.
Bruce H. Lee.
Mr. Lee, 44,
is President of Development of Lee Development Group, a closely held family
real estate business founded in 1920 and based in downtown Silver Spring. He is
principal broker of record for Montgomery Land Company, LLC, which specializes
in commercial sales, leasing, and property management and the general partner
of Montgomery 1936 Land Company LLC and General Manager of Acorn Self Storage. Mr. Lee was the charter president of the
Greater Silver Spring Chamber in 1993. Mr. Lee
was an elected Council member and Chairman of the Township of Chevy Chase View.
Thomas Roberson.
Mr. Roberson,
52, is a partner of Montouri & Roberson.
Mr. Roberson specializes in investment real estate. Mr. Roberson
was a former Director of Laszlo N. Tauber, M.D. & Associates, LLC and
is a current director of the Laszlo N. Tauber Trust. He served on the Board of
BB&T, DC Metro Region until January 2006, and was a director of
F&T Bank until August 2008. Mr. Roberson
is a licensed General Real Property Appraiser, a Commercial Broker, and a tax
advocate for assessment appeals.
Benjamin N. Soto.
Mr. Soto, 40, is a principal of Premium
Title and Escrow, LLC, a Washington D.C. based law firm and title company he
founded in 2000. Prior to forming
Premium, Mr. Soto was a partner in the firm of Garza, Regan, Rosenblatt,
PC, where he practiced real estate and bankruptcy law. He frequently lectures to members of the D.C.
Bar, is a former chair of the Bankruptcy Section of the National Bar
Association, and in 2007, was appointed by Mayor Adrian Fenty to serve on the
D.C. Sports and Entertainment Commission.
He is also a member of the D.C. Land Title Association, Maryland Land
Title Association, Better Business Bureau and the D.C. Chamber of
Commerce. Mr. Soto was appointed to
the Banks Board of Directors in November 2006.
James A. Soltesz.
Mr. Soltesz, 54, has served as Chief Executive
Officer of Loiederman Soltesz Associates, Inc., a land development
engineering and consulting firm since 1997.
Mr. Soltesz was appointed to the Banks Board of Directors in September 2007. Mr. Soltesz serves on the Board of
Trustees of Georgetown Preparatory School, Mater Dei School, as a Life Director
of the Maryland-National Capital Area Building Industry Association, and
Catholic Charities Foundation. His firm
includes 280 people located in six offices throughout the metropolitan area of
Washington, D.C.
Worthington H. Talcott, Jr.
Mr. Talcott, 56, an attorney engaged in
private practice since 1979, has been a partner in Shulman, Rogers, Gandal,
Pordy & Ecker, P.A. since 1998.
Mr. Talcott has been an active member of the Juvenile Diabetes
Foundation, serving as a member of the Board of Directors for the Capital
Chapter from 1992 to 1996, and as President of the Capital Chapter from 1994 to
1995.
Eric H. West.
Mr. West, 46, is a founding principal of West,
Lane & Schlager/Oncor International, specializing in tenant
representation and strategic real estate consulting in the Washington, D. C.
metropolitan area. During his career, Mr. West has
developed a specialty in not-for-profit organizations and corporations, leading
to ongoing relationships with such diverse groups as The National Council on
the Aging, The American Forest and Paper Association, The American Iron &
Steel Institute, among many others.
Committees, Meetings and Procedures of the Board
of Directors
Meetings.
The
Board of Directors of the Company met sixteen (16) times during 2008. All members of the Board of Directors of the
Company attended at least 75% of the meetings held by the Board of Directors
and by all committees on which such member served during the 2008 fiscal year
or any portion thereof.
Audit Committee.
The Board of
Directors has a standing Audit Committee. The Audit Committee is responsible
for the selection, review and oversight of the Companys independent
accountants, the approval of all audit, review and attest services provided by
the independent accountants,
the integrity
of the Companys reporting practices
and evaluation of the Companys
internal controls and accounting procedures.
It also periodically reviews audit reports with the Companys
independent auditors. The Board of Directors has adopted a written charter for
the Audit Committee.
A copy of the charter
is available on the Companys website at www.eaglebankcorp.com.
The
Audit Committee of the Company is currently comprised of Mr. Dworken, the
Chairman, and Messrs. Abel, Alperstein,
7
Gross, Pincus,
Pozez and Weinstein. Each of the members
of the Audit Committee is independent,
as determined under the definition of independence adopted by NASDAQ for
audit committee members in Rule 4350(d)(2)(A).
During the 2008 fiscal
year, the Audit Committee of the Company met nine (9) times.
The Board
of Directors has determined that Mr. Alperstein is an audit committee
financial expert as defined under regulations of the Securities and Exchange
Commission.
The audit committee is also responsible for the pre-approval of all
non-audit services provided by its independent auditors. Non-audit services are only provided by the
Companys auditors to the extent permitted by law. Pre-approval is required unless a
de minimus
exception is met. To qualify for the
de minimus
exception, the aggregate amount of all such
non-audit services provided to the Company must constitute not more than five
percent of the total amount of revenues paid by the Company to its independent
auditors during the fiscal year in which the non-audit services are provided;
such services were not recognized by the Company at the time of the engagement
to be non-audit services; and the non-audit services are promptly brought to
the attention of the committee and approved prior to the completion of the
audit by the committee or by one or more members of the committee to whom
authority to grant such approval has been delegated by the committee.
Nominating
Committee.
The Board
of Directors has a standing nominating committee, consisting of four members of
the Board of Directors who are independent directors
within the meaning of NASDAQ Rule 4200(a)(15).
The nominating
committee is currently comprised of Mr. Weinstein, the Chairman, and Messrs. Margolius,
Pincus and Pozez. The nominating
committee is responsible for the evaluation of nominees for election as
director, the nomination of director candidates for election by the
shareholders and evaluation of sitting directors.
The Board of Directors has adopted a charter addressing the nominations
process. A copy of the charter is available on the Companys website at
www.eaglebankcorp.com.
The Board has not developed a formal policy for the identification or
evaluation of nominees.
In
general, when the Board determines that expansion of the Board or replacement
of a director is necessary or appropriate, the nominating committee will
review, through candidate interviews with members of the Board and management,
consultation with the candidates associates and through other means, a
candidates honesty, integrity, reputation in and commitment to the community,
judgment, personality and thinking style, willingness to invest in the Company,
residence, willingness to devote the necessary time, potential conflicts of
interest, independence, understanding of financial statements and issues, and
the willingness and ability to engage in meaningful and constructive discussion
regarding Company issues. The committee would review any special expertise, for
example, expertise that qualifies a person as an audit committee financial
expert, and membership or influence in a particular geographic or business
target market, or other relevant business experience. To date the Company has
not paid any fee to any third party to identify or evaluate, or to assist it in
identifying or evaluating, potential director candidates.
The nominating
committee will consider director candidates nominated by shareholders during
such times as the Company is actively considering obtaining new directors. Candidates recommended by shareholders will be
evaluated based on the same criteria described above. Shareholders desiring to
suggest a candidate for consideration should send a letter to the Companys
Secretary and include: (a) a statement that the writer is a shareholder
(providing evidence if the persons shares are held in street name) and is
proposing a candidate for consideration; (b) the name and contact
information for the candidate; (c) a statement of the candidates business
and educational experience; (d) information regarding the candidates
qualifications to be director, including but not limited to an evaluation of
the factors discussed above which the Board would consider in evaluating a
candidate; (e) information regarding any relationship or understanding
between the proposing shareholder and the candidate; (f) information
regarding potential conflicts of interest; and (g) a statement that the
candidate is willing to be considered and willing to serve as director if
nominated and elected. Because of the
limited resources of the Company and the limited opportunity to seek additional
directors, there is no assurance that all shareholder proposed candidates will
be fully considered, that all candidates will be considered equally, or that
the proponent of any candidate or the proposed candidate will be contacted by
the Company or the Board, and no undertaking to do so is implied by the
willingness to consider candidates proposed by shareholders.
Compensation Committee.
The Board of Directors of the Company has a
Compensation Committee (the Compensation Committee), consisting of all of the
members of the Board of Directors who are independent directors
within the meaning of NASDAQ Rule 4200(a)(15).
The Compensation Committee has the sole
8
responsibility for determining executive compensation, including that of
the named executive officers. The Compensation Committee makes determination
with respect to salary levels, bonus compensation and equity compensation
awards for executive officers. In exercising its role, the Compensation
Committee may consider information or recommendations to the Compensation
Committee provided by the
Compensation Committee of the Bank (the Bank
Compensation Committee), which determines compensation policy for nonexecutive
employees. The Bank Compensation
Committee is currently comprised of Mr. Blitz, the Chairman, and Messrs. Abel,
Dworken, Paul, Pincus, Rogers and Weinstein. Mr. Paul does not participate
in, or remain present during, discussions of his compensation.
The Board
of Directors has adopted a charter for the Compensation Committee. A copy of the charter is available on the
Companys website at www.eaglebankcorp.com.
During the 2008 fiscal year, the Compensation
Committee met eight (8) times.
In January 2008, the Compensation Committee authorized the
retention of a compensation consultant every other year to assist the Company
in evaluating executive compensation levels and the form of executive compensation.
The Compensation Committee retained Amalfi Consulting, Inc. in connection
with compensation levels for 2009. Previously, in 2005, the Bank Compensation
Committee engaged Clark Consulting (Clark), an executive compensation and
benefits consulting firm of national scope and reputation, to evaluate whether
its compensation levels were reasonably competitive and to make specific
compensation plan recommendations with respect to changes in executive
compensation levels and development of an equity compensation strategy.
Compensation
Committee Interlocks and Insider Participation.
No member of the Compensation Committee has
served as an officer or employee of the Company or Bank at any time. None of
our executive officers serve as a member of the compensation committee of any
other company that has an executive officer serving as a member of our Board of
Directors. None of our executive
officers serve as a member of the board of directors of any other company that
has an executive officer serving as a member of the Compensation Committee.
Except for loans and deposit transactions in the ordinary course of business
made on substantially the same terms, including interest rates and collateral,
as those for comparable transactions with unaffiliated parties, and not
presenting more than the normal risk of collectability or other unfavorable
features, no member of the Compensation Committee or any of their related
interests has any material interest in any transaction involving more than
$120,000 to which the Company is a party.
Shareholder Communications.
Company shareholders who wish to communicate with the Board of Directors
or an individual director can write to Eagle Bancorp, Inc., 7815 Woodmont
Avenue, Bethesda, Maryland 20814, Attention: Jane E. Cornett, Corporate
Secretary. Your letter should indicate that you are a shareholder, and whether
you own your shares in street name. Depending on the subject matter, management
will: (a) forward the communication to the director or directors to whom
it is addressed; (b) handle the inquiry directly or delegate it to
appropriate employees, such as where the communication is a request for
information, a stock related matter, or a matter related to ordinary course
matters in the conduct of the Companys banking business; or (c) not
forward the communication where it is primarily commercial or political in
nature, or where it relates to an improper, frivolous or irrelevant topic.
Communications which are not forwarded will be retained until the next Board
meeting, where they will be available to all directors.
Director Attendance at the Annual
Meeting.
The Board of
Directors believes it is important for all directors to attend the annual
meeting of shareholders in order to show their support for the Company and to
provide an opportunity for shareholders to communicate any concerns to them.
Accordingly, it is the policy of the Company to encourage all directors to
attend each annual meeting of shareholders unless they are unable to attend by
reason of personal or family illness or pressing matters. All
of
the Companys directors in office at the time attended the 2008 annual meeting
of shareholders.
Audit Committee Report
The
Audit Committee has been appointed to assist the Board of Directors in
fulfilling the Boards oversight responsibilities by reviewing the financial
information that will be provided to the shareholders and others, the systems
of internal controls established by management and the Board and the
independence and performance of the Companys audit process.
9
The
Audit Committee has:
(1) reviewed
and discussed with management the audited consolidated financial statements
included in the Companys Annual Report on Form 10-K;
(2) discussed
with Stegman & Company, the Companys independent registered public
accounting firm, the matters required to be discussed by Statement on Auditing
Standards No. 61, as amended, as adopted by the Public Company Accounting
Oversight Board in Rule 3200T; and
(3) has
received the written disclosures and letter from Stegman & Company as
required by the Public Company Accounting Oversight Board in Rule 3526,
Communications with Audit Committees Concerning Independence and has discussed
with Stegman & Company, its independence and has received confirmation
from Stegman & Company that they are independent of the Company in
compliance with Public Company Accounting Oversight Board Rule 3520.
Based
on these reviews and discussions, the Audit Committee has recommended to the
Board of Directors that the audited consolidated financial statements be
included in the Companys annual report on Form 10-K for the year ended December 31,
2008. The Audit Committee has also
considered whether the amount and nature of non-audit services provided by
Stegman & Company is compatible with the auditors independence.
Members of the Audit Committee
|
|
Dudley C.
Dworken, Chairman
|
|
Robert P. Pincus
|
Leonard L. Abel
|
|
Norman R. Pozez
|
Leslie M.
Alperstein
|
|
Leland M.
Weinstein
|
Neal R. Gross
|
|
|
Director Compensation
The following table sets forth information regarding compensation paid
to, or earned by, non-employee directors of the Company during the fiscal year
ended December 31, 2008 for service as members of the Company and Bank
Boards of Directors. Members of the
Board of Directors who are employees do not receive additional cash
compensation for service on the Board of Directors.
|
|
Fees Earned or
|
|
Option
|
|
All Other
|
|
|
|
Name
|
|
Paid in Cash
|
|
Awards(1)(2)
|
|
Compensation
|
|
Total
|
|
Leonard L. Abel
|
|
$
|
75,000
|
|
$
|
|
|
$
|
|
|
$
|
75,000
|
|
Leslie M.
Alperstein, Ph.D.
|
|
$
|
10,700
|
|
$
|
2,386
|
|
$
|
|
|
$
|
13,086
|
|
Dudley C.
Dworken
|
|
$
|
29,800
|
|
$
|
3,877
|
|
$
|
|
|
$
|
33,677
|
|
Harvey M.
Goodman
|
|
$
|
18,900
|
|
$
|
3,877
|
|
$
|
|
|
$
|
22,777
|
|
Neal R. Gross
|
|
$
|
10,400
|
|
$
|
1,491
|
|
$
|
|
|
$
|
11,891
|
|
Philip N.
Margolius
|
|
$
|
22,400
|
|
$
|
3,877
|
|
$
|
|
|
$
|
26,277
|
|
Robert P. Pincus
|
|
$
|
73,332
|
|
$
|
|
|
$
|
5,000
|
(3
)
|
$
|
78,332
|
|
Norman R. Pozez
|
|
$
|
3,300
|
|
$
|
|
|
$
|
|
|
$
|
3,300
|
|
Donald R. Rogers
|
|
$
|
16,500
|
|
$
|
3,877
|
|
$
|
|
|
$
|
20,377
|
|
Leland M.
Weinstein
|
|
$
|
24,200
|
|
$
|
3,877
|
|
$
|
|
|
$
|
28,077
|
|
(1)
|
Represents the amount of expense recognized in 2008 with respect to
option awards for financial reporting purposes. The grant date fair value of
the 2008 option awards for each director, other than Mr. Alperstein was
$7,755, and was $4,772 for Mr. Alperstein. Please refer to note 13 to
the Companys Consolidated Financial Statements for the year ended
December 31, 2008 for a discussion of the assumptions used in
calculating the grant date fair value.
|
(2)
|
At December 31, 2008, the non-employee directors had outstanding
option awards, vested and unvested, to purchase shares of common stock as
follows: Mr. Abel 11,154 shares; Mr. Alperstein 2,943 shares;
Mr. Dworken 3,575 shares; Mr. Goodman 8,233 shares;
Mr. Gross 2,886 shares; Mr. Margolius 6,496 shares;
Mr. Pincus 93,045 shares; Mr. Pozez 0 shares; Mr. Rogers 4,318
shares and Mr. Weinstein 22,230 shares.
|
(3)
|
Represents car allowance of $1,250 per month.
|
10
During 2008, each
non-employee director of the Company and Bank, other than Mr. Abel and Mr. Pincus,
received an annual retainer of $5,000 in cash ($7,500 if a member of both the
Bank and Company Board of Directors), plus a cash fee of $300 for each meeting
of the Board of Directors of the Company, the Board of Directors of the Bank or
a committee of the Board of the Company or the Bank attended ($400 per meeting
of a committee if serving as chair of the committee). Additionally, in January 2008, each of Mr. Paul
and the then serving non-employee members of the Company Board of Directors,
other than Mr. Abel and Mr. Alperstein, was granted options to
purchase 3,575 shares of common stock for service on the Company and Bank
Boards, as adjusted for the 10% stock dividend paid in October 2008. Mr. Alperstein, who serves only on the
Company Board of Directors, was granted options to purchase 2,200 shares of
common stock, as adjusted, and Mr. Abel declined the grant. Each other
member of the Bank Board of Directors was granted options to purchase 1,375
shares of common stock, as adjusted. All
of such options have an exercise price of $11.87 per share, as adjusted, a five
year term, and vest in three substantially equal installments, on the date of
grant, and the first and second anniversaries of the date of grant. In 2008, an
aggregate of $289,532 in cash retainers and meeting fees were paid to members
of the Board of Directors of the Company for service on the Board of Directors
of the Company and Bank, and $100,000 was paid to members of only the Board of
Directors of the Bank for such service
.
During
2009, non-employee directors, other than Mr. Abel and Mr. Pincus, are
currently entitled to receive the same cash fees. Commencing in March 2009,
non-employee directors serving as the chair of a committee will receive an
additional annual retainer of $1,000 to $3,000 per committee for such service.
However, the Board believes that Director fees appear to be modest based on
published reports and statistical comparisons, and the review performed by the
Companys compensation consultant, Amalfi Consulting, Inc.
During
2008, Mr. Abel, who served as Chairman of the Board of Directors of the
Company until the 2008 Annual Meeting of Shareholders, received an annual payment
of $75,000 in lieu of regular director fees from the Company and the Bank, the
same amount he received in 2007. Mr. Abel and the Company are parties to
an agreement governing his service and compensation. The term of Mr. Abels current agreement
expires on December 31, 2011. On
each December 31, the term of the agreement automatically extends for one
additional year, unless Mr. Abel has given notice of his intention not to
renew the term. Under his agreement, Mr. Abel is entitled to receive an
annual fee, currently $75,000, subject to periodic increase, in lieu of all
other fees for service on the Boards of Directors or any committees of the
Company and the Bank. In the event of termination of Mr. Abels service on
the Board of Directors for any reason other than for cause (as defined), Mr. Abel
(or his estate), is entitled to receive an amount equal to 2.99 times his then
current annual fee, subject to certain limitations in the event that his
termination occurs in connection with a change in control (as defined) of the
Company or the Bank. If Mr. Abel
were entitled to receive the termination benefits as of December 31, 2008,
he would receive approximately $224,250, unless the termination were in
connection with a change in control, in which case he would receive
approximately $138,636. Mr. Abels compensation is determined by the
Companys Board, exclusive of Mr. Abels participation, and is based on
the best judgment of the members of the Board, taking into consideration his
total value to the Company and the Bank and the various aspects of his
contribution.
In connection with the acquisition of Fidelity, Mr. Pincus and the
Bank entered into an agreement pursuant to which he is retained to serve as
Vice Chairman of the Board of Directors of the Bank. Under that agreement, Mr. Pincus
receives an annual payment of $220,000, subject to annual increase to reflect,
at a minimum, the increase in the consumer price index, in lieu of all other
fees for service on the Board of Directors. Mr. Pincus will also be eligible
to receive incentive bonuses pursuant to Board approved plans, and to a car
allowance of $1,250 per month. The agreement has a term extending until August 31,
2011. In the event of early
termination
of the agreement by the Bank without cause, or as a result of Mr. Pincus
death or disability, Mr. Pincus (or his estate) would be entitled to
receive continued payment of retainer compensation and car allowance for the
remainder of the term, subject to his continued compliance with the
confidentiality, noncompete and nonsolicitation provisions of the agreement.
The agreement provides that during the term and for a period of eighteen months
after termination, Mr. Pincus will not in any capacity (i) render any
services to a bank or financial services business, including but not limited to
any consumer savings, commercial banking, insurance or trust business, or a
savings and loan or mortgage business, or other business in which the Bank has
invested significant resources in anticipation of commencing, or to any person
or entity that is attempting to form such a business if it operates any office,
branch or other facility that is (or is proposed to be) located within a
thirty-five mile radius of the location of any branch of the Company or Bank or
their affiliates, or (ii) induce or attempt to induce any customers,
suppliers, officers, employees, contractors, consultants,
11
agents or representatives of, or any other person that has a business
relationship with, the Company or Bank or their affiliates, to discontinue,
terminate or reduce the extent of their relationship with such entity or to
solicit any such customer for any competitive product or service, or otherwise
solicit any customer or employee of the Company, or the Bank.
Under the
agreement, in the event that (i) Mr. Pincus is terminated without
cause after a change in control, (ii) his title, duties or position are
materially reduced within twelve months after a change in control, without his
consent, such that he would not have materially comparable compensation
benefits and responsibilities, and not have his primary worksite moved more
than twenty five miles, and such change is not cured within thirty days of
notice of termination, or (iii) he voluntary terminates the agreement
within the thirty day period following twelve months after a change in control,
Mr. Pincus would be entitled to receive a lump sum payment equal to 2.99
times his highest rate of base compensation in effect within the twelve months
prior to termination, subject to adjustment to avoid adverse tax consequences
resulting from characterization of such payment for tax purposes as a parachute
payment. If Mr. Pincus were
entitled to receive the termination benefits as of December 31, 2008, he
would receive approximately $626,666, unless the termination were in connection
with a change in control, in which case he would receive approximately
$234,212.
The Company does
not maintain any discretionary bonus or non-equity incentive plans or
compensation programs, deferred compensation, defined contribution or defined
benefit retirement plans, for non-employee directors, or in which such
directors may participate.
Executive Officers Who Are Not Directors
Set forth below is certain information regarding persons who are
executive officers of the Company or the Bank and who are not directors of the
Company. Except as otherwise indicated,
the occupation listed has been such persons principal occupation for at least
the last five years.
Michael T. Flynn.
Mr. Flynn, 61, has served as Executive
Vice President and Chief Operating Officer of the Company since June 2006,
previously served as President - District of Columbia Division of the Bank,
from June 2006 until August 2008, was President of the Bank from January 2004
until June 2006. Mr. Flynn has
over 37 years experience in the banking industry in the Washington, D.C. and
Maryland region. Prior to joining EagleBank in January 2004, he was the
Washington region executive for Mercantile Bankshares Corporation from April 2003.
He previously was the Director of Strategic Planning for Allfirst Financial, Inc.,
and prior to that held several executive level positions for Bank of America
and predecessor companies. He has been involved in community affairs throughout
his career, particularly educational groups including the American Institute of
Banking and the Corcoran College of Art & Design. He is a Director of
the Workforce Investment Council of the District of Columbia and the Maryland Banking
School.
Martha Foulon-Tonat
. Ms. Foulon-Tonat, 53, Executive Vice
President and Chief Lending Officer of the Bank, served at Allegiance Bank from
January 1990 to December 1997.
Her duties included being Senior Vice President and Chief Lending Officer. Prior to her service at Allegiance Bank, Ms. Foulon-Tonat
served at various commercial banks in the area. She has over 25 years
experience in the commercial banking industry.
James H. Langmead
. Mr. Langmead, 59, Executive Vice
President and Chief Financial Officer of the Company since January 2007,
and Executive Vice President and Chief Financial Officer of the Bank since January 2005,
previously served as Chief Financial Officer of Sandy Spring Bank and Sandy
Spring Bancorp. Mr. Langmead, a CPA, served in various financial and
senior management roles with Sandy Spring Bank from 1992 through 2004. Prior to
that time, Mr. Langmead managed the finance group at the Bank of
Baltimore.
Thomas D. Murphy.
Mr. Murphy, 61, has served as President
- Montgomery County Division of the Bank since June 2006, and was
previously Executive Vice President - Chief Operating Officer of the Bank. He
served at Allegiance from September 1994, including as Executive Vice
President and Chief Operating Officer from December 1995 until November 1997. Prior to his service at Allegiance, he served
in the same position at First Montgomery Bank from August 1991 until its
acquisition by Sandy Spring National Bank of Maryland in December 1993,
and he served as a Vice President of that organization until September 1994.
Mr. Murphy has 34 years experience in the commercial
12
banking
industry. Active in community affairs, he is past president of the
Bethesda-Chevy Chase Chamber of Commerce.
Susan G. Riel.
Ms. Riel, 59, Executive Vice President -
Chief Operating Officer of the Bank, and formerly Chief Administrative Officer,
previously served as Executive Vice President - Chief Operating Officer of
Columbia First Bank, FSB from 1989 until that institutions acquisition by
First Union Bancorp in 1995. Ms. Riel
has over 29 years of experience in the commercial banking industry.
Barry C. Watkins.
Mr. Watkins, 40
has served as
the President - District of Columbia and Northern Virginia Operations since
joining the Bank in August 2008.
Prior to joining the Bank, he served as President and Chief Executive
Officer of F&T Bank from April 2004. Prior to joining F&T Bank, Mr. Watkins
was a Senior Vice President and City Executive for BB&T, D.C. Metro Region.
Mr. Watkins was also previously with Franklin National Bank, which was
acquired by BB&T in 1998.
Janice L. Williams.
Ms. Williams,
52, Executive Vice President and Chief Credit Officer of the Bank, has been
employed with the Bank as Credit Officer, Senior Credit Officer, and Chief
Credit Officer for the past 6 years. Prior to employment with the Bank, Ms. Williams
served with Capital Bank, Sequoia Bank, and American Security Bank. Additionally, Ms. Williams, a graduate
of Georgetown University Law Center and a Member of the Maryland Bar, was
previously employed in the private practice of law in Maryland.
Compensation Disclosure and Analysis
In this
Compensation Discussion and Analysis, we give an overview and analysis of our
compensation program and policies, the material compensation decisions we have
made under those programs and policies, and the material factors that we
considered in making those decisions. Later in this proxy statement under the
heading Executive Compensation Tables, you will find a series of tables
containing specific information about the compensation earned or paid in 2008
to Mr. Paul, the Chief Executive Officer of the Company, Mr. Langmead,
the Chief Financial Officer, and the three most highly compensated executive
officers of the Company (including officers of the Bank) who received total
compensation of $100,000 or more during the fiscal year ended December 31,
2008, referred to as our named executive officers or named executives.
Compensation Objectives.
The primary objectives of
the Board of Directors with respect to executive compensation is to tie annual
and long-term cash and stock incentives to the achievement of measurable
Company and individual performance objectives, thereby aligning the named
executives incentive with maintaining and increasing shareholder value. We attempt to achieve these objectives
through pay for performance compensation policies and programs that put a
significant portion of our named executives officers overall compensation at
risk; potentially 30-45% of total compensation is in the form of cash bonuses
and equity compensation awards to focus executives on both short and long term
financial performance. We also recognize that ours is a highly competitive
market for executive officers, and that we compete for personnel against local
community banks and against national, regional and local institutions that
operate in the entire metropolitan Washington D.C. area, and in surrounding
markets.
Compensation Philosophy.
Our
compensation philosophy is to reward our executives with total compensation at
or above market commensurate with our performance. In the past, and prior to the acquisition of
Fidelity we viewed our executives as peers with similar levels of responsibility,
and as a result we targeted the same base salary levels for this group of
executives. We differentiated the
achievements of each executive officers performance in their cash bonus and
equity compensation awards. We also, targeted the market 75
th
percentile for base salaries due to our
competitive market. Going forward, we
will target base salaries at the market median.
Our incentive programs will be structured to pay cash incentives and
equity awards at the market median for budgeted performance and at the 75
th
percentile or higher when performance
expectations are exceeded.
The Role of Consultants.
In 2008, the Companys Compensation
Committee (in this Compensation Disclosure and Analysis, the Committee)
worked with Amalfi Consulting LLC. (Amalfi), an independent executive
compensation consulting firm specializing in the financial services
industry. The Committee engaged Amalfi
consulting to assist with a competitive analysis of executive compensation in
the fourth quarter of 2008. Amalfi consultants
report
13
directly to the
Committee. The Committee considered
competitive proposals from other firms before retaining Amalfi. Amalfi does not
provide any other services to the Company.
The Role of Management.
Input from
the Chief Executive Officer is considered by the Committee and the
Bank Compensation Committee regarding the criteria to be used to determine base
salary, bonuses and other benefits for
named executive officers other than
the Chief Executive Officer. Although input from
the Chief Executive Officer is considered by the Committee,
the Committee exercises final authority on compensation matters for all named
executive officers. The Chief Executive
Officer is excused from committee meetings during discussion and deliberations
regarding his own compensation.
Peer Groups &
Benchmarking.
In the
fourth quarter of 2008, Amalfi was engaged to evaluate whether the Companys
executive compensation levels were competitive and to make specific
compensation plan recommendations with respect to changes in executive
compensation programs. Amalfi utilized
2008 proxy data for a peer group of 17 publicly traded banks, the selection of
which was based upon similarities in asset size, markets and region. As proxies filed in 2008 reflected
compensation earned in 2007, the study used a 4% annual aging factor. For 2008 our peer group increased in median
asset size as compared to 2007 to reflect the Companys increased size
following the acquisition of Fidelity.
Peer Group.
The 2008 proxy peer group
is listed below. Financial data is the
data that was available at the time of the study (December 2008) and
reflects 3
rd
quarter 2008 financials. As of September 30, 2008, the Companys
performance was strong compared to this peer group.
Company Name
|
|
City
|
|
State
|
|
Total
Assets
MRQ
($000)
|
|
Asset
Growth
3 Yr
(%)
|
|
ROAA
MRQ
(%)
|
|
ROAE
MRQ
(%)
|
|
Net
Interest
Margin
MRQ
(%)
|
|
Efficiency
Ratio
MRQ
(%)
|
|
NPAs/
Assets
MRQ
(%)
|
|
Core
EPS
Growth
MRQ
(%)
|
|
Total
Return
1 Year
(%)
|
|
Sandy Spring Bancorp, Inc.
|
|
Olney
|
|
MD
|
|
3,195,117
|
|
31.8
|
|
0.68
|
|
6.68
|
|
4.0
|
|
54.6
|
|
2.08
|
|
-35.5
|
|
-33.7
|
|
TowneBank
|
|
Portsmouth
|
|
VA
|
|
3,015,506
|
|
72.7
|
|
0.90
|
|
8.37
|
|
3.6
|
|
68.9
|
|
0.09
|
|
-4.3
|
|
24.6
|
|
StellarOne Corporation
|
|
Charlottesville
|
|
VA
|
|
2,985,858
|
|
98.4
|
|
0.27
|
|
2.22
|
|
4.1
|
|
64.7
|
|
1.57
|
|
-72.0
|
|
-5.2
|
|
First Bancorp
|
|
Troy
|
|
NC
|
|
2,700,666
|
|
41.4
|
|
0.96
|
|
11.15
|
|
3.8
|
|
54.1
|
|
0.89
|
|
-7.5
|
|
-7.6
|
|
Virginia Commerce
Bancorp, Inc.
|
|
Arlington
|
|
VA
|
|
2,661,688
|
|
105.4
|
|
0.40
|
|
6.03
|
|
3.4
|
|
47.9
|
|
2.92
|
|
-61.4
|
|
-64.4
|
|
Pennsylvania
Commerce Bancorp, Inc.
|
|
Harrisburg
|
|
PA
|
|
2,125,279
|
|
54.9
|
|
0.67
|
|
12.03
|
|
4.2
|
|
73.0
|
|
0.57
|
|
85.7
|
|
-7.4
|
|
NewBridge Bancorp
|
|
Greensboro
|
|
NC
|
|
2,108,294
|
|
124.9
|
|
-0.31
|
|
-3.39
|
|
3.4
|
|
83.3
|
|
1.98
|
|
NM
|
|
-76.6
|
|
FNB United Corp.
|
|
Asheboro
|
|
NC
|
|
2,071,126
|
|
120.9
|
|
-0.33
|
|
-3.17
|
|
3.5
|
|
69.6
|
|
2.22
|
|
NM
|
|
-70.6
|
|
Cardinal Financial Corporation
|
|
McLean
|
|
VA
|
|
1,638,192
|
|
39.5
|
|
-1.09
|
|
-11.03
|
|
3.0
|
|
77.2
|
|
0.00
|
|
NM
|
|
-47.6
|
|
First United Corporation
|
|
Oakland
|
|
MD
|
|
1,629,546
|
|
19.9
|
|
0.46
|
|
8.09
|
|
3.7
|
|
56.2
|
|
1.83
|
|
-48.3
|
|
-18.1
|
|
Capital Bank Corporation
|
|
Raleigh
|
|
NC
|
|
1,594,402
|
|
72.0
|
|
0.51
|
|
4.83
|
|
3.2
|
|
73.5
|
|
0.47
|
|
-38.0
|
|
-52.8
|
|
First Mariner Bancorp
|
|
Baltimore
|
|
MD
|
|
1,276,336
|
|
-0.3
|
|
-0.71
|
|
-15.03
|
|
4.2
|
|
99.9
|
|
5.29
|
|
NM
|
|
-80.2
|
|
Shore Bancshares, Inc.
|
|
Easton
|
|
MD
|
|
1,037,026
|
|
21.0
|
|
1.20
|
|
9.86
|
|
4.1
|
|
63.5
|
|
0.72
|
|
-19.1
|
|
-8.6
|
|
Commonwealth Bankshares, Inc.
|
|
Norfolk
|
|
VA
|
|
1,019,742
|
|
125.4
|
|
-3.68
|
|
-31.33
|
|
4.0
|
|
42.0
|
|
2.83
|
|
NM
|
|
-55.6
|
|
Republic First Bancorp, Inc.
|
|
Philadelphia
|
|
PA
|
|
964,732
|
|
41.1
|
|
0.66
|
|
7.81
|
|
3.5
|
|
63.3
|
|
1.64
|
|
16.7
|
|
-3.3
|
|
Severn Bancorp, Inc.
|
|
Annapolis
|
|
MD
|
|
964,279
|
|
36.8
|
|
0.24
|
|
2.40
|
|
3.1
|
|
50.7
|
|
5.42
|
|
-75.0
|
|
-51.4
|
|
Hampton Roads Bankshares, Inc.
|
|
Norfolk
|
|
VA
|
|
917,825
|
|
63.4
|
|
0.79
|
|
6.32
|
|
3.8
|
|
65.9
|
|
0.30
|
|
-16.8
|
|
-22.7
|
|
Average
|
|
|
|
|
|
1,876,801
|
|
62.9
|
|
0.10
|
|
1.28
|
|
3.7
|
|
65.2
|
|
1.81
|
|
-23.0
|
|
-34.2
|
|
25
th
Percentile
|
|
|
|
|
|
1,037,026
|
|
36.8
|
|
-0.31
|
|
-3.17
|
|
3.4
|
|
73.0
|
|
2.22
|
|
-51.6
|
|
-55.6
|
|
50
th
Percentile
|
|
|
|
|
|
1,638,192
|
|
54.9
|
|
0.46
|
|
6.03
|
|
3.7
|
|
64.7
|
|
1.64
|
|
-27.3
|
|
-33.7
|
|
75
th
Percentile
|
|
|
|
|
|
2,661,688
|
|
98.4
|
|
0.68
|
|
8.09
|
|
4.0
|
|
54.6
|
|
0.57
|
|
-6.7
|
|
-7.6
|
|
Eagle Bancorp, Inc.
|
|
Bethesda
|
|
MD
|
|
1,457,545
|
|
125.3
|
|
0.82
|
|
10.02
|
|
4.1
|
|
62.7
|
|
1.43
|
|
NA
|
|
-42.3
|
|
Percent Rank
|
|
|
|
|
|
36
|
%
|
99
|
%
|
83
|
%
|
88
|
%
|
89
|
%
|
63
|
%
|
58
|
%
|
NA
|
|
46
|
%
|
14
Market Comparison.
The 2008 Amalfi executive
compensation study found that the Company was paying below market median base
salaries for the Chief Executive Officer and Chief Operating Officer of the
Bank, while the rest of the named executive officers had base salaries near the
75
th
percentile, consistent with our compensation
philosophy. Cash compensation was also
below the market median for the Chief Executive Officer and Chief Operating
Officer of the Bank due to their below market base salaries. Annual incentive opportunity levels were
slightly below market for these same two executives. The other named executives had market
competitive annual incentive award opportunities and their cash compensation
was generally between the market median and market 75
th
percentiles.
Equity grants for each of the named executives were market
competitive. Based on the Amalfi study
and the current challenges facing the Company and community banking industry we
are implementing the following changes to our compensation programs for 2009:
·
Revise our compensation philosophy to
target base salaries at the market median, although no base salary increases
have been provided to named executive officers in 2009.
·
Benchmark executive officers
compensation against market based on their functional area and responsibility
level, as opposed to paying executive officers the same salaries as has been
our past practice.
·
Revise the annual Senior Executive
Incentive Plan to ensure target and maximum award opportunities are market
competitive.
·
Include Mr. Paul, the Chairman
and Chief Executive Officer, in the Senior Executive Incentive Plan. In 2008
and previous years, his annual cash bonus was at the discretion of the Board.
·
Refine the annual Senior Executive
Incentive Plan to customize goals to better reflect individual position
responsibilities. In the past, named
executives, with exception of Mr. Paul, had the same company-wide goals
with different weightings.
Compensation Components.
The key components of our
2008 executive compensation program for all named executive officers other than
Mr. Paul consisted of a base salary, performance-based compensation plans,
including our Senior Executive Incentive Plan, a performance-based cash bonus
plan, and the 2006 Stock Plan, a long-term equity based compensation plan,
potential discretionary cash bonuses, and a 401(k) Plan. Base salary and
bonus and incentive payments, or cash compensation, comprise the most
substantial portions of total executive compensation. For Mr. Paul, whose
formal responsibilities have increased in recent years, base salary is the
principal form of compensation, along with awards of equity based compensation,
which ties a significant portion of his compensation to increases in
shareholder value as reflected in long term increases in the price of the
common stock.
Base Salary.
The Board of Directors believes
that base salary for named executive officers should be targeted at market
competitive levels. Base salaries are
reviewed annually and adjusted from time to time, based on our review of market
data and assessment of Company and individual executive performance. In 2008, the following base salary increases
were provided for the named executive officers.
Name
|
|
Title
|
|
2007 Base
|
|
2008 Base
|
|
Increase
|
|
Ronald D. Paul
|
|
Chairman and Chief Executive
Officer
|
|
$
|
350,000
|
|
$
|
350,000
|
|
0.00
|
%
|
Martha Foulon-Tonat
|
|
EVP Chief Lending Officer
|
|
$
|
231,525
|
|
$
|
243,100
|
|
5.00
|
%
|
James H. Langmead
|
|
EVP Chief Financial Officer
|
|
$
|
231,525
|
|
$
|
243,100
|
|
5.00
|
%
|
Thomas D. Murphy
|
|
President Montgomery County
Division
|
|
$
|
231,525
|
|
$
|
243,100
|
|
5.00
|
%
|
Susan G. Riel
|
|
EVP Chief Operating Officer
of the Bank
|
|
$
|
231,525
|
|
$
|
243,100
|
|
5.00
|
%
|
Going forward, we have changed our compensation philosophy and will
target base salaries for named executives at the market median (50
th
percentile).
Based on the market review that was conducted by Amalfi in 2008, Mr. Paul
and Ms. Riel have base salaries that are below the market median, however
both have declined base salary increases for 2009. The rest of the named
executives have base salaries that are at or above the market median, therefore
they have not received base salary increases in 2009.
Senior Executive Incentive
Plan.
The Senior
Executive Incentive Plan was established to maintain the competitiveness of our
total cash compensation for executives compared to peers. In 2008, executive management, including all
named executive officers other than Mr. Paul, participated in the Senior
Executive Incentive Plan, the annual incentive bonus plan for senior
executives. Under the plan, an executive
is eligible to earn a percentage of his or
15
her base salary
based on achievement of Company and individual performance objectives. During
2008, participating executives could earn up to 23% of the base salary in
bonus, based upon Company wide and individual performance metrics, which can
vary each year. Performance weightings
for 2008 are show below.
Weighting of Performance Criteria by NEO
Name
|
|
Bank-Wide
Performance
|
|
Personal
Performance
|
|
Martha
Foulon-Tonat
|
|
70
|
%
|
30
|
%
|
James H.
Langmead
|
|
70
|
%
|
30
|
%
|
Thomas D. Murphy
|
|
70
|
%
|
30
|
%
|
Susan G. Riel
|
|
70
|
%
|
30
|
%
|
In order for the executive to receive any portion of the potential
aggregate bonus payout, the Company must first meet established income
goals. Then, component portions of the
aggregate potential bonus may be earned, based upon the achievement of
designated performance targets as summarized in the table below. The measures
to which each named executives award is subject may vary depending on the
officers area of responsibility.
Senior Executive Incentive Bonus Plan Bank-Wide Goals
|
|
|
|
2008
|
|
Goal
|
|
Target
|
|
Actual Results (1)
|
|
Non Interest Income to Total Income
|
|
12.07
|
%
|
10.52
|
%
|
Net Interest Margin
|
|
4.10
|
%
|
4.26
|
%
|
Efficiency Ratio
|
|
63.33
|
%
|
62.21
|
%
|
Total Loans/Loan Growth
|
|
$
|
747,397,945
|
|
$
|
762,418,312
|
|
Non Interest Expense Budget
|
|
$
|
16,809,967
|
|
$
|
16,738,753
|
|
(1)
The Board agreed to review the Companys performance at the end of August 2008
prior to the acquisition of Fidelity.
2008 incentive awards were based on pre-merger financials.
The
target level for net income and deposit growth are not disclosed in order to
prevent competitive harm to the Company. Bonus target levels for all factors are based upon the Companys budget goals,
which are established by determining the expected financial position and
results of operations of the Company at the end of the budget year, in light of
the available resources of the Company, market conditions, anticipated interest
rates, competitive factors and other anticipated economic and financial
conditions, and adjusting the budgeted results of operation, deposit and loan
totals and performance ratios to reflect improvement. The Committee and Board of Directors
considers these goals aggressive in regards to expected performance and
industry standards, and they are generally in line with the Companys five year
historical growth rates.
No amounts are payable if the Company does not first achieve at least 80%
of the Companys consolidated net income goal.
Each component portion of the potential bonus is subject to payment only
if the target is met or exceeded in total, with no provision for partial or
graduated payments. The actual bonus
which an individual named executive officer may receive may therefore be equal
to or below the indicated amount or percentage.
In addition, the Board of Directors reserves the right to grant a
discretionary bonus in addition to the performance related bonus, or to award all
or a portion of the aggregate potential bonus where the targets are not met,
based upon extenuating factors.
In 2008, we achieved at least 80% of the net income target and achieved
target performance in four of the six criteria, therefore amounts paid pursuant
to the Senior Executive Incentive Bonus Plan for 2008 performance ranged from
11% to 19% of base salary for the named executives. Based on the successful effectuation of the
acquisition of Fidelity and the Banks performance, the Committee approved a
discretionary bonus for Mr. Paul for 2008.
As noted previously, The Committee is moving away from a completely
discretionary bonus for Mr. Paul. Mr. Paul
will participate in the Senior Executive Incentive Bonus Plan for 2009.
16
Name
|
|
Title
|
|
2008 Annual Incentive Plan
Target Award
|
|
Actual Payout
|
|
Martha Foulon-Tonat
|
|
EVP Chief Lending Officer
|
|
20
|
%
|
17
|
%
|
James H. Langmead
|
|
EVP Chief Financial Officer
|
|
20
|
%
|
19
|
%
|
Thomas D. Murphy
|
|
President Montgomery County Division
|
|
20
|
%
|
14
|
%
|
Susan G. Riel
|
|
EVP Chief Operating Officer of the Bank
|
|
20
|
%
|
19
|
%
|
Equity Compensation.
We believe that our
long-term interests are best advanced by aligning the interests of our
executive officers with the interests of our shareholders. Accordingly, we may
award stock options, stock appreciation rights (SARS) and restricted stock to
our executive officers pursuant to our 2006 Stock Plan, which was adopted by
our shareholders in 2006.
Prior to 2009, Mr. Paul has been granted only stock options in
order to tie his potential compensation to increases in shareholder value as
reflected in the stock price. In 2009 he
received an award of restricted stock, which also ties a portion of his
potential compensation to increases in shareholder value. The Company continues to grant annual stock
option awards which are at the discretion of the Board and determined at the
end of the year based on the Companys performance. In 2008, all named
executive officers received grants of stock options, with three-year
installment vesting. These are presented
later in the Grants of Plan-Based Awards Table.
In addition to our annual grants of stock options or stock appreciation
rights, we implemented a three-year performance plan in 2006 for all named
executives other than Mr. Paul.
This plan provided for awards of restricted stock, the vesting of which
was performance based and linked to the bank-wide goal of three year average
net income. All named executives had the same earning potential, which ranged
from 5% to 20% of their base salary depending on the our average net income as
measured at the end of 2008. This
performance period expired on December 31, 2008. The restricted stock
awards under this plan did not vest due to failure to hit the threshold
three-year performance goal, set forth in the table below.
|
|
2006-2008 Net Income Goals
|
|
|
|
Minimum
|
|
Target
|
|
Maximum
|
|
2006
|
|
$
|
7,558,400
|
|
$
|
9,448,000
|
|
$
|
10,392,800
|
|
2007
|
|
$
|
9,070,400
|
|
$
|
11,338,000
|
|
$
|
12,471,800
|
|
2008
|
|
$
|
10,884,800
|
|
$
|
13,606,000
|
|
$
|
14,966,600
|
|
3-year average
|
|
$
|
9,171,200
|
|
$
|
11,464,000
|
|
$
|
12,610,400
|
|
|
|
|
|
|
|
|
|
|
|
Award Potential as Percent of Base Salary
|
|
|
|
5%
|
|
10%
|
|
20%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Compensation for
2008.
In 2009 the
Board approved a one time equity award in the form of Incentive Stock Options
to named executives to reward them for their role in the acquisition of
Fidelity , which took place in 2008. The options awarded were based on the
overall performance of the individual executive and the role the individual
executive played in the acquisition, the time devoted to the acquisition, and
the day to day responsibilities the executive had during this period in
addition to the acquisition. The total
economic value of these awards ranged from $10,000 to $100,000 based on each
executives involvement and time commitment to merger related issues. These awards have a five year ratable vesting
schedule.
Timing and Pricing of Equity
Awards
. Equity
compensation awards for named executive officers and employees are generally
approved in January or early February of each year, or in connection
with revisions to annual compensation.
Awards may be made periodically for new hires during the year. Awards are based on a number of criteria including
the Banks performance, the relative rank of the executive within the Company
and his or her specific contributions to the success of the Company.
The grant date is established when the Committee approves the grant and
all key terms have been established. We set the exercise price for our stock
options as the average stock price on the grant date. Our equity award process
is independent of any consideration of the timing of the release of material
nonpublic information, including with respect
17
to the
determination of grant dates or stock option exercise prices. Similarly, we expect that the release of
material nonpublic information will not be timed with the purpose or intent to
affect the value of executive compensation.
401(k) Plan.
Our 401(k) Plan allows
all officers and employees of the Company working 1,000 hours or more in a
calendar year to defer a portion of their compensation, and provides a match of
up to 3% of their base salaries, subject to certain IRS limitations. While the
decision to match employee contributions is discretionary, all employees
receive the same percentage match.
Effective February 2009, we have reduced our match to 1.25%.
Additional Employee Benefit
Plans.
The Bank also
provides additional benefit programs to all employees including health and
dental insurance, life and long term and short term disability insurance.
Employee Stock Purchase
Plan.
The Company also
maintained the 2004 Employee Stock Purchase Plan (the ESPP). No grants were made under the ESPP in 2007 or
in 2008. The ESPP expired in June 2008.
Employment and Severance Arrangements.
Each of our named executive
officers has an employment agreement which contains provisions for payments
upon a change in control of the Company, and provides for noncompetition and
nonsolicitation provisions benefiting the Company under certain
circumstances. These agreements are
described in detail under the caption Employment Agreements. The Committee believes that the agreements
provide continuity of executive management, employment security which is
conducive to maximum employee effort and valuable protections for the Company
and its executive officers. All
agreements were amended to conform to the executive compensation requirements
of the Emergency Economic Stimulus Act of 2008 (EESA), discussed in greater
detail below, and the Securities Purchase Agreement (Purchase Agreement)
executed in connection with the Companys issuance of preferred stock and
warrants to the United States Department of the Treasury (the Treasury)
pursuant to the TARP Capital Purchase Program (the TARP or CPP).
Inter-Relationship of Elements of
Total Compensation.
The
various elements of the compensation package are not interrelated. For example,
if it does not appear as though the target bonus will be achieved, the size of
equity compensation awards will not be affected. While the potential size of an
element of compensation may be expressed as a percentage of base or total
compensation, there is no significant interplay of the various elements of
total compensation between each other. If awards that are granted in one year
become less valuable, or less likely of vesting, the amount of the bonus or
base compensation to be paid the executive officer for the next year is not impacted. Similarly, if equity awards
become extremely valuable, the amount of base compensation or bonus to be
awarded for
the next year
is not affected. While the Board has
discretion to make exceptions to any base compensation or bonus payouts under
existing plans, it has not approved any exceptions to the plans with regard to
any executive officers.
Equity Ownership Guidelines.
We have no equity or
security ownership requirements or guidelines for executive officers, however,
all of the executive officers own common stock, and options to purchase common
stock, SARs payable in common stock or performance based awards of restricted
stock pursuant to our equity compensation plans.
Emergency Economic Stabilization Act of 2008.
As noted above, the Company
sold shares of a series of its preferred stock and common stock purchase
warrants to the Treasury under the CPP established under EESA. As a result of this transaction,
the Company became subject to certain executive compensation requirements under
the CPP, the EESA, and Treasury regulations. Those requirements apply the
Companys named executive officers of the Company, as they be determined from
time to time (collectively, the SEOs). Those requirements are:
·
A prohibition on providing incentive
compensation arrangements that encourage SEOs to take unnecessary and excessive
risks.
·
The compensation committee must
review SEO incentive compensation arrangements with the senior risk officers to
ensure that SEOs are not encouraged to take such risks and must meet annually
with the senior risk officers to discuss and review the relationship between
risk management policies and practices and the SEO incentive compensation
arrangements.
·
Recovery of any bonus or incentive
compensation paid to an SEO where the payment was later found to have been
based on statements of earnings, gains, or other criteria which prove to be
materially inaccurate.
18
·
Limits on the amounts that can be
paid under change in control and similar agreements which provide payments upon
separation of service.
·
Limits on the Companys tax deduction
for compensation paid to any SEO to $500,000 annually.
American Reinvestment and Recovery Act of 2009.
On
February 17, 2009, the President of the United States signed into law the
American Reinvestment and Recovery Act of 2009 (ARRA). ARRA contains
expansive new restrictions on executive compensation for participants in the CPP.
The ARRA amends the executive compensation and corporate governance provisions
of EESA.
Key features of the ARRA are:
·
A prohibition of the payment of any bonus, retention award,
or incentive compensation to the five most highly compensated employees of the
Company (whether or not SEOs) for as long as any CPP related obligations are
outstanding. The prohibition does not apply to bonuses payable pursuant to employment
agreements in effect prior to February 11, 2009.
·
Long-term restricted stock is excluded from ARRAs bonus
prohibition, but only to the extent the value of the stock does not exceed
one-third of the total amount of annual compensation of the employee receiving
the stock, the stock does not fully vest until after all obligations under
financial assistance provided under the TARP is outstanding (excluding any
period in which the federal government only holds warrants to purchase common
stock, referred to as while assistance is outstanding), and any other
conditions which the Treasury may specify have been met.
·
A prohibition on any payment to any SEO or any of the next
five most highly-compensated employees upon termination of employment for any
reason for while assistance is outstanding.
·
Recovery of any bonus or other incentive payment made on the
basis of materially inaccurate financial or other performance criteria that is
paid to the next twenty most highly compensated employees in addition to the
SEOs.
·
Limits on compensation that exclude incentives for SEOs to
take unnecessary and excessive risks that threaten the value of the Company
while assistance is outstanding.
·
Prohibition on compensation plans that encourage earnings
manipulation in order to enhance any employees compensation.
·
A requirement that the Chief Executive Officer and Chief
Financial Officer provide a written certification of compliance with the
executive compensation restrictions in ARRA in the Companys annual filings
with the Securities and Exchange Commission (the SEC).
·
Implementation of a company-wide policy regarding excessive
or luxury expenditures.
·
Review by Treasury of bonuses, retention awards, and other
compensation paid to the SEOs and the next twenty most highly-compensated
employees of each company receiving CPP assistance before ARRA was enacted, and
that Treasury seek to negotiate with the CPP recipient and affected employees
for reimbursement if it finds any such payments were inconsistent with the CPP
or otherwise in conflict with the public interest.
The ARRA requires both the
Treasury and the SEC to issue rules to implement these new executive
compensation restrictions, and as such the requirements remain subject to
clarification, revision or expansion.
After the Treasury and the SEC publish these rules, the Committee will
consider these new limits on executive compensation and determine how they
impact the Companys executive compensation program. While the Committee
believes that it does not have any compensation policies which are inconsistent
with EESA or the ARRA, it expects that the Company will seek changes to its
compensation policies and agreements in order to meet the requirements of these
statutes and regulations while assistance is outstanding.
Compensation Committee Report
We have reviewed and discussed the foregoing Compensation Disclosure and
Analysis with management. Based on our review and discussion with management we
have recommended to the Board of Directors that the Compensation Disclosure and
Analysis be included in this proxy statement and incorporated by reference in
our annual report on Form 10-K for the year ended December 31, 2008.
19
The Committee certifies that it has reviewed with the Companys senior
risk officers the incentive compensation arrangements for named executive
officers and has made reasonable efforts to ensure that such arrangements do
not encourage such officers to take unnecessary and excessive risks that
threaten the value of the financial institution.
Members of the Companys Compensation Committee
|
|
|
|
Leonard L. Abel
|
|
Robert P. Pincus
|
Leslie
M. Alperstein, Ph.D.
|
|
Norman
R. Pozez
|
Dudley
C. Dworken
|
|
Donald
R. Rogers
|
Harvey
M. Goodman
|
|
Leland
M. Weinstein
|
Philip
N. Margolius, Chairman
|
|
|
This report shall not be deemed to be incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, and shall not otherwise be deemed
filed under such acts.
Executive Compensation Tables
The following
table sets forth a comprehensive overview of the compensation for Mr. Paul,
the President of the Company, Mr. Langmead, the Chief Financial Officer of
the Company, and the three most highly compensated executive officers of the
Company (including officers of the Bank) who received total compensation of
$100,000 or more during the fiscal year ended December 31, 2008.
Summary Compensation Table
Name and Principal Position
|
|
Year
|
|
Salary
|
|
Bonus(1)
|
|
Stock
Awards(2)
|
|
Option
Awards(2)
|
|
Non Equity
Incentive Plan
Compensation
|
|
All Other
Compensation
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald D. Paul, President and Chief
|
|
2008
|
|
$
|
350,000
|
|
$
|
74,115
|
|
$
|
|
|
$
|
65,273
|
|
$
|
|
|
$
|
|
|
$
|
489,388
|
|
Executive Officer of the Company; Chief
|
|
2007
|
|
$
|
350,000
|
|
$
|
|
|
$
|
|
|
$
|
74,228
|
|
$
|
|
|
$
|
|
|
$
|
424,228
|
|
Executive Officer of the Bank
|
|
2006
|
|
$
|
197,827
|
|
$
|
|
|
$
|
|
|
$
|
24,308
|
|
$
|
|
|
$
|
|
|
$
|
222,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James H. Langmead, Executive Vice
|
|
2008
|
|
$
|
243,100
|
|
$
|
|
|
$
|
(7,595
|
)
|
$
|
14,870
|
|
$
|
44,118
|
|
$
|
20,465
|
(3)
|
$
|
314,758
|
|
President, Chief Financial Officer of the
|
|
2007
|
|
$
|
231,525
|
|
$
|
20,000
|
|
$
|
6,829
|
|
$
|
6,029
|
|
$
|
|
|
$
|
19,697
|
(4)
|
$
|
284,080
|
|
Company and Bank
|
|
2006
|
|
$
|
207,595
|
|
$
|
14,327
|
|
$
|
7,871
|
|
$
|
5,211
|
|
$
|
|
|
$
|
5,691
|
(5)
|
$
|
240,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martha Foulon-Tonat, Executive Vice
|
|
2008
|
|
$
|
243,100
|
|
$
|
|
|
$
|
(9,311
|
)
|
$
|
14,461
|
|
$
|
39,334
|
|
$
|
16,898
|
(6)
|
$
|
304,482
|
|
President Chief Lending Officer of the
|
|
2007
|
|
$
|
231,525
|
|
$
|
12,500
|
|
$
|
7,090
|
|
$
|
6,429
|
|
$
|
|
|
$
|
16,653
|
(7)
|
$
|
274,197
|
|
Bank
|
|
2006
|
|
$
|
207,595
|
|
$
|
12,500
|
|
$
|
9,123
|
|
$
|
5,511
|
|
$
|
|
|
$
|
14,726
|
(8)
|
$
|
249,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas D. Murphy, Executive Vice
|
|
2008
|
|
$
|
243,100
|
|
$
|
|
|
$
|
(9,311
|
)
|
$
|
13,627
|
|
$
|
33,597
|
|
$
|
21,447
|
(9)
|
$
|
303,294
|
|
President of the Company; President -
|
|
2007
|
|
$
|
231,525
|
|
$
|
12,500
|
|
$
|
7,090
|
|
$
|
6,429
|
|
$
|
|
|
$
|
21,479
|
(10)
|
$
|
279,023
|
|
Montgomery County Division of the
|
|
2006
|
|
$
|
220,500
|
|
$
|
12,500
|
|
$
|
9,123
|
|
$
|
6,075
|
|
$
|
|
|
$
|
19,922
|
(11)
|
$
|
268,120
|
|
Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Susan G. Riel, Executive Vice President
|
|
2008
|
|
$
|
243,100
|
|
$
|
|
|
$
|
(9,311
|
)
|
$
|
15,295
|
|
$
|
46,423
|
|
$
|
20,350
|
(12)
|
$
|
315,857
|
|
Chief Operating Officer of the Bank
|
|
2007
|
|
$
|
231,525
|
|
$
|
27,500
|
|
$
|
7,090
|
|
$
|
6,429
|
|
$
|
|
|
$
|
20,367
|
(13)
|
$
|
292,911
|
|
|
|
2006
|
|
$
|
207,595
|
|
$
|
27,500
|
|
$
|
9,123
|
|
$
|
5,511
|
|
$
|
|
|
$
|
18,430
|
(14)
|
$
|
268,159
|
|
(1)
|
Reflects amounts earned
pursuant to the discretionary awards under Companys Senior Executive
Incentive Plan, except for Mr. Paul. Amounts shown are earned and accrue
in the year indicated and are paid in the following year, except with respect
to Mr. Langmeads 2006 payment, which was earned and paid 2006.
|
(2)
|
Represents the
amount of expense recognized in year indicated with respect to awards of
performance based restricted stock (in the case of Stock Awards) and options
and SARs (in the case of Option Awards) for financial reporting purposes.
Please refer to note 13 to the Companys Consolidated Financial Statements
for the year ended December 31, 2008 for a discussion of the assumptions
used in calculating the grant date fair value.
|
(3)
|
Includes $9,000
car allowance, $4,172 insurance premium and $7,293 401(k) matching
contribution.
|
20
(4)
|
Includes $9,000
car allowance, $3,799 insurance premium and $6,898 401(k) matching
contribution.
|
(5)
|
Represents
401(k) matching contribution.
|
(6)
|
Includes $9,000
car allowance, $970 insurance premium and $6,928 401(k) matching
contribution.
|
(7)
|
Includes $9,000
car allowance, $909 insurance premium and $6,744 401(k) matching
contribution.
|
(8)
|
Includes $7,800
car allowance, $728 insurance premium and $6,198 401(k) matching
contribution.
|
(9)
|
Includes $9,000
car allowance, $5,534 insurance premium and $6,913 401(k) matching
contribution.
|
(10)
|
Includes $9,000
car allowance, $5,534 insurance premium and $6,945 401(k) matching
contribution.
|
(11)
|
Includes $7,800
car allowance, $5,534 insurance premium and $6,588 401(k) matching
contribution.
|
(12)
|
Includes $9,000
car allowance, $4,422 insurance premium and $6,928 401(k) matching
contribution.
|
(13)
|
Includes $9,000
car allowance, $4,422 insurance premium and $6,945 401(k) matching
contribution.
|
(14)
|
Includes $7,800
car allowance, $4,432 insurance premium and $6,208 401(k) matching
contribution.
|
The Company does not maintain (i) any defined benefit retirement
plans, or (ii) any nonqualified deferred compensation programs or
arrangements.
Employment Agreements.
The
Company and Mr. Paul are parties to an employment agreement governing his
service and compensation as President of the Company.
The
current term of Mr. Pauls employment agreement expires on December 31,
2011. On each December 31, the term of the agreement automatically extends
for one additional year, unless Mr. Paul has given notice of his intention
not to renew the term. Under his
agreement, Mr. Paul is entitled to receive a current annual base salary of
$350,000, subject to periodic increase. Mr. Paul
was granted incentive options to purchase 27,500 shares of common stock, and
nonincentive options to purchase 3,525 shares of common stock in his capacity
as a director, in January 2008, in each case as adjusted. Mr. Paul
may receive additional grants of options and may also receive a bonus in the
discretion of the Board of Directors. The compensation under Mr. Pauls
employment agreement is in lieu of all other cash fees for service on the
Boards of Directors or any committees of the Company and the Bank. In the event of termination of Mr. Pauls
employment for any reason other than for cause (as defined), Mr. Paul (or
his estate), is entitled to receive an amount in cash equal to 2.99 times his
then current base salary, subject to certain limitations in the event that his
termination occurs in connection with a change in control (as defined) of the
Company or the Bank, and subject, during any period when the Company has any
securities issued under the TARP CPP held by the Treasury or another agency of
the Federal government, to regulations prohibiting golden parachutes under
ARRA. In addition, all of Mr. Pauls
options will immediately vest upon any termination, subject to the effect of
any regulations under ARRA.
If
Mr. Paul were entitled to receive the termination benefits as of December 31,
2008, he would receive approximately $1,050,000, or approximately $518,960 if
the termination were in connection with a change in control. Additionally, in
the event of any termination, all of the unvested options held by Mr. Paul
will accelerate and become immediately exercisable. At December 31, 2008, none of Mr. Pauls
unvested options were in the money.
Each
of the four other named executive officers has an employment agreement with the
Bank. Each of the agreements expires August 31, 2011. The table below sets
forth the current base salary, amount of Bank paid life insurance (at standard
rates), and annual car allowance to which the named executive officers are
entitled. Each of these officers is also
entitled to participation in all other health, welfare, benefit, stock, option
and bonus plans, if any, generally available to all officers and employees of
the Bank or the Company. Under each
agreement if the officers employment is terminated without cause for reasons
other than death, disability or in connection with a change of control (as
defined), he/she would be entitled to receive continued payment of base salary
through the end of the term of his/her agreement, subject to his/her compliance
with the noncompete and nondisturbance provisions of the agreement. These provisions,
and the change in control payment provisions discussed below, are potentially
subject to limitation or elimination in accordance with the golden parachute
prohibitions under ARRA during any period while the Treasury holds preferred
stock issued by the Company or common stock acquired upon exercise of warrants.
The Company will review and expects that it will modify named executive
employment agreements accordingly following issuance of implementing
regulations. Each agreement (i) limits the executives severance
compensation in connection with an involuntary termination or in connection
with any bankruptcy, liquidation or receivership of the Company to the amount
permitted under Section 280G of the Code, and (ii) provides for the
recovery by the Company of payments based on financial statements or other
criteria that are later proven to be materially inaccurate. Each of these
requirements applies during the period that the Treasury owns any securities
acquired under the Purchase Agreement.
21
The
noncompete and nondisturbance provisions of the agreements (the Noncompete
Provisions) provide that (i) for 180 days after termination, or until the
end of the original term of the agreement, whichever is earlier, the officer
will not in any capacity render any services to a bank or savings and loan or a
holding company of a bank or savings and loan
or to any person or entity that is attempting to form a bank, with respect
to any office, branch or other facility that is (or is proposed to be) located
within a thirty-five (35) mile radius of the location of the Companys
headquarters, and (ii) for twelve (12) months after the last date of
employment, the officer will not, directly or indirectly, induce or attempt to
induce any customers, suppliers, officers, employees, contractors, consultants,
agents or representatives of, or any other person that has a business
relationship with, the Company or any of its parent, subsidiaries and
affiliates to discontinue, terminate or reduce the extent of their relationship
with the Company and/or any such parent, subsidiary or affiliate or to take any
action that would disrupt or otherwise be disadvantageous to any such
relationship, or otherwise solicit any customer or employee of the
Company. The amount to which each of the
named executive officers would be entitled to if he/she were terminated, other
than for cause or in connection with a change in control, as of December 31,
2008 is set forth in the fifth column of the table below.
In
the event of termination of the other named executive officers respective
employment, or reduction in his/her compensation or position or
responsibilities within 120 days before or after a change in control, or the
voluntary termination of employment within the 30 day period following 120 days
after a change in control, each of the other named executive officers would be
entitled to receive a lump sum payment equal to 2.99 times his/her base salary,
subject to adjustment to avoid adverse tax consequences resulting from
characterization of such payment for tax purposes as a parachute payment, and
all unvested stock options, SARs and restricted stock awards would immediately
vest and become exercisable. The amount of the cash payment which each of the
other named executive officers would be entitled to receive if the change in
control termination benefits were paid as of December 31, 2008 is set
forth in column 6 of the table below, the value of the accelerated equity
awards is set forth in column 7 of the table below, and the sum of these two
amounts is set forth in column 8.
Column Number 1
|
|
2
|
|
3
|
|
4
|
|
5
|
|
6
|
|
7
|
|
8
|
|
Name and Title
|
|
Base
Salary
|
|
Car
Allowance
|
|
Bank Paid Life
Insurance (at
standard rates)(1)
|
|
Payment
Following
Termination
Without Cause(2)
|
|
Cash Payment
Upon
Termination in
Connection with
a Change in
Control(2)
|
|
Value of Equity
Awards
Accelerated Upon
a Change in
Control(3)
|
|
Sum of Amounts
Payable Upon a
Change in
Control (Sum of
Columns 6 and 7)
|
|
Martha Foulon-Tonat, Executive Vice President Chief
Lending Officer of the Bank
|
|
$
|
243,101
|
|
$
|
9,000
|
|
$
|
750,000
|
|
$
|
648,267
|
|
$
|
597,077
|
|
$
|
31,838
|
|
$
|
628,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James H. Langmead, Executive Vice President, Chief Financial
Officer of the Company and Bank
|
|
$
|
243,101
|
|
$
|
9,000
|
|
$
|
750,000
|
|
$
|
648,267
|
|
$
|
685,335
|
|
$
|
29,871
|
|
$
|
715,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas D. Murphy, Executive Vice President of the
Company; President - Montgomery County Division of the Bank
|
|
$
|
243,101
|
|
$
|
9,000
|
|
$
|
750,000
|
|
$
|
648,267
|
|
$
|
668,722
|
|
$
|
31,838
|
|
$
|
700,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Susan G. Riel, Executive Vice President Chief
Operating Officer of the Bank
|
|
$
|
243,101
|
|
$
|
9,000
|
|
$
|
750,000
|
|
$
|
648,267
|
|
$
|
617,951
|
|
$
|
31,838
|
|
$
|
649,789
|
|
(1)
|
The cost of this benefit is reflected under All Other Compensation
in the Summary Compensation Table, and the amount paid in respect of each
officer is reflected in the footnotes to that table.
|
(2)
|
Subject to limitation or elimination under ARRA.
|
(3)
|
Reflects the excess of the last trade price for the Companys common
stock on December 31, 2008 over the exercise or strike price of unvested
options and SARs, plus the last trade price of unvested shares of restricted
stock (assuming vesting of the maximum number of shares subject to the
award). Out of the money options and SARs have been excluded from the
calculation.
|
22
Grants of Plan-Based Awards
The following table presents information regarding awards made during
2008 to named executive officers under the Companys 2006 Stock Plan and Senior
Executive Incentive Plan.
Name
|
|
Grant Date
|
|
Estimated Future
Payouts Under Non-
Equity Incentive Plan
Awards
Target
|
|
All Other Stock
Awards: Number
of Shares of Stock
or Units
|
|
All Other Option
Awards: Number
of Securities
Underlying
Options(1)
|
|
Exercise or Base
Price of Option
Awards
|
|
Grant Date Fair
Value of Stock
and Option
Awards
|
|
Ronald D. Paul
|
|
1/16/2008
|
|
|
|
|
|
31,075
|
(2)
|
$
|
11.87
|
|
$
|
130,542
|
|
James H. Langmead
|
|
1/16/2008
|
|
$
|
55,913
|
|
|
|
5,500
|
|
$
|
11.87
|
|
$
|
16,682
|
|
Martha
Foulon-Tonat
|
|
1/16/2008
|
|
$
|
55,913
|
|
|
|
4,950
|
|
$
|
11.87
|
|
$
|
15,013
|
|
Thomas D. Murphy
|
|
1/16/2008
|
|
$
|
55,913
|
|
|
|
4,400
|
|
$
|
11.87
|
|
$
|
13,345
|
|
Susan G. Riel
|
|
1/16/2008
|
|
$
|
55,913
|
|
|
|
5,500
|
|
$
|
11.87
|
|
$
|
16,682
|
|
(1)
|
As adjusted for the 10% stock dividend paid on October 1, 2008.
|
(2)
|
Includes options to acquire 3,575 shares of common stock granted in
Mr. Pauls capacity as a director of the Company and Bank.
|
Under
the 2006 Stock Plan, the Company can make awards of stock options, stock
appreciation rights (SARs) and restricted stock to employees of the Company
and Bank, including all of the named executive officers. While Mr. Paul is
eligible for grants of SARs and restricted stock under the 2006 Stock Plan,
through 2008, he has received awards of stock options only, as a result of
negotiations between Mr. Paul and the Compensation Committee, and the
determination by the Compensation Committee that the equity portion of his
compensation should be linked to the increase in the market price of the
Companys common stock, which best reflects the creation of shareholder value,
and not narrower performance goals which while essential to long term
shareholder value, may not be rewarded in the market price of the common stock.
The
payouts under non-equity incentive plan awards reflected in the table represent
the maximum amount of formula payment which the named executive officer could
have earned with respect to 2008 performance under the Senior Executive Incentive
Plan if each of the performance targets established by the Board of Directors
in its capacity as compensation committee were achieved. The aggregate amount which could be earned
represented, in 2008, 23% of salary. A portion of the aggregate amount is
subject to the achievement of designated Company or divisional performance
targets. Each such portion is subject to
payment only if the target is met or exceeded in total, with no provision for
partial or graduated payments. The
targets were established with the expectation that the goals were stretch
goals, representing performance standards in excess of expected results.
Through 2008, Mr. Paul did not participate in the Senior Executive
Incentive Plan. The amounts paid
pursuant to the Senior Executive Incentive Plan in respect of 2008 are
reflected in the Summary Compensation Table above, and represented from 11% to
19% of base salary for the named officers.
Outstanding Equity Awards at
Fiscal Year-End
The following table sets forth, on an award by award basis, information
concerning all awards of stock options, SARs and restricted stock held by named
executive officers at December 31, 2008.
All options and SARs were granted with an exercise or base price of
100% of market value as determined in accordance with the applicable plan. The
number of shares subject to each award and the exercise or base price have been
adjusted to reflect all stock dividends, and stock splits effected after the
date of such award, but have not otherwise been modified.
23
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
|
|
Option
Exercise
Price
|
|
Option
Expiration
Date
|
|
Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested
|
|
Equity Incentive
Plan Awards:
Market or Payout
Value of
Unearned Shares,
Units or Other
Rights That Have
Not Vested(1)
|
|
Ronald D. Paul
|
|
2,032
|
(2)
|
|
|
$
|
3.0740
|
|
3/30/2010
|
|
|
|
|
|
|
|
2,032
|
(2)
|
|
|
$
|
3.0740
|
|
6/29/2010
|
|
|
|
|
|
|
|
2,032
|
(2)
|
|
|
$
|
2.9780
|
|
9/29/2010
|
|
|
|
|
|
|
|
2,032
|
(2)
|
|
|
$
|
3.2200
|
|
12/30/2010
|
|
|
|
|
|
|
|
1,912
|
(2)
|
|
|
$
|
3.2660
|
|
3/30/2011
|
|
|
|
|
|
|
|
1,055
|
(2)
|
|
|
$
|
5.9170
|
|
6/29/2011
|
|
|
|
|
|
|
|
1,009
|
(2)
|
|
|
$
|
6.1860
|
|
9/29/2011
|
|
|
|
|
|
|
|
1,145
|
(2)
|
|
|
$
|
5.4600
|
|
12/30/2011
|
|
|
|
|
|
|
|
619
|
(2)
|
|
|
$
|
6.4550
|
|
1/30/2012
|
|
|
|
|
|
|
|
619
|
(2)
|
|
|
$
|
7.0740
|
|
2/27/2012
|
|
|
|
|
|
|
|
620
|
(2)
|
|
|
$
|
8.4720
|
|
3/30/2012
|
|
|
|
|
|
|
|
619
|
(2)
|
|
|
$
|
8.2030
|
|
4/29/2012
|
|
|
|
|
|
|
|
619
|
(2)
|
|
|
$
|
8.3380
|
|
5/30/2012
|
|
|
|
|
|
|
|
619
|
(2)
|
|
|
$
|
7.8270
|
|
6/29/2012
|
|
|
|
|
|
|
|
619
|
(2)
|
|
|
$
|
6.0520
|
|
7/30/2012
|
|
|
|
|
|
|
|
619
|
(2)
|
|
|
$
|
6.7560
|
|
8/30/2012
|
|
|
|
|
|
|
|
620
|
(2)
|
|
|
$
|
6.4550
|
|
9/29/2012
|
|
|
|
|
|
|
|
619
|
(2)
|
|
|
$
|
6.6430
|
|
10/30/2012
|
|
|
|
|
|
|
|
619
|
(2)
|
|
|
$
|
6.7560
|
|
11/29/2012
|
|
|
|
|
|
|
|
620
|
(2)
|
|
|
$
|
7.3480
|
|
12/30/2012
|
|
|
|
|
|
|
|
1,191
|
(3)
|
2,384
|
(3)
|
$
|
11.8680
|
|
1/15/2013
|
|
|
|
|
|
|
|
619
|
(2)
|
|
|
$
|
7.5310
|
|
1/30/2013
|
|
|
|
|
|
|
|
619
|
(2)
|
|
|
$
|
7.9720
|
|
2/27/2013
|
|
|
|
|
|
|
|
620
|
(2)
|
|
|
$
|
7.3960
|
|
3/30/2013
|
|
|
|
|
|
|
|
619
|
(2)
|
|
|
$
|
7.3800
|
|
4/29/2013
|
|
|
|
|
|
|
|
619
|
(2)
|
|
|
$
|
7.3960
|
|
5/31/2013
|
|
|
|
|
|
|
|
620
|
(2)
|
|
|
$
|
8.0690
|
|
6/29/2013
|
|
|
|
|
|
|
|
619
|
(2)
|
|
|
$
|
7.3590
|
|
7/30/2013
|
|
|
|
|
|
|
|
619
|
(2)
|
|
|
$
|
7.7460
|
|
8/30/2013
|
|
|
|
|
|
|
|
620
|
(2)
|
|
|
$
|
8.1760
|
|
9/29/2013
|
|
|
|
|
|
|
|
619
|
(2)
|
|
|
$
|
9.3380
|
|
10/30/2013
|
|
|
|
|
|
|
|
619
|
(2)
|
|
|
$
|
9.2520
|
|
11/29/2013
|
|
|
|
|
|
|
|
4,206
|
|
|
|
$
|
9.5050
|
|
12/30/2013
|
|
|
|
|
|
|
|
620
|
(2)
|
|
|
$
|
9.5050
|
|
12/30/2013
|
|
|
|
|
|
|
|
44,616
|
(4)
|
|
|
$
|
9.5050
|
|
12/30/2013
|
|
|
|
|
|
|
|
6,811
|
(5)
|
26,189
|
(5)
|
$
|
17.0140
|
|
10/17/2016
|
|
|
|
|
|
|
|
|
|
27,500
|
(6)
|
$
|
11.8680
|
|
1/15/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martha Foulon-Tonat
|
|
|
|
2,492
|
(7)
|
$
|
17.6910
|
|
1/31/2009
|
|
|
|
|
|
|
|
|
|
4,468
|
(8)
|
$
|
15.2050
|
|
2/28/2010
|
|
|
|
|
|
|
|
6,506
|
(8)
|
|
|
$
|
3.1700
|
|
7/6/2010
|
|
|
|
|
|
|
|
9,109
|
(9)
|
|
|
$
|
5.5710
|
|
5/15/2011
|
|
|
|
|
|
|
|
4,647
|
(9)
|
|
|
$
|
5.4060
|
|
12/4/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
|
|
Option
Exercise
Price
|
|
Option
Expiration
Date
|
|
Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested
|
|
Equity Incentive
Plan Awards:
Market or Payout
Value of
Unearned Shares,
Units or Other
Rights That Have
Not Vested(1)
|
|
Martha Foulon-Tonat
|
|
5,112
|
(9)
|
|
|
$
|
7.4450
|
|
5/18/2013
|
|
|
|
|
|
|
|
9,295
|
(9)
|
|
|
$
|
9.9350
|
|
1/11/2014
|
|
|
|
|
|
|
|
9,295
|
(9)
|
|
|
$
|
10.8980
|
|
1/13/2015
|
|
|
|
|
|
|
|
1,649
|
(10)
|
3,301
|
(10)
|
$
|
11.8680
|
|
1/15/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
623
|
(11)
|
$
|
3,582
|
|
|
|
|
|
|
|
|
|
|
|
761
|
(12)
|
$
|
4,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James H. Langmead
|
|
9,295
|
(8)
|
|
|
$
|
11.0650
|
|
1/03/2015
|
|
|
|
|
|
|
|
|
|
1,972
|
(7)
|
$
|
17.6910
|
|
1/31/2009
|
|
|
|
|
|
|
|
|
|
4,468
|
(8)
|
$
|
15.2050
|
|
2/28/2010
|
|
|
|
|
|
|
|
1,833
|
(10)
|
3,667
|
(10)
|
$
|
11.8680
|
|
1/15/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
537
|
(11)
|
$
|
3,582
|
|
|
|
|
|
|
|
|
|
|
|
761
|
(12)
|
$
|
4,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas D. Murphy
|
|
9,759
|
(9)
|
|
|
$
|
3.0740
|
|
12/14/2009
|
|
|
|
|
|
|
|
|
|
2,286(7
|
)
|
$
|
17.6910
|
|
1/31/2009
|
|
|
|
|
|
|
|
|
|
4,468(8
|
)
|
$
|
15.2050
|
|
2/28/2010
|
|
|
|
|
|
|
|
15,615
|
(9)
|
|
|
$
|
5.5710
|
|
5/15/2011
|
|
|
|
|
|
|
|
6,506
|
(9)
|
|
|
$
|
5.4060
|
|
12/1/2011
|
|
|
|
|
|
|
|
8,450
|
(9)
|
|
|
$
|
11.0882
|
|
1/10/2013
|
|
|
|
|
|
|
|
5,112
|
(8)
|
|
|
$
|
7.4450
|
|
5/18/2013
|
|
|
|
|
|
|
|
9,295
|
(8)
|
|
|
$
|
9.4140
|
|
1/3/2014
|
|
|
|
|
|
|
|
9,295
|
(8)
|
|
|
$
|
10.8980
|
|
1/13/2015
|
|
|
|
|
|
|
|
1,466
|
(10)
|
2,934
|
(10)
|
$
|
11.8680
|
|
1/15/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
623
|
(11)
|
$
|
3,832
|
|
|
|
|
|
|
|
|
|
|
|
761
|
(12)
|
$
|
4,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Susan G. Riel
|
|
|
|
2,286(7
|
)
|
$
|
17.6910
|
|
1/31/2009
|
|
|
|
|
|
|
|
|
|
4,468(8
|
)
|
$
|
15.2050
|
|
2/28/2010
|
|
|
|
|
|
|
|
6,506
|
(9)
|
|
|
$
|
3.1700
|
|
7/6/2010
|
|
|
|
|
|
|
|
9,109
|
(9)
|
|
|
$
|
5.5710
|
|
5/15/2011
|
|
|
|
|
|
|
|
4,647
|
(9)
|
|
|
$
|
5.4060
|
|
12/4/2011
|
|
|
|
|
|
|
|
5,112
|
(9)
|
|
|
$
|
7.4450
|
|
5/18/2013
|
|
|
|
|
|
|
|
9,295
|
(9)
|
|
|
$
|
9.9350
|
|
1/11/2014
|
|
|
|
|
|
|
|
9,295
|
(9)
|
|
|
$
|
10.8980
|
|
1/13/2015
|
|
|
|
|
|
|
|
1,833
|
(10)
|
3,667
|
(10)
|
$
|
11.8680
|
|
1/15/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
623
|
(11)
|
$
|
3,832
|
|
|
|
|
|
|
|
|
|
|
|
761
|
(12)
|
$
|
4,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Based on the $5.75 closing price of the common stock on
December 31, 2008.
|
(2)
|
Vested immediately upon grant.
|
(3)
|
Represents grants of stock options pursuant to Companys 2006 Stock
Plan in Mr. Pauls capacity as a director. The grant vests in three
annual installments commencing on the date of grant.
|
25
(4)
|
Represents grant of stock options pursuant to Companys 1998 Stock
Option Plan. Vest in installments, commencing with an installment of 5,450
shares immediately upon grant,
three annual installments of 10,518 shares on January 15, 2004
through 2006 and a final installment of 8,848 shares on January 15,
2007.
|
(5)
|
Represents grant of stock options pursuant to Companys 2006 Stock
Plan. Vests in installments, commencing with an installment of 933 shares on
January 1, 2007, five annual installments of 5,877 shares on
January 1, 2008 through 2012 and a final installment of 2,679 shares on
January 1, 2013.
|
(6)
|
Represents grants of stock options pursuant to Companys 2006 Stock
Plan in Mr. Pauls capacity as an officer. The grant vest installments,
commencing with an installment of 4,421 shares on January 1, 2016 and
three annual installments of 15,772 shares on January 1, 2017 through
2019.
|
(7)
|
Represents grant of SARs pursuant to the Companys 2006 Stock Plan.
Such grant vests in its entirety on January 1, 2009 if the grantee is
continuously employed by the Company through such date. These awards expired
without the issuance of any shares.
|
(8)
|
Represents grant of SARs pursuant to the Companys 2006 Stock Plan.
Such grant vests in its entirety on February 1, 2010 if the grantee is
continuously employed by the Company through such date.
|
(9)
|
Represents grant of stock options pursuant to the Companys 1998 Stock
Option Plan. All options have a term of 10 years from the date of grant.
Except as otherwise indicated, such awards vested in two equal installments,
the first on the date of grant and the second on the first anniversary thereof.
|
(10)
|
Represents grants of stock options pursuant to the Companys 2006
Stock Plan. Vests in five substantially equal annual installments, commencing
on the first anniversary of the date of grant.
|
(11)
|
Represents threshold level grant of performance based restricted stock
pursuant to the Companys 2006 Stock Plan. Vests, subject to satisfaction of
designated performance conditions, on January 31, 2009. These awards
expired without vesting.
|
(12)
|
Represents threshold level grant of performance based restricted stock
pursuant to the Companys 2006 Stock Plan. Vests, subject to satisfaction of
designated performance conditions, on February 28, 2010.
|
Options
Exercised and Stock Vested
The following
table sets forth information regarding options exercised by the named executive
officers during 2008, and the aggregate amount realized upon such exercises,
based on the difference between the closing market value on the exercise date
and the exercise or base price.
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Number of Shares
Acquired on
Exercise
|
|
Value Realized on
Exercise
|
|
Number of Shares
Acquired on
Vesting
|
|
Value Realized on
Vesting
|
|
Ronald D. Paul
|
|
|
|
|
|
|
|
|
|
Martha Foulon-Tonat
|
|
9,759
|
(1)
|
$
|
86,665
|
|
|
|
|
|
James H. Langmead
|
|
|
|
|
|
|
|
|
|
Thomas D. Murphy
|
|
|
|
|
|
|
|
|
|
Susan G. Riel
|
|
9,759
|
(1)
|
$
|
77,349
|
|
|
|
|
|
(1) Adjusted
to reflect the 10% stock dividend paid on October 1, 2008.
Employee Benefit Plans.
The Bank
provides a benefit program which includes health and dental insurance, life and
long term and short term disability insurance and a 401(k) plan under
which the Company makes matching contributions up to 3% of an employees
salary, for all officers and employees working 1,000 hours or more in a
calendar year.
Equity Compensation Plans.
The
Company maintains two equity compensation plans, the 1998 Stock Option Plan
(the 1998 Plan), adopted by shareholders at the 1999 annual meeting, and the
2006 Stock Plan (the 2006 Stock Plan), adopted by the shareholders at the
2006 annual meeting. The purpose of each
plan is to attract, retain, and motivate key officers, employee and directors
of the Company and the Bank by providing them with a stake in the success of
the Company as measured by the value of its shares. In connection with the acquisition of
Fidelity, the Company assumed Fidelitys option plans. Options to purchase an aggregate of 215,585
shares of common stock (as adjusted) were assumed in connection with the
acquisition. No further options can be granted under Fidelitys plans.
Under the 1998 Plan, 1,634,107 shares of common stock (as adjusted for
the 25% stock split in the form of a dividend paid on March 31, 2000, the
40% stock split in the form of a dividend paid on June 15, 2001, the 30%
stock splits in the form of stock dividends paid on February 28, 2005 and July 5,
2006 and the 10% stock dividend on October 1, 2008), were available for
issuance upon the exercise of incentive stock options (ISOs) or non-incentive
stock options (Non-ISOs) granted to key employees, and warrants (Warrants)
and other Non-ISOs granted to directors.
26
No further options
may be granted under the 1998 Plan, which was terminated upon approval by
shareholders of the 2006 Stock Plan.
Under the 2006 Stock Plan, an aggregate of 715,000 shares of common
stock (as adjusted) are available for issuance upon the exercise of incentive
stock options, nonincentive stock options and SARs, and the award of shares of
restricted stock to such employees as the Committee may designate, and may
grant Non-ISOs to directors and advisory board members of the Company, the Bank,
and their affiliates. In the event of any merger, consolidation,
recapitalization, reorganization, reclassification, stock dividend, split-up,
combination of shares or similar event in which the number or kind of shares is
changed without receipt or payment of consideration by the Company, the number
and kind of shares of stock as to which options, SARs and restricted stock may
be awarded under the 2006 Stock Plan, the affected terms of all outstanding
options, SARs and shares of restricted stock, and the aggregate number of
shares of common stock remaining available for grant under the 2006 Stock Plan
will be adjusted. At the meeting,
shareholders are being asked to approve an amendment to the 2006 Stock Plan
increasing the number of shares subject to the plan by 500,000.
The 2006 Stock Plan is administered by a committee (the Committee),
appointed by the Board of Directors of the Company, consisting of not less than
three (3) members of the Board. Members of the Committee must be
independent within the meaning of the listing requirements of NASDAQ, may not
be employees, and serve at the pleasure of the Board of Directors. The members of the Compensation Committee are
also designated as the Stock Option Committee, with Mr. Weinstein serving
as Chairman.
The 2006 Stock
Plan has a term of ten years from May 26, 2006, its effective date, after
which date no awards may be granted. The
maximum term for an option or SAR is ten years from its date of grant, except
that the maximum term of an ISO may not exceed five years if the optionee owns
more than 10% of the common stock on the date of grant. The expiration of the
2006 Stock Plan, or its termination by the Committee, will not affect any award
then outstanding.
The exercise price
of options under the 2006 Stock Plan may not be less than 100% of the fair
market value of the common stock on the date of grant. In the case of an optionee who owns more than
10% of the outstanding common stock on the date of grant, such option price may
not be less than 110% of fair market value of the shares. The base price of
SARs may not be less than 100% of the fair market value of the common stock on
the date of grant. If the common stock
is listed on a national securities exchange (including the Nasdaq Stock Market)
on the date of grant, then the market value per share will be not less than the
average of the highest and lowest selling price. In the event that the fair
market value per share of the common stock falls below the exercise price of
previously granted options, the Committee will have the authority, with the
consent of the optionee, to cancel outstanding options and to issue new options
with an exercise price equal to the then current fair market price per share of
the common stock, provided that no such repricing will occur without
ratification or approval by the shareholders.
Restricted stock is an
award of shares of common stock that is subject to forfeiture, restrictions
against transfer, meeting specific corporate or individual performance or
achievement standards or goals, or other conditions or restrictions set forth
in an award agreement.
The
Committee has discretion at the time of making a restricted stock grant to
determine a period of up to five years during which the shares granted will be
subject to restrictions, and the conditions that must be satisfied in order for
the shares of restricted stock to become unrestricted (i.e., vested and
nonforfeitable). For example, the Committee may condition vesting upon a
recipients continued employment or upon the recipients attainment of specific
corporate, divisional, or individual performance or achievement standards or
goals. However, the minimum vesting period for restricted stock is three years
if the vesting is based solely on the passage of time and continued employment,
although vesting may occur ratably over such period; and the minimum
measurement date for vesting of restricted stock based upon performance
criteria is one year. At the meeting, shareholders are being asked to approve
and amendment to the 2006 Stock Plan to authorize the issuance of restricted
stock to senior executive officers having terms which comply with the
requirements of the ARRA.
Until a recipients
interest vests, restricted stock is nontransferable and forfeitable.
Nevertheless, the recipient may be entitled to vote the restricted stock and to
receive dividends and other distributions made with respect to restricted stock
grants that are issued subject to forfeiture in the event that the vesting
conditions are not met, as opposed to shares that are issued only upon
satisfaction of the conditions. To the extent that a recipient becomes vested
in restricted stock and has satisfied applicable income tax withholding
obligations, the Company will deliver unrestricted
27
shares of common stock to the recipient. At the end of
the restriction period, the recipient will forfeit to the Company any issued
shares of restricted stock as to which the recipient did not earn a vested
interest during the restriction period, i.e. where the performance based
conditions are not met.
Change in
Control.
Notwithstanding
the provisions of any option, SAR or restricted stock award which provide for
its exercise or vesting in installments or subject to conditions, all awards
will be immediately exercisable and fully vested upon the occurrence of a
change in control. At the time of a
change in control that does not constitute a transaction, the participant
shall, at the discretion of the Committee, be entitled to receive cash in an
amount equal to the excess of the fair market value of the common stock subject
to an option or SAR over the exercise price of such shares, in exchange for the
cancellation of such options and SARs by the optionee. Notwithstanding the previous sentence, in no
event may an option or SAR be cancelled in exchange for cash, within the
six-month period following the date of its grant.
In the event of a change
in control that is a transaction, all awards of options, SARs and restricted
stock must be surrendered, and with respect to each award surrendered, the
Board will in its sole and absolute discretion determine whether the holder of
the surrendered award will receive: (1) an award for the number and kind
of shares into which each outstanding share (other than shares held by
dissenting shareholders) is changed or exchanged, together with an appropriate
adjustment to the exercise price; (2) the number and kind of shares into
which each outstanding share (other than shares held by dissenting
shareholders) is changed or exchanged in the transaction that are equal in
market value to the excess of the market value on the date of the transaction
of the shares subject to the option or SAR, over the exercise price; or (3) a
cash payment (from the Company or the successor corporation) in an amount equal
to the excess of the market value on the date of the transaction of the shares
subject to the option or SAR over the exercise price.
For purposes of
the 2006 Stock Plan, change in control means any one of the following events:
(1) the acquisition of ownership, holding or power to vote more than 50%
of the Banks or Companys voting stock, (2) the acquisition of the power
to control the election of a majority of the Banks or Companys directors, (3) the
exercise of a controlling influence over the management or policies of the Bank
or the Company by any person or by persons acting as a group (within the
meaning of Section 13(d) of the Securities Exchange Act of 1934), or (4) the
failure of Continuing Directors to constitute at least two-thirds of the
Board of Directors of the Company or the Bank (the Company Board) during any
period of two consecutive years. For purposes of this Plan, Continuing
Directors shall include only those individuals who were members of the Company
Board at the Effective Date and those other individuals whose election or
nomination for election as a member of the Company Board was approved by a vote
of at least two-thirds of the Continuing Directors then in office. The decision of the Committee as to whether a
change in control has occurred shall be conclusive and binding. Transaction
means (i) the liquidation or dissolution of the Company, (ii) a
merger or consolidation in which the Company is not the surviving entity, or (iii) the
sale or disposition of all or substantially all of the Companys assets. No
adjustment upon a change in control, a transaction or otherwise may be made
in such a manner as to constitute a modification, within the meaning of Section 424(h) of
the Code, of outstanding ISOs. If, by
reason of any such adjustments, an optionee becomes entitled to new,
additional, or different shares of stock or securities, such new, additional,
or different shares of stock or securities shall thereupon be subject to all of
the conditions and restrictions which were applicable to the shares pursuant to
the option before the adjustment was made.
As of December 31, 2008, the Company had options, SARs which may
only be settled by the issuance of stock, and restricted stock awards with
respect to an aggregate of 1,029,067 shares of common stock issued and
outstanding under all equity compensation plans. Subsequent to December 31, 2008, options
to purchase 54,000 shares of common stock were issued to Mr. Pincus, and
options and restricted stock were granted to the executive officers as set
forth below:
Name
|
|
Options Granted
|
|
Restricted Stock Granted
|
|
Ronald D. Paul
|
|
51,737
|
|
30,763
|
|
Martha
Foulon-Tonat
|
|
21,200
|
|
|
|
James H.
Langmead
|
|
20,200
|
|
|
|
Thomas D. Murphy
|
|
9,400
|
|
|
|
Susan G. Riel
|
|
32,000
|
|
|
|
All executive
officers as group (8 persons)
|
|
204,937
|
|
30,763
|
|
28
All of the options granted subsequent to December 31, 2008 have an
exercise price of $6.34 per share and have a ten year term. All of the options,
other than those granted to Mr. Paul, vest in five substantially equal
annual installments, commencing on the first anniversary of the date of
grant. Mr. Pauls options vest as
follows: 4,421 on January 1, 2016 and 15,772 on January 1, 2017
through 2019. The restricted stock
granted to Mr. Paul will vest over five years.
At March 27, 2009, 32,517 shares of common stock remained
available for issuance pursuant to the 2006 Stock Plan.
Certain Relationships and Related Transactions
The Bank has had, and expects to have in the future, banking
transactions in the ordinary course of business with some of its and the
Companys directors, officers, and employees and their associates. In the past, 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
collectability or present other unfavorable features. Loans to insiders require approval by the
Board of Directors, with any interested director not participating. The Company also applies the same standards
to any other transaction with an insider. Additionally, loans and other related
party transactions involving Company directors must be reviewed and approved by
the Audit Committee.
The maximum aggregate amount of loans (including lines of credit) to
officers, directors and affiliates of the Company and Bank during the year
ended December 31, 2008 amounted to $24.6 million, representing
approximately 17.3% of the Companys total shareholders equity at December 31,
2008. In the opinion of the Board of
Directors, the terms of these loans are no less favorable to the Bank than
terms of the loans from the Bank to unaffiliated parties. On December 31, 2008, $242.6 million of
loans were outstanding to individuals who, during 2008, were officers,
directors or affiliates of the Company and Bank. At the time each loan was made, management
believed that the loan involved no more than the normal risk of collectability
and did not present other unfavorable features.
None of such loans were classified as Substandard, Doubtful or Loss.
The Bank leases certain office space, at a current monthly rental of
$46,716, excluding certain pass through expenses, from two limited liability
companies in which a trust for the benefit of Mr. Pauls children has an
85% interest in the first company and a 51% interest in the second company.
Mr. Rogers
is a partner in the law firm Shulman, Rogers, Gandal, Pordy & Ecker,
P.A. which has provided, and continues to provide, legal services to the
Company and its subsidiaries. During
2008 and 2007, the Company and its subsidiaries paid aggregate fees of
approximately $428,215 and $21,372 to that firm
.
The Bank has obtained certain deposits through title company clients in
which Mr. Soto, a director of the Bank has a direct interest, and for
which a broker fee of 0.50% of average deposits is paid to him monthly in
arrears. During 2008 and 2007, approximately $110 thousand and $28 thousand in
broker fees was paid under this arrangement.
Mr. Goodman is President of The Goodman, Gable, Gould Company, a
public insurance adjusting firm, which represents the Bank, on a contingent fee
basis, in connection with insurance claims in respect of a charged off
loan. No amounts were paid to that firm
during 2008 or 2007.
Ryan Riel, the adult son of Ms. Riel, is employed by the Bank as a
loan officer. During 2008 and 2007, Mr. Riels
compensation was $125,000 and $120,000, respectively, plus incentive bonus
payments and awards of stock options. Mr. Riels
compensation is determined on the same basis as all other comparable employees,
and is determined by the Bank Compensation Committee, without any participation
or input by Ms. Riel.
29
PROPOSAL 2 - AMENDMENT OF THE
2006 STOCK PLAN TO
INCREASE THE NUMBER OF SHARES
SUBJECT TO THE PLAN
At the meeting, the
shareholders are being asked to approve an amendment to the Companys 2006
Stock Plan to increase the number of shares of common stock reserved for
issuance under the plan, and the number of shares of common stock for which
awards may be granted, by 500,000 to an aggregate of 1,215,000. As of the date hereof, there are only 32,517
shares of common stock currently available for issuance under the 2006 Stock
Plan.
The purpose of the 2006
Stock Plan is to advance the interests of the Company by providing directors
and selected employees of the Bank, the Company, and their affiliates with the
opportunity to acquire shares of common stock, through awards of options,
restricted stock and stock appreciation rights. By encouraging such stock
ownership, the Company seeks to attract, retain and motivate the best available
personnel for positions of substantial responsibility and to provide additional
incentive to directors and employees of the Company, the Bank and any affiliate
to promote the success of the business as measured by the value of its shares,
and to increase the commonality of interests among directors, key employees and
other shareholders.
Reasons for the Amendment
Since adoption of the
2006 Stock Plan, awards of stock options, restricted stock and SARs with
respect to an aggregate of 682,483 shares have been granted to directors,
officers and employees of the Company and the Bank. As of the date hereof, only
32,517 shares remain available for issuance under the 2006 Stock Plan. In light
of the increased size of the Company and increased number of employees as a
result of the acquisition completed last year, the number of shares available
for awards under the plan is insufficient to meet the Companys goal of
incentivizing employees by aligning their interests with those of
shareholders. Additionally, under the
provisions of ARRA, the Company will be required to issue shares of restricted
stock to certain officers and employees, in lieu of cash bonuses it might
otherwise pay, as long as the Companys preferred stock or common stock are
held by Treasury or another agency of the federal government under the CPP.
The Board of Directors
believes that the availability of an equity based compensation program intended
to provide directors, officers and key employees with at least a moderate
portion of their overall compensation package, and that will enable them to
participate in the growth and prosperity of the Company as reflected in the
stock price, is necessary in order to attract and retain high caliber
directors, officers and employees in key positions. The Board of Directors also
believes that such a plan is necessary to align the interests of such persons
with the interests of the Companys shareholders, which will increase their
incentive to improve the Companys performance.
As such, the Board of Directors believes that the authorization of
additional shares for issuance under the 2006 Stock Plan is necessary in order
to permit the Companys continued growth and profitability.
A restated copy of the
2006 Stock Plan, as proposed to be amended at the meeting, is included as
Appendix A to this proxy statement. All
descriptions of the provisions of the 2006 Stock Plan, as proposed to be
amended, are qualified by reference to the full text of the plan.
If the amendment to the
2006 Stock Plan is approved, an aggregate of 532,517 shares of common stock
will be available for future issuance of equity based awards. The total number of shares subject to
issuance under outstanding awards under the 1998 Plan, the assumed Fidelity
option plans and the 2006 Stock Plan, and future awards pursuant to the 2006
Stock Plan will be 1,561,584, or approximately 12.25% of the outstanding common
stock as of March 27, 2009.
Description
of the 2006 Stock Plan
Administration.
The 2006 Stock Plan is
administered by a committee (the Committee), appointed by the Board of
Directors of the Company, consisting of not less than three (3) members of
the Board. Members of the Committee must be Independent Directors within the
meaning of the listing requirements of Nasdaq, and Non-Employee Directors, and
serve at the pleasure of the Board of Directors. In the absence at any time of a duly
appointed Committee, the 2006 Stock Plan will be administered by the members of
the Board of Directors who are Independent Directors.
30
The Committee has
discretion and authority to select participants and grant awards, to determine
the form and content of any awards made under the 2006 Stock Plan, to interpret
the 2006 Stock Plan, to prescribe, amend and rescind rules and regulations
relating to the 2006 Stock Plan, and to make all other decisions necessary or
advisable in connection with administering the 2006 Stock Plan, including
establishing the corporate divisional or individual performance or achievement
standards on which an award may be contingent.
All decisions, determinations and interpretations of the Committee are
final and conclusive on all persons affected thereby. Members of the Committee will be indemnified
to the full extent permissible under the Companys articles of incorporation
and bylaws in connection with any claims or other actions relating to any
action taken under the 2006 Stock Plan.
As of the date hereof, the Committee consists of all of the members of
the Board of Directors of the Company who are independent within the meaning of
NASD Rule 4200(a)(15).
Eligible
Persons; Types of Awards.
Under
the 2006 Stock Plan, the Committee may grant incentive stock options (ISOs),
non-incentive stock options (Non-ISOs and together with ISOs, Options),
stock appreciation rights (SARs) and shares of restricted stock (Restricted
Stock) to such employees as the Committee may designate, and may grants
Non-ISOs to directors and advisory board members of the Company, the Bank, and
their affiliates.
Financial
Effects to the Company of Grants.
The
Company will receive no monetary consideration for the granting of Options
under the 2006 Stock Plan. It will
receive no monetary consideration other than the option exercise price for
shares of common stock issued to optionees upon the exercise of their
Options. It will receive no monetary
consideration for the exercise of SARs or the issuance of Restricted Stock.
The Company is
required to accrue compensation expense for the grant of options or other
equity based instruments such as SARs and Restricted Stock. Generally, the measurement date of the
expense is the date of grant, subject to adjustment over the vesting or performance
period for the award.
Shares
Available for Grants.
If
the amendment increasing the number of shares subject to the 2006 Stock Plan is
approved, the 2006 Stock Plan will reserve 1,215,000 shares of common stock for
issuance upon the exercise of Options, SARs and the grant of Restricted Stock,
of which 682,483 are currently outstanding.
In the event of any merger, consolidation, recapitalization,
reorganization, reclassification, stock dividend, split-up, combination of
shares or similar event in which the number or kind of shares is changed
without receipt or payment of consideration by the Company, the number and kind
of shares of stock as to which Options, SARs and Restricted Stock may be
awarded under the 2006 Stock Plan, the affected terms of all outstanding
Options, SARs and shares of Restricted Stock, and the aggregate number of
shares of common stock remaining available for grant under the 2006 Stock Plan
will be adjusted. Generally, the number of shares as to which SARs are granted
are charged against the aggregate number of shares available for grant under
the 2006 Stock Plan, provided that, in the case of a SAR granted in conjunction
with an Option, under circumstances in which the exercise of the SAR results in
termination of the option and vice versa, only the number of shares of common
stock subject to the option shall be charged against the aggregate number of
shares of common stock remaining available under the 2006 Stock Plan. If awards
should expire, become unexercisable, or be forfeited for any reason without
having been exercised or become vested in full, the shares of common stock
subject to such awards will be available for the grant of additional awards,
unless the 2006 Stock Plan has been terminated. Shares issued upon the exercise
of Options or SARS or in respect of Restricted Stock awards may be either
authorized but unissued shares or, to the extent permitted by Maryland law,
treasury stock.
Duration
of the 2006 Stock Plan and Grants.
The
term of the 2006 Stock Plan extends until May 26, 2016, after which date
no awards may be granted. The maximum
term for an Option or SAR is ten years from its date of grant, except that the
maximum term of an ISO may not exceed five years if the optionee owns more than
10% of the common stock on the date of grant.
The expiration of the 2006 Stock Plan, or its termination by the
Committee, will not affect any award then outstanding.
Repricing.
No awards under the 2006 Stock Plan may be
repriced or exchanged for awards with lower exercise prices without the
approval of shareholders.
Options.
The exercise price of
Options may not be less than 100% of the fair market value of the common stock
on the date of grant. In the case of an
optionee who owns more than 10% of the outstanding common stock on the date of
grant, such option price may not be less than 110% of fair market value of the
shares. As required by federal tax
31
laws, to the extent that
the aggregate fair market value (determined when an ISO is granted) of the
common stock with respect to which ISOs are exercisable by an optionee for the
first time during any calendar year (under all plans of the Company and of any
subsidiary) exceeds $100,000, the Options will be treated as Non-ISOs, and not
as ISOs. In the event that the fair
market value per share of the common stock falls below the exercise price of
previously granted Options, the Committee will have the authority, with the
consent of the optionee, to cancel outstanding Options and to issue new Options
with an exercise price equal to the then current fair market price per share of
the common stock, provided that no such repricing will occur without
ratification or approval by the shareholders.
If the common
stock is listed on a national securities exchange (including the Nasdaq
National Market or Nasdaq Capital Market) on the date in question, then the
market value per share will be not less than the average of the highest and
lowest selling price on such exchange on such date, or if there were no sales
on such date, then the exercise price will be not less than the mean between
the bid and asked prices on such date. If the common stock is traded otherwise
than on a national securities exchange on the date in question, then the market
value per share will be not less than the mean between the bid and asked price
on such date, or, if there is no bid and asked price on such date, then on the
next prior business day on which there was a bid and asked price. If no such bid and asked price is available,
then the market value per share will be its fair market value as determined by
the Committee, in its sole and absolute discretion.
SARs.
A SAR is a right that entitles the holder to
receive, as the Committee prescribes in the grant, all or a percentage of the
difference between (i) the fair market value of the shares of common stock
subject to the SAR at the time of its exercise, and (ii) the fair market
value of such shares at the time the SAR was granted (or, in the case of SARs
granted in tandem with options, the exercise price). This difference is payable
in cash or common stock or a combination of cash and stock, as designated by
the Committee. The exercise price as to any particular SAR may not be less than
the fair market value of the optioned shares on the date of grant. A SAR may be
granted in tandem with all or part of any Option granted under the 2006 Stock
Plan or without any relationship to any Option. A SAR granted in tandem with an
ISO must expire no later than the ISO, must have the same exercise price as the
ISO and may be exercised only when the ISO is exercisable and when the fair
market value of the shares subject to the ISO exceeds the exercise price of the
ISO. For SARs granted in tandem with options, the optionees exercise of the
SAR cancels the right to exercise the option, and vice versa.
Exercise of Options and SARs.
The exercise of Options and
SARs will be subject to such terms and conditions as are established by the
Committee in a written agreement between the Committee and the optionee. In the absence of Committee action to the
contrary: (A) an otherwise unexpired ISO shall cease to be exercisable
upon (i) an employees termination of employment for just cause (as
defined in the 2006 Stock Plan), (ii) the date three months after an
employee terminates service for a reason other than just cause, death, or
disability, or (iii) the date one year after an employee terminates
service due to disability, or two years after termination of such service due
to his death, and in each case such shorter period as may be set forth in an
award; (B) an unexpired Non-ISO shall be exercisable at any time (but not
later than the date on which the Non-ISO would otherwise expire), except where
the optionees service with the Company terminates as a result of just cause
or where a director optionee is removed from the board of directors on which he
or she serves, in which case Non-ISO will terminate on the date of termination
or removal, as the case may be. Notwithstanding the provisions of any Option
which provides for its exercise in installments as designated by the Committee,
an Option will become immediately exercisable upon the optionees death or
permanent and total disability. Notwithstanding the provisions of any SAR, upon
the death, disability or retirement of the holder of a SAR after achieving the
age of 65 and after five years of continuous service: (A) a SAR that is
not a performance based award and that provides for its vesting or exercise in
installments or at a future date as designated by the Committee, will be
exercisable for that portion of the award as bears the same relation to the
total amount of the award as the period of service from the date of grant to
the date of death, disability or retirement bears to the period from the date
of grant to original date of vesting or exercisability, and (B) a SAR that
is a performance based award, may be exercised for that portion of the award as
bears the same relationship to the achievement in respect of the performance based
award standards or conditions, as determined by the Committee in its sole
discretion. In no event, however, will any Option or SAR be exercisable after
its expiration date, as to fractional shares of common stock or prior to the
holders satisfaction of any income tax withholding requirements.
A participant may
exercise Options or SARs, subject to provisions regarding their termination and
limitations on their exercise, only by (i) written notice of intent to
exercise with respect to a specified number of shares of common
32
stock, and (ii) payment
to the Company (contemporaneously with delivery of such notice) in cash, in
common stock, or a combination of cash and common stock, of the amount of the
exercise price for the number of shares with respect to which the Option or SAR
is then being exercised. Common stock
used in full or partial payment of the exercise price for Options or SARs will
be valued at its market value at the date of exercise. Shares acquired from the Company within six
months of an exercise may generally not be used to pay the exercise price.
Restricted Stock.
Restricted Stock is an award of shares of
common stock that is subject to forfeiture, restrictions against transfer, meeting
specific corporate, individual or individual performance or achievement
standards or goals, or other conditions or restrictions set forth in an award
agreement.
The Committee has discretion at
the time of making a Restricted Stock grant to determine a period of up to five
years during which the shares granted will be subject to restrictions, and the
conditions that must be satisfied in order for the shares of restricted stock
to become unrestricted (i.e., vested and nonforfeitable). For example, the Committee
may condition vesting upon a recipients continued employment or upon the
recipients attainment of specific corporate, divisional, or individual
performance or achievement standards or goals. However, the minimum vesting
period for Restricted Stock is three years if the vesting is based solely on
the passage of time and continued employment, although vesting may occur
ratably over such period; and the minimum measurement date for vesting of
restricted stock based upon performance criteria is one year. The Committee
shall determine the percentage of the award of restricted stock which shall
vest in the event of death, disability, or retirement prior to the expiration
of the restriction period or the satisfaction of the restrictions applicable to
an award of restricted stock. Neither the Committee nor the Board will have the
authority, without shareholder approval, to accelerate the vesting period of
Restricted Stock other than in the event of a change-in-control of the Company
or the death, disability, retirement, or termination of employment of the
participant.
Until a recipients
interest vests, Restricted Stock is nontransferable and forfeitable.
Nevertheless, the recipient may be entitled to vote the Restricted Stock and to
receive dividends and other distributions made with respect to Restricted Stock
grants that are issued subject to forfeiture in the event that the vesting
conditions are not met, as opposed to shares that are issued only upon
satisfaction of the conditions. To the extent that a recipient becomes vested
in Restricted Stock and has satisfied applicable income tax withholding
obligations, the Company will deliver unrestricted shares of common stock to
the recipient. At the end of the restriction period, the recipient will forfeit
to the Company any issued shares of Restricted Stock as to which the recipient
did not earn a vested interest during the restriction period, i.e. where the
performance based conditions are not met.
Separately,
the shareholders are being asked to vote on an amendment to the 2006 Stock Plan
that will broaden the authority to grant Restricted Stock in order to enable
the Company to make restricted stock grants in compliance with ARRA. See Proposal 3.
Change in
Control.
Notwithstanding
the provisions of any Option, SAR or Restricted Stock award which provide for
its exercise or vesting in installments or subject to conditions, all awards
will be immediately exercisable and fully vested upon the occurrence of a
change in control. At the time of a
change in control that does not constitute a transaction, the participant
shall, at the discretion of the Committee, be entitled to receive cash in an
amount equal to the excess of the fair market value of the common stock subject
to an Option or SAR over the exercise price of such shares, in exchange for the
cancellation of such Options and SARs by the optionee. Notwithstanding the previous sentence, in no
event may an Option or SAR be cancelled in exchange for cash, within the
six-month period following the date of its grant.
In the event of a change
in control that is a transaction, all awards of Options, SARs and Restricted
Stock must be surrendered, and with respect to each award surrendered, the
Board will in its sole and absolute discretion determine whether the holder of
the surrendered award will receive: (1) an award for the number and kind
of shares into which each outstanding share (other than shares held by
dissenting shareholders) is changed or exchanged, together with an appropriate
adjustment to the exercise price; (2) the number and kind of shares into
which each outstanding share (other than shares held by dissenting
shareholders) is changed or exchanged in the transaction that are equal in
market value to the excess of the market value on the date of the transaction
of the shares subject to the Option or SAR, over the exercise price; or (3) a
cash payment (from the Company or the successor corporation) in an amount equal
to the excess of the market value on the date of the transaction of the shares
subject to the Option or SAR over the
exercise price.
For purposes of
the 2006 Stock Plan, change in control means any one of the following events:
(1) the acquisition of ownership, holding or power to vote more than 50%
of the Banks or Companys voting stock, (2) the
33
acquisition of the power
to control the election of a majority of the Banks or Companys directors, (3) the
exercise of a controlling influence over the management or policies of the Bank
or the Company by any person or by persons acting as a group (within the
meaning of Section 13(d) of the Securities Exchange Act of 1934), or (4) the
failure of Continuing Directors to constitute at least two-thirds of the
Board of Directors of the Company or the Bank (the Company Board) during any
period of two consecutive years. For purposes of this Plan, Continuing
Directors shall include only those individuals who were members of the Company
Board at the Effective Date and those other individuals whose election or
nomination for election as a member of the Company Board was approved by a vote
of at least two-thirds of the Continuing Directors then in office. The decision of the Committee as to whether a
change in control has occurred shall be conclusive and binding. Transaction
means (i) the liquidation or dissolution of the Company, (ii) a
merger or consolidation in which the Company is not the surviving entity, or (iii) the
sale or disposition of all or substantially all of the Companys assets. No
adjustment upon a change in control, a transaction or otherwise may be made
in such a manner as to constitute a modification, within the meaning of Section 424(h) of
the Code, of outstanding ISOs. If, by
reason of any such adjustments, an optionee becomes entitled to new,
additional, or different shares of stock or securities, such new, additional,
or different shares of stock or securities shall thereupon be subject to all of
the conditions and restrictions which were applicable to the shares pursuant to
the Option before the adjustment was made.
Although these
provisions are included in the 2006 Stock Plan primarily for the protection of
an employee-participant in the event of a change in control of the Company,
they may also be regarded as having a takeover defensive effect, which may
reduce the Companys vulnerability to hostile takeover attempts and certain
other transactions which have not been negotiated with and approved by the
Board of Directors.
Restrictions
on Transferability.
Options,
SARs and Restricted Stock may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws of
descent and distribution, or pursuant to the terms of a qualified domestic
relations order. Non-ISOs may not be
sold, pledged, assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the laws of descent and distribution, pursuant to the
terms of a qualified domestic relations order or, in the sole discretion of the
Committee, in connection with a transfer for estate or retirement planning
purposes to a trust established for such purposes.
Restrictions
on Sale of Shares.
Shares
of common stock acquired in connection with an award or exercise of Options,
SARs or Restricted Stock may not be sold or otherwise disposed of before the
end of a six-month period beginning on the date the award was granted, except
for dispositions by bona fide gifts or transfers by will or the laws of descent
or distribution. This restriction is in
addition to any other restriction imposed by the 2006 Stock Plan or by the
Committee in connection with any grant of an award. This restriction is also in addition to the
holding period discussed below under Federal Income Tax Consequences required
for treatment of an Option as an ISO.
Conditions
on Issuance of Shares.
The
Committee will have the discretionary authority to impose, in agreements, such
restrictions on shares issued pursuant to the 2006 Stock Plan as it may deem
appropriate or desirable, including but not limited to the authority to impose
a right of first refusal or to establish repurchase rights or both of these
restrictions. In addition, the Committee
may not issue shares unless the issuance complies with applicable securities
laws, and to that end may require that an optionee or recipient make certain
representations or warranties.
Amendment
and Termination of the 2006 Stock Plan.
The
Board of Directors may from time to time amend the terms of the 2006 Stock Plan
and, with respect to any shares at the time not subject to Options, suspend or
terminate the 2006 Stock Plan; provided that shareholder approval is required
to increase the number of shares subject to the 2006 Stock Plan or to extend
the term of the 2006 Stock Plan. No amendment, suspension, or termination of
the 2006 Stock Plan will, without the consent of any affected holders of an
award, alter or impair any rights or obligations under any award granted prior
to any such termination, amendment or suspension.
Federal
Income Tax Consequences
ISOs.
An employee recognizes no
taxable income upon the grant of ISOs.
If the optionee holds the option shares for at least two years from the
date the ISO is granted and one year from the date the ISO is exercised, any gain
realized on the sale of the shares received upon exercise of such ISO is taxed
as long-term capital gain. However, the
difference between the fair market value of the stock at the date of exercise
and the exercise price of the ISO will be
34
treated as an item of tax
preference in the year of exercise for purposes of the alternative minimum
tax. If the employee disposes of the
shares before the expiration of either of the special holding periods, the disposition
is a disqualifying disposition. In
this event, the employee will be required, at the time of the disposition of
the stock, to treat the lesser of the gain realized or the difference between
the exercise price and the fair market value of the stock at the date of
exercise as ordinary income and the excess, if any, as capital gain.
The Company will not be
entitled to any deduction for federal income tax purposes as the result of the
grant or exercise of an ISO, regardless of whether or not the exercise of the
ISO results in liability under the alternative minimum tax. However, if the employee has ordinary income
taxable as compensation as a result of a disqualifying disposition, the Company
will be entitled to deduct an equivalent amount,
subject to federal income tax limitations on
annual executive compensation deductions.
Non-ISOs.
In the case of a Non-ISO,
the holder will recognize ordinary income upon the exercise of the Non-ISO in
an amount equal to the difference between the fair market value of the shares
on the date of exercise and the exercise price (or, if the optionee is subject
to certain restrictions imposed by the federal securities laws, upon the lapse
of those restrictions unless the optionee makes a special tax election within 30
days after the date of exercise to have the general rule apply). Upon a subsequent disposition of such shares,
any amount received by the optionee in excess of the fair market value of the
shares as of the of exercise will be taxed as capital gain. The Company will be entitled to a deduction
for federal income tax purposes at the same time and in the same amount as the
ordinary income recognized by the optionee in connection with the exercise of a
Non-ISO.
SARs.
The grant
of a SAR has no tax effect on the optionee or the Company. Upon exercise of the
SARs, however, any cash or common stock received by the optionee in connection
with the exercise of a SAR will be treated as compensation income to the
optionee, and the Company will be entitled to a business expense deduction for
the amounts treated as such compensation income, subject to federal income tax
limitations on annual executive compensation deductions.
Restricted
Stock.
The recipient of Restricted Stock will not
have taxable income upon grant, except that the recipient may elect to be taxed
at the time of grant. Unless an election
is made to be tax as of the time of grant, the recipient of Restricted Stock
will have ordinary income at the time of vesting of shares of Restricted
Stock. The Company will be entitled to a
business expense deduction in the same amount, subject to federal income tax
limitations on annual executive compensation deductions. The treatment of Restricted Stock granted
pursuant to the requirements of ARRA may vary.
Vote
Required and Recommendation of the Board of Directors
.
The affirmative
vote of a majority of the votes cast at the meeting on the proposal to amend
the 2006 Stock Plan is required for the approval of the amendment to the 2006
Stock Plan. It is expected that all of
the shares of the common stock entitled to vote on the proposal to amend the
2006 Stock Plan over which the nominees for election as directors of the
Company exercise voting power will be voted for the proposed amendment.
The Board of Directors recommends
that shareholders vote FOR the approval of the amendment.
PROPOSAL
3 -
AMENDMENT OF THE 2006
STOCK PLAN TO
AUTHORIZE THE ISSUANCE OF
RESTRICTED STOCK IN COMPLIANCE WITH ARRA
At the meeting, the shareholders are being asked to
approve an amendment to the Companys 2006 Stock Plan to
broaden the
authority to grant Restricted Stock in order to enable the Company to make
Restricted Stock grants in compliance with the American Recovery and
Reinvestment Act of 2009 (ARRA).
Under the 2006
Stock Plan as currently in effect, the Company may only make Restricted Stock
grants which have a Restriction Period of not more than five years from the
date of grant. Under ARRA, the Company
will not be able to accrue or pay any bonus, retention award, or incentive
compensation to at least its five most highly compensated employees other
than in long-term restricted stock which does not fully vest while the
Treasury or another agency of the federal government owns the Companys
preferred stock or shares of the Companys common stock acquired upon the
exercise of the warrant granted under the CPP.
The amount of such restricted stock which may
35
be granted to any covered highly compensated employee in any year is
also subject to limitation. Please refer to the Compensation Disclosure and
Analysis included under Proposal 1 for additional details on the requirements
of ARRA.
Although
significant details of the compensation requirements under ARRA are subject to
clarification in implementing regulations to be adopted by the Treasury, the
Company believes that it is important that the Company have the ability to
issue bonuses in a compliant form to its senior executive officers, or to other
highly compensated employees. As the
period during which the Treasury or another agency of the federal government
may own the Companys securities is not fixed, and could be longer than five
years, it is possible that the vesting period for long term restricted stock
permitted under ARRA would exceed the authority of the Company to issue
Restricted Stock under the 2006 Stock Plan.
Under Nasdaq listing requirements as currently in effect, the Company
would generally not be able to grant equity compensation to executive officers without
shareholder approval.
The Company could
therefore find itself unable to provide employees, including its senior
executive officers, with incentive compensation or bonuses in a form that
complies with applicable law. The
inability to provide incentive compensation, retention payments or bonuses to
senior executive officers and other highly compensated employees could have an
adverse effect on the ability of the Company to retain such officers, or to
attract highly productive commission or production based employees. As such,
the Board of Directors has approved an amendment to the 2006 Stock Plan which
would add a new Section 11(h) to the Plan, reading it its entirety
substantially as follows:
(h)
Restricted Stock Under ARRA
.
During any period in which any obligation arising from financial
assistance provided under the TARP remains outstanding (as that phrase is used
for purposes of Section 111 of the Emergency Economic Stabilization Act of 2008
(EESA) as amended by the American Recovery and Reinvestment Act of 2009
(ARRA), and as such section may be hereafter be amended, and any regulations
promulgated thereunder or under any successor legislation (collectively
Section 111)), with respect to an employee for whom the accrual, or to whom the
payment, of any bonus, retention payment or incentive compensation is
prohibited under Section 111 (a restricted employee), other than in the form
of restricted stock meeting the requirements of Section 111, the Committee
may grant awards of Restricted Stock to such restricted employee which have
terms which comply with the requirements of Section 111, without regard to any
restrictions or limitations on the terms of Restricted Stock contained in this
Plan.
The Company reserves the right to revise or amend the
language of proposed section 11(h) in order to better reflect or more fully
carry out the intent to permit the Committee to grant Restricted Stock having
terms compliant with ARRA to such persons who are not otherwise permitted to
receive a bonus, retention award or inventive compensation payment in cash.
Vote
Required and Recommendation of the Board of Directors
.
The affirmative
vote of a majority of the votes cast at the meeting on the proposal to amend
the 2006 Stock Plan is required for the approval of the amendment to the 2006
Stock Plan. It is expected that all of
the shares of the common stock entitled to vote on the proposal to amend the
2006 Stock Plan over which the nominees for election as directors of the
Company exercise voting power will be voted for the proposed amendment.
The Board of Directors
recommends that shareholders vote FOR the approval of the amendment.
PROPOSAL 4 -
NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION
On February 17, 2009, the President of the United States
signed into law the American Recovery and Reinvestment Act of 2009 (ARRA).
ARRA revised Section 111 of the Emergency Economic Stabilization Act to require
any recipient of funds under TARP to permit a separate shareholder vote to
approve the compensation of executives, as disclosed pursuant to the
compensation disclosure rules of the Securities and Exchange Commission (the
SEC). The SEC has advised that this requirement is effective prior to the
adoption of implementing regulations under ARRA, for companies filing proxy
statements after February 17, 2009. As a result, the Company is providing
shareholders with the opportunity to cast a non-binding advisory vote at the
meeting to approve the compensation of the Companys executives. This proposal,
commonly known as a Say-on-Pay proposal, gives shareholders the opportunity
to endorse or not endorse our executive pay program through the following
resolution:
36
RESOLVED
, that the shareholders approve the overall
executive compensation policies and procedures employed by the Company, as
described in Compensation Discussion and Analysis and the tabular disclosure
regarding named executive officer compensation (together with the accompanying
narrative disclosure) in this proxy statement for the 2009 Annual Meeting.
Because this vote is advisory, it will not be binding
upon the Board of Directors. However, the Compensation Committee will take into
account the outcome of the vote when considering future executive compensation
arrangements. Under the ARRA, the vote may not be construed as overruling a
decision by such the Board of Directors, or to create or imply any additional
fiduciary duty by the Board.
Shareholders are encouraged to
read the section of this proxy statement titled Compensation Discussion and
Analysis as well as the tabular disclosure regarding named executive officer
compensation, together with the accompanying narrative disclosure.
Vote Required
The affirmative vote of a majority of the
votes cast at the meeting on the proposal is required for the approval of this
proposal.
It is expected that all
of the shares of the common stock entitled to vote on the proposal over which
directors of the Company exercise voting power will be voted for the proposal.
We believe are compensation policies are strongly
aligned with the long term interests of the Company and its shareholders.
As such, the Board of
Directors recommends that shareholders vote FOR approval of this non-binding
advisory resolution.
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Audit Committee of the Board of Directors has selected Stegman &
Company to audit the Companys financial statements for the fiscal year ending December 31,
2009. Stegman & Company has audited the financial statements of the
Company since its organization.
Representatives of Stegman & Company are expected to be present
at the 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.
During 2008, the
aggregate amount of fees billed to the Company by Stegman & Company
for services rendered by it for the audit of the Companys financial statements
and review of financial statements included in the Companys reports on Form 10-Q,
and for services normally provided in connection with statutory and regulatory
filings was $120,786. In 2007, Stegman &
Company billed $94,083 for such services.
AuditRelated
Fees.
During 2008, the
aggregate amount of fees billed to the Company by Stegman & Company
for services related to the performance of audit services was $76,580. These services included an audit of the
Companys 401(k) Plan and services in respect of securities and regulatory
filings related to the Fidelity acquisition and accounting and tax advice
relating to the acquisition. In 2007, Stegman & Company billed the
Company $12,100 for services related to the performance of the audit services.
These services included an audit of the Companys 401(k) Plan.
Tax
Fees.
During 2008, the
aggregate amount of fees billed to the Company by Stegman & Company
for tax advice, compliance and planning services was $10,450. In 2007, Stegman & Company billed
$9,108 for such services.
All Other
Fees.
Stegman &
Company did not bill the Company any amounts for other services in 2008 or
2007.
None of the engagements of Stegman & Company to provide services
other than audit services was made pursuant to the
de minimus
exception to the pre-approval requirement
contained in the rules of the Securities and Exchange Commission and the
Companys audit charter.
37
FORM 10-K ANNUAL REPORT
The Company will provide, without charge, to any
shareholder of record entitled to vote at the meeting or any beneficial owner
of common stock solicited hereby, a copy of its Annual Report on Form 10-K
for the year ended December 31, 2008 filed with the Securities and
Exchange Commission, upon the written request of such shareholder. Requests
should be directed to Jane E. Cornett, Corporate Secretary, at the Companys
executive offices, 7815 Woodmont Avenue, Bethesda, Maryland 20814.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of
the Securities Exchange Act of 1934 requires the Companys 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.
Based solely upon the Companys review of the copies
of the forms which it has received and written representations from the Companys
directors, executive officers and ten percent shareholders, the Company is not
aware of any failure of any such person to comply with the requirements of Section 16(a),
except that
one Form 4 reporting
one transaction for Ms. Foulon-Tonat, two Forms 4 reporting an aggregate of
three transactions for Mr. Goodman, three Forms 4 reporting an aggregate of
four transactions for Mr. Paul, one Form 4 reporting one transaction for Mr.
Pincus, and one Form 4 reporting one transaction for Mr. Rogers, were not filed
in a timely manner.
OTHER MATTERS
The Board of Directors of the Company 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
are properly brought before the meeting or any adjournment thereof, the persons
named in the accompanying proxy will vote such proxy in accordance with their
judgment on such matters.
SHAREHOLDER PROPOSALS
All shareholder proposals to be presented for consideration at the next
annual meeting and to be included in the Companys proxy materials must be
received by the Company no later than December 11, 2009. Shareholder proposals for nominations for
election as director must be received by the Company no later than January 10,
2010. In order to be eligible for consideration at the next annual meeting of
shareholders, the Company must receive notice of shareholder proposals for
business other than the election of directors to be conducted at the annual
meeting which are not proposed to be included in the Companys proxy materials
not less than thirty and not more than ninety days before the date of the
annual meeting, or if less than forty five days notice of the meeting is given,
by the earlier of two days before the meeting and fifteen days after the notice
of the meeting is mailed.
|
By Order of the
Board of Directors
|
|
|
|
Jane E. Cornett,
Corporate Secretary
|
|
|
April 10,
2009
|
|
38
Appendix A
EAGLE
BANCORP, INC.
2006 STOCK
PLAN
[As
proposed to be amended at the 2009 Annual Meeting of Shareholders]
1.
Purpose of the Plan.
The purpose of this Eagle Bancorp, Inc. 2006 Stock Plan (the Plan) is to
advance the interests of the Company by providing directors and selected
employees of the Bank, the Company, and their Affiliates with the opportunity
to acquire Shares. By encouraging stock
ownership, the Company seeks to attract, retain and motivate the best available
personnel for positions of substantial responsibility; to provide additional
incentive to directors and selected employees of the Company, the Bank and
their Affiliates to promote the success of the business as measured by the
value of its shares; and generally to increase the commonality of interests
among directors, employees, and other shareholders.
Upon approval
of this Plan by shareholders of the Company, the Plan shall replace the
Companys 1998 Stock Option Plan (the 1998 Plan), which shall be terminated
as of that time. Following such
termination, Options granted under the 1998 Plan shall continue in effect, and
shall be subject to the provisions of the 1998 Plan, but no new options may be
granted under the 1998 Plan.
2.
Definitions.
In this Plan:
(a)
Affiliate means any
parent corporation or subsidiary corporation of the Company as such terms
are defined in Section 424(e) and (f), respectively, of the Code.
(b)
Agreement means a
written agreement entered into in accordance with Section 5(c).
(c)
Awards means,
collectively Options, SARs and Restricted Stock, unless the context clearly
indicates a different meaning.
(d)
Bank means EagleBank.
(e)
Board means the Board
of Directors of the Company.
(f)
Bank Board means the
Board of Directors of the Bank.
(g)
Change in Control means
any one of the following events occurring after the Effective Date: (1) the
acquisition of ownership, holding or power to vote more than 50% of the Banks
or Companys voting stock, (2) the acquisition of the power to control the
election of a majority of the Banks or Companys directors, (3) the
exercise of a controlling influence over the management or policies of the Bank
or the Company by any person or by persons acting as a group (within the
meaning of Section 13(d) of the Securities Exchange Act of 1934), or (4) the
failure of Continuing Directors to constitute at least two-thirds of the Board
of Directors of the Company or the Bank (the Company Board) during any period
of two consecutive years. For purposes of this Plan, Continuing Directors
shall include only those individuals who were members of the Company Board at
the Effective Date and those other individuals whose election or nomination for
election as a member of the Company Board was approved by a vote of at least
two-thirds of the Continuing Directors then in office. For purposes of this
subsection only, the term person refers to an individual or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of entity not
specifically listed herein. The decision
of the Committee as to whether a Change in Control has occurred shall be
conclusive and binding.
(h)
Code means the Internal
Revenue Code of 1986, as amended.
(i)
Committee means the
Stock Option Committee appointed by the Board in accordance with Section 5(a) hereof.
(j)
Common Stock means
the common stock, par value $0.01 per share, of the Company.
(k)
Company
means Eagle Bancorp, Inc.
(l)
Continuous Service
means the absence of any interruption or termination of service as an Employee
of the Company or an Affiliate.
Continuous Service shall not be considered interrupted in the case of
sick leave, military leave or any other leave of absence approved by the
Company or in the case of transfers between payroll locations of the Company or
between the Company, an Affiliate or a successor.
(m)
Disability means
permanent and total disability as defined in Section 22(e)(3) of the
Code.
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(n)
Effective Date means
the date specified in Section 17 hereof.
(o)
Employee means any
person employed by the Company, the Bank, or by an Affiliate, other than in the
capacity as a director, advisory director or comparable status.
(p)
Exercise Price means
the price per Optioned Share at which an Option or SAR may be exercised.
(q)
Independent Director
means an independent director as defined for purposes other than audit
committee service in the listing standards and regulations of the Nasdaq Stock
Market, or if the Companys Common Stock is primarily traded on a national
securities exchange other than the Nasdaq Stock Market (including any level or
submarket thereof), then the listing standards and regulations of such other
national securities exchange. Not in
limitation of the foregoing, all Independent Directors must be Non-Employee
Directors.
(r)
ISO means an option
to purchase Common Stock that meets the requirements set forth in the Plan, and
which is intended to be and is identified as an incentive stock option within
the meaning of Section 422 of the Code.
(s)
Market Value means the
fair market value of the Common Stock, as determined under Section 7(b) hereof.
(t)
Non-Employee Director
means any member of the Board who, at the time discretion under the Plan is
exercised, is a Non-Employee Director within the meaning of Rule 16b-3.
(u)
Non-ISO means an option
to purchase Common Stock that meets the requirements set forth in the Plan but
which is not intended to be, and is not identified as, an ISO, or an option
which meets the circumstances of Section 6(b) hereof.
(v)
Option means an ISO or
Non-ISO.
(w)
Optioned Shares means
Shares subject to an Option, SAR or grant of Restricted Stock granted pursuant
to this Plan.
(x)
Outstanding Shares
means the total shares of Common Stock which have been issued and which (a) are
not held as treasury shares, and (b) have not been cancelled or retired by
the Company.
(y)
Parent means any
present or future entity which would be a parent corporation of the Company
as defined in Section 424(e) and Section 424(g) of the
Code.
(z)
Participant means any
person who receives an Award pursuant to the Plan.
(aa)
Plan means the Eagle Bancorp, Inc.
2006 Stock Plan.
(bb)
Performance Based Award means
an Award, the vesting, exercise or retention of which is subject to or based
upon specific corporate, individual or individual performance or achievement
standards or goals set forth in an Agreement.
(cc)
Restricted Stock means
Common Stock that is subject to forfeiture, restrictions against transfer,
specific corporate, divisional or individual performance or achievement
standards or goals, or other conditions or restrictions set forth in an
Agreement.
(dd)
Retirement means normal
retirement from employment with the Company or any Parent or Subsidiary,
after five (5) or more years of
Continuous Service or such shorter period as may be specified in an Award, and
upon or after achieving the age of 65.
(ee)
Rule 16b-3 means Rule 16b-3
of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended.
(ff)
SAR means a right to
receive all or a specified portion of the increase in value over the Market
Value on the date of grant of a specified number of Shares of Common Stock.
(gg)
Share means one share of
Common Stock.
(hh)
Subsidiary means any present
or future entity which would be a subsidiary corporation of the Company as
defined in Section 424(f) and Section 424(g) of the Code.
(ii)
Transaction means (i) the
liquidation or dissolution of the Company, (ii) a merger or consolidation
in which the Company is not the surviving entity, or (iii) the sale or
disposition of all or substantially all of the Companys assets.
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3.
Term of the Plan and Awards.
(a)
Term of the Plan
. The
Plan shall continue in effect for a term of ten (10) years from the Effective
Date unless sooner terminated pursuant to Section 20. No Award may be granted under the Plan after
ten (10) years from the Effective Date.
(b)
Term of Options and SARs
.
The Committee shall establish the term of each Option and SAR granted
under the Plan. No Option or SAR may have a term that exceeds ten (10) years.
No ISO granted to an Employee who owns Shares representing more than ten
percent (10%) of the outstanding shares of Common Stock, as determined in
accordance with the Code, at the time an ISO is granted may have a term that
exceeds five (5) years.
4.
Shares Subject to the Plan.
(a)
General.
Except
as otherwise required by the provisions of Section 14, the aggregate number of
Shares deliverable upon the exercise of Awards shall be 1,215,000. Optioned Shares may either be authorized but
unissued Shares or Shares held in treasury to the extent allowed by Maryland
law. If Awards should expire, become unexercisable or be forfeited for any
reason without having been exercised or become vested in full, the Optioned
Shares shall be available for the grant of additional Awards under the Plan,
unless the Plan shall have been terminated.
(b)
Special Rule for SARs.
Not in limitation of the provisions of Section 4(a), the number of Shares with
respect to which a SAR is granted, and not the number of Shares delivered upon
the exercise of the SAR, shall be charged against the aggregate number of
Shares remaining available under the Plan, provided, however, that in the case
of a SAR granted in tandem with an Option, under circumstances where the exercise
of the Option results in the termination of the SAR, or
vice versa
,
only the number of Shares subject to the Option shall be charged against the
aggregate number of Shares remaining available under the Plan. The Shares related to an Option as to which
Option rights have been terminated as a result of the exercise of a related SAR
shall not be available for the grant of additional Awards.
5.
Administration of the Plan.
(a)
Composition of the
Committee.
The Plan shall be
administered by the Committee, which shall consist of not less than three (3)
members of the Board. All members of the
Committee shall be Independent Directors, and shall serve at the pleasure of
the Board. In the absence at any time of
a duly appointed Committee, the Plan shall be administered by the members of
the Board who are Independent Directors.
(b)
Powers of the Committee.
Except as limited by the express provisions
of the Plan or by resolutions adopted by the Board, the Committee shall have
sole and complete authority and discretion (i) to select Participants and grant
Awards, (ii) to determine the form and content of Awards to be issued in the
form of Agreements under the Plan, including but not limited to the corporate,
divisional or individual performance or achievement standards or goals of
Performance Based Awards, which need not be identical among Participants
granted Awards at the same time, (iii) to interpret the Plan, (iv) to
prescribe, amend and rescind rules and regulations relating to the Plan, and
(v) to make other determinations necessary or advisable for the administration
of the Plan. The Committee shall have
and may exercise such other power and authority as may be delegated to it by
the Board from time to time. A majority
of the entire Committee shall constitute a quorum and the action of a majority
of the members present at any meeting at which a quorum is present, or acts
approved in writing by a majority of the Committee without a meeting, shall be
deemed the action of the Committee.
(c)
Agreement.
Each Award shall be evidenced by a written
agreement containing such provisions as may be approved by the Committee. Each such Agreement shall constitute a
binding contract between the Company and the Participant, and every
Participant, upon acceptance of such Agreement, shall be bound by the terms and
restrictions of the Plan and of such Agreement.
The terms of each such Agreement shall be in accordance with the Plan,
but each Agreement may include such additional provisions and restrictions
determined by the Committee, in its discretion, provided that such additional
provisions and restrictions are not inconsistent with the terms of the
Plan. In particular, the Committee shall
set forth in each Agreement (i) the Exercise Price of an Option or SAR, (ii)
the number of Shares subject to, and the expiration date of, the Award, (iii)
the manner, time and rate (cumulative or otherwise) of exercise or vesting of
such Award, and (iv) the restrictions, including Performance Based Awards
standards, if any, to be placed upon such Award, or upon Shares which may be
issued in respect of such Award. The Chairman of the Committee and such other
officers as shall be designated by the Committee are hereby authorized to
execute Agreements on behalf of the Company and to cause them to be delivered
to the recipients of Awards.
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(d)
Effect of the Committees
Decisions.
All decisions,
determinations, and interpretations of the Committee shall be final and
conclusive on all persons affected thereby. The Committees determination
whether a Participants Continuous Service has ceased, the effective date
thereof, and whether a Performance Based Award standard or condition shall have
been met in the event of the Death, Disability or Retirement shall be final and
conclusive on all persons affected thereby.
(e)
Indemnification.
In addition to such other rights of
indemnification as they may have, the members of the Committee shall be
indemnified by the Company in connection with any claim, action, suit or
proceeding relating to any action taken or failure to act under or in
connection with the Plan or any Option, granted hereunder to the full extent
provided for under the Companys Articles of Incorporation or Bylaws with
respect to the indemnification of directors.
6.
Grant of Options.
(a)
General Rule
. The Committee, in its sole discretion, may
grant ISOs or Non-ISOs to Employees of the Company or its Affiliates and may
grant Non-ISOs to members of the Board, members of the Bank Board, members of
Bank advisory boards, and members of the boards of directors of Affiliates.
(b)
Special Rules for ISOs.
The aggregate Market Value, as of the date
the Option is granted, of the Shares with respect to which ISOs are exercisable
for the first time by an Employee during any calendar year (under all incentive
stock option plans, as defined in Section 422 of the Code, of the Company, or
any Parent or Subsidiary), shall not exceed $100,000. Notwithstanding the prior provisions of this
Section, the Committee may grant Options in excess of the foregoing
limitations, in which case such Options granted in excess of such limitation
shall be Options which are Non-ISOs.
7.
Exercise Price for Options.
(a)
Limits on Committee
Discretion
. The Exercise
Price as to any particular Option granted under the Plan shall not be less than
the Market Value of the Optioned Shares on the date of grant. In the case of an
Employee who owns Shares, as determined in accordance with the Code,
representing more than 10% of the Companys Outstanding Shares of Common Stock
at the time an ISO is granted, the Exercise Price shall not be less than 110%
of the Market Value of the Optioned Shares at the time the ISO is granted.
(b)
Standards for Determining
Exercise Price
. If the Common
Stock is listed on a national securities exchange (including the Nasdaq
National Market or Nasdaq Capital Market) on the date in question, then the
Market Value per Share shall be not less than the average of the highest and
lowest selling price on such exchange on such date, or if there were no sales
on such date, then the Exercise Price shall be not less than the mean between
the bid and asked prices on such date. If the Common Stock is traded otherwise
than on a national securities exchange on the date in question, then the Market
Value per Share shall be not less than the mean between the bid and asked price
on such date, or, if there is no bid and asked price on such date, then on the
next prior business day on which there was a bid and asked price. If no such bid and asked price is available,
then the Market Value per Share shall be its fair market value as determined in
good faith by the Committee, in its sole and absolute discretion.
8.
Exercise of Options.
(a)
Generally.
Any Option
shall be exercisable at such times and under such conditions as shall be
permissible under the terms of the Plan and of the Agreement. An Option may not be exercised for a
fractional Share. In the event that any adjustment of an Option pursuant to Section 14
or otherwise would result in an Optionee being entitled to exercise for a
fractional Share, then upon such adjustment, the number of Shares which may be
acquired upon exercise of such Option shall be rounded down to the next whole
share, and the Optionee shall not be entitled to any payment, compensation or
alternative Award in lieu thereof.
(b)
Procedure for Exercise.
A Participant may exercise Options, subject to provisions relative to
its termination and limitations on its exercise, only by (1) written
notice of intent to exercise the Option with respect to a specified number of
Shares, and (2) payment to the Company (contemporaneously with delivery of
such notice) in cash, in Common Stock, or a combination of cash and Common
Stock, of the amount of the Exercise Price for the number of Shares with
respect to which the Option is then being exercised. Each such notice (and payment where required)
shall be delivered, or mailed by prepaid registered or certified mail,
addressed to the Treasurer of the Company at the Companys executive
offices. Common Stock utilized in full
or partial payment of the Exercise Price for Options shall be valued at its
Market Value at the date of exercise. Notwithstanding the foregoing, a Share
acquired upon the exercise of an Option (or otherwise directly acquired from
the Company) may not be surrendered in payment of any portion of
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the exercise price of an Option unless such
Share shall have been held for at least six months, or the Committee shall have
determined that the use of such Share shall not result in adverse tax or
accounting consequences to the Company.
(c)
Period of
Exercisability-ISOs
. An ISO may be exercised by a Participant only
while the Participant is an Employee and has maintained Continuous Service from
the date of the grant of the ISO, or within three months after termination of
such Continuous Service (but not later than the date on which the Option would
otherwise expire), except if the Employees Continuous Service terminates by
reason of
(1)
Just
Cause which for purposes hereof shall have the meaning set forth in any
unexpired employment or severance agreement between the Participant and the
Bank and/or the Company (and, in the absence of any such agreement, means
termination because of the Employees personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order), then the Participants rights to exercise such ISO
shall expire on the date of such termination;
(2)
death,
then to the extent that the Participant would have been entitled to exercise
the ISO immediately prior to his death, such ISO of the deceased Participant
may be exercised by the personal representatives of his estate or person or
persons to whom his rights under such ISO shall have passed by will or by laws
of descent and distribution within two years from the date of his death, or
such shorter period as may be set forth in an Agreement, but not later than the
date on which the Option would otherwise expire,;
(3)
Disability,
then to the extent that the Participant would have been entitled to exercise
the ISO immediately prior to his Disability, such ISO may be exercised within
one year from the date of such Disability, or such shorter period as may be set
forth in an Agreement, but not later than the date on which the ISO would
otherwise expire.
(d)
Acceleration on Death or
Disability
. Notwithstanding
the provisions of any Option that provides for its exercise in installments as
designated by the Committee, such Option shall become immediately exercisable
upon the Participants death or Disability.
(e) Period of Exercisability-Non-ISOs.
Except to the extent otherwise provided in the terms of an Agreement, a Non-ISO
may be exercised by a Participant, or the estate of a Participant, at any time
before its expiration date, except if the Participants Service terminates by
reason of:
(1)
Just
Cause which for purposes hereof shall have the meaning set forth in any
unexpired employment or severance agreement between the Participant and the
Bank and/or the Company (and, in the absence of any such agreement, means
termination because of the Participants personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order), then the Participants rights to exercise such Non-ISO
shall expire on the date of such termination; or
(2)
Removal
from the Board or the Bank Board pursuant to the respective Articles of
Incorporation, or termination of service as an advisory board member for any
reason whatsoever then the Participants rights to exercise such Non-ISO shall
expire on the date of such removal.
Failure to be nominated for reelection or failure to be reelected to the
Board at the end of a directors term shall not constitute a removal.
9.
Stock Appreciation Rights (SARs).
(a)
Granting of SARs
.
In its sole discretion, the Committee may from time to time grant to Employees
SARs either in conjunction with, or independently of, any Options granted under
the Plan. A SAR granted in conjunction with an Option may be an alternative
right wherein the exercise of the Option terminates the SAR to the extent of
the number of shares purchased upon exercise of the Option and,
correspondingly, the exercise of the SAR terminates the Option to the extent of
the number of Shares with respect to which the SAR is exercised. Alternatively,
a SAR granted in conjunction with an Option may be an additional right wherein
both the SAR and the Option may be exercised. A SAR may not be granted in
conjunction with an ISO under circumstances in which the exercise of the SAR
affects the right to exercise the ISO or vice versa, unless the SAR, by its
terms, meets all of the following requirements:
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(1) The SAR will expire no later than
the ISO;
(2) The
SAR may be for no more than the difference between the Exercise Price of the
ISO and the Market Value of the Shares subject to the ISO at the time the SAR
is exercised;
(3) The SAR is transferable only when
the ISO is transferable, and under the same conditions;
(4) The SAR may be exercised only when
the ISO may be exercised; and
(5) The
SAR may be exercised only when the Market Value of the Shares subject to the
ISO exceeds the Exercise Price of the ISO.
(b)
Exercise Price
.
The Exercise Price as to any particular SAR shall not be less than the Market
Value of the Optioned Shares on the date of grant.
(c)
Exercise of SARs
.
A SAR granted hereunder shall be exercisable at such times and under such
conditions as shall be permissible under the terms of the Plan and of the
Agreement granted to a Participant, provided that a SAR may not be exercised
for a fractional Share. Upon exercise of a SAR, the Participant shall be
entitled to receive, without payment to the Company except for applicable
withholding taxes, an amount equal to the excess of (or, in the discretion of
the Committee if provided in the Agreement, a portion of) the excess of the
then aggregate Market Value of the number of Optioned Shares with respect to
which the Participant exercises the SAR, over the aggregate Exercise Price of
such number of Optioned Shares. This amount shall be payable by the Company, in
the discretion of the Committee as set forth in an Agreement with respect to an
Award of SARs, in cash or in Shares valued at the then Market Value thereof, or
any combination thereof. The provisions of
Section 8(d) regarding the period of exercisability of Options are
incorporated by reference herein, and shall determine the period of
exercisability of SARs. Not in limitation of the foregoing, unless an Agreement
provides that a SAR may be settled only in Shares, a SAR shall be exercisable
only on a date certain specified in the Agreement.
(d)
Procedure for Exercising
SARs
. To the extent not inconsistent with this Section, the
provisions of Section 8(b) as to the procedure for exercising Options are
incorporated by reference, and shall determine the procedure for exercising
SARs.
(e)
Acceleration of SARs
. Notwithstanding the provisions of any SAR,
upon the Death, Disability or Retirement of a Participant, such Participant (or
the Participants estate) shall be entitled to exercise such SAR:
(1) that is not a Performance Based Award and
that provides for its vesting or exercise in installments or at a future date
as designated by the Committee in an Agreement, for that portion of the award
as bears the same relation to the total amount of the Award as the period of
service from the date of grant to the date of Death, Disability or Retirement
bears to the period from the date of grant to original date of vesting or
exercisability;
(2). that is a
Performance Based Award, for that portion of the Award as bears the same
relationship to the achievement in respect of the Performance Based Award
Standards or conditions, as determined by the Committee in its sole discretion.
10.
Reissuance of Options or
SARs.
Notwithstanding anything
herein to the contrary, the Committee shall have the authority to cancel
outstanding Options or SARs with the consent of the Participant and to reissue
new Options or SARs at a lower Exercise Price equal to the then Market Value
per share of Common Stock in the event that the Market Value per share of
Common Stock at any time prior to the date of exercise of outstanding Options
or SARs falls below the Exercise Price, provided, however, that no such
repricing shall be effective unless specifically approved or ratified by the
affirmative vote of a majority of the Common Stock present or represented and
entitled to vote at a meeting of shareholders duly called and held on a date
not later than the date of the next annual meeting of shareholders following such
cancellation and reissuance.
11.
Restricted Stock Awards.
Any Share of
Restricted Stock subject to an Award shall be subject to the following terms
and conditions, and otherwise to such other terms and conditions as are either
applicable generally to Awards, or prescribed by the Committee in the
applicable Agreement.
(a)
Restriction Period
.
At the time of each award of Restricted Stock, there shall be established for
the Restricted Stock a restriction period, which shall be no less than 12
months and no greater than 5 years (the
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Restriction Period). Such
Restriction Period may differ among Participants and may have different
expiration dates with respect to portions of shares of Restricted Stock covered
by the same Award. In no event (i) may the goal or standard measurement date
for a Performance Based Award of Restricted Stock be less than one year from
the date of grant; or (ii) may the Restriction Period for any other award of
Restricted Stock be less than 3 years, provided that restrictions may terminate
ratably over the vesting period.
(b)
Vesting Restrictions
.
The Committee shall determine the restrictions applicable to the award of
Restricted Stock, including, but not limited to, requirements of Continuous
Service for a specified term, or, for Performance Based Awards of Restricted
Stock, the attainment of specific corporate, divisional, or individual
performance or achievement standards or goals, which restrictions may differ
with respect to each Participant granted an Award of Restricted Stock at the
same time. The Agreement shall provide for forfeiture of Shares covered thereby
if the specified restrictions are not met during the Restriction Period. Awards of Restricted Stock may provide for
the issue of Shares upon grant, subject to forfeiture if the specified
restrictions are not met, or for the issuance of Shares only upon the
achievement of the restrictions at the end of the Restricted Period or upon the
achievement of the performance standards or goals, subject to earlier vesting
as provided herein.
(c)
Vesting upon Death,
Disability, or Retirement
. The Committee shall set forth in the
Agreement the percentage of the Award of Restricted Stock, if any, which shall
vest in the Participant in the event of death, Disability, or Retirement prior
to the expiration of the Restriction Period or the satisfaction of the
restrictions applicable to an award of Restricted Stock.
(d)
Acceleration of Vesting
.
Notwithstanding the Restriction Period and the restrictions imposed on the
Restricted Stock, as set forth in any Agreement, the Committee may shorten the
Restriction Period or waive any restrictions, if the Committee concludes that
it is in the best interests of the Company to do so, provided that any such
actions not done in connection with a Change in Control or the death,
Disability, Retirement, or termination of employment of a Participant shall not
be effective unless specifically approved or ratified by the affirmative votes
of the holders of a majority of the Common Stock present or represented and
entitled to vote at a meeting duly held on date no later than the next annual
meeting of shareholders.
(e)
Ownership; Voting
.
Where stock certificates are issued in respect of Restricted Stock Awards
awarded hereunder, which are subject to forfeiture if the restrictions are not
satisfied, such certificates shall be registered in the name of the
Participant, whereupon the Participant shall become a shareholder of the
Company with respect to such Restricted Stock and shall, to the extent not
inconsistent with express provisions of the Plan, have all the rights of a
shareholder, including but not limited to the right to vote and to receive all
dividends paid on such Shares, and the certificates shall be deposited with the
Company or its designee, together with a stock power endorsed in blank, and the
following legend shall be placed upon such certificates reflecting that the
shares represented thereby are subject to restrictions against transfer and forfeiture:
The
transferability of this certificate and the shares of stock represented thereby
are subject to the terms and conditions (including forfeiture) contained in the
Eagle Bancorp, Inc. 2006 Stock Plan, and an agreement entered into between the
registered owner and Eagle Bancorp, Inc. Copies of such Plan and Agreement are
on file in the offices of the Secretary of Eagle Bancorp, Inc.
Where an Award of Restricted
Stock is subject to issuance upon the achievement of Performance Based Award
standards or goals or other conditions, no certificates shall be issued until
satisfaction of such conditions.
(f)
Lapse of Restrictions
.
At the expiration of the Restricted Period applicable to the Restricted Stock,
or upon the satisfaction of conditions to receipt of the Restricted Stock, as
applicable, the Company shall deliver to the Participant, or the legal
representative of the Participants estate, or if the personal representative
of the Participants estate shall have assigned the estates interest in the
Restricted Stock, to the person or persons to whom his rights under such
Restricted Stock shall have passed by assignment pursuant to his will or to the
laws of descent and distribution, the stock certificates deposited with it or
its designee and as to which the Restricted Period has expired and the
requirements of the restrictions have been met. If a legend has been placed on
such certificates, the Company shall cause such certificates to be reissued
without the legend.
(g)
Forfeiture of Restricted
Stock
. The Agreement shall provide for forfeiture of any Restricted
Stock which is not vested in the Participant or for which the restrictions have
not been satisfied during the Restriction Period.
(h)
Restricted Stock Under
ARRA
. During any period in
which any obligation arising from financial
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assistance provided under the
TARP remains outstanding (as that phrase is used for purposes of Section 111
of the Emergency Economic Stabilization Act of 2008 (EESA) as amended by the
American Recovery and Reinvestment Act of 2009 (ARRA), and as such section
may be hereafter be amended, and any regulations promulgated thereunder or
under any successor legislation (collectively Section 111)), with respect to
an employee for whom the accrual, or to whom the payment, of any bonus,
retention payment or incentive compensation is prohibited under Section 111 (a
restricted employee), other than in the form of restricted stock meeting
the requirements of Section 111, the Committee may grant awards of Restricted
Stock to such restricted employee which have terms which comply with the
requirements of Section 111, without regard to any restrictions or limitations
on the terms of Restricted Stock contained in this Plan.
12.
Conditions Upon Issuance
of Shares.
(a)
Compliance with Securities
Laws.
Shares of Common Stock
shall not be issued with respect to any Award unless the issuance and delivery
of such Shares shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the rules and
regulations promulgated thereunder, any applicable state securities law, and
the requirements of any securities exchange upon which the Shares may then be
listed. The Plan is intended to comply with Rule 16b-3, and any provision of
the Plan than the Committee determines in its sole and absolute discretion to
be inconsistent with said Rule shall, to the extent of such inconsistency, be
inoperative and null and void, and shall not affect the validity of the
remaining provisions of the Plan.
(b)
Special Circumstances.
The inability of the Company to obtain
approval from any regulatory body or authority deemed by the Companys counsel
to be necessary to the lawful issuance and sale of any Shares hereunder shall
relieve the Company of any liability in respect of the non-issuance or sale of
such Shares. As a condition to the
exercise or vesting of an Award , the Company may require the person exercising
or vesting in the Award to make such representations and warranties as the
Committee determines may be necessary to assure the availability of an
exemption from the registration requirements of federal or state securities
law.
(c)
Committee Discretion.
The Committee shall have the discretionary
authority to impose in Agreements such restrictions on Shares as it may deem
appropriate or desirable, including but not limited to the authority to impose
a right of first refusal or to establish repurchase rights or both of these
restrictions.
(d)
Compliance with Section
409A.
It is intended and anticipated that Awards under the Plan will
not be subject to the requirements of Code Section 409A. However, to the extent
that Code Section 409A does apply to an Award, the Plan is intended to comply
with Code Section 409A, and official guidance issued thereunder, and thus avoid
the imposition of any excise tax and interest on any Participant pursuant to
Code Section 409A(a)(1)(B). Notwithstanding any provision of the Plan to the
contrary, the Plan shall be interpreted, operated and administered consistent
with this intent, and any inconsistent provision of any Award or Agreement
shall be deemed to be modified accordingly as the Committee shall determine in
its sole discretion and without further consent of the affected Participant;
provided that the Company shall have no liability whatsoever to any Participant
or any other person in the event that any Award is determined to be subject to,
and is not in compliance with, Section 409A of the Code. Notwithstanding any
other provision of the Plan to the contrary, any Award or vesting, issuance or
payment of an Award hereunder or any Agreement that is considered nonqualified
deferred compensation that is to be made to a Participant while such
Participant is a specified employee, in each case as defined and determined
for purposes of Section 409A, within six months following such Participants
separation from service (as determined in accordance with Section 409A), then
to the extent that such Award, vesting, issuance or payment of an Award is not
otherwise permitted under Section 409A, such Award, vesting, issuance or
payment of an Award shall be delayed and shall be effected on the first
business day of the seventh calendar month following the Participants
separation from service, or, if earlier upon Participants death.
A-8
13.
Restrictions on Sale of
Shares
(a)
Six-Month Restriction.
Shares of Common Stock that have been
acquired upon exercise of an Award may not be sold or otherwise disposed of
before the end of a six-month period beginning on the date the Award was
granted. This restriction is in addition to any other restriction imposed by
this Plan or by the Committee pursuant to this Plan.
(b)
Exceptions.
The
six-month restriction imposed by subsection (a) shall not apply to
dispositions by bona fide gifts or to transfers by will or the laws of descent
or distribution.
14.
Effect of Changes in Control and Changes in Common Stock Subject to the
Plan.
(a)
Effects
of Change in Control.
(1)
Notwithstanding the
provisions of any Award that provides for its exercise or vesting in
installments, all Awards shall be immediately exercisable and fully vested upon
a Change in Control, and all conditions to the vesting, exercise or receipt of
an Award or Shares subject to an Award shall be deemed to be satisfied.
(2)
At the time of a Change
in Control which does not constitute a Transaction, in the discretion of the
Committee, any or all outstanding Options and/or SARs may be cancelled, in
exchange for which cancellation the Participant shall receive payment in cash
or Shares in an amount equal to the excess of the Market Value at the time of
the Change in Control of the Shares subject to such Option and/or SAR over the
Exercise Price of such Options or SAR (or in the event that the terms of any
SAR limit the maximum payment pursuant to such SAR, such maximum amount),
provided that in no event may an Option or SAR be cancelled in exchange for
cash pursuant to this Section (a)(2) within the six-month period
following the date of its grant.
(3)
In the event there is a
Change in Control that constitutes a Transaction, all outstanding Awards shall be surrendered. With respect to each such Award so
surrendered, the Committee shall in its sole and absolute discretion determine
whether the holder of each such Award so surrendered shall receive
(A)
for
each Share then subject to an Award, an Award for the number and kind of shares
(or amount of cash or other property, or combination thereof)into which each
Outstanding Share (other than Shares held by dissenting stockholders) is
changed or exchanged, together with an appropriate adjustment to the Exercise
Price in the case of Options and SARs; or
(B)
the
number and kind of shares (or amount cash or other property, or combination
thereof) into which each Outstanding Share (other than Shares held by
dissenting stockholders) is changed or exchanged in the Transaction that are
equal in market value to the Market Value of the Shares subject to the Award,
and in the case of Options or SARS, the excess of the Market Value on the date
of the Transaction of the over the Exercise Price of the Option or SAR; or
(C)
a
cash payment (from the Company or the successor corporation), in an amount
equal to the excess of the Market Value on the date of the Transaction of the
Shares subject to the Award, over the Exercise Price of the Option or SAR.
(b)
Recapitalizations; Stock Splits, Etc.
The number and kind of shares reserved for issuance
under the Plan, and the number and kind of shares subject to outstanding Awards
and the Exercise Price thereof, shall be proportionately adjusted for any
increase, decrease, change or exchange of Shares for a different number or kind
of shares or other securities of the Company which results from a merger,
consolidation, recapitalization, reorganization, reclassification, stock
dividend, split-up, combination of shares, or similar event in which the number
or kind of shares is changed without the receipt or payment of consideration by
the Company.
(c)
Special Rule for ISOs.
Any adjustment made pursuant to subsections (a)(3)(A) or (b) of
this Section shall be made in such a manner as not to constitute a
modification, within the meaning of Section 424(h) of the Code, of
outstanding ISOs.
A-9
(d)
Conditions and Restrictions on New, Additional, or Different Shares or
Securities.
If, by reason of
any adjustment made pursuant to this Section, a Participant becomes entitled to
new, additional, or different shares of stock or securities, such new,
additional, or different shares of stock or securities shall thereupon be
subject to all of the conditions and restrictions which were applicable to the
Shares pursuant to the Award before the adjustment was made.
(e)
Other Issuances.
Except as expressly provided in this Section, the issuance by the
Company or an Affiliate of shares of stock of any class, or of securities
convertible into Shares or stock of another class, for cash or property or for
labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, shall not affect, and no adjustment shall be
made with respect to, the number, class, or Exercise Price of Shares then
subject to Awards or reserved for issuance under the Plan.
15.
Non-Transferability of Awards.
(a) ISOs,
SARs and Restricted Stock may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws of
descent and distribution, or pursuant to the terms of a qualified domestic
relations order (within the meaning of Section 414(p) of the Code
and the regulations and rulings thereunder).
(b) Non-ISOs
may not be sold, pledged, assigned, hypothecated, transferred or disposed of in
any manner other than by will or by the laws of descent and distribution,
pursuant to the terms of a qualified domestic relations order (within the
meaning of Section 414(p) of the Code and the regulations and rulings
thereunder), or, in the sole discretion of the Committee, in connection with a
transfer for estate or retirement planning purposes to a trust established for
such purposes.
16.
Time of Granting Options.
The date of grant of an Award shall, for all purposes, be the later of the date
on which the Committee makes the determination of granting such Option, and the
Effective Date. Notice of the determination shall be given to each Participant
to whom an Award is so granted within a reasonable time after the date of such
grant.
17.
Effective Date.
The Plan shall be effective as of the date of shareholder approval of the
Plan. Awards may be made prior to
approval of the Plan by the stockholders of the Company, if the exercise of
Awards is conditioned upon stockholder approval of the Plan. In the event that
shareholder approval is not obtained, all Awards shall terminate and be of no
force or effect, and no Participant shall be entitled to any payment or
alternative compensation or award.
18.
Approval by Stockholders.
The Plan shall be approved by stockholders of
the Company within twelve (12) months before or after the Effective Date.
19.
Modification of Awards.
At any time, and from time to time, the Board
may authorize the Committee to direct execution of an instrument providing for
the modification of any outstanding Award, provided no such modification shall
confer on the holder of said Award any right or benefit which could not be
conferred on him by the grant of a new Award at such time, or impair the Award
without the consent of the holder.
20.
Amendment and Termination
of the Plan.
The Board may
from time to time amend the terms of the Plan and, with respect to any Shares
at the time not subject to Awards, suspend or terminate the Plan; provided that
shareholder approval shall be required to increase the number of Shares subject
to the Plan provided in Section 4 or to extend the term of the Plan. No
amendment, suspension, or termination of the Plan shall, without the consent of
any affected holders of an Award, alter or impair any rights or obligations
under any Award theretofore granted.
21.
Reservation of Shares.
The Company, during the term of the Plan,
will reserve and keep available a number of Shares sufficient to satisfy the
requirements of the Plan.
22.
Withholding Tax.
The Companys obligation to deliver Shares
upon exercise or vesting of Awards (or such earlier time that the Participant
makes an election under Section 83(b) of the Code) shall be subject to the
Participants satisfaction of all applicable federal, state and local income
and employment tax withholding obligations.
The Committee, in its discretion, may permit the Participant to satisfy
the obligation, in whole or in part, by irrevocably electing to have the
Company withhold Shares, or to deliver to the Company Shares that he already
owns, having a value equal to the amount required to be withheld. The value of Shares to be withheld, or
delivered to the Company, shall be based on the Market Value of the Shares on
the date the amount of tax to be withheld is to be determined. As an alternative, the Company may retain, or
sell without notice, a number of such Shares sufficient to cover the amount
required to be withheld.
A-10
23.
No Employment or Other
Rights.
In no event shall a
Participants eligibility to participate or participation in the Plan create or
be deemed to create any legal or equitable right of the Director or Employee or
any other party to continue service with the Company, the Bank, or any
Affiliate of such corporations. No
member of the Board, Bank Board, or board of directors of any Affiliate shall
have a right to be granted an Award or, having received an Award, the right to
be granted an additional Award.
24.
Governing Law.
The Plan shall be governed by and construed
in accordance with the laws of the State of Maryland, except to the extent that
federal law shall be deemed to apply.
A-11
FRONT
PROXY - EAGLE BANCORP, INC.
This Proxy is solicited on behalf of the Board of
Directors
The undersigned hereby makes, constitutes and appoints Arthur H. Blitz
and Bruce H. Lee, 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 Eagle Bancorp, Inc. (the Company) which the
undersigned would be entitled to vote if personally present at the Companys
Annual Meeting of Shareholders to be held on May 21, 2009 and at any
adjournment or postponement of the meeting.
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 on the reverse side and
FOR
the proposals to amend the 2006 Stock Plan and
FOR
the resolution approving the Companys executive compensation.
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 meeting
or any adjournment or postponement of the meeting.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
BACK
Annual Meeting Proxy Card
A. Election
of Directors
The Board of Directors recommends a vote FOR the listed nominees.
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For
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Withhold
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01 - Leslie M. Alperstein
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o
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o
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02 - Dudley C. Dworken
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o
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o
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03 - Harvey M. Goodman
|
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o
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|
o
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04 Neal R. Gross
|
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o
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o
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05 - Philip N. Margolius
|
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o
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o
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06 - Ronald D. Paul
|
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o
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o
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07 Robert P. Pincus
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o
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o
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08 Norman R. Pozez
|
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o
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o
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09 - Donald R. Rogers
|
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o
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o
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10 - Leland M. Weinstein
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o
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o
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B. Issue
The Board of Directors
recommends a vote FOR the following proposal.
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For
|
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Against
|
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Abstain
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Proposal to approve the
amendment to 2006 Stock Plan to increase the number of shares subject to the
plan
|
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o
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|
o
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|
o
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C. Issue
The Board of Directors
recommends a vote FOR the following proposal.
|
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For
|
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Against
|
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Abstain
|
Proposal to approve the
amendment to 2006 Stock Plan to authorize grant of Restricted Stock compliant
with ARRA
|
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o
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o
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o
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D. Issue
The Board of Directors
recommends a vote FOR the following proposal.
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For
|
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Against
|
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Abstain
|
Non-binding advisory
resolution approving the compensation of our executive officers
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o
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|
o
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o
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Please check here if you plan to attend the Annual
Meeting.
o
c. Authorized
Signatures Sign Here This section must be completed for your instructions
to be executed.
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.
Signature 1 Please keep signature within the box
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Signature 2 Please keep signature within the box
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Date (mm/dd/yyyy)
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