<PAGE>
As filed with the Securities and Exchange Commission on October 11, 1996
Registration No. 333-_______________
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________________
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
_______________________________________
PATAPSCO BANCORP, INC.
--------------------------------------------------------
(Exact name of Registrant as Specified in Its Charter)
Maryland 52-1951797
-------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1301 Merritt Boulevard
Dundalk, Maryland 21222-2194
---------------------------------------------------------------------
(Address of Principal Executive Offices)
Patapsco Bancorp, Inc.
Management Recognition Plan
Patapsco Bancorp, Inc.
1996 Stock Option and Incentive Plan
-------------------------------------------------
(Full Title of the Plan)
Gary R. Bronstein, Esquire
J. Mark Poerio, Esquire
Housley Kantarian & Bronstein, P.C.
1220 19th Street N.W., Suite 700
Washington, D.C. 20036
---------------------------------------------------------------------
(Name and Address of Agent For Service)
(202) 822-9611
-----------------------------------------------------------------------
(Telephone number, including area code, of agent for service)
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=================================================================================================
Title of Proposed Maximum Proposed Maximum Amount of
Securities Amount to be Offering Price Aggregate Offering Registration
to be Registered Registered Per Share Price Fee
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$0.01 par value 50,757 (1) $(2) $1,395,817.50 (2) $ 481.32
=================================================================================================
</TABLE>
(1) Maximum number of shares issuable under Patapsco Bancorp, Inc. Management
Recognition Plan (14,502 shares) and Patapsco Bancorp, Inc. 1996 Stock
Option and Incentive Plan (36,255 shares), as such amounts may be increased
in accordance with said plans in the event of a merger, consolidation,
recapitalization or similar event involving the Registrant.
(2) Under Rule 457(h) the registration fee for shares to be issued upon the
exercise of options may be calculated, inter alia, based upon the price at
----- ----
which the options may be exercised. 50,757 shares are being registered
hereby, of which 36,255 are under option at a weighted average exercise
price of $27.50 per share ($997,012.50 in the aggregate). The remainder of
such shares, which are not presently subject to option (14,502 shares), are
being registered based upon the average of the bid and asked price of the
common stock of the Registrant as reported on the National Quotation Bureau
"Pink Sheets" on October 9, 1996 of $27.50 per share ($398,805.00 in the
aggregate). Therefore, the total amount of the offering being registered
herein is $1,395,817.50.
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION
10(A) PROSPECTUS
ITEM 1. PLAN INFORMATION*
- ------
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION*
- ------
*Documents containing the information required by Part I of this
Registration Statement will be sent or given to participants in the Patapsco
Bancorp, Inc. Management Recognition Plan and 1996 Stock Option and Incentive
Plan (together, the "Plans") in accordance with Rule 428(b)(1). In accordance
with Note to Part I of Form S-8, such documents are not filed with the
Securities and Exchange Commission (the "Commission") either as part of this
Registration Statement or as prospectuses or prospectus supplements.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
- ------
Patapsco Bancorp, Inc. (the "Company") is subject to the informational
requirements of the Securities Exchange Act of 1934 (the "1934 Act") and,
accordingly, files periodic reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports, proxy statements and other
information concerning the Company filed with the Commission may be inspected
and copies may be obtained (at prescribed rates) at the Commission's Public
Reference Section, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549.
The Commission also maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission, including the Company. The address for the
Commission's Web site is "http://www.sec.gov".
The following documents are incorporated by reference in this Registration
Statement:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1996, as filed with the Commission on September 27, 1996 (Commission
File No. 0-28032).
(b) The description of the Company's securities contained in the Company's
Registration Statement on Form 8-A as declared effective by the Commission on
March 29, 1996.
ALL DOCUMENTS FILED BY THE COMPANY PURSUANT TO SECTIONS 13(A), 13(C), 14,
AND 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, PRIOR TO THE
FILING OF A POST-EFFECTIVE AMENDMENT WHICH INDICATES THAT ALL SECURITIES OFFERED
HAVE BEEN SOLD OR WHICH DEREGISTERS ALL SECURITIES THEN REMAINING UNSOLD, SHALL
BE DEEMED TO BE INCORPORATED BY REFERENCE IN THIS REGISTRATION STATEMENT, AND TO
BE A PART HEREOF FROM THE DATE OF FILING OF SUCH DOCUMENTS.
<PAGE>
ITEM 4. DESCRIPTION OF SECURITIES
- ------
Not applicable, as the Common Stock is registered under Section 12 of
the Securities Exchange Act of 1934.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
- ------
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY
- ------
Article XVII of the Company's Articles of Incorporation sets forth
circumstances under which directors, officers, employees and agents may be
indemnified against liability which they may incur in their capacities as
follows:
ARTICLE XVII
INDEMNIFICATION
A. The Corporation shall indemnify, to the fullest extent
permissible under the Maryland General Corporation Law, any individual who
is or was a director, officer, employee or agent of the Corporation, and
any individual who serves or served at the Corporation's request as a
director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust, other enterprise or
employee benefit plan, in any proceeding in which the individual is made a
party as a result of his service in such capacity.
B. (1) Reasonable expenses incurred by any person identified
in paragraph A of this Article XVII who is a party to a proceeding will be
paid or reimbursed by the Corporation in advance of the final disposition
of the proceeding upon receipt by the Corporation of: (i) a written
affirmation by such person of his good faith belief that the standard of
conduct necessary for indemnification by the Corporation as authorized in
this Article XVII has been met; and (ii) a written undertaking by or on
behalf of such person to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
(2) The undertaking required by subparagraph (ii) of
paragraph (1) of this subsection shall be an unlimited general obligation
of such person but need not be secured and may be accepted without
reference to financial ability to make the repayment.
C. Nonexclusive. The indemnification and advance payment of
------------
expenses provided by paragraphs A and B shall not be exclusive of any other
rights to which a person may be entitled by law, bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise.
D. Continuation. The indemnification and advancement of
------------
expenses provided by this Article XVII shall be deemed to be a contract
between the Corporation and the persons entitled to indemnification
thereunder, and any repeal or modification of this
<PAGE>
Article XVII shall not affect any rights or obligations then existing with
respect to any state of facts then or theretofore existing or any action,
suit or proceeding theretofore or thereafter brought based in whole or in
part upon any such state of facts. The indemnification and advance payment
provided by paragraphs A and B shall continue as to a person who has ceased
to hold a position named in paragraph A and shall inure to his heirs,
executors and administrators.
E. Insurance. The Corporation shall purchase and maintain
---------
insurance on behalf of any person who holds or who has held any position
named in paragraph A, against any liability incurred by him in any such
position, or arising out of his status as such, whether or not the
Corporation would have power to indemnify him against such liability under
paragraphs A and B.
F. Intention and Savings Clause. It is the intention of this
----------------------------
Article XVII to provide for indemnification to the fullest extent permitted
by the General Corporation Law of the State of Maryland, and this Article
XVII shall be interpreted accordingly. If this Article XVII or any portion
hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify each
director, officer, employee, and agent of the Corporation as to costs,
charges, and expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement with respect to any action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, including an
action by or in the right of the Corporation, to the full extent permitted
by any applicable portion of this Article XVII that shall not have been
invalidated and to the full extent permitted by applicable law. If the
General Corporation Law of the State of Maryland is amended, or other
Maryland law is enacted, to permit further or additional indemnification of
the persons defined in this Article XVII.A, then the indemnification of
such persons shall be to the fullest extent permitted by the General
Corporation Law of the State of Maryland, as so amended, or such other
Maryland law.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such
repeal or modification.
In accordance with Section 2-418 of the Maryland General Corporation Law,
directors, officers and employees of the Company generally shall be indemnified
in the defense of a proceeding if they are successful, on the merits or
otherwise, and in other circumstances unless (i) the act or omission was
material to the matter giving rise to the proceeding and either was committed in
bad faith or was the result of active and deliberate dishonesty; (ii) the
director actually received an improper personal benefit, in money, property or
services; or, (iii) in the case of a criminal proceeding, the director had
reasonable cause to believe that the act or omission was unlawful. Additionally,
a director may not be indemnified with respect to any proceeding by or in the
right of the Company in which the director shall have been adjudged to be liable
to the Company.
<PAGE>
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
- ------
Not Applicable.
ITEM 8. EXHIBITS
- ------
For a list of all exhibits filed or included as part of this Registration
Statement, see "Index to Exhibits" at the end of this Registration Statement.
ITEM 9. UNDERTAKINGS
- ------
1. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement --
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement;
provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the
registration statement is on Form S-3, Form S-8, or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1934, to treat each post-effective amendment as a new
registration statement relating to the securities offered, and the offering of
the securities at that time to be the initial bona fide offering.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
2. The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
<PAGE>
3. The undersigned registrant hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security holders that is incorporated
by reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
4. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Dundalk, State of Maryland, on October 10, 1996.
PATAPSCO BANCORP, INC.
By: /s/ Joseph J. Bouffard
------------------------------------
Joseph J. Bouffard
President and Chief Executive Officer
(Duly Authorized Representative)
POWER OF ATTORNEY
We, the undersigned directors and officers of Patapsco Bancorp, Inc.(the
"Company"), hereby severally constitute and appoint Joseph J. Bouffard our true
and lawful attorney and agent, to do any and all things in our names in the
capacities indicated below which said Joseph J. Bouffard may deem necessary or
advisable to enable the Company to comply with the Securities Act of 1933, as
amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with the registration statement on Form S-8,
including specifically, but not limited to, power and authority to sign for us
in our names in the capacities indicated below the registration statement and
any and all amendments (including post-effective amendments) thereto; and we
hereby ratify and confirm all that said Joseph J. Bouffard shall do or cause to
be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Joseph J. Bouffard President, Chief Executive October 10, 1996
- -------------------------------
Joseph J. Bouffard Officer and Director
(Principal Executive
Officer)
/s/ Timothy C. King Controller and Treasurer October 10, 1996
- -------------------------------
Timothy C. King (Principal Financial and
Accounting Officer)
/s/ S. Robert Kinghorn Chairman of the Board October 10, 1996
- -------------------------------
S. Robert Kinghorn
/s/ Joseph N. McGowan Vice Chairman of the Board October 10, 1996
- -------------------------------
Joseph N. McGowan
/s/ Theodore C. Patterson Director and Secretary October 10, 1996
- -------------------------------
Theodore C. Patterson
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Robert M. Lating Director October 10, 1996
- -------------------------------
Robert M. Lating
/s/ Douglas H. Ludwig Director October 10, 1996
- -------------------------------
Douglas H. Ludwig
/s/ Nicole N. Kantorski Director October 10, 1996
- -------------------------------
Nicole N. Kantorski
/s/ Thomas P. O'Neill Director October 10, 1996
- -------------------------------
Thomas P. O'Neill
</TABLE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequential
Exhibit Description Page Number
- ------- ----------- -----------
<S> <C> <C>
5 Opinion of Housley Kantarian & Bronstein, P.C. as to the
validity of the Common Stock being registered
23.1 Consent of Housley Kantarian & Bronstein, P.C. (appears
in their opinion filed as Exhibit 5)
23.2 Consent of Independent Certified Public Accountants
24 Power of Attorney (contained in the signature page to this
registration statement).
99.1 Patapsco Bancorp, Inc. Management Recognition Plan and
associated trust agreement
99.2 Patapsco Bancorp, Inc. 1996 Stock Option and Incentive Plan
and associated trust agreement
99.3 Form of Stock Option Agreement to be entered into with
Optionees with respect to Incentive Stock Options granted
under the Patapsco Bancorp, Inc. 1996 Stock Option and
Incentive Plan
99.4 Form of Stock Option Agreement to be entered into with
Optionees with respect to Non-Incentive Stock Options granted
under the Patapsco Bancorp, Inc. 1996 Stock Option and
Incentive Plan
99.5 Form of Agreement to be entered into with Optionees with respect
to Stock Appreciation Rights granted under the Patapsco Bancorp,
Inc. 1996 Stock Option and Incentive Plan
99.6 Notice of MRP Award
99.7 Memorandum concerning taxation of MRP Awards, and associated
election form
</TABLE>
<PAGE>
EXHIBIT 5
October 11, 1996
Board of Directors
Patapsco Bancorp, Inc.
1301 Merritt Boulevard
Dundalk, Maryland 21222-2194
Re: Registration Statement on Form S-8
----------------------------------
Patapsco Bancorp, Inc. Management Recognition Plan
and 1996 Stock Option and Incentive Plan
Dear Board Members:
We have acted as special counsel to Patapsco Bancorp, Inc., a Maryland
Corporation (the "Company"), in connection with the preparation of the
Registration Statement on Form S-8 filed with the Securities and Exchange
Commission (the "Registration Statement") under the Securities Act of 1933, as
amended, relating to shares of common stock, par value $.01 per share (the
"Common Stock"), of the Company which may be issued pursuant to the Patapsco
Bancorp, Inc. Management Recognition Plan and 1996 Stock Option and Incentive
Plan (together, the "Plans"), all as more fully described in the Registration
Statement. You have requested the opinion of this firm with respect to certain
legal aspects of the proposed offering.
We have examined such documents, records and matters of law as we have
deemed necessary for purposes of this opinion and based thereon, we are of the
opinion that the Common Stock when issued pursuant to and in accordance with the
terms of the Plans will be duly and validly issued, fully paid, and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form S-8 and to references to our firm included under
the caption "Legal Opinion" in the Prospectus which is part of the Registration
Statement.
Very truly yours,
Housley Kantarian & Bronstein, P.C.
By: /s/ J. Mark Poerio
---------------------------------
J. Mark Poerio
<PAGE>
EXHIBIT 23.2
CONSENTS OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Patapsco Bancorp, Inc.:
We consent to the use of our report incorporated herein by reference.
/s/ KPMG Peat Marwick LLP
-------------------------------------------
KPMG Peat Marwick LLP
<PAGE>
EXHIBIT 99.1
PATAPSCO BANCORP, INC.
MANAGEMENT RECOGNITION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
1.01 The Company hereby establishes this Plan upon the terms and
conditions hereinafter stated.
1.02 Through acceptance of their appointment to the Committee, each
member of the Committee hereby accepts his or her appointment hereunder
upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to reward and retain personnel of
experience and ability in key positions of responsibility by providing Employees
and Directors of the Company, the Association, and their Affiliates with a
proprietary interest in the Company, and as compensation for their past
contributions to the Association, and as an incentive to make such contributions
in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Plan with an initial
capital letter, shall have the meanings set forth below unless the context
clearly indicates otherwise. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.
3.01 "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Company, as such terms are defined in Section 424(e) and
(f), respectively, of the Internal Revenue Code of 1986, as amended.
3.02 "Association" means Patapsco Federal Savings and Loan Association.
3.03 "Beneficiary" means the person or persons designated by a
Participant to receive any benefits payable under the Plan in the event of such
Participant's death. Such person or persons shall be designated in writing on
forms provided for this purpose by the Committee and may be changed from time to
time by similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Participant's surviving spouse, if any
or if none, his estate.
3.04 "Board" means the Board of Directors of the Company or, prior to the
Company's formation on November 9, 1995, Board of Directors of the Association.
3.05 "Committee" means the Management Recognition Plan Committee
appointed by the Board pursuant to Article IV hereof.
3.06 "Common Stock" means shares of the common stock, par value $.01
per share, of the Company.
3.07 "Company" means Patapsco Bancorp, Inc.
3.08 "Continuous Service" shall mean the absence of any interruption or
termination of service as an Employee, Director, or honorary Director of the
Company or an Affiliate. Continuous Service shall not be
1
<PAGE>
considered interrupted in the case of sick leave, military leave or any other
leave of absence approved by the Company in the case of transfers between
payroll locations of the Company or between the Company, an Affiliate or a
successor, or in the case of a Director's performance of services in an
emeritus, advisory, or honorary capacity.
3.09 "Date of Conversion" means the date of the conversion of the
Association from mutual to stock form.
3.10 "Director" means a member of the Board.
3.11 "Disability" shall mean a physical or mental condition, which in the
sole and absolute discretion of the Committee, is reasonably expected to be of
indefinite duration and to substantially prevent a Participant from fulfilling
his or her duties or responsibilities to the Company or an Affiliate.
3.12 "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 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended.
3.13 "Effective Date" means the date on which the Plan first becomes
effective, as determined under Section 8.07 hereof.
3.14 "Employee" means any person who is employed by the Company or an
Affiliate.
3.15 "Participant" means an Employee, Director, or honorary Director who
holds a Plan Share Award.
3.16 "Plan" means this Patapsco Bancorp, Inc. Management Recognition
Plan.
3.17 "Plan Shares" means shares of Common Stock held in the Trust which
are awarded or issuable to a Participant pursuant to the Plan.
3.18 "Plan Share Award" means a right granted under this Plan to receive
Plan Shares.
3.19 "Plan Share Reserve" means the shares of Common Stock held by the
Trustee pursuant to Sections 5.02 and 5.03.
3.20 "Trust Agreement" means that agreement entered into pursuant to the
terms hereof between the Company and the Trustee, and "Trust" means the trust
created thereunder.
3.21 "Trustee" means that person(s) or entity appointed by the Board
pursuant to the Trust Agreement to hold legal title to the Plan assets for the
purposes set forth herein.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 ROLE AND POWERS OF THE COMMITTEE. The Plan shall be administered
and interpreted by the Committee, which shall consist of not less than two Non-
employee members of the Board who are Non-employee Directors. In the absence at
any time of a duly appointed Committee, the Plan shall be administered by those
members of the Board who are Disinterested Persons, and by the Board if there
are less than two Non-employee Directors.
The Committee shall have all of the powers allocated to it in this and
other Sections of the Plan. 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 make Plan Share Awards to such
Employees as the Committee may
2
<PAGE>
select, (ii) to determine the form and content of Plan Share Awards to be issued
under the Plan, (iii) to interpret the Plan, (iv) to prescribe, amend and
rescind rules and regulations relating to the Plan, and (v) to make other deter
minations 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. Subject to Section 4.02, the
interpretation and construction by the Committee of any provisions of the Plan
or of any Plan Share Award granted hereunder shall be final and binding. The
Committee shall act by vote or written consent of a majority of its members, and
shall report its actions and decisions with respect to the Plan to the Board at
appropriate times, but in no event less than one time per calendar year. The
Committee may recommend to the Board one or more persons or entity to act as
Trustee(s) in accordance with the provisions of this Plan and the Trust.
4.02 ROLE OF THE BOARD. The members of the Committee shall be appointed
or approved by, and will serve at the pleasure of, the Board. The Board may in
its discretion from time to time remove members from, or add members to, the
Committee. The Board shall have all of the powers allocated to it in this and
other Sections of the Plan, may take any action under or with respect to the
Plan which the Committee is authorized to take, and may reverse or override any
action taken or decision made by the Committee under or with respect to the
Plan, provided, however, that the Board may not revoke any Plan Share Award
already made or impair a participant's vested rights under a Plan Share Award.
Members of the Board who are eligible for or who have been granted Plan Share
Awards (other than pursuant to Section 6.04) may not vote on any matters
affecting the administration of the Plan or the grant of Plan Shares or Plan
Share Awards (although such members may be counted in determining the existence
of a quorum at any meeting of the Board during which actions with regard thereto
are taken). Further, with respect to all actions taken by the Board in regard to
the Plan, such action shall be taken by a majority of the Board where such a
majority of the directors acting in the matter are Non-employee Directors.
4.03 LIMITATION ON LIABILITY. No member of the Board or the Committee or
the Trustee(s) shall be liable for any determination made in good faith with
respect to the Plan or any Plan Shares or Plan Share Awards granted under it. If
a member of the Board or the Committee or any Trustee is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of anything done or not done by him in such capacity under or with
respect to the Plan, the Company shall indemnify such member against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in the best interests of the Company and its
Affiliates and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
ARTICLE V
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 AMOUNT AND TIMING OF CONTRIBUTIONS. The Board shall determine the
amounts (or the method of computing the amounts) to be contributed by the
Company to the Trust. Such amounts shall be paid to the Trustee at the time of
contribution. No contributions to the Trust by Employees shall be permitted.
5.02 INVESTMENT OF TRUST ASSETS. The Trustee shall invest Trust assets
only in accordance with the Trust Agreement; provided that the Trust shall not
purchase more than four percent (4%) of the number of shares of Common Stock
issued on the Date of Conversion. Such shares may either be authorized but
unissued shares or shares held in treasury.
5.03 EFFECT OF ALLOCATIONS, RETURNS AND FORFEITURES UPON PLAN SHARE
RESERVES. Upon the allocation of Plan Share Awards under Section 6.02, the Plan
Share Reserve shall be reduced by the number of Shares subject to the Awards so
allocated. Any Shares subject or attributable to an Award which may not be
earned because of a forfeiture by the Participant pursuant to Section 7.01 shall
be added to the Plan Share Reserve.
3
<PAGE>
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 ELIGIBILITY. Only Employees shall be eligible to receive Plan Share
Awards. In selecting those Employees to whom Plan Share Awards will be granted
and the number of shares covered by such Awards, the Committee shall consider
the position, duties and responsibilities of the eligible Employees, the value
of their services to the Company and its Affiliates, and any other factors the
Committee may deem relevant. Notwithstanding the foregoing, (i) the Committee
shall automatically make the Plan Share Awards specified in Sections 6.04 and
6.05 hereof; and (ii) no Employee shall receive Plan Share Awards relating to
more than 25% of the Plan Shares reserved under Section 5.02, and no Non-
employee Director shall receive Plan Share Awards relating to more than 5% of
the Plan Shares reserved under Section 5.02, with all Non-employee Directors as
a group receiving Plan Share Awards relating to no more than 30% of the Plan
Shares reserved under Section 5.02.
6.02 ALLOCATIONS. The Committee will determine which Employees will be
granted discretionary Plan Share Awards, and the number of Shares covered by
each Plan Share Award, provided that in no event shall any Awards be made which
will violate the governing instruments of the Association or its Affiliates or
any applicable federal or state law or regulation. In the event Plan Shares are
forfeited for any reason or additional shares of Common Stock are purchased by
the Trustee, the Committee may, from time to time, determine which of the
Employees referenced in Section 6.01 above will be granted additional Plan Share
Awards to be awarded from the forfeited or acquired Plan Shares.
6.03 FORM OF ALLOCATION. As promptly as practicable after a determination
is made pursuant to Section 6.02 that a Plan Share Award is to be made, the
Committee shall notify the Participant in writing of the grant of the Award, the
number of Plan Shares covered by the Award, and the terms upon which the Plan
Shares subject to the Award may be earned. The date on which the Committee so
notifies the Participant shall be considered the date of grant of the Plan Share
Awards. The Committee shall maintain records as to all grants of Plan Share
Awards under the Plan.
6.04 AUTOMATIC GRANTS TO NON-EMPLOYEE DIRECTORS. Notwithstanding any
other provisions of this Plan, each Director who is a Non-employee Director on
September 30, 1995 and who has not terminated Continuous Service before the
Effective Date shall receive, on the Effective Date, a Plan Share Award for a
number of shares equal to 4.784% of the number of Plan Shares which the Trust is
authorized to purchase pursuant to Section 5.02 of the Plan.
Each Non-employee Director who joins the Board after September 30, 1995
shall receive, on the later of the Effective Date and the date of becoming a
Director, a Plan Share Award of 1.28% of the number of Plan Shares which the
Trust is authorized to purchase pursuant to Section 5.02 of the Plan (or such
lesser number as are available hereunder for Plan Share Awards). Plan Share
Awards received under the provisions of this Section shall become vested and
nonforfeitable according to the general rules set forth in subsections (a) and
(b) of Section 7.01, and the Committee shall have no discretion to alter or
accelerate said vesting requirements. Unless otherwise inapplicable or
inconsistent with the provisions of this Section, the Plan Share Awards to be
granted hereunder shall be subject to all other provisions of this Plan.
6.05 AUTOMATIC GRANTS TO EMPLOYEES. On the Effective Date, each of the
following individuals shall receive a Plan Share Award as to the number of Plan
Shares listed below, provided that such award shall not be made to an individual
who is not an Employee on the Effective Date:
4
<PAGE>
<TABLE>
<CAPTION>
Percentage of Plan Shares Authorized
Employee for Purchase under Plan (S)5.02
-------- -------------------------------------------
<S> <C>
Joseph Bouffard 21.50%
Debra Brockschmidt 16.25%
Timothy King 10.75%
Jack McClean 10.75%
Joe Sallese 10.75%
</TABLE>
Plan Share Awards received under the provisions of this Section shall
become vested and nonforfeitable according to the general rules set forth in
subsections (a) and (b) of Section 7.01, and the Committee shall have no
discretion to alter said vesting requirements. Unless otherwise inapplicable or
inconsistent with the provisions of this Section, the Plan Share Awards to be
granted hereunder shall be subject to all other provisions of this Plan.
6.06 ALLOCATIONS NOT REQUIRED. Notwithstanding anything to the contrary
in Sections 6.01 and 6.02, but subject to Sections 6.04 and 6.05, no Employee or
Director shall have any right or entitlement to receive a Plan Share Award
hereunder, such Awards being at the total discretion of the Committee, nor shall
any Employees or Directors as a group have such a right. The Committee may, with
the approval of the Board (or, if so directed by the Board) return all Common
Stock in the Plan Share Reserve to the Company at any time, and cease issuing
Plan Share Awards.
ARTICLE VII
EARNINGS AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 EARNING PLAN SHARES; FORFEITURES.
(a) GENERAL RULES. Twenty percent (20%) of the Plan Shares subject to a
Plan Share Award shall be earned and become non-forfeitable by a Participant
upon his or her completion of each of five Years of Service. For purposes of
this paragraph, with respect to each Plan Share Award, "Year of Service" means a
full twelve-month period, measured from the date of a Plan Share Award and each
annual anniversary of that date, throughout which the Participant's Continuous
Service has not terminated for any reason.
(b) EXCEPTION FOR TERMINATIONS DUE TO DEATH OR DISABILITY.
Notwithstanding the general rule contained in Section 7.01(a) above, all Plan
Shares subject to a Plan Share Award held by a Participant whose service with
the Company or an Affiliate terminates due to the Participant's death or
Disability, shall be deemed earned as of the Participant's last day of service
with the Company or an Affiliate and shall be distributed as soon as practicable
thereafter.
7.02 ACCRUAL OF DIVIDENDS. Whenever Plan Shares are paid to a
Participant or Beneficiary under Section 7.03, such Participant or Beneficiary
shall also be entitled to receive, with respect to each Plan Share paid an
amount equal to any cash dividends and a number of shares of Common Stock equal
to any stock dividends, declared and paid with respect to a share of Common
Stock between the date the relevant Plan Share Award was initially granted to
such Participant and the date the Plan Shares are being distributed. There shall
also be distributed an appropriate amount of net earnings, if any, of the Trust
with respect to any cash dividends so paid out.
7.03 DISTRIBUTION OF PLAN SHARES.
(a) TIMING OF DISTRIBUTIONS: GENERAL RULE. Except as provided in
Subsections (c) and (d) below, the Trustee shall distribute Plan Shares and
accumulated cash from dividends and interest to the Participant or his
Beneficiary, as the case may be, as soon as practicable after they have been
earned. No fractional shares shall be distributed.
5
<PAGE>
(b) FORM OF DISTRIBUTION. The Trustee shall distribute all Plan Shares,
together with any shares representing stock dividends, in the form of Common
Stock. One share of Common Stock shall be given for each Plan Share earned.
Payments representing cash dividends (and earnings thereon) shall be made in
cash.
(c) WITHHOLDING. The Trustee shall withhold from any cash payment made
under this Plan sufficient amounts to cover any applicable withholding and
employment taxes, and if the amount of such cash payment is not sufficient, (i)
the Trustee shall require the Participant or Beneficiary to pay to the Trustee
the amount required to be withheld as a condition of delivering the Plan Shares,
and (ii) the Participant or Beneficiary shall be entitled to have the Company
withhold shares subject to the Plan Share Award in order to satisfy such
obligations. The Trustee shall pay over to the Company or Affiliate which
employs or employed such Participant any such amount withheld from or paid by
the Participant or Beneficiary.
(d) TIMING: EXCEPTION FOR 10% SHAREHOLDERS. Notwithstanding Subsections
(a) and (b) above, no Plan Shares may be distributed prior to the date which is
five (5) years from the Date of Conversion to the extent the Participant or
Beneficiary, as the case may be, would after receipt of such Shares own in
excess of ten percent (10%) of the issued and outstanding shares of Common Stock
unless such action is approved in advance by a majority vote of disinterested
directors of the Board. To the extent this limitation would delay the date on
which a Participant receives Plan Shares, the Participant may elect to receive
from the Trust, in lieu of such Plan Shares, the cash equivalent thereof. Any
Plan Shares remaining undistributed solely by reason of the operation of this
Subsection (d) shall be distributed to the Participant or his Beneficiary on the
date which is five years from the Date of Conversion.
(e) REGULATORY EXCEPTIONS. No Plan Shares shall be distributed unless and
until all of the requirements of all applicable law and regulation shall have
been fully complied with, including the receipt of approval of the Plan by the
stockholders of the Company by such vote, if any, as may be required by
applicable law and regulations.
7.04 VOTING OF PLAN SHARES. All shares of Common Stock held by the Trust
(whether or not subject to a Plan Share Award) shall be voted by the Trustee in
the same proportion as the trustee of the Company's Employee Stock Ownership
Plan votes Common Stock held in the trust associated therewith, and in the
absence of any such voting, shall be voted in the manner directed by the Board.
ARTICLE VIII
MISCELLANEOUS
8.01 ADJUSTMENTS FOR CAPITAL CHANGES.
(a) RECAPITALIZATIONS; STOCK SPLITS, ETC. The number and kind of shares
which may be purchased under the Plan, and the number and kind of shares subject
to outstanding Plan Share Awards, shall be proportionately adjusted for any
increase, decrease, change or exchange of shares of Common Stock for a different
number or kind of shares or other securities of the Company which results from a
merger, consolidation, recapita lization, 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.
(b) TRANSACTIONS IN WHICH THE COMPANY IS NOT THE SURVIVING ENTITY.
In the event of (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 Company's assets (any of
the foregoing to be referred to herein as a "Transaction"), all outstanding Plan
Share Awards shall be adjusted for any change or exchange of shares of Common
Stock for a different number or kind of shares or other securities which results
from the Transaction.
(c) 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
6
<PAGE>
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
Plan Share Award before the adjustment was made. In addition, the Committee
shall have the discretionary authority to impose on the Shares subject to Plan
Share Awards such restrictions as the Committee may deem appropriate or
desirable, including but not limited to a right of first refusal, or repurchase
option, or both of these restrictions.
(d) 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 of Common Stock 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 or class of shares of
Common Stock then subject to Plan Share Awards or reserved for issuance under
the Plan.
8.02 AMENDMENT AND TERMINATION OF PLAN. The Board may, by resolution, at
any time amend or terminate the Plan; provided that no amendment or termination
of the Plan shall, without the written consent of a Participant, impair any
rights or obligations under a Plan Share Award theretofore granted to the
Participant. The power to amend or terminate the Plan in accordance with this
Section 8.02 shall include the power to direct the Trustee to return to the
Company all or any part of the assets of the Trust, including shares of Common
Stock held in the Plan Share Reserve. However, the termination of the Trust
shall not affect a Participant's right to earn Plan Share Awards and to receive
a distribution of Common Stock relating thereto, including earnings thereon, in
accordance with the terms of this Plan and the grant by the Committee or the
Board.
8.03 NONTRANSFERABILITY. Plan Share Awards 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. Notwithstanding the foregoing,
or any other provision of this Plan, a Participant who holds Plan Share Awards
may transfer such Plan Share Awards to his or her spouse, lineal ascendants,
lineal descendants, or to a duly established trust for the benefit of one or
more of these individuals. Plan Share Awards so transferred may thereafter be
transferred only to the Participant who originally received the grant or to an
individual or trust to whom the Participant could have initially transferred the
Plan Share Awards pursuant to this Paragraph. Plan Share Awards which are
transferred pursuant to this Paragraph shall be exercisable by the transferee
according to the same terms and conditions as applied to the Participant.
8.04 NO EMPLOYMENT OR OTHER RIGHTS. Neither the Plan nor any grant of a
Plan Share Award or Plan Shares hereunder nor any action taken by the Trustee,
the Committee or the Board in connection with the Plan shall create any right,
either express or implied, on the part of any Employee or Director to continue
in the service of the Company, the Association, or an Affiliate thereof.
8.05 VOTING AND DIVIDEND RIGHTS. No Participant shall have any voting or
dividend rights or other rights of a stockholder in respect of any Plan Shares
covered by a Plan Share Award, except as expressly provided in Section 7.03
above, prior to the time said Plan Shares are actually distributed to him.
8.06 GOVERNING LAW. The Plan and Trust shall be governed and construed
under the laws of the State of Maryland to the extent not preempted by Federal
law.
8.07 EFFECTIVE DATE. The Plan shall become effective immediately upon
its approval by a favorable vote of stockholders of the Company who own at least
a majority of the total votes eligible to be cast at a duly called meeting of
the Company's stockholders held in accordance with applicable laws, provided
that the Plan shall not be submitted for such approval within the six-month
period after the Date of Conversion. In no event shall Plan Share Awards be made
prior to the Effective Date.
8.08 TERM OF PLAN. This Plan shall remain in effect until the earlier of
(i) termination by the Board, or (ii) the distribution of all assets of the
Trust. Termination of the Plan shall not affect any Plan Share Awards
7
<PAGE>
previously granted, and such Awards shall remain valid and in effect until they
have been earned and paid, or by their terms expire or are forfeited.
8.09 TAX STATUS OF TRUST. It is intended that (i) the Trust associated
with the Plan be treated as a grantor trust of the Company under the provisions
of Section 671 et seq. of the Code, as the same may be amended from time to
-- ---
time, and (ii) that in accordance with Revenue Procedure 92-65 (as the same may
be amended from time to time), Participants have the status of general unsecured
creditors of the Company, the Plan constitutes a mere unfunded promise to make
benefit payments in the future, the Plan is unfunded for tax purposes and for
purposes of Title I of the Employee Retirement Income Security Act of 1974, as
amended, and the Trust has been and will continue to be maintained in conformity
with Revenue Procedure 92-64 (as the same may be amended from time to time).
8
<PAGE>
TRUST AGREEMENT
UNDER THE PATAPSCO BANCORP, INC.
MANAGEMENT RECOGNITION PLAN
This Agreement made this ____ day of __________, 1996 by and between
Patapsco Bancorp, Inc. (the "Company") and Joseph McGowan, Theodore Patterson,
and S. Robert Kinghorn (acting by majority, the "Trustee").
WHEREAS, the Company maintains the Patapsco Bancorp, Inc. Management
Recognition Plan (the "Plan"); and
WHEREAS, the Company has incurred or expects to incur liability under the
terms of the Plan with respect to the individuals participating in the Plan
("Participants"); and
WHEREAS, the Company wishes to establish a trust (the "Trust") and to
contribute to the Trust assets that shall be held therein, subject to the claims
of the Company's general creditors in the event of Insolvency, as defined in
Section 3(a) hereof, until paid to Participants and their beneficiaries in such
manner and at such times as specified in the Plan; and
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
and
WHEREAS, it is the intention of the Company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plan.
NOW, THEREFORE, the parties do hereby establish this Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of Trust.
----------------------------------
(a) The Company hereby deposits, or will shortly hereafter deposit, with
the Trustee in trust (i) a number of shares of the Company's common stock
("Common Stock") equal to four percent (4%) of the number of shares of Common
Stock issued in connection with the conversion of Patapsco Federal Savings &
Loan Association (the "Association") from mutual-to-stock form, or (ii) an
amount expected to be sufficient to permit the Trust to purchase said shares.
Said shares or amount shall become the initial principal of the Trust to be
held, administered and disposed of by the Trustee as provided in this Trust
Agreement.
(b) The Trust shall become irrevocable upon the effective date of the
Plan.
(c) The Trust is intended to be a grantor trust, of which the Company is
the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended (the "Code"), and
shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon, shall be held
separate and apart from other funds of the Company and shall be used exclusively
for the uses and purposes of Participants and general creditors as herein set
forth. Participants and their beneficiaries shall have no preferred claim on, or
any beneficial ownership interest in, any assets of the Trust. Any rights
created under the Plan and this Trust Agreement shall be mere
<PAGE>
unsecured contractual rights of Participants and their beneficiaries against the
Company. Any assets held by the Trust will be subject to the claims of the
Company's general creditors under federal and state law in the event of
Insolvency, as defined in Section 3(a) herein.
(e) The Company, in its sole discretion, may at any time, or from time to
time, make additional deposits of cash or other property in trust with the
Trustee to augment the principal to be held, administered and disposed of by
Trustee as provided in this Trust Agreement. Neither the Trustee nor any
Participant or beneficiary shall have any right to compel such additional
deposits.
Section 2. Payments to Plan Participants and Their Beneficiaries.
-----------------------------------------------------------------
(a) The Company shall deliver to the Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each Participant
(and his or her beneficiaries), that provides a formula or other instructions
acceptable to the Trustee for determining the amounts so payable, the form in
which such amount is to be paid (as provided for or available under the Plan),
and the time of commencement for payment of such amounts. Except as otherwise
provided herein, the Trustee shall make payments to Participants and their
beneficiaries in accordance with such Payment Schedule. The Trustee shall make
provision for the reporting and withholding of any federal, state or local taxes
that may be required to be withheld with respect to the payment of benefits
pursuant to the terms of the Plan and shall pay amounts withheld to the
appropriate taxing authorities or determine that such amounts have been
reported, withheld and paid by the Company.
(b) The entitlement of a Participant or his or her beneficiaries to
benefits under the Plan shall be determined by the Company or such party as it
shall designate under the Plan, and any claim for such benefits shall be
considered and reviewed under the procedures set out in the Plan.
(c) The Company may make payment of benefits directly to Participants or
their beneficiaries as they become due under the terms of the Plan. The Company
shall notify the Trustee of its decision to make payment of benefits directly
prior to the time amounts are payable to Participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the terms of the
Plan, the Company shall make the balance of each such payment as it falls due.
The Trustee shall notify the Company where principal and earnings are not
sufficient.
Section 3. Trustee Responsibility Regarding Payments to Trust
--------------------------------------------------------------
Beneficiary When Company Is Insolvent.
-------------------------------------
(a) The Trustee shall cease payment of benefits to Participants and their
beneficiaries if the Company is Insolvent. The Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) the Company is unable to
pay its debts as they become due, or (ii) the Company becomes subject to a
pending proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of the Company under federal and state law as set
forth below.
(c) The Board of Directors and the Chief Executive Officer of the Company
shall have the duty to inform the Trustee in writing of the Company's
Insolvency. If a person claiming to be a creditor of the Company alleges in
writing to the Trustee that the Company has become Insolvent, the Trustee shall
determine whether the Company is Insolvent and, pending such determination, the
Trustee shall discontinue payment of benefits to Participants or their
beneficiaries.
(1) Unless the Trustee has actual knowledge of the Company's
Insolvency, or has received notice from the Company or a person claiming to be a
creditor alleging that the Company is Insolvent, the Trustee shall have no duty
to inquire whether the Company is Insolvent. The Trustee may in all events rely
on such
2
<PAGE>
evidence concerning the Company's solvency as may be furnished to the Trustee
and that provides the Trustee with a reasonable basis for making a determination
concerning the Company's solvency.
(2) If at any time the Trustee has determined that the Company is
Insolvent, the Trustee shall discontinue payments to Plan participants or their
beneficiaries, shall liquidate the Trust's investment in Common Stock, and shall
hold the assets of the Trust for the benefit of the Company's general creditors.
Nothing in this Trust Agreement shall in any way diminish any rights of
Participants or their beneficiaries as general creditors of the Company with
respect to benefits due under the Plan or otherwise.
(3) The Trustee shall resume the payment of benefits to Participants
or their beneficiaries in accordance with Section 2 of this Trust Agreement only
after the Trustee has determined that the Company is not Insolvent (or is no
longer Insolvent).
(d) Provided that there are sufficient assets, if the Trustee discontinues
the payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
Participants or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to
Participants or their beneficiaries by the Company in lieu of the payments
provided for hereunder during any such period of discontinuance.
Section 4. Payments to the Company.
-----------------------------------
Except as provided in Section 3 hereof, after the Trust has become
irrevocable, the Company shall have no right or power to direct the Trustee to
return to the Company or to divert to others any of the Trust assets before all
payment of benefits have been made to Plan Participants and their beneficiaries
pursuant to the terms of the Plan.
Section 5. Investment Authority.
--------------------------------
(a) The Trustee shall have sole discretion as to the investment of Trust
assets, except that to the extent reasonably practicable, the Trustee shall
invest all assets of the Trust in Common Stock provided that the Trust shall not
purchase from time to time a number of shares of Common Stock exceeding 4% of
the shares of Common Stock issued in the Association's mutual-to-stock
conversion.
(b) All rights associated with assets of the Trust shall be exercised by
the Trustee or the person designated by the Trustee, and shall in no event be
exercisable by or rest with Participants, except that voting rights with respect
to Common Stock will be exercised in accordance with the terms of the Plan.
(c) Subject to applicable federal and state securities laws, if for any
reason the Trustee will be selling shares of Common Stock, the Trustee shall
sell such shares by (i) giving each Beneficiary 20 business days within which to
purchase, at fair market value, all or part of the shares of Common Stock that
the Trustee holds for the benefit of the Beneficiary, and (ii) to the extent
purchases by Beneficiaries are insufficient to eliminate the Trusts' excess
holdings of Common Stock, to offer to sell, and to sell, all or any part of the
excess shares held by the Trust to the following purchasers, listed here by
order of priority: first, the Company; second, any benefit plan maintained by
the Company or the Association; third, directors of the Association; fourth,
officers of the Association; fifth, members of the general public.
Section 6. - Disposition of Income.
----------------------------------
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
3
<PAGE>
Section 7. Accounting by Trustee.
---------------------------------
The Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between the
Company and the Trustee. Within 60 days following the close of each calendar
year and within 20 days after the removal or resignation of the Trustee, the
Trustee shall deliver to the Company a written account of its administration of
the Trust during such year or during the period from the close of the last
preceding year to the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other transactions effected by it,
including a description of all securities and investments purchased and sold
with the cost or net proceeds of such purchased and sold with the cost or net
proceeds of such purchases or sales (accrued interest paid or receivable being
shown separately), and showing all cash, securities and other property held in
the Trust at the end of such year or as of the date of such removal or
resignation, as the case may be.
Section 8. Responsibility of Trustee.
-------------------------------------
(a) The Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by the Company which is contemplated by,
and in conformity with, the terms of the Plan or this Trust and is given in
writing by the Company. In the event of a dispute between the Company and a
party, the Trustee may apply to a court of competent jurisdiction to resolve the
dispute.
(b) If the Trustee undertakes or defends any litigation arising in
connection with this Trust, the Company agrees to indemnify the Trustee against
Trustee's costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments, except in those cases where the Trustee shall have been found by
a court of competent jurisdiction to have acted with gross negligence or willful
misconduct. If the Company does not pay such costs, expenses and liabilities in
a reasonably timely manner, the Trustee may obtain payment from the Trust.
(c) The Trustee may consult with legal counsel with respect to any of its
duties or obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers conferred on
trustees by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of the Trust,
the Trustee shall have no power to name a beneficiary of the policy other than
the Trust, to assign the policy (as distinct from conversion of the policy to a
different form) other than to a successor trustee, or to loan to any person the
proceeds of any borrowing against such policy.
(f) Notwithstanding any powers granted to the Trustee pursuant to this
Trust Agreement or to applicable law, the Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Code.
Section 9. Compensation and Expenses of Trustee.
------------------------------------------------
The Company shall pay all administrative expenses and the Trustee's fees
and expenses relating to the Plan and this Trust. If not so paid, the fees and
expenses shall be paid from the Trust.
4
<PAGE>
Section 10. Resignation and Removal of Trustee.
-----------------------------------------------
The Trustee (or any individual serving as one of the trustees who act by
majority as the Trustee) may resign at any time by written notice to the
Company, which resignation shall be effective 30 days after the Company receives
such notice (unless the Company and the Trustee agree otherwise). The Trustee
(or any individual serving as one of the trustees who act by majority as the
Trustee) may be removed by the Company on 30 days notice or upon shorter notice
accepted by the Trustee.
If the Trustee (or any individual serving as one of the trustees who act by
majority as the Trustee) resigns or is removed, a successor shall be appointed,
in accordance with Section 11 hereof, by the effective date or resignation or
removal under this section. If no such appointment has been made, the Trustee
may apply to a court of competent jurisdiction for appointment of a successor or
for instructions. All expenses of the Trustee in connection with the proceeding
shall be allowed as administrative expenses of the Trust. Upon resignation or
removal of the Trustee and appointment of a successor trustee, all assets shall
subsequently be transferred to the successor trustee. The transfer shall be
completed within 60 days after receipt of notice of resignation, removal or
transfer, unless the Company extends the time limit.
Section 11. Appointment of Successor.
-------------------------------------
If the Trustee resigns or is removed in accordance with Section 10 hereof,
the Company may appoint any other party as a successor to replace the Trustee
upon resignation or removal. The appointment shall be effective when accepted in
writing by the new trustee, who shall have all of the rights and powers of the
former trustee, including ownership rights in the Trust assets. The former
trustee shall execute any instrument necessary or reasonably requested by the
Company or the successor trustee to evidence the transfer.
A successor trustee need not examine the records and acts of any prior
trustee and may retain or dispose of existing Trust assets, subject to Sections
7 and 8 hereof. The successor trustee shall not be responsible for, and the
Company shall indemnify and defend the successor trustee from, any claim or
liability resulting from any action or inaction of any prior trustee or from any
other past event, or any condition existing at the time it becomes successor
trustee.
Section 12. Amendment or Termination.
-------------------------------------
(a) This Trust Agreement may be amended by a written instrument executed
by the Trustee and the Company, provided that no such amendment shall make the
Trust revocable.
(b) The Trust shall not terminate until the date on which Participants and
their beneficiaries are no longer entitled to benefits pursuant to the terms
hereof. Upon termination of the Trust, the Trustee shall return any assets
remaining in the Trust to the Company.
(c) Upon written approval of all Participants (or their beneficiaries if
they are then entitled to payment of benefits), the Company may terminate this
Trust prior to the time all benefit payments under the Plan have been made. All
assets in the Trust at termination shall be returned to the Company.
Section 13. Miscellaneous.
--------------------------
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Participants and their beneficiaries under this
Trust Agreement may not be anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process, except pursuant to the terms of
the Plan.
5
<PAGE>
(c) This Trust Agreement shall be governed by and construed in accordance
with the laws of the State of Maryland, to the extent not preempted by federal
law.
(d) The Trustee agrees to be bound by the terms of the Plan, as in effect
from time to time.
(e) The Trustee shall act by vote or written consent of a majority of its
duly-appointed members.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, has caused
this Agreement to be executed, and its corporate seal affixed, and the Trustees
have executed this Agreement, this ____ day of __________, 1996.
ATTEST: PATAPSCO BANCORP, INC.
_______________________ By:/s/Joseph J. Bouffard
------------------------------------
Joseph J. Bouffard, President
ATTEST: TRUSTEE
/s/Joseph McGowan
--------------------- ---------------------------------------
Joseph McGowan
/s/Theodore Patterson
- ---------------------- --------------------------------------
Theodore Patterson
/s/Robert Kinghorn
- ---------------------- -------------------------------------
S. Robert Kinghorn
6
<PAGE>
EXHIBIT 99.2
<PAGE>
PATAPSCO BANCORP, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
1. PURPOSE OF THE PLAN.
The purpose of this Patapsco Bancorp, Inc. 1996 Stock Option and Incentive
Plan (the "Plan") is to advance the interests of the Company through providing
select key Employees and Directors of the Association, the Company, and their
Affiliates with the opportunity to acquire Shares. 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 key Employees of the Company or any Affiliate to
promote the success of the business.
2. DEFINITIONS.
As used herein, the following definitions shall apply.
(a) "Affiliate" shall mean 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" shall mean a written agreement entered into in accordance
with Paragraph 5(c).
(c) "Association" shall mean Patapsco Federal Savings & Loan Association.
(d) "Awards" shall mean, collectively, Options and SARs, unless the
context clearly indicates a different meaning.
(e) "Board" shall mean the Board of Directors of the Company.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Committee" shall mean the Stock Option Committee appointed by the
Board in accordance with Paragraph 5(a) hereof.
(h) "Common Stock" shall mean the common stock, par value $.01 per share,
of the Company.
(i) "Company" shall mean Patapsco Bancorp, Inc.
(j) "Continuous Service" shall mean the absence of any interruption or
termination of service as an Employee, Director, or honorary Director 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, in the case of transfers between payroll locations of the
Company or between the Company, an Affiliate or a successor, or in the case of a
Director's performance of services in an emeritus, advisory, or honorary
capacity.
(k) "Director" shall mean any member of the Board, and any member of the
board of directors of any Affiliate that the Board has by resolution designated
as being eligible for participation in this Plan.
(l) "Disability" shall mean a physical or mental condition, which in the
sole and absolute discretion of the Committee, is reasonably expected to be of
indefinite duration and to substantially prevent a Participant from fulfilling
his or her duties or responsibilities to the Company or an Affiliate.
<PAGE>
(m) "Effective Date" shall mean the date specified in Paragraph 14 hereof.
(n) "Employee" shall mean any person employed by the Company, the
Association, or an Affiliate.
(o) "Exercise Price" shall mean the price per Optioned Share at which an
Option or SAR may be exercised.
(p) "ISO" means an option to purchase Common Stock which 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.
(q) "Market Value" shall mean the fair market value of the Common Stock,
as determined under Paragraph 7(b) hereof.
(r) "Non-employee Director" shall mean 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.
(s) "Non-ISO" means an option to purchase Common Stock which meets the
requirements set forth in the Plan but which is not intended to be and is not
identified as an ISO.
(t) "Option" means an ISO and/or a Non-ISO.
(u) "Optioned Shares" shall mean Shares subject to an Option granted
pursuant to this Plan.
(v) "Participant" shall mean any person who receives an Award pursuant to
the Plan.
(w) "Plan" shall mean this Patapsco Bancorp, Inc. 1996 Stock Option and
Incentive Plan.
(x) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended.
(y) "Share" shall mean one share of Common Stock .
(z) "SAR" (or "Stock Appreciation Right") means a right to receive the
appreciation in value, or a portion of the appreciation in value, of a specified
number of shares of Common Stock.
3. TERM OF THE PLAN AND AWARDS.
(a) Term of the Plan. The Plan shall continue in effect for a term of ten
years from the Effective Date, unless sooner terminated pursuant to Paragraph 16
hereof. No Award shall be granted under the Plan after ten years from the
Effective Date.
(b) Term of Awards. The term of each Award granted under the Plan shall
be established by the Committee, but shall not exceed 10 years; provided,
however, that in the case of an Employee who owns Shares representing more than
10% of the outstanding Common Stock at the time an ISO is granted, the term of
such ISO shall not exceed five years.
4. SHARES SUBJECT TO THE PLAN.
(a) General Rule. Except as otherwise required by the provisions of
Paragraph 11 hereof, the aggregate number of Shares deliverable pursuant to
Awards shall not exceed 36,255 shares, which equals ten percent (10%) of the
Shares issued by the Company in connection with the Association's conversion
from mutual to stock form
2
<PAGE>
("Conversion"). Such Shares may be (i) authorized but unissued Shares, (ii)
Shares held in treasury, or (iii) Shares held in a grantor trust. If any Awards
should expire, become unexercisable, or be forfeited for any reason without
having been exercised, the Optioned Shares shall, unless the Plan shall have
been terminated, be available for the grant of additional Awards under the Plan.
(b) Special Rule for SARs. The number of Shares with respect to which an
SAR is granted, but not the number of Shares which the Company delivers or could
deliver to an Employee or individual upon exercise of an SAR, shall be charged
against the aggregate number of Shares remaining available under the Plan;
provided, however, that in the case of an 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 subject to
the Option shall be charged against the aggregate number of Shares remaining
available under the Plan. The Shares involved in an Option as to which option
rights have terminated by reason of the exercise of a related SAR, as provided
in Paragraph 10 hereof, shall not be available for the grant of further Options
under the Plan.
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 two (2) members of the Board who
are Non-employee Directors. Members of the Committee 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 those members of the Board who are Disinterested
Persons.
(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, (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, if any, to be placed upon such
Award, or upon Shares which may be issued upon exercise of such Award.
The Chairman of the Committee and such other Directors and 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.
(d) Effect of the Committee's Decisions. All decisions, determinations and
interpretations of the Committee 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
Award, granted hereunder
3
<PAGE>
to the full extent provided for under the Company's governing instruments with
respect to the indemnification of Directors.
6. GRANT OF OPTIONS.
(a) General Rule. Only Employees shall be eligible Awards. In selecting
those Employees to whom Awards will be granted and the number of shares covered
by such Awards, the Committee shall consider the position, duties and
responsibilities of the eligible Employees, the value of their services to the
Company and its Affiliates, and any other factors the Committee may deem
relevant. Notwithstanding the foregoing, the Committee shall automatically make
the Awards specified in Sections 6(b) and 9 hereof, and no Employee shall
receive Options to purchase more than 25% of the Shares reserved under Paragraph
4(a), and no Non-employee Director shall receive Options to purchase more than
5% of the Shares reserved under Paragraph 4(a), with all Non-employee Directors
as a group receiving Options on the Effective Date to purchase no more than 30%
of the Shares reserved under Paragraph 4(a).
(b) Automatic Grants to Employees. On the Effective Date, each of the
following Employees shall receive an Option (in the form of an ISO, to the
extent permissible under the Code) to purchase the number of Shares listed
below, at an Exercise Price per Share equal to the Market Value of a Share on
the Effective Date; provided that such grant shall not be made to an Employee
whose Continuous Service terminates on or before the Effective Date:
<TABLE>
<CAPTION>
Percentage of Shares
Participant Reserved under Paragraph 4(a)
----------- -----------------------------
<S> <C>
Joseph Bouffard 18.6%
Timothy King 9.3%
Debra Brockschmidt 9.3%
Frank Duchacek, Jr. 9.3%
Jack McClean 9.3%
Joe Sallese 9.3%
</TABLE>
With respect to each of the above-named Participants, the Option granted to
the Participant hereunder (i) shall vest in accordance with the general rule set
forth in Paragraph 8(a) of the Plan, (ii) shall have a term of ten years from
the Effective Date, and (iii) shall be subject to the general rule set forth in
Paragraph 8(c) with respect to the effect of a Participant's termination of
Continuous Service on the Participant's right to exercise his Options.
(c) 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
present or future Affiliate of the Company) shall not exceed $100,000.
Notwithstanding the foregoing, 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 shall not be less than 100% of the Market Value of the
Optioned Shares on the date of grant. In the case of an Employee who owns Shares
representing more than 10% of the Company's 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.
4
<PAGE>
(b) Standards for Determining Exercise Price. If the Common Stock is
listed on a national securities exchange (including the NASDAQ National Market
System) on the date in question, then the Market Value per Share shall be 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 the
mean between the bid and asked price 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 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 by the Committee, in its sole and absolute
discretion.
8. EXERCISE OF OPTIONS.
(a) Generally. Each Option shall become exercisable with respect to
twenty percent (20%) of the Optioned Shares upon the Participant's completion of
each of five Years of Service, provided that an Option shall become fully (100%)
exercisable immediately upon termination of the Participant's Continuous Service
due to the Participant's Disability or death. An Option may not be exercised for
a fractional Share.
(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 Company's
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, and may consist of Shares subject to the Option being exercised. Upon
a Participant's exercise of an Option, the Company shall pay the Participant a
cash amount equal to any dividends declared on the underlying Shares between the
date of grant and the date of exercise of the Option.
(c) Period of Exercisability. Except to the extent otherwise provided in
the terms of an Agreement, an Option may be exercised by a Participant only
while he is an Employee and has maintained Continuous Service from the date of
the grant of the Option, 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 Employee's 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 Association and/or the Company (and, in the absence of
any such agreement, shall mean termination because of the Employee's
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 Participant's rights to exercise such Option shall expire on the
date of such termination;
(2) death, then to the extent that the Participant would have been
entitled to exercise the Option immediately prior to his death, such Option
of the deceased Participant may be exercised within two years from the date
of his death (but not later than the date on which the Option would
otherwise expire) by the personal representatives of his estate or person
or persons to whom his rights under such Option shall have passed by will
or by laws of descent and distribution;
(3) Disability, then to the extent that the Participant would have
been entitled to exercise the Option immediately prior to his or her
Disability, such Option may be exercised within one year from the
5
<PAGE>
date of termination of employment due to Disability, but not later than the
date on which the Option would otherwise expire.
(d) Effect of the Committee's Decisions. The Committee's determination
whether a Participant's Continuous Service has ceased, and the effective date
thereof, shall be final and conclusive on all persons affected thereby.
9. GRANTS OF OPTIONS TO NON-EMPLOYEE DIRECTORS
(a) Automatic Grants. Notwithstanding any other provisions of this Plan,
and each Director who is not an Employee but is a Director on the Effective Date
shall receive, on said date, Non-ISOs to purchase the number of Shares listed
below. Such Non-ISOs shall have an Exercise Price per Share equal to the Market
Value of a Share on the date of grant.
<TABLE>
<CAPTION>
Number
Participant of Shares
----------- ---------
<S> <C>
Joseph N. McGowan, Chairman of the Board 1,345
S. Robert Kinghorn, Vice Chairman of the Board 1,813
Theodore C. Patterson, Secretary 1,770
Nicole N. Kantorski 1,302
Robert M. Lating 1,685
Douglas H. Ludwig 1,557
Thomas P. O'Neill 1,404
</TABLE>
Each Director who joins the Board after the Effective Date and who is not then
an Employee shall receive, on the date of joining the Board, Non-ISOs to
purchase 1% of the Shares reserved under Paragraph 4(a) of the Plan, at an
Exercise Price per Share equal to its Market Value on the date of grant.
(b) Terms of Exercise. Options received under the provisions of this
Paragraph will become exercisable in accordance with the general rule set forth
in Paragraph 8(a) hereof, and may be exercised from time to time by (a) written
notice of intent to exercise the Option with respect to all or a specified
number of the Optioned Shares, and (b) payment to the Company (contemporaneously
with the 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 the
Optioned Shares with respect to which the Option is then being exercised. Each
such notice and payment shall be delivered, or mailed by prepaid registered or
certified mail, addressed to the Treasurer of the Company at the Company's
executive offices. Upon a Director's exercise of an Option, the Company shall
pay the Participant a cash amount equal to any dividends declared on the
underlying Shares between the date of grant and the date of exercise of the
Option. A Director who exercises Options pursuant to this Paragraph may satisfy
all applicable federal, state and local income and employment tax withholding
obligations, in whole or in part, by irrevocably electing to have the Company
withhold shares of Common Stock, or to deliver to the Company shares of Common
Stock that he already owns, having a value equal to the amount required to be
withheld; provided that to the extent not inconsistent herewith, such election
otherwise complies with those requirements of Paragraphs 8 and 20 hereof.
Options granted under this Paragraph shall have a term of ten years;
provided that Options granted under this Paragraph shall (i) become exercisable
in accordance with paragraph 8(a) of the Plan, and (ii) expire one year after
the date on which a Director terminates Continuous Service as a voting member on
the Board, or five years after the date on which a Director retires at or after
age 72, but in no event later than the date on which such Options would
otherwise expire. In the event of such Director's death during the term of his
directorship, Options granted under this Paragraph shall become immediately
exercisable, and may be exercised within two years from the date of his death by
the personal representatives of his estate or person or persons to whom his
rights under such Option shall have passed by will or by laws of descent and
distribution, but in no event later than the date on which
6
<PAGE>
such Options would otherwise expire. In the event of such Director's Disability
during his or her directorship, the Director's Option shall become immediately
exercisable, and such Option may be exercised within one year of the termination
of directorship due to Disability, but not later than the date that the Option
would otherwise expire. Unless otherwise inapplicable or inconsistent with the
provisions of this Paragraph, the Options to be granted to Directors hereunder
shall be subject to all other provisions of this Plan.
(c) Effect of the Committee's Decisions. The Committee's determination
whether a Participant's Continuous Service has ceased, and the effective date
thereof, shall be final and conclusive on all persons affected thereby.
10. SARS (STOCK APPRECIATION RIGHTS)
(a) Granting of SARs. In its sole discretion, the Committee may from time
to time grant SARs to Employees either in conjunction with, or independently of,
any Options granted under the Plan. An 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, an SAR granted in conjunction with an Option may be an additional
right wherein both the SAR and the Option may be exercised. An 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:
(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) Timing of Exercise. Any election by a Participant to exercise SARs
shall be made during the period beginning on the 3rd business day the release
for publication of quarterly or annual financial information and ending on the
12th business day following such date. This condition shall be deemed to be
satisfied when the specified financial data is first made publicly available. In
no event, however, may an SAR be exercised within the six-month period following
the date of its grant.
The provisions of Paragraph 8(c) regarding the period of exercisability of
Options are incorporated by reference herein, and shall determine the period of
exercisability of SARs.
(d) Exercise of SARs. An SAR granted hereunder shall be exercisable at
such times and under such con ditions as shall be permissible under the terms of
the Plan and of the Agreement granted to a Participant, provided that an SAR may
not be exercised for a fractional Share. Upon exercise of an 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,
7
<PAGE>
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, in cash or
in Shares valued at the then Market Value thereof, or any combination thereof.
(e) Procedure for Exercising SARs. To the extent not inconsistent
herewith, the provisions of Paragraph 8(b) as to the procedure for exercising
Options are incorporated by reference, and shall determine the procedure for
exercising SARs.
11. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.
(a) 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.
(b) Transactions in which the Company is Not the Surviving Entity. In the
event of (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 Company's assets (any of
the foregoing to be referred to herein as a "Transaction"), all outstanding
Awards, together with the Exercise Prices thereof, shall be equitably adjusted
for any change or exchange of Shares for a different number or kind of shares or
other securities which results from the Transaction.
(c) Special Rule for ISOs. Any adjustment made pursuant to subparagraphs
(a) or (b)(1) hereof 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.
(d) Conditions and Restrictions on New, Additional, or Different Shares or
Securities. If, by reason of any adjustment made pursuant to this Paragraph, 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 Paragraph, 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.
12. NON-TRANSFERABILITY OF AWARDS.
Awards 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. Notwithstanding the foregoing, or any other provision of this
Plan, an Optionee who holds Options that are not Incentive Stock Options within
the meaning of Section 422 of the Code may transfer such Options to his or her
spouse, lineal ascendants, lineal descendants, or to a duly established trust
for the benefit of one or more of these individuals. Options so transferred may
thereafter be transferred only to the Optionee who originally received the grant
or to an individual or trust to whom the Optionee could have initially
transferred the Option pursuant to this Paragraph. Options which are transferred
pursuant to this Paragraph shall be exercisable by the transferee according to
the same terms and conditions as applied to the Optionee.
8
<PAGE>
13. TIME OF GRANTING AWARDS.
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 Award, 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.
14. EFFECTIVE DATE.
The Plan shall become effective immediately upon its approval by a
favorable vote of stockholders owning at least a majority of the total votes
eligible to be cast at a duly called meeting of the Company's stockholders held
in accordance with applicable laws, provided that the Plan shall not be
submitted for such approval within the six-month period after the Association
completes its Conversion and provided further that the Plan's effectiveness
shall be contingent on its approval by the Office of Thrift Supervision ("OTS").
No Awards may be made prior to approval of the Plan by the stockholders of the
Company, and any Awards made before the Plan receives OTS approval shall be
subject thereto.
15. 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 of the Award.
16. 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 the provisions of Paragraph 9 may not be amended more
than once every six months (other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder).
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.
17. 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
stock exchange upon which the Shares may then be listed.
(b) Special Circumstances. The inability of the Company to obtain approval
from any regulatory body or authority deemed by the Company's 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 of an Option or SAR, the Company may
require the person exercising the Option or SAR to make such representations and
warranties as 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.
9
<PAGE>
18. 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.
19. WITHHOLDING TAX.
The Company's obligation to deliver Shares upon exercise of Options and/or
SARs shall be subject to the Participant's satisfaction of all applicable
federal, state and local income and employment tax withholding obligations.
20. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall an Employee's or Director's eligibility to participate or
participation in the Plan create or be deemed to create any legal or equitable
right of the Employee, Director, or any other party to continue service with the
Company, the Association, or any Affiliate of such corporations. Except to the
extent provided in Paragraphs 6(b) and 9(a), no Employee or Director shall have
a right to be granted an Award or, having received an Award, the right to again
be granted an Award. However, an Employee or Director who has been granted an
Award may, if otherwise eligible, be granted an additional Award or Awards.
21. 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.
10
<PAGE>
TRUST AGREEMENT
UNDER THE PATAPSCO BANCORP, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
This Agreement made this ____ day of ____________, 1996, by and between
Patapsco Bancorp, Inc. (the "Company") and _____________ ("Trustee").
WHEREAS, the Company maintains the Patapsco Bancorp, Inc. 1996 Stock Option
and Incentive Plan (the "Plan"); and
WHEREAS, the Company has incurred or expects to incur liability under the
terms of the Plan with respect to the individuals participating in the Plan
("Participants"); and
WHEREAS, the Company wishes to establish a trust (the "Trust") and to
contribute to the Trust assets that shall be held therein, subject to the claims
of the Company's general creditors in the event of Insolvency, as defined in
Section 3(a) hereof, until paid to Participants and their beneficiaries in such
manner and at such times as specified in the Plan; and
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing compensation for a
select group of management or other employees for purposes of Title I of the
Employee Retirement Income Security Act of 1974; and
WHEREAS, it is the intention of the Company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plan; and
WHEREAS, the Company believes that it is in its best interests to appoint
an independent Trustee to maintain and oversee the Trust. NOW, THEREFORE, the
parties do hereby establish this Trust and agree that the Trust shall be
comprised, held, and disposed of as follows:
Section 1. Establishment of Trust.
----------------------------------
(a) The Company hereby deposits, or will from time to time deposit, with
the Trustee in trust an amount expected to be sufficient to permit the Trust to
purchase up to ten percent (10%) of the shares of common stock ("Common Stock")
issued by the Company in connection with Patapsco Federal Savings and Loan
Association's conversion from mutual to stock form (the "Conversion"). Said
amount shall become the initial principal of the Trust to be held, administered
and disposed of by the Trustee as provided in this Trust Agreement.
(b) The Trust shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which the Company is
the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended (the "Code"), and
shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon, shall be held
separate and apart from other funds of the Company and shall be used exclusively
for the uses and purposes of Participants and general creditors as herein set
forth. Participants and their beneficiaries shall have no preferred claim on, or
any beneficial ownership
<PAGE>
interest in, any assets of the Trust. Any rights created under the Plan and this
Trust Agreement shall be mere unsecured contractual rights of Participants and
their beneficiaries against the Company. Any assets held by the Trust will be
subject to the claims of the Company's general creditors under federal and state
law in the event of Insolvency, as defined in Section 3(a) herein.
(e) The Company, in its sole discretion, may at any time, or from time to
time, make additional deposits of cash or other property in trust with the
Trustee to augment the principal to be held, administered and disposed of by
Trustee as provided in this Trust Agreement. Neither the Trustee nor any
Participant or beneficiary shall have any right to compel such additional
deposits.
Section 2. Payments to Plan Participants and Their Beneficiaries.
-----------------------------------------------------------------
(a) The Company shall deliver to the Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each Participant
(and his or her beneficiaries), that provides a formula or other instructions
acceptable to the Trustee for determining the amounts so payable, the form in
which such amount is to be paid (as provided for or available under the Plan,
and including transfers of Common Stock from the Trust to Participants), and the
time of commencement for payment of such amounts. Except as otherwise provided
herein, the Trustee shall make payments to Participants and their beneficiaries
in accordance with such Payment Schedule. The Trustee shall make provision for
the reporting and withholding of any federal, state or local taxes that may be
required to be withheld with respect to the payment of benefits pursuant to the
terms of the Plan and shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been reported, withheld and paid
by the Company.
(b) The entitlement of a Participant or his or her beneficiaries to
benefits under the Plan shall be determined by the Company or such party as it
shall designate under the Plan, and any claim for such benefits shall be
considered and reviewed under the procedures set out in the Plan.
(c) The Company may make payment of benefits directly to Participants or
their beneficiaries as they become due under the terms of the Plan. The Company
shall notify the Trustee of its decision to make payment of benefits directly
prior to the time amounts are payable to Participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the terms of the
Plan, the Company shall make the balance of each such payment as it falls due.
The Trustee shall notify the Company where principal and earnings are not
sufficient.
Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary
--------------------------------------------------------------------------
When Company Is Insolvent.
-------------------------
(a) The Trustee shall cease payment of benefits to Participants and their
beneficiaries if the Company is Insolvent. The Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) the Company is unable to
pay its debts as they become due, or (ii) the Company becomes subject to a
pending proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of the Company under federal and state law as set
forth below.
(c) The Board of Directors and the Chief Executive Officer of the Company
shall have the duty to inform the Trustee in writing of the Company's
Insolvency. If a person claiming to be a creditor of the Company alleges in
writing to the Trustee that the Company has become Insolvent, the Trustee shall
determine whether the Company is Insolvent and, pending such determination, the
Trustee shall discontinue payment of benefits to Participants or their
beneficiaries.
2
<PAGE>
(1) Unless the Trustee has actual knowledge of the Company's
Insolvency, or has received notice from the Company or a person claiming to be a
creditor alleging that the Company is Insolvent, the Trustee shall have no duty
to inquire whether the Company is Insolvent. The Trustee may in all events rely
on such evidence concerning the Company's solvency as may be furnished to the
Trustee and that provides the Trustee with a reasonable basis for making a
determination concerning the Company's solvency.
(2) If at any time the Trustee has determined that the Company
is Insolvent, the Trustee shall discontinue payments to Plan participants or
their beneficiaries, shall liquidate the Trust's investment in Common Stock, and
shall hold the assets of the Trust for the benefit of the Company's general
creditors. Nothing in this Trust Agreement shall in any way diminish any rights
of Participants or their beneficiaries as general creditors of the Company with
respect to benefits due under the Plan or otherwise.
(3) The Trustee shall resume the payment of benefits to
Participants or their beneficiaries in accordance with Section 2 of this Trust
Agreement only after the Trustee has determined that the Company is not
Insolvent (or is no longer Insolvent).
(d) Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
Participants or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to
Participants or their beneficiaries by the Company in lieu of the payments
provided for hereunder during any such period of discontinuance.
Section 4. Payments to the Company.
-----------------------------------
Except as provided in Section 3 hereof, the Company shall have no
right or power to direct the Trustee to return to the Company or to divert to
others any of the Trust assets before all payment of benefits have been made to
Plan Participants and their beneficiaries pursuant to the terms of the Plan.
Section 5. Investment Authority.
--------------------------------
(a) The Trustee shall have sole discretion as to the investment of
Trust assets, except that to the extent reasonably practicable, the Trustee
shall invest all assets of the Trust in Common Stock; provided that the Trust
shall not purchase, in the aggregate, more than 10% of the shares of Common
Stock issued by the Company in the Conversion.
(b) All rights associated with assets of the Trust shall be exercised
by the Trustee or the person designated by the Trustee, and shall in no event be
exercisable by or rest with Participants, except that voting rights with respect
to Common Stock will be exercised in accordance with the terms and conditions
for the exercise of voting rights of unallocated shares under the Company's
Employee Stock Ownership Plan, as in effect on the date hereof.
(c) Subject to applicable federal and state securities laws, if for
any reason the Trustee will be selling shares of Common Stock, the Trustee shall
sell such shares by (i) giving each Participant 20 business days within which to
purchase, at fair market value, all or part of any shares of Common Stock that
the Trustee holds for the benefit of the Participant, and (ii) to the extent
purchases by Participants are insufficient to eliminate the Trust's excess
holdings of Common Stock, to offer to sell, and to sell, all or any part of the
excess shares held by the Trust to the following purchasers, listed here by
order of priority: first, the Company; second, any benefit plan maintained by
the Company or the Bank; third, directors of the Bank; fourth, officers of the
Bank; fifth, members of the general public (through sales on the open market).
3
<PAGE>
Section 6. Disposition of Income.
--------------------------------
During the term of this Trust, all income received by the Trust, net
of expenses and taxes, shall be accumulated and reinvested.
Section 7. Accounting by Trustee.
---------------------------------
The Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions required to be
made, including such specific records as shall be agreed upon in writing between
the Company and the Trustee. Within 60 days following the close of each calendar
year and within 20 days after the removal or resignation of the Trustee, the
Trustee shall deliver to the Company a written account of its administration of
the Trust during such year or during the period from the close of the last
preceding year to the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other transactions effected by it,
including a description of all securities and investments purchased and sold
with the cost or net proceeds of such purchased and sold with the cost or net
proceeds of such purchases or sales (accrued interest paid or receivable being
shown separately), and showing all cash, securities and other property held in
the Trust at the end of such year or as of the date of such removal or
resignation, as the case may be.
Section 8. Responsibility of Trustee.
-------------------------------------
(a) The Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that the
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by the Company which is contemplated by,
and in conformity with, the terms of the Plan or this Trust and is given in
writing by the Company. In the event of a dispute between the Company and a
party, the Trustee may apply to a court of competent jurisdiction to resolve the
dispute.
(b) If the Trustee undertakes or defends any litigation arising in
connection with this Trust, the Company agrees to indemnify the Trustee against
Trustee's costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments, except in those cases where the Trustee shall have been found by
a court of competent jurisdiction to have acted with gross negligence or willful
misconduct. If the Company does not pay such costs, expenses and liabilities in
a reasonably timely manner, the Trustee may obtain payment from the Trust.
(c) The Trustee may consult with legal counsel with respect to any of
its duties or obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers conferred on
trustees by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of the Trust,
the Trustee shall have no power to name a beneficiary of the policy other than
the Trust, to assign the policy (as distinct from conversion of the policy to a
different form) other than to a successor Trustee, or to loan to any person the
proceeds of any borrowing against such policy.
(f) Notwithstanding any powers granted to the Trustee pursuant to this
Trust Agreement or to applicable law, the Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Code.
4
<PAGE>
Section 9. Compensation and Expenses of Trustee.
------------------------------------------------
The Company shall pay all administrative expenses and the Trustee's
fees and expenses relating to the Plan and this Trust. If not so paid, the fees
and expenses shall be paid from the Trust.
Section 10. Resignation and Removal of Trustee.
-----------------------------------------------
The Trustee may resign at any time by written notice to the Company,
which resignation shall be effective 30 days after the Company receives such
notice (unless the Company and the Trustee agree otherwise). The Trustee may be
removed by the Company on 30 days notice or upon shorter notice accepted by the
Trustee, but only if each Participant (and each beneficiary in pay status)
consents in writing to such removal.
If the Trustee resigns or is removed, a successor shall be appointed,
in accordance with Section 11 hereof, by the effective date or resignation or
removal under this section. If no such appointment has been made, the Trustee
may apply to a court of competent jurisdiction for appointment of a successor or
for instructions. All expenses of the Trustee in connection with the proceeding
shall be allowed as administrative expenses of the Trust. Upon resignation or
removal of the Trustee and appointment of a successor trustee, all assets shall
subsequently be transferred to the successor trustee. The transfer shall be
completed within 60 days after receipt of notice of resignation, removal or
transfer, unless the Company extends the time limit.
Section 11. Appointment of Successor.
-------------------------------------
If the Trustee resigns or is removed in accordance with Section 10
hereof, the Company may appoint any other party as a successor to replace the
Trustee upon such resignation or removal. The appointment shall be effective
when accepted in writing by the new trustee, who shall have all of the rights
and powers of the former trustee, including ownership rights in the Trust
assets. The former trustee shall execute any instrument necessary or reasonably
requested by the Company or the successor trustee to evidence the transfer.
A successor trustee need not examine the records and acts of any prior
trustee and may retain or dispose of existing Trust assets, subject to Sections
7 and 8 hereof. The successor trustee shall not be responsible for, and the
Company shall indemnify and defend the successor trustee from, any claim or
liability resulting from any action or inaction of any prior trustee or from any
other past event, or any condition existing at the time it becomes successor
trustee.
Section 12. Amendment or Termination.
-------------------------------------
(a) This Trust Agreement may be amended by a written instrument
executed by the Trustee and the Company, provided that no such amendment shall
make the Trust revocable.
(b) The Trust shall not terminate until the date on which no
Participant or his or her beneficiaries is entitled to benefits pursuant to the
terms hereof. Upon termination of the Trust, the Trustee shall return any assets
remaining in the Trust to the Company.
(c) Upon written approval of all Participants (or their beneficiaries
if they are then entitled to payment of benefits), the Company may terminate
this Trust prior to the time all benefit payments under the Plan have been made.
All assets in the Trust at termination shall be returned to the Company.
Section 13. Miscellaneous.
--------------------------
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
5
<PAGE>
(b) Benefits payable to Participants and their beneficiaries under
this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment, garnishment,
levy, execution or other legal or equitable process, except pursuant to the
terms of the Plan.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland, to the extent not preempted
by federal law.
(d) The Trustee agrees to be bound by the terms of the Plan, as in
effect from time to time.
(e) The Trustee shall act by vote or written consent of a majority of
its then duly-appointed members.
Section 14. Effective Date.
---------------------------
The effective date of this Trust shall be the date of execution
designated below.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, has
caused this Agreement to be executed, and its corporate seal affixed, and the
undersigned Trustees have executed this Agreement, this ____ day of __________,
1996.
ATTEST: PATAPSCO BANCORP, INC.
_____________________________ By:/s/Joseph J. Bouffard
-------------------------------------
Joseph J. Bouffard, President
ATTEST: TRUSTEE
_____________________________ /s/Joseph N. McGowan
----------------------------------------
Joseph N. McGowan
/s/Theodore C. Patterson
_____________________________ ----------------------------------------
Theodore C. Patterson
_____________________________ /s/S. Robert Kinghorn
---------------------------------------
S. Robert Kinghorn
6
<PAGE>
EXHIBIT 99.3
STOCK OPTION AGREEMENT
FOR INCENTIVE STOCK OPTIONS UNDER SECTION 422
OF THE INTERNAL REVENUE CODE
PURSUANT TO THE
PATAPSCO BANCORP, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
STOCK OPTION for a total of _________ shares of Common Stock, par value
$.01 per share, of Patapsco Bancorp, Inc. (the "Company"), which Option is
intended to qualify as an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), is hereby granted to
__________________ (the "Optionee") at the price set forth herein, and in all
respects subject to the terms, definitions and provisions of the Patapsco
Bancorp, Inc. 1996 Stock Option and Incentive Plan (the "Plan") which was
adopted by the Company and which is incorporated by reference herein, receipt of
which is hereby acknowledged.
1. Option Price. The option price is $______ for each share, being 100%
------------
*/ of the fair market value, as determined by the Committee, of the Common
Stock on the date of grant of this Option.
2. Exercises of Option. This Option shall be exercisable in accordance
-------------------
with provisions of the Plan as follows:
(i) Schedule of rights to exercise.
------------------------------
<TABLE>
<CAPTION>
Percentage of Total Shares
Years of Continuous Employment Subject to Option Which May
After Date of Grant of Option Be Exercised
------------------------------ ---------------------------
<S> <C>
Upon Grant 0%
1 year but less than 2 years 20%
2 years but less than 3 years 40%
3 years but less than 4 years 60%
4 years but less than 5 years 80%
5 years or More 100%
</TABLE>
__________________________
*/ 110% in the case of an Optionee who owns shares representing more than 10%
of the outstanding common stock of the Company on the date of grant of this
Option.
<PAGE>
ISO Agreement
Page 9
(ii) Method of Exercise. This Option shall be exercisable by a written
------------------
notice by the Optionee which shall:
(a) state the election to exercise the Option, the number of shares with
respect to which it is being exercised, the person in whose name the stock
certificate or certificates for such shares of Common Stock is to be
registered, his address and Social Security Number (or if more than one,
the names, addresses and Social Security Numbers of such persons);
(b) contain such representations and agreements as to the holder's
investment intent with respect to such shares of Common Stock as may be
satisfactory to the Company's counsel;
(c) be signed by the person or persons entitled to exercise the Option
and, if the Option is being exercised by any person or persons other than
the Optionee, be accompanied by proof, satisfactory to counsel for the
Company, of the right of such person or persons to exercise the Option; and
(d) be in writing and delivered in person or by certified mail to the
Treasurer of the Company.
Payment of the purchase price of any shares with respect to which the
Option is being exercised shall be by cash, Common Stock, or such combination of
cash and Common Stock as the Optionee elects. The certificate or certificates
for shares of Common Stock as to which the Option shall be exercised shall be
registered in the name of the person or persons exercising the Option.
(iii) Restrictions on exercise. This Option may not be exercised if the
------------------------
issuance of the shares upon such exercise would constitute a violation of any
applicable federal or state securities or other law or valid regulation. As a
condition to the Optionee's exercise of this Option, the Company may require the
person exercising this Option to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
3. Withholding. The Optionee hereby agrees that the exercise of the
-----------
Option or any installment thereof will not be effective, and no shares will
become transferable to the Optionee, until the Optionee makes appropriate
arrangements with the Company for such tax withholding as may be required of the
Company under federal, state, or local law on account of such exercise.
4. Non-transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or the laws of descent or distribution. The
terms of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
<PAGE>
ISO Agreement
Page 10
5. Term of Option. This Option may not be exercisable for more than
--------------
ten**/ years from the date of grant of this Option, as stated below, and may be
exercised during such term only in accordance with the Plan and the terms of
this Option.
PATAPSCO BANCORP, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
COMMITTEE
By_____________________________________
__________________________
Date of Grant Attest: ________________ (Seal)
__________________________
**/ Five years in the case of an Optionee who owns shares representing more
than 10% of the outstanding common stock of the Company on the date of
grant of this Option.
<PAGE>
INCENTIVE STOCK OPTION EXERCISE FORM
PURSUANT TO THE
PATAPSCO BANCORP, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
__________________________
Date
Treasurer
Patapsco Bancorp, Inc.
1301 Merritt Boulevard
Dundalk, Maryland 21222-2194
Re: Patapsco Bancorp, Inc.
----------------------
1996 Stock Option and Incentive Plan
Dear Sir:
The undersigned elects to exercise the Incentive Stock Option to purchase
________ shares, par value $.01 per share, of Common Stock of Patapsco Bancorp,
Inc. under and pursuant to a Stock Option Agreement dated ______, 199__.
Delivered herewith is a certified or bank cashier's or teller's check
and/or shares of Common Stock, valued at the fair market value of the stock on
the date of exercise, as set forth below.
$______ of cash or check
______ ____ shares of Common Stock, valued at $____ per share
$ Total
======
The name or names to be on the stock certificate or certificates and the
address and Social Security Number of such person(s) is as follows:
Name________________________________________________________________________
Address_____________________________________________________________________
Social Security Number______________________________________________________
Very truly yours,
_______________________________
<PAGE>
EXHIBIT 99.4
STOCK OPTION AGREEMENT
FOR NON-INCENTIVE STOCK OPTIONS PURSUANT TO THE
PATAPSCO BANCORP, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
STOCK OPTION for a total of __________ shares of Common Stock, par value
$.01 per share, of Patapsco Bancorp, Inc. (the "Company") is hereby granted to
_____________ (the "Optionee") at the price set forth herein, and in all
respects subject to the terms, definitions and provisions of the Patapsco
Bancorp, Inc. 1996 Stock Option and Incentive Plan (the "Plan") which has been
adopted by the Company and which is incorporated by reference herein, receipt of
which is hereby acknowledged. Such Stock Options do not comply with Options
---
granted under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
1. Option Price. The option price is $_______ for each share, being
------------
100% of the fair market value, as determined by the Committee, of the Common
Stock on the date of grant of this Option.
2. Exercise of Option. This Option shall be exercisable in
------------------
accordance with provisions of the Plan as follows:
(i) Schedule of rights to exercise.
------------------------------
<TABLE>
<CAPTION>
Percentage of Total Shares
Years of Continuous Employment Subject to Option Which May
After Date of Grant of Option Be Exercised
------------------------------ -----------------------------
<S> <C>
Upon Grant 0%
1 year but less than 2 years 20%
2 years but less than 3 years 40%
3 years but less than 4 years 60%
4 years but less than 5 years 80%
5 years or More 100%
</TABLE>
(ii) Method of Exercise. This Option shall be exercisable by a written
------------------
notice which shall:
(a) state the election to exercise the Option, the number of shares with
respect to which it is being exercised, the person in whose name the stock
certificate or certificates for
<PAGE>
such shares of Common Stock is to be registered, his address and Social
Security Number (or if more than one, the names, addresses and Social
Security Numbers of such persons);
(b) contain such representations and agreements as to the holders'
investment intent with respect to such shares of Common Stock as may be
satisfactory to the Company's counsel;
(c) be signed by the person or persons entitled to exercise the Option
and, if the Option is being exercised by any person or persons other than
the Optionee, be accompanied by proof, satisfactory to counsel for the
Company, of the right of such person or persons to exercise the Option; and
(d) be in writing and delivered in person or by certified mail to the
Treasurer of the Company.
Payment of the purchase price of any shares with respect to which the
Option is being exercised shall be by cash, Common Stock, or such combination of
cash and Common Stock as the Optionee elects. The certificate or certificates
for shares of Common Stock as to which the Option shall be exercised shall be
registered in the name of the person or persons exercising the Option.
(iii) Restrictions on exercise. The Option may not be exercised if
------------------------
the issuance of the shares upon such exercise would constitute a violation of
any applicable federal or state securities or other law or valid regulation. As
a condition to his exercise of this Option, the Company may require the person
exercising this Option to make any representation and warranty to the Company as
may be required by any applicable law or regulation.
3. Withholding. The Optionee hereby agrees that the exercise of the
-----------
Option or any installment thereof will not be effective, and no shares will
become transferable to the Optionee, until the Optionee makes appropriate
arrangements with the Company for such tax withholding as may be required of the
Company under federal, state, or local law on account of such exercise.
4. Non-transferability of Option. This Option may not be
-----------------------------
transferred in any manner otherwise than by will or the laws of descent or
distribution. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee. Notwithstanding
any other terms of this agreement, to the extent permissible under Rule 16b-3 of
the Securities Exchange Act of 1934, as amended, this Option may be transferred
to the Optionee's spouse, lineal ascendants, lineal descendants, or to a duly
established trust, provided that such transferee shall be permitted to exercise
this Option subject to the same terms and conditions applicable to the Optionee.
<PAGE>
5. Term of Option. This Option may not be exercisable for more than
--------------
ten years from the date of grant of this Option, as set forth below, and may be
exercised during such term only in accordance with the Plan and the terms of
this Option.
PATAPSCO BANCORP, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
COMMITTEE
By___________________________________
______________________________
Date of Grant
Attest__________________ (Seal)
<PAGE>
NON-INCENTIVE STOCK OPTION EXERCISE FORM
PURSUANT TO THE
PATAPSCO BANCORP, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
_____________________________
Date
Treasurer
Patapsco Bancorp, Inc.
1301 Merritt Boulevard
Dundalk, Maryland 21222-2194
Re: Patapsco Bancorp, Inc.
----------------------
1996 Stock Option and Incentive Plan
Dear Sir:
The undersigned elects to exercise his Non-Incentive Stock Option to
purchase ___________ shares, par value $.01 per share, of Common Stock of
Patapsco Bancorp, Inc. under and pursuant to a Stock Option Agreement dated
________________, 199__.
Delivered herewith is a certified or bank cashier's or tellers check and/or
shares of Common Stock, valued at the fair market value of the stock on the date
of exercise, as set forth below.
$________ of cash or check
________ ____ shares of Common Stock, valued at $____ per share
$ Total
========
The name or names to be on the stock certificate or certificates and the
address and Social Security Number of such person is as follows:
Name_______________________________________________________________________
Address____________________________________________________________________
Social Security Number_____________________________________________________
Very truly yours,
_______________________________
<PAGE>
EXHIBIT 99.5
PATAPSCO BANCORP, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
STOCK APPRECIATION RIGHTS AGREEMENT
NOT IN TANDEM WITH STOCK OPTION
On the date of grant specified below, the Stock Option Committee of
Patapsco Bancorp, Inc. (the "Company") hereby grants to ________________ (the
"Optionee") a total of ______ Stock Appreciation Rights (SARs), subject to the
terms and conditions set forth in the Patapsco Bancorp, Inc. 1996 Stock Option
and Incentive Plan (the "Plan") (a copy of which is available to the Optionee
upon request). The terms and conditions of the Plan are incorporated herein by
reference.
(a) The exercise price is $____ for each share, such price being 100% of
the fair market value, as determined by the Committee, of the Common Stock on
the date of grant of this option.
(b) The SAR shall be exercisable to the extent permitted in the Plan.
(c) The SAR shall be accepted for surrender by the Optionee in
consideration for the payment by the Company of an amount equal to the excess of
the fair market value on the date of exercise of the shares of Common Stock
subject to such SAR over the exercise price specified in Paragraph (a) hereof.
(d) Payment hereunder shall be made in shares of Common Stock or in
cash as provided in the Plan.
(e) The SAR is nontransferable, except in accordance with Section 12
of the Plan.
(f) The SAR may be exercised only in accordance with Sections 8(c), and 10
of the Plan, and only when there is a positive spread, i.e., when the market
price of the Common Stock subject to the SAR exceeds the exercise price of the
SAR.
(g) In the event of any inconsistency or conflict between this Agreement
and the Plan, the Plan shall be controlling and supercede any conflicting or
inconsistent provision of the Agreement.
PATAPSCO BANCORP, INC.
1996 STOCK OPTION AND
INCENTIVE PLAN COMMITTEE
By: ____________________
Date of Grant: ATTEST:
______________ ________________________
<PAGE>
EXHIBIT 99.6
PATAPSCO BANCORP, INC.
MANAGEMENT RECOGNITION PLAN COMMITTEE
NOTICE OF AWARD
---------------
WHEREAS, the Board of Directors of Patapsco Bancorp, Inc. (the "Company")
has previously adopted the Patapsco Bancorp, Inc. Management Recognition Plan
(the "Plan"), and
WHEREAS, the Board of Directors of the Company has previously appointed
Directors McGowan, Patterson, and Kinghorn as members of the Management
Recognition Plan Committee (the "Committee") pursuant to the terms of the Plan;
and
WHEREAS, the Plan became effective on ___________ upon its receipt of
stockholder approval, and Sections 6.04 and 6.05 of the Plan provide for
automatic awards on the Plan's effective date, including the award referenced
below.
PLEASE TAKE NOTICE, that the following individual be granted an award under
the Plan ("Plan Share Award"), effective __________________________:
Number of Shares Subject to
Recipient Plan Share Award
--------- ----------------
____________________ ________________
AND BE IT FURTHER RESOLVED, that the Plan Share Award specified herein
shall be subject to the restrictions and other provisions of Section 7.01 of the
Plan.
Date of Notice:
_____________, 199__
PATAPSCO BANCORP, INC.
MANAGEMENT RECOGNITION PLAN
COMMITTEE
By: _______________________________
Its Chairman
<PAGE>
EXHIBIT 99.7
M E M O R A N D U M
TO: Participants in the Patapsco Bancorp, Inc. (the "Company")
Management Recognition Plan
DATE: October 11, 1996
FROM: Patapsco Bancorp, Inc.
RE: Taxation of MRP Awards
==================================================================
* * * * * * * * * * * * * * * * *
THIS DOCUMENT CONSTITUTES PART OF
A PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933
* * * * * * * * * * * * * * * * *
This memorandum concerns the taxation of the awards that will
automatically occur under the Company's Management Recognition Plan (the
"MRP") upon its receipt of stockholder approval. To facilitate your
review, the discussion below is divided as follows:
Part I: General Tax Principles and Application to the MRP
Part II: Accelerated Taxation under Section 83(b)
Please understand that this memorandum is merely designed to summarize
the tax rules generally applicable to MRP awards. We could provide
individual tax advice to the recipients of MRP awards ("Recipients"),
should anyone desire assistance.
The deadline for making a Section 83(b) election is 30 days after the
award date -- or November 9, 1996 with respect to awards occurring on the
MRP's receipt of stockholder approval.
<PAGE>
PART I:
GENERAL TAX PRINCIPLES
Section 83 -- Generally. Section 83 of the Internal Revenue Code
-----------------------
(the "Code") controls the federal income taxation of property that is
transferred in connection with the performance of services. In the absence
of the Section 83(b) election described in Part II, the recipient of
restricted property (such as an MRP award) recognizes income not on the
---
date of the award but on the date that his or her interest vests. The
---
amount of the recipient's taxable income will equal the fair market value
of the restricted property when vesting occurs.***/ Subsequent gain or loss
----
is treated as capital gain, with the amount that is included in the
recipient's ordinary income determining his or her basis in the property.
Operation of the MRP. The Company's MRP will generally work as
--------------------
follows for Recipients who do not make Section 83(b) elections:
---
<TABLE>
<CAPTION>
Date Event
- ---- -----
<S> <C>
Stockholder The MRP should provide a "Notice of
Approval Award" to each Recipient. The notice
will specify the number of shares
subject to the award.
Recipients will not receive shares of
the Company's common stock, or be
--
subject to federal income taxation as
the result of receiving an award.
The First Five The MRP trusts will transfer to each
Anniversary Recipient a number of unrestricted
Dates of the MRP's shares equal to one-fifth of the
Receipt of Approval number of shares subject to the
award, plus any dividends
----
attributable to those shares
(provided that the Recipient has not
previously terminated service)
</TABLE>
As you may recall, vesting would accelerate to 100% upon a
Recipient's termination of service due to death or disability, and that
special rules apply if a transfer of Common Stock would cause the Recipient
to own in excess of 10% of the Common Stock.
Tax Withholding. In the case of Recipients who are non-employee
---------------
directors, federal income tax withholding is not required when their MRP
awards give rise to taxable income. On the other hand, Recipients who are
employees must satisfy federal income tax withholding not only at the time
their MRP awards generate taxable income, but also before they may receive
shares of Common Stock from the MRP trust.
IRS Reporting. We understand that in the case of an employee,
-------------
the ordinary income arising from the vesting of MRP awards and from the
payment of tax bonuses is reportable on Form W-2, in Box 11, and that in
the case of a non-employee director, such income is reportable on Form
1099-MISC, in Box 7.
____________________________
***/ This contrasts with the financial accounting treatment for MRP awards
- ----
(i.e., expense recognition is determined by the fair market on the date of
the award).
<PAGE>
PART II:
ACCELERATED TAXATION UNDER SECTION 83(B)
Section 83(b) Generally. Within 30 days after receiving an MRP
-----------------------
Award, a Recipient may make a special, irrevocable election under Code Section
83(b), and thereby accelerate ordinary income taxation to the date that the
property transfer occurred. The amount of the Recipient's ordinary income would
equal the fair market value of the Common Stock subject to the MRP award as of
the date on which the award occurred. Subsequent gain (or loss, if the award is
forfeited or depreciates) would be long- or short-term capital gain, not
ordinary income.
Procedural Requirements. Section 83(b) elections must include
-----------------------
the information set forth in the form of Section 83(b) election that we
have attached hereto. Further, Section 83(b) elections must be filed with
the IRS Service Center where the Recipient files his or her return (both
----
within 30 days after the transfer occurs, and as an attachment to his or
---
her tax return for the year to which the Section 83(b) election relates).
A copy of the Section 83(b) election must also be filed with the Company.
Tax Caveat. In several recent private letter rulings (which, while not
----------
binding precedent, are indicative of current IRS policy), the Internal Revenue
Service has taken the position that, for purposes of Section 83 of the Code, no
"transfer" of property occurs when an individual receives an interest in an
employer's grantor trust. Because the trust associated with the MRP is a grantor
trust (by design, in order to secure deferred taxation of awards), these rulings
suggest that the IRS could question whether Section 83(b) elections may be made
with respect to MRP awards. While we do not believe that this theoretical
possibility involves a substantial tax risk for Recipients, each Recipient
should contact his or her personal tax counsel for independent advice about this
issue.
Tax Reporting and Withholding. The rules described in Part I would apply,
-----------------------------
as though vesting occurred on the date of the Recipient's Section 83(b)
election.
CONCLUSION
Whether or not a Recipient should make a Section 83(b) election
depends on a variety of factors, including the Recipient's expectations as
to (i) the short-term and long-term future value of the Common Stock, (ii)
the length of time the Recipient is likely to hold the Common Stock, (iii)
future tax rates -- as to both income and capital gain, (iv) the risk of
forfeiture, and (v) the Recipient's ability to pay the taxes associated
with the MRP award.
<PAGE>
PATAPSCO BANCORP, INC.
MANAGEMENT RECOGNITION PLAN
-------------------------------------------
ELECTION TO INCLUDE VALUE OF RESTRICTED STOCK IN GROSS INCOME
IN YEAR OF TRANSFER UNDER CODE SECTION 83(B)
--------------------------------------------
* * * * * * * * * * * * * * * * *
THIS DOCUMENT CONSTITUTES PART OF
A PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933
* * * * * * * * * * * * * * * * *
The undersigned hereby makes the election permitted under Section
83(b) of the Internal Revenue Code of 1986, as amended, with respect to the
property described below, and supplies the following information in
accordance with the regulations promulgated thereunder:
1. The name, address, and taxpayer identification or social security
number of the undersigned are:
Name: ________________________________
Address: ________________________________
________________________________
I.D. No. ________________________________
2. Description of the property with respect to which the election is
being made:
____________________( ) shares of common stock, par value
$0.01 per share, of Patapsco Bancorp, Inc. (hereinafter, the
"Common Stock").
3. The date on which the Common Stock was transferred is ______________
___, 19__. The taxable year to which this election relates is
calendar year 19__.
4. The nature of the restrictions to which the Common Stock is subject is
as follows:
The Common Stock is forfeitable until it is earned in accordance
with Article VII of the Patapsco Bancorp, Inc. Management
Recognition Plan (the "Plan"). Generally, the Common Stock
becomes earned and nonforfeitable by the undersigned at the rate
of one-fifth per year of service. For special rules
<PAGE>
Section 83(b) Election
Page 2 of 2
regarding the vesting of the undersigned's interest in the Common
Stock, see Section 7.01 of the Plan.
The Common Stock is non-transferable until the undersigned's
interest therein becomes vested and nonforfeitable, pursuant to
Section 8.03 of the Plan.
5. Fair market value:
The fair market value at the time of transfer (determined without
regard to any restrictions other than restrictions which by their
terms will never lapse) of the stock with respect to which this
election is being made is $_____ per share.
6. Amount paid for Common Stock:
The amount paid by taxpayer for said Common Stock is $0.00 per
share.
7. Furnishing statement to employer:
A copy of this statement has been furnished to Patapsco Bancorp,
Inc..
8. Notice:
Nothing contained herein shall be held to alter, vary or affect
any of the terms, provisions or conditions of the Plan, or the
award made thereunder to the undersigned.
Dated: ____________ __, 199__.
______________________________
Taxpayer/Plan Participant
