SCHEDULE 14A INFORMATION
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. ___)
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ]Preliminary Proxy Statement [ ]Confidential, for Use of the
[x]Definitive Proxy Statement Commission Only (as permitted
[ ]Definitive Additional Materials by Rule 14a-6(e)(2))
[ ]Soliciting Material Under Rule 14a-12
PATAPSCO BANCORP, INC.
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(Name of Registrant as Specified in Its Charger)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
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2. Form, Schedule or Registration Statement No.:
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3. Filing Party:
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4. Date Filed:
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<PAGE>
[LETTERHEAD OF PATAPSCO BANCORP, INC.]
September 25, 2000
Dear Stockholder:
You are invited to attend the annual meeting of stockholders of
Patapsco Bancorp, Inc. to be held at the office of The Patapsco Bank, located at
1301 Merritt Boulevard, Dundalk, Maryland, on Thursday, October 26, 2000 at 4:00
p.m.
The accompanying notice and proxy statement describe the formal
business to be transacted at the meeting. During the meeting, we will also
report on the operations of the Company's wholly owned subsidiary, The Patapsco
Bank. Directors and officers of the Company will be present to respond to any
questions the stockholders may have.
ON BEHALF OF THE BOARD OF DIRECTORS, WE URGE YOU TO SIGN, DATE AND
RETURN THE ACCOMPANYING FORM OF PROXY AS SOON AS POSSIBLE EVEN IF YOU CURRENTLY
PLAN TO ATTEND THE ANNUAL MEETING. Your vote is important, regardless of the
number of shares you own. This will not prevent you from voting in person but
will assure that your vote is counted if you are unable to attend the meeting.
Sincerely,
/s/ Joseph J. Bouffard
Joseph J. Bouffard
President
<PAGE>
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PATAPSCO BANCORP, INC.
1301 MERRITT BOULEVARD
DUNDALK, MARYLAND 21222-2194
(410) 285-1010
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 26, 2000
--------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the "Annual
Meeting") of Patapsco Bancorp, Inc. (the "Company") will be held at the office
of The Patapsco Bank, located at 1301 Merritt Boulevard, Dundalk, Maryland, on
Thursday, October 26, 2000 at 4:00 p.m.
A Proxy Statement and form of proxy for the Annual Meeting accompany this
notice.
The Annual Meeting is for the purpose of considering and acting upon:
1. The election of two directors of the Company for terms of three years;
2. The approval of the Patapsco Bancorp, Inc. 2000 Stock Option and
Incentive Plan; and
3. The transaction of such other matters as may properly come before the
Annual Meeting or any adjournments thereof.
The Board of Directors is not aware of any other business to come before
the Annual Meeting.
Any action may be taken on any one of the foregoing proposals at the Annual
Meeting on the date specified above or on any date or dates to which, by
original or later adjournment, the Annual Meeting may be adjourned. Stockholders
of record at the close of business on September 15, 2000 are the stockholders
entitled to vote at the Annual Meeting and any adjournments thereof.
You are requested to fill in and sign the accompanying form of proxy which
is solicited by the Board of Directors and to mail it promptly in the
accompanying envelope. The proxy will not be used if you attend and vote at the
Annual Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Theodore C. Patterson
THEODORE C. PATTERSON
SECRETARY
Dundalk, Maryland
September 25, 2000
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. THE ACCOMPANYING FORM
OF PROXY IS ACCOMPANIED BY A SELF-ADDRESSED ENVELOPE FOR YOUR CONVENIENCE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
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<PAGE>
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PROXY STATEMENT
OF
PATAPSCO BANCORP, INC.
1301 MERRITT BOULEVARD
DUNDALK, MARYLAND 21222-2194
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ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 26, 2000
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GENERAL
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This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Patapsco Bancorp, Inc. (the "Company")
to be used at the annual meeting of stockholders (the "Annual Meeting") which
will be held at the office of The Patapsco Bank, located at 1301 Merritt
Boulevard, Dundalk, Maryland, on Thursday, October 26, 2000 at 4:00 p.m. This
proxy statement and the accompanying notice and form of proxy are being first
mailed to stockholders on or about September 25, 2000.
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VOTING AND REVOCABILITY OF PROXIES
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Stockholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by properly executed proxies
will be voted at the Annual Meeting and all adjournments thereof. Proxies may be
revoked by written notice to Dr. Theodore C. Patterson, Secretary of the
Company, at the address shown above, by filing a later-dated proxy prior to a
vote being taken on a particular proposal at the Annual Meeting or by attending
the Annual Meeting and voting in person. The presence of a stockholder at the
Annual Meeting will not in itself revoke such stockholder's proxy.
Proxies solicited by the Board of Directors of the Company will be
voted in accordance with the directions given therein. WHERE NO INSTRUCTIONS ARE
INDICATED, PROXIES WILL BE VOTED FOR THE NOMINEES FOR DIRECTORS SET FORTH BELOW.
The proxy confers discretionary authority on the persons named therein to vote
with respect to the election of any person as a director where the nominee is
unable to serve or for good cause will not serve, and matters incident to the
conduct of the Annual Meeting. If any other business is presented at the Annual
Meeting, proxies will be voted by those named therein in accordance with the
determination of a majority of the Board of Directors. Proxies marked as
abstentions will not be counted as votes cast. Shares held in street name which
have been designated by brokers on proxies as not voted will not be counted as
votes cast. Proxies marked as abstentions or as broker nonvotes, however, will
be treated as shares present for purposes of determining whether a quorum is
present.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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The securities entitled to vote at the Annual Meeting consist of the
Company's common stock, $.01 par value per share (the "Common Stock").
Stockholders of record as of the close of business on September 15, 2000 (the
"Record Date") are entitled to one vote for each share of Common Stock then
held. At the Record Date, the Company had 327,390 shares of Common Stock issued
and outstanding. The presence, in person or by proxy, of at least a majority of
the total number of shares of Common Stock outstanding and entitled to vote will
be necessary to constitute a quorum at the Annual Meeting.
1
<PAGE>
Persons and groups beneficially owning in excess of 5% of the Common
Stock are required to file certain reports regarding such ownership pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
following table sets forth, as of September 15, 2000, certain information as to
the Common Stock believed by management to be beneficially owned by persons
owning in excess of 5% of the Company's Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF SHARES OF
NAME AND ADDRESS BENEFICIAL COMMON STOCK
OF BENEFICIAL OWNER OWNERSHIP (1) OUTSTANDING
------------------- ------------- ------------
<S> <C> <C>
Patapsco Bancorp, Inc. 41,341 12.6%
Employee Stock Ownership Plan ("ESOP")
1301 Merritt Boulevard
Dundalk, Maryland 21224
<FN>
____________
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934
(the "Exchange Act"), a person is deemed to be the beneficial owner,
for purposes of this table, of any shares of Common Stock if he or she
has or shares voting or investment power with respect to such Common
Stock or has a right to acquire beneficial ownership at any time within
60 days from the Record Date. As used herein, "voting power" is the
power to vote or direct the voting of shares and "investment power" is
the power to dispose or direct the disposition of shares.
(2) These shares are held in a suspense account for future allocation among
participating employees as the loan used to purchase the shares is
repaid. The ESOP trustees, currently Directors O'Neill, Patterson and
Bouffard, vote all allocated shares in accordance with instructions of
the participants. Unallocated shares and shares for which no
instructions have been received are voted by the ESOP trustees in the
same ratio as participants direct the voting of allocated shares or, in
the absence of such direction, as directed by the Company's Board of
Directors. At the Record Date, 22,872 shares had been allocated.
</FN>
</TABLE>
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PROPOSAL I -- ELECTION OF DIRECTORS
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GENERAL
The Company's Board of Directors currently consists of six members. The
Company's Articles of Incorporation require that directors be divided into three
classes, as nearly equal in number as possible, with approximately one-third of
the directors elected each year. Under the Company's Articles of Incorporation,
directors are elected by a plurality of the votes cast at a meeting at which a
quorum is present.
It is intended that the persons named in the proxies solicited by the
Board of Directors will vote for the election of the named nominees. If any
nominee is unable to serve, the shares represented by all valid proxies will be
voted for the election of such substitute as the Board of Directors may
recommend or the size of the Board may be reduced to eliminate the vacancy. At
this time, the Board knows of no reason why any nominee might be unavailable to
serve.
2
<PAGE>
The following table sets forth, for each nominee for director and
continuing director of the Company, his or her age, the year he or she first
became a director of The Patapsco Bank (the "Bank"), which is the Company's
principal operating subsidiary, and the expiration of his or her term as a
director. All such persons were appointed as directors in 1995 in connection
with the incorporation and organization of the Company, except for Mr. Waters
who was appointed as a director in August 1999 to fill a vacancy on the Board of
Directors. Each director of the Company also is a member of the Board of
Directors of the Bank.
<TABLE>
<CAPTION>
YEAR FIRST
AGE AT ELECTED AS CURRENT
JUNE 30, DIRECTOR OF TERM
NAME 2000 THE BANK TO EXPIRE
---- ---- ---------- ---------
BOARD NOMINEES FOR TERMS TO EXPIRE IN 2003
<S> <C> <C> <C>
Joseph J. Bouffard 50 1995 2000
Nicole N. Glaeser 42 1993 2000
DIRECTORS CONTINUING IN OFFICE
Thomas P. O'Neill 47 1995 2001
William R. Waters 57 1999 2001
Douglas H. Ludwig 62 1992 2002
Theodore C. Patterson 68 1979 2002
</TABLE>
Set forth below is information concerning the Company's directors.
Unless otherwise stated, all directors have held the positions indicated for at
least the past five years.
JOSEPH J. BOUFFARD joined the Bank's predecessor, Patapsco Federal
Savings and Loan Association (the "Association"), in April 1995 as its President
and Chief Executive Officer. Prior to joining the Association, from December
1990 Mr. Bouffard was Senior Vice President of The Bank of Baltimore, and its
successor, First Fidelity Bank. Prior to that, he was President of Municipal
Savings Bank, FSB in Towson, Maryland. He is a current Board member of the
Dundalk Community College Foundation. He is a former chairman of the Board of
Governors of the Maryland Mortgage Bankers Association. He served as Treasurer
of the Neighborhood Housing Services of Baltimore and was a charter member and
Treasurer of the TowsonTowne Rotary Club.
NICOLE N. GLAESER is Budget Director for the Baltimore County Police
Department, a position she has held since 1988, except for six months in 1992,
during which time she served as Chief of Staff to the Baltimore County
Executive. On a part-time basis, Ms. Glaeser is a practicing attorney and is
also a Certified Public Accountant.
THOMAS P. O'NEILL was named Chairman of the Board of the Company and
the Bank in August 1999 and has been a director since 1995. He is a managing
director of American Express Tax and Business Services. Formerly he was the
managing partner of the regional accounting firm of Wolpoff & Company LLP, which
merged with American Express Tax and Business Services in 1998. He joined
Wolpoff as a staff accountant in 1974 and became a partner in 1983. Mr. O'Neill
is a member of the American Institute of Certified Public Accountants, the
Maryland Association of Certified Public Accountants and the Pennsylvania
Associates of Certified Public Accountants. He has served on the boards of many
charitable and civic groups.
WILLIAM R. WATERS is a Vice President and owner of Scott Pontiac in Bel
Air, Maryland. He is the President and owner of Bel Air Medicine Inc., which
trades as The Medicine Shop. He is a member of the advisory board of
Donahue-Hart and Associates, an insurance and financial services company located
in Bel Air, Maryland. Mr. Waters also serves on the financial board of Grace
Community Church of Perry Hall. He was formerly a member of the Board of the
Bank's predecessor organization, Patapsco Federal Savings and Loan Association,
from 1984 to 1994.
3
<PAGE>
DOUGLAS H. LUDWIG served as a teacher, counselor and principal in the high
schools of the southeast area of the Baltimore County Public Schools until his
retirement in 1992. Mr. Ludwig has been active in many community organizations
during his 47 years of residence in Dundalk.
THEODORE C. PATTERSON is Secretary of both the Company and the Bank and is
a retired physician. Prior to his retirement in September 1996, he was the
Medical Director of Meridian-Heritage Nursing Center and staff physician at the
Fort Howard V.A. Medical Center. He is the recipient of many awards including
Dundalk Citizen of the Year for 1990, Baltimore County Physician Community
Service Award, University of Maryland School of Medicine Dedicated Service
Award, and most recently, the Distinguished Service Award given by the
University of Maryland Medical Alumni Association. He has held leadership
positions in a number of community organizations.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following sets forth information with respect to executive officers of
the Bank who do not serve on the Board of Directors.
<TABLE>
<CAPTION>
AGE AT
JUNE 30,
NAME 2000 TITLE WITH THE BANK
---- -------- -------------------
<S> <C> <C>
Debra L. Penczek 44 Vice President - Operations
Frank J. Duchacek, Jr. 56 Senior Vice President - Commercial Lending
Michael J. Dee 40 Vice President, Chief Financial Officer and
Controller of the Company and the Bank
John W. McClean 56 Vice President - Real Estate Lending
</TABLE>
DEBRA L. PENCZEK has served in various capacities since joining the Bank in
1974 and has served in her present capacity as Vice President of Operations
since 1992. Ms. Penczek is Secretary and the former President of the Breakfast
Optimist Club of Dundalk, Lieutenant Governor of the Maryland-South Delaware
Optimist District, President of the Dundalk Association of Business, Inc. and
Director of the Maryland Institute of Financial Education. She is a past member
of the Management Studies Advisory Board of Dundalk Community College, the
Eastern Baltimore Area Chamber of Commerce, the North Point Peninsula Community
Coordinating Council and the Sandy Plains Elementary School Improvement Team and
various boards and committees of the Patapsco United Methodist Church.
FRANK J. DUCHACEK, JR. is a Senior Vice President who joined the Bank in
February 1996 as its Vice President of Commercial Lending. Prior to that time,
Mr. Duchacek was a credit underwriter and business development officer for First
Union Bank, successor of First Fidelity Bank, N.A. From 1989 to 1993, Mr.
Duchacek was a department manager for commercial lending at Provident Bank of
Maryland. During the preceding 28 years, Mr. Duchacek occupied various lending
and management positions with Union Trust Bank and its successor, Signet Bank,
Maryland. Mr. Duchacek is a Director of the Eastern Baltimore County Chamber of
Commerce. Mr. Duchacek served as a member of the Maryland Home Improvement
Commission and currently is active with St. John's Episcopal Church in
Kingsville, Maryland.
MICHAEL J. DEE joined the Company and the Bank in May 1999 as its Chief
Financial Officer and Controller. From September 1997 to May 1999, Mr. Dee was
Vice President of Management Accounting for Sandy Spring National Bank of
Maryland. From May 1995 to October 1997, Mr. Dee was the Manager of Financial
Planning and Analysis with United Press International in Washington, D.C. From
December 1989 to March 1995, Mr. Dee was employed by The Bank of Baltimore and
its successors, First Fidelity Bank, N.A. and First Union Bank, in a variety of
financial positions. Mr. Dee is a Certified Management Accountant (CMA).
4
<PAGE>
JOHN W. MCCLEAN joined the Bank in August 1995 as its Vice President of
Real Estate Lending. From January 1994 to August 1995, Mr. McClean was a
self-employed business consultant. Prior to engaging in his own business, Mr.
McClean was employed by Baltimore Bancorp from December 1990 as Vice President
of the Bank of Baltimore's Asset Management and Disposition Group and from
December 1985 as Senior Vice President and Chief Lending Officer of Municipal
Savings Bank. Prior to that, Mr. McClean spent 20 years working for First
National Bank of Maryland in the Commercial Real Estate Department. Mr. McClean
is a past president of the Maryland Mortgage Bankers Association and has served
on the Board of Neighborhood Housing Services of Baltimore. He is the Vice
President of Finance of the Baltimore County Volunteer Firemen's Association and
past President and current member of the Board of Directors of the Providence
Volunteer Fire Company.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company holds regular monthly meetings
and holds special meetings as needed. During the year ended June 30, 2000, the
Board of Directors of the Company met 18 times. No director of the Company
attended fewer than 75% in the aggregate of the total number of Board meetings
held while he was a member during the year ended June 30, 2000 and the total
number of meetings held by committees on which he or she served during such
fiscal year.
The Board of Directors' Audit Committee consists of Directors Ludwig
and Glaeser, who serves as Chairperson. The Committee met four times during the
year ended June 30, 2000 to examine and approve the audit report prepared by the
independent auditors of the Company, to review and recommend the independent
auditors to be engaged by the Company, to review the internal audit function and
internal accounting controls, and to review and approve Company policies.
The Company's full Board of Directors acts as a nominating committee.
The Company's full Board of Directors met once as a Nominating Committee during
the year ended June 30, 2000. In its deliberations, the Board, functioning as a
nominating committee, considers the candidate's knowledge of the banking
business and involvement in community, business and civic affairs, and also
considers whether the candidate would provide for adequate representation in its
market area. The Company's Articles of Incorporation set forth procedures that
must be followed by stockholders seeking to make nominations for directors. In
order for a stockholder of the Company to make any nominations, he or she must
give written notice thereof to the Secretary of the Company not less than thirty
days nor more than sixty days prior to the date of any such meeting; provided,
however, that if less than forty days' notice of the meeting is given to
stockholders, such written notice shall be delivered or mailed, as prescribed,
to the Secretary of the Company not later than the close of business on the
tenth day following the day on which notice of the meeting was mailed to
stockholders. Each such notice given by a stockholder with respect to
nominations for the election of directors must set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed in
such notice; (ii) the principal occupation or employment of each such nominee;
and (iii) the number of shares of stock of the Company which are beneficially
owned by each such nominee. In addition, the stockholder making such nomination
must promptly provide any other information reasonably requested by the Company.
The Board of Directors' Compensation Committee consists of Directors
Patterson, Bouffard and O'Neill. The Compensation Committee evaluates the
compensation and benefits of the directors, officers and employees, recommends
changes, and monitors and evaluates employee performance. The Compensation
Committee met five times during the year ended June 30, 2000.
5
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the cash and
noncash compensation for the fiscal years ended June 30, 2000, 1999 and 1998
awarded to or earned by the Chief Executive Officer for services rendered in all
capacities to the Company and the Bank during those years. No other executive
officer of the Company earned salary and bonus in fiscal year 2000 exceeding
$100,000 for services rendered in all capacities to the Company and the Bank.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------
AWARDS
ANNUAL COMPENSATION (1) -------------------------
------------------------------------- RESTRICTED SECURITIES
NAME AND FISCAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (2) AWARD(S)(3) OPTIONS COMPENSATION
------------------ ---- ------ ----- ---------------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph J. Bouffard 2000 $ 100,673 $ 15,122 $6,000 $ -- -- $ 21,908 (4)
President and CEO 1999 100,000 12,295 6,000 -- -- 17,193
1998 100,002 23,300 6,000 -- -- 27,101
<FN>
__________
(1) Executive officers of the Bank receive indirect compensation in the
form of certain perquisites and other personal benefits. The amount of
such benefits received by the named executive officers in fiscal year
2000 did not exceed 10% of the executive officer's salary and bonus.
(2) Consists of an automobile allowance.
(3) As of June 30, 2000, based on the closing sale price of the Common
Stock of $22.25 as reported on the OTC Bulletin Board, the aggregate
value of the 1,840 shares of restricted Common Stock held by Mr.
Bouffard was $40,940. In addition, at June 30, 2000, the Company's MRP
Trust held $819 in cash representing accrued dividends for the benefit
of Mr. Bouffard. In the event the Company pays dividends with respect
to its Common Stock, when shares of restricted stock vest and/or are
distributed, the holder will be entitled to receive 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 restricted Common Stock
between the date the restricted stock was awarded and the date the
restricted stock is distributed, plus interest on cash dividends,
provided that dividends paid with respect to unvested restricted stock
must be repaid to the Company in the event the restricted stock is
forfeited prior to vesting.
(4) For fiscal year 2000, such amount includes $4,737 of matching
contributions under the Bank's 401(k) Plan and $17,171 in Common Stock
allocated to Mr. Bouffard's account under the ESOP, based on the
closing price of the Common Stock of $22.25 as quoted on the OTC
Bulletin Board on June 30, 2000.
</FN>
</TABLE>
Year-End Option Values. The following table sets forth information
concerning the value as of June 30, 2000 of options held by the executive
officer named in the Summary Compensation Table set forth above.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END (1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Joseph J. Bouffard 5,057 3,372 $16,890 $11,262
<FN>
____________
(1) Based on the difference between the fair market value of the underlying
Common Stock of $22.25 as quoted on the OTC Bulletin Board on June 30,
2000 and the exercise price of $18.91 per share.
</FN>
</TABLE>
No options were granted to or exercised by the named executive officer
during the year ended June 30, 2000, and no options held by any executive
officer of the Company repriced during the past fiscal year.
6
<PAGE>
DIRECTOR COMPENSATION
General. Each nonemployee member of the Company's Board of Directors
receives a fee of $450 for each regular and special meeting attended of the
Company's Board of Directors and $200 for each meeting attended of a committee
of either the Company's or the Bank's Board of Directors. No fees are paid for
attendance at meetings of the Bank's Board of Directors. The Chairman of the
Board receives an additional $500 per month.
Nonemployee directors also participate in the Company's 1996 Stock
Option and Incentive Plan (the "Option Plan") Management Recognition Plan (the
"MRP") and Incentive Compensation Plan (the "ICP"). During the year ended June
30, 2000, Mr. William Waters was granted an option to purchase 540 shares of
Common Stock at an exercise price of $20.00 per share. The option has a ten-year
term and becomes exercisable at the rate of 20% per year. In addition, during
the year ended June 30, 2000, Mr. Waters was awarded 185 shares of restricted
Common Stock under the MRP, with the award to vest at the rate of 20% per year.
The other directors did not receive any awards under the Option Plan or the MRP
during the year ended June 30, 2000. Nonemployee directors Glaeser, Ludwig,
O'Neill and Patterson each received $3,368, and non employee Director Waters
received $2,806, during the year ended June 30, 2000 under the ICP.
Director Retirement Plan. The Bank's Board of Directors has adopted a
retirement plan (the "Directors' Plan"), for each non-employee director (i) who
is a voting member of the Bank's Board of Directors at any time on or after
September 28, 1995, which is the plan's effective date and (ii) who is not an
employee on the date of being both nominated and elected or reelected to the
Bank's Board of Directors. Under the Directors' Plan, a participant who
terminates service as a voting member of the Bank's Board of Directors will
receive a payment equal to the product of his or her "Benefit Percentage," his
or her "Vested Percentage," and $65,185. A participant's "Benefit Percentage"
increases from 0% for less than five years of service on the Bank's Board of
Directors to 30% for five years of service, and thereafter in additional
increments of 7% for each year of service from six to fourteen years, to 100%
for fifteen or more years of service. A participant's "Vested Percentage" begins
at 50%, increases to 75% upon completion of one year of service following the
effective date, and becomes 100% if the participant completes a second year of
service following the effective date. However, a participant's Vested Percentage
becomes 100% regardless of his or her years of service in the event the
participant terminates service on the Bank's Board of Directors due to death,
"disability," retirement at or after age 72, or in the event of a "change in
control" (as such terms are defined in the Directors' Plan). The provision
accelerating a participant's Vested Percentage due to a change in control may
have the effect of deferring a hostile change in control by increasing the costs
of acquiring control.
Each participant may elect to receive his or her plan benefits either
in a lump sum cash payment or in substantially equal annual payments over a
period of up to ten years, in which event the undistributed portion of the
participant's benefits will be credited with an annual rate of return equal to
the Bank's highest rate of interest on certificates of deposit having a one year
term. If a participant dies, his or her beneficiary will receive the
participant's benefits in a lump sum (unless the participant elects a
distribution period of up to ten years).
The Bank will pay all plan benefits from its general assets, and
expects to establish a trust in the event of a change in control of the Bank.
All expenses associated with the implementation and maintenance of the trust
will be paid by the Bank. The Bank will fund the trust through a lump sum
deposit of an amount that is projected to be sufficient to pay each director the
benefits to which he or she is entitled pursuant to the Directors' Plan as of
the date of the change in control. Trust assets will be subject to the claims of
the Bank's general creditors.
During the year ended June 30, 2000, $6,010, $6,284, $4,851, $3,911 and
$0 were accrued under the Directors' Plan for the benefit of Directors Glaeser,
Ludwig, O'Neill, Patterson and Waters, respectively.
EMPLOYMENT AGREEMENTS
The Company and the Bank have entered into employment agreements (the
"Employment Agreements") with Mr. Joseph J. Bouffard, President and Chief
Executive Officer of the Bank and of the Company. In such capacities, Mr.
Bouffard is responsible for overseeing all operations of the Bank and the
Company, and for implementing the policies adopted by the Boards of Directors of
the Company and the Bank. The Employment Agreements provide for a term of three
years. On each anniversary date from the date of commencement of the Employment
Agreements, the term of Mr. Bouffard's employment under the Employment
Agreements may be extended for an additional one-year period beyond the then
effective expiration date, upon a determination by the
7
<PAGE>
Board of Directors that Mr. Bouffard's performance has met the required
performance standards and that such Employment Agreements should be extended.
The Employment Agreements provide Mr. Bouffard with a salary review by the
Boards of Directors not less often than annually, as well as with inclusion in
any discretionary bonus plans, retirement and medical plans, customary fringe
benefits and vacation and sick leave. Mr. Bouffard's base salary currently is
$103,500. The Employment Agreements will terminate upon Mr. Bouffard's death or
disability, and are terminable by the Bank for "just cause" as defined in the
Employment Agreements. In the event of termination for just cause, no severance
benefits are available. If the Company or the Bank terminates Mr. Bouffard
without just cause, he will be entitled to a continuation of his salary and
benefits from the date of termination through the remaining terms of the
Employment Agreements plus an additional 12-month period (but not, from the
Bank, in excess of three times his five years' average compensation). If the
Employment Agreements are terminated due to Mr. Bouffard's "disability" (as
defined in the Employment Agreements), he will be entitled to a continuation of
his salary and benefits through the date of such termination, including any
period prior to establishment of Mr. Bouffard's disability. In the event of Mr.
Bouffard's death during the term of the Employment Agreements, his estate will
be entitled to receive his salary through the last day of the month in which his
death occurs.
The Employment Agreements provide that in the event of Mr. Bouffard's
involuntary termination of employment in connection with, or within one year
after, any "change in control" (as defined in the Employment Agreements) of the
Bank or the Company, other than for "just cause," Mr. Bouffard will be paid
within 10 days of such termination an amount equal to the difference between (i)
2.99 times his "base amount," as defined in Section 280G(b)(3) of the Internal
Revenue Code and (ii) the sum of any other parachute payments, as defined under
Section 280G(b)(2) of the Internal Revenue Code, that Mr. Bouffard receives on
account of the change in control. The Employment Agreement with the Bank
provides that within five business days before or after a change in control
which was not approved in advance by a resolution of a majority of the
Continuing Directors, the Bank shall fund, or cause to be funded, a trust in the
amount of 2.99 times Mr. Bouffard's base amount, that will be used to pay Mr.
Bouffard amounts owed to him upon termination, other than for just cause. The
Employment Agreements also provide for a similar lump sum payment to be made in
the event of Mr. Bouffard's voluntary termination of employment within one year
following a change in control, upon the occurrence, or within 90 days
thereafter, of certain specified events following the change in control, which
have not been consented to in writing by Mr. Bouffard. Such events generally
relate to a reduction in Mr. Bouffard's salary, benefits or duties. The
aggregate payments that would be made to Mr. Bouffard assuming his termination
of employment under the foregoing circumstances at June 30, 2000 would have been
approximately $309,465. These provisions may have an anti-takeover effect by
making it more expensive for a potential acquiror to obtain control of the
Company. In the event that Mr. Bouffard prevails over the Company and the Bank
in a legal dispute as to the Employment Agreements, he will be reimbursed for
his legal and other expenses.
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
In January 1998, in order to provide Joseph J. Bouffard (the
"Executive") with supplemental retirement benefits and thereby encourage his
continuing service as President and Chief Executive Officer of the Company and
the Bank, the Bank has entered into a Supplemental Executive Retirement
Agreement (the "SERA") with the Executive. Pursuant to the terms of the SERA,
the Bank established an account in the name of the Executive to which the Bank
credits $439 on the first day of each month in which the Executive continues to
be employed with the Bank. For each calendar year, the value of this account
will appreciate or depreciate as if the account was invested in, at the election
of the Executive, the highest rate paid by the Bank on certificates of deposit
having a term of one year, a fund that invested in the Common Stock or a mutual
fund agreed upon by the Bank and the Executive. Amounts credited to the
Executive's account are unvested and forfeitable until the earlier of one of the
following events (at which time the Executive becomes fully vested in his
account): (i) the Executive's continued status as an employee through April 2,
2000; (ii) termination of the Executive's status as an employee due to his death
or disability; or (iii) termination of the Executive's status as an employee
either without Just Cause (as defined in the Employment Agreements) or on or
after a Change in Control (as defined in the Employment Agreements).
Upon his termination of employment from the Bank for a reason other
than Just Cause, the balance in his account will be paid to the Executive either
in a lump sum or in substantially equal annual installments over a period of up
to ten years, with the first installment due on the first day of the second
month after he leaves employment. If the Executive's employment with the Bank is
terminated for Just Cause, he will forfeit the right to receive any payments
pursuant to the SERA. In the event of a Change in Control, the present value of
the benefits to which he is entitled shall be payable to the Executive in
accordance with his distribution election form.
8
<PAGE>
TRANSACTIONS WITH MANAGEMENT
The Bank offers loans to its directors and officers. These loans
currently are made in the ordinary course of business with the same collateral,
interest rates and underwriting criteria as those of comparable transactions
prevailing at the time and do not involve more than the normal risk of
collectibility or present other unfavorable features. Under current law, the
Bank's loans to directors and executive officers are required to be made on
substantially the same terms, including interest rates, as those prevailing for
comparable transactions and must not involve more than the normal risk of
repayment or present other unfavorable features. Furthermore, all loans to such
persons must be approved in advance by a disinterested majority of the Board of
Directors. At June 30, 2000, the Bank's loans to directors and executive
officers totaled $48,625, or .51% of the Company's stockholders' equity, at that
date.
--------------------------------------------------------------------------------
SECURITY OWNERSHIP OF MANAGEMENT
--------------------------------------------------------------------------------
The following table sets forth, as of the Record Date, the beneficial
ownership of the Company's Common Stock by each of the Company's directors and
nominees, the sole executive officer named in the Summary Compensation Table and
by all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF SHARES OF
BENEFICIAL COMMON STOCK
NAME OWNERSHIP (1) OUTSTANDING
---- ------------- ------------
<S> <C> <C>
Joseph J. Bouffard 16,149 (2) 4.8%
Nicole N. Glaeser 3,987 1.2
Douglas H. Ludwig 5,492 (3) 1.7
Thomas P. O'Neill 4,098 (4) 1.2
Theodore C. Patterson 6,606 2.0
William R. Waters 2,150 (5) 0.7
All Executive Officers and Directors
as a Group (10 persons) 64,168 (6) 18.3
<FN>
___________
(1) For the definition of beneficial ownership, see Footnote 1 to the table in
"Voting Securities and Principal Holders Thereof." Unless otherwise
indicated, ownership is direct and the named individual exercises sole
voting and investment power over the shares listed as beneficially owned by
such person. Amounts shown include 6,743, 1,302, 1,558, 1,404, 1,770, 0 and
22,890 shares which may be acquired by Directors Bouffard, Glaeser, Ludwig,
O'Neill, Patterson and Waters, and by all directors and executive officers
of the Company as a group, respectively, upon the exercise of options
exercisable within 60 days of the Record Date. Amounts shown 920, 205, 205,
55, 205, 0 and 3,416 shares of restricted Common Stock which are held in
the MRP Trust for the benefit of Directors Bouffard, Glaeser, Ludwig,
O'Neill, Patterson and Waters, and all executive officers and directors as
a group, respectively, and which will vest within 60 days of the Record
Date. Does not include shares with respect to which Directors O'Neill,
Patterson and Bouffard share "voting power" by virtue of their positions as
trustees of the trusts holding 41,341 shares under the Company's ESOP and
7,012 shares under the MRP. Shares held by the ESOP trust and allocated to
the accounts of participants are voted in accordance with the participants'
instructions, and unallocated shares are voted in the same ratio as ESOP
participants direct the voting of allocated shares or, in the absence of
such direction, in the ESOP trustees' best judgment. The shares held by the
MRP trust are voted in the same proportion as the ESOP trustees vote the
shares held in the ESOP trust.
(2) Includes 100 shares owned by Mr. Bouffard's wife, 100 shares owned by Mr.
Bouffard's wife as custodian for their son and 100 shares owned by Mr.
Bouffard's son.
(3) Includes 349 shares owned by Mr. Ludwig's wife.
(4) Includes 100 shares owned by Mr. O'Neill as custodian for his daughter.
(5) Includes 750 shares owned by Mr. Waters' wife.
(6) Includes shares held by certain directors and executive officers as
custodian under the Uniform Transfer to Minors Act and by their spouses as
set forth above. The amount shown includes 5,919 shares of Common Stock
allocated to the accounts of all executive officers and directors as a
group under the ESOP.
</FN>
</TABLE>
9
<PAGE>
--------------------------------------------------------------------------------
PROPOSAL II -- APPROVAL OF PATAPSCO BANCORP, INC. 2000
STOCK OPTION AND INCENTIVE PLAN
--------------------------------------------------------------------------------
GENERAL
The Board of Directors of the Company has adopted the Patapsco Bancorp,
Inc. 2000 Stock Option and Incentive Plan (the "Option Plan"), subject to its
approval by the Company's stockholders. The Option Plan is attached hereto as
Exhibit A and should be consulted for additional information. All statements
made herein regarding the Option Plan, which are only intended to summarize the
Option Plan, are qualified in their entirety by reference to the Option Plan.
PURPOSE OF THE OPTION PLAN
The purpose of the Option Plan is to advance the interests of the
Company by providing directors and selected employees of the Company and its
affiliates, including the Bank, with the opportunity to acquire shares of Common
Stock. By encouraging stock ownership, the Company seeks to attract, retain, and
motivate the best available personnel for positions of substantial
responsibility and to provide additional incentive to directors and employees of
the Company and its affiliates to promote the success of the business of the
Company.
DESCRIPTION OF THE OPTION PLAN
Effective Date. The Option Plan will become effective on the date of
its approval by the Company's stockholders (the "Effective Date"), and prior
thereto no awards may or will be made.
Administration. The Option Plan is administered by a committee (the
"Committee"), appointed by the Board of Directors, consisting of at least two
directors of the Company who are "Non-employee Directors" within the meaning of
the federal securities laws. The Committee has discretionary authority to select
participants and grant awards, to determine the form and content of any awards
made under the Option Plan, to interpret the Option Plan, to prescribe, amend
and rescind rules and regulations relating to the Option Plan, and to make other
decisions necessary or advisable in connection with administering the Option
Plan. All decisions, determinations, and interpretations of the Committee are
final and conclusive on all persons affected thereby. Members of the Committee
will be indemnified to the full extent permissible under the Company's governing
instruments in connection with any claims or other actions relating to any
action taken under the Option Plan. It is expected that the Committee will
initially consist of Directors Patterson and O'Neill.
Eligible Persons; Types of Awards. Under the Option Plan, the Committee
may grant stock options ("Options") and stock appreciation rights ("SARs")
(collectively, "Awards") to such employees as the Committee shall designate. As
of the Record Date, the Company and its subsidiaries had approximately 17
employees, five Non-employee Directors and two honorary directors who were
eligible to participate in the Option Plan.
Shares Available for Grants. The Option Plan reserves 20,000 shares of
Common Stock for issuance upon the exercise of Options or SARs. Such shares may
be (i) authorized but unissued shares, (ii) shares held in treasury, or (iii)
shares held in a grantor trust. In the event of any merger, consolidation,
recapitalization, reorganization, reclassification, stock dividend, split-up,
combination of shares, or similar event in which the number or kind of shares is
changed without receipt or payment of consideration by the Company, the
Committee will adjust the number and kind of shares reserved for issuance under
the Option Plan, and the number and kind of shares subject to outstanding
Awards, and the exercise prices of such Awards. Generally, the number of shares
as to which SARs are granted are charged against the aggregate number of shares
available for grant under the Option Plan, provided 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 of Common Stock subject to the Option shall be charged against the
aggregate number of shares of Common Stock remaining available under the Option
Plan. If Awards should expire, become unexercisable or be forfeited for any
reason without having been
10
<PAGE>
exercised, the shares of Common Stock subject to such Awards shall, unless the
Option Plan shall have been terminated, be available for the grant of additional
Awards under the Option Plan.
Options. Options may be either incentive stock options ("ISOs") as
defined in Section 422 of the Internal Revenue Code, or options that are not
ISOs ("Non-ISOs"). The exercise price as to any Option may not be less than the
fair market value (determined under the Option Plan) of the optioned shares on
the date of grant. In the case of a participant who owns more than 10% of the
outstanding Common Stock on the date of grant, the exercise price for an ISO may
not be less than 110% of fair market value of the shares. As required by federal
tax laws, to the extent that the aggregate fair market value (determined when an
ISO is granted) of the Common Stock with respect to which ISOs are exercisable
by an optionee for the first time during any calendar year (under all plans of
the Company and of any subsidiary) exceeds $100,000, the Options granted in
excess of $100,000 will be treated as Non-ISOs, and not as ISOs.
SARs. An SAR may be granted in tandem with all or part of any Option
granted under the Option Plan, or without any relationship to any Option. An SAR
granted in tandem with an ISO must expire no later than the ISO, must have the
same exercise price as the ISO and may be exercised only when the ISO is
exercisable and when the fair market value of the shares subject to the ISO
exceeds the exercise price of the ISO. Also, the SAR may be for no more than the
difference between the exercise price of the ISO and the market value of the
shares at the time the SAR is exercised and is transferable only when the ISO is
transferable and under the same conditions. For SARs granted in tandem with
Options, the optionee's exercise of the SAR cancels his or her right to exercise
the Option, and vice versa. Regardless of whether an SAR is granted in tandem
with an Option, exercise of the SAR will entitle the optionee to receive, as the
Committee prescribes in the grant, all or a percentage of the difference between
(i) the fair market value of the shares of Common Stock subject to the SAR at
the time of its exercise, and (ii) the fair market value of such shares at the
time the SAR was granted (or, in the case of SARs granted in tandem with
Options, the exercise price). The exercise price as to any particular SAR may
not be less than the fair market value of the optioned shares on the date of
grant.
Exercise of Options and SARs. The exercise of Options and SARs will be
subject to such terms and conditions as are established by the Committee in a
written agreement between the Committee and the optionee. Unless the Committee
chooses to make alternative arrangements, each Award shall become exercisable
with respect to 20% of the underlying shares on each of the five annual
anniversary dates of the date on which the Award occurred. Such vesting shall
accelerate to 100% upon optionee's termination of service as an employee,
director, or honorary director due to death, disability (as defined in the
Option Plan) or retirement at or after age 65. In the absence of Committee
action to the contrary, an otherwise unexpired Option shall cease to be
exercisable upon (i) an optionee's termination of employment for "just cause"
(as defined in the Option Plan), (ii) the date three months after an optionee
terminates service for a reason other than just cause, death, or disability,
(iii) the date one year after an optionee terminates service due to disability,
or (iv) the date five years after an optionee terminates service due to death or
retirement.
Notwithstanding the provisions of any Award which provides for its
exercise or vesting in installments, upon a "change in control," all Awards
shall be immediately exercisable and fully vested. With respect to Options, at
the time of a change in control, the optionee shall, at the discretion of the
Committee, be entitled to receive cash in an amount equal to the excess of the
market value of the Common Stock subject to such Option over the exercise price
of such Option, in exchange for the cancellation of such Option by the optionee.
"Change in Control" as defined in the Option Plan means any one of the following
events: (1) the acquisition of ownership, holding or power to vote more than 25%
of the Bank's or the Company's voting stock, (2) the acquisition of the ability
to control the election of a majority of the Bank's or the Company's directors,
(3) the acquisition of a controlling influence over the management or policies
of the Bank or the Company by any person or by persons acting as a "group"
(within the meaning of Section 13(d) of the Securities Exchange Act of 1934),
(4) the acquisition of control of the Bank or the Company within the meaning of
applicable regulations, or (5) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company or the Bank (the "Existing Board") (the "Continuing
Directors") cease for any reason to constitute at least a majority thereof,
provided that any
11
<PAGE>
individual whose election or nomination for election as a member of the Existing
Board was approved by a vote of at least a majority of the Continuing Directors
then in office shall be considered a Continuing Director.
An optionee may exercise Options or SARs, subject to provisions
relative to their termination and limitations on their exercise, only by (i)
written notice of intent to exercise the Option or SAR with respect to a
specified number of shares of Common Stock, and (ii) in the case of Options,
payment to the Company (contemporaneously with delivery of such notice) in cash,
in Common Stock owned for more than six months, 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. 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.
Conditions on Issuance of Shares. The Committee will have the
discretionary authority to impose, in agreements, such restrictions on shares of
Common Stock issued pursuant to the Option Plan as it may deem appropriate or
desirable, including but not limited to the authority to impose a right of first
refusal or to establish repurchase rights or both of these restrictions. In
addition, the Committee may not issue shares unless the issuance complies with
applicable securities laws, and to that end may require that a participant make
certain representations or warranties.
Transferability. Optionees may transfer their Awards to family members
or trusts under specified circumstances. Awards may not otherwise be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other
than by will or by the laws of descent and distribution.
Effect of Dissolution and Related Transactions. 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, will be equitably adjusted for any change or
exchange of shares for a different number or kind of shares which results from
the Transaction. However, any such adjustment will be made in such a manner as
to not constitute a modification, within the meaning of Section 424(h) of the
Internal Revenue Code, of outstanding ISOs.
Duration of the Option Plan and Grants. The Option Plan has a term of
10 years from the Effective Date, after which date no Awards may be granted. The
maximum term for an Award is 10 years from the date of grant, except that the
maximum term of an ISO (and an SAR granted in tandem with an ISO) may not exceed
five years if the optionee owns more than 10% of the Common Stock on the date of
grant. The expiration of the Option Plan, or its termination by the Committee,
will not affect any Award then outstanding.
Amendment and Termination of the Option Plan. The Board of Directors of
the Company may from time to time amend the terms of the Option Plan and, with
respect to any shares at the time not subject to Awards, suspend or terminate
the Option Plan. No amendment, suspension, or termination of the Option Plan
will, without the consent of any affected optionee, alter or impair any rights
or obligations under any Award previously granted.
Financial Effects of Awards. The Company will receive no monetary
consideration for the granting of Awards under the Option Plan. It will receive
no monetary consideration other than the exercise price for shares of Common
Stock issued to optionees upon the exercise of their Options, and will receive
no monetary consideration upon the exercise of SARs. Under applicable accounting
standards, recognition of compensation expense is not required when Options are
granted at an exercise price equal to or exceeding the fair market value of the
Common Stock on the date the Option is granted.
The granting of SARs will require charges to the income of the Company
based on the amount of the appreciation, if any, in the average market price of
the Common Stock to which the SARs relate over the exercise price of those
shares. If the average market price of the Common Stock declines subsequent to a
charge against earnings due to estimated appreciation in the Common Stock
subject to SARs, the amount of the decline will reverse such prior charges
against earnings (but not by more than the aggregate of such prior charges).
12
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
ISOs. An optionee recognizes no taxable income upon the grant of ISOs.
If the optionee holds the shares purchased upon exercise of an ISO for at least
two years from the date the ISO is granted, and for at least one year from the
date the ISO is exercised, any gain realized on the sale of the shares received
upon exercise of the ISO is taxed as long-term capital gain. However, the
difference between the fair market value of the Common Stock on the date of
exercise and the exercise price of the ISO will be treated by the optionee as an
item of tax preference in the year of exercise for purposes of the alternative
minimum tax. If an optionee disposes of the shares before the expiration of
either of the two special holding periods noted above, the disposition is a
"disqualifying disposition." In this event, the optionee will be required, at
the time of the disposition of the Common Stock, to treat the lesser of the gain
realized or the difference between the exercise price and the fair market value
of the Common Stock at the date of exercise as ordinary income and the excess,
if any, as capital gain.
The Company will not be entitled to any deduction for federal income
tax purposes as the result of the grant or exercise of an ISO, regardless of
whether or not the exercise of the ISO results in liability to the optionee for
alternative minimum tax. However, if an optionee has ordinary income taxable as
compensation as a result of a disqualifying disposition, the Company will be
entitled to deduct an equivalent amount.
Non-ISOs. In the case of a Non-ISO, an optionee will recognize ordinary
income upon the exercise of the Non-ISO in an amount equal to the difference
between the fair market value of the shares on the date of exercise and the
option price (or, if the optionee is subject to certain restrictions imposed by
the federal securities laws, upon the lapse of those restrictions unless the
optionee makes a special tax election within 30 days after the date of exercise
to have the general rule apply). Upon a subsequent disposition of such shares,
any amount received by the optionee in excess of the fair market value of the
shares as of the exercise will be taxed as capital gain. The Company will be
entitled to a deduction for federal income tax purposes at the same time and in
the same amount as the ordinary income recognized by the optionee in connection
with the exercise of a Non-ISO.
SARs. The grant of an SAR has no tax effect on the optionee or the
Company. Upon exercise of the SARs, however, any cash or Common Stock received
by the optionee in connection with the surrender of his or her SAR will be
treated as compensation income to the optionee, and the Company will be entitled
to a business expense deduction for the amounts treated as compensation income.
NEW PLAN BENEFITS
Option awards are discretionary. The Company anticipates that Options
will be granted to employees of the Company during the year ending June 30,
2001, although no specific determination has been made as to the specific
amounts to be granted or as to who will receive grants during the year ending
June 30, 2001 if the Option Plan is approved by stockholders at the Annual
Meeting. All such Options (i) will be subject to the terms and conditions
described above, and (ii) will automatically expire ten years after the date of
their grant. The exercise price for these Options will equal the fair market
value of the Common Stock on the date of grant. The closing sale price of the
Common Stock on September 14, 2000, as reported on the OTC Bulletin Board, was
$21.00 per share. No Options would have been granted to directors or officers
during the year ended June 30, 2000 had the Option Plan been approved at last
year's annual meeting.
RECOMMENDATION AND VOTE REQUIRED
The Board of Directors has determined that the Option Plan is
desirable, cost effective, and produces incentives which will benefit the
Company and its stockholders. The Board of Directors is seeking stockholder
approval of the Option Plan in order to satisfy the requirements of the Code for
favorable tax treatment of ISOs, and to exempt certain option transactions from
the short-swing trading rules of the Securities and Exchange Commission ("SEC").
Stockholder approval of the Option Plan requires the affirmative vote
of the holders of a majority of the votes eligible to be cast at the Annual
Meeting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE OPTION
PLAN.
13
<PAGE>
--------------------------------------------------------------------------------
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
--------------------------------------------------------------------------------
Anderson Associates, LLP ("Anderson"), which was the Company's
independent certified public accounting firm for the 2000 fiscal year, has been
retained by the Board of Directors to be the Company's auditors for the 2001
fiscal year. A representative of Anderson Associates, LLP is expected to be
present at the Annual Meeting and will have the opportunity to make a statement
if he or she so desires.
--------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
--------------------------------------------------------------------------------
Pursuant to regulations promulgated under the Exchange Act, the
Company's officers, directors and persons who own more than ten percent of the
outstanding Common Stock ("Reporting Persons") are required to file reports
detailing their ownership and changes of ownership in such Common Stock
(collectively, "Reports"), and to furnish the Company with copies of all such
Reports. Based solely on its review of the copies of such Reports or written
representations that no such Reports were necessary that the Company received
during the past fiscal year or with respect to the last fiscal year, management
believes that during the fiscal year ended June 30, 2000, all of the Reporting
Persons complied with these reporting requirements.
--------------------------------------------------------------------------------
OTHER MATTERS
--------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Annual Meeting other than those matters described above in this proxy statement
and matters incident to the conduct of the Annual Meeting. However, if any other
matters should properly come before the Annual Meeting, it is intended that
proxies in the accompanying form will be voted in respect thereof in accordance
with the determination of a majority of the Board of Directors.
--------------------------------------------------------------------------------
MISCELLANEOUS
--------------------------------------------------------------------------------
The cost of soliciting proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation.
The Company's 2000 Annual Report to Stockholders, including financial
statements, is being mailed to all stockholders of record as of the close of
business on the Record Date. Any stockholder who has not received a copy of such
Annual Report may obtain a copy by writing to the Secretary of the Company. Such
Annual Report is not to be treated as a part of the proxy solicitation materials
or as having been incorporated herein by reference.
14
<PAGE>
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STOCKHOLDER PROPOSALS
--------------------------------------------------------------------------------
Under the Company's Articles of Incorporation, stockholder proposals
must be submitted in writing to the Secretary of the Company at the address
stated later in this paragraph no less than 30 days nor more than 60 days prior
to the date of such meeting; provided, however, that if less than 40 days'
notice of the meeting is given to stockholders, such written notice shall be
delivered or mailed, as prescribed, to the Secretary of the Company not later
than the close of business on the tenth day following the day on which notice of
the meeting was mailed to stockholders. For consideration at the Annual Meeting,
a stockholder proposal must be delivered or mailed to the Company's Secretary no
later than October 5, 2000. In order to be eligible for inclusion in the
Company's proxy materials for next year's Annual Meeting of Stockholders, any
stockholder proposal to take action at such meeting must be received at the
Company's main office at 1301 Merritt Boulevard, Dundalk, Maryland 21222-2194,
no later than May 28, 2001. Any such proposal shall be subject to the
requirements of the proxy rules adopted under the Exchange Act.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Theodore C. Patterson
THEODORE C. PATTERSON
SECRETARY
Dundalk, Maryland
September 25, 2000
--------------------------------------------------------------------------------
ANNUAL REPORT ON FORM 10-KSB
--------------------------------------------------------------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL
YEAR ENDED JUNE 30, 2000 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
WILL BE FURNISHED WITHOUT CHARGE TO EACH STOCKHOLDER AS OF THE RECORD DATE UPON
WRITTEN REQUEST TO CORPORATE SECRETARY, PATAPSCO BANCORP, INC., 1301 MERRITT
BOULEVARD, DUNDALK, MARYLAND 21222-2194.
--------------------------------------------------------------------------------
15
<PAGE>
Exhibit A
PATAPSCO BANCORP, INC.
2000 STOCK OPTION AND INCENTIVE PLAN
1. PURPOSE OF THE PLAN.
The purpose of this Patapsco Bancorp, Inc. 2000 Stock Option and Incentive
Plan (the "Plan") is to advance the interests of the Company through providing
select key Employees and Directors of the Bank, 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) "Awards" shall mean, collectively, Options and SARs, unless the context
clearly indicates a different meaning.
(d) "Bank" shall mean The Patapsco Bank.
(e) "Board" shall mean the Board of Directors of the Company.
(f) "Change in Control" shall mean any one of the following events: (1) the
acquisition of ownership, holding or power to vote more than 25% of the Bank's
or the Company's voting stock, (2) the acquisition of the ability to control the
election of a majority of the Bank's or the Company's directors, (3) the
acquisition of a controlling influence over the management or policies of the
Bank or the Company by any person or by persons acting as a "group" (within the
meaning of Section 13(d) of the Securities Exchange Act of 1934), (4) the
acquisition of control of the Bank or the Company within the meaning of 12
C.F.R. Section 225.2(e) or its applicable equivalent (except in the case of (1),
(2), (3) and (4) hereof, ownership or control of the Bank by the Company itself
shall not constitute a "change in control"), or (5) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company or the Bank (the "Existing Board") (the
"Continuing Directors") cease for any reason to constitute at least a majority
thereof, provided that any individual whose election or nomination for election
as a member of the Existing Board was approved by a vote of at least a majority
of the Continuing Directors then in office shall be considered a Continuing
Director. For purposes of this subparagraph only, the term "person" refers to an
individual or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any other
form of entity not specifically listed herein.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(h) "Committee" shall mean the Stock Option Committee appointed by the
Board in accordance with Paragraph 5(a) hereof.
(i) "Common Stock" shall mean the common stock, par value $.01 per share,
of the Company.
(j) "Company" shall mean Patapsco Bancorp, Inc.
(k) "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
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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.
(l) "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.
(m) "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.
(n) "Effective Date" shall mean the date specified in Paragraph 15 hereof.
(o) "Employee" shall mean any person employed by the Company, the Bank or
an Affiliate.
(p) "Exercise Price" shall mean the price per Optioned Share at which an
Option or SAR may be exercised.
(q) "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.
(r) "Market Value" shall mean the fair market value of the Common Stock, as
determined under Paragraph 7(b) hereof.
(s) "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.
(t) "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.
(u) "Option" means an ISO and/or a Non-ISO.
(v) "Optioned Shares" shall mean Shares subject to an Option granted
pursuant to this Plan.
(w) "Participant" shall mean any person who receives an Award pursuant to
the Plan.
(x) "Plan" shall mean this Patapsco Bancorp, Inc. 2000 Stock Option and
Incentive Plan.
(y) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended.
(z) "Share" shall mean one share of Common Stock.
(aa) "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.
(bb) "Year of Service" shall mean a full twelve-month period, measured from
the date of an Award and each anniversary of that date, during which a
Participant has not terminated Continuous Service for any reason.
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 17
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
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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 12 hereof, the aggregate number of Shares deliverable pursuant to
Awards shall not exceed 20,000 shares. 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.
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(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 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 and Directors shall be eligible to receive
Awards. In selecting those Employees and Directors 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 and
Directors, the value of their services to the Company and its Affiliates, and
any other factors the Committee may deem relevant.
(b) Special Rules for ISOs. The aggregate Market Value, as of the date the
Option is granted, of the Shares with respect to which ISOs are exercisable for
the first time by an Employee during any calendar year (under all incentive
stock option plans, as defined in Section 422 of the Code, of the Company or any
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.
(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. Except as otherwise determined by the Committee 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, death or retirement at or after age 65. 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 owned for more than six
months, or a combination of cash and Common Stock owned for more than six
months, 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
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the Company's executive offices. Common Stock owned for more than six months
utilized in full or partial payment of the Exercise Price for Options shall be
valued at its Market Value at the date of exercise.
(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 five 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, a duly established trust (in the case of a non-ISO) for the
benefit of the participant's spouse, lineal ascendants or descendants,
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 date
of termination of employment due to Disability, but not later than the
date on which the Option would otherwise expire.
(4) Retirement on or after age 65, then to the extent that the Participant
would have been entitled to exercise the Option immediately prior to
his retirement, such Option may be exercised within five years from
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) Grants. Grants of Non-ISOs to Non-employee Directors shall have an
Exercise Price per Share equal to the Market Value of a Share on the date of the
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 shall be exercisable in accordance with the terms
of Paragraph 8(b) 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 five years from the date of his death
by the personal representatives of his estate, a duly established trust for the
benefit of the Director's spouse lineal ascendants or descendants, 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
such Options would otherwise expire. In the event of such Director's
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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 following 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 conditions 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, 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.
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(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. CHANGE IN CONTROL
Notwithstanding the provisions of any Award which provides for its exercise
or vesting in installments, upon a Change in Control, all Options and SARs shall
be immediately exercisable and fully vested. With respect to Options, at the
time of a Change in Control, the Participant shall, at the discretion of the
Committee, be entitled to receive cash in an amount equal to the excess of the
Market Value of the Common Stock subject to such Option over the Exercise Price
of such Shares, in exchange for the cancellation of such Options by the
Participant.
12. 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.
13. 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 non-ISOs 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.
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14. 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 or
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.
15. 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. No Awards may be made prior to approval of
the Plan by the stockholders of the Company.
16. 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.
17. 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 or
the regulations 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.
18. 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.
19. 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.
20. 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
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obligations. The amount of the withholding requirement shall be the applicable
statutory minimum federal, state or local income tax with respect to the award
on the date that the amount of tax is to be withheld.
21. 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 Bank, 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.
22. 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.
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REVOCABLE PROXY
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PATAPSCO BANCORP, INC.
Dundalk, Maryland
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ANNUAL MEETING OF STOCKHOLDERS
October 26, 2000
The undersigned hereby appoints Douglas H. Ludwig, William L. Waters
and Thomas P. O'Neill with full powers of substitution, to act as proxies for
the undersigned, to vote all shares of Common Stock of Patapsco Bancorp, Inc.
(the "Company") which the undersigned is entitled to vote at the Annual Meeting
of Stockholders, to be held at the office of The Patapsco Bank, located at 1301
Merritt Boulevard, Dundalk, Maryland, on Thursday October 26, 2000, at 4:00
p.m., and at any and all adjournments thereof, as follows:
VOTE
FOR WITHHELD
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1. The election as directors of all
nominees listed below (except as
marked to the contrary below). [ ] [ ]
Joseph J. Bouffard
Nicole N. Glaeser
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEE,
INSERT THAT NOMINEE'S NAME ON THE LINE PROVIDED BELOW.
________________________________
FOR AGAINST ABSTAIN
2. The approval of the Patapsco Bancorp, Inc.
2000 Stock Option and Incentive Plan [ ] [ ] [ ]
The Board of Directors recommends a vote "FOR" each of the nominees and the
proposition listed above.
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THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE LISTED NOMINEES AND THE OTHER PROPOSITION STATED. IF
ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY WILL BE VOTED
BY THOSE NAMED IN THIS PROXY IN ACCORDANCE WITH THE DETERMINATION OF A MAJORITY
OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF
NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING. THIS PROXY CONFERS
DISCRETIONARY AUTHORITY ON THE HOLDERS THEREOF TO VOTE WITH RESPECT TO THE
ELECTION OF ANY PERSON AS DIRECTOR WHERE THE NOMINEE IS UNABLE TO SERVE OR FOR
GOOD CAUSE WILL NOT SERVE AND MATTERS INCIDENT TO THE CONDUCT OF THE ANNUAL
MEETING.
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<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual
Meeting or at any adjournment thereof and after notification to the Secretary of
the Company at the Annual Meeting of the stockholder's decision to terminate
this proxy, then the power of said attorneys and proxies shall be deemed
terminated and of no further force and effect.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of notice of the annual meeting, a Proxy Statement dated
September 25, 2000 and an Annual Report to Stockholders.
Dated: ________________________, 2000
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PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
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SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on the envelope in which this
form of proxy was mailed. When signing as attorney, executor, administrator,
trustee or guardian, please give your full title. If shares are held jointly,
each holder should sign.
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PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ACCOMPANYING
POSTAGE-PREPAID ENVELOPE.
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