<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by the 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 Pursuant to Rule 14a-11(c) or Rule 14a-12
HOPFED BANCORP, INC
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(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:
______________________________________________________________________
2. Aggregate number of securities to which transaction applies:
______________________________________________________________________
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):
______________________________________________________________________
4. Proposed maximum aggregate value of transaction:
______________________________________________________________________
5. Total fee paid:
______________________________________________________________________
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:
-----------------------------------------------------
2. Form, Schedule or Registration Statement No.:
-----------------------------------------------------
3. Filing Party:
-----------------------------------------------------
4. Date Filed:
-----------------------------------------------------
<PAGE>
HOPFED BANCORP, INC.
2700 FORT CAMPBELL BOULEVARD
HOPKINSVILLE, KENTUCKY 42440
April 13, 1999
Dear Stockholder:
We invite you to attend the Annual Meeting of Stockholders (the "Annual
Meeting") of HopFed Bancorp, Inc. (the "Company") to be held at the main office
of Hopkinsville Federal Savings Bank, 2700 Fort Campbell Boulevard,
Hopkinsville, Kentucky on Wednesday, May 12, 1999 at 3:00 p.m., local time.
The attached Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the Annual Meeting.
As an integral part of the Annual Meeting, we will report on the operations
of the Company. Directors and officers of the Company will be present to respond
to any questions that our stockholders may have. Detailed information concerning
our activities and operating performance is contained in our Annual Report which
also is enclosed.
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. On
behalf of the Board of Directors, we urge you to please sign, date and return
the enclosed proxy card in the enclosed postage-prepaid envelope as soon as
possible even if you currently plan to attend the Annual Meeting. This will not
prevent you from voting in person, but will assure that your vote is counted if
you are unable to attend the Annual Meeting.
Sincerely,
/s/ Bruce Thomas
Bruce Thomas
President and Director
<PAGE>
HOPFED BANCORP, INC.
2700 FORT CAMPBELL BOULEVARD
Hopkinsville, Kentucky 42440
(502) 885-1171
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 1999
- --------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of HopFed Bancorp, Inc. (the "Company") will be held at the main
office of Hopkinsville Federal Savings Bank, 2700 Fort Campbell Boulevard,
Hopkinsville, Kentucky on Wednesday, May 12, 1999 at 3:00 p.m., local time.
The Annual Meeting is for the following purposes, which are more completely
described in the accompanying Proxy Statement:
1. The election of two directors of the Company.
2. The approval of the HopFed Bancorp, Inc. 1999 Stock Option Plan.
3. The approval of the HopFed Bancorp, Inc. Management Recognition Plan.
4. Such other matters as may properly come before the Annual Meeting or
any adjournment 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 or any adjournments thereof. Stockholders of record at the close of
business on April 1, 1999, are the stockholders entitled to vote at the Annual
Meeting and any adjournment thereof.
You are requested to fill in and sign the enclosed proxy which is solicited
by the Board of Directors and to mail it promptly in the enclosed 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/ Boyd M. Clark
BOYD M. CLARK
SECRETARY
Hopkinsville, Kentucky
April 13, 1999
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF A
FURTHER REQUEST FOR PROXIES IN ORDER TO INSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED
WITHIN THE UNITED STATES.
<PAGE>
PROXY STATEMENT
HOPFED BANCORP, INC.
2700 Fort Campbell Boulevard
HOPKINSVILLE, KENTUCKY 42440
(502) 885-1171
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
May 12, 1999
- --------------------------------------------------------------------------------
INTRODUCTION
- --------------------------------------------------------------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of HopFed Bancorp, Inc. (the "Company") for
the Annual Meeting of Stockholders (the "Annual Meeting") to be held at the main
office of Hopkinsville Federal Savings Bank (the "Bank"), 2700 Fort Campbell
Boulevard, Hopkinsville, Kentucky on Wednesday, May 12, 1999, at 3:00 p.m.,
local time. The accompanying Notice of Annual Meeting and this Proxy Statement,
together with the enclosed form of proxy, are first being mailed to stockholders
on or about April 13, 1999.
- --------------------------------------------------------------------------------
VOTING AND REVOCATION OF PROXIES
- --------------------------------------------------------------------------------
Proxies solicited by the Board of Directors of the Company will be voted in
accordance with the directions given therein. PROPERLY EXECUTED BUT UNMARKED
PROXIES WILL BE VOTED FOR PROPOSAL I TO ELECT TWO NOMINEES OF THE BOARD OF
DIRECTORS AS DIRECTORS OF THE COMPANY, FOR PROPOSAL II TO APPROVE THE HOPFED
BANCORP, INC. 1999 STOCK OPTION PLAN (THE "OPTION PLAN"), AND FOR PROPOSAL III
TO APPROVE THE HOPFED BANCORP, INC. MANAGEMENT RECOGNITION PLAN (THE "MRP"). If
any other matters are properly brought before the Annual Meeting as to which
proxies in the accompanying form confer discretionary authority, the persons
named in the accompanying proxies will vote the shares represented thereby on
such matters as determined by a majority of the Board of Directors. The proxies
solicited by the Board of Directors confer 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,
with respect to matters incident to the conduct of the Annual Meeting and with
respect to any other matter presented to the Annual Meeting if notice of such
matter has not been delivered to the Company in accordance with the Certificate
of Incorporation and Bylaws. Proxies marked as abstentions will not be counted
as votes cast. In addition, shares held in street name which have been
designated by brokers on proxy cards as not voted ("broker no votes") will not
be counted as votes cast. Proxies marked as abstentions or as broker no votes,
however, will be treated as shares present for purposes of determining whether a
quorum is present.
Stockholders who execute the form of proxy enclosed herewith retain the
right to revoke such proxies at any time prior to exercise. 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 at any time prior
to exercise by written notice to the Secretary of the Company or by the filing
of a properly executed, later-dated proxy. A proxy will not be voted if a
stockholder attends the Annual Meeting and votes in person. The presence of a
stockholder at the Annual Meeting alone will not revoke such stockholder's
proxy.
The Company has retained Corporate Communications, Inc. to aid in the
solicitation of proxies and to verify certain records related to the
solicitation of proxies at a fee of $3,500, plus reimbursement of normal
expenses.
<PAGE>
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
- --------------------------------------------------------------------------------
The securities which can be voted at the Annual Meeting consist of shares
of the Company's common stock, $.01 par value per share ("Common Stock").
Stockholders of record as of the close of business on April 1, 1999 (the "Record
Date") are entitled to one vote for each share of Common Stock then held on all
matters. As of the Record Date, 4,033,625 shares of the Common Stock were issued
and outstanding. The presence, in person or by proxy, of at least one-third 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.
The following table sets forth, as of the Record Date, certain information
as to the persons believed by management to be the beneficial owners of more
than 5% of the outstanding shares of Common Stock and as to the shares of Common
Stock beneficially owned by all executive officers and directors of the Company
as a group. Persons and groups owning in excess of 5% of Common Stock are
required to file certain reports regarding such ownership with the Company and
the Securities and Exchange Commission ("SEC") pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). This information is based
on the most recent reports filed by such persons or information provided to the
Company by such persons.
<TABLE>
<CAPTION>
Percent of Shares
Name and Address of Amount and Nature of of Common Stock
Beneficial Owners Beneficial Ownership(1) Outstanding
- ------------------- ----------------------- -----------------
<S> <C> <C>
All Executive Officers and 138,136 (2) 3.4%
Directors as a Group
(7 persons)
HopFed Bancorp, Inc. 322,690 (3) 8.0%
Employee Stock Ownership
Plan and Trust
2700 Fort Campbell Boulevard
Hopkinsville, Kentucky 42440
</TABLE>
______________________
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is
considered to "beneficially own" any shares of Common Stock (a) over which he
has or shares voting or investment power, or (b) of which he has the right to
acquire beneficial ownership at any time within 60 days of the Record Date. As
used herein, "voting power" is the power to vote or direct the vote of shares,
and "investment power" is the power to dispose or direct the disposition of
shares.
(2) Includes shares owned directly by directors and officers of the Company as
well as shares held by their spouses and minor children and trusts of which
certain directors are trustees, but does not include shares held or beneficially
owned by other relatives as to which they disclaim beneficial ownership.
(3) These shares are currently held in a suspense account for future allocation
and distribution among participants as the loan used to purchase the shares is
repaid. Trustees of the Employee Stock Ownership Plan and Trust ("ESOP") vote
all allocated shares in accordance with the instructions of participating
employees. Unallocated shares and allocated shares for which no instructions
have been received are voted by the trustees (directors Cochran, Ezell and Hall)
in the same ratio as participants direct the voting of allocated shares or, in
the absence of such direction, as directed by the Board of Directors. As of the
Record Date, 29,423 shares had been allocated.
- --------------------------------------------------------------------------------
PROPOSAL I -- ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
The Company's Certificate of Incorporation requires that directors be
divided into three classes, as nearly equal in number as possible, the members
of each class to serve for a term of three years and until their successors are
elected and qualified. As a result of the resignation of Chester K. Wood, the
Board of Directors consists of seven members. Mr. Wood has become an advisory
director of the Bank. The Board of Directors has nominated Boyd M. Clark and
John Noble Hall, Jr. to serve for three-year terms or until their successors are
elected and qualified. Delaware law provides that directors shall be elected by
a plurality of the votes of the shares present in person or represented by proxy
and entitled to vote on the election of directors.
2
<PAGE>
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. Stockholders are
not entitled to cumulate their votes for the election of directors. If any
nominee is unable to serve, the shares represented by all valid proxies will be
voted for the election of such substitute director as the Board of Directors may
recommend or the Board of Directors may reduce the number of directors to
eliminate the vacancy.
The following table sets forth for each nominee and for each director
continuing in office, including the named executive officer, such person's name,
age, the year such person first became a director and the number of shares and
percentage of Common Stock beneficially owned.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES NAMED BELOW AS
DIRECTORS OF THE COMPANY.
<TABLE>
<CAPTION>
PRESENT SHARES OF
YEAR FIRST TERM COMMON STOCK
ELECTED TO BENEFICIALLY
NAME AGE(1) DIRECTOR (2) EXPIRE OWNED (3)
---- ------ ------------ -------- ------------
<S> <C> <C> <C> <C>
BOARD NOMINEES FOR TERMS TO EXPIRE IN 2002
Boyd M. Clark 53 1990 1999 12,639
John Noble Hall, Jr. 77 1962 1999 23,385
DIRECTORS CONTINUING IN OFFICE
Bruce Thomas 61 1990 2000 14,084
Peggy R. Noel 60 1995 2000 19,318
WD Kelley 78 1972 2001 20,374
Clifton H. Cochran 77 1977 2001 25,000
Walton G. Ezell 64 1965 2001 23,336
</TABLE>
____________________
(1) At December 31, 1998.
(2) Includes term of office as director of the Bank prior to the conversion of
the Bank to a stock savings bank as a wholly owned subsidiary of the Company on
February 6, 1998 (the "Conversion"). Each director of the Company is also a
director of the Bank.
(3) At the Record Date. In accordance with Rule 13d-3 under the Exchange Act, a
person is considered to "beneficially own" any shares of Common Stock (a) over
which he has or shares voting or investment power, or (b) as to which he has the
right to acquire beneficial ownership at any time within 60 days of the Record
Date. As used herein, "voting power" is the power to vote or direct the vote of
shares, and "investment power" is the power to dispose or direct the disposition
of shares. Includes shares owned directly by the named individuals, shares held
by their spouses and minor children and ESOP shares allocated to the accounts of
Messrs. Thomas and Clark and Ms. Noel, but does not include shares held or
beneficially owned by other relatives as to which the named individuals disclaim
beneficial ownership. Does not include unallocated shares held by the ESOP trust
and shares with respect to which the ESOP trustees have voting power in such
capacity. Each nominee and director beneficially owns less than 1% of the shares
outstanding. See "Voting Securities and Principal Holders Thereof."
Listed below is certain information about the principal occupations of
the Board nominees and the other directors of the Company. Unless otherwise
noted, all such persons have held these positions for at least five years.
3
<PAGE>
BOYD M. CLARK. Mr. Clark has served as Senior Vice President --Loan
Administrator of the Bank since 1995. Prior to his current position, Mr. Clark
served as First Vice President of the Bank. He has been an employee of the Bank
since 1973. Mr. Clark also serves as Vice President and Secretary of the
Company.
JOHN NOBLE HALL, JR. Prior to his retirement in 1980, Mr. Hall was a real
estate agent.
BRUCE THOMAS. Mr. Thomas has served as President and Chief Executive
Officer of the Bank since 1992. He has been an employee of the Bank since 1962.
Mr. Thomas also serves as President and Chief Executive Officer of the Company.
PEGGY R. NOEL. Ms. Noel has served as Executive Vice President, Chief
Financial Officer and Chief Operations Officer of the Bank since 1990. She has
been an employee of the Bank since 1966. Ms. Noel also serves as Vice President,
Chief Financial Officer and Treasurer of the Company.
WD KELLEY. Prior to his retirement in 1980, Mr. Kelley served as
superintendent of Schools for Christian County, Kentucky. Mr. Kelley currently
serves as Chairman of the Board of Directors of the Bank, a position he has held
since 1995. He also serves as Chairman of the Board of Directors of the Company.
CLIFTON H. COCHRAN. Prior to his retirement in 1982, Mr. Cochran was in the
retail clothing business.
WALTON G. EZELL. Mr. Ezell is a self-employed farmer engaged in the
production of grain in Christian County, Kentucky.
ADVISORY DIRECTORS
DRURY R. EMBRY. Upon his resignation from the boards of directors of the
Company and the Bank, Mr. Embry was elected an advisory director of the Bank.
Prior to his retirement in 1996, Mr. Embry was Farm Director of WHOP, a radio
station in Hopkinsville, Kentucky.
CHESTER K. WOOD. Upon his resignation from the boards of directors of the
Company and the Bank, Mr. Wood was elected an advisory director of the Bank.
Prior to his retirement in 1968, Mr. Wood was a pharmacist.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held 14 meetings during the year
ended December 31, 1998. The members of the Company's Board of Directors are
also members of the Bank's Board of Directors, which held 14 meetings during the
year ended December 31, 1998. All incumbent directors attended 75% or more of
the total number of Board meetings held during the year ended December 31, 1998
and the total number of meetings held by committees on which such directors
served during such period.
The Board of Directors of the Company serves as a nominating committee for
selecting the management nominees for election as directors. While the Board of
Directors will consider nominees recommended by stockholders, it has not
actively solicited recommendations from stockholders for nominees, nor has it
established any procedures for this purpose. Subsequent to December 31, 1998,
the Board of Directors held one meeting in its capacity as a nominating
committee to nominate the individuals named herein for election as directors at
the Annual Meeting.
The Board of Directors' Audit and Finance Committee consists of directors
Ezell, Kelley and Cochran. The Audit and Finance Committee met four times during
the year ended December 31, 1998. The Audit and Finance Committee is authorized
to examine and approve the audit report prepared by the independent auditors of
the Bank, to review and recommend the independent auditors to be engaged by the
Bank, to review the internal audit function and internal accounting controls,
and to review and approve conflict of interest and audit policies.
4
<PAGE>
In the year ended December 31, 1998, there were no standing committees of
the Board of Directors of the Company other than the Audit and Finance
Committee. The Board of Directors of the Bank carries out many of its duties
through committees.
The Bank's Executive Committee consists of directors Kelley, Thomas and
Ezell and is authorized to take actions it deems necessary or appropriate
between regular meetings of the Board. The Executive Committee met seven times
during the year ended December 31, 1998.
The Bank's Personnel and Compensation Committee consists of directors Hall,
Cochran and Kelley. The Personnel and Compensation Committee evaluates the
compensation and benefits of the directors, officers and employees, recommends
changes, and monitors and evaluates employee performance. All compensation
decisions are made by the full Board of Directors. However, directors who are
also employees of the Bank abstain from voting and are not present during
discussions of the Board on matters relating to their employee compensation. The
Personnel and Compensation Committee met one time during the year ended December
31, 1998.
EXECUTIVE COMPENSATION
The following table sets forth the cash and noncash compensation for the
last fiscal year awarded to or earned by the Chief Executive Officer. No
executive officer of the Company earned salary and bonus in the year ended
December 31, 1998 exceeding $100,000 for services rendered in all capacities to
the Company and the Bank.
<TABLE>
<CAPTION>
Annual Compensation
-----------------------------------------------------------
Other Annual
Name Year Salary Bonus Compensation (1)
- ---- ---- ------ ----- ----------------
<S> <C> <C> <C> <C>
Bruce Thomas 1998 $100,000 $ -- $ --
President and Chief 1997 $ 93,500 $ -- $ --
Executive Officer 1996 $ 70,000 $ 3,500 $ --
</TABLE>
(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 officer in the year ended December 31, 1998
did not exceed 10% of each of the executive officer's salary and bonus.
DIRECTORS' COMPENSATION
The members of the Board of Directors of the Company currently do not
receive fees in their capacity as such. The Bank's non-employee directors and
advisory directors receive a fee of $550 per meeting attended, plus all non-
employee directors and advisory directors receive a retainer of $250 per month.
The Chairman of the Board receives a fee of $650 per meeting attended. Non-
employee directors of the Bank also receive a fee of $275 per committee meeting
attended. During the year ended December 31, 1998, the Bank's non-employee
directors' fees totaled $67,525.
CERTAIN BENEFIT PLANS AND AGREEMENTS
PENSION PLAN. The Bank maintains a non-contributory, defined benefit
pension plan (the "Pension Plan") for the benefit of employees who are 21 years
of age and have completed one year of service with the Bank. The benefits are
based on years of service and the employee's average final compensation, which
is computed using the five consecutive years prior to retirement that yield the
highest average. The normal retirement benefit is equal to 1.75% of average
final compensation, multiplied by service not in excess of 35 years. The normal
retirement date is age 65 and completion of five years of participation in the
Pension Plan or age 60 with 30 years of vesting service, if earlier. The Pension
Plan also provides for early retirement benefits beginning at age 55 and
completion of 10 years of service, and for death benefits.
5
<PAGE>
The following table illustrates the maximum estimated annual benefits
payable upon retirement pursuant to the Pension Plan based upon the Pension Plan
formula for specified average final compensation and specified years of service.
<TABLE>
<CAPTION>
Average Final Years of Service
---------------------------------------------------------
Compensation 15 20 25 30 35
- ------------ ---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 20,000.................. $ 5,250 $ 7,000 $ 8,750 $10,500 $12,250
40,000.................. 10,500 14,000 17,500 21,000 24,500
60,000.................. 15,750 21,000 26,250 31,500 36,750
80,000.................. 21,000 28,000 35,000 42,000 49,000
100,000.................. 26,250 35,000 43,750 52,500 61,250
</TABLE>
Benefits are hypothetical amounts only. Currently, the maximum annual
benefit payable under the Pension Plan is $98,000. Also, compensation in excess
of $160,000 is not covered under the Pension Plan. "Average Final Compensation"
is based upon compensation that would appear under the "Salary" column of the
Summary Compensation Table. As of December 31, 1998, Mr. Thomas had 36.3 years
of credited service under the Pension Plan. Benefits set forth in the preceding
table are computed as a straight-life annuity and are unaffected by payments
expected to be made to employees by Social Security.
Pursuant to the Pension Plan, employees who terminate employment or who
have qualified for normal retirement may elect to receive a lump sum payment of
vested Pension Plan benefits. Such a payment to a qualified employee may be for
either 100% or 50% of the vested amount, at the employee's discretion. Prior to
December 31, 1998, Mr. Thomas satisfied the conditions for normal retirement and
elected to receive a lump sum distribution of 50% of his vested benefit.
EMPLOYMENT AGREEMENTS. The Company and the Bank have entered into separate
employment agreements (the "Employment Agreements") with the following officers
of the Company and the Bank: Bruce Thomas, President and Chief Executive Officer
of the Company and the Bank; Peggy R. Noel, Vice President, Chief Financial
Officer and Treasurer of the Company and Executive Vice President, Chief
Financial Officer and Chief Operations Officer of the Bank; and Boyd M. Clark,
Vice President and Secretary of the Company and Senior Vice President --Loan
Administration of the Bank (collectively, the "Employees"). The Board of
Directors of each of the Company and the Bank believe that the Employment
Agreements assure fair treatment of the Employees in their careers with the
Company and the Bank by assuring them of some financial security.
The Employment Agreements became effective upon consummation of the
Conversion, each for a term of one year and with an annual base salary equal to
the Employee's current base salary. As of the first anniversary date of the
commencement of each of the Employment Agreements, the term was extended for two
years. On each anniversary date of the commencement of the Employment
Agreements, the term of each Employee's employment may be extended for an
additional one-year period beyond the then effective expiration date, upon a
determination by the Board of Directors that the performance of the Employee has
met the required performance standards and that such Employment Agreement should
be extended. The Employment Agreements provide the Employees with a salary
review by the Board of Directors not less often than annually, as well as with
inclusion in any discretionary bonus plans, retirement and medical plans,
customary fringe benefits, vacation and sick leave. Each of the Employment
Agreements shall terminate upon the Employee's death, may terminate upon the
Employee's 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 any of the Employees without just cause, the Employee will be
entitled to a continuation of his or her salary and benefits from the date of
termination through the remaining term of the Employment Agreement and, at the
Employee's election, either continued participation in benefit plans which the
Employee would have been eligible to participate in through the Employment
Agreements' expiration date or the cash equivalent thereof. If an Employment
Agreement is terminated due to the Employee's "disability" (as defined in the
Employment Agreements), the Employee will be entitled to a continuation of his
or her salary and benefits through the date of such termination, including any
period prior to the establishment of the Employee's disability. In the event of
the Employee's death during the term of the Employment Agreements, his or her
estate will be entitled to receive his or her salary through the last day of the
6
<PAGE>
calendar month in which the Employee's death occurred. Each of the Employees is
able to voluntarily terminate his or her Employment Agreements by providing 60
days prior written notice to the Boards of Directors of the Bank and the
Company, in which case the Employee is entitled to receive only his or her
compensation, vested rights and benefits accrued up to the date of termination.
In the event of the Employee's involuntary termination of employment other
than for "just cause" within 12 months after a change in control of the Company
or the Bank which has not been approved in advance by a two-thirds vote of the
full Board of Directors of each of the Company and the Bank, the Employee will
be paid within 10 days of such termination an amount equal to the difference
between (i) 2.99 times his or her "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
the Employee receives on account of the change in control. The term "change in
control" is defined in the Employment Agreements to mean (i) a change in the
ownership, holding or power to vote more than 25% of the Bank's or Company's
voting stock, (ii) a change in the ownership or possession of the ability to
control the election of a majority of the Bank's or Company's directors, or
(iii) a change in the ownership or possession of the ability to exercise 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 Exchange Act. The aggregate payment that would be made to Mr.
Thomas assuming his termination of employment under the foregoing circumstances
at December 31, 1998 would have been approximately $240,000. 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 the Employee
prevails over the Company and the Bank, or obtains a written settlement, in a
legal dispute as to the Employment Agreement, the Employee will be reimbursed
for his or her legal and other expenses.
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. No loans to directors and officers have
terms more favorable than might be otherwise offered to customers.
REPORT OF THE COMPENSATION COMMITTEE
As members of the Personnel and Compensation Committee (the "Compensation
Committee") of the Bank, it is our duty to review compensation policies
applicable to executive officers; to consider the relationship of corporate
performance to that compensation; to recommend salary and bonus levels for
executive officers for consideration by the Board of Directors of the Bank; and
to administer various incentive plans of the Company and the Bank.
Overview. Under the compensation policies of the Bank, which are endorsed
by the Compensation Committee, compensation is paid based both on the executive
officer's performance and the performance of the entire Company. In assessing
the performance of the Company and the Bank for purposes of compensation
decisions, the Compensation Committee considers a number of factors, including
profits of the Company and the Bank during the past year relative to their
profit plans, changes in the value of the Company's stock, reports of federal
regulatory examinations of the Company and the Bank, growth, business plans for
future periods, and regulatory capital levels. The Compensation Committee
assesses individual executive performance based upon its determination of the
officer's contributions to the performance of the Company and the Bank and the
accomplishment of the Company's and the Bank's strategic goals, such as loan
growth, deposit growth, expense control and net income. In assessing performance
for 1998 and previous years, the members of the Committee did not make use of a
mechanical weighting formula or use specific performance targets, but instead
weighed the described factors as they deemed appropriate in the total
circumstances.
7
<PAGE>
Base Salary. The 1998 salary levels of the Bank's senior officers were
established in 1997 consistent with this compensation policy. In its 1997 review
of base compensation, the Committee determined that the performance of Mr.
Thomas in managing the Company and the Bank was satisfactory, based upon the
1997 financial performance of the Bank, including the growth in assets, income,
and capitalization during 1997; the financial performance trends for 1997 and
the preceding four years, which included growth in assets, net income, and total
equity in each year; the results of confidential regulatory examinations; his
continued involvement in community affairs in the communities served by the
Bank; the Company's planned levels of financial performance for 1998; his
involvement in the Conversion which was successfully completed in early 1998;
and a general level of satisfaction with the management of the Company and the
Bank. Based upon the results of this review, the salary of Mr. Thomas was
established at $100,000 per year for 1998, which represented an increase of
6.95% over his 1997 base salary.
No member of the Compensation Committee is a former or current officer of
the Company or the Bank.
March 31, 1999 John Noble Hall, Jr.
Clifton H. Cochran
WD Kelley
8
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STOCK PERFORMANCE COMPARISONS
The following graph, which was prepared by SNL Securities LC,
Charlottesville, Virginia, shows the cumulative total return on the Common Stock
of the Company since the Conversion, compared with the NASDAQ Total Return
Index, comprised of all U.S. Companies quoted on NASDAQ, and the SNL less than
$250 Million Thrift Index, comprised of publicly traded thrifts and thrift
holding companies with total assets of less than $250 million. Cumulative total
return on the Common Stock or the index equals the total increase in value since
February 9, 1998 assuming reinvestment of all dividends paid into the Common
Stock or the index, respectively. The graph was prepared assuming that $100 was
invested on February 9, 1998 in the Common Stock, and the securities included in
the indexes.
CUMULATIVE TOTAL STOCKHOLDER RETURN
COMPARED WITH PERFORMANCE OF SELECTED INDEXES
FEBRUARY 9, 1998 THROUGH DECEMBER 31, 1998
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
PERIOD ENDING
========================================================================================
INDEX 2/9/98 4/30/98 6/30/98 8/31/98 10/31/98 12/31/98
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
HopFed Bancorp, Inc. 100.00 127.88 112.26 98.14 104.57 103.15
NASDAQ - Total US 100.00 110.48 111.78 88.91 105.33 130.51
SNL less than $250M Thrift Index 100.00 107.24 101.06 83.40 82.33 81.96
</TABLE>
9
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the SEC. Officers, directors and greater than 10% stockholders
are required to furnish the Company with copies of all such reports. Based
solely on its review of copies of such reports received by it, or written
representations from certain reporting persons that no annual report of change
in beneficial ownership is required, the Company believes that during the year
ended December 31, 1998, all such filing requirements were complied with, except
that two reports of changes in beneficial ownership involving a total of four
transactions were not filed by Bruce Thomas, but such reports were subsequently
filed.
- --------------------------------------------------------------------------------
PROPOSAL II -- APPROVAL OF THE HOPFED BANCORP, INC. 1999 STOCK OPTION PLAN
- --------------------------------------------------------------------------------
General
The Board of Directors of the Company is seeking stockholder approval of
the HopFed Bancorp, Inc. 1999 Stock Option Plan (the "Option Plan"). A copy of
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 selected directors, advisory directors and employees of the Company
and its affiliates, including the Bank, with the opportunity to acquire shares
of Common Stock. By encouraging such stock ownership, the Company seeks to
attract, retain, and motivate the best available personnel for positions of
substantial responsibility and to provide additional incentive to directors and
employees of the Company and its affiliates to promote the success of the
business of the Company.
DESCRIPTION OF THE OPTION PLAN
Effective Date. The Option Plan became effective February 24, 1999 (the
"Effective Date"), although the effectiveness of the Option Plan and any awards
thereunder are contingent on the Option Plan's approval by the Company's
stockholders at the Annual Meeting.
Administration. The Option Plan is administered by a committee (the "Option
Committee"), appointed by the Board of Directors, and consisting of at least two
directors of the Company who are "non-employee directors" within the meaning of
the federal securities laws. The Option Committee has discretionary authority
(i) to select participants and grant awards, (ii) to determine the form and
content of any awards granted under the Option Plan, (iii) to interpret the
Option Plan, (iv) to prescribe, amend and rescind rules and regulations relating
to the Option Plan, and (v) to make other decisions necessary or advisable for
the administration of the Option Plan. All decisions, determinations and
interpretations of the Option Committee are final and conclusive on all persons
affected thereby. Members of the Option 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. The Option Committee initially consists of Directors Hall, Cochran, and
Kelley.
Eligible Persons; Types of Awards. Under the Option Plan, the Option
Committee has discretionary authority to grant stock options ("Options") and
stock appreciation rights ("SARs") (collectively, "Awards") to such employees,
directors (including members of the Committee) and advisory directors as the
Option Committee shall designate. In addition, on the Effective Date, certain
employees and non-employee directors and advisory directors of the Company and
the Bank received one-time grants of Options to purchase shares of Common Stock
(see "--Proposed Stock Option Grants" and "New Plan Benefits" below). As of the
Record Date, the Company and its
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<PAGE>
subsidiaries had seven employees, four non-employee directors and two non-
employee advisory directors who were eligible to participate in the Option Plan.
Shares Available for Grants. The Option Plan reserves 403,362 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 Option Committee will adjust the number and kind of shares reserved
for issuance under the Option Plan, the number of 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, 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 of Common Stock subject to the
Option will 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 exercised, the
shares of Common Stock subject to such Awards will, unless the Option Plan shall
have been terminated, be available for the grant of additional Awards under the
Option Plan.
Options; Exercise Price. 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, such
exercise price of 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 a participant 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. The exercise price of shares subject to any outstanding Option
will be proportionately adjusted upon the payment of a special large and
nonrecurring dividend that has the effect of a return of capital to the
stockholders.
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. For SARs granted in tandem with Options,
the participant'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 participant to receive, as the
Option 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 participant. Each Option granted
on the Effective Date will be vested and exercisable with respect to 50% of the
underlying shares on the date the Option Plan receives stockholder approval, and
will become vested and exercisable with respect to an additional 50% of those
shares on January 1, 2000; provided, however, that grants to non-employee
directors will become immediately exercisable on the date the Option Plan
receives stockholder approval, and further provided that no vesting will occur
on a particular date in the event of the termination or interruption of the
participant's continuous service as a director, advisory director or employee of
the Company or an affiliate prior thereto. Notwithstanding the foregoing, an
Option will become fully exercisable upon termination of the participant's
continuous service due to (i) the participant's disability (as defined in the
Option Plan), (ii) death, (iii) retirement at or after age 62, or (iv) upon a
"Change in Control" (as defined in the Option Plan) or, if earlier, the
execution of an agreement to effect a change in control. Although the latter
provision is included in the Option Plan
11
<PAGE>
primarily for the protection of an employee-participant in the event of a Change
in Control of the Company, it may be regarded as having a takeover defensive
effect, which may reduce the Company's vulnerability to hostile takeover
attempts and certain other transactions which have not been negotiated with and
approved by the Board of Directors.
Method for Exercise. A participant 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, 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 will be valued at its market value at
the date of exercise, and may consist of shares subject to the Option being
exercised.
Effect of Termination of Service. In the absence of Option Committee
action to the contrary, an otherwise unexpired Option will cease to be
exercisable upon (i) a participant's termination of employment for "just cause"
(as defined in the Option Plan), (ii) the date that is one year after a
participant terminates service for a reason other than just cause or death, or
(iii) the date that is two years after a participant's death. Options granted
to non-employee directors and advisory directors expire one year after a
director terminates continuous service for any reason other than death (but in
no event later than the date on which such Option would otherwise expire). In
the event of a director's or advisory director's death during the term of his or
her directorship, the Option will become immediately exercisable and will expire
two years after his or her death. In the event of such director's or advisory
director's disability during his or her directorship, the Option will become
immediately exercisable, and such Option may be exercised within two years of
the termination of directorship or advisory directorship due to disability, but
not later than the date that the Option would otherwise expire.
Conditions on Issuance of Shares. The Option 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, to establish repurchase rights, or to impose both of these
restrictions. In addition, the Option 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.
Nontransferability. Participants may transfer their Awards other than
ISOs 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. In
addition, Common Stock that is purchased upon the exercise of an Option or SAR
may not be sold within the six-month period following the grant date of that
Option or SAR, except in the event of the participant's death or disability, or
such other event as the Board of Directors may specifically deem appropriate.
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 or other securities
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 participant owns more than 10% of the Common Stock on
the date of grant. The expiration of the Option Plan, or its termination by the
Option Committee, will not affect any Award then outstanding.
Amendment and Termination of the Option Plan. The Board of Directors
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
12
<PAGE>
Option Plan. No amendment, suspension, or termination of the Option Plan will,
without the consent of any affected participant, 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 participants 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, but disclosure may
be required in financial statement footnotes regarding pro forma effects on
earnings and earnings per share of recognizing as a compensation expense an
estimate of the fair value of such stock-based awards.
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).
Proposed Stock Option Grants. For information relating to proposed awards
under the Option Plan, see "New Plan Benefits" below.
FEDERAL INCOME TAX CONSEQUENCES
ISOs. A participant recognizes no taxable income upon the grant of
ISOs. If the participant 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 participant as
an item of tax preference in the year of exercise for purposes of the
alternative minimum tax. If a participant 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 participant
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 participant
for alternative minimum tax. However, if a participant 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. A participant 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 participant is subject to certain restrictions imposed by the federal
securities laws, upon the lapse of those restrictions unless the participant
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 participant 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 participant in
connection with the exercise of a Non-ISO.
SARs. The grant of an SAR has no tax effect on the participant or the
Company. Upon exercise of the SARs, however, any cash or Common Stock received
by the participant in connection with the surrender of his or her SAR will be
treated as compensation income to the participant, and the Company will be
entitled to a business expense deduction for the amounts treated as compensation
income.
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<PAGE>
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 Internal Revenue Code
for favorable tax treatment of ISOs and to satisfy the requirements of the
National Association of Securities Dealers for Nasdaq Stock Market securities.
Stockholder approval of the Option Plan requires the affirmative vote of
the holders of a majority of the votes cast at the Annual Meeting. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE OPTION PLAN.
- --------------------------------------------------------------------------------
PROPOSAL III -- APPROVAL OF THE HOPFED BANCORP, INC. MANAGEMENT RECOGNITION PLAN
- --------------------------------------------------------------------------------
GENERAL
The Board of Directors of Directors of the Company is seeking stockholder
approval of the HopFed Bancorp, Inc. Management Recognition Plan (the "MRP"). A
copy of the MRP is attached hereto as Exhibit B, and should be consulted for
additional information. All statements made herein regarding the MRP, which are
only intended to summarize the MRP, are qualified in their entirety by reference
to the MRP.
PURPOSE OF THE MRP
The purpose of the MRP is to reward and retain personnel of experience and
ability in key positions of responsibility by providing selected directors,
advisory directors and employees of the Company, the Bank and their affiliates
with a proprietary interest in the Company, with compensation for their past
contributions to the Company and the Bank, and with an incentive to make such
contributions in the future.
DESCRIPTION OF THE MRP
Effective Date. The MRP became effective February 24, 1999 (the "Effective
Date"), although the effectiveness of the MRP and any awards thereunder are
contingent on the MRP's approval by the Company's stockholders at the Annual
Meeting.
Administration. The MRP is administered by a committee (the "MRP
Committee"), appointed by the Board of Directors and consisting of not less than
two members of the Board of Directors who are "non-employee directors" within
the meaning of federal securities laws. Except as limited by the express
provisions of the MRP or by resolutions adopted by the Board of Directors, the
MRP Committee will have sole and complete authority and discretion (i) to grant
MRP awards to such employees as the MRP Committee may select, (ii) to determine
the form and content of MRP awards to be issued under the MRP, (iii) to
interpret the MRP, (iv) to prescribe, amend, and rescind rules and regulations
relating to the MRP, and (v) to make other determinations necessary or advisable
for the administration of the MRP. The MRP provides that members of the MRP
Committee will be indemnified and held harmless for actions taken under the MRP
in good faith and which he or she reasonably believed to be in the best
interests of the Company and its affiliates. The MRP Committee initially
consists of Directors Hall, Cochran, and Kelly.
Grantor Trust; Purchase Limitations. The assets of the MRP will be held in
a grantor trust (the "Grantor Trust"), as to which Directors Hall, Cochran, and
Kelley act as trustees (the "Trustees") and thereby have the responsibility to
invest all funds contributed to the Grantor Trust by the Company or the Bank.
With funds contributed by the Company, the Grantor Trust may purchase, in the
aggregate, up to 161,345 shares of the Common Stock. Such shares may be newly
issued shares, shares held in treasury, or shares held in the Grantor Trust, and
are the maximum that the Grantor Trust may purchase. As of the Record Date, the
Grantor Trust held no shares. If the MRP is approved at the Annual Meeting,
it is currently expected that the Grantor Trust will purchase
14
<PAGE>
newly issued shares of Common Stock with respect to MRP awards that will vest as
of the Effective Date. In the event an MRP award is forfeited for any reason or
additional shares are subsequently purchased by the Grantor Trust, the MRP
Committee may make MRP awards with respect to such shares.
Types of Awards; Eligible Persons. The MRP Committee has the discretion to
select employees of the Company and/or of the Bank who will receive
discretionary MRP awards. In addition, certain employees and all non-employee
directors and advisory directors received awards on the Effective Date. See
"New Plan Benefits" below.
Vesting. The vesting of an MRP award will be subject to such terms and
conditions as are established in a written notice from the MRP Committee to the
award participant. With respect to MRP awards that occur on the Effective Date,
each award will be vested with respect to 33-1/3% of the awarded shares on the
date of the award and shall become vested with respect to an additional 33-1/3%
of the awarded shares on January 1, 2000 and January 1, 2001, respectively;
provided, however, that no vesting will occur prior to stockholder approval of
the MRP at the Annual Meeting, and provided, further, that no vesting will occur
on a particular date in the event of the termination or interruption of the MRP
award participant's continuous service as a director, advisory director, or
employee prior thereto. Notwithstanding the foregoing, (i) all shares subject to
an award held by a participant whose service with the Company or an affiliate
terminates due to the participant's death, disability (as defined in the MRP) or
retirement at or after age 62, will be deemed earned and 100% vested as of the
participant's last day of service with the Company or an affiliate and (ii) all
shares subject to an award held by a participant will be deemed 100% vested as
of the earlier date of a change in control, as defined in the MRP, or the
execution of an agreement to effect a change in control.
Voting; Distributions of Shares. The Grantor Trust requires that its
Trustees vote all shares of Common Stock held by the Grantor Trust (whether or
not subject to an MRP award) in the same proportion as the trustees of the
Company's Employee Stock Ownership Plan trust vote Common Stock held therein
(and in the absence of any such voting, in the manner directed by the Board of
Directors). The Trustees will distribute shares, together with any shares
representing stock dividends, in the form of Common Stock as participants earn a
vested interest in their awards. One share of Common Stock will be given for
each share earned. However, shares may not be distributed from the Grantor
Trust prior to the date which is five years from the date of the Conversion to
the extent the participant would after receipt of such shares own in excess of
10% of the issued and outstanding shares of Common Stock, unless such action is
approved in advance by a majority vote of the non-employee directors of the
Company's Board of Directors. Any shares remaining undistributed solely by
reason of the operation of this rule will be distributed to the participant on
the date which is five years from the date of the Conversion.
Dividends. Whenever shares of Common Stock are paid to an award
participant or beneficiary thereof, such participant or beneficiary will also be
entitled to receive, with respect to each share paid, an amount equal to any
cash dividends (including special large and nonrecurring dividends, including
one that has the effect of a return of capital to the Company's stockholders)
and a number of shares of Common Stock equal to any stock dividends, declared
and paid with respect to a share of Common Stock between the date the relevant
MRP award was initially granted to such participant and the date the shares are
being distributed. There will also be distributed an appropriate amount of net
earnings, if any, of the Grantor Trust with respect to any cash dividends so
paid out.
Deferral of Awards. The MRP provides that at any time prior to December
31st of any year prior to the date on which a participant becomes vested in any
shares subject to his or her award, a participant who is a member of a select
group of management or highly compensated employees (within the meaning of the
Employees' Retirement Income Security Act of 1973) may irrevocably elect to
defer the receipt of all or a percentage of the shares that would otherwise be
transferred to the participant upon the vesting of such award. MRP participants
will receive earnings on dividends paid on deferred shares at a rate equal to
the dividend-adjusted total return on the Common Stock, as determined from time
to time by the MRP Committee in its sole discretion. The Trustees will hold
each participant's deferred shares and deferred earnings in the Grantor Trust
until distribution is required pursuant to the participant's election.
Transferability. Participants may transfer their MRP awards to family
members or trusts under specified circumstances. MRP awards and rights to
shares held in the Grantor Trust are not otherwise transferable by
15
<PAGE>
participants in the MRP, and during the lifetime of a participant, shares held
in the Grantor Trust may only be earned by and paid to the participant.
Taxation. Participants will recognize compensation income when their
interest vests, or at an earlier date pursuant to a participant's election to
accelerate recognition pursuant to Section 83(b) of the Internal Revenue Code.
Whenever they recognize compensation income, the Company will be entitled to a
corresponding deduction.
Financial Effects of Awards. Neither the Company nor the Bank will receive
any monetary consideration for the granting of awards under the MRP. Under
applicable accounting standards, if the MRP is approved by the Company's
stockholders, the Company must recognize compensation expense based on the fair
market value of the Common Stock on the date the MRP awards were granted ($20.75
per share), with such amount being amortized over the expected vesting period
for the award.
Adjustments for Capital Changes. 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 MRP Committee will adjust both the number and kind of shares of
stock which may be purchased under the MRP and the number and kind of shares of
stock subject to outstanding MRP awards. 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, all outstanding MRP awards will be
adjusted for any change or exchange of shares of Common Stock for a different
number or kind of shares or other securities which results from the transaction.
Amendment and Termination of the MRP. The Company's Board of Directors
may, by resolution, amend or terminate the MRP at any time; provided, however,
that no amendment or termination of the MRP will, without the written consent of
any affected holder of an MRP award, impair any rights or obligations under any
MRP award previously granted. The power to amend or terminate includes the
power to direct the MRP Trustees to return to the Company all or any part of the
assets of the MRP Trust, including shares of Common Stock held in the plan share
reserve of the MRP. However, the termination of the MRP Trust will not affect a
participant's right to earn outstanding MRP awards and to receive Common Stock
relating thereto, including earnings thereon, in accordance with the terms of
the MRP and the particular MRP award made to the participant.
Duration of the MRP. The MRP and MRP Trust will remain in effect until the
earlier of (i) termination by the Company's Board of Directors, or (ii) the
distribution of all assets of the MRP Trust. Termination of the MRP will not
affect any MRP awards previously granted, and such MRP awards will remain valid
and in effect until they have been earned and distributed from the MRP Trust, or
by their terms expire or are forfeited.
Proposed MRP Awards. For information relating to proposed MRP awards, see
"New Plan Benefits" below.
RECOMMENDATION AND VOTE REQUIRED
The Board of Directors has determined that the MRP is desirable, cost
effective, and produces incentives that will benefit the Company and its
stockholders. The Board of Directors is seeking stockholder approval of the MRP
to satisfy the listing requirements of the National Association of Securities
Dealers for Nasdaq Stock Market securities.
Approval of the MRP requires the affirmative vote of the holders of a
majority of the votes cast at the Annual Meeting. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" APPROVAL OF THE MRP.
16
<PAGE>
- -------------------------------------------------------------------------------
NEW PLAN BENEFITS
- -------------------------------------------------------------------------------
The following table sets forth certain information regarding benefits
expected to be received under the Option Plan and the MRP, subject to
stockholder approval of the plans at the Annual Meeting. For additional
information, including information regarding vesting of awards, see "Proposal
II -- Approval of the HopFed Bancorp, Inc. 1999 Stock Option Plan" and "Proposal
III -- Approval of the HopFed Bancorp, Inc. Management Recognition Plan."
<TABLE>
<CAPTION>
Option Plan MRP
-------------------------- --------------------------
Dollar Number Dollar Number
Name and Position Value ($)(1) of Units Value ($)(2) of Units
- ----------------- -------------------------- --------------------------
<S> <C> <C> <C> <C>
Bruce Thomas, President
and Chief Executive Officer of
the Company and the Bank $ 20,168 80,672 $ 677,649 32,269
Peggy R. Noel, Vice President,
Chief Financial Officer and Treasurer $ 18,151 72,605 $ 609,882 29,042
of the Company and Executive Vice
President, Chief Financial Officer and
Chief Operations Officer of the Bank
Boyd M. Clark, Vice President
and Secretary of the Company and $ 12,101 48,403 $ 406,581 19,361
Senior Vice President -
Loan Administration of the Bank
WD Kelley, Director $ 5,042 20,168 $ 169,407 8,067
Clifton H. Cochran, Director $ 5,042 20,168 $ 169,407 8,067
Walton G. Ezell, Director $ 5,042 20,168 $ 169,407 8,067
John Noble Hall, Jr., Director $ 5,042 20,168 $ 169,407 8,067
Drury R. Embry, Advisory Director $ 5,042 20,168 $ 169,407 8,067
Chester K. Wood, Advisory Director $ 5,042 20,168 $ 169,407 8,067
All current executive officers as a group (3 persons) $ 50,420 201,680 $1,694,112 80,672
All current directors who are not executive officers
as a group (4 persons) $ 20,168 80,672 $ 677,628 32,268
All employees, including all current officers who
are not executive officers, as a group (7 persons) $ 70,588 282,352 $2,371,740 112,940
___________________
</TABLE>
(1) Based on the fair market value of the Common Stock on the Record Date
($21.00 per share), less the exercise price. All Options were granted at
an exercise price equal to $20.75 per share, which was the fair market
value of the underlying shares of Common Stock on the date of the grant.
All options (i) will be contingent on, and not exercisable until, the
Option Plan receives stockholder approval at the Annual Meeting, and (ii)
will automatically expire 10 years after the date of their grant.
(2) Based on the closing price of the underlying Common Stock of $21.00 per
share as quoted on the Nasdaq Stock Market on the Record Date. All MRP
awards are contingent on the MRP's approval by the Company's stockholders
at the Annual Meeting.
17
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
York, Neel & Co. - Hopkinsville, LLP served as the Company's and the Bank's
independent auditors for the year ended December 31, 1998. The Board of
Directors has appointed York, Neel & Co. - Hopkinsville, LLP to serve as the
Company's independent auditors for the fiscal year ending December 31, 1999. A
representative of York, Neel & Co. - Hopkinsville, LLP is expected to be present
at the Annual Meeting to respond to appropriate questions and will have the
opportunity to make a statement if he so desires.
- --------------------------------------------------------------------------------
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. Properly executed
proxies in the accompanying form that have not been revoked confer discretionary
authority on the persons named therein to vote at the direction of a majority of
the Board of Directors on any other matters presented at the Annual Meeting.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The cost of solicitation of 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 material
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company and the Bank may
solicit proxies personally, by telegraph or telephone without additional
compensation.
The Annual Report to Stockholders for the year ended December 31, 1998,
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 part of
the proxy solicitation material nor as having been incorporated herein by
reference.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
In order to be eligible for inclusion in the proxy statement and proxy
relating to the 2000 annual meeting of stockholders of the Company, which will
be held on or about May 10, 2000, any stockholder proposal to take action at
such meeting must be received by the Secretary of the Company at 2700 Fort
Campbell Boulevard, Hopkinsville, Kentucky no later than December 16, 1999.
With respect to the 2000 annual meeting of stockholders of the Company, if
notice of a stockholder proposal, which the stockholder has not previously
sought to include in the Company's proxy statement, is not received by April 10,
2000, management proxies will be allowed to use their discretionary authority to
vote on such proposal without any discussion of the matter in the proxy
statement. Nothing in this paragraph shall be deemed to require the Company to
include in its proxy statement and proxy relating to the 2000 annual meeting, or
to consider and vote upon at any such meeting, any stockholder proposal which
does not meet all of the requirements established by the SEC or the Company's
Certificate of Incorporation or Bylaws in effect at the time such proposal is
received.
18
<PAGE>
- --------------------------------------------------------------------------------
ANNUAL REPORT ON FORM 10-K
- --------------------------------------------------------------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1998, AS FILED WITH THE SEC, WILL BE FURNISHED WITHOUT CHARGE TO
STOCKHOLDERS AS OF THE RECORD DATE UPON WRITTEN REQUEST TO THE SECRETARY, HOPFED
BANCORP, INC., 2700 FORT CAMPBELL BOULEVARD, HOPKINSVILLE, KENTUCKY.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ BOYD M CLARK
BOYD M. CLARK
SECRETARY
Hopkinsville, Kentucky
April 13, 1999
19
<PAGE>
EXHIBIT A
HOPFED BANCORP, INC.
1999 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
The purpose of this Plan is to advance the interests of the Company through
providing select key Employees, Directors and Advisory 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 incentives 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) "Advisory Director" shall mean any former Director who has been
elected an Advisory Director of the Company or the Bank.
(b) "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.
(c) "Agreement" shall mean a written agreement entered into in accordance
with Paragraph 5(c).
(d) "Bank" shall mean Hopkinsville Federal Savings 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. Part 574 or its applicable equivalent, or (5) during any period of two
consecutive years, individuals (the "Continuing Directors") who at the beginning
of such period constitute the Board of Directors of the Company or the Bank (the
"Existing Board") cease for any reason to constitute at least two-thirds
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 two-thirds
of the Continuing Directors then in office shall be considered a Continuing
Director. In the case of subsections (1), (2), (3) and (4) above, ownership or
control of the Bank by the Company itself shall not constitute a "Change in
Control." For purposes of defining Change in Control, the term "person" refers
to an individual or a corporation, partnership, trust, association, joint
venture, pool, syndicate, sole proprietorship, unincorporated organization or
any other form of entity not specifically listed herein. The decision of the
Committee as to whether a Change in Control has occurred shall be conclusive and
binding.
(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; provided that the Board may act
in lieu of the Committee with respect to any matter as to which the Committee
may act.
(i) "Common Stock" shall mean the common stock of the Company, par value
$.01 per share.
A-1
<PAGE>
(j) "Company" shall mean HopFed Bancorp, Inc.
(k) "Continuous Service" shall mean the absence of any interruption or
termination of service as an Employee or Director of the Company or an
Affiliate. Continuous Service shall not be considered interrupted in the case of
sick leave, military leave or any other leave of absence approved by the
Company, in the case of transfers between payroll locations of the Company or
between the Company, an Affiliate or a successor, or in the case of a Director's
performance of services in an emeritus capacity or as an Advisory Director.
(l) "Director" shall mean any member of the Board, 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, and any Advisory Director.
(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 14 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 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 have the meaning provided in 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 Option pursuant to
the Plan.
(x) "Plan" shall mean this HopFed Bancorp, Inc. 1999 Stock Option 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") shall mean 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 Option and each annual anniversary of that date, during which a
Participant has not terminated Continuous Service for any reason.
A-2
<PAGE>
3. TERM OF THE PLAN AND OPTIONS.
(a) Term of the Plan. The Plan shall continue in effect for a term of 10
years from the Effective Date, unless sooner terminated pursuant to Paragraph 16
hereof. No Option shall be granted under the Plan after ten years from the
Effective Date.
(b) Term of Options. The term of each Option granted under the Plan shall
be established by the Committee, but shall not exceed 10 years; provided,
however, that in the case of an Employee who owns Shares representing more than
10% of the outstanding Common Stock at the time an ISO is granted, the term of
such ISO shall not exceed five years.
4. SHARES SUBJECT TO THE PLAN.
Except as otherwise required under Paragraph 11, the aggregate number of
Shares deliverable pursuant to Options shall not exceed 403,362 Shares, which
equals 10% of the Shares issued by the Company in connection with the Bank's
conversion from mutual to stock form. Such Shares may either be authorized but
unissued Shares, Shares held in treasury, or Shares held in a grantor trust
created by the Company. If any Options 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 Options under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) Composition of the Committee. The Plan shall be administered by the
Committee, appointed by the Board, and consisting of at least two 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
Non-Employee Directors.
(b) Powers of the Committee. Except as limited by the express provisions
of the Plan or by resolutions adopted by the Board, the Committee shall have
sole and complete authority and discretion (i) to select Participants and grant
Options, (ii) to determine the form and content of Options 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 Option 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,
(ii) the number of Shares subject to, and the expiration date of, the Option,
(iii) the manner, time and rate (cumulative or otherwise) of exercise or vesting
of such Option, and (iv) the restrictions, if any, to be placed upon such
Option, or upon Shares which may be issued upon exercise of such Option.
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
the Options.
(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.
A-3
<PAGE>
(e) Indemnification. In addition to such other rights of indemnification
as they may have, the members of the Committee shall be indemnified by the
Company in connection with any claim, action, suit or proceeding relating to any
action taken or failure to act under or in connection with the Plan or any
Option, granted hereunder to the full extent provided for under the Company's
governing instruments with respect to the indemnification of Directors.
6. GRANT OF OPTIONS.
(a) General Rule. The Committee shall have the discretion to make
discretionary grants of Options to Employees and Directors (including members of
the Committee). In addition, the Committee shall automatically make the awards
specified in Paragraphs 6(b) and 9(a) hereof.
(b) Automatic Grants to Employees. On a date that the Committee selects in
its discretion for initial grants, each of the following Employees shall receive
an Option to purchase the number of Shares listed below, at an Exercise Price
per Share equal to the Market Value of a Share on the Effective Date; provided
that such grant shall not be made to an Employee whose Continuous Service
terminates on or before the Effective Date:
<TABLE>
<CAPTION>
Participant Number of Shares
----------- ----------------
<S> <C>
Thomas 80,672
Noel 72,605
Clark 48,403
Roberts 20,168
Boyd 20,168
Mallory 20,168
Foley 20,168
</TABLE>
With respect to each of the above-named Participants, the Option granted to
the Participant hereunder (i) shall vest in accordance with the general rule set
forth in Paragraph 8(a) of the Plan, (ii) shall have a term of ten years from
the Effective Date, and (iii) shall be subject to the general rule set forth in
Paragraph 8(c) with respect to the effect of a Participant's termination of
Continuous Service on the Participant's right to exercise his Options.
(c) Special Rules for ISOs. The aggregate Market Value, as of the date the
Option is granted, of the Shares with respect to which ISOs are exercisable for
the first time by an Employee during any calendar year (under all incentive
stock option plans, as defined in Section 422 of the Code, of the Company or any
present or future Affiliate of the Company) shall not exceed $100,000.
Notwithstanding the foregoing, the Committee may grant Options in excess of the
foregoing limitations, in which case such Options granted in excess of such
limitation shall be Options which are Non-ISOs.
7. EXERCISE PRICE FOR OPTIONS.
(a) Limits on Committee Discretion. The Exercise Price as to any
particular Option shall not be less than 100% of the Market Value of the
Optioned Shares on the date of grant. In the case of an Employee who owns Shares
representing more than 10% of the Company's outstanding Shares of Common Stock
at the time an ISO is granted, the Exercise Price shall not be less than 110% of
the Market Value of the Optioned Shares at the time the ISO is granted.
(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
A-4
<PAGE>
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. Unless the Committee specifically eliminates any vesting
requirement or imposes a different vesting schedule in an Agreement granting an
Option, each Option grant shall be vested and exercisable with respect to 50% of
the Optioned Shares on the date of grant and shall become vested and exercisable
with respect to an additional 50% of the Optioned Shares on January 1, 2000;
provided that no vesting shall occur prior to stockholder approval pursuant to
Paragraph 14 hereof, and further provided that no vesting shall occur on a
particular date if the Participant's Continuous Service has ended prior thereto.
Notwithstanding the foregoing, an Option shall become fully (100%) exercisable
immediately upon termination of the Participant's Continuous Service due to (i)
the Participant's Disability, (ii) death, (iii) retirement at or after age 62,
or (iv) upon a Change in Control or, if earlier, the execution of an agreement
to effect a Change in Control. An Option may not be exercised for a fractional
Share.
(b) Procedure for Exercise. A Participant may exercise an Option, subject
to provisions relative to its termination and limitations on its exercise, only
by (1) written notice of intent to exercise the Option with respect to a
specified number of Shares, and (2) payment to the Company (contemporaneously
with delivery of such notice) in cash, in Common Stock, or a combination of cash
and Common Stock, of the amount of the Exercise Price for the number of Shares
with respect to which the Option is then being exercised. Each such notice (and
payment where required) shall be delivered, or mailed by prepaid registered or
certified mail, addressed to the Treasurer of the Company at its executive
offices. Common Stock utilized in full or partial payment of the Exercise Price
for Options shall be valued at its Market Value at the date of exercise, and may
consist of Shares subject to the Option being exercised.
(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 one year 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 Bank and/or the Company (and, in the absence of any
such agreement, shall mean termination because of the Employee's
personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform
stated duties, willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or final cease-and-desist
order), then the Participant's rights to exercise such Option shall
expire on the date of such termination;
(2) death, then to the extent that the Participant would have been
entitled to exercise the Option immediately prior to his death, such
Option of the deceased Participant may be exercised within two years
from the date of his death (but not later than the date on which the
Option would otherwise expire) by the personal representatives of his
estate or person or persons to whom his rights under such Option shall
have passed by will or by laws of descent and distribution.
(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.
(e) Mandatory Six-Month Holding Period. Notwithstanding any other
provision of this Plan to the contrary, Common Stock that is purchased upon
exercise of an Option may not be sold within the six-month period following the
grant date of that Option, except in the event of the Participant's death or
Disability, or such other event as the Board may specifically deem appropriate.
A-5
<PAGE>
9. AUTOMATIC GRANTS TO NON-EMPLOYEE DIRECTORS.
(a) Automatic Grants. Notwithstanding any other provisions of this Plan,
each Director who is not an Employee but is a Director or advisory Director on
the Effective Date shall receive, on a date that the Committee selects in its
discretion for initial grants, Non-ISOs to purchase 20,168 Shares. Such Non-ISOs
shall have an Exercise Price per Share equal to the Market Value of a Share on
the date of grant, and be subject to the terms of Paragraph 9(b) hereof.
(b) Terms of Exercise. Options received under the provisions of Paragraph
9(a) shall (i) become exercisable on the date that the Plan receives stockholder
approval, and (ii) may be exercised from time to time pursuant to Paragraph 8 by
written notice of intent to exercise the Option with respect to all or a
specified number of the Optioned Shares, and payment to the Company
(contemporaneously with the delivery of such notice), in cash, in Common Stock,
or a combination of cash and Common Stock, of the amount of the Exercise Price
for the number of the Optioned Shares with respect to which the Option is then
being exercised. Each such notice and payment shall be delivered, or mailed by
prepaid registered or certified mail, addressed to the Treasurer of the Company
at the Company's executive offices. Upon a Director's exercise of an Option, the
Company may, in the discretion of the Committee, pay to the Director a cash
amount up to but not exceeding the amount of dividends, if any, declared on the
underlying Shares between the date of grant and the date of exercise of the
Option. A Director who exercises Options pursuant to this Paragraph may satisfy
all applicable federal, state and local income and employment tax withholding
obligations, in whole or in part, by irrevocably electing to have the Company
withhold shares of Common Stock, or to deliver to the Company shares of Common
Stock that he already owns, having a value equal to the amount required to be
withheld; provided that to the extent not inconsistent herewith, such election
otherwise complies with those requirements of Paragraphs 8 and 19 hereof.
Options granted under this Paragraph shall have a term of 10 years;
provided that Options granted under this Paragraph shall expire one year after
the date on which a Director terminates Continuous Service on the Board for a
reason other than death, but in no event later than the date on which such
Options would otherwise expire. In the event of such Director's death during
the term of his directorship, Options granted under this Paragraph shall become
immediately exercisable, and may be exercised within two years from the date of
his death by the personal representatives of his estate or person or persons to
whom his rights under such Option shall have passed by will or by laws of
descent and distribution, but in no event later than the date on which such
Options would otherwise expire. In the event of such Director's Disability
during his or her directorship, the Director's Option shall become immediately
exercisable, and such Option may be exercised within two years 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.
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.
A-6
<PAGE>
(c) Timing of Exercise. 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, at the discretion of the Committee, in cash or in Shares valued at the
then Market Value thereof, or any combination thereof.
(e) Procedure for Exercising SARs. To the extent not inconsistent
herewith, the provisions of Paragraph 8b) as to the procedure for exercising
Options are incorporated by reference, and shall determine the procedure for
exercising SARs.
11. CHANGE IN CONTROL; EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE
PLAN.
(a) Change in Control. Upon a Change in Control or, if earlier, the
execution of an agreement to effect a Change in Control, all Options and SARs
shall become fully exercisable, notwithstanding any other provision of the Plan
or any Agreement.
(b) Recapitalizations; Stock Splits, Etc. The number and kind of shares
reserved for issuance under the Plan, and the number and kind of shares subject
to outstanding Options and SARs, and the Exercise Price thereof, shall be
proportionately adjusted for any increase, decrease, change or exchange of
Shares for a different number or kind of shares or other securities of the
Company which results from a merger, consolidation, recapitalization,
reorganization, reclassification, stock dividend, split-up, combination of
shares, or similar event in which the number or kind of shares is changed
without the receipt or payment of consideration by the Company .
(c) 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
Options and SARs, 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.
(d) Special Rule for ISOs. Any adjustment made pursuant to subparagraphs
(a) or (b) 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.
(e) 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 Option before the adjustment was made.
(f) 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 Options or reserved for issuance under the Plan.
(g) Certain Special Dividends. The Exercise Price of shares subject to
outstanding Options shall be proportionately adjusted upon the payment of a
special large and nonrecurring dividend that has the effect of a
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return of capital to the stockholders, except that this subparagraph (g) shall
not apply to any dividend which is paid to the Participant pursuant to Paragraph
8(b) or 9(b) hereof.
12. NON-TRANSFERABILITY OF OPTIONS.
Options may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution. Notwithstanding the foregoing, or any other provision of this
Plan, a Participant who holds SARs or Options may transfer such SARs or Options
(but not ISOs) 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.
SARs and Options so transferred may thereafter be transferred only to the
Participant who originally received the grant or to an individual or trust to
whom the Participant could have initially transferred the SARs or Options
pursuant to this Paragraph 12. SARs and Options which are transferred pursuant
to this Paragraph 12 shall be exercisable by the transferee according to the
same terms and conditions as applied to the Participant.
13. TIME OF GRANTING OPTIONS.
The date of grant of an Option shall, for all purposes, be the later of the
date on which the Committee makes the determination of granting such Option, and
the Effective Date. Notice of the determination shall be given to each
Participant to whom an Option is so granted within a reasonable time after the
date of such grant.
14. EFFECTIVE DATE.
The Plan shall become effective immediately, but its effectiveness and the
effectiveness of any grants of Options and SARs shall be contingent upon the
Plan's approval by a favorable vote of stockholders owning at least a majority
of the total votes cast at a duly called meeting of the Company's stockholders
held in accordance with applicable laws.
15. MODIFICATION OF OPTIONS.
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 Option, provided no such modification shall confer on the holder of
said Option any right or benefit which could not be conferred on him by the
grant of a new Option at such time, or impair the Option without the consent of
the holder of the Option.
16. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend the terms of the Plan and, with
respect to any Shares at the time not subject to Options, suspend or terminate
the Plan. No amendment, suspension or termination of the Plan shall, without
the consent of any affected holders of an Option, alter or impair any rights or
obligations under any Option theretofore granted.
17. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Compliance with Securities Laws. Shares of Common Stock shall not be
issued with respect to any Option 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, the Company may require the
person exercising the Option 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.
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(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 to pay an Optionee
the in-the-money value of his Option in consideration for its cancellation, or
all of these restrictions.
18. RESERVATION OF SHARES.
The Company, during the term of the Plan, will reserve and keep available a
number of Shares sufficient to satisfy the requirements of the Plan.
19. WITHHOLDING TAX.
The Company's obligation to deliver Shares upon exercise of Options shall
be subject to the Participant's satisfaction of all applicable federal, state
and local income and employment tax withholding obligations. The Committee, in
its discretion, may permit the Participant to satisfy the obligation, in whole
or in part, by irrevocably electing to have the Company withhold Shares, or to
deliver to the Company Shares that he already owns, having a value equal to the
amount required to be withheld. The value of the Shares to be withheld, or
delivered to the Company, shall be based on the Market Value of the Shares on
the date the amount of tax to be withheld is to be determined. As an
alternative, the Company may retain, or sell without notice, a number of such
Shares sufficient to cover the amount required to be withheld.
20. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall an Employee's or Director's eligibility to participate or
participation in the Plan create or be deemed to create any legal or equitable
right of the Employee, Director, or any other party to continue service with the
Company, the 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 Option or, having received an Option, the right to again be
granted an Option. However, an Employee or Director who has been granted an
Option may, if otherwise eligible, be granted an additional Option or Options.
21. GOVERNING LAW.
The Plan shall be governed by and construed in accordance with the laws of
the Commonwealth of Kentucky, except to the extent that federal law shall be
deemed to apply.
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EXHIBIT B
HOPFED BANCORP, INC.
MANAGEMENT RECOGNITION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
1.01 The Company hereby establishes this Plan upon the terms and
conditions hereinafter stated.
1.02 Through acceptance of their appointment to the Committee, each member
of the Committee hereby accepts his or her appointment hereunder upon the terms
and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to reward and retain personnel of
experience and ability in key positions of responsibility by providing Employees
and Directors of the Company, the Bank, and their Affiliates with a proprietary
interest in the Company, and as compensation for their past contributions to the
Bank, and as an incentive to make such contributions in the future.
ARTICLE III
DEFINITIONS
The following words and phrases, when used in this Plan with an initial
capital letter, shall have the meanings set forth below unless the context
clearly indicates otherwise. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.
3.01 "Advisory Director" shall mean any former Director who has been
elected as an Advisory Director of the Company or the Bank.
3.02 "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Company, as such terms are defined in Section 424(e) and
(f), respectively, of the Internal Revenue Code of 1986, as amended.
3.03 "Bank" shall mean Hopkinsville Federal Savings Bank.
3.04 "Beneficiary" shall mean the person or persons designated by a
Participant to receive any benefits payable under the Plan in the event of such
Participant's death. Such person or persons shall be designated in writing on
forms provided for this purpose by the Committee and may be changed from time to
time by similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Participant's surviving spouse, if
any, or if none, his estate.
3.05 "Board" shall mean the Board of Directors of the Company.
3.06 "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. Part 574 or its applicable equivalent, or (5) during any period of two
consecutive years, individuals (the "Continuing Directors") who at the beginning
of such period constitute the Board of Directors of the Company or the Bank (the
"Existing Board") cease for any reason to constitute at least two-thirds
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 two-thirds
of the Continuing
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Directors then in office shall be considered a Continuing Director. In the case
of subsections (1), (2), (3) and (4) above, ownership or control of the Bank by
the Company itself shall not constitute a "Change in Control." For purposes of
defining Change in Control, the term "person" refers to an individual or a
corporation, partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein. The decision of the Committee as to whether a Change
in Control has occurred shall be conclusive and binding.
3.07 "Committee" shall mean the Management Recognition Plan Committee
appointed by the Board pursuant to Article IV hereof; provided that the Board
may act in lieu of the Committee on any matter as to which the Committee has
authority to act.
3.08 "Common Stock" shall mean shares of the common stock of the Company,
par value $.01 per share.
3.09 "Company" shall mean HopFed Bancorp, Inc.
3.10 "Continuous Service" shall mean the absence of any interruption or
termination of service as an Employee or Director of the Company or an
Affiliate. Continuous Service shall not be considered interrupted in the case
of sick leave, military leave, or any other leave of absence approved by the
Company in the case of transfers between payroll locations of the Company or
between the Company, an Affiliate or a successor, or in the case of a Director's
performance of services in an emeritus capacity or as an Advisory Director.
3.11 "Date of Conversion" shall mean the date of the conversion of the
Bank from mutual to stock form.
3.12 "Director" shall mean a member of the Board, any member of the board
of directors of an Affiliate whose members the Board has by resolution
designated as being eligible for participation in this Plan, and any Advisory
Director.
3.13 "Disability" shall mean a physical or mental condition, which in the
sole and absolute discretion of the Committee, is reasonably expected to be of
indefinite duration and to substantially prevent a Participant from fulfilling
his or her duties or responsibilities to the Company or an Affiliate.
3.14 "Effective Date" shall mean the date on which the Plan first becomes
effective, as determined under Section 8.07 hereof.
3.15 "Employee" shall mean any person who is employed by the Company or an
Affiliate.
3.16 "Non-employee Director" shall have the meaning provided in Rule 16b-3
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended.
3.17 "Participant" shall mean an Employee or Director who holds a Plan
Share Award.
3.18 "Plan" shall mean this HopFed Bancorp, Inc. Management Recognition
Plan.
3.19 "Plan Shares" shall mean shares of Common Stock held in the Trust
which are awarded or issuable to a Participant pursuant to the Plan.
3.20 "Plan Share Award" shall mean a right granted under this Plan to
receive Plan Shares.
3.21 "Plan Share Reserve" shall mean the shares of Common Stock held by
the Trustee pursuant to Sections 5.02 and 5.03.
3.22 "Trust" and "Trust Agreement" shall mean that agreement entered into
pursuant to the terms hereof between the Company and the Trustee, and "Trust"
means the grantor trust created thereunder.
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3.23 "Trustee" shall mean that person(s) or entity appointed by the Board
pursuant to the Trust Agreement to hold legal title to the Plan assets for the
purposes set forth herein.
3.24 "Year of Service" shall mean a full twelve-month period, measured
from the date of a Plan Share Award and each annual anniversary of that date,
during which a Participant's Continuous Service has not terminated for any
reason.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 ROLE AND POWERS OF THE COMMITTEE. The Plan shall be administered and
interpreted by the Committee, which shall consist of not less than two members
of the Board who are Non-Employee Directors. In the absence at any time of a
duly appointed Committee, the Plan shall be administered by those members of the
Board who are Non-Employee Directors, and by the Board if there are less than
two Non-Employee Directors.
The Committee shall have all of the powers allocated to it in this and
other Sections of the Plan. Except as limited by the express provisions of the
Plan or by resolutions adopted by the Board, the Committee shall have sole and
complete authority and discretion (i) to make Plan Share Awards to such
Employees as the Committee may select, (ii) to determine the form and content of
Plan Share Awards to be issued under the Plan, (iii) to interpret the Plan, (iv)
to prescribe, amend and rescind rules and regulations relating to the Plan, and
(v) to make other 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. Subject to
Section 4.02, the interpretation and construction by the Committee of any
provisions of the Plan or of any Plan Share Award granted hereunder shall be
final and binding. The Committee shall act by vote or written consent of a
majority of its members, and shall report its actions and decisions with respect
to the Plan to the Board at appropriate times, but in no event less than one
time per calendar year. The Committee may recommend to the Board one or more
persons or entity to act as Trustee(s) in accordance with the provisions of this
Plan and the Trust.
4.02 ROLE OF THE BOARD. The members of the Committee shall be appointed
or approved by, and will serve at the pleasure of, the Board. The Board may in
its discretion from time to time remove members from, or add members to, the
Committee. The Board shall have all of the powers allocated to it in this and
other Sections of the Plan, may take any action under or with respect to the
Plan which the Committee is authorized to take, and may reverse or override any
action taken or decision made by the Committee under or with respect to the
Plan, provided, however, that the Board may not revoke any Plan Share Award
already made or impair a participant's vested rights under a Plan Share Award.
Members of the Board who are eligible for or who have been granted Plan Share
Awards (other than pursuant to Section 6.04) may not vote on any matters
affecting the administration of the Plan or the grant of Plan Shares or Plan
Share Awards (although such members may be counted in determining the existence
of a quorum at any meeting of the Board during which actions with regard thereto
are taken). Further, with respect to all actions taken by the Board in regard
to the Plan, such action shall be taken by a majority of the Board where such a
majority of the directors acting in the matter are Non-Employee Directors.
4.03 LIMITATION ON LIABILITY. No member of the Board or the Committee or
the Trustee(s) shall be liable for any determination made in good faith with
respect to the Plan or any Plan Shares or Plan Share Awards granted under it.
If a member of the Board or the Committee or any Trustee is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of anything done or not done by him in such capacity under or with
respect to the Plan, the Company shall indemnify such member against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in the best interests of the Company and its
Affiliates and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
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ARTICLE V
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 AMOUNT AND TIMING OF CONTRIBUTIONS. The Board shall determine the
amounts (or the method of computing the amounts) to be contributed by the
Company to the Trust, provided that the Bank may also make contributions to the
Trust. Such amounts shall be paid to the Trustee at the time of contribution.
No contributions to the Trust by Employees shall be permitted.
5.02 INVESTMENT OF TRUST ASSETS; MAXIMUM PLAN SHARE AWARDS. The Trustee
shall invest Trust assets only in accordance with the Trust Agreement; provided
that the Trust shall not purchase, and Plan Share Awards shall not be made with
respect to, more than 161,345 Shares. Such Shares may either be authorized but
unissued Shares, Shares held in treasury, or Shares held in a grantor trust.
5.03 EFFECT OF ALLOCATIONS, RETURNS AND FORFEITURES UPON PLAN SHARE
RESERVES. Upon the allocation of Plan Share Awards under Section 6.02, the Plan
Share Reserve shall be reduced by the number of Shares subject to the Awards so
allocated. Any Shares subject or attributable to an Award which may not be
earned because of a forfeiture by the Participant pursuant to Section 7.01 shall
be added to the Plan Share Reserve.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 ELIGIBILITY. Except as otherwise provided in Section 6.04 hereof,
the Committee shall make Plan Share Awards only to Employees. In selecting
those Employees to whom Plan Share Awards will be granted and the number of
shares covered by such Awards, the Committee shall consider the position, duties
and responsibilities of the eligible Employees, the value of their services to
the Company and its Affiliates, and any other factors the Committee may deem
relevant. Notwithstanding the foregoing, the Committee shall automatically make
the Plan Share Awards specified in Sections 6.04 and 6.05 hereof.
6.02 ALLOCATIONS. The Committee will determine which Employees will be
granted discretionary Plan Share Awards, and the number of Shares covered by
each Plan Share Award, provided that in no event shall any Awards be made which
will violate the governing instruments of the Bank or its Affiliates or any
applicable federal or state law or regulation. In the event Plan Shares are
forfeited for any reason or additional shares of Common Stock are purchased by
the Trustee, the Committee may, from time to time, determine which of the
Employees referenced in Section 6.01 above will be granted additional Plan Share
Awards to be awarded from the forfeited or acquired Plan Shares.
6.03 FORM OF ALLOCATION. As promptly as practicable after a determination
is made pursuant to Section 6.02 that a Plan Share Award is to be made, the
Committee shall notify the Participant in writing of the grant of the Award, the
number of Plan Shares covered by the Award, and the terms upon which the Plan
Shares subject to the Award may be earned. The date on which the Committee so
notifies the Participant shall be considered the date of grant of the Plan Share
Awards. The Committee shall maintain records as to all grants of Plan Share
Awards under the Plan.
6.04 AUTOMATIC GRANTS TO NON-EMPLOYEE DIRECTORS. Notwithstanding any
other provisions of this Plan, each Director or advisory Director who is not an
Employee but is a Director on the Effective Date shall receive, on said date, a
Plan Share Award for 8,067 Shares. Plan Share Awards received under the
provisions of this Section shall become vested and nonforfeitable according to
the general rules set forth in subsections (a) and (b) of Section 7.01. Unless
otherwise inapplicable or inconsistent with the provisions of this Section, the
Plan Share Awards to be granted hereunder shall be subject to all other
provisions of this Plan.
6.05 AUTOMATIC GRANTS TO EMPLOYEES. On the Effective Date, each of the
following individuals shall receive a Plan Share Award as to the number of Plan
Shares listed below, provided that such award shall not be made to an individual
who is not an Employee on the Effective Date:
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Officer Shares Subject to Plan Share Award
------- ----------------------------------
Thomas 32,269
Noel 29,042
Clark 19,361
Roberts 8,067
Boyd 8,067
Mallory 8,067
Foley 8,067
Plan Share Awards received under the provisions of this Section shall become
vested and nonforfeitable according to the general rules set forth in
subsections (a) and (b) of Section 7.01. Unless otherwise inapplicable or
inconsistent with the provisions of this Section, the Plan Share Awards to be
granted hereunder shall be subject to all other provisions of this Plan.
6.06 ALLOCATIONS NOT REQUIRED. Notwithstanding anything to the contrary in
Sections 6.01 and 6.02, but subject to Sections 6.04 and 6.05, no Employee or
Director shall have any right or entitlement to receive a Plan Share Award
hereunder, such Awards being at the total discretion of the Committee, nor shall
any Employees or Directors as a group have such a right. The Committee may,
with the approval of the Board (or, if so directed by the Board) return all
Common Stock in the Plan Share Reserve to the Company at any time, and cease
issuing Plan Share Awards.
ARTICLE VII
EARNINGS AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 EARNING PLAN SHARES; FORFEITURES.
(a) GENERAL RULES. With respect to Plan Share Awards that occur on
the Effective Date, the Plan Shares subject to such Awards shall be earned and
become non-forfeitable by a Participant according to the following schedule,
provided the Participant is an Employee or Director on the scheduled vesting
date:
Percent of Plan Share
Vesting Date Award that Becomes Vested
------------ -------------------------
The Effective Date 33 1/3%
January 1, 2000 33 1/3%
January 1, 2001 33 1/3%
(b) ACCELERATION FOR TERMINATIONS DUE TO DISABILITY, DEATH,
RETIREMENT, OR CHANGE IN CONTROL. Notwithstanding the general rule contained in
Section 7.01(a) above, (i) all Plan Shares subject to a Plan Share Award held by
a Participant whose service with the Company or an Affiliate terminates due to
the Participant's Disability, death, or retirement at or after age 62, and (ii)
all Plan Shares subject to a Plan Share Award held by a Participant shall be
deemed earned and 100% vested upon a Change in Control or, if earlier, the
execution of an agreement to effect a Change in Control.
7.02 ACCRUAL OF DIVIDENDS. Whenever Plan Shares are paid to a Participant
or Beneficiary under Section 7.03, such Participant or Beneficiary shall also be
entitled to receive, with respect to each Plan Share paid, an amount equal to
any cash dividends (including special large and nonrecurring dividends,
including one that has the effect of a return of capital to the Company's
stockholders) and a number of shares of Common Stock equal to any stock
dividends, declared and paid with respect to a share of Common Stock between the
date the relevant Plan Share Award was initially granted to such Participant and
the date the Plan Shares are being distributed. There shall also be distributed
an appropriate amount of net earnings, if any, of the Trust with respect to any
cash dividends so paid out.
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7.03 DISTRIBUTION OF PLAN SHARES.
(a) TIMING OF DISTRIBUTIONS: GENERAL RULE. Except as provided in
subsections (c), and (d) below, the Trustee shall distribute Plan Shares and
accumulated cash from dividends and interest to the Participant or his
Beneficiary, as the case may be, as soon as practicable after they have been
earned. No fractional shares shall be distributed.
(b) FORM OF DISTRIBUTION. The Trustee shall distribute all Plan
Shares, together with any shares representing stock dividends, in the form of
Common Stock. One share of Common Stock shall be given for each Plan Share
earned. Payments representing cash dividends (and earnings thereon) shall be
made in cash.
(c) WITHHOLDING. The Trustee shall withhold from any cash payment
made under this Plan sufficient amounts to cover any applicable withholding and
employment taxes, and if the amount of such cash payment is not sufficient, the
Trustee shall require the Participant or Beneficiary to pay to the Trustee the
amount required to be withheld as a condition of delivering the Plan Shares.
The Trustee shall pay over to the Company or Affiliate which employs or employed
such Participant any such amount withheld from or paid by the Participant or
Beneficiary.
(d) TIMING: EXCEPTION FOR 10% STOCKHOLDERS. Notwithstanding
Subsections (a) and (b) above, no Plan Shares may be distributed prior to the
date which is five (5) years from the Date of Conversion to the extent the
Participant or Beneficiary, as the case may be, would after receipt of such
Shares own in excess of ten percent (10%) of the issued and outstanding shares
of Common Stock unless such action is approved in advance by a majority vote of
Non-employee Directors of the Board. To the extent this limitation would delay
the date on which a Participant receives Plan Shares, the Participant may elect
to receive from the Trust, in lieu of such Plan Shares, the cash equivalent
thereof. Any Plan Shares remaining undistributed solely by reason of the
operation of this Subsection (d) shall be distributed to the Participant or his
Beneficiary on the date which is five years from the Date of Conversion.
(e) REGULATORY EXCEPTIONS. No Plan Shares shall be distributed
unless and until all of the requirements of all applicable law and regulations
shall have been fully complied with, including the receipt of approval of the
Plan by the stockholders of the Company by such vote, if any, as may be required
by applicable law and regulations.
7.04 VOTING OF PLAN SHARES. All shares of Common Stock held by the Trust
(whether or not subject to a Plan Share Award) shall be voted by the Trustee in
the same proportion as the trustee of the Company's Employee Stock Ownership
Plan votes Common Stock held in the trust associated therewith, and in the
absence of any such voting, shall be voted in the manner directed by the Board.
7.05 DEFERRAL ELECTIONS BY PARTICIPANTS.
(a) ELECTIONS TO DEFER. At any time prior to December 31st of any
year prior to the date on which a Participant becomes vested in any shares
subject to his or her Plan Share Award, a Participant who is a member of a
select group of management or highly compensated employees (within the meaning
of the Employees' Retirement Income Security Act of 1973) may irrevocably elect,
on the form attached hereto as Exhibit "A" (the "Election Form"), to defer the
receipt of all or a percentage of the Plan Shares that would otherwise be
transferred to the Participant upon the vesting of such award (the "Deferred
Shares").
(b) RECORDKEEPING; HOLDING OF DEFERRED SHARES. The Committee shall
establish and maintain an individual account (the "Cash Account") in the name of
each Participant who files an Election Form for the purpose of tracking deferred
earnings ("Deferred Earnings") attributable to cash dividends paid on Deferred
Shares. On the last day of each fiscal year of the Company, the Committee shall
credit to the Participant's Cash Account earnings on the balance of the Cash
Account at a rate equal to the dividend-adjusted total return on Common Stock,
as determined from time to time by the Committee in its sole discretion. The
Trustees shall hold each Participant's Deferred Shares and Deferred Earnings in
the Trust until distribution is required pursuant to the election set forth in
the Participant's Election Form.
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(c) DISTRIBUTIONS OF DEFERRED SHARES. The Trustee shall distribute a
Participant's Deferred Shares and Deferred Earnings in accordance with the
Participant's Election Form. All distributions made by the Company and/or the
Trustees pursuant to elections made hereunder shall be subject to applicable
federal, state, and local tax withholding and to such other deductions as shall
at the time of such payment be required under any income tax or other law,
whether of the United States or any other jurisdiction, and, in the case of
payments to a beneficiary, the delivery to the Committee and/or Trustees of all
necessary waivers, qualifications and other documentation. Within 90 days after
receiving notice of a Participant's death, the Trustee shall distribute any
balance of the Participant's Deferred Shares and Deferred Earnings to the
Participant's Beneficiary. If, on the other hand, a Participant's Continuous
Service terminates for a reason other than the Participant's death, Disability,
early retirement, or normal retirement, the Participant's Deferred Shares and
Deferred Earnings shall be distributed to the Participant in a lump sum
occurring as soon as reasonably practicable. The distribution provisions of a
Participant's Election Form shall become irrevocable on the date that occurs (i)
one year before the Participant's termination of Continuous Service for a reason
other than death, and (ii) on the Participant's death if that terminates the
Participant's Continuous Service.
(d) HARDSHIP WITHDRAWALS. Notwithstanding any other provision of the
Plan or a Participant's Election Form, in the event the Participant suffers an
unforeseeable emergency hardship within the contemplation of this paragraph, the
Participant may apply to the Committee for an immediate distribution of all or a
portion of his Deferred Shares and Deferred Earnings. The hardship must result
from a sudden and unexpected illness or accident of the Participant or a
dependent of the Participant, casualty loss of property, or other similar
conditions beyond the control of the Participant. Examples of purposes which
are not considered hardships include post-secondary school expenses or the
desire to purchase a residence. In no event will a distribution be made to the
extent the hardship could be relieved through reimbursement or compensation by
insurance or otherwise, or by liquidation of the Participant's nonessential
assets to the extent such liquidation would not itself cause a severe financial
hardship. The amount of any distribution hereunder shall be limited to the
amount necessary to relieve the Participant's financial hardship. The
determination of whether a Participant has a qualifying hardship and the amount
which qualifies for distribution, if any, shall be made by the Committee in its
sole discretion. The Committee may require evidence of the purpose and amount
of the need, and may establish such application or other procedures as it deems
appropriate.
(e) RIGHTS TO DEFERRED SHARES AND EARNINGS. A Participant may not
assign his or her claim to Deferred Shares and Deferred Earnings during his or
her lifetime, except in accordance with Section 8.03 of this Plan. A
Participant's right to Deferred Shares and Deferred Earnings shall at all times
constitute an unsecured promise of the Company to pay benefits as they come due.
The right of the Participant or his or her beneficiary to receive benefits
hereunder shall be solely an unsecured claim against the general assets of the
Company. Neither the Participant nor his or her beneficiary shall have any
claim against or rights in any specific assets or other fund of the Company, and
any assets in the Trust shall be deemed general assets of the Company.
ARTICLE VIII
MISCELLANEOUS
8.01 ADJUSTMENTS FOR CAPITAL CHANGES.
(a) RECAPITALIZATIONS; STOCK SPLITS, ETC. The number and kind of
shares which may be purchased under the Plan, and the number and kind of shares
subject to outstanding Plan Share Awards, shall be proportionately adjusted for
any increase, decrease, change or exchange of shares of Common Stock for a
different number or kind of shares or other securities of the Company which
results from a merger, consolidation, 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 Plan
Share Awards shall be adjusted for any
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change or exchange of shares of Common Stock for a different number or kind of
shares or other securities which results from the Transaction.
(c) CONDITIONS AND RESTRICTIONS ON NEW, ADDITIONAL, OR DIFFERENT
SHARES OR SECURITIES. If, by reason of any adjustment made pursuant to this
Section, a Participant becomes entitled to new, additional, or different shares
of stock or securities, such new, additional, or different shares of stock or
securities shall thereupon be subject to all of the conditions and restrictions
which were applicable to the shares pursuant to the Plan Share Award before the
adjustment was made. In addition, the Committee shall have the discretionary
authority to impose on the Shares subject to Plan Share Awards to Employees such
restrictions as the Committee may deem appropriate or desirable, including but
not limited to a right of first refusal, or repurchase option, or both of these
restrictions.
(d) OTHER ISSUANCES. Except as expressly provided in this Section,
the issuance by the Company or an Affiliate of shares of stock of any class, or
of securities convertible into shares of Common Stock or stock of another class,
for cash or property or for labor or services either upon direct sale or upon
the exercise of rights or warrants to subscribe therefor, shall not affect, and
no adjustment shall be made with respect to, the number or class of shares of
Common Stock then subject to Plan Share Awards or reserved for issuance under
the Plan.
8.02 AMENDMENT AND TERMINATION OF PLAN. The Board may, by resolution, at
any time amend or terminate the Plan; provided that no amendment or termination
of the Plan shall, without the written consent of a Participant, impair any
rights or obligations under a Plan Share Award theretofore granted to the
Participant. The power to amend or terminate the Plan in accordance with this
Section 8.02 shall include the power to direct the Trustee to return to the
Company all or any part of the assets of the Trust, including shares of Common
Stock held in the Plan Share Reserve. However, the termination of the Trust
shall not affect a Participant's right to earn Plan Share Awards and to receive
a distribution of Common Stock relating thereto, including earnings thereon, in
accordance with the terms of this Plan and the grant by the Committee or the
Board.
8.03 NONTRANSFERABILITY. Plan Share Awards may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent and distribution. Notwithstanding the foregoing,
or any other provision of this Plan, a Participant who holds Plan Share Awards
may transfer such Awards to his or her spouse, lineal ascendants, lineal
descendants, or to a duly established trust for the benefit of one or more of
these individuals. Plan Share Awards so transferred may thereafter be
transferred only to the Participant who originally received the grant or to an
individual or trust to whom the Participant could have initially transferred the
Awards pursuant to this Section 8.03. Plan Share Awards which are transferred
pursuant to this Section 8.03 shall be exercisable by the transferee according
to the same terms and conditions as applied to the Participant.
8.04 NO EMPLOYMENT OR OTHER RIGHTS. Neither the Plan nor any grant of a
Plan Share Award or Plan Shares hereunder nor any action taken by the Trustee,
the Committee or the Board in connection with the Plan shall create any right,
either express or implied, on the part of any Employee or Director to continue
in the service of the Company, the Bank, or an Affiliate thereof.
8.05 VOTING AND DIVIDEND RIGHTS. No Participant shall have any voting or
dividend rights or other rights of a stockholder in respect of any Plan Shares
covered by a Plan Share Award prior to the time said Plan Shares are actually
distributed to him.
8.06 GOVERNING LAW. The Plan and Trust shall be governed and construed
under the laws of the Commonwealth of Kentucky to the extent not preempted by
federal law.
8.07 EFFECTIVE DATE. The Plan shall become effective immediately upon its
receipt of Board approval, provided that the effectiveness of the Plan and any
Plan Share Awards shall be absolutely contingent upon the Plan's approval by a
favorable vote of stockholders of the Company who own at least a majority of the
total votes cast at a duly called meeting of the Company's stockholders held in
accordance with applicable laws.
8.08 TERM OF PLAN. This Plan shall remain in effect until the earlier of
(i) termination by the Board, or (ii) the distribution of all assets of the
Trust. Termination of the Plan shall not affect any Plan Share Awards
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previously granted, and such Awards shall remain valid and in effect until they
have been earned and paid, or by their terms expire or are forfeited.
8.09 TAX STATUS OF TRUST. It is intended that (i) the Trust associated
with the Plan be treated as a grantor trust of the Company under the provisions
of Section 671 et seq. of the Code, as the same may be amended from time to
------
time, and (ii) that in accordance with Revenue Procedure 92-65 (as the same may
be amended from time to time), Participants have the status of general unsecured
creditors of the Company, the Plan constitutes a mere unfunded promise to make
benefit payments in the future, the Plan is unfunded for tax purposes and for
purposes of Title I of the Employee Retirement Income Security Act of 1974, as
amended, and the Trust has been and will continue to be maintained in conformity
with Revenue Procedure 92-64 (as the same may be amended from time to time).
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<PAGE>
REVOCABLE PROXY
HOPFED BANCORP, INC.
--------------------
ANNUAL MEETING OF STOCKHOLDERS
May 12, 1999
-------------------------
The undersigned stockholder of HopFed Bancorp, Inc. (the "Company") hereby
appoints Walton G. Ezell and Clifton H. Cochran, or either of them, with full
powers of substitution, as attorneys and proxies for the undersigned, to vote
all shares of Common Stock of the Company which the undersigned is entitled to
vote at the Annual Meeting of Stockholders, to be held at the main office of
Hopkinsville Federal Savings Bank, 2700 Fort Campbell Boulevard, Hopkinsville,
Kentucky on Wednesday, May 12, 1999 at 3:00 p.m., local time, and at any and all
adjournments thereof, as indicated below and as determined by a majority of the
Board of Directors with respect to such other matters as may come before the
Annual Meeting.
VOTE FOR ALL
FOR WITHHELD EXCEPT
--- -------- --------
I. Election as directors of all nominees [_] [_] [_]
listed below (except as marked to the
contrary).
Boyd M. Clark
John Noble Hall, Jr.
INSTRUCTION: TO WITHHOLD AUTHORITY
TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
"FOR ALL EXCEPT" AND WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
---------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
II. Approval of the HopFed Bancorp, Inc. [_] [_] [_]
1999 Stock Option Plan.
III. Approval of the HopFed Bancorp, Inc. [_] [_] [_]
Management Recognition Plan.
IV. Such other matters as may properly come before the Annual Meeting or any
adjournment thereof.
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED. IF ANY OTHER BUSINESS
IS PRESENTED AT THE ANNUAL MEETING AS TO WHICH THIS PROXY CONFERS DISCRETIONARY
AUTHORITY, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY AS DETERMINED
BY 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.
- --------------------------------------------------------------------------------
<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 hereby revokes any and all
proxies heretofore given with respect to shares of Common Stock of the Company
which the undersigned is entitled to vote at the Annual Meeting.
The undersigned stockholder acknowledges receipt from the Company, prior to
the execution of this proxy, of Notice of the Annual Meeting, a Proxy Statement,
and the Annual Report to Stockholders.
Dated: _________________ _____, 1999
___________________________ __________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
___________________________ __________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on the envelope in which this card 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.
- --------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
- --------------------------------------------------------------------------
