SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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|_| Soliciting Material under ss.240.14a-12
Eagle Bancorp
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(Name of Registrant as Specified In Its Charter)
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<PAGE>
EAGLE BANCORP
1400 Prospect Avenue
Helena, Montana 59601
(406) 442-3080
September 15, 2000
Dear Stockholder:
You are invited to attend the First Annual Meeting of Stockholders (the
"Annual Meeting") of Eagle Bancorp, the stock holding company for American
Federal Savings Bank (the "Bank"). The Annual Meeting is scheduled to be held on
Thursday, October 19, 2000, at 10:00 a.m., Montana time at the main office of
the Bank, located at 1400 Prospect Avenue, Helena, Montana.
The attached Notice of Annual Meeting and Proxy Statement describes the
proposals to be voted on at the Annual Meeting. The Board of Directors of Eagle
Bancorp has determined the approval of the proposals is in the best interest of
Eagle Bancorp and its stockholders. Therefore, the Board unanimously recommends
that you vote in favor of all proposals and in favor of the Board's nominees for
director. Members of the Board and officers of Eagle Bancorp will be present at
the Annual Meeting to respond to any questions that you may have regarding the
agenda for the Annual Meeting.
Please sign and return the enclosed proxy card promptly. Your cooperation
is appreciated since a majority of the common stock outstanding must be
represented either in person or by proxy to constitute a quorum for the conduct
of business at the annual meeting.
On behalf of the Board of Directors and all of the employees of Eagle
Bancorp, I wish to thank you for all your support and interest. We look forward
to seeing you at the Annual Meeting.
Sincerely yours,
/s/ Larry A. Dreyer
Larry A. Dreyer
President and CEO
<PAGE>
EAGLE BANCORP
1400 Prospect Avenue
Helena, MT 59601
(406) 442-3080
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 19, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Eagle
Bancorp ("Eagle" or the "Company") will be held at the home office of American
Federal Savings Bank located at 1400 Prospect Avenue, Helena, Montana on
Thursday, October 19, 2000, at 10:00 a.m. Montana time, for the following
purposes, as more completely set forth in the accompanying Proxy Statement:
I. To elect two (2) directors of the Company for three year terms.
II. To ratify the appointment by the Company's Board of Directors of the
firm of Anderson ZurMuehlen & Co, P.C. as independent public accountants for the
Company for the fiscal year ending June 30, 2001.
III. To approve the Eagle Bancorp 2000 Stock Incentive Plan for directors,
officers and employees (the "Stock Incentive Plan").
IV. To transact such other business as may properly come before the
meeting. Except with respect to procedural matters incident to the conduct of
the meeting, management of Eagle is not aware of any matters other than those
set forth above which may properly come before the meeting.
The Board of Directors of Eagle has fixed September 8, 2000, as the voting
record date for the determination of stockholders entitled to notice of and to
vote at the Annual Meeting. Only those stockholders of record as of the close of
business on that date will be entitled to vote at the Annual Meeting.
BY ORDER OF THE BOARD OF
DIRECTORS
/s/ Larry A. Dreyer
Larry A. Dreyer
President & CEO
September 15, 2000
Helena, Montana
YOUR VOTE IS IMPORTANT. YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE
ANNUAL MEETING YOU MAY VOTE EITHER IN PERSON OR BY YOUR PROXY. ANY PROXY GIVEN
MAY BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE
THEREOF. PROXIES MUST BE RECEIVED PRIOR TO THE COMMENCEMENT OF THE MEETING.
<PAGE>
EAGLE BANCORP
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 19, 2000
This Proxy Statement is being furnished to the holders of the common
stock, par value $0.01 per share ("Common Stock"), of Eagle Bancorp ("Eagle" or
the "Company"), in connection with the solicitation of proxies by the Board of
Directors for use at its first Annual Meeting of Stockholders ("Annual Meeting")
to be held on Thursday, October 19, 2000, at the home office of American Federal
Savings Bank located at 1400 Prospect Avenue, Helena, Montana at 10:00 a.m.
Montana time, for the purposes set forth in the attached Notice of Annual
Meeting of Stockholders. This Proxy Statement is first being mailed to
stockholders on or about September 19, 2000.
Each proxy solicited hereby, if properly signed and returned to Eagle and
not revoked prior to its use, will be voted in accordance with the instructions
indicated on the proxies. If no contrary instructions are given, each signed
proxy received will be voted in favor of the election of Messrs. Maierle and
McCarvel, in favor of the ratification of Anderson ZurMuehlen & Co., P.C., in
favor of the Stock Incentive Plan, and in the discretion of the proxy holder, as
to any other matter which may properly come before the Annual Meeting. Only
proxies that are returned can be counted and voted at the Annual Meeting.
SOLICITATION OF PROXIES
All costs of the solicitation of proxies will be borne by Eagle. In
addition, directors, officers and other employees of Eagle or American Federal
Savings Bank (the "Bank" or "American Federal") may solicit proxies personally
or by telephone or other means without additional compensation. Eagle will
reimburse brokerage firms and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of Common Stock.
REVOCATION OF PROXIES
A stockholder who has given a proxy may revoke it at any time prior to its
exercise at the Annual Meeting by (i) giving written notice of revocation to the
Secretary of Eagle, (ii) properly submitting to Eagle a duly-executed proxy
bearing a later date, or (iii) attending the Annual Meeting and voting in
person. All written notices of revocation and other communications with respect
to revocation of proxies should be addressed as follows: Eagle Bancorp, 1400
Prospect Avenue, Helena, Montana 59601, Attention: Deborah M. Willey. Proxies
solicited hereby may be exercised only at the Annual Meeting and will not be
used for any other meeting.
VOTING SECURITIES
The securities that may be voted at the Annual Meeting consists of shares
of Common Stock, with each share entitling its owner to one vote on all matters
to be voted on at the Annual Meeting. Only holders of record of Common Stock at
the close of business on September 8, 2000, (the "Record Date") will be entitled
to notice of and to vote at the Annual Meeting. On the Record Date there were
1,223,572 shares of Common Stock issued and outstanding. 648,493 shares of
Common Stock are held by Eagle Financial MHC, Eagle's mutual holding company.
Eagle had no other class of securities outstanding at this time.
1
<PAGE>
The presence in person or by proxy of the holders of at least a majority
of the total number of shares of Common Stock entitled to vote is necessary to
constitute a quorum at the Annual Meeting. With respect to any matter, any
shares for which a broker indicates on the proxy that it does not have
discretionary authority as to such shares to vote on such matter ("Broker
Non-Votes") will be considered present for the purposes of determining whether a
quorum is present. In the event there are not sufficient votes for a quorum or
to approve or ratify any proposal at the time of the Annual Meeting, the Annual
Meeting shall be adjourned in order to permit further solicitation of proxies.
VOTING PROCEDURES
Once a quorum has been established, the affirmative vote of a majority of
the outstanding shares of Common Stock present or represented by proxy at the
Annual Meeting is required to approve the proposals described in this proxy
statement, except as described below. Additionally, directors can be elected by
a plurality of stockholders. Stockholders are not permitted to cumulate their
votes for the election of directors or any other purpose. Votes may be cast for
or withheld from each nominee for election as directors. Votes that are withheld
and Broker Non-Votes will have no effect on the outcome of the election for
directors because directors will be elected by a plurality of votes cast.
With respect to the other proposals to be voted upon at the Annual
Meeting, stockholders may vote for or against a proposal and may abstain from
voting. Ratification of Anderson ZurMuehlen & Co., P.C. as independent auditors
for the fiscal year ending June 30, 2001, will require the affirmative vote of a
majority of the outstanding shares of Common Stock present in person or by proxy
at the Annual Meeting and entitled to vote. Abstentions and Broker Non-Votes
will have the same effect as a vote against this proposal.
Approval of the Stock Incentive Plan will require the affirmative vote of
the holders of the majority of total votes eligible to be cast at the Annual
Meeting (excluding shares of Common Stock held by Eagle Financial MHC).
Abstentions and Broker Non-Votes will have the same effect as a vote against the
approval of the Stock Incentive Plan.
The Company's annual report on Form 10-KSB for its fiscal year ended June
30, 2000, is mailed herewith to stockholders. The Company has filed with the
Securities and Exchange Commission (the "SEC") this report. Stockholders may
obtain, free of charge, an additional copy of the annual report on Form 10-KSB
by requesting it by telephone or in writing from Deborah M. Willey, Eagle
Bancorp, 1400 Prospect Avenue, Helena, Montana 59601, (406) 442-3080.
Executed, unmarked proxies will be voted FOR all proposals.
Proxies solicited hereby are to be returned to the Company's transfer
agent, Registrar & Transfer Company. The Board of Directors has designated
Deborah M. Willey, corporate secretary, to act as Inspector of Election and
tabulate votes at the Annual Meeting. After the final adjournment of the Annual
Meeting, the proxies will be returned to the Company.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of June 30, 2000, except as
specifically noted, with respect to ownership of the Company's Common Stock by:
(i) Eagle Financial MHC, the company's mutual holding company; (ii) the American
Federal Savings Bank Employee Stock Ownership Plan (the "ESOP"); (iii) the
executive officers and directors of the Company; and (iv) all the directors and
executive officers of the Company as a group. Except for those listed below,
Eagle has no knowledge of any other person (including any "group" as that term
is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended)
who owns beneficially more than 5% of the Common Stock.
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<TABLE>
<CAPTION>
Common Stock
Beneficially Owned(1)
---------------------
Name Title or Address Number(2) Percent
---- ---------------- --------- -------
<S> <C> <C> <C>
Eagle Financial MHC 1400 Prospect Avenue 648,493 53.00%
Helena, MT 59601
American Federal Savings Bank 1400 Prospect Avenue
Employee Stock Ownership Plan Helena, MT 59601 46,006 3.76%
Robert L. Pennington Chairman of the Board 17,500(3) 1.43%
Charles G. Jacoby Vice Chairman of the Board 13,750 1.12%
Don O. Campbell Director 6,250 *
Larry A. Dreyer Director, President and Chief 17,500 1.43%
Executive Officer
Teresa Hartzog Director 11,250 *
James A. Maierle Director 13,750(4) 1.12%
Thomas J. McCarvel Director 8,250 *
Peter J. Johnson Senior Vice President/Treasurer 12,550(5) 1.03%
Michael C. Mundt Senior Vice President/Lending 5,000 *
Joanne Y. Sanderson Senior Vice President/Operations 17,500 1.43%
Directors and Executive Officers as a
group (10 persons) N/A 123,300 10.08%
</TABLE>
--------------------
(1) Except as otherwise noted, all beneficial ownership by directors and
executive officers is direct and each director or executive officer
exercises sole voting and investment power over the shares.
(2) Reflects information provided by these persons, filings made by these
persons with the Securities and Exchange Commission, and other information
known to Eagle.
(3) Includes 5,000 shares held jointly by Mr. Pennington and his spouse. Mr.
Pennington has shared voting and investment power over these 5,000 shares.
(4) Includes 5,000 shares held by Rosmar, Inc. Mr. Maierle is President of
Rosmar, Inc.
(5) Includes 50 shares held by children.
* Represents less than 1% of outstanding shares.
---------------
3
<PAGE>
PROPOSAL I - ELECTION OF DIRECTORS
The Company's Bylaws provide that the Board of Directors be composed of
seven (7) members, whose terms are divided into three approximately equal
classes. The members of each class are elected for a term of three years. One
class is elected annually.
Two directors will be elected at the Annual Meeting. The Board of
Directors has nominated current directors James A. Maierle and Thomas J.
McCarvel for re-election. If elected, Messrs. Maierle and McCarvel will each
serve as director for a three year term expiring at the Annual Meeting to be
held in 2003.
The Board of Directors acts as Eagle's Nominating Committee and determines
management nominees for election as directors. The Bylaws also allow
stockholders to submit nominations in writing directly to the Corporate
Secretary of the Company not fewer than five (5) days prior to the date of the
Annual Meeting. No stockholder nominations have been received by the Company.
There are no arrangements known to management between the persons named and any
other person pursuant to which such nominees were selected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE ABOVE
NOMINEES FOR DIRECTOR UNDER THIS PROPOSAL I.
The persons named in the enclosed proxy intend to vote for the election of
the named nominees, unless the proxy is marked by the stockholder to the
contrary. Eagle Financial MHC, which owns a majority of the Company's common
stock, also intends to vote its shares in favor of the named nominee. If any
nominee is unable to serve, all valid proxies will be voted for the election of
such substitute as the Board of Directors may recommend. The Board of Directors
knows of no reason why any nominee might be unable to serve.
The following table sets forth certain information, as of June 30, 2000,
with respect to each nominee, and each director continuing in office.
<TABLE>
<CAPTION>
Name Age Director Since(1) New or Current Term to Expire(2)
---- --- ----------------- --------------------------------
<S> <C> <C> <C>
BOARD NOMINEES
James A. Maierle 52 1997 2003
Thomas J. McCarvel 51 1998 2003
DIRECTORS CONTINUING IN OFFICE
Robert L. Pennington 68 1973 2001
Don O. Campbell 66 1994 2001
Larry A. Dreyer 54 1990 2002
Teresa Hartzog 70 1993 2002
Charles G. Jacoby 67 1979 2001
</TABLE>
--------------------
(1) Includes prior service on the Board of Directors of American Federal
Savings Bank.
(2) All terms expire on the date of the Annual Meeting.
---------------
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<PAGE>
The principal occupation for the last five years for each nominee and
continuing director of the Company is set forth below.
Robert L. Pennington Mr. Pennington is the Chairman of Eagle. He
was previously the President and Chief
Executive Officer of American Federal Savings
Bank from 1974 through 1995, when he retired.
He has served as Chairman of American Federal
since 1993.
Charles G. Jacoby Mr. Jacoby is retired. He formerly owned a
retail clothing establishment in Helena. He
serves as Vice Chairman of the Board.
Don O. Campbell Mr. Campbell is a certified public accountant
and previously served as Vice President and
Controller of Capri, Inc., an investment
management company located in Helena.
Larry A. Dreyer Mr. Dreyer is currently President (since 1993)
and Chief Executive Officer (since 1995) of
American Federal. He is also President and CEO
of Eagle. He joined American Federal Savings
Bank in 1973, serving as its Controller. He is
a board member of the Lewis and Clark County
United Way, a member and past president of the
Downtown Helena Kiwanis Club and past chairman
of both the St. Peter's Hospital Foundation
and Diocese of Helena Finance Council. He is
also a member of the Independent Community
Bankers of America, National Bank Services
Committee.
Teresa Hartzog Ms. Hartzog is retired. She was formerly
employed by the Leaphart law firm where she
served as office manager and a legal
secretary.
Thomas J. McCarvel Mr. McCarvel currently serves as a Vice
President of Carroll College in Helena. He was
previously the Chief Operating Officer of
Anderson ZurMuehlen & Co., P.C., a public
accounting firm in Helena, Montana, and Eagle
and American Federal's independent auditors.
James A. Maierle Mr. Maierle currently serves as President of
Morrison-Maierle, Inc., a civil engineering
corporation, headquartered in Helena.
Board Meetings and Committees
The Board of Directors currently meets once a month and may have
additional meetings. During the fiscal year ended June 30, 2000, the Board met
17 times. All Directors who served as directors during the fiscal year ended
June 30, 2000, attended at least 75% of Board meetings. All committee members
attended at least 75% of the meetings of their respective committees. The
standing committees include the following:
Audit Committee. The Audit Committee met five (5) times during the fiscal
year ended September 30, 2000. The Audit Committee reviews the internal audit
department of the Bank as well as selecting the independent auditors for Eagle.
It also has oversight of the Bank's internal control structure and financial
reporting and reviews the Bank's annual audit plan. This committee currently
consists of Campbell and Jacoby.
Compensation Committee. The Compensation Committee met one (1) time in
fiscal 2000. It reviews and discusses employee performance and prepares
recommendations for annual salary adjustments and bonuses. This committee
currently consists of Messrs. Pennington and Campbell and Ms. Hartzog.
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<PAGE>
The Investment Committee. The Investment Committee consists of Directors
Dreyer, Jacoby and Maierle, as well as executive officers Johnson and Mundt. The
Investment Committee meets at least quarterly in order to review investment
performance and strategy. The Investment Committee met five (5) times during the
year ended June 30, 2000.
The Asset Liability Management Committee. The Asset Liability Management
Committee consists of Directors Pennington and Dreyer as well as executive
officers Johnson and Mundt. The Asset Liability Management Committee meets at
least quarterly to review American Federal's policies concerning interest rate
risk and loan and deposit rates. It met four (4) times during the year ended
June 30, 2000.
Directors' Compensation
During fiscal 2000, each director, except for the Chairman of the Board,
was paid an annual fee of $12,000. The Chairman of the Board receives an annual
fee of $19,800. Also, each non-employee director, other than the Chairman of the
Board, was paid $130 for each committee meeting attended. The total fees paid to
the directors of Eagle for the year ended June 30, 2000, were approximately
$97,400. Eagle has no other director compensation plans or director deferred
compensation plans. Each director of the Company also serves as a director of
American Federal and Eagle Financial MHC. Directors do not receive additional
compensation for their service on the boards of American Federal or Eagle
Financial MHC.
Executive Compensation
Summary Compensation Table. The following table sets forth the cash and
non-cash compensation awarded to or earned by Larry A. Dreyer in each of the
last two fiscal years. No other executive officer of Eagle or American Federal
served as President or earned a total salary and bonus in excess of $100,000
during these two fiscal years.
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------------------------
As of Other Annual All Other
Name and Position June 30(1) Compensation Bonus Compensation(2) Compensation(3)
----------------- ---------- ------------ ----- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Larry A. Dreyer 2000 $98,000 $6,860 $12,000 $33,482
President and Chief Executive Officer 1999 $96,000 $9,025 $12,000 $29,875
</TABLE>
----------
(1) Compensation information for the fiscal year ended June 30, 1998 has
been omitted as American Federal Savings Bank was not a public company nor a
subsidiary thereof at such times.
(2) Represents compensation for serving on the board of directors of Eagle
Bancorp in fiscal 2000 and American Federal in fiscal 1999.
(3) For fiscal 2000 consists of employer contribution to profit sharing
plan of $10,489, $1,463 for employer 401(k) payments, $18,002 for employer
deferred compensation payments and $3,529 for various medical and life insurance
payments.
--------------------
6
<PAGE>
Employment Agreement. American Federal entered into an Employment
Agreement with its President, Larry A. Dreyer, effective January 1, 2000. The
Employment Agreement has an initial term of three years. The Employment
Agreement is terminable by the Bank for cause as defined in the Employment
Agreement. If Mr. Dreyer is terminated without cause, he will be entitled to a
continuation of his salary plus bonuses and deferred compensation from the date
of termination through the remaining term of the Employment Agreement. The
aggregate payment made to Mr. Dreyer would be an expense to the Bank and would
result in reductions to net income and capital. After the first three years, the
Employment Agreement may be renewed annually by the board of directors after a
determination of the satisfactory performance of Mr. Dreyer in the Board's sole
discretion. If Mr. Dreyer becomes disabled during the term of the Employment
Agreement, he would continue to receive payment of 75% of the base salary until
he returns to full-time employment at American Federal, reaches age 65, accepts
another full-time position with another employer, or upon his death. Such
payments shall be reduced by any other benefit payments made under a disability
plan in effect for Mr. Dreyer and the Bank's other employees.
Non-Contributory Profit Sharing Plan. Neither Eagle nor American Federal
has a pension plan for employees. Instead, the Bank has established a
non-contributory profit sharing plan for eligible employees who have completed
one year of service with American Federal. The non-contributory plan enables
American Federal to contribute up to 15% of qualified salaries each year.
Typically 10% is contributed. The percentage amount of the contribution is
determined by the board of directors each year and is based primarily on
profitability for the past year. For the year ended June 30, 2000, the Board
authorized profit sharing contributions to Mr. Dreyer of $10,498 and total
contributions of $177,000.
The Non-Contributory Profit Sharing Plan also allows employees to make
contributions to a tax-qualified defined contribution savings plan or an
employee owned 401(k) plan. Employees can contribute a portion of their
salaries, (up to a maximum of $10,500 for calendar 2000), to a 401(k) plan.
Eagle's board of directors has the authority to match up to a maximum of 50% of
an employee's contribution provided that the matching amount does not exceed
3.0% of such employee compensation. For the year ended June 30, 2000, the Bank
contributed $1,463 to Mr. Dreyer's 401(k) program and $19,000 in total to the
401(k) program.
Salary Continuation Agreement. Another benefit offered by American Federal
is a program to increase overall retirement benefits for employees to levels
which more closely approximate those in comparable businesses. American Federal
consulted with independent compensation consultants and developed a plan to
supplement retirement benefits. The plan American Federal adopted covers eight
of its senior officers, including Mr. Dreyer and all senior vice presidents and
vice presidents. It is a non-qualified retirement plan which is designated the
American Federal Savings Bank Salary Continuation Agreement (the "Salary
Continuation Agreement"). Under the Salary Continuation Agreement, each officer
receives a fixed retirement benefit based on his or her years of service with
American Federal. This plan is funded by insurance policies owned by American
Federal. It also provides for partial payments in the event of early retirement,
death or disability. In Mr. Dreyer's case, if he retires at age 65, the Salary
Continuation Agreement provides for a lump sum payment of $414,000, or an annual
payment for life of $45,000. American Federal has purchased life insurance
contracts for each covered executive to fund the payments. American Federal
Savings Bank recognizes expenses to maintain the plan. For the year ended June
30, 2000, the total expenses were $71,000.
The plan also contains a provision which reduces the annual or lump sum
benefit to Mr. Dreyer by 10% and to other executives by 5% in the event any of
the executives or Mr. Dreyer is the recipient of stock options from Eagle
Bancorp. If the Stock Incentive Plan is approved pursuant to Proposal III, it is
anticipated that Mr. Dreyer will be awarded stock options and, therefore, will
have his benefit under the Salary Continuation Agreement reduced.
Bonus Plan. American Federal also provides a discretionary bonus program
("Bonus Program") for all eligible employees. The Bonus Program is based on the
after-tax net profitability of American Federal and is linked specifically to
the Bank's return on assets. In the case of non-officer employees, bonus amounts
are based on salary levels. Under the Bonus Program, the Bank's return on assets
for the period from January through October is used to determine the bonus
levels of Bank officers. Officers' bonuses are directly linked to the return on
assets. For example, if American Federal Savings Bank produces a return on
assets of .90%, then each officer would receive a
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<PAGE>
bonus of 9% of annual base salary. For the year ended June 30, 2000, American
Federal Savings Bank paid total bonuses of $99,000. Mr. Dreyer's bonus during
this period was $6,860.
Employee Stock Ownership Plan. In connection with its reorganization to
the mutual holding company form of organization, the Bank established the ESOP
for employees age 21 or older who have at least one year of credited service
with the Bank.
As of June 30, 2000, the ESOP held 46,006 shares of Common Stock. These
shares represent shares purchased by the ESOP in the offering. Shares of Common
Stock purchased by the ESOP were funded by funds borrowed from Eagle. Shares
purchased in the reorganization by the ESOP will be allocated to participants'
accounts over ten (10) years.
The ESOP is administered by an unaffiliated corporate trustee in
conjunction with the ESOP Committee of the Bank. The ESOP trustee must vote all
allocated shares held by the ESOP in accordance with the instructions of
participating employees. Shares for which employees do not give instructions
will be voted by the ESOP trustee.
GAAP requires that any third party borrowing by the ESOP be reflected as a
liability on Eagle's statement of financial condition. Since the ESOP is
borrowing from Eagle, such obligation is eliminated in consolidation. However,
the cost of unallocated shares are treated as a reduction of shareholders'
equity.
Contributions to the ESOP and shares released from the suspense account
are allocated among ESOP participants on the basis of participants' compensation
as it relates to total participant compensation. Employees are fully vested upon
completion of seven (7) years of service. Benefits may be payable upon
retirement, early retirement, disability, death or separation from service.
The ESOP is subject to the requirements of ERISA and regulations of the
IRS and the United States Department of Labor.
CERTAIN TRANSACTIONS
No directors, executive officers or immediate family members of such
individuals were engaged in transactions with Eagle, American Federal or any
subsidiary involving more than $60,000 (other than through a loan) during the
fiscal year ended June 30, 2000. Furthermore, Eagle has no "interlocking"
relationships in which any executive officer is a member of the board of
directors of another entity, one of whose executive officers are a member of
American Federal's board of directors. It also does not have any executive
officer who is a member of the compensation committee of another entity, one of
whose executive officers is a member of American Federal's board of directors.
American Federal has followed the policy of offering residential mortgage
loans for the financing of personal residences, and consumer loans to its
officers, directors and employees. Loans are made in the ordinary course of
business. They are also made on substantially the same terms and conditions,
including interest rate and collateral, as those of comparable transactions
prevailing at the time with other persons. These loans do not include more than
the normal risk of collectibility or present other unfavorable features. As of
June 30, 2000, the aggregate principal balance of loans outstanding to all
directors, executive officers and immediate family members of such individuals
was approximately $81,000.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCES
To the knowledge of the Board and based upon a review of Forms 3 and 4 and
amendments thereto furnished to the Company pursuant to Rule 16a-3(e) during the
fiscal year ended June 30, 2000, no person who is a director, officer or
beneficial owner of 10% of the Common Stock failed to file on a timely basis,
the reports required by Section 16(a) of the Securities Exchange Act.
8
<PAGE>
PROPOSAL II - RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed the firm of Anderson
ZurMuehlen & Co., P.C., Certified Public Accountants, to act as independent
auditors for the Company for the fiscal year ending June 30, 2000, subject to
ratification of such appointment by the stockholders. A representative of
Anderson ZurMuehlen & Co., P.C. will be present at the Annual Meeting, will be
given an opportunity to make a statement if he or she desires to do so and will
be available to respond to appropriate questions. Eagle Financial MHC intends to
vote its shares of Common Stock in favor of the ratification of the appointment
of Anderson ZurMuehlen & Co., P.C.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF Anderson ZurMuehlen & Co., P.C. AS THE COMPANY'S INDEPENDENT
AUDITORS FOR FISCAL 2001 UNDER THIS PROPOSAL II.
Information Concerning Change in Auditor. On April 20, 2000, the board of
directors of Eagle approved a change in auditors. Specifically, the Board
determined to replace Moss Adams LLP ("Moss Adams") with Anderson ZurMuehlen &
Co., P.C. Anderson ZurMuehlen & Co., P.C. has audited the financial statements
of Eagle and its subsidiary, American Federal for the fiscal year ended June 30,
2000.
Moss Adams' report on the financial statements for the fiscal year ended
June 30, 1999, did not contain an adverse opinion or disclaimer of opinion and
was not qualified as to uncertainty, audit scope or accounting principles.
During the fiscal year ended June 30, 1999, and through the date hereof, there
were no disagreements between Eagle or the Bank and Moss Adams on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure.
During the fiscal year ended June 30, 1999, and through the date hereof,
Moss Adams did not advise, and has not indicated to Eagle or the Bank that it
had any reason to advise Eagle or the Bank of the following:
o that the internal controls necessary for Eagle to develop
reliable financial statements did not exist;
o that information had come to Moss Adams' attention that had
led it to no longer be able to rely on management's
representations, or that made it unwilling to be associated
with the financial statements prepared by management;
o that Moss Adams needed to expand significantly the scope of
Eagle or the Bank's audit, or that information had come to
Moss Adams' attention during such time period that if further
investigated might materially impact the fairness or
reliability of a previously issued audit report or the
underlying financial statements. Further, Moss Adams did not
advise Eagle or the Bank that matters came to its attention
which would materially impact upon the financial statements
issued or to be issued covering the fiscal periods subsequent
to the date of the most recent financial statements covered by
an audit report (including information that may prevent it
from rendering an unqualified audit report on those financial
statements). In addition, Eagle or the Bank were not advised
by Moss Adams of any matters that would cause it to be
unwilling to rely on management's representation or to be
associated with Eagle or the Bank's financial statements;
o that information had come to Moss Adams' attention that it had
concluded materially impacted the fairness or reliability of
either a previously issued audit report or the underlying
financial statements, or the financial statements issued or to
be issued covering the fiscal periods subsequent to the date
of the most recent financial statements covered by an audit
report (including information that, unless resolved to Moss
Adams' satisfaction, have prevented it from rendering an
unqualified audit report on those financial statements);
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Eagle requested Moss Adams to furnish it with a letter addressed to the
Securities and Exchange Commission stating whether or not Moss Adams agrees with
the statements made by Eagle herein and, if not, stating the respects to which
Moss Adams does not agree. A copy of such letter has been filed with the
Securities and Exchange Commission as an Exhibit to Eagle's Form 10-KSB.
The Board has determined to appoint Anderson ZurMuehlen & Co., P.C. as
Eagle and the Bank's outside independent auditor because the Board has
determined that it is in the best interest of Eagle and its shareholders to
engage a local accounting firm. Anderson ZurMuehlen & Co., P.C. has an office
in, and is based in, Helena, Montana. Moss Adams does not have such an office.
Anderson ZurMuehlen & Co., P.C. previously provided accounting services to the
Bank, including auditing the financial statements of the Bank for each of the
fiscal years up to and including the fiscal year ended June 30, 1998. During
this period, Anderson ZurMuehlen & Co., P.C. was the Bank principal accountant.
In that connection, Anderson ZurMuehlen & Co., P.C. met with directors and
senior officers of the Bank and discussed its audit reports of the Bank.
Anderson ZurMuehlen & Co., P.C.'s audit reports for these periods did not
contain an adverse opinion or disclaimer of opinion and were not qualified as to
uncertainty, audit scope or accounting principles. The Bank and Anderson
ZurMuehlen & Co., P.C. have had no disagreements on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure.
Eagle requested Anderson ZurMuehlen & Co., P.C. to furnish it with a
letter addressed to the Securities and Exchange Commission stating whether or
not Anderson ZurMuehlen & Co., P.C. agrees with the statements made by Eagle
herein and if not, stating the respects to which Anderson ZurMuehlen & Co., P.C.
does not agree. A copy of such letter was filed with the Securities and Exchange
Commission on Form 8-K on April 27, 2000.
PROPOSAL III - APPROVAL OF EAGLE BANCORP
2000 STOCK INCENTIVE PLAN
The Eagle Bancorp 2000 Stock Incentive Plan (the "Stock Incentive Plan")
authorizes up to 80,511 shares of Common Stock to be made available to
non-employee directors, officers and employees as options (incentive or
nonqualified) (collectively, "Options"), or restricted stock ("Recognition and
Retention Plan Stock" or "RRP Stock") as described below. Options under the
Stock Incentive Plan are rights to purchase Common Stock at a fixed price set
forth in an option agreement, generally the fair market value at the date of
grant. RRP Stock is an award of actual stock subject to forfeiture provisions if
the recipient leaves the Company or the Bank before a specified number of years.
The purpose of the Stock Incentive Plan is to attract and retain qualified
personnel in key positions and provide officers, employees and non-employee
directors with a proprietary interest in Eagle as an incentive to contribute to
the success of Eagle. Additionally, the Stock Incentive Plan serves to promote
the attention of management to stockholders' concerns and to reward employees
for outstanding performance. The following is a summary of the material terms of
the Stock Incentive Plan, which is qualified in its entirety by the complete
provisions of the Stock Incentive Plan, attached hereto as Exhibit A.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE EAGLE BANCORP 2000 STOCK INCENTIVE PLAN UNDER THIS PROPOSAL III
General. The Stock Incentive Plan authorizes the granting of options to
purchase Common Stock and awards of RRP Stock. The maximum number of shares
reserved for purchase pursuant to the exercise of options is 57,508 shares,
provided such number is not in excess of 4.70% of the outstanding shares of
Common Stock as of the effective date of the Stock Incentive Plan. The maximum
number of the shares reserved for the award of RRP Stock is 23,003 shares,
provided such number is not in excess of 1.88% of the outstanding shares of
Common Stock as of the effective date of the Stock Incentive Plan. All officers,
employees and non-employee directors of the Company and its affiliates are
eligible to receive awards under the Stock Incentive Plan. The Stock Incentive
Plan will be administered by the Compensation Committee of the Company (the
"Committee"). Authorized but unissued shares or shares previously issued and
reacquired by the Company may be used to satisfy the awards under the Stock
Incentive Plan. If authorized but unissued shares are utilized to fund the grant
of RRP Stock or the exercise of options granted under the Stock Incentive Plan,
it will result in an increase in the number of shares outstanding
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and will have a dilutive effect on the holdings of existing stockholders.
Management's current intention is to purchase Common Stock from market sources
in order to fund the grants to RRP Stock. However, management's intention is
based on current market conditions and is subject to change.
Stock Option Awards. The Stock Incentive Plan permits the award of Options
to employees and officers of the Bank or the Company in the form of either
incentive options qualified under ss. 422 of the Code ("Incentive Stock Options"
or "ISO") or as nonqualified stock options. Non-employee directors are only
eligible to receive grants of non-qualified stock options. Under the Stock
Incentive Plan, the Committee will determine which non-employee directors,
officers and employees will be granted Options, whether such Options will be
ISOs or nonqualified stock options, and when such Options can be exercised.
Under the terms of the Stock Incentive Plan, any Option granted prior to April
4, 2001, may not vest in annual installments of greater than 20% of the number
of shares underlying the Option award. Vesting must not commence earlier than at
least one year from the date of the grant. Finally, the vesting of such Options
may not be accelerated, except in the case of death or disability. The exercise
price of all Incentive Stock Options must be at least 100% of the fair market
value of the underlying Common Stock at the time of grant, except as provided
below. The criteria used for the award of Options will be determined by the
Committee. The Committee may take into account job duties and responsibilities,
seniority, job performance, and a comparison of similar awards by companies
comparable to the Company when granting Options to officers, employees and
directors.
Incentive Stock Options may only be granted to officers and employees. In
order to qualify as Incentive Stock Options under Section 422 of the Code, the
exercise price must not be less than 100% of the fair market value of the
underlying Common Stock on the date of the grant and the term of the Option may
not exceed ten years from the date of grant. Incentive Stock Options granted to
any person who is the beneficial owner of more than 10% of the outstanding
Common Stock may be exercised only for a period of five years from the date of
grant and the exercise price must be at least equal to 110% of the fair market
value of the underlying Common Stock on the date of grant.
The Stock Incentive Plan permits the Committee to grant, in its
discretion, non-qualified options at fair market value to directors, as well as
to officers and employees. No awards of any nature are specifically contemplated
at this time. Unless sooner terminated, the Stock Incentive Plan will be in
effect for a period of ten years from the date of approval by Eagle's
stockholders.
Tax Treatment of Options. A recipient will generally not be deemed to have
recognized taxable income upon grant or exercise of any Incentive Stock Option,
provided that shares transferred in connection with the exercise are not
disposed of by the optionee for at least one year after the date the shares are
transferred in connection with the exercise of the option and two years after
the date of grant of the option. If certain holding periods are satisfied, upon
disposal of the Common Stock, the aggregate difference between the per share
option exercise price and the fair market value of the Common Stock is
recognized as income taxable at long-term capital gains rates. No compensation
deduction may be taken by the Company as a result of the grant or exercise of
Incentive Stock Options, assuming these holding periods are met.
For nonqualified stock options and, in the case of a disqualifying
disposition of an Incentive Stock Option, a recipient will be deemed to receive
ordinary income upon exercise of the stock option in an amount equal to the
amount by which the exercise price of the option is exceeded by the fair market
value of the Common Stock purchased by exercising an option on the date of
exercise. The amount of any ordinary income deemed to be received by an optionee
upon the exercise of a nonqualified stock option, or due to a disqualifying
disposition of an Incentive Stock Option, would be a deductible expense for tax
purposes by Eagle.
As of September 12, 2000, the closing price per share of the Common Stock
as reported on the OTC Bulletin Board was $10 3/8.
Recognition and Retention Plan Stock Awards. The Stock Incentive Plan also
permits the use of Recognition and Retention Plan Stock awards ("RRP Stock").
Under the terms of the Stock Incentive Plan up to 23,003 of the shares contained
in the Stock Incentive Plan are available for awards as RRP Stock. The terms of
the
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RRP Stock awards shall be set by the Committee at the time of grant; however,
pursuant to OTS policy, any RRP Stock granted prior to April 4, 2001, may not
vest at a rate greater than 20% per year nor begin to vest sooner than one year
from the date of grant. The vesting of any RRP Stock so granted may not be
accelerated, except in the case of death or disability. The use of RRP Stock is
intended to enable the Company and the Bank to retain personnel of experience
and ability in key positions of responsibility.
Restricted stock awards to officers, employees and non-employee directors
will be granted based upon a number of factors to be determined by the
Committee, including seniority, job duties and responsibilities, job
performance, and a comparison of similar awards by companies comparable to the
Company. Common Stock used for RRP Stock awards may be authorized but unissued
shares or previously issued shares of Common Stock repurchased by the Company.
Tax Treatment of RRP Stock. Recipients of the RRP Stock will recognize
income for the taxable years in which stock becomes vested without restriction,
unless the recipients elect to be taxed in an earlier year before the RRP Stock
is vested. The Company will receive a tax deduction for the fair market value of
the shares when included in income by recipients. Any increase in the value of
the Common Stock would increase the tax deduction taken by the Company. Likewise
a decrease in the value of the Common Stock would decrease the tax deduction
taken by the Company.
Amendment, Termination or Revision of the Stock Incentive Plan. The
Committee may amend or terminate the Stock Incentive Plan at any time. Such
amendments are required to be approved by stockholders in accordance with
applicable law and regulation if such approval is required to satisfy
requirements of the Securities and Exchange Commission under Rule 16b-3 under
the Securities Exchange Act of 1934 or other regulatory requirements. The Stock
Incentive Plan terminates ten years after its effective date. The Stock
Incentive Plan permits Options which expire to be reissued. The Stock Incentive
Plan permits adjustment by the Committee of the number of shares to reflect
reclassification, recapitalization or similar capital change. The adjustments by
the Committee shall be conclusive and binding on the Company and any
participants. The Committee's adjustments are designed to maintain the same
proportion for the number of shares which existed before the event requiring
adjustment.
Stockholder Approval. The Stock Incentive Plan complies with the
regulations of the Office of Thrift Supervision ("OTS"). The OTS has not
endorsed or approved of the Stock Incentive Plan. Pursuant to OTS regulations,
the Stock Incentive Plan may not be implemented prior to April 4, 2001, unless
it is approved by the affirmative vote of the holders of a majority of the total
votes eligible to be cast by the Company's stockholders, other than those held
by Eagle Financial MHC, at a duly called meeting of stockholders held no earlier
than six months after completion of the reorganization.
The Stock Incentive Plan provides that it shall become effective upon the
earlier of: (i) the date that it is approved by the Company's stockholders as
provided above; or (ii) April 4, 2001. Accordingly, if the Stock Incentive Plan
is not approved at the Annual Meeting, the Stock Incentive Plan, and any grants
thereunder, may become effective on April 4, 2001, without further stockholder
approval, unless it is terminated by the Board of Directors. However, in the
absence of approval of the Stock Incentive Plan by stockholders, the Board of
Directors will review applicable law before implementation of the Stock
Incentive Plan. If the Board determines to implement the Stock Incentive Plan
under such circumstances, the Options awarded under the Stock Incentive Plan
would not qualify as Incentive Stock Options under the Code, and the Company's
qualification to have the Common Stock quoted on the OTC Bulletin Board.
NEW PLAN BENEFITS
As of the date of this Proxy Statement, no determination has been made
regarding the granting of RRP Stock or Options under the Stock Incentive Plan.
However, under OTS regulations governing stock incentive plans adopted within
one year of reorganization, or April 4, 2001, in the case of Eagle, no
individual employee may receive more than 25% of the shares of any plan and
non-employee directors may not receive more than 5% of any
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plan individually or 30% in the aggregate for all directors. Any grants made
under the Stock Incentive Plan will comply with these limitations.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors of the
Company knows of no matters to be brought before the Annual Meeting other than
procedural matters incident to the conduct of the Annual Meeting. If further
business is properly presented, the proxy holders will vote proxies, as
determined by a majority of the Board of Directors.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Pursuant to the proxy solicitation regulations of the Securities and
Exchange Commission (the "SEC"), any shareholder proposal intended for inclusion
in the Company's proxy statement and form of proxy related to the Company's 2001
Annual Meeting of stockholders must be received by the Company by May 22, 2001,
pursuant to the proxy solicitation regulations of the SEC. Nothing in this
paragraph shall be deemed to require the Company to include in its proxy
statement and form of proxy any stockholder proposal which does not meet the
requirements of the SEC in effect at that time.
Whether or not you intend to be present at the Annual Meeting, you are
urged to return your proxy card promptly. If you are then present at the Annual
Meeting and wish to vote your shares in person, your original proxy may be
revoked by voting at the Annual Meeting. However, if you are a stockholder whose
shares are not registered in your own name, you will need appropriate
documentation from your recordholder to vote personally at the Annual Meeting.
By Order of the Board of Directors
/s/ Larry A. Dreyer
Larry A. Dreyer
President and CEO
Helena, Montana
September 15, 2000
<PAGE>
EXHIBIT A
EAGLE BANCORP
2000 Stock Incentive Plan for Directors, Officers and Employees
This 2000 Stock Incentive Plan (the "Plan") governs: (i) grants of options
to purchase shares of the common stock, $.01 par value (the "Common Stock") of
Eagle Bancorp (the "Company" or "Eagle") ("Options"), and (ii) awards of
restricted Common Stock ("Recognition and Retention Plan Stock" or "RRP Stock")
by the Company to directors, officers and employees of the Company or American
Federal Savings Bank (the "Bank"). The Plan is intended to provide additional
incentives to promote the future success and growth of the Company by providing
participants with a direct stake in the Company and, in the case of officers and
employees, to encourage qualified persons to seek and accept employment with the
Company. The Plan will be effective on the earlier of October 19, 2000, or the
date that the Plan is approved by stockholders of Eagle (the "Effective Date").
I. Administration of the Plan.
(a) The Compensation Committee of Eagle (the "Committee") shall administer
the Plan. The Committee shall at all times consist of two or more disinterested
directors of the Company, who shall be appointed by the Board of Directors. A
member of the Board of Directors shall be deemed to be "disinterested" only if
he satisfies (i) such requirements as the Securities and Exchange Commission may
establish for non-employee directors administering plans intended to qualify for
exemption under Rule 16b-3 (or its successor) under the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and (ii) such requirement as the
Internal Revenue Service may establish for outside directors acting under plans
intended to qualify for exemption under Section 162(m)(4)(C) of the Internal
Revenue Code of 1986, as amended (the "Code"). The Board of Directors may also
appoint one or more separate committees of the Board of Directors, each composed
of one or more directors of the Company who need not be disinterested and who
may grant awards and administer the Plan with respect to employees and directors
who are not considered officers or directors of the Company under Section 16 of
the Exchange Act or for whom awards are not intended to satisfy the provisions
of Section 162(m) of the Code.
(b) Within the limits of the Plan, the Committee shall determine the
individuals to whom, and the times at which, Options shall be granted and awards
made, the type of Option to be granted and the number of shares subject to each
Option or award. The Committee may establish such rules as it deems necessary
for the proper administration of the Plan, make such determinations and
interpretations with respect to the Plan and Options granted hereunder as may be
necessary or desirable and include such further provisions or conditions in such
Options as it deems advisable. Any determination or interpretation made by the
Committee hereunder shall be conclusive and binding upon both the Company and
the participant.
II. Shares Subject to the Plan.
(a) Subject to adjustment as provided in Section (b), below, the maximum
number of shares issuable under the Plan shall be 80,511. Subject to adjustment
as provided in Section (b), below, the maximum number of shares reserved for RRP
Stock under the Plan is 23,003, which number shall not exceed 1.88% of the
outstanding shares of the Common Stock determined as of the Effective Date.
Subject to adjustment as provided in section (b), below, the maximum number of
shares reserved hereby for purchase pursuant to the exercise of Options granted
under the Plan is 57,508, which number shall not exceed 4.70% of the outstanding
shares of Common Stock as of the Effective Date. The shares of Common Stock
issued under the Plan may be either authorized but unissued shares or authorized
shares previously issued and reacquired by the Company. To the extent that
Options and RRP Stock are granted under the Plan, the shares underlying such
awards will be unavailable for any other use including future grants under the
Plan except that, to the extent that RRP Stock or Options terminate, expire, or
are forfeited without having vested or without having been exercised, new awards
may be made with respect to these shares.
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(b) In the event of a stock dividend, split, combination or
reclassification of shares, recapitalization or other similar capital change
relating to the Common Stock, the aggregate number and kind of shares or
securities of the Company that may be issued under the Plan and the price of
such shares, shall be appropriately adjusted by the Committee (whose
determination shall be conclusive and binding upon both the Company and the
participant) so that the proportionate number of shares or securities shall be
maintained as before the occurrence of such event.
(c) Whenever Options or RRP Stock under the Plan lapse or terminate or
otherwise become unexercisable, the shares of Common Stock that were awarded as
RRP stock or subject to such Options may again be made awarded under the Plan.
The Company shall at all times while the Plan is in force reserve such number of
shares of Common Stock as will be sufficient to satisfy the requirements of the
Plan.
III. Participants.
Options and RRP Stock may be granted to directors, officers and other
employees provided that the Committee may exclude any individual from
eligibility under the Plan. The foregoing notwithstanding, Incentive Stock
Options may be awarded only to persons eligible under the Code.
IV. Options.
(a) Options may be granted under the Plan either as Incentive Stock
Options under Section 422 of the Code (or any successor section), or as
non-statutory stock options. Options may be granted from time to time by the
Committee, provided that no Incentive Stock Option shall be granted hereunder
after 10 years from the Effective Date hereof, or if the limitation of $100,000
set forth in the Code on the aggregate fair market value of Common Stock
underlying Incentive Stock Options exercisable for the first time by a
participant in any calendar year (or such other limitation as the Code may
prescribe) would be exceeded. The granting date for each Option shall be the
date on which it is approved by the Committee, or such later date as the
Committee may specify. Options granted hereunder shall be evidenced by stock
option certificates in such form not inconsistent with the Plan (which in the
case of Incentive Stock Options shall conform to the requirements for an
Incentive Stock Option contained in the Code) as the Committee may from time to
time determine. The form of such Options may vary among optionees.
(b) 1. In the case of Incentive Stock Options, the price per share at
which Common Stock may from time to time be optioned shall be
determined by the Committee at the time of grant, provided
that such price shall not be less than 100 percent of the fair
market value (110 percent in the case of employees who own or
are deemed to own more than 10 percent of the total combined
voting power of all classes of stock of the Company or any
subsidiary of the Company) of a share of Common Stock on the
granting date as reasonably determined by the Committee in
good faith (or such other minimum price as the Committee may
prescribe).
2. In the case of non-statutory stock options the price per share
at which Common Stock may from time to time be optioned shall
be determined by the Committee at the time of grant provided
that such price shall not be less than 100 percent of the fair
market value of a share of Common Stock on the granting date
as reasonably determined by the Committee in good faith (or
such other minimum price as the Committee may prescribe).
3. Common Stock purchased pursuant to an option agreement shall
be paid for in full at time of purchase. The purchase price
upon exercise of an Option may be paid in whole or in part in
(i) cash or (ii) whole shares of Common Stock which the
optionee has held for at least six months, evidenced by
negotiable certificates valued at their fair market value on
the date of exercise. Upon receipt of payment Eagle shall
deliver to the optionee (or other person entitled to exercise
the Option) a certificate or certificates for such shares. If
certificates representing shares of Common Stock are used to
pay all or part of the purchase price of an Option, the
Committee shall determine acceptable methods for tendering
Common Stock and may impose such limitations and prohibitions
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on the use of Common Stock to pay all or part of the purchase
price of an option as it deems appropriate. It shall be a
condition to the performance of Eagle's obligation to issue or
transfer Common Stock upon the exercise of an Option that the
optionee pay, or may provision satisfactory to Eagle for the
payment of, any taxes (other than stock transfer taxes) which
Eagle is obligated to collect with respect to the issue or
transfer of Common Stock upon such exercise.
(c) The Committee shall determine the term of all Options (provided in the
case of an Incentive Stock Option that the term shall not be greater than the
term prescribed by the Code, which is currently by 5 years in the case of
employees who own or are deemed to own more than 10 percent of the total
combined voting power of all classes of stock of the Company or any subsidiary
of the Company and 10 years in the case of other employees), the time or times
that Options are exercisable and whether they are exercisable in installments.
Such determination shall be made in compliance with Section IX hereof.
V. Other Provisions Relating to Options.
(a) Options granted under the Plan shall not be transferable by the holder
thereof otherwise than by will or the laws of descent and distribution. Each
Option shall be exercisable, during a participant's lifetime, only by him or
her. After a participant's death, an Option shall be exercisable only by the
executor, administrator or other legal representative of the estate of the
participant (the "Representative").
(b) In the event of a consolidation or merger of the Company or the Bank
with another corporation, the sale or exchange of all or substantially all the
assets of the Company or the Bank or a reorganization or liquidation of the
Company or the Bank, each holder of any outstanding and vested Option shall be
entitled to receive upon exercise and payment in accordance with the terms of
the Option the same shares, securities or property that such holder would have
been entitled to receive upon the occurrence of such event if such holder had
been, immediately prior to such event, the holder of the number of shares of
Common Stock purchasable under his or her Option or, if another corporation
shall be the survivor, such corporation shall substitute therefor substantially
equivalent shares, securities or property of such other corporation.
(c) In the event that the Committee shall at any time prior to the
exercise in full by a participant of Options held by him or her (and regardless
of whether such participant is then in the employ of or is a director of the
Company or the Bank) determine that such participant either before or after the
termination of his or her employment or directorship with the Company or the
Bank has committed an act of misconduct for which such participant (if the
participant had been an employee) could have been discharged for cause by the
Company or the Bank or has participated or engaged in any business activity
determined by the Committee to be in any way harmful or prejudicial to the
interests of the Company or the Bank, such Options shall forthwith terminate,
and notwithstanding any other provisions hereof, such participant shall not
thereafter be entitled to exercise such Options in whole or in part. Any
determination made by the Committee hereunder shall be conclusive and binding
upon both the Company and the participant.
(d) In the case of a participant who is a director and who terminates
service as a director for any reason before having exercised all granted
Options, such Options may be exercised in whole or in part within one year of
the date of termination to the extent exercisable on the date of termination. If
a participant's employment with the Company or the Bank or any subsidiary
corporation, or a corporation (or parent or subsidiary corporation of such
corporation) issuing or assuming a stock option in a transaction to which
Section 424(a) of the Code (or any successor section) applies, is terminated for
any reason otherwise than by his or her death or disability (within the meaning
of Section 22(e)(3) of the Code (or any successor section)), he or she may
exercise the Options that he or she had been granted hereunder to the extent
exercisable at the time of such termination only within 90 days from the date of
termination. If a participant's employment is terminated by reason of
disability, such Options may be exercised within one year from the date of
termination to the extent exercisable on the date of termination. Upon the death
of a participant, the participant's Representative shall have the right, at any
time within two years after the date of death, to exercise in whole or in part
any Options that were available to the participant at the time of his or
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her death. Notwithstanding the foregoing, no Option shall be exercisable after
the expiration of the applicable exercise period.
(e) Options may be granted under the Plan in substitution for Options held
by employees of a corporation who become employees of the Company or the Bank or
any subsidiary corporation of the Company or the Bank eligible to receive
options under the Plan as a result of an acquisition transaction. The terms and
conditions of the substitute Options granted may vary from those set forth in
the Plan to the extent deemed appropriate by the Committee to conform to the
provisions of the Options for which they are substituted.
VI. Recognition and Retention Plan Stock.
(a) Notice. The Committee shall promptly provide each director, officer or
other employee designated by the Committee to receive RRP Stock ("Recipient")
with written notice setting forth the amount of the award, the vesting schedule
of the award, and such other terms and conditions of the award as may be
considered appropriate by the Committee.
(b) Restrictions. The shares of Common Stock transferred pursuant to an
award of RRP Stock shall be subject to the following restrictions:
1. No shares of Common Stock subject to awards granted under the
Plan may be sold, transferred, assigned, pledged, encumbered
or otherwise alienated or hypothecated unless, until and then
only to the extent that the restrictions set forth in this
paragraph VI(b) shall have lapsed in accordance with paragraph
VI(c).
2. The Committee may provide either that
(i) Stock certificates evidencing shares of Common Stock
transferred pursuant to an award of RRP Stock shall be
issued in the sole name of the Recipient (but shall be
held by the Company until the restrictions shall have
lapsed in accordance with the terms of the award and the
Plan) and shall bear a legend which, in part, shall
provide that:
"The shares of Common Stock of Eagle Bancorp, evidenced
by this certificate are subject to the terms and
restrictions of the Eagle Bancorp 2000 Stock Incentive
Plan. Such shares are subject to forfeiture or
cancellation under the terms of said Plan, and such
shares shall not be sold, transferred, assigned,
pledged, encumbered or otherwise alienated or
hypothecated except pursuant to the provisions of said
Plan, a copy of which is available from Eagle Bancorp
upon request."
or
(ii) Stock certificates evidencing shares of Common Stock
that are the subject of an award of RRP Stock shall be
issued in the name of the Company. The Company shall
hold such Common Stock for the benefit of the Recipient
until the restrictions have lapsed in accordance with
the terms of the award and the Plan. In such instance,
whenever shares of Common Stock underlying an award of
RRP Stock are distributed to a Recipient or beneficiary
thereof under the Plan, such Recipient or beneficiary
shall also be entitled to receive with respect to each
such share distributed, a payment equal to any cash
dividends or distributions (other than distributions in
shares of Common Stock) and the number of shares of
Common Stock equal to any stock dividends, declared and
paid with respect to a share of Common Stock if the
record date for determining shareholders entitled to
receives such dividends falls between the date of the
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relevant award was granted and the date the relevant
award or installment thereof is distributed. If the
Committee determines to establish a trust in connection
with this Plan to hold Plan assets for the purposes set
forth herein, there shall also be distributed an
appropriate amount of net earnings, if any, of the trust
with respect to any dividends paid out.
(c) Lapse of Restrictions. The restrictions set forth in paragraph VI(b)
shall lapse as follows:
1. Such restrictions shall lapse with respect to the shares of
Common Stock awarded pursuant to a specific award of RRP Stock
at the times determined by the Committee and on the terms
stated in the notice of the award. Such restrictions shall
lapse only if on the date restrictions are to lapse, the
Recipient has been an officer, director or employee
continuously from the time of the award to such date of lapse.
The purpose of the restrictions is to provide an incentive to
each Recipient to remain with the Company or the Bank and to
perform assigned tasks and responsibilities in a manner
consistent with the best interests of the Company or the Bank
and its stockholders.
2. In the event of the termination of employment of a Recipient,
except as specified in paragraph VI(c)(3) below, all shares of
Common Stock still subject to restrictions shall be returned
to or canceled by the Company and shall be deemed to have been
forfeited by the Recipient.
3. In the event of the termination of employment of a Recipient
by reason of death or permanent and total disability within
the meaning of Section 22(e)(3) of the Code, any outstanding
restrictions in respect to any RRP Stock awarded to such
Recipient will automatically lapse, and the shares of Common
Stock subject to the award shall be distributed to the
Recipient or, in the case of death, to his or her estate.
(d) Rights as a Shareholder. Upon issuance of the stock certificates
evidencing an award of RRP Stock and subject to the restrictions set out in
paragraph VI(b), the Recipient of an award shall have all of the rights of a
shareholder of the Company with respect to the shares of Common Stock
represented by such award, including the right to vote the shares and receive
all dividends and other distributions paid or made with respect to such shares,
provided that any stock dividends received on shares of restricted stock shall
be subject to the same restrictions as such underlying shares until the
restrictions on such underlying shares lapse.
VII. Withholding Taxes.
(a) Upon the exercise of non-statutory stock options, the participant
shall be required to pay to the Company or authorize the Company to deduct from
other amounts payable to the participant the amount of any taxes that the
Company is required to withhold with respect to such exercise. The participant
may elect to satisfy such withholding obligation by (i) delivering to the
Company Common Stock owned by such individual having a fair market value equal
to such withholding obligation or (ii) requesting that the Company withhold from
the shares of Common Stock to be delivered a number of shares of Common Stock
having a fair market value equal to such withholding obligation.
(b) In the case of an Incentive Stock Option, the participant shall be
required (i) to inform the Company promptly of any disposition (within the
meaning of Section 424(c) of the Code (or any successor section) and the rules
thereunder) of Common Stock received upon exercise, and (ii) to pay to the
Company or authorize the Company to deduct from other amounts payable to the
participant the amount of any taxes that the Company is required to withhold
with respect to such disposition.
(c) In the case of RRP Stock, the Company shall have the right to withhold
the amount of taxes the Company is required to withhold from the amount awarded,
or from the amount paid, or from other amounts payable to the participant.
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VIII. Amendment or Termination.
The Committee may amend or terminate the Plan at any time, provided that
any such amendment shall be subject to the approval of the stockholders of the
Company in accordance with applicable law and regulations if such approval is
necessary to satisfy the requirements of Rule 16b-3 (or any successor rule)
under the Exchange Act or other regulatory requirements. Unless hereafter
amended to provide for a different termination date, the Plan shall terminate
ten years after the Effective Date.
IX. Compliance With OTS Conversion Regulations.
Notwithstanding any other provision contained in this Plan:
(a) No award or Option under the Plan shall be made which would be
prohibited by 12 C.F.R. ss. 563b.3(g)(4).
(b) Unless the Plan is approved by a majority vote of the outstanding
shares of the total votes eligible to be cast at duly called meeting of
stockholders to consider the Plan, other than those held by Eagle Financial MHC,
as required by 12 C.F.R. ss. 563b.3(g)(4)(vii), the Plan shall not become
effective or implemented prior to one year from the date of the Bank's
reorganization, or April 4, 2001;
(c) No award or Option granted prior to one year from the date of the
Bank's reorganization, or April 4, 2001, shall become vested or exercisable at a
rate in excess of 20% per year of the total number of Restricted Stock Awards or
Options (whichever may be the case) granted to such Participant, provided, that
awards or Options shall become fully vested or immediately exercisable in the
event of a Participant's termination of service due to death or disability;
(d) No award or Options granted to any individual Employee prior to one
year from the date of the Bank's reorganization, or April 4, 2001, may exceed
25% of the total amount of awards or Options, respectively, which may be granted
under the Plan;
(e) No award or Options granted to any individual non-employee director
prior to one year from the date of the Bank's reorganization, or April 4, 2001,
may exceed 5% of the total amount of awards or Options, respectively, which may
be granted under the Plan; and
(f) The aggregate amount of awards or Options granted to all non-employee
directors prior to one year from the date of the Bank's reorganization, or April
4, 2001, may not exceed 30% of the total amount of awards or Options,
respectively, which may be granted under the Plan.
(g) Any change or amendment to the Plan which eliminates the restrictions
required by 12 C.F.R. ss. 563b.3(g)(4) shall require prior approval of the
Company's stockholders.
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