SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2)) [ ]
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
James Monroe 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)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4. Proposed maximum aggregate value of transaction:
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5. Total Fee Paid:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
JAMES MONROE BANCORP INC.
3033 WILSON BOULEVARD
ARLINGTON, VIRGINIA 22201-3843
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 30, 2002
TO THE SHAREHOLDERS OF JAMES MONROE BANCORP INC.:
The Annual Meeting of Shareholders (the "Meeting") of James Monroe
Bancorp, Inc. will be held on Wednesday, April 30, 2003, at
The Country Club of Fairfax
5110 Ox Road
Fairfax, Virginia
at 6:30 P.M., for the following purposes:
(1) To elect twelve (12) persons to serve as directors until the next
annual meeting of shareholders and until their successors are
duly elected and qualified;
(2) To consider and approve the James Monroe Bancorp 2003 Equity
Compensation Plan; and
(3) To transact such other business as may properly come before the
Meeting or any adjournment or postponement of the Meeting.
ONLY SHAREHOLDERS OF RECORD AS OF MARCH 20, 2003 WILL BE ENTITLED TO
VOTE AT THE MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE AS SOON AS POSSIBLE. THIS WILL NOT PREVENT YOU FROM VOTING IN PERSON,
BUT WILL ASSURE THAT YOUR VOTE IS COUNTED IF YOU ARE UNABLE TO ATTEND THE
MEETING.
By order of the Board of Directors
Richard I. Linhart, Secretary
March 25, 2003
JAMES MONROE BANCORP, INC.
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 30, 2003
This proxy statement is being sent to shareholders of James Monroe
Bancorp, Inc., a Virginia corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Shareholders to be held at 6:30 p.m. on April 30, 2003 (the
"Meeting"), and at any adjournment or postponement of the Meeting. The purposes
of the Meeting are:
(1) electing twelve (12) directors to serve until their successors
are duly elected and qualified;
(2) considering and approving the James Monroe Bancorp 2003 Equity
Compensation Plan; and
(3) transacting such other business as may properly come before the
Meeting or any adjournment or postponement of the Meeting.
The Meeting will be held at:
The Country Club of Fairfax
5110 Ox Road
Fairfax, Virginia
This proxy statement and proxy card are being sent to shareholders of
the Company on or about March 25, 2003. A copy of the Annual Report to
Shareholders of James Monroe Bancorp, Inc. for the year ended December 31, 2002
also accompanies this proxy statement.
VOTING RIGHTS AND PROXIES
VOTING RIGHTS
Only shareholders of record at the close of business on March 20, 2003,
will be entitled to notice of and to vote at the Meeting or any adjournment or
postponement thereof. On that date, the Company had 1,840,677 shares of Common
Stock, par value $1.00 per share (the "Common Stock"), outstanding, constituting
the only class of stock outstanding, held by approximately 532 shareholders of
record. Each share of Common Stock is entitled to one vote on all matters
submitted to a vote of the shareholders. Shareholders do not have the right to
cumulate votes in the election of directors. The presence, in person or by
proxy, of not less than a majority of the total number of outstanding shares of
Common Stock is necessary to constitute a quorum at the Meeting.
PROXIES
Properly executed proxies which are received by the Company in time to
be voted at the Meeting will be voted as specified by the shareholder giving the
proxy. In the absence of specific instructions, proxies received will be voted
in FOR of the election of the nominees for election as directors, and FOR the
approval of the 2003 Equity Compensation Plan. Management does not know of any
matters that will be brought before the Meeting, other than as described herein.
If other matters are properly brought before the Meeting, the persons named in
the proxy intend to vote the shares to which the proxies relate in accordance
with their best judgment.
Votes cast by proxy or in person at the Meeting will be tabulated by
the election inspectors appointed for the Meeting who will determine whether or
not a quorum is present. Where, as to any matter submitted to shareholders for a
vote, proxies are marked as abstentions (or shareholders appear in person but
abstain from voting), such abstentions will be treated as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum, and shares held in street name by brokers for which no voting
instructions are given ("broker non-votes") will be treated as shares present
and entitled to vote for quorum purposes but as unvoted.
Please sign, date, mark and promptly return the enclosed proxy in the
postage paid envelope provided for this purpose, in order to assure that their
shares are voted. A proxy may be revoked at any time prior to the exercise of
the authority granted thereby by:
o delivering written notice of such revocation to the Company's
Secretary prior to the Meeting,
o by granting and delivering a later dated proxy with respect to
such shares, or
o by attending the Meeting in person and voting the shares.
Attendance at the Meeting will not, in itself, revoke a proxy. If your shares
are not registered in your name, you will need additional documentation from
your recordholder in order to vote in person at the Meeting. Please see the
voting form provided by your recordholder for additional information regarding
the voting of your shares.
Many shareholders whose shares are held in an account at a brokerage
firm or bank will have the option to submit their proxies or voting instructions
electronically through the Internet or by telephone. Shareholders should check
the voting form or instructions provided by their recordholder to see which
options are available. Shareholders submitting proxies or voting instructions
electronically should understand that there may be costs associated with
electronic access, such as usage charges from Internet access providers and
telephone companies, that would be borne by the shareholder. To revoke a proxy
previously submitted electronically, a shareholder may simply submit a new proxy
at a later date before the taking of the vote at the Meeting, in which case, the
later submitted proxy will be recorded and the earlier proxy will be revoked.
The enclosed proxy is being solicited on behalf of the Board of
Directors of the Company, which will pay the entire cost of solicitation. In
addition to solicitation by mail, officers, directors and employees of the
Company may solicit proxies by telecopier, telegram, in person or otherwise.
Such persons will not receive any additional or special remuneration or payment
for such solicitation.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
SECURITIES OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of January 31,
2003 concerning the number and percentage of shares of the Common Stock
beneficially owned by our directors and executive officers, and by all of our
directors and executive officers as a group, as well as information regarding
each other person known by the Company to own in excess of 5% of the outstanding
Common Stock. Except as otherwise indicated, all shares are owned directly, and
the named person possesses sole voting and sole investment power with respect to
all such shares. Except as set forth below, we are not aware of any other person
or persons who beneficially own in excess of 5% of the Common Stock. Further, we
are not aware of any arrangement which at a subsequent date may result in a
change of control of the Company.
Name Age Position Shares Beneficially Owned(1) Percentage
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Directors
Fred A. Burroughs, III 67 Director 27,000 1.46%
Dr. Terry L. Collins 57 Director 91,563 4.95%
Norman P. Horn 71 Director 22,713 1.23%
Dr. David C. Karlgaard 56 Director 96,813 5.22%
12750 Fair Lakes Circle
Fairfax, VA 22033
Richard Linhart 59 Director, Executive Vice President and 24,450 1.31%
Chief Operating Officer
Richard C. Litman 45 Director 24,513 1.32%
John R. Maxwell 42 Director, President & CEO 73,770 3.89%
Dr. Alvin E. Nashman 76 Director 47,400(2) 2.58%
Helen L. Newman 59 Director 43,913(3) 2.38%
Thomas L. Patterson 50 Director 29,984(4) 1.62%
David W. Pijor 50 Chairman of the Board and Director 33,180(5) 1.78%
Russell E. Sherman 66 Director 20,163 1.09%
Executive Officers and Directors
as a Group (12 individuals) 535,462(1) 26.72%
Principal Shareholders
Nino Vaghi 140,975 7.66%
c/o National Mailing Systems
1749 Old Meadow Road
McLean, VA 22101
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(1) The shares "beneficially owned" by an individual are determined in
accordance with the definitions of "beneficial ownership" set forth in the
General Rules and Regulations of the U.S. Securities and Exchange
Commission and may include shares owned by or for the individual's spouse
and minor children and any other relative of the individual who lives in
the same home, as well as shares to which the individual has, or shares,
voting or investment power, or has the right to acquire beneficial
ownership within sixty (60) days after January 31, 2002. Beneficial
ownership may be disclaimed as to certain of the shares.
Directors and executive officers beneficially own the following stock
options which are exercisable within 60-days following January 31, 2003:
Burroughs--4,500 shares; Collins-- 10,563 shares; Horn-- 7,713 shares;
Karlgaard-- 13,563 shares; Linhart--22,200 shares; Litman--13,263 shares;
Maxwell--55,320 shares; Nashman-- -0- shares; Newman--1,113 shares;
Patterson--6,813 shares; Pijor--19,563 shares; Sherman--8,913 shares.
(2) Includes 7,800 shares held individually by his spouse.
(3) Includes 36,300 shares of Common Stock held individually by Mrs. Newman
and 6,500 shares of Common Stock held individually by her spouse.
(4) Includes 12,671 shares held in various trusts which Mr. Patterson has
voting and/or investment power. Does not include 3,379 shares held by Mr.
Patterson's sibling for benefit of Mr. Patterson's son.
(5) Includes 10,992 shares held individually by Mr. Pijor, 2,325 shares held
jointly, and 300 shares held by his minor children which Mr. Pijor claims
beneficial ownership.
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ELECTION OF DIRECTORS
Twelve (12) directors will be elected at the Meeting for a one-year
term extending until the next annual meeting of shareholders, or until their
successors shall have been elected and qualified. Each nominee currently serves
as a director of the Company. Unless authority is withheld, proxies received in
response to this solicitation will be voted for the nominees listed below.
Directors are elected by a plurality of the votes cast at the Meeting. Each
nominee has indicated a willingness to serve, however, if any nominee becomes
unavailable to serve, proxies will be voted for a replacement nominee selected
in accordance with the best judgment of the proxy holders named therein.
Vote Required and Recommendation of the Board of Directors. Nominees
receiving a plurality of the votes cast at the Meeting in the election of
directors will be elected as directors in the order of the number of votes
received. THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR EACH OF
THE NOMINEES FOR ELECTION AS DIRECTORS OF THE COMPANY.
NOMINEES FOR ELECTION AS DIRECTOR
The Board of Directors has fixed the number of persons constituting the
Board of Directors at twelve (12), Each of the following persons currently
serves as a director of the Company and the Bank. Directors serve for a one year
term and until their successors have been elected and qualified.
Set forth below is a description of the principal occupation and
business experience of each of the directors and executive officers of the
Company. Except as expressly indicated below, each person has been engaged in
his principal occupation for at least five years. Each of the members of the
Board of Directors has served since the organization of the Company in 1999, and
has served as a director of the Bank since its inception in 1997, except Mr.
Burroughs, who joined the Board of the Bank on February 10, 1999, and Mr.
Linhart, who joined the Board of the Company in June 2000 and the Board of the
Bank in May 2000.
Fred A. Burroughs, III. Mr. Burroughs retired in 1997 from his position
as Chairman of the Board and Chief Executive Officer of The Bank of Northern
Virginia.
Dr. Terry L. Collins. Dr. Collins is the Co-Founder and President of
Argon Engineering Associates, founded in 1997 (Systems and Information
Technology Firm). He was also the Vice President and General Manager of the
Falls Church Operation of Raytheon E-Systems from 1989 - 1997.
Norman P. Horn. Mr. Horn retired in 1997 from his position as a
Principal in Homes, Lowry, Horn & Johnson, Ltd. (Accounting Firm).
Dr. David C. Karlgaard. Dr. Karlgaard is the Founder, Chairman and
President of PEC Solutions, Inc (Information Technology Firm) (listed on the
Nasdaq National Market).
Richard I. Linhart. Mr. Linhart has been Executive Vice President and
Chief Operating Officer of the Bank since February 1998 and of the Company since
its formation. Prior to that time, Mr. Linhart was President of ALM Associates
from 1995 to 1998, Executive Vice President and CFO of Hubco, Inc., Mahwah, New
Jersey from 1994 to 1995 and Executive Vice President and COO of NBT Bancorp,
Norwich, New York from 1991 to 1994.
Richard C. Litman. Mr. Litman is a Registered Patent Attorney;
President of Litman Law Offices, Ltd.
John R. Maxwell. Mr. Maxwell has been President and Chief Executive
Officer of the Bank since April 1997 and of the Company since its formation.
Prior to joining James Monroe Bank, he was Senior Vice President - Lending of
the Bank of Northern Virginia from 1988 to 1996 and Executive Vice President and
Chief Lending Officer of the Bank of Northern Virginia from 1996 to 1997.
Dr. Alvin E. Nashman. Dr. Nashman retired in 1991 from his position of
Head of the Systems Group of Computer Sciences Corporation which he held for
over 27 years. Mr. Nashman is a Director of Micros to Mainframes (publicly
traded on Nasdaq); Director of Andreulis Corporation; Director of Spaceworks;
and Director of Federal Sources, Inc.
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Helen L. Newman. Mrs. Newman was Senior Vice President of Government
Operations for Gulfstream Aerospace Corporation until December 31, 2002. She is
currently retired.
Thomas L. Patterson. Mr. Patterson is an attorney with Linowes and
Blocher, LLP. (Law Firm) since May 2000. From November 1998 until May 2000 he
was an attorney with Venable, Baetjer, Howard & Civiletti (or Tucker, Flyer &
Lewis, which became a part of that firm in 2000). Mr. Patterson was Vice
President - Real Estate Counsel of Federal Realty Investment Trust from March
1997 until September 1998, and prior to that time was an attorney in private
practice.
David W. Pijor. Mr. Pijor has been Chairman of the Bank since February
1997 and Chairman of the Company since its formation Mr. Pijor has been an
attorney in private practice for the past 24 years and is currently Of Counsel
to the firm of Sherman & Fromme, P.C. (Law Firm).
Russell E. Sherman. Mr. Sherman is the President of Sherman & Fromme,
P.C. (Law Firm).
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company and the Bank met 16 times in
2002. All members of the Board of Directors attended at least 75% of the
meetings held by the Board of Directors and by all committees on which such
member served during the 2002 fiscal year.
The Board of Directors has a standing Audit Committee. The Audit
Committee is responsible for the review and evaluation of Bancorp's internal
controls and accounting procedures. It also periodically reviews audit reports
with Bancorp's independent auditors, and recommends the annual appointment of
such auditors. The Audit Committee is currently comprised of Messrs. Horn,
Patterson and Karlgaard. Each of the members of the Audit Committee is
independent, as determined under the definition of independence adopted by the
National Association of Securities Dealers The Board of Directors has adopted a
written charter for the Audit Committee. During the 2002 fiscal year, the Audit
Committee met once.
The Board of Directors does not have a standing Nominating Committee.
The Board has an Executive Compensation Committee that met one time during 2002.
The Committee is currently comprised of Messrs. Horn, Pijor, Sherman, Burroughs
and Ms. Newman. The Compensation Committee is responsible for making
recommendations to the Board of Directors regarding the development and
administration of the Management Stock Option Plan and the Director Option Plan.
The Committee also reviews and recommends executive compensation an incentive
compensation awards and plans.
AUDIT COMMITTEE REPORT
The Audit Committee has been appointed to assist the Board of Directors
in fulfilling the Board's oversight responsibilities by reviewing the financial
information that will be provided to the shareholders and others, the systems of
internal controls establish by management and the Board and the independence and
performance of the Company's audit process.
The Audit Committee has:
(1) reviewed and discussed with management the audited financial
statements included in the Company's Annual Report and Form 10-KSB;
(2) discussed with Yount, Hyde & Barbour, P.C., the Company's
independent auditors, the matters required to be discussed by statement of
Auditing Standards No. 61, and has received the written disclosures and letter
from Yount, Hyde & Barbour, as required by Independence Standards Board Standard
No. 1; and
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(3) discussed with Yount, Hyde & Barbour, its independence.
Based on these reviews and discussions, the Audit Committee has recommended to
the Board of Directors that the audited financial statements be included in the
Company's annual report on Form 10-KSB for the year ended December 31, 2002. The
Audit Committee has also considered whether the amount and nature of non-audit
services provided by Yount, Hyde & Barbour is compatible with the auditor's
independence.
Members of the Audit Committee
Norman P. Horn, Chairman
Thomas L. Patterson
Dr. David C. Karlgaard
DIRECTORS' COMPENSATION
Directors receive $250 for attendance at meetings of the Board of
Directors of the Company or the Bank, and $100 for each committee meeting, other
than Mr. Pijor, the Chairman, who receives a monthly retainer of $1,000 in
addition to meeting fees. Directors are entitled to receive options under the
2000 Directors' Option Plan. In 2002, directors each received options to
purchase 1,113 shares of Common Stock at an exercise price of $12.34 per share,
except Mr. Burroughs, who was granted 4,500 options. The Directors' Option Plan
was approved by stockholders in 2000. Under the Directors' Option Plan, 100,320
shares of Common Stock, as adjusted for the stock split, were available for
issuance under options. The purpose of the Directors' Option Plan is to enable
the Company to continue to attract and retain outstanding outside directors, and
to further the growth, development and financial success of the Company and the
Bank. Only non-employee directors of the Company and any subsidiary are eligible
to participate in the Plan. As of December 31, 2002 no options remained
available for issuance under the Directors' Option Plan.
EXECUTIVE COMPENSATION
The following table sets forth a comprehensive overview of the
compensation for Mr. Maxwell, the President of the Bank and the Company, and
executive officers who received total salary and bonuses of $100,000 or more
during the fiscal year ended December 31, 2002.
SUMMARY COMPENSATION TABLE
Long-term
Annual Compensation Compensation Awards
----------------------------------- -------------------
Securities All Other
Name and Principal Position Year Salary Bonus Underlying Options Compensation($)
- -----------------------------------------------------------------------------------------------------------------------
John R. Maxwell, President 2002 $170,000 $50,400 -0- Less than $10,000
and Chief Executive Officer
2001 $145,833 $38,000 -0- Less than $10,000
2000 $133,750 $30,000 -0- Less than $10,000
Richard I. Linhart, 2002 $125,000 $35,000 2,700 (1) Less than $10,000
Executive Vice President,
Chief Operating Officer 2001 $115,000 $27,000 2,700 (1) Less than $10,000
2000 $102,000 $25,000 2,700 (1) Less than $10,000
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(1) Adjusted to reflect the 3-for-2 stock split in the form of a fifty percent
stock dividend paid on June 30, 2002.
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OPTION GRANTS IN LAST FISCAL YEAR
Percent of Total
Number of Securities Options Granted to Exercise
Underlying Options Employees in Fiscal Price Per
Name Granted(1) Year Share(1) Expiration Date
- --------------------- ------------------------ ---------------------- -------------- ------------------
John R. Maxwell -0- N/A N/A N/A
Richard I. Linhart 2,700 16.0% $12.09 January 9, 2012
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(1) Adjusted to reflect the 3-for-2 stock split in the form of a fifty percent
stock dividend paid on June 30, 2002.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR AND OPTION VALUES
Number of Securities
Underlying Unexercised In-The-Money Options at
Shares Acquired on Options at December 31, 2002 December 31, 2002
Name Exercise Value Realized Exercisable/Unexercisable Exercisable/Unexercisable(1)
- -------------------------------------------------------------------------------------------------------------------------------
John R. Maxwell -0- -0- 55,320/-0- $626,776/$0
Richard I. Linhart -0- -0- 22,200/900 $233,667/$5,319
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(1) Based on $18.00 per share, the last sale price of for the Common Stock as of
December 31, 2002.
EMPLOYMENT AGREEMENTS
John R. Maxwell. The Bank and the Company have entered into an
agreement with Mr. Maxwell, pursuant to which Mr. Maxwell serves as President
and Chief Executive Officer of each institution. Without cause or Mr. Maxwell's
consent, he may not be removed from these positions, nor may any executive
position higher than Mr. Maxwell's be established. The term of Mr. Maxwell's
agreement expires on December 31, 2004, and is subject to automatic one-year
extensions on each January 1 thereafter, provided that neither the Company nor
Mr. Maxwell has given written notice of intention not to renew at least 90 days
prior to the renewal date. The agreement provides for the payment of cash and
other benefits to Mr. Maxwell, including a base salary of $170,000 during the
period January 1, 2002 to December 31, 2002. Mr. Maxwell's base salary for
subsequent periods is subject to annual review by the Board of Directors, and is
currently $190,000 for the calendar year 2003. Under the agreement, Mr. Maxwell
was entitled to 28% of the award from the bonus pool established for employees
in 2002. In future years, Mr. Maxwell is entitled to a bonus as determined in
the Board's discretion, after consultation with Mr. Maxwell. Seventy-five
percent of the bonus is to be based on objective performance criteria. The
amount of the bonus pool is established by the Board of Directors, with the
actual award based upon the achievement of income and asset size goals
determined by the Board of Directors. Mr. Maxwell is also entitled to $1,700,000
of Bank paid life insurance (subject to increase based upon the percentage
increase in base salary), use of a Bank owned or leased car and an automobile
allowance, and is entitled to reimbursement of reasonable business expenses. Mr.
Maxwell is entitled to reimbursement of income taxes payable upon the exercise
of 55,320 options (as adjusted for the stock split) previously granted under a
prior employment agreement, up to the amount of the tax benefit realized by the
Company as a result of the exercise, and under certain circumstances, to
registration of the shares under the securities laws. Mr. Maxwell is entitled to
receive supplemental payments upon disability, in excess of those provided under
the Company's generally applicable plan, to bring total payments to 100% of his
base salary for the first six months of the disability. Subsequently, Mr.
Maxwell will be entitled to receive only payments under the Company's disability
income plan, except he shall not be subject to the generally applicable $5,000
monthly payment limit. Mr. Maxwell is also entitled to participate in any
pension, retirement, profit sharing, stock purchase, stock option, insurance,
deferred compensation and other benefit plans provided to other executives or
employees.
The agreement terminates as of the end of the initial or any renewal
terms if either party gives notice of non-renewal. If Mr. Maxwell elects not to
renew the agreement, he is not entitled to any additional payments, and is
subject to a two year non-competition restriction. If the Bank or the Company
elects not to renew the agreement, Mr. Maxwell is entitled to receive continued
salary, bonus and benefits for 18 months, and is subject to the non-
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competition restriction for that period. If the agreement is terminated by Mr.
Maxwell, at his option following the Bank or Company materially changing,
without his consent, his status, duties or responsibilities, discontinuing
compensation plans in which he is participating without comparable replacement,
limiting his outside activities, or assigning the agreement or the obligations
of the Bank under the Agreement within 12 months of a "change in control" (as
defined), Mr. Maxwell shall be entitled to receive continued salary, bonus and
benefits for 24 months, and is subject to the non-competition restriction for
that period. If the agreement is terminated by the Bank or the Company in breach
of the agreement, or Mr. Maxwell terminates because of such breach, Mr. Maxwell
is entitled to receive continued salary, bonus and benefits for 12 months, and
outplacement assistance from an organization of Mr. Maxwell's choice, at a cost
paid by the Bank and the Company of up to 18% of his base salary at the time of
termination, and is not subject to the non-competition restriction. The
agreement prohibits conflicts of interests, and requires that Mr. Maxwell
maintain the confidentiality of nonpublic information regarding the Bank, the
Company and its customers.
Richard I. Linhart. The Bank and the Company have entered into an
agreement with Mr. Linhart, pursuant to which he serves as Executive Vice
President and Chief Operating Officer of the Bank. The current term of Mr.
Linhart's agreement expires on December 31, 2003. The agreement provides for the
payment of cash and other benefits to Mr. Linhart, including a base salary of
$125,000 during the period January 1, 2002 to December 31, 2002. Mr. Linhart's
base salary, $137,000 for the calendar year 2003, is subject to annual review,
provided that the salary may not be less than his base salary for the prior
period. Mr. Linhart is entitled to reimbursement of income taxes payable upon
the exercise of options to purchase 15,000 shares (as adjusted for the stock
split) previously granted under a prior employment agreement, up to the amount
of the tax benefit realized by the Company as a result of the exercise, and
under certain circumstances, to registration of the shares under the securities
laws. Mr. Linhart is entitled to disability payments in the same manner as Mr.
Maxwell. Mr. Linhart is also entitled to major medical health insurance as
provided to other officers of the Bank, to a car allowance in the amount of $500
per month and to participate in any pension, retirement, profit sharing, stock
purchase, stock option, insurance, deferred compensation and other benefit plans
provided to other executives or employees.
The agreement terminates as of December 31, 2003. If the agreement is
terminated by Mr. Linhart, at his option, for "good reason" (as defined) within
12 months of a "change in control" (as defined), Mr. Linhart shall be entitled
to receive continued salary and benefits for 24 months. If the agreement is
terminated by the Bank or Bancorp in breach of the agreement, or by Mr. Linhart
as a result of Bank's breach, Mr. Linhart is entitled to receive continued
salary, bonus and benefits for the greater of twelve months or the remaining
term of the agreement, and outplacement assistance from an organization of Mr.
Linhart's choice, at a cost paid by the Bank and the Company of up to 18% of Mr.
Linhart's base salary at the time of termination.
401(k) Plan. The Company maintains a 401(k) defined contribution plan
for all eligible employees. Employees who are at least 21 years of age, have
completed at least ninety days of continuous service with the Bank and have
completed at least 1,000 hours of work during any plan year are eligible to
participate. Under the plan, a participant may contribute up to 15% of his or
her compensation for the year, subject to certain limitations. The Bank may also
make, but is not required to make, a discretionary contribution for each
participant. The amount of such contribution is determined annually by the Board
of Directors, and is currently 83.33% of employee contributions up to 6% of
salary. Contributions by the Company totaled $29,000 for the fiscal year ended
December 31, 2002.
Stock Option Plan. The Company also maintains the 1998 Stock Option
Plan for key employees, pursuant to which options to purchase up to 137,820
shares of Common Stock may be issued as either incentive stock options or
nonincentive stock options. As of December 31, 2002, options to purchase 108,195
shares of Common Stock had been issued.
Securities Authorized for Issuance Under Equity Compensation Plans. The
following table sets forth information as of December 31, 2002, regarding
options issuable and issued under our plans under which stock options or other
equity based compensation may be granted. The options reflected in the table do
not include those which may be issued under the 2003 Equity Compensation Plan,
which is being presented for shareholder approval at the Meeting.
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Equity Compensation Plan Information
Number of securities
remaining available
for future issuance
Number of securities to be issued Weighted average exercise under equity compensation
upon exercise of outstanding price of oustanding options, plans (excluding securities)
Plan category options, warrants and rights warrants and rights reflected in column (a)
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c)
Equity compensation plans
approved by security holders (1) 194,199 $7.68 28,625
Equity compensation plans not
approved by security holders 0 N/A 0
Total 194,199 $7.68 28,625
(1) Consists of the 1998 Management Incentive Stock Option Plan and 2000
Director's Stock Option Plan described further in Note 8 to the
consolidated financial statements. Mr. Maxwell's and Mr. Linhart's prior
employment arrangements, which have not individually been approved by
shareholders, required the Company to issue them options. Such options
were issued under the 1998 Management Incentive Option Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has had, and expects to have in the future, banking
transactions in the ordinary course of business with some of its directors,
officers, and employees and their associates. In the past, substantially all of
such transactions have been on the same terms, including interest rates,
maturities and collateral requirements as those prevailing at the time for
comparable transactions with non-affiliated persons and did not involve more
than the normal risk of collectibility or present other unfavorable features.
The maximum aggregate amount of loans to officers, directors and
affiliates of the Company during 2002 amounted to $1,538,800 representing
approximately 8.0% of the Company's total shareholders' equity at December 31,
2002. In the opinion of the Board of Directors, the terms of these loans are no
less favorable to the Company than terms of the loans from the Company to
unaffiliated parties. On December 31, 2002, $1,252,064 of loans were outstanding
to individuals who, during 2002, were officers, directors or affiliates of the
Company. At the time each loan was made, management believed that the loan
involved no more than the normal risk of collectibility and did not present
other unfavorable features. None of such loans were classified as Substandard,
Doubtful or Loss.
David W. Pijor has performed legal services for the Company and the
Bank in the ordinary course of their businesses, and the Company expects that he
will continue to perform services for the Company and the Bank. In 2002, the
aggregate fee paid to Mr. Pijor by the Company and the Bank was $78,857. In 2001
he received $32,437 for his services. Fred A. Burroughs, III has a management
consulting agreement with the Bank under which he receives $60,000 annually for
business development services and activities.
APPROVAL OF THE 2003 EQUITY COMPENSATION PLAN
The Board of Directors has adopted the James Monroe Bancorp, 2003
Equity Compensation Plan (the "2003 Plan"), subject to approval by the Company's
shareholders. The 2003 Plan is attached hereto as Exhibit A and should be
consulted for additional information. All statements made herein regarding the
2003 Plan, which are only intended to summarize the 2003 Plan, are qualified in
their entirety by reference to the text of the 2003 Plan.
The 2003 Plan is intended to replace the existing 1998 Stock Option
Plan (the "1998 Plan") and the 2000 Directors' Stock Option Plan (the
"Directors' Plan"), after remaining options under the plans have been granted.
There are currently no shares available for issuance under the Directors' Plan
and only 28,625 shares remain available for grant under the 1998 Plan. The
approval of the 2003 Plan will not affect the rights of persons holding options
under the 1998 and Directors' Plans. Such options will continue to be
exercisable in accordance with their terms.
9
No awards have yet been made under the 2003 Plan.
Purpose of the 2003 Plan. The purpose of the 2003 Plan is to promote
the long term interests of the Company and the Bank by motivating selected key
personnel and directors through the grant of equity compensation, in the form of
stock options, restricted stock awards, stock appreciation rights, phantom stock
and performance shares; to further the identity of interests of key personnel
and directors with those of shareholders and permit the Company and Bank to
attract and retain key personnel and directors for positions of substantial
responsibility.
Administration. The 2003 Plan is administered by the full Board of
Directors or a committee designated by the Board of Directors (the "Board"). The
Board has discretion and authority to:
o select participants and grant awards;
o impose terms, limitations, restrictions and conditions upon any
awards as the Board deems appropriate;
o modify, amend, extend or renew outstanding awards; accelerate or
otherwise change the time in which an award may be exercised or
becomes payable;
o to waive or accelerate the lapse of any restriction or condition
on an award;
o to establish objectives and conditions, if any, for earning awards
and determining whether awards will be paid after the end of a
performance period;
o to administer and interpret the 2003 Plan;
o to adopt and interpret rules and regulations relating to the 2003
Plan, and to make all other decisions necessary or advisable in
connection with administering the 2003 Plan.
All decisions, determinations and interpretations of the Board are final and
conclusive on all persons affected thereby.
Eligible Persons. Under the 2003 Plan, the Board may make awards to key
employees or directors of the Company or any subsidiary. A key employee is an
employee of the Company or a subsidiary who holds a position of responsibility
in a managerial, administrative or professional capacity, or a consultant to the
Company, in either case whose performance, as determined by the Board in the
exercise of its sole and absolute discretion, can have a significant effect on
the growth, profitability and success of the Company.
Types of Awards. The Board may grant stock options, stock appreciation
rights ("SARs"), restricted stock, phantom stock and/or performance shares under
the 2003. Stock options may be either incentive stock options ("ISOs") as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or options that are not ISOs ("Non-ISOs"), or other type of tax
advantaged option that may be permitted under the Internal Revenue Code
(collectively "Options"). Awards to directors may consist only of Non-ISOs.
Shares Available for Grants. The 2003 Plan reserves an aggregate of
200,000 authorized but unissued or treasury shares of Common Stock for issuance
as awards of Options, SARs, restricted stock, phantom stock and or performance
shares, representing approximately 10.87% of the shares of Common Stock
outstanding as of the date hereof. If approved, an aggregate of 422,824 shares,
representing 22.97% of the outstanding Common Stock, will be reserved for
issuance upon the exercise of options outstanding under the Company's existing
stock option plans, and in connection with awards under the 2003 Plan. In the
event of any merger, consolidation, recapitalization, reorganization,
reclassification, stock dividend, stock split, combination or exchange of
shares, or merger, consolidation or change in the corporate structure or shares
of the Company, the number and class of shares as to which awards may be made
under the 2003 Plan, and the shares issuable under outstanding awards, including
the exercise price of outstanding options, will be appropriately adjusted. If
awards should expire, become unexercisable or be forfeited for any reason
without having been exercised or become vested in full, the shares of Common
Stock subject to such awards will be available for the grant of additional
awards under the 2003 Plan, unless the 2003 Plan has been terminated.
Duration of the 2003 Plan and Grants. If approved at the Meeting, the
2003 Plan will have a term of ten years from June 30, 2003, its effective date,
until June 29, 2013, after which date no Awards may be granted. The maximum term
for an Option is ten years from the date of grant, except that the maximum term
of an ISO may not exceed five years if the optionee owns more than 10% of the
Common Stock on the date of grant. The expiration of the 2003 Plan, or its
termination, will not affect any award then outstanding.
10
Options. The exercise price of Options may not be less than 100% of the
fair market value of the Common Stock on the date of grant. In the case of an
optionee who owns more than 10% of the outstanding Common Stock on the date of
grant, the option price of any ISO received by such optionee may not be less
than 110% of fair market value of the shares. As required by federal tax laws,
to the extent that the aggregate fair market value (determined when an ISO is
granted) of the Common Stock with respect to which ISOs are exercisable by an
optionee for the first time during any calendar year (under all plans of the
Bank and of any subsidiary) exceeds $100,000, the Options will be treated as
Non-ISOs, and not as ISOs. In the event that the fair market value per share of
the Common Stock falls below the exercise price of previously granted Options,
the Board will have the authority, with the consent of the optionee, to cancel
outstanding Options and to issue new Options with an exercise price equal to the
then current fair market price per share of the Common Stock.
SARs. An SAR may be granted in tandem with all or part of any Option
granted under the 2003 Plan, or as a freestanding instrument 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 optionee's exercise of the SAR cancels his
right to exercise the Option, and vice versa. Regardless of whether an SAR is
granted in tandem with an Option, exercise of the SAR will entitle the optionee
to receive, as the Board 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 shall not be less than the fair market value of the optioned
shares on the date of grant. SARs may not be exercised within six months of the
date of grant.
RESTRICTED STOCK, PHANTOM STOCK AND PERFORMANCE SHARES.
Restricted Stock The Board may in its discretion award shares of Common
Stock subject to such restrictions, limitations and conditions as it may deem
appropriate, including but not limited to restrictions on transferability,
requirements of continued employment or individual performance or the financial
performance of the Corporation. The Committee may modify, or accelerate the
termination of, the restrictions applicable to a restricted stock award under
such circumstances as it deems appropriate. During the period which the Board
subjects an award of restricted stock to the restrictions, the Board may, in its
discretion grant the grant recipient any or all of the rights as a shareholders
with respect to such shares, including but not limited to the right to vote and
receive dividends.
Phantom Stock. Phantom stock awards entitle the recipient to receive
the market value or the appreciation in value of an equivalent number of shares
of Common Stock on a settlement date determined by the Board in connection with
the grant.
Performance Shares. The Board may grant awards of performance shares to
participants entitling the participants to receive cash, shares of our Common
Stock, or a combination of both, upon the achievement of performance targets and
other conditions determined by the Board and reflected in the grant. The
performance goals may be based on our operating income, returns on assets or
equity, asset or income growth levels, or on one or more other business or
performance criteria selected by the Board.
An award agreement may provide that, at the discretion of the Board,
payment of awards may be made in cash, Common Stock, a combination of cash and
Common Stock, or any other form of property as the Board shall determine.
Further, award agreements may provide for payment of awards in the form of a
lump sum or installments, as determined by the Board. If an award is granted in
the form of restricted stock, phantom stock or a freestanding SAR, the Board may
choose, at the time of the grant of the award, to include as part of such award
an entitlement to receive dividends or dividend equivalents, subject to such
terms, conditions, restrictions or limitations as the Board may establish.
Dividends or dividend equivalents which are not paid currently may, at the
Board's discretion, accrue interest or be reinvested into additional shares of
Common Stock.
11
Exercise of Options and SARs. The exercise of Options and will be
subject to such terms and conditions as are established by the Board in the
written award agreement between. No SAR may be exercised within six months of
its date of grant. The Board will determine at what time or times each option
may be exercised and, the period of time, if any, after retirement, death,
disability or termination of employment during which options may be exercised.
Notwithstanding the provision of any Option which provides for its exercise over
a stated vesting period, an Option shall become immediately exercisable and
fully vested upon the death or permanent and total disability (as defined in the
Code) of the optionee. Any Option granted under the 2003 Plan will cease to be
exercisable one year after the date of permanent and total disability, or two
years after death.
Change in Control. Upon the date of a change in control, all Options
will be immediately exercisable and fully vested. At the time of a change in
control, the Options will, at the discretion of the Board, be assumed, or an
equivalent option substituted, by any successor corporation. Option holders will
have a minimum of forty-five (45) days prior to the change in control to
exercise the Options. Tandem SARs will become exercisable to the extent that the
related Option is exercisable. Freestanding SARs will become fully exercisable
upon a change in control. Upon the change in control, the Company shall make
payment to participants with respect to SARs in cash in an amount equal to the
appreciation in the value of the SAR from the base price specified in the award
agreement to the higher of the average trading price of the Common Stock on the
date of determination of the change in control, or the highest price actually
paid in connection with the change in control. All restrictions and conditions
on restricted stock awards and phantom stock awards shall be deemed to be
satisfied and fulfilled upon the occurrence of a change in control, and the
award recipient will be entitled to receive the shares or cash payment to which
they are entitled under the terms of the award. All performance targets under
performance share awards will be deemed to have been met upon a change in
control and award recipients will be entitled to a pro-rata proportion of the
shares of Common Stock which would have been issued to them. The pro-rata
proportion of the shares of Common Stock to be issued shall be equal to a
fraction, the numerator of which is the duration of the performance period prior
to the change in control and the denominator of which is the original length of
the performance period.
For purposes of the 2003 Plan, "change in control" means a change in
control of the Company of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation l4A promulgated under the
Securities Exchange Act of 1934, provided that, without limitation, a change in
control will be deemed to have occurred at such time as (i) any "person" becomes
the beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities, or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors cease for any reason to constitute at least a majority thereof unless
the election or the nomination for election, by the Company's shareholders, of
each new director was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of the period.
Although these provisions are included in the 2003 Plan primarily for
the protection of recipients of awards, in the event of a change in control of
the Company, they may also be regarded as having a takeover defensive effect,
which may reduce the Company's vulnerability to hostile takeover attempts and
certain other transactions which have not been negotiated with and approved by
the Board of Directors.
Transferability. Awards may not be assigned encumbered or transferred
except by will or by the laws of descent and distribution, or, except with
respect to ISOs, as otherwise expressly provided in an award agreement.
Amendment and Termination of the 2003 Plan. The Company reserves the
right to amend, modify or terminate the 2003 Plan at any time by action of the
Board of Directors, or, by action of the Board of Directors with the consent of
a Participant, to amend, modify or terminate any outstanding award, except that
the Company may not, without shareholder approval, adopt any amendment which
would (a) materially increase the benefits accruing to participants under the
plan, (b) materially increase the number of shares of Common Stock which may be
issued under the plan, or (c) materially modify the requirements as to
eligibility for participation in the plan. No action may be taken by the Company
without the consent of the participant that will impair the validity of any
award then outstanding or that will prevent any incentive stock options issued
or to be issued under the 2003 Plan from being ISOs.
12
FEDERAL INCOME TAX CONSEQUENCES.
ISOs. An employee recognizes no taxable income upon the grant of ISOs.
If the optionee holds the shares received upon exercise of the option for at
least two years from the date the ISO is granted and one year from the date the
ISO is exercised, any gain realized on the sale of the shares received upon
exercise of such ISO is taxed as long-term capital gain. However, the difference
between the fair market value of the stock at the date of exercise and the
exercise price of the ISO will be treated as an item of tax preference in the
year of exercise for purposes of the alternative minimum tax. If the employee
disposes of the shares before the expiration of either of the special holding
periods, the disposition is a "disqualifying disposition." In this event, the
employee will be required, at the time of the disposition of the stock, to treat
the lesser of the gain realized or the difference between the exercise price and
the fair market value of the stock at the date of exercise as ordinary income
and the excess, if any, as capital gain.
The Company will not be entitled to any deduction for federal income
tax purposes as the result of the grant or exercise of an ISO, regardless of
whether or not the exercise of the ISO results in liability under the
alternative minimum tax. However, if the employee has ordinary income taxable as
compensation as a result of a disqualifying disposition, the Company will be
entitled to deduct an equivalent amount for federal income tax purposes.
Non-ISOs. In the case of a Non-ISO, an optionee will recognize ordinary
income upon the exercise of the Non-ISO in an amount equal to the difference
between the fair market value of the shares on the date of exercise and the
option price (or, if the optionee is subject to certain restrictions imposed by
the federal securities laws, upon the lapse of those restrictions unless the
optionee makes a special tax election within 30 days after the date of exercise
to have the general rule apply). Upon a subsequent disposition of such shares,
any amount received by the optionee in excess of the fair market value of the
shares as of the of exercise will be taxed as capital gain. If an optionee has
ordinary income taxable as compensation as a result of a disqualifying
disposition, the Company will be entitled to deduct an equivalent amount for
federal income tax purposes.
SARs. The grant of an SAR has no tax effect on the optionee or the
Company. Upon exercise of the SARs, however, any cash or Common Stock received
by the optionee in connection with the surrender of his or her SAR will be
treated as ordinary income to the optionee, and the Company will be entitled to
deduct an equivalent amount for federal income tax purposes.
Restricted Stock. The grant of restricted stock has no tax effect on
the Company or the grantee. When the shares become vested pursuant to the
restricted stock award, the grantee will recognize ordinary income equal to the
fair market value of the shares delivered to him or her under the restricted
stock award, and the Company will be entitled to deduct an equivalent amount for
federal income tax purposes.
Performance Shares and Phantom Stock. The grant of performance shares
and phantom stock has no tax effect on the Company or the grantee. When the
shares become vested and cash or stock delivered to the grantee pursuant to the
award, the grantee will recognize ordinary income equal to the fair market value
of the shares or cash delivered to him or her under the award, and the Company
will be entitled to deduct an equivalent amount for federal income tax purposes.
No Awards Granted. As of the date of the Meeting, no awards have been
made to any person under the 2003 Plan and the amounts to be received by Messrs.
Maxwell and Linhart, all current directors and executive officers as a group and
all employees, including all current officers who are not executive officers, as
a group cannot be determined at this time.
Vote Required and Board Recommendation. The Board of Directors has
determined that the 2003 Plan is desirable and effective and produces incentives
which will benefit the Company and its shareholders. The Board of Directors is
seeking stockholder approval of the 2003 Plan in order to satisfy the
requirements of the Code for favorable tax treatment of incentive stock options,
to exempt certain option transactions from the short-swing trading rules of the
Securities and Exchange Commission ("SEC"), and to satisfy the rules of the
National Association of Securities Dealers, Inc. ("NASD") for continued listing
of the Common Stock on the Nasdaq SmallCap Market.
13
Approval of the 2003 Plan requires the favorable vote of a majority of the
outstanding shares of Common Stock. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF THE 2003 PLAN.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Common Stock, to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission, and
to provide the Company with copies of all Forms 3, 4, and 5 they file.
Based solely upon the Company's review of the copies of the forms which
it has received and written representations from the Company's directors,
executive officers and ten percent shareholder, the Company is not aware of any
failure of any such person to comply with the requirements of Section 16(a).
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has selected the independent certified public
accounting firm of Yount, Hyde & Barbour, P.C. to audit the accounts of the
Company for the fiscal year ended December 31, 2003. Representatives of Yount,
Hyde & Barbour are expected to be present at the Annual Meeting and available to
respond to appropriate questions. The representatives also will be provided with
an opportunity to make a statement, if they desire.
FEES PAID TO INDEPENDENT ACCOUNTING FIRM
Audit fees.
The aggregate amount of fees billed by Yount, Hyde & Barbour for
services provided in connection with the audit of the Company's financial
statements for the year ended December 31, 2002, and for review of the financial
statements included in the Company' quarterly reports on Form 10-QSB filed
during 2002 was $29,100.
All Other Fees.
The aggregate amount of fees billed for all other professional services
provided by Yount, Hyde & Barbour during the year ended December 31, 2001 was
$1,826. No portion of this amount related to fees for the design, implementation
or operation of the Company's financial information systems.
FORM 10-K ANNUAL REPORT
THE COMPANY WILL PROVIDE TO ANY SHAREHOLDER SOLICITED HEREBY, WITHOUT
CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER
31, 2002 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, UPON WRITTEN
REQUEST. REQUESTS SHOULD BE DIRECTED TO THE COMPANY'S CHIEF FINANCIAL OFFICER,
RICHARD I. LINHART, 3003 WILSON BOULEVARD, ARLINGTON, VIRGINIA 22207.
OTHER BUSINESS
Management is not aware of any other matters to be presented for action
by shareholders at the meeting. If, however, any other matters not now known or
any adjournment thereof, the persons named in the accompanying proxy will vote
such proxy in accordance with the judgment on such matters.
14
STOCKHOLDER PROPOSALS
All proposals of shareholders to be presented for consideration at the
next annual meeting and included in the Company's proxy materials must be
received by the Company no later than November 26, 2002. Shareholder proposals
and nominations not sought to be included in the Company's proxy materials must
be received by the Company not later than January 30, 2003.
By Order of the Board of Directors
JAMES MONROE BANCORP INC.
/s/ Richard I. Linhart
-------------------------------------------
March 25, 2003 Richard I. Linhart
Secretary
15
Exhibit A
JAMES MONROE BANCORP, INC.
2003 EQUITY COMPENSATION PLAN
1. PURPOSE OF PLAN.
The purpose of this James Monroe Bancorp, Inc. 2003 Equity Compensation
Plan is to promote the long-term interests of James Monroe Bancorp, Inc. and its
wholly-owned subsidiary, James Monroe Bank, by (i) motivating key personnel and
directors through the grant of equity compensation, (ii) furthering the identity
of interests of Participants with those of the shareholders of the Corporation
through the ownership of the Common Stock of the Corporation and (iii)
permitting the Corporation to attract and retain key personnel and directors
upon whose judgment and efforts the successful conduct of the business of the
Corporation largely depends. Toward this objective, the Committee may grant
stock options, stock appreciation rights, restricted stock awards, phantom stock
and/or performance shares to Key Employees of the Corporation and its
Subsidiaries, and to non-employee directors of the Corporation and its
Subsidiaries, on the terms and subject to the conditions set forth in the Plan.
2. DEFINITIONS.
2.1 "Administrative Policies" shall mean the administrative policies
and procedures, if any, adopted and amended from time to time by the Committee
regarding the administration of the Plan.
2.2 "Award" shall mean any form of stock option, stock appreciation
right, restricted stock award, phantom stock or performance share granted under
the Plan, whether singly, in combination, or in tandem, to a Participant by the
Committee pursuant to such terms, conditions, restrictions and limitations, if
any, as the Committee may establish by the Award Agreement or otherwise.
2.3 "Award Agreement" shall mean a written agreement with respect to an
Award between the Corporation and a Participant establishing the terms,
conditions, restrictions and limitations applicable to an Award. To the extent
an Award Agreement is inconsistent with the terms of the Plan, the Plan shall
govern the rights of the Participant thereunder.
2.4 "Board" shall mean the Board of Directors of the Corporation.
2.5 "Change In Control" shall mean a change in control of the
Corporation of a nature that would be required to be reported (assuming such
event has not been previously reported) in response to Item 6(e) of Schedule 14A
of Regulation l4A promulgated under the Securities Exchange Act of 1934 (or a
successor provision thereto), provided that, without limitation, a Change In
Control shall be deemed to have occurred at such time after the Effective Date
as (i) any "person", within the meaning of Section 14(d) of the Exchange Act,
becomes the beneficial owner, directly or indirectly, of securities of the
Corporation representing 50% or more of the combined voting power of the
Corporation's then outstanding securities, or (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors cease for any reason to constitute at least a majority
thereof unless the election or the nomination for election, by the Corporation's
shareholders, of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of the
period.
2.6 "Change In Control Price" shall mean the higher of (i) the mean of
the high and low trading prices for the Corporation's Common Stock on the Stock
Exchange on the date of determination of the Change In Control or (ii) the
highest price per share actually paid for the Common Stock in connection with
the Change In Control of the Corporation.
2.7 "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
2.8 "Committee" shall mean the entire Board of Directors of the
Corporation, or such other committee designated by the Board, authorized to
administer the Plan under Section 3 hereof. The Committee, in its discretion,
may delegate to a senior executive officer of the Corporation all or part of the
Committee's authority and duties with
A-1
respect to Awards to individuals who are not subject to the reporting and other
provisions of Section 16 of the Exchange Act. In the event of any such
delegation, references herein to the "Committee" shall, to the extent of such
permitted delegation, be deemed to be references to such senior executive
officer as well. The Committee may revoke or amend the terms of a delegation at
any time, but such action shall not invalidate any prior actions of any such
senior executive officer that were consistent with the terms of the Plan.
2.9 "Common Stock" shall mean Common Stock, par value $1.00, of the
Corporation.
2.10 "Corporation" shall mean James Monroe Bancorp, Inc.
2.11 "Effective Date" shall mean June 30, 2003.
2.12 "Key Employee" shall mean an employee of the Corporation or a
Subsidiary who holds a position of responsibility in a managerial,
administrative or professional capacity, or a consultant to the Corporation, in
either case whose performance, as determined by the Committee in the exercise of
its sole and absolute discretion, can have a significant effect on the growth,
profitability and success of the Corporation.
2.13 "Participant" shall mean any individual to whom an Award has been
granted by the Committee under this Plan.
2.14 "Plan" shall mean this James Monroe Bancorp, Inc. 2003 Equity
Compensation Plan, as amended from time to time.
2.15 "Share" shall mean one share of Common Stock of the Corporation.
2.16 "Stock Exchange" shall mean the Nasdaq SmallCap Market or National
Market System or the principal stock exchange upon which the Common Stock is
traded or, if the Common Stock is no longer traded on such a market or a stock
exchange, then such other market price reporting system on which the Common
Stock is traded or quoted designated by the Committee after it determines that
such other system is both reliable and reasonably accessible.
2.17 "Subsidiary" shall mean a corporation or other business entity in
which the Corporation directly or indirectly owns fifty percent (50%) or more of
the voting equity.
3. ADMINISTRATION OF THE PLAN.
(a) Composition of the Committee. The Plan shall be administered by the
entire Board of Directors of the Corporation which shall serve as the Committee
("Committee").
(b) Powers of the Committee. The Committee shall have all the powers
vested in it by the terms of the Plan, such powers to include authority, in its
sole and absolute discretion, to grant Awards under the Plan, prescribe Award
Agreements evidencing such Awards and establish programs for granting Awards.
The Committee shall have full power and authority to take all other
actions necessary to carry out the purpose and intent of the Plan, including,
but not limited to, the authority to (i) determine the eligible persons to whom,
and the time or times at which Awards shall be granted; (ii) determine the types
of Awards to be granted; (iii) determine the number of shares to be covered by
or used for reference purposes for each Award; (iv) impose such terms,
limitations, restrictions and conditions upon any such Awards as the Committee
shall deem appropriate; (v) modify, amend, extend or renew outstanding Awards,
or accept the surrender of outstanding Awards and substitute new Awards
(provided, however, that, except as provided in Section 17 of the Plan, any
modification that would materially adversely affect any outstanding Awards shall
not be made without the consent of the holder); (vi) accelerate or otherwise
change the time in which an Award may be exercised or becomes payable and to
waive or accelerate the lapse, in whole or in part, of any restriction or
condition with respect to such Award, including, but not limited to, any
restriction or condition with respect to the vesting or exercisability of an
Award following termination of any grantee's employment or other relationship
with the Company; and (vii) establish objectives and conditions, if any, for
earning Awards and determining whether Awards will be paid after the end of a
performance period.
A-2
The Committee shall have full power and authority, in its sole and
absolute discretion, to administer and interpret the Plan and to adopt and
interpret such rules, regulations, agreements, guidelines and instruments for
the administration of the Plan and for the conduct of its business as the
Committee deems necessary or advisable.
(c) Award Agreement. Each Award shall be evidenced by an Award
Agreement containing such provisions as may be approved by the Committee. Each
such Award Agreement shall constitute a binding contract between the Corporation
and the Participant, and every Participant, upon acceptance of such Award
Agreement, shall be bound by the terms and restrictions of the Plan and of such
Award Agreement. The terms of each such Award Agreement shall be in accordance
with the Plan, but each Award 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 Award
Agreement (i) the number of Shares subject to, and the expiration date of, the
Award, (ii) the manner, time and rate (cumulative or otherwise) of exercise or
vesting of such Award and (iv) the restrictions, if any, to be placed upon such
Award, or upon Shares which may be issued upon exercise of such Award.
The Chairman of the Board of Directors, the Chief Executive Officer of
the Corporation and such other officers as shall be designated by the Committee
are hereby authorized to execute Agreements on behalf of the Corporation and to
cause them to be delivered to the recipients of Awards.
(d) Non-Uniform Determinations. The Committee's determinations under
the Plan (including, without limitation, determinations of the persons to
receive Awards, the form, amount and timing of such Awards, the terms and
provisions of such Awards and the Award Agreements evidencing such Awards) need
not be uniform and may be made by the Committee selectively among persons who
receive, or are eligible to receive, Awards under the Plan, whether or not such
persons are similarly situated.
(e) Limited Liability. To the maximum extent permitted by law, no
member of the Committee shall be liable for any action taken or decision made in
good faith relating to the Plan or any Award thereunder.
(f) Effect of the Committee's Decisions. All decisions, determinations
and interpretations of the Committee shall be final and conclusive on all
persons affected thereby.
(g) Indemnification. In addition to such other rights of
indemnification as they may have, the members of the Committee shall be
indemnified by the Corporation in connection with any claim, action, suit or
proceeding relating to any action taken or failure to act under or in connection
with the Plan or any Award granted thereunder to the full extent provided for
under the Corporation's Articles of Incorporation or Bylaws with respect to the
indemnification of Directors.
4. ELIGIBILITY.
Any Key Employee or director of the Corporation or Subsidiary is
eligible to become a Participant in the Plan.
5. SHARES AVAILABLE FOR THE PLAN.
(a) Shares Reserved. Shares of Common Stock available for issuance
under the Plan may be authorized and unissued shares or treasury shares. Subject
to the adjustments provided for in Section 17 hereof, the maximum number of
shares of Common Stock available for grant of Awards under the Plan during shall
be Two Hundred Thousand (200,000);
(b) Shares Granted. For purposes of calculating the number of Shares of
Common Stock deemed to be granted hereunder, each Award, whether denominated in
stock options, stock appreciation rights, restricted stock, performance shares
or phantom stock, shall be deemed to be a grant of a number of shares of Common
Stock equal to the number of shares represented by the stock options, shares of
restricted stock, performance shares, shares of phantom stock or stock
appreciation rights set forth in the Award, provided, however:
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(i) in the case of any Award as to which the exercise of one right
nullifies the exercisability of another (including, by way of illustration, the
grant of a stock option with Tandem SARs (as hereinafter defined)), the number
of Shares deemed to have been granted shall be the maximum number of Shares
(and/or cash equivalents) that could have been acquired upon the maximum
exercise or settlement of the Award; and
(ii) in the case of performance share awards providing for
payments in excess of 100% of the number of shares set forth in the Award
Agreement, the number of shares granted shall be deemed to be the maximum number
of shares (and/or the cash equivalent thereof) issuable under the Award at the
highest level of performance.
(c) Release of Shares. Any shares for which an Award is granted
hereunder that are released from such Award for any reason shall become
available for other Awards to be granted under the Plan. Notwithstanding the
foregoing, for purposes of calculating the number of shares available for
re-grant in any year, the portion of any Award that has been settled by the
payment of cash or the issuance of shares of Common Stock, or a combination
thereof, shall not be available for re-grant under the Plan, irrespective of the
value of the settlement or the method of its payment. The settlement of an Award
shall not be deemed to be the grant of an Award hereunder.
6. TERM.
The Plan shall become effective as of June 30, 2003 subject to approval
of the Plan by the Corporation's shareholders at the 2003 annual meeting. No
Awards shall be exercisable or payable before approval of the Plan has been
obtained from the Corporation's shareholders. Any Award made under the Plan
prior to the date of approval by the shareholders shall be void if shareholder
approval is not obtained.
7. PARTICIPATION.
The Committee shall select, from time to time, Participants from
directors and those Key Employees who, in the opinion of the Committee, can
advance the Plan's purposes, and the Committee shall determine the type or types
of Awards to be made to the Participant. The terms, conditions and restrictions
of each Award shall be set forth in an Award Agreement.
8. STOCK OPTIONS.
(a) Grants. Awards may be granted in the form of stock options. Stock
options may be incentive stock options within the meaning of section 422 of the
Code or non-statutory stock options (i.e., stock options which are not incentive
stock options), or a combination of both, or any particular type of tax
advantage option authorized by the Code from time to time.
(b) Terms and Conditions of Options. An option shall be exercisable in
whole or in such installments and at such times as may be determined by the
Committee; provided, however, that no stock option shall be exercisable more
than ten (10) years after the date of grant thereof. The option exercise price
shall be established by the Committee, but such price shall not be less than the
per share fair market value of the Common Stock, as determined by the Committee,
on the date of the stock option's grant subject to adjustment as provided in
Section 17.
(c) Restrictions Relating to Incentive Stock Options. Stock options
issued in the form of incentive stock options shall, in addition to being
subject to all applicable terms, conditions, restrictions and/or limitations
established by the Committee, comply with section 422 of the Code. Incentive
Stock Options shall be granted (i) only to employees of the Corporation and its
subsidiaries within the meaning of section 424 of the Code and (ii) within ten
(10) years after the date of adoption of this Plan. The aggregate fair market
value (determined as of the date the option is granted) of Shares with respect
to which incentive stock options are exercisable for the first time by an
individual during any calendar year (under this Plan or any other plan of the
Corporation or any Subsidiary
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which provides for the granting of incentive stock options) may not exceed
$100,000 or such other number as may be applicable under the Code from time to
time. Any Incentive Stock Option that is granted to any employee who is, at the
time the option is granted, deemed for purposes of section 422 of the Code, or
any successor provision, to own Shares of the Corporation possessing more than
ten percent of the total combined voting power of all classes of shares of the
Corporation or of a parent or subsidiary of the Corporation, shall have an
option exercise price that is at least one hundred ten percent (110%) of the
fair market value of the Shares at the date of grant and shall not be
exercisable after the expiration of five years from the date it is granted.
(d) Additional Terms and Conditions. The Committee may, by way of the
Award Agreement or otherwise, establish such other terms, conditions,
restrictions and/or limitations, if any, on any stock option Award, provided
they are not inconsistent with the Plan.
(e) Payment. Upon exercise, a Participant may pay the option exercise
price of a stock option in cash or Shares of Common Stock, stock appreciation
rights or a combination of the foregoing, or such other consideration as the
Committee may deem appropriate. The Committee shall establish appropriate
methods for accepting Common Stock and may impose such conditions as it deems
appropriate on the use of such Common Stock to exercise a stock option.
9. STOCK APPRECIATION RIGHTS.
(a) Grants. Awards may be granted in the form of Stock Appreciation
Rights ("SARs"). SARs shall entitle the recipient to receive a payment equal to
the appreciation in market value of a stated number of Shares of Common Stock
from the price stated in the Award Agreement to the market value of the Common
Stock on the date of exercise or surrender. An SAR may be granted in tandem with
all or a portion of a related stock option under the Plan ("Tandem SARs"), or
may be granted separately ("Freestanding SARs"). A Tandem SAR may be granted
either at the time of the grant of the related stock option or at any time
thereafter during the term of the stock option. An SAR may be exercised no
sooner than six months after it is granted. In the case of SARs granted in
tandem with stock options granted prior to the grant of such SARs, the
appreciation in value shall be appreciation from the option exercise price of
such related stock option to the market value of the Common Stock on the date of
exercise.
(b) Terms and Conditions of Tandem SARs. Subject to limitations
contained in the preceding paragraph, a Tandem SAR shall be exercisable to the
extent, and only to the extent, that the related stock option is exercisable.
Upon exercise of a Tandem SAR as to some or all of the Shares covered by an
Award, the related stock option shall be canceled automatically to the extent of
the number of SARs exercised, and such Shares shall not thereafter be eligible
for grant under Section 5 hereof.
(c) Terms and Conditions of Freestanding SARs. Freestanding SARs shall
be exercisable in whole or in such installments and at such times as may be
determined by the Committee. The base price of a Freestanding SAR shall also be
determined by the Committee; provided, however, that such price shall not be
less than the fair market value of the Common Stock, as determined by the
Committee, on the date of the award of the Freestanding SAR.
(d) Deemed Exercise. The Committee may provide that an SAR shall be
deemed to be exercised at the close of business on the scheduled expiration date
of such SAR, if at such time the SAR by its terms is otherwise exercisable and,
if so exercised, would result in a payment to the participant.
(e) Additional Terms and Conditions. The Committee may, consistent with
the Plan, by way of the Award Agreement or otherwise, determine such other
terms, conditions, restrictions and/or limitations, if any, on any SAR Award,
including, but not limited to, determining the manner in which payment of the
appreciation in value shall be made.
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10. RESTRICTED STOCK AWARDS.
(a) Grants. Awards may be granted in the form of Restricted Stock
Awards. Restricted Stock Awards shall be awarded in such numbers and at such
times as the Committee shall determine.
(b) Award Restrictions. Restricted Stock Awards shall be subject to
such terms, conditions, restrictions, or limitations as the Committee deems
appropriate including, by way of illustration but not by way of limitation,
restrictions on transferability, requirements of continued employment or
individual performance or the financial performance of the Corporation. The
Committee may modify, or accelerate the termination of, the restrictions
applicable to a Restricted Stock Award under such circumstances as it deems
appropriate.
(c) Rights as Shareholders. During the period in which any restricted
shares of Common Stock are subject to the restrictions imposed under the
preceding paragraph, the Committee may, in its discretion, grant to the
Participant to whom such restricted shares have been awarded all or any of the
rights of a shareholder with respect to such shares, including, by way of
illustration but not by way of limitation, the right to vote such shares and to
receive dividends.
(d) Evidence of Award. Any Restricted Stock Award granted under the
Plan may be evidenced in such manner as the Committee deems appropriate,
including, without limitation, book-entry registration or issuance of a stock
certificate or certificates.
11. PHANTOM STOCK.
(a) Grants. Awards may be granted in the form of Phantom Stock Awards.
Phantom Stock Awards shall entitle the Participant to receive the market value
or the appreciation in value of an equivalent number of shares of Common Stock
on a settlement date determined by the Committee.
(b) Additional Terms and Conditions. The Committee may, consistent with
the Plan, by way of Award Agreement or otherwise, determine such other terms,
conditions, restrictions or limitations, if any, on any Award of Phantom Stock.
12. PERFORMANCE SHARES.
(a) Grants. Awards may be granted in the form of Performance Shares.
"Performance Shares" shall mean interests the entitlement to which is based upon
the attainment of predetermined Performance Targets as hereinafter defined
during a Performance Period as hereinafter defined. At the end of the
Performance Period, Performance Shares shall be converted into Common Stock (or
Common Stock and cash, as determined by the Award Agreement) and distributed to
Participants based upon such entitlement.
(b) Performance Criteria. The Committee may grant an Award of
Performance Shares to Participants as of the first day of each Performance
Period. As used herein, the term "Performance Period" shall mean the period
during which a Performance Target is measured and the term "Performance Target"
shall mean the predetermined goals established by the Committee. A Performance
Target will be established at the beginning of each Performance Period. If at
the end of the Performance Period, the Performance Target is fully met, the
Performance Shares will be converted 100% into shares of Common Stock (or the
cash equivalent thereof, as determined by the Award Agreement) and issued to the
Participant. Award payments in excess of 100% shall be permitted based upon an
attainment in excess of 100% of the Performance Target. If the Performance
Target has not been fully met, Performance Shares will be converted and
delivered only to the extent, if any, provided at the time of the grant of such
Award for conversion based upon partial attainment of the Performance Target and
the balance of the Performance Shares will be forfeited to the Corporation and
available for reissuance pursuant to Section 5 hereof. Award payments made in
cash rather than the issuance of Common Stock shall not, by reason of such
payment in cash, result in additional shares being available for reissuance
pursuant to Section 5 hereof.
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(c) Additional Terms and Conditions. The Committee may, consistent with
the terms of this Plan, by way of the Award Agreement or otherwise, determine
the manner of payment of Awards of Performance Shares and other terms,
conditions, restrictions or limitations, if any, on any Award of Performance
Shares.
13. PAYMENT OF AWARDS.
Except as otherwise provided herein, Award Agreements may provide that,
at the discretion of the Committee, payment of Awards may be made in cash,
Common Stock, a combination of cash and Common Stock, or any other form of
property as the Committee shall determine. Further, the terms of Award
Agreements may provide for payment of Awards in the form of a lump sum or
installments, as determined by the Committee.
14. DIVIDENDS AND DIVIDEND EQUIVALENTS.
If an Award is granted in the form of a Restricted Stock Award, Phantom
Stock Award or a Freestanding SAR, the Committee may choose, at the time of the
grant of the Award, to include as part of such Award an entitlement to receive
dividends or dividend equivalents, subject to such terms, conditions,
restrictions or limitations, if any, as the Committee may establish. Dividends
and dividend equivalents shall be paid in such form and manner and at such time
as the Committee shall determine. All dividends or dividend equivalents which
are not paid currently may, at the Committee's discretion, accrue interest or be
reinvested into additional Shares of Common Stock.
15. TERMINATION OF EMPLOYMENT.
The Committee may adopt Administrative Policies determining the
entitlement of Participants who cease to be employed by either the Corporation
or Subsidiary whether because of death, disability, resignation, termination or
retirement pursuant to an established retirement plan or policy of the
Corporation or of its applicable Subsidiary. Such matters may also be dealt with
under the terms of Award Agreements.
Notwithstanding the provision of any stock option granted hereunder
which provides for its exercise over a stated vesting period as indicated in the
Award Agreement, such stock option shall become immediately exercisable and
fully vested upon the Participant's death or Permanent and Total Disability.
Any stock option granted hereunder shall be exercisable by a
Participant:
(i) in the event of death, within two (2) years from the date of
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;
(ii) in the event of permanent and total disability (as such term
is defined in Section 22(e)(3) of the Code), within one (1) year from the date
of such permanent and total disability, but not later than the date on which the
option would otherwise expire.
16. ASSIGNMENT AND TRANSFER.
The rights and interests of a Participant under the Plan may not be
assigned, encumbered or transferred except (a) in the event of the death of a
Participant, by will or the laws of descent and distribution, and (b) as may be
explicitly set forth in an Award Agreement.
17. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
In the event of any change in the outstanding Shares of Common Stock by
reason of any reorganization, recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation or any change in the
corporate structure or shares of the Corporation, the maximum aggregate number
and class of shares as to which Awards may be granted under the Plan and the
shares issuable pursuant to then outstanding Awards (and the exercise price of
any outstanding stock options) shall be appropriately adjusted by the Committee,
whose determination shall be final.
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18. WITHHOLDING TAXES.
The Corporation or the applicable Subsidiary shall be entitled to
deduct from any payment under the Plan, regardless of the form of such payment,
the amount of all applicable income and employment tax required by law to be
withheld with respect to such payment or may require the Participant to pay to
it such tax prior to and as a condition of the making of such payment. The
Committee may allow a Participant to pay the amount of taxes required by law to
be withheld from an Award by withholding from any payment of Common Stock due as
a result of such Award, or by permitting the Participant to deliver to the
Corporation shares of Common Stock having a fair market value, as determined by
the Committee, equal to the amount of such required withholding taxes.
19. REGULATORY APPROVALS AND LISTINGS.
Notwithstanding anything contained in this Plan to the contrary, the
Corporation shall have a no obligation to issue or deliver certificates of
Common Stock evidencing Restricted Stock Awards or any other Award payable in
Common Stock prior to (a) the obtaining of any approval from any governmental
agency which the Corporation shall, in its sole discretion, determine to be
necessary or advisable, (b) the admission of such shares to listing on the Stock
Exchange and (c) the completion of any registration or other qualification of
said shares under any state or federal law or ruling of any governmental body
that the Corporation shall, in its sole discretion, determine to be necessary or
advisable.
20. NO RIGHT TO CONTINUED EMPLOYMENT OR GRANTS.
Participation in the Plan shall not give any Key Employee any right to
remain in the employ of the Corporation or any Subsidiary or any director the
right to remain as a director of the Corporation or any Subsidiary. The
Corporation or, in the case of employment with a Subsidiary, the Subsidiary,
reserves the right to terminate the employment of any Key Employee at any time.
The adoption of this Plan shall not be deemed to give any Key Employee or any
other individual any right to be selected as a Participant, to be granted any
Awards hereunder or if granted an Award in any year, to receive Awards in any
subsequent year.
21. AMENDMENT.
The Corporation reserves the right to amend, modify or terminate this
Plan at any time by action of its Board of Directors, or, by action of the Board
of Directors with the consent of a Participant, to amend, modify or terminate
any outstanding Award or Award Agreement, except that the Corporation may not,
without shareholder approval, adopt any amendment which would (a) materially
increase the benefits accruing to Participants under the Plan, (b) materially
increase the number of shares of Common Stock which may be issued under the Plan
(except as specified in Section 17), or (c) materially modify the requirements
as to eligibility for participation in the Plan. Moreover, no action may be
taken by the Corporation (without the consent of the Participant) that will
impair the validity of any Award then outstanding or that will prevent any
incentive stock options issued or to be issued under this Plan from being
"incentive stock options" as defined under section 422 of the Code or any
successor provision.
22. CHANGE IN CONTROL.
(a) Stock Options. In the event of a Change In Control options not
otherwise exercisable at the time of a Change In Control shall become fully
exercisable immediately prior to such Change In Control and, in the discretion
of the Committee, (i) the options shall be assumed, or an equivalent option
substituted, by any successor corporation to the Corporation, or (ii) the
Corporation shall make provisions for the Participant to exercise the options
for a minimum of forty-five (45) days prior to the Change In Control as to all
Shares subject to the options.
(b) Stock Appreciation Rights. In the event of a Change In Control,
Tandem SARs not otherwise exercisable upon a Change In Control shall become
exercisable to the extent that the related Stock Option is exercisable.
Freestanding SARs not otherwise exercisable upon a Change In Control shall also
become fully exercisable upon such Change In Control.
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(i) The Corporation shall make payment to Participants with
respect to SARs in cash in an amount equal to the appreciation in the value of
the SAR from the base price specified in the Award Agreement to the Change In
Control Price;
(ii) Such cash payments to Participants shall be due and payable,
and shall be paid by the Corporation, immediately upon the occurrence of such
Change In Control; and
(iii) After the payment provided for in (ii) above, Participants
shall have no further rights under SARs outstanding at the time of such Change
In Control.
(c) Restricted Stock Awards. In the event of a Change In Control, all
restrictions previously established with respect to Restricted Stock Awards will
conclusively be deemed to have been satisfied. Participants shall be entitled to
have issued to them the Shares of Common Stock described in the applicable Award
Agreements, free and clear of any restriction or restrictive legend, except that
if, upon the advice of counsel to the Corporation, Shares of Common Stock cannot
lawfully be issued without restriction, then the Corporation shall make payment
to Participants in cash in an amount equal to the Change In Control Price of the
Common Stock that otherwise would have been issued:
(i) Such cash payments to Participants shall be due and payable,
and shall be paid by the Corporation, immediately upon the occurrence of such
Change In Control; and
(ii) After the payment provided for in (i) above, Participants
shall have no further rights under Restricted Stock Awards outstanding at the
time of such Change In Control of the Corporation.
(d) Phantom Stock. In the event of a Change In Control:
(i) All restrictions and conditions, if any, previously
established with respect to Phantom Stock Awards will conclusively be deemed to
have been satisfied and fulfilled, and the Corporation shall make payment to
Participants in cash in an amount necessary to satisfy the Participants' rights
under Phantom Stock Awards in accordance with the amounts otherwise payable by
the Corporation pursuant to the Award Agreement;
(ii) Such cash payments shall be made to Participants by the
Corporation immediately prior to the occurrence of such Change In Control; and
(iii) After the payment provided for in (ii) above, the
Participants shall have no further rights under Phantom Stock Awards outstanding
at the time of such change of control of the Corporation.
(e) Performance Shares. In the event of a Change In Control:
(i) All previously established Performance Targets will be
conclusively deemed to have been met. Participants shall be entitled to a
pro-rata proportion of the shares of Common Stock which would have been issued
to them upon conversion of any outstanding Performance Shares at the end of the
Performance Period (based upon the applicable Performance Targets, which are
conclusively deemed to have been met by reason of the Change In Control),
payable in the manner specified in subsection (ii) hereof. The pro-rata
proportion of the shares of Common Stock to be issued shall be equal to a
fraction, the numerator of which is the duration of the Performance Period prior
to such Change In Control and the denominator of which is the original length of
the Performance Period;
(ii) In lieu of issuing shares of Common Stock upon such
conversion of Performance Shares, the Corporation shall make payment to
Participants in cash in an amount equal to the Change In Control Price of the
shares of Common Stock that would have been issued under paragraph (i) above;
A-9
(iii) Such cash payments to Participants shall be due and payable,
and shall be paid by the Corporation, immediately upon the occurrence of such
Change In Control; and
(iv) After the payment provided for in (ii) above, the
Participants shall have no further rights under awards of Performance Shares
outstanding at the time of such Change In Control of the Corporation.
(f) Miscellaneous. Upon a Change In Control, no action shall be taken
which would adversely affect the rights of any Participant or the operation of
the Plan with respect to any Award to which the Participant may have become
entitled hereunder on or prior to the date of the Change In Control or to which
he may become entitled as a result of such Change In Control.
23. NO RIGHT, TITLE OR INTEREST IN CORPORATION ASSETS.
No Participant shall have any rights as a shareholder as a result of
participation in the Plan until the date of issuance of a stock certificate in
his name except, in the case of Restricted Stock Awards, to the extent such
rights are granted to the Participant under Section 10(c) hereof. To the extent
any person acquires a right to receive payments from the Corporation under this
Plan, such rights shall be no greater than the rights of an unsecured creditor
of the Corporation.
24. PAYMENT BY SUBSIDIARIES.
Settlement of Awards to employees of Subsidiaries shall be made by and
at the expense of such Subsidiary. Except as prohibited by law, if any portion
of an Award is to be settled in shares of Common Stock, the Corporation shall
sell and transfer to the Subsidiary, and the Subsidiary shall purchase, the
number of shares necessary to settle such portion of the Award.
25. GOVERNING LAW.
The Plan shall be governed by and. construed in accordance with the
laws of the Commonwealth of Virginia, except as preempted by applicable Federal
law.
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REVOCABLE PROXY
JAMES MONROE BANCORP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby makes, constitutes and appoints David W. Pijor and
John R. Maxwell and each of them (with the power of substitution), proxies for
the undersigned to represent and to vote, as designated below, all shares of
common stock of James Monroe Bancorp, Inc. (the "Company") which the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Shareholders of James Monroe Bancorp, Inc. to be held on April 30, 2003 and at
any adjournment or postponement of the Meeting.
ELECTION OF DIRECTORS
[ ] FOR all nominees listed below (except as noted to the contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
Nominees: Fred A. Burroughs, III; Dr. Terry L. Collins; Norman P. Horn;
Dr. David C. Karlgaard; Richard I. Linhart; Richard C. Litman;
John R. Maxwell; Dr. Alvin E. Nashman; Helen L. Newman;
Thomas L. Patterson; David W. Pijor; Russell E. Sherman
(Instructions: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
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APPROVAL OF THE COMPANY'S 2003 EQUITY COMPENSATION PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN the proposal to approve
the 2003 Equity Compensation Plan.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this proxy will be
voted FOR all of the nominees set forth above, and FOR the approval of the 2003
Equity Compensation Plan. In addition, this proxy will be voted at the
discretion of the proxy holder(s) upon any other matter which may properly come
before the Meeting or any adjournment or postponement of the Meeting.
Important: Please date and sign your name as addressed, and return this proxy in
the enclosed envelope. When signing as executor, administrator, trustee,
guardian, etc., please give full title as such. If the shareholder is a
corporation, the proxy should be signed in the full corporate name by a duly
authorized officer whose title is stated.
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Signature of Shareholder
-------------------------------------
Signature of Shareholder
Dated: , 2003
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PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
[ ] Please check here if you plan to attend the Annual Meeting.