SUMMIT FINANCIAL CORPORATION
1999 INCENTIVE STOCK OPTION PLAN
1. PURPOSE
The purpose of the Summit Financial Corporation 1999 Incentive Stock Option
Plan (the "1999 Plan") is to encourage and enable eligible officers and
employees of Summit Financial Corporation (the "Corporation") and its
subsidiaries to acquire proprietary interests in the Corporation through the
ownership of Common Stock of the Corporation. The Corporation believes that
officers and employees who participate in the Plan will have a closer
identification with the Corporation by virtue of their ability as stockholders
to participate in the Corporation's growth and earnings. The Plan also is
designed to provide motivation for participating officers and employees to
remain in the employ of and to give greater effort on behalf of the Corporation.
It is the intention of the Corporation that options granted under the Plan
qualify as "incentive stock options" ("ISOs") within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations promulgated thereunder. Accordingly, the provisions of the Plan
shall be construed so as to extend and limit participation in a manner
consistent with the requirements of that section of the Code.
2. DEFINITIONS
The following words or terms shall have the following meanings:
(a) "Agreement" shall mean an incentive stock option agreement between the
Corporation and an Eligible Employee pursuant to the terms of this Plan.
(b) "Corporation" shall mean Summit Financial Corporation.
(c) "Committee" shall mean the committee appointed by the Board of Directors
to administer the Plan.
(d) "Common Stock", "Shares" or "Stock" shall mean the $1.00 par value
Common Stock of the Corporation.
(e) "Eligible Employee(s)" shall mean a person or persons regularly employed
by the Corporation or a subsidiary, including officers and other employees, but
excluding non-employee Directors.
(f) "Optionee" shall mean an Eligible Employee having a right to purchase
common Stock under an Agreement.
(g) "Option(s)" shall mean the right or rights granted to Eligible Employees
to purchase Common Stock under an offering made under the Plan.
(h) "Plan" shall mean this Summit Financial Corporation 1999 Incentive Stock
Option Plan.
(i) "Subsidiary" shall mean any corporation or association, if the
Corporation owns or controls, directly or indirectly, more than a majority of
the voting stock of such corporation or association.
(j) "Ten Percent Owner" shall mean an individual who, at the time an Option
is granted, owns directly or indirectly, more than ten (10%) percent of the
total combined voting power of all classes of stock of the Corporation or
otherwise is considered a Ten Percent Owner by reason of Section 424(d) of the
Code.
(k) "Retirement" shall mean at the normal retirement age of 65.
(l) "Nonqualified Deferred Compensation Plan" shall mean any plan or program
sponsored by the Corporation which provides for deferral of income by highly
compensated individuals who constitute a bonafide executive group under
Department of Labor regulations in effect at the time that the individual is
eligibile to participate in said plan or program.
3. EFFECTIVE DATE
The Effective Date of the Plan shall be the date the Plan is adopted by the
Board of Directors or the date the Plan is approved by the stockholders of the
Corporation, whichever is earlier. The Plan must be approved by the shareholders
within twelve (12) months of the effective date.
4. SHARES RESERVED FOR PLAN
The shares of the Corporation's Common Stock to be sold to Eligible
Employees under the Plan may, at the election of the Board of Directors, be
either treasury shares or shares originally issued for such purpose. The
maximum number of shares which shall be reserved and made available for sale
under the Plan shall be 215,000. If any Options granted under the Plan
terminate, expire or are otherwise surrendered without having been exercised in
full, the number of such Options shall be available again to be granted under
the Plan, subject to all provisions and limitations provided herein.
In the event of a subdivision or combination of the Corporation's shares
(including a stock dividend), the maximum number of shares that may thereafter
be issued and sold under the Plan and the number of shares under option will be
proportionately increased or decreased. In addition, the terms relating to the
price at which shares under option will be sold will be approximately adjusted,
and such other action will be taken as in the opinion of the Board of Directors
is appropriate under the circumstances. In case of a reclassification or other
change in the Corporation's shares, the Board of Directors also will make
appropriate adjustments.
5. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee. The Committee shall be
comprised of not less than two non-employee directors (as defined in Section
16b-3 of the Securities Exchange Act of 1934) appointed by the Board of
Directors of the Corporation from among its members. No member of the Board of
Directors shall be appointed or serve as a member of the Committee, and any such
appointment or service immediately and automatically shall terminate, in the
event that such person is, or becomes, an Eligible Employee (as described in
Section 2 of the Plan) or is otherwise disqualified by the provisions of Section
16b-3 of the Securities Exchange Act of 1934.
Within the limitations described herein, the Committee shall administer the
Plan; select the Eligible Employees to whom Options will be granted; determine
the number of shares to be optioned to each Eligible Employee; interpret,
construe and implement the provisions of the Plan; establish, amend, revoke
rules and regulations relating to the Plan and its administration; and to
correct any defect, supply any omission, or reconcile and inconsistency in the
Plan in a manner and to the extent deemed necessary, all or which determinations
and interpretations made by the Committee shall be conclusive and binding on all
Optionees and their legal representatives and beneficiaries.
The Committee shall select one of its members as Chairman and shall hold
its meetings at such time and places, and pursuant to such rules consistent with
the Plan, as it may determine. A majority of the members of the Committee shall
constitute a quorum, and the acts of a majority of the members present at any
meeting at which a quorum is present, or acts approved in writing by a majority
of the members of the Committee, shall be the acts of the Committee.
6. ELIGIBILITY
Options may be granted only to Eligible Employees.
7. DURATION OF THE PLAN
This Plan shall terminate on November 15, 2009, unless terminated sooner by
the Board of Directors. The Plan shall remain in effect until all shares
subject to, or which may become subject to, the Plan shall have been purchased
pursuant to Options granted under the Plan. No Options shall be granted
pursuant to this Plan after November 15, 2009.
8. OPTIONS GRANTS
It is intended that Options granted under the Plan shall be qualified
incentive stock options ("ISOs") under the provisions of Section 422 of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder or
corresponding provisions of subsequent revenue laws and regulations in effect at
the time such Options are granted. Such Options shall be evidenced by stock
option agreements in such form and not inconsistent with this Plan as the
Committee and/or the full Board shall approve from time to time, which
agreements shall contain in substance, the following terms and conditions:
(a) Price. The purchase price for shares purchased under exercise of an
------
Option shall not be less than 100% of the Fair Market Value of the Stock on the
day the Option is granted, as defined below, and in no case less than the par
value of such stock. However, if an ISO is granted to a Ten Percent Owner, the
purchase price of the Stock covered by such ISO shall be not less than one
hundred ten (110%) percent of the Fair Market Value of the Stock on the day the
Option is granted. Any Option granted to a Ten Percent Owner must, by its terms,
be exercisable within five (5) years from the date it is granted.
For purposes of the Plan, "Fair Market Value" shall be the closing quoted
selling price of the Stock as reported by NASDAQ on the grant date. In the
event that the Stock is not publicly traded, or a published quoted is not
otherwise available, the Fair Market Value shall be the amount determined by the
Committee in good faith.
(b) Number of Shares. The Agreement shall specify the number of shares
-------------------
which the Optionee may purchase under such Option.
(c) Rights as a Shareholder. An Optionee shall have no rights as a
---------------------------
shareholder with respect to any shares covered by an Option until the date of
issuance of the stock certificate to the Optionee for such shares. Except as
otherwise expressly provided in the Plan, no adjustments shall be made for cash
dividends or other rights for which the record date is prior to the date such
stock certificate is issued. Options will be appropriately adjusted for all
stock distributions or dividends as discussed in Section 4 of the Plan.
(d) Limitation on Grants. The aggregate fair market value (determined at
-----------------------
the time the Option is granted) of the shares with respect to which ISOs are
exercisable for the first time by an Optionee during any calendar year (under
all incentive stock option plans of the Corporation) shall not exceed $100,000
or such other amount as may be specified in Section 422(d) of the Code. To the
extent that any Options granted fail to comply with the limitations set forth in
this subparagraph, such Options shall be treated as non-qualified options as
defined by the Code.
9. OPTION EXERCISES
(a) Exercise of Options. Options hereunder may be exercised by an Optionee
---------------------
on a cumulative basis up to a maximum of twenty (20%) percent of the shares
subject to Option on each of the first five (5) anniversaries of the grant of
such option, but in no event later than ten (10) years from the date of grant of
the Option or within sixty (60) days from date of such written notice to an
Optionee as referred to in Section 11(c) of the Plan. Options may be exercised
in whole or in part upon giving written notice to the Corporation stating the
number of shares and Option price for which the Option is being exercised.
(b) Medium and Time of Payment. Stock purchased pursuant to an Agreement
------------------------------
shall be paid for in full at the time of purchase evidenced by the written
request discussed in 9(a) above. Payment of the purchase price shall be made
(1) in cash; (2) in whole or in part through the surrender of previously owned
(i.e. held by the Optionee in excess of 6 months) shares of Stock at their Fair
Market Value on the exercise date; or (3) by a cash equivalent acceptable to the
Corporation and approved by the Committee. Upon receipt of payment, the
Corporation shall, without transfer or issue tax, deliver to the Optionee a
certificate or certificates for such shares. Additional or different procedures
or requirements for the exercise of Options may be established from time to time
as directed by the Committee.
10. DURATION OF OPTIONS
(a) Termination of Employment or Service - General. Unless otherwise
- --- -----------------------------------------------------
determined by the Committee, upon the termination of an Optionee's employment or
other service for any reason other than retirement, disability, or death, the
Optionee may exercise only those ISOs that were immediately exercisable by the
Optionee at the date of such termination and only for a period of 30 days
following the date of such termination.
(b) Termination of Employment - Retirement. Unless otherwise determined by
- --- -----------------------------------------
the Committee, in the event of an Optionee's Retirement (as defined), the
Optionee may exercise only those ISOs that were immediately exercisable by the
Optionee at the date of such termination and only for a period of 3 months
following the date of such termination of employment.
(c) Termination of Employment - Disability or Death. Unless otherwise
- --- ------------------------------------------------------
determined by the Committee, in the event that an Optionee ceases to be an
employee of the Corporation or any of its subsidiaries for reasons of disability
(in the sole determination of the Committee) or death, all ISOs held by such
Optionee shall immediately become exercisable. In the event of disability, the
Optionee shall have a period of three (3) months from the date of termination of
employment in which to exercise the Options. In the event of the death, the
Option shall be exercisable by his or her legal representative, heirs or
legatees within a period of twelve (12) months from the date on which the
Optionee died.
(d) Despite provisions made above, in no event shall any Option be
exercisable after ten (10) years from the date the Option was granted.
11. MISCELLANEOUS OPTION PROVISIONS
(a) Nonassignability of Option. No Option shall be assignable or transferable
---------------------------
by the Optionee except by will or by the laws of descent and distribution.
During the lifetime of the Optionee, the Option shall be exercisable only by him
or her.
(b) Continuance of Employment. Nothing contained in the Plan or in any
----------------------------
Options granted under the Plan shall confer upon the Optionee any rights with
respect to the continuation of employment by the Company or interfere in any way
with the right of the Company (subject to the terms of any separate employment
agreement to the contrary) at any time to terminate such employment or to
increase or decrease the compensation of the Optionee from the rate in existence
at the time of the granting of any Option.
(c) Change of Control. Upon a Change in Control of the Corporation (as
- --- --------------------
defined below), all the outstanding Options shall become 100% vested and
exercisable as of the effective date of the Change in Control. Exercise must be
made within 60 days from the written notice to the Optionee of such change in
control. If, in connection with or as a consequence of a Change in Control, the
Company is merged into or consolidated with another corporation, if the Company
becomes a subsidiary of another corporation or if the Company sells or otherwise
disposes of substantially all of its assets to another corporation, then unless
provisions are made in connection with such transactions for the continuance of
the Plan and/or the assumption or substitution of then outstanding Options with
new options covering the stock of the successor corporation, or parent or
subsidiary thereof, with appropriate adjustments as to the number and kind of
shares and prices, such Options shall be canceled as of the effective date of
the merger, consolidation, or sale and the Optionee shall be paid in cash an
amount equal to the difference between the Fair Market Value of the Stock
subject to the Options on the effective date of such corporate event and the
exercise price of the Options.
For purposes of this Plan, a "Change in Control" shall mean an event deemed
to occur if and when (a) an offeror other than the Company purchases shares of
the stock of the Company pursuant to a tender or exchange offer for such shares,
(b) any person (as such term is used in Sections 13(d) and 14(d)(2) of the
Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing twenty-five percent (25%) or more of the
combined voting power of the Company's then outstanding securities, (c) the
membership of the board of directors of the Company changes as the result of a
contested election, such that individuals who were directors at the beginning of
any twenty-four (24) month period (whether commencing before or after the date
of adoption of this Plan) do not constitute a majority of the Board at the end
of such period, or (d) a plan of reorganization, merger, consolidation, sale of
all or substantially all the assets of the Company or similar transaction occurs
or is effectuated in which the Company is not the resulting entity; provided,
however, that such an event listed above will be deemed to have occurred or to
have been effectuated upon the receipt of all required federal regulatory
approvals not including the lapse of any statutory waiting periods.
(d) General Provision Applicable to Nonqualified Options. In the event
----------------------------------------------------------
that, pursuant to the provisions of section 8(d) above, any option that shall be
so impacted shall, notwithstanding any provisions of this Plan to the contrary,
be subject to the provisions of this paragraph. In the event that the
Corporation shall have in effect a Nonqualified Deferred Compensation Plan (as
defined) at the time of exercise of any option so effected by section 8(b), the
Optionee shall be provided proper forms on a timely basis to properly elect
deferral of any stock option gain that may have otherwise been recognized for
tax purposes.
(e) General Restrictions. Each Option shall be subject to the requirement
----------------------
that if at any time the Board of Directors shall determine, in its discretion,
that the listing, registration or qualification of the Shares subject to such
Option upon any securities exchange or under any state or federal law, or the
consent or approval of any government regulatory body, is necessary or desirable
as a condition of, or in connection with, the granting of such Option or the
issue or purchase of shares thereunder, such Option may not be exercised in
whole or in part unless such listing, registration, qualification, consent or
approval shall have been affected or obtained free of any conditions not
acceptable to the Board of Directors.
12. AMENDMENT AND TERMINATION OF THE PLAN
The Plan may at any time or from time to time be terminated, modified or
amended by the affirmative vote of not less than a majority of the votes
entitled to be case thereon by the Corporation's shareholders. The Board of
Directors may at any time and from time to time, terminate, modify or amend the
Plan in any respect, except that without shareholder approval the Board of
Directors may not (i) increase the maximum number of shares for which Options
may be granted under the Plan either in the aggregate (other than increases due
to changes in capitalization as referred to in Section 4 hereof), or (ii) reduce
the option price or waiting period under Section 422 of the Internal Revenue
Code (except as otherwise expressly provided in the Plan in the case of a change
of control of the Company as referred to in Section 11(c) hereof), or (iii)
extend the period during which Options may be granted or exercised, or (iv)
change the class of employees eligible for incentive stock options under Section
6 hereof, or (v) otherwise materially modify the requirements as to eligibility
for participation in the Plan, or (vi) otherwise materially increase the benefit
accruing to participants under the Plan. The termination or any modification or
amendment of the Plan shall not, without the consent of an Optionee, affect his
or her rights under an Option or right previously granted to him or her. With
the consent of the Optionee affected, the Committee may amend outstanding option
Agreements in a manner not inconsistent with the Plan. Without employee consent,
the Board of Directors may at any time and from time to time, modify or amend
outstanding option Agreements in such respects as it shall deem necessary in
order that Options granted hereunder shall comply with the appropriate
provisions of the Internal Revenue Code of 1986, as amended, and regulations
thereunder which are in effect from time to time respecting qualified incentive
stock options.
13. BINDING EFFECT
All decisions of the Board of Directors or the Committee involving the
implementation, administration or operation of the Plan or any offering under
the Plan shall be binding on the Corporation, all Eligible Employees
participating in the Plan, and on all persons eligible or who become eligible to
participate in the Plan.
APPROVED this 15th day of November 1999,
BY: WITNESS:
/s/ C. Vincent Brown /s/ J. Randolph Potter
---------------------------- ----------------------------
C. Vincent Brown, Chairman
/s/ Blaise B. Bettendorf
------------------------------