TRI-COUNTY FINANCIAL CORPORATION
1995 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE OF THE PLAN.
The purpose of this Tri-County Financial Corporation 1995 Stock Option Plan
for Non-Employee Directors (the "Plan") is to advance the interests of the
Company through providing Directors of the Company and its Affiliates with the
opportunity to acquire Shares. By encouraging such stock ownership, the Company
seeks to attract, retain, and motivate the best available personnel for
positions of substantial responsibility and to provide additional incentive to
Directors to promote the success of the business.
2. DEFINITIONS.
As used herein, the following definitions shall apply.
(a) "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Company, as such terms are defined in Section 424(e) and
(f), respectively, of the Code.
(b) "Agreement" shall mean a written agreement entered into in accordance
with Paragraph 5(c).
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Change in Control" shall mean the acquisition of the beneficial
ownership (as that term is defined in Rule 13d-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended) of 25% or
more of the voting securities of the Company by any person or by persons acting
as a "group" (within the meaning of Section 13(d) of the Securities Exchange Act
of 1934). For purposes of this subparagraph only, the term "person" refers to an
individual or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any other
form of entity not specifically listed herein. The decision of the Board as to
whether a change in control has occurred shall be conclusive and binding.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) "Common Stock" shall mean the common stock, par value $.01 per share,
of the Company.
(g) "Company" shall mean Tri-County Financial Corporation.
(h) "Continuous Service" shall mean the absence of any interruption or
termination of service as a Director of the Company or an Affiliate. Continuous
Service shall not be considered interrupted in the case of sick leave, military
leave or any other leave of absence approved by the Company or in the case of
transfers between payroll locations of the Company or between the Company, an
Affiliate or a successor.
(i) "Director" shall mean any member of the Board or of the Board of
Directors of an Affiliate, including advisory director Gough.
(j) "Effective Date" shall mean the date specified in Paragraph 13 hereof.
(k) "Employee" shall mean any person employed on a full-time basis by the
Company or an Affiliate.
(l) "Exercise Price" shall mean the price per Optioned Share at which an
Option may be exercised.
(m) "Market Value" shall mean the fair market value of the Common Stock, as
determined under Paragraph 7(b) hereof.
(n) "Option" means an option to purchase Common Stock which meets the
requirements set forth in the Plan. Such Options shall not constitute "incentive
stock options" within the meaning of Section 422 of the Code.
(o) "Optioned Shares" shall mean Shares subject to an Option granted
pursuant to this Plan.
(p) "Participant" shall mean any person who receives an Option pursuant to
the Plan.
(q) "Plan" shall mean this Tri-County Financial Corporation 1995 Stock
Option Plan for Non-Employee Directors.
(r) "Share" shall mean one share of Common Stock.
3. TERM OF THE PLAN AND OPTIONS.
(a) Term of the Plan. The Plan shall continue in effect for a term of five
years from the Effective Date, unless sooner terminated pursuant to Paragraph 14
hereof. No Option shall be granted under the Plan after five years from the
Effective Date.
(b) Term of Options. The term of each Option granted under the Plan shall
be 10 years.
4. SHARES SUBJECT TO THE PLAN.
Except as otherwise required by the provisions of Paragraph 10 hereof, the
aggregate number of Shares deliverable pursuant to Options shall not exceed
7,000 Shares. Such Shares may either be authorized but unissued Shares or Shares
held in treasury. If Options should expire, become unexercisable or be forfeited
for any reason without having been exercised or become vested in full, the
Optioned Shares shall, unless the Plan shall have been terminated, be available
for the grant of additional Options under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) General Rule. The Plan shall be administered by the Board, provided
that the Board may appoint a committee of Directors to make any determinations
required pursuant to the Plan.
(b) Powers. Except as limited by the express provisions of the Plan, the
Board shall have sole and complete authority and discretion (i) to determine the
form and content of Options to be issued in the form of Agreements under the
Plan, (ii) to interpret the Plan, (iii) to prescribe, amend and rescind rules
and regulations relating to the Plan, and (iv) to make other determinations
necessary or advisable for the administration of the Plan.
(c) Agreement. Each Option shall be evidenced by a written agreement
containing such provisions as may be approved by the Board. Each such Agreement
shall constitute a binding contract between the Company and the Participant, and
every Participant, upon acceptance of such Agreement, shall be bound by the
terms and restrictions of the Plan and of such Agreement. The terms of each such
Agreement shall be in accordance with the Plan. In particular, the Board shall
set forth in each Agreement (i) the Exercise Price of an Option, (ii) the number
of Shares subject to, and the expiration date of, the Option, (iii) the manner,
time, and rate (cumulative or otherwise) of exercise or vesting of such Option,
and (iv) the restrictions, if any, to be placed upon such Option, or upon Shares
which may be issued upon exercise of such Option.
The President of the Company and such Directors as shall be designated by
the Board are hereby authorized to execute Agreements on behalf of the Company,
and to cause them to be delivered to the recipients of Options.
(d) Effect of the Board's Decisions. All decisions, determinations and
interpretations of the Board shall be final and conclusive on all persons
affected thereby.
(e) Indemnification. In addition to such other rights of indemnification as
they may have, the members of the Board shall be indemnified by the Company in
connection with any claim, action, suit or proceeding relating to any action
taken or failure to act under or in connection with the Plan or any Option,
granted hereunder to the full extent provided for under the Company's governing
instruments with respect to the indemnification of Directors.
(f) Certain Mandatory Abstentions. Notwithstanding anything herein to the
contrary, no Director shall have any vote with regard to any Option previously
granted to himself or herself.
6. GRANT OF OPTIONS.
Each Director who is not an Employee but is a Director on the Effective
Date shall receive, on said date, an Option to purchase 1,400 Shares at an
Exercise Price per Share equal to its Market Value on the Effective Date.
7. EXERCISE PRICE FOR OPTIONS.
(a) General Rule. The Exercise Price as to any particular Option shall be
the Market Value of the Optioned Shares on the date of grant, as determined by
the Board.
(b) Standards for Determining Exercise Price. If the Common Stock is listed
on a national securities exchange (including the NASDAQ National Market System)
on the date in question, then the Market Value per Share shall be the average of
the highest and lowest selling price on such exchange on such date, or if there
were no sales on such date, then the Exercise Price shall be the mean between
the bid and asked price on such date. If the Common Stock is traded otherwise
than on a national securities exchange on the date in question, then the Market
Value per Share shall be the mean between the bid and asked price on such date,
or, if there is no bid and asked price on such date, then on the next prior
business day on which there was a bid and asked price. If no such bid and asked
price is available, then the Market Value per Share shall be its fair market
value as determined by the Board, in its sole and absolute discretion.
8. EXERCISE OF OPTIONS.
(a) Generally. Each Option shall be fully (100%) exercisable immediately
upon the date of its grant.
(b) Procedure for Exercise. A Participant may exercise Options, subject to
provisions relative to its termination and limitations on its exercise, only by
(1) written notice of intent to exercise the Option with respect to a specified
number of Shares, and (2) payment to the Company (contemporaneously with
delivery of such notice) in cash, in Common Stock owned for more than six
months, or a combination of cash and Common Stock owned for more than six
months, of the amount of the Exercise Price for the number of Shares with
respect to which the Option is then being exercised. Each such notice (and
payment where required) shall be delivered, or mailed by prepaid registered or
certified mail, addressed to the Treasurer of the Company at the Company's
executive offices. Common Stock owned for more than six months utilized in full
or partial payment of the Exercise Price for Options shall be valued at its
Market Value at the date of exercise.
A Director who exercises Options may satisfy all applicable federal, state
and local income and employment tax withholding obligations, in whole or in
part, by irrevocably electing to have the Company withhold shares of Common
Stock, or to deliver to the Company shares of Common Stock that he already owns,
having a value equal to the amount required to be withheld. The amount of the
withholding requirement shall be the applicable statutory minimum federal, state
or local income tax with respect to the award on the date that the amount of tax
is to be withheld.
(c) Exercisability. Options granted under this Paragraph may be exercised
only while the Participant is a Director of the Company, or within one year
after termination of the Participant's Continuous Service as a Director, but in
no event later than the date on which such Options would otherwise expire. In
the event of such Director's death during the term of his directorship, Options
granted under this Paragraph may be exercised within one year from the date of
his death by the personal representatives of his estate or person or persons to
whom his
rights under such Option shall have passed by will or by laws of descent and
distribution, but in no event later than the date on which such Options would
otherwise expire.
9. CHANGE IN CONTROL
At the time of a Change in Control, each holder of an Option shall be
entitled to receive cash from the Company in an amount equal to the excess of
the Market Value of the Common Stock subject to the Option over the Exercise
Price of the Optioned Shares, in exchange for the cancellation of such Option.
10. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.
(a) Recapitalizations; Stock Splits, Etc. The number and kind of shares
reserved for issuance under the Plan, and the number and kind of shares subject
to outstanding Options (and the Exercise Price thereof) shall be proportionately
adjusted for any increase, decrease, change or exchange of Shares for a
different number or kind of shares or other securities of the Company which
results from a merger, consolidation, recapitalization, reorganization,
reclassification, stock dividend, split-up, combination of shares, or similar
event in which the number or kind of shares is changed without the receipt or
payment of consideration by the Company.
(b) Transactions in which the Company is Not the Surviving Entity. Subject
to Paragraph 9 hereof, in the event of (i) the liquidation or dissolution of the
Company, (ii) a merger or consolidation in which the Company is not the
surviving entity, or (iii) the sale or disposition of all or substantially all
of the Company's assets (any of the foregoing to be referred to herein as a
"Transaction"), all outstanding Options shall be surrendered. With respect to
each Option so surrendered, the holder of the surrendered Option may elect to
receive --
(1) for each Share then subject to an outstanding Option the
number and kind of shares into which each outstanding Share (other than
Shares held by dissenting stockholders) is changed or exchanged,
together with an appropriate adjustment to the Exercise Price; or
(2) a cash payment (from the Company or the successor
corporation), in an amount equal to the Market Value of the Shares
subject to the Option on the date of the Transaction, less the Exercise
Price of the Option.
(c) Conditions and Restrictions on New, Additional, or Different Shares or
Securities. If, by reason of any adjustment made pursuant to this Paragraph, a
Participant becomes entitled to new, additional, or different shares of stock or
securities, such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and restrictions which were
applicable to the Shares pursuant to the Option before the adjustment was made.
(d) Other Issuances. Except as expressly provided in this Paragraph, the
issuance by the Company or an Affiliate of shares of stock of any class, or of
securities convertible into Shares or stock of another class, for cash or
property or for labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, shall not affect, and no adjustment
shall be made with respect to, the number, class, or Exercise Price of Shares
then subject to Options or reserved for issuance under the Plan.
11. NON-TRANSFERABILITY OF OPTIONS.
Options may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution.
12. TIME OF GRANTING OPTIONS.
The date of grant of an Option shall, for all purposes, be the date on
which the Board makes the determination granting such Option. Notice of the
determination shall be given to each Participant to whom an Option is so granted
within a reasonable time after the date of such grant.
13. EFFECTIVE DATE.
The Plan shall become effective immediately upon its approval by the Board.
14. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend the terms of the Plan and, with
respect to any Shares at the time not subject to Options, suspend or terminate
the Plan; provided that no provision hereof may be amended more than once every
six months (other than to comport with changes in the Code, the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder). No
amendment, suspension or termination of the Plan shall, without the consent of
any affected holders of an Option, alter or impair any rights or obligations
under any Option theretofore granted.
15. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Compliance with Securities Laws. Shares of Common Stock shall not be
issued with respect to any Option unless the issuance and delivery of such
Shares shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law, and the
requirements of any stock exchange upon which the Shares may then be listed.
(b) Special Circumstances. The inability of the Company to obtain approval
from any regulatory body or authority deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder shall relieve
the Company of any liability in respect of the non-issuance or sale of such
Shares. As a condition to the exercise of an Option, the Company may require the
person exercising the Option to make such representations and warranties as may
be necessary to assure the availability of an exemption from the registration
requirements of federal or state securities law.
16. RESERVATION OF SHARES.
The Company, during the term of the Plan, will reserve and keep available a
number of Shares sufficient to satisfy the requirements of the Plan.
17. WITHHOLDING TAX.
The Company's obligation to deliver Shares upon exercise of Options shall
be subject to the Participant's satisfaction of all applicable federal, state
and local income and employment tax withholding obligations. Each Participant
may satisfy the obligation, in whole or in part, by irrevocably electing to have
the Company withhold Shares, or to deliver to the Company Shares that he already
owns, having a value equal to the amount required to be withheld. The value of
Shares to be withheld, or delivered to the Company, shall be based on the Market
Value of the Shares on the date the amount of tax to be withheld is to be
determined. As an alternative, the Company may retain, or sell without notice, a
number of such Shares sufficient to cover the amount required to be withheld.
18. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall a Director's eligibility to participate or participation
in the Plan create or be deemed to create any legal or equitable right of the
Director, or any other party to continue service with the Company or any
Affiliate. No Director shall have a right to be granted an Option or, having
received an Option, the right to again be granted an Option. However, a Director
who has been granted an Option may, if otherwise eligible, be granted an
additional Option or Options.
19. GOVERNING LAW.
The Plan shall be governed by and construed in accordance with the laws of
the State of Maryland, except to the extent that federal law shall be deemed to
apply.