WEETAMOE BANCORP
STOCK OPTION PLAN
1. Purpose of plan. This Stock Option Plan (the "Plan"), is intended to
encourage ownership of shares of Weetamoe Bancorp (the "Corporation") by key
employees (including officers) and non-employee Directors of the Corporation and
its subsidiaries and to provide additional incentive for them to promote the
success of the business.
2. Shares subject to plan. There will be reserved for use upon the
exercise of options to be granted from time to time under the Plan ("Options"),
an aggregate of 250,000 Common Shares, of the par value of $.01 per share (the
"Common Shares"), of the Corporation, which shares may be in whole or in part,
as the Board of Directors of the Corporation (the "Board of Directors"), shall
from time to time determine, authorized but unissued Common Shares or issued
Common Shares which shall have been reacquired by the Corporation. For purposes
of the Plan, the "Plan Year" shall be the 12-month period ending on each
February 28. Options shall not be granted in any Plan Year for in excess of an
aggregate of 50,000 Common Shares under both the Discretionary Grant and the
Automatic Grant Programs hereunder; provided, however, that, if an Option shall
expire or terminate for any reason without having been exercised in full, the
unpurchased shares covered thereby shall (unless the Plan shall have been
terminated) be added to the shares otherwise available for Options which may be
granted in accordance with the terms of the Plan.
3. Administration of plan. The Board of Directors shall appoint a Stock
Option Plan Committee (the "Committee"), which shall consist of not less than
three members of the Board of Directors. Subject to the provisions of the Plan,
the Committee shall have plenary authority in its discretion to administer the
Discretionary Grant Program, including to determine the employees (including
officers) of the Corporation and its subsidiaries to whom Options shall be
granted, the number of shares to be covered by each of the Options, the time or
times at which Options shall be granted, the date or dates on which the option
is to become exercisable and the remaining provisions of the option grant. The
Committee shall also have the authority to interpret the Plan and to prescribe,
amend, and rescind rules and regulations relating to it.
The Automatic Grant Program shall be administered by the Committee but all
grants under that program will be made in strict compliance with the express
provisions of that program and no administrative discretion will be exercised by
the Committee with respect to grants made under that program.
The Board of Directors may from time to time appoint members of the
Committee in substitution for or in addition to members previously appointed and
may fill vacancies, however caused, in the Committee. The Committee shall select
one of its members as its chairman and shall hold its meetings at such times and
places as it shall deem advisable. A majority of its members shall constitute a
quorum. All action of the Committee shall be taken by a majority of its members.
Any action may be taken by a written instrument signed by a majority of the
members and action so taken shall be fully as effective as if it had been taken
by a vote of a majority of the members at a meeting duly called and held. The
Committee shall make such rules and regulations for the conduct of its business
as it shall deem advisable. No Board member may serve on the Committee if he or
she has received an option grant or stock award under the Option Plan other than
pursuant to the Automatic Grant Program, or under any other stock plan of the
Corporation or its parent or subsidiary within the twelve months preceding
his/her appointment to the Committee.
4. Discretionary Grant Program.
(a) Subject to the overall limitations on the number of shares for
which options may be granted set forth in paragraph 2, options under this
program may be granted in each Plan Year to such eligible persons for such
number of shares as the Committee in its discretion determines
appropriate. All options granted hereunder must be granted and exercised
within ten years from the date the Plan is adopted by the Corporation or
approved by the stockholders, whichever is earlier, and the option price
may not be less than the fair market value of the stock at the time the
option is granted. Options granted under this program will be incentive
stock options designed to meet the requirements of Section 422 of the
Internal Revenue Code.
(b) Key employees (including officers) of the Corporation or its
subsidiaries (whether now existing or subsequently established) are
eligible to receive option grants under the Discretionary Option Grant
Program. Only employee Board members (other than Board members serving on
the Committee) are eligible to participate in the Discretionary Option
Grant Program. In making any determination as to persons to whom Options
shall be granted and as to the number of shares to be covered by such
Options, the Committee shall take into account the duties of the
respective person, their present and potential contributions to the
success of the Corporation, and such other factors as the Committee shall
deem relevant in connection with accomplishing the purpose of the Plan.
(c) An employee granted an option under this program (a "Grantee")
must remain an employee of the Corporation or its subsidiaries from the
time the option is granted until three months before the option is
exercised. Once a Grantee's employment is terminated, other than by death
or disability, the Grantee must exercise any option he has a right to
exercise within three months of the date of his termination of employment
or the option will automatically expire. If a Grantee's employment is
terminated as a result of his permanent and total disability, such Grantee
shall have one year from the date of termination to exercise any option he
has a right to exercise or it will automatically expire. If a Grantee's
employment is terminated by the Grantee's death, the option may be
exercised according to its terms by the personal representative of the
Grantee's estate or the person to whom the option is transferred by the
Grantee's will or the laws of inheritance. Under no circumstances can an
option be exercised after the specified expiration of the option term.
(d) Stock that has been purchased by exercise of an option granted
under the Discretionary Option Program can not be sold, exchanged or
disposed of by gift for at least two years from the date the option was
granted and one year from the date the option was exercised and the stock
was transferred to him.
(e) The shares of Common Stock acquired upon the exercise of one or
more options may be subject to repurchase by the Company at the original
exercise price paid per share upon the Grantee's cessation of service
prior to vesting in such shares. The Committee has complete discretion in
establishing the vesting schedule to be in effect for any such unvested
shares and may cancel the Company's outstanding repurchase rights with
respect to those shares at any time, thereby accelerating the vesting of
the shares subject to the canceled rights.
(f) Subject to the general conditions stated below and the express
provisions of the Plan, the Committee has full authority to determine the
eligible individuals who are to receive grants under the Discretionary
Option Grant Program, the number of shares to be covered by each granted
option, the date or dates on which the option is to become exercisable,
the maximum term for which the option is to remain outstanding and the
remaining provisions of the option grant.
5. Automatic Grant Program.
(a) An Option for 2,000 shares of Common Stock shall be granted each
Plan Year on the day after the Annual Shareholders' Meeting or any Special
Meeting in lieu thereof to each eligible non-employee director of the
Corporation or its subsidiaries (the "Grantee"). All grants under this
program will be non-statutory options which are not intended to satisfy
the requirements of Section 422 of the Internal Revenue Code.
(b) Eligibility for participation under this program is limited to
non-employee directors of the Corporation or its subsidiaries who have
completed three (3) full years of service as directors as of the date of
issuance of the Option. Any employee director of the Corporation or its
subsidiaries who ceases to be an employee but remains as a director shall
be eligible under this program, provided he otherwise qualifies, in the
first Plan year commencing after the termination of his employment with
the Corporation or its subsidiaries.
In no event shall an Option be granted to any person who,
immediately after such Option is granted, owns (as defined in Sections 422
and 424 of the Internal Revenue Code of 1986) shares possessing more than
10 percent of the total combined voting power or value of all classes of
shares of the Corporation or of its parent or any subsidiary corporation.
(c) Each option granted under the Automatic Option Grant Program
will be subject to the following terms and conditions:
(i) The exercise price per share will be equal to 100% of the fair
market value per share of Common Stock on the automatic grant
date.
(ii) Each option will have a maximum term of five years measured
from the grant date.
(iii) Each option will be immediately exercisable for all the option
shares, but any purchased shares will be subject to repurchase
by the Corporation, at the exercise price paid per share, upon
the Grantee's cessation of Board service prior to vesting in
such shares.
(iv) The shares subject to each 2,000 share grant will vest (and
the Corporation's repurchase rights will lapse) in three equal
annual installments over the Grantee's period of Board
service, with the first such installment to vest upon the
completion of one year of Board service measured from the
automatic grant date.
(v) The option will remain exercisable for a six-month period
following the Grantee's cessation of Board service for any
reason other than death or permanent disability. Should the
Grantee die within such six-month period, then each such
option will remain exercisable for a twelve-month period
following such Grantee's death and may be exercised by the
personal representative of the Grantee's estate or the person
to whom the option is transferred by the Grantee's will or the
laws of inheritance. In no event, however, may the option be
exercised after the expiration date of the option term. During
the applicable exercise period, the option may not be
exercised for more than the number of shares (if any) in which
the Grantee is vested at the time of cessation of Board
service.
(vi) Should the Grantee die or become permanently disabled while
serving as a Board member, then the shares of Common Stock
subject to each automatic option grant held by that individual
Grantee will immediately vest in full, and those vested shares
may be purchased at any time within the twelve month period
following the date of the Grantee's cessation of Board
service.
(vii) The shares subject to each automatic option grant will
immediately vest upon a Corporate Transaction (as such term in
defined below) or a hostile take-over of the Corporation
effected through a tender offer for more than 50% of the
Company's outstanding voting stock or one or more contested
elections for Board membership.
(viii)Upon the successful completion of a hostile tender offer for
securities possessing more than 50% of the Corporation's
outstanding voting stock, each automatic option grant which
has been outstanding for at least six months may be
surrendered to the Corporation for a cash distribution per
surrendered option share in an amount equal to the excess of
(i) the highest price per share of Common Stock paid in such
hostile tender offer over (ii) the exercise price payable for
such share.
The remaining terms and conditions of the option will in general conform
to the general terms and conditions set forth in paragraph 8 and will be
incorporated into the option agreement evidencing the automatic grant.
6. Stock Appreciation Rights. Two types of stock appreciation rights are
authorized for issuance under the Discretionary Option Grant Program: (i) tandem
rights, which require the option holder to elect between the exercise of the
underlying option for shares of Common Stock and the surrender of such option
for an appreciation distribution and (ii) limited rights, which are
automatically exercised upon the occurrence of a hostile takeover.
The appreciation distribution payable by the Corporation upon the exercise
of a tandem stock appreciation right will be equal in amount to the excess of
(i) the fair market value (on the exercise date) of the shares of Common Stock
in which the Grantee is at the time vested under the surrendered option over
(ii) the aggregate exercise price payable for such shares. Such appreciation
distribution may, at the Committee's discretion be made in shares of Common
Stock valued at fair market value on the exercise date, in cash or in a
combination of cash and Common Stock.
One or more officers or directors of the Company subject to the
short-swing profit restrictions of the Federal securities laws may, at the
discretion of the Committee, be granted limited stock appreciation rights in
connection with their option grants under the Discretionary Option Grant
Program. Any option with such a limited stock appreciation right in effect for
at least six (6) months will automatically be canceled, to the extent
exercisable for one or more vested option shares, upon the successful completion
of a hostile tender offer for more than 50% of the Corporation's outstanding
voting stock. In return, the officer will be entitled to a cash distribution
from the Corporation in an amount per cancelled option share equal to the excess
of (i) the highest price per share of Common Stock paid in the tender offer over
(ii) the option exercise price.
7. Acceleration of Options/Termination of Repurchase Rights. Upon the
occurrence of any of the following transactions (a "Corporate Transaction"):
(i) a merger or consolidation in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of which
is to change the state of the Corporation's incorporation;
(ii) the sale, transfer, or other disposition of all, or
substantially all, of the Corporation's assets; or
(iii) any reverse merger in which the Corporation is the surviving
entity, but in which fifty percent (50%) or more of the Corporation's
outstanding voting stock is transferred to holders different from those
who held the stock immediately prior to such merger;
each outstanding option under the Discretionary Option Grant Program will,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares at the time subject to such option. No
such acceleration will occur, however, if (i) the option is either to be assumed
by the successor corporation or replaced by a comparable option to purchase
shares of the capital stock of the successor corporation or (ii) the
acceleration of the option is subject to other limitations imposed by the
Committee at the time of grant. Immediately following the consummation of the
Corporate Transaction, all outstanding options will terminate and cease to be
exercisable, except to the extent assumed by the successor corporation.
The Corporation's outstanding repurchase rights under the Discretionary
Option Grant Program will also terminate and all shares subject to such
repurchase rights will immediately vest, upon the occurrence of any such
Corporate Transaction, except to the extent (i) the repurchase rights are
expressly assigned to the successor corporation or (ii) such accelerated vesting
is subject to other limitations imposed by the Committee at the time the
underlying options were granted.
8. General Terms and Conditions.
(a) All options are non-transferable and are exercisable only by the
individual to whom it was granted except upon the individual's death when
the option may be exercised by the personal representative of that
individual's estate or the person to whom the option is transferred as
established by will or under law at the individual's death.
(b) No option may be granted to any person who at the time of the
option grant, owns stock with more than ten percent of the total combined
voting power of all classes of stock of the Corporation or any parent
subsidiary. No person eligible to participate herein shall be granted
Options to purchase Common Shares which are exercisable during any one
calendar year, to the extent that the fair market value of such shares
(determined at the time of the grant of the Option) exceeds $100,000 in
any calendar year, except and to the extent that the Options shall have
accumulated over a period in excess of one year.
(c) The option price of all options shall be not less than the fair
market value of the stock at the time the option is granted. The fair
market value shall be determined to be the average of the closing bid and
ask prices for the stock as quoted by A. G. Edwards & Sons, Inc., the
market maker for the Corporation's common stock.
(d) Should an option expire or terminate for any reason prior to
exercise in full, the shares subject to the portion of the option not so
exercised will be available for subsequent options grants under the Option
Plan. Shares subject to any options surrendered or canceled in accordance
with the stock appreciation right provisions of the Option Plan will not
be available for subsequent grants.
(e) No Grantee shall have any shareholder rights with respect to any
option shares until the Grantee has exercised the option and paid the
purchase price.
(f) The exercise price of an option may be paid in whole or in part
with shares of Weetamoe common stock owned by the Grantee.
9. Changes in Capitalization. In the event any change is made to the
Common Stock issuable under the Option Plan by reason of any stock split, stock
dividend, combination of shares, exchange of shares or other change affecting
the outstanding Common Stock as a class without the Company's receipt of
consideration, appropriate adjustments will be made to (i) the maximum number
and/or class of securities issuable under the Option Plan, (ii) the maximum
number and/or class of securities for which any one individual may be granted
stock options and separately exercisable stock appreciation rights under the
Option Plan, (iii) the number and/or class of securities for which option grants
will subsequently be made under the Automatic Option Grant Program to each
non-employee Board member, and (iv) the class and/or number of securities and
exercise price per share in effect under each outstanding option.
Each outstanding option which is assumed in connection with a Corporate
Transaction will be appropriately adjusted to apply and pertain to the number
and class of securities which would otherwise have been issued in consummation
of such Corporate Transaction, to the option holder had the option been
exercised immediately prior to the Corporate Transaction. Appropriate
adjustments will also be made to the option price payable per share and to the
class and number of securities available for future issuance under the Option
Plan on both an aggregate and a per-participant basis.
10. Option Plan Amendments. The Board may amend or modify the Option Plan
in any or all respects whatsoever. However, the Board may not, without the
approval of the Corporation's shareholders, (i) materially increase the maximum
number of shares issuable under the Option Plan (except in connection with
certain changes in capitalization), (ii) materially modify the eligibility
requirements for option grants, or (iii) otherwise materially increase the
benefits accruing to participants under the Option Plan.
Unless sooner terminated by the Board, the Option Plan will in all events
terminate on March 11, 2006. Any options outstanding at the time of such
termination will remain in force in accordance with the provisions of the
instruments evidencing such grants.
11. Effectiveness of plan. The Plan shall become effective on such date as
the Board of Directors shall determine, but only after: (a) the shareholders of
the Corporation shall, by the affirmative vote of a majority in interest of the
Common Shares, have approved the Plan; (b) any amendment to the Corporation's
Articles of Organization necessary to increase the number of authorized Common
Shares to accommodate shares set aside under the plan has been filed with the
Massachusetts Secretary of State's Office; (c) the Common Shares reserved for
the purposes of the Plan shall have been registered under the Securities Act of
1993 as amended; and (d) the Board of Directors shall have been advised by
counsel that all applicable legal requirements have been complied with.
12. Time of granting options. Nothing contained in the Plan or in any
resolution adopted or to be adopted by the Board of Directors or the
stockholders of the Corporation nor any action taken by the Committee shall
constitute the granting of any Option. The granting of an Option shall take
place only when a written option agreement shall have been duly executed and
delivered by or on behalf of the Corporation and by the Grantee to whom such
Option shall be granted.