MONTGOMERY FINANCIAL CORPORATION
1997 STOCK OPTION AND INCENTIVE PLAN
1. Plan Purpose. The purpose of the Plan is to promote the long-term
interests of the Corporation and its stockholders by providing a means for
attracting and retaining directors, advisory directors, directors emeriti,
officers and employees of the Corporation and its Affiliates. It is intended
that designated Options granted pursuant to the provisions of this Plan to
persons employed by the Corporation or its Affiliates will qualify as Incentive
Stock Options. Options granted to persons who are not employees will be
Non-Qualified Stock Options. Options granted as Incentive Stock Options but
which, for any reason, fail to qualify as such shall automatically become
Non-Qualified Stock Options.
2. Definitions. The following definitions are applicable to the Plan:
"Affiliate" - means any "parent corporation" or "subsidiary
corporation" of the Corporation, as such terms are defined in Section 424(e) and
(f), respectively, of the Code.
"Association" - means Montgomery Savings, A Federal Association and any
successor entity.
"Award" - means the grant of an Incentive Stock Option, a Non-Qualified
Stock Option, a Stock Appreciation Right, a Limited Stock Appreciation Right or
any combination thereof, as provided in the Plan.
"Code" - means the Internal Revenue Code of 1986, as amended.
"Committee" - means the Committee referred to in Section 3 hereof.
"Continuous Service" - means the absence of any interruption or
termination of service as a director, advisory director, director emeritus,
officer or employee of the Corporation or an Affiliate, except that when used
with respect to any Options which at the time of exercise are intended to be
Incentive Stock Options, continuous service means the absence of any
interruption or termination of service as an employee of the Corporation or an
Affiliate. Service shall not be considered interrupted in the case of sick
leave, military leave or any other leave of absence approved by the Corporation
or in the case of transfers between payroll locations of the Corporation or
between the Corporation, its parent, its subsidiaries or its successor. With
respect to any advisory director or director emeritus, continuous service shall
mean availability to perform such functions as may be required of such persons.
"Conversion and Reorganization" - means (i) the conversion of
Montgomery Mutual Holding Company from mutual form to a federal interim stock
savings association and its merger into the Association and (ii) the merger
transaction pursuant to which the Association will become a wholly owned
subsidiary of the Corporation.
"Corporation" - means Montgomery Financial Corporation, an Indiana
corporation.
"Employee" - means any person, including an officer or director, ,,who
is employed by the Corporation or any Affiliate.
"ERISA" - means the Employee Retirement Income Security Act of 1974, as
amended.
"Exercise Price" - means (i) in the case of an Option, the price per
Share at which the Shares subject to such Option may be purchased upon exercise
of such Option and (ii) in the case of a Right, the price per Share (other than
tile Market Value per Share on the date of exercise and the Offer Price per
Share as defined in Section 10 hereof) which, upon grant, the Committee
determines shall be utilized in calculating the aggregate value which a
Participant shall be entitled to receive pursuant to Sections 9, 10 or 12 hereof
upon exercise of such Right.
"Incentive Stock Option" - means an option to purchase Shares -ranted
by the Committee pursuant to Section 6 hereof which is subject to the
limitations and restrictions of Section 8 hereof and is intended to qualify
under Section 422(b) of the Code. "Limited Stock Appreciation Right" - means a
stock appreciation right with respect to Shares granted by the Committee
pursuant to Sections 6 and 10 hereof
"Market Value" - means the average of the high and low quoted sales
price on the date in question (or, if there is no reported sale on such date, on
the last preceding date on which any reported sale occurred) of a Share on the
Composite Tape for the New York Stock Exchange-Listed Stocks, or, if on such
date the Shares are not quoted on the Composite Tape, on the New York Stock
Exchange, or, if the Shares are not listed or admitted to trading on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which the Shares are listed or admitted
to trading, or, if the Shares are not listed or admitted to trading on any such
exchange, the mean between the closing high bid and low asked quotations with
respect to a Share on such date on the NASDAQ System, or any similar system then
in use, or, if no such quotations are available, the fair market value on such
date of a Share as the Committee shall determine
"Non-Employee Director" - means a director who a) is not currently an
officer or employee of the Corporation; b) is not a former employee of the
Corporation who receives compensation for prior services (other than from a tax
qualified retirement plan); c) has not been an officer of the Corporation; it)
does not receive remuneration from the Corporation in any capacity other than as
a director; and a) does not possess an interest in any other transactions or is
not engaged in a business relationship for which disclosure would be required
under Item 404(a) or (b) of Regulation S-K.
"Non-Qualified Stock Option" - means an option to purchase Shares
granted by the Committee pursuant to Section 6 hereof which is not intended to
qualify under Section 422(b) of the Code.
"Option" - means an Incentive Stock Option or a Non-Qualified Stock
Option.
"Participant" - means any director, advisory director, director
emeritus, officer or employee of the Corporation or any Affiliate who is
selected by the Committee to receive an Award.
"Plan" - means the 1997 Stock Option and Incentive Plan of the
Corporation.
"Related" - means (i) in the case of a Right, a Right which is granted
in connection with, and to the extent exercisable, in whole or in part, in lieu
of, an Option or another Right and (ii) in the case of an Option, an Option with
respect to which and to the extent a Right is exercisable, in whole or in part,
in lieu thereof has been granted.
"Right" - means a Limited Stock Appreciation Right or a Stock
Appreciation Right.
"Shares" - means the shares of common stock of the Corporation.
"Stock Appreciation Right" - means a stock appreciation right with
respect to Shares granted by the Committee pursuant to Sections 6 and 9
hereof.
"Ten Percent Beneficial Owner" - means the beneficial owner of more
than ten percent of any class of the Corporation's equity securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934.
3. Administration. The Plan shall be administered by a Committee
consisting of two or more members, each of whom shall be a Non-Employee
Director. The members of the Committee shall be appointed by the Board of
Directors of the Corporation. Except as limited by the express provisions of the
Plan, the Committee shall have sole and complete authority and discretion, to
(i) select Participants and grant Awards; (ii) deter-mine the number of Shares
to be subject to types of Awards generally, as well as to individual Awards
granted under the Plan; (iii) determine the terms and conditions upon which
Awards shall be granted tinder the Plan; (iv) prescribe the form and terms of
instruments evidencing such grants; and (v) establish from time to time
regulations for the administration of the Plan, interpret the Plan, and make all
determinations deemed necessary or advisable for the administration of the Plan.
A majority 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 Committee without a meeting,
shall be acts of the Committee.
4. Participation in Committee Awards. The Committee may select from
time to time Participants in the Plan from those directors (including advisory
directors and directors emeriti), officers and employees of the Corporation or
its Affiliates who, in the opinion of the Committee, have the capacity for
contributing to the successful performance of the Corporation or its Affiliates.
5. Shares Subject to Plan. Subject to adjustment by the operation of
Section I I hereof, the maximum number of Shares with respect to which Awards
may be made un ' der the Plan is 10% of the Shares issued in the Conversion and
Reorganization (excluding Shares issued in exchange for shares of the
Association). The Shares with respect to which Awards may be made under the Plan
may be either authorized and unissued shares or issued shares heretofore or
hereafter reacquired and held as treasury shares. Shares which are subject to
Related Rights and Related Options shall be counted only once in determining
whether the maximum number of Shares with respect to which Awards may be granted
under the Plan has been exceeded. An Award shall not be considered to have been
made under the Plan with respect to any Option or Right which terminates and new
Awards may be granted under the Plan with respect to the number of Shares as to
which such termination has occurred.
6. General Terms and Conditions of Options and Rights. The Committee
shall have full and complete authority and discretion, except as expressly
limited by the Plan, to grant Options and/or Rights and to provide the terms and
conditions (which need not be identical among Participants) thereof. In
particular, the Committee shall prescribe the following terms and conditions:
(i) the Exercise Price of any Option or Right, which shall not be less than the
Market Value per Share at the date of grant of such Option or Right, (ii) the
number of Shares subject to, and the expiration date of, any Option or Right,
which expiration date shall not exceed ten years from the date of grant, (iii)
the manner, time and rate (cumulative or otherwise) of exercise of such Option
or Right, and (iv) the restrictions, if any, to be placed upon such Option or
Right or upon Shares which may be issued upon exercise of such Option or Right.
No individual shall be granted Awards in any calendar year with respect to more
than 25% of the total Shares subject to the Plan.
Furthermore, at the time of any Award, the Participant shall enter into
an agreement with the Corporation in a form specified by the Committee, agreeing
to the terms and conditions of the Award and such other matters as the
Committee, in its sole discretion, shall determine (the "Option Agreement").
7. Exercise of Options or Rights.
(a) Except as provided herein, an Option or Right granted under the Plan
shall be exercisable during the lifetime of the Participant to whom such
Option or Right was granted only by such Participant and, except as
provided in paragraphs (c) and (d) of this Section 7, no such Option or
Right may be exercised unless at the time such Participant exercises such
Option or Right, such Participant has maintained Continuous Service since
the date of grant of such Option or Right.
(b) To exercise an Option or Right under the Plan, the Participant to whom
such Option or Right was granted shall give written notice to the
Corporation in form satisfactory to the Committee (and, if partial
exercises have been permitted by the Committee, by specifying the number
of Shares with respect to which such Participant elects to exercise such
Option or Right) together with full payment of the Exercise Price, if any
and to the extent required. The date of exercise shall be the date on
which such notice is received by the Corporation. Payment, if any is
required, shall be made either (i) in cash (including check, bank draft
or money order) or (it) by delivering (A) Shares already owned by the
Participant and having a fair market value equal to the applicable
exercise price, such fair market value to be determined in such
appropriate manner as may be provided by the Committee or as may be
required in order to comply with or to conform to requirements of any
applicable laws or regulations, or (B) a combination of cash and such
Shares.
(c) If a Participant to whom an Option or Right was granted shall cease to
maintain Continuous Service for any reason (excluding death, disability
and termination of employment by the Corporation or any Affiliate for
cause), such Participant may, but only within the period of three months
immediately succeeding such cessation of Continuous Service and in no
event after the expiration date of such Option or Right, exercise such
Option or Right to the extent that such Participant was entitled to
exercise such Option or Right at the date of such cessation, provided,
however, that such right of exercise after cessation of Continuous
Service shall not be available to a Participant if the Committee
otherwise determines and so provides in the applicable instrument or
instruments evidencing the grant of such Option or Right. If a
Participant to whom an Option or Right was granted shall cease to
maintain Continuous Service by reason of death or disability then, unless
the Committee shall have otherwise provided in the instrument evidencing
the grant of an Option or Right, all Options and Rights granted and not
fully exercisable shall become exercisable in full upon the happening of
such event and shall remain so exercisable (i) in the event of death for
the period described in paragraph (d) of this Section 7 and (ii) in the
event of disability for a period of three months following such date. If
the Continuous Service of a Participant to whom an Option or Right was
granted by the Corporation is terminated for cause, all rights under any
Option or Right of such Participant shall expire immediately upon the
effective date of such termination.
(d) In the event of the death of a Participant while in the Continuous
Service of the Corporation or an Affiliate or within the three-month
period refer-red to in paragraph (c) of this Section 7, the person to
whom any Option or Right held by the Participant at the time of his death
is transferred by will or the laws of descent and distribution, or in the
case of an Award other than an Incentive Stock Option, pursuant to a
qualified domestic relations order, as defined in the Code or Title I of
ERISA or the rules thereunder may, but only to the extent such
Participant was entitled to exercise such Option or Right upon his death
as provided in paragraph (c) above, exercise such Option or Right at any
time within a period of one year succeeding the date of death of such
Participant, but in no event later than ten years from the date of grant
of such Option or Right. Following the death of any Participant to whom
an Option was granted under the Plan, irrespective of whether any Related
Right shall have theretofore been granted to the Participant or whether
the person entitled to exercise such Related Right desires to do so, the
Committee may, as an alternative means of settlement of such Option,
elect to pay to the person to whom such Option is transfer-red by will or
by the laws of descent and distribution, or in the case of an Option
other than an Incentive Stock Option, pursuant to a qualified domestic
relations order, as defined in the Code or Title I of ERISA or the rules
thereunder, the amount by which the Market Value per Share on the date of
exercise of such Option shall exceed the Exercise Price of such Option,
multiplied by the number of Shares with respect to which such Option is
properly exercised. Any such settlement of an Option shall be considered
an exercise of such Option for all purposes of the Plan.
8. Incentive Stock Options. Incentive Stock Options may be granted only
to Participants who are Employees. Any provision of the Plan to the contrary
notwithstanding, (i) no Incentive Stock Option shall be granted more than ten
years from the date the Plan is adopted by the Board of Directors of the
Corporation and no Incentive Stock Option shall be exercisable more than ten
years from the date such Incentive Stock Option is granted, (ii) the Exercise
Price of any Incentive Stock Option shall not be less than the Market Value per
Share on the date such Incentive Stock Option is granted, (iii) any Incentive
Stock Option shall not be transferable by the Participant to whom such Incentive
Stock Option is granted other than by will or the laws of descent and
distribution, and shall be exercisable during such Participant's lifetime only
by such Participant, (iv) no Incentive Stock Option shall be granted to any
individual who, at the time such Incentive Stock Option is granted, owns stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Corporation or any Affiliate unless the Exercise Price
of such Incentive Stock Option is at least I 10 percent of the Market Value per
Share at the date of grant and such Incentive Stock Option is not exercisable
after the expiration of five years from the date such Incentive Stock Option is
granted, and (v) the aggregate Market Value (determined as of the time any
Incentive Stock Option is granted) of the Shares with respect to which Incentive
Stock Options are exercisable for the first time by a Participant in any
calendar year shall not exceed $ 100,000.
9. Stock Appreciation Rights A Stock Appreciation Right shall, upon its
exercise, entitle the Participant to whom such Stock Appreciation Right was
granted to receive a number of Shares or cash or combination thereof, as the
Committee in its discretion shall determine, the aggregate value of which (i.e.,
the sum of the amount of cash and/or Market Value of such Shares on date of
exercise) shall equal (as nearly as possible, it being understood that the
Corporation shall not issue any fractional shares) the amount by which the
Market Value per Share on the date of such exercise shall exceed the Exercise
Price of such Stock Appreciation Right, multiplied by the number of Shares with
respect of which such Stock Appreciation Right shall have been exercised. A
Stock Appreciation Right may be Related to an Option or may be granted
independently of any Option as the Committee shall from time to time in each
case determine. At the time of grant of an Option the Committee shall determine
whether and to what extent a Related Stock Appreciation Right shall be granted
with respect thereto, provided, however, and notwithstanding any other provision
of the Plan, that if the Related Option is an Incentive Stock Option, the
Related Stock Appreciation Right shall satisfy all the restrictions and
limitations of Section 8 hereof as if such Related Stock Appreciation Right were
an Incentive Stock Option and as if other rights which are Related to Incentive
Stock Options were Incentive Stock Options. In the case of a Related Option,
such Related Option shall cease to be exercisable to the extent of the Shares
with respect to which the Related Stock Appreciation Right was exercised. Upon
the exercise or termination of a Related Option, any Related Stock Appreciation
Right shall terminate to the extent of the Shares with respect to which the
Related Option was exercised or terminated.
10. Limited Stock Appreciation Rights. At the time of grant of an Option
or Stock Appreciation Right to any Participant, the Committee shall have full
and complete authority and discretion to also grant to such Participant a
Limited Stock Appreciation Right which is Related to such Option or Stock
Appreciation Right, provided, however and notwithstanding any other provision of
the Plan, that if the Related Option is an Incentive Stock Option, the Related
Limited Stock Appreciation Right shall satisfy all the restrictions and
limitations of Section 8 hereof as if such Related Limited Stock Appreciation
Right were an Incentive Stock Option and as if all other Rights which are
Related to Incentive Stock Options were Incentive Stock Options. Notwithstanding
any other provision of the Plan, a Limited Stock Appreciation Right shall be
exercisable only during the period beginning on the first day following the date
of expiration of any "offer" (as such term is hereinafter defined) and ending on
the forty-fifth day following such date.
A Limited Stock Appreciation Right shall, upon its exercise, entitle the
Participant to whom such Limited Stock Appreciation Right was granted to receive
an amount of cash equal to the amount by which the "Offer Price per Share" (as
such term is hereinafter defined) or the Market Value on the date of such
exercise, as shall have been provided by the Committee in its discretion at the
time of grant, shall exceed the Exercise Price of such Limited Stock
Appreciation Right, multiplied by the number of Shares with respect to which
such Limited Stock Appreciation Right shall have been exercised. Upon the
exercise of a Limited Stock Appreciation Right, any Related Option and/or
Related Stock Appreciation Right shall cease to be exercisable to the extent of
the Shares with respect to which such Limited Stock Appreciation Right was
exercised. Upon the exercise or termination of a Related Option or Related Stock
Appreciation Right, any Related Limited Stock Appreciation Right shall terminate
to the extent of the Shares with respect to which such Related Option or Related
Stock Appreciation Right was exercised or terminated.
For the purposes of this Section 10, the term "Offer" shall mean any
tender offer or exchange offer for Shares other than one made by the
Corporation, provided that the corporation, person or other entity making the
offer acquires pursuant to such offer either (i) 25% of the Shares outstanding
immediately prior to the commencement of such offer or (ii) a number of Shares
which, together with all other Shares acquired in any tender offer or exchange
offer (other than one made by the Corporation) which expired within sixty days
of the expiration date of the offer in question, equals 25% of the Shares
outstanding immediately prior to the commencement of the offer in question. The
term "Offer Price per Share" as used in this Section 10 shall mean the highest
price per Share paid in any Offer which Offer is in effect any time during the
period beginning on the sixtieth day prior to the date on which a Limited Stock
Appreciation Right is exercised and ending on the date on which such Limited
Stock Appreciation Right is exercised. Any securities or property which are part
or all of the consideration paid for Shares in the Offer shall be valued in
determining the Offer Price per Share at the higher of (A) the valuation placed
on such securities or property by the corporation, person or other entity making
such Offer or (B) the valuation placed on such securities or property by the
Committee.
11. Adjustments Upon Changes in Capitalization. In the event of any
change in the outstanding Shares subsequent to the effective date of the Plan 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
number, class and exercise price of shares with respect to which Awards
theretofore have been granted under the Plan shall be appropriately adjusted by
the Committee, whose determination shall be conclusive.
12. Effect of Merge . In the event of any merger, consolidation or
combination of the Corporation (other than a merger, consolidation or
combination in which the Corporation is the continuing entity and which does not
result in the outstanding Shares being converted into or exchanged for different
securities, cash or other property, or any combination thereof) pursuant to a
plan or agreement the terms of which are binding upon all stockholders of the
Corporation (except to the extent that dissenting stockholders may be entitled,
under statutory provisions or provisions contained in the certificate or
articles of incorporation, to receive the appraised or fair value of their
holdings), any Participant to whom an Option or Right has been granted shall
have the right (subject to the provisions of the Plan and any limitation or
vesting period applicable to such Option or Right), thereafter and during the
term of each such Option or Right, to receive upon exercise of any such Option
or Right an amount equal to the excess of the fair market value on the date of
such exercise of the securities, cash or other property, or combination thereof,
receivable upon such merger, consolidation or combination in respect of a Share
over the Exercise Price of such Right or Option, multiplied by the number of
Shares with respect to which such Option or Right shall have been exercised.
Such amount may be payable fully in cash, fully in one or more of the kind or
kinds of property payable in such merger, consolidation or combination, or
partly in cash and partly in one or more of such kind or kinds of property, all
in the discretion of the Committee.
13. Effect of Change in Control. Each of the events specified in the
following clauses (i) through (iii) of this Section 13 shall be deemed a "change
of control": (i) any third person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, shall become the beneficial
owner of shares of the Corporation or the Association with respect to which 25%
or more of the total number of votes for the election of the Board of Directors
of the Corporation or the Association may be cast, (ii) as a result of, or in
connection with, any cash tender offer, exchange offer, merger or other business
combination, sale of assets or contested election, or combination of the
foregoing, the persons who were directors of the Corporation or the Association
shall cease to constitute a majority of the Board of Directors of the
Corporation or the Association, or (iii) the shareholders of the Corporation
shall approve an agreement providing either for a transaction in which the
Corporation will cease to be an independent publicly owned entity or for a sale
or other disposition of all or substantially all the assets of the Corporation
or the Association. If a tender offer or exchange offer for Shares (other than
such an offer by the Corporation) is commenced, or if any of the events
specified in clauses (i) through (iii) above shall occur, unless the Committee
shall have otherwise provided in the instrument evidencing the grant of an
Option or Stock Appreciation Right, all Options and Stock Appreciation Rights
theretofore granted and not fully exercisable shall become exercisable in full
upon the happening of such event; provided, however, that no Option or Stock
Appreciation Right which has previously been exercised or otherwise terminated
shall become exercisable.
14. Assignments and Transfers. No Award nor any right or interest of a
Participant under the Plan in any instrument evidencing any Award under the Plan
may be assigned, encumbered or transferred except, in the event of the death of
a Participant, by will or the laws of descent and distribution or in the case of
Awards other than Incentive Stock Options pursuant to a qualified domestic
relations order, as defined in the Code or Title I of ERISA or the rules
thereunder.
15. Employee Rights Under the Plan. No director, advisory director,
director emeritus, officer or employee shall have a right to be selected as a
Participant nor, having been so selected, to be selected again as a Participant
and no director, advisory directory, director emeritus, officer, employee or
other person shall have any claim or right to be granted an Award under the Plan
or under any other incentive or similar plan of the Corporation or any
Affiliate. Neither the Plan nor any action taken thereunder shall be construed
as giving any employee any right to be retained in the employ of the Corporation
or any Affiliate.
16. Delivery and Registration of Stock, The Corporation's obligation to
deliver Shares with respect to an Award shall, if the Committee so requests, be
conditioned upon the receipt of a representation as to the investment intention
of the Participant to whom Such Shares are to be delivered, in such form as the
Committee shall deter-mine to be necessary or advisable to comply with the
provisions of the Securities Act of 1933 or any other Federal, state or local
securities legislation or regulation. It may be provided that any representation
requirement shall become inoperative upon a registration of the Shares or other
action eliminating the necessity of such representation under such Securities
Act or other securities legislation. The Corporation shall not be required to
deliver any Shares under the Plan prior to (i) the admission of such shares to
listing on any stock exchange or other system on which Shares may then be
listed. and (ii) the completion of such registration or other qualification of
such Shares under any state or Federal law, rule or regulation, as the Committee
shall determine to be necessary or advisable.
17. Withholding Tax. The Corporation shall have the right to deduct
from all amounts paid in cash with respect to the exercise of a Right under the
Plan any taxes required by law to be withheld with respect to such cash
payments. Where a Participant or other person is entitled to receive Shares
pursuant to the exercise of an Option or Right pursuant to the Plan, the
Corporation shall have the right to require the Participant or such other person
to pay the Corporation the amount of any taxes which the Corporation is required
to withhold with respect to such Shares, and may, in its sole discretion,
withhold sufficient Shares to cover the amount of taxes which the Corporation is
required to withhold.
18. Amendment or Termination. The Board of Directors of the Corporation
may amend, suspend or terminate the Plan or any portion thereof at any time, but
(except as provided in Section I I hereof) no amendment shall be made without
approval of the stockholders of the Corporation which shall (i) materially
increase the aggregate number of Shares with respect to which Awards may be made
under the Plan, (ii) materially change the requirements as to eligibility for
participation in the Plan or (iii) change the class of persons eligible to
participate in the Plan; provided, however, that no such amendment, suspension
or termination shall impair the rights of any Participant, without his consent,
in any Award theretofore made pursuant to the Plan.
19. Effective Date and Term of Plan. The Plan shall become effective
upon its ratification by stockholders of the Corporation. It shall continue in
effect for a term of ten years unless sooner terminated under Section 17 hereof.