EXHIBIT 4.1
Norwood Financial Corp. Stock Option Plan
NORWOOD FINANCIAL CORP.
STOCK OPTION PLAN
Approved by Board of Directors
Ratified by Board of Directors
Shareholders' Approval
NORWOOD FINANCIAL CORP.
1. Purpose of the Plan
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The Plan shall be known as the Norwood Financial Corp. Stock Option
Plan (the "Plan"). The purpose of the Plan is to attract and retain the
best available personnel for positions of substantial responsibility
and to provide additional incentive to officers of the Corporation (the
"Corporation"), or any present or future parent or subsidiary of the
Bank to promote the success of its business. The Plan is intended to
provide for the grant of "Incentive Stock Options" within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") . Each and every one of the provisions of the Plan relating to
Incentive Stock Options shall be interpreted to conform to the
requirements of Section 422 of the Code.
2. Definitions
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As used herein, the following definitions shall apply:
(a) "Award" means the grant by the Committee of an Incentive Stock
Option as provided in the Plan.
(b) "Board" means the Board of Directors of the Corporation, or
any successor or parent corporation thereto.
(c) "Code" means the Internal Revenue Code of 1986, as amended, or
any succeeding statute.
(d) "Committee" means the Compensation Committee appointed by the
Board in accordance with paragraph 4(a) of the Plan.
(e) "Common Stock" means Common Stock, par value One Dollar
($0.10) per share, of the Corporation, or any successor or
parent corporation hereto.
(f) "Continuous Employment" or "Continuous Status as an Employee"
means the absence of any interruption or termination of
employment with the Corporation or any present or future
Parent or Subsidiary of the Corporation. Employment 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, any
Parent, Subsidiaries or successor.
(g) "Bank" means Wayne Bank, or any successor corporation thereto.
(h) "Effective Date" means the date specified in Section 12 hereof.
(i) "Employee" means any person employed by the Corporation or any
present or future Parent or Subsidiary of the Corporation.
(j) "Incentive Stock Option" or "ISO" means an Option to purchase
Shares granted, by the Committee pursuant to Section 7 hereof
which is subject to the limitations and restrictions of
Section 7 hereof and is intended to qualify under Section 422
of the Code.
(k) "Option" means an Option granted pursuant to this Plan
providing the holder of such Option with the right to purchase
Common Stock.
(1) "Optioned Stock" means stock subject to an Option granted
pursuant to the Plan.
(m) "Optionee" means any person who receives an Option or Award
pursuant to the Plan.
(n) "Parent" shall mean any present or future corporation which
would be a "parent corporation" as defined in Subsections
424(e) and (g) of the Code.
(o) "Participant" means any Officer of the Corporation or any
Parent or Subsidiary of the Corporation.
(p) "Plan" shall mean the Norwood Financial Corp. Stock Option
Plan.
(q) "Share" shall mean one share of the Common Stock.
(r) "Subsidiary" shall mean any present or future corporation
which would be a "subsidiary corporation" as defined in
Subsections 424(f) and (g) of the Code.
3. Shares Subject to the Plan
--------------------------
Except as otherwise required by the provisions of Section 14 hereof,
the aggregate number of Shares with respect to which Awards may be made
pursuant to the Plan shall not exceed Five Hundred Thousand (500,000)
Shares. Such Shares may either be authorized but unissued shares or
treasury shares.
An Award shall not be considered to be made under the Plan with respect
to any Option which terminates prior to its exercise. New Awards may be
granted under the Plan with respect to the number of Shares as to which
termination has occurred.
4. Administration of the Plan
--------------------------
(a) Composition of the Committee. The Plan shall be administered
by the Committee consisting of at least three (3) nonemployee
Directors of the Corporation appointed by the Board and
serving at the pleasure of the Board. All persons designated
as members of the Committee shall be "disinterested persons"
within the meaning of Rule 16b-3 under the Securities Exchange
Act Of 1934.
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(b) Powers of the Committee. The Committee is authorized (but only to
the extent not contrary to the express provisions of the Plan or
to resolutions adopted by the Board) to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to
the Plan, to determine the form and content of Awards to be
issued under the Plan and to make other determinations necessary
or advisable for the administration of the Plan, and shall have
and may exercise such other power and authority as may be
delegated to it by the Board from time to time. A majority of the
entire Committee shall constitute a quorum and the action of a
majority of the members present at any meeting at which a quorum
is present shall be deemed the action of the Committee. In no
event may the Committee revoke outstanding Awards without the
consent of the Participant.
The President and Chief Executive Officer of the Corporation and
such other officers as shall be designated by the Committee are
hereby authorized to execute instruments evidencing Awards on
behalf of the Corporation and to cause them to be delivered to
the Participants.
(c) Effect of Committee's Decision. All decisions, determinations and
interpretations of the Committee shall be final and conclusive on
all persons affected thereby.
5. Eligibility
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(a) Awards may be granted to Employees. The Committee shall from time
to time determine the Employees who shall be granted Awards under
the Plan and the number to be granted to each such officer and
other persons under the Plan. In selecting Participants and in
determining the number of Shares of Common Stock to be granted to
each such Participant pursuant to each Award granted under the
Plan, the Committee may consider the nature of the services
rendered by each such Participant, each such Participant's
current and Potential contribution to the Corporation and such
other factors as the Committee may, in its sole discretion deem
relevant. The Committee shall also consider those Options to be
awarded under any employment contract with any officer or
Employee in effect now or in the future to be granted hereunder.
Officers or other persons who have been granted an Award may, if
otherwise eligible, be granted additional Awards.
(b) The aggregate fair market value (determined as of the date the
Option is granted) of the Shares with respect to which Incentive
Stock Options are exercisable for the first time by each Employee
during any calendar year (under all Incentive Stock Option plans,
as defined in Section 422 of the Code, of the Corporation or any
present or future Parent or Subsidiary of the Corporation) shall
not exceed $100,000. Notwithstanding the prior provisions of this
Section 5, the Committee may grant Options in excess of the
foregoing limitations, provided said Options shall be clearly and
specifically designated as not being Incentive Stock Options, as
defined in Section 422 of the Code.
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6. Term of the Plan
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The Plan shall continue in effect for a term of ten (10) years from the
Effective Date, unless sooner terminated pursuant to Section 15 hereof. No
Option shall be granted under the Plan after ten (10) years from the
Effective Date.
7. Terms and Conditions of Incentive Stock Options
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Incentive Stock Options may be granted only to Participants who are
Employees. Each Incentive Stock Option granted pursuant to the Plan shall
be evidenced by an instrument in such form as the Committee shall from time
to time approve. Each and every Incentive Stock Option granted pursuant to
the Plan shall comply with, and be subject to, the following terms and
conditions:
(a) Option Price
(i) The price per Share at which each Incentive Stock Option
granted under the Plan may be exercised shall not, as to any
particular Incentive Stock Option, be less than the fair market
value of the Common Stock at the time such Incentive Stock Option
is granted. For such purposes, if the Common Stock is traded
otherwise than on a national securities exchange at the time of
the granting of an Option, then the price per Share of the
Optioned Stock shall be not less than the mean between the bid
and asked price on the date the Incentive Stock Option is granted
or, if there is no bid and asked price on said 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 price per
Share shall be determined by the Committee. If the Common Stock
is listed on a national securities exchange at the time of the
granting of an Incentive Stock Option, then the price per Share
shall be not less than the average of the highest and lowest
selling price on such exchange on the date such Incentive Stock
Option is granted or, if there were no sales on said date, then
the price shall be not less than the mean between the bid and
asked price on such date.
(ii) In the case of an Employee who owns Common Stock
representing more than ten percent (10%) of the outstanding
Common Stock at the time the Incentive Stock Option is granted,
the Incentive Stock Option price shall not be less than one
hundred and ten percent (110%) of the fair market value of the
Common Stock at the time the Incentive Stock Option is granted.
(b) Payment. Full payment for each Share of Common Stock purchased upon
the exercise of any Incentive Stock Option granted under the Plan
shall be made at the time of exercise of each such Incentive Stock
Option and shall be paid in cash (in United States Dollars), Common
Stock or a combination of cash and Common Stock. Common Stock utilized
in full or partial payment of the exercise price shall be valued at
its fair market value at the date of exercise. The Corporation shall
accept full or partial payment in Common Stock only to the extent
permitted by applicable law. No Shares of Common Stock shall be issued
until full payment therefor has been received by the Bank, and no
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Optionee shall have any of the rights of a stockholder of the
Bank until Shares of Common Stock are issued to an Employee.
(c) Term of Incentive Stock Option. The term of each Incentive Stock
Option granted pursuant to the Plan shall be not more than ten
(10) years from the date each such Incentive Stock Option is
granted, provided that in the case of an Employee who owns stock
representing more than ten percent (10%) of the Common Stock
outstanding at the time the Incentive Stock Option is granted,
the term of the Incentive Stock Option shall not exceed five (5)
years.
(d) Exercise Generally. Except as otherwise provided in Section 8
hereof, no Incentive Stock Option may be exercised unless the
Optionee shall have been in the employ of the Corporation at all
times during the period beginning with the date of grant of any
such Incentive Stock Option and ending on the date of exercise of
any such Incentive Stock Option. The Committee may impose
additional conditions upon the right of an Optionee to exercise
any Incentive Stock Option granted hereunder which are not
inconsistent with the terms of the Plan or the requirements for
qualification as an Incentive Stock Option under Section 422 of
the Code.
(e) Transferability. Any Incentive Stock Option granted pursuant to
the Plan shall be exercised during an Optionee's lifetime only by
the Optionee to whom it was granted and shall not be assignable
or transferable otherwise than by will or by the laws of descent
and distribution.
8. Effect of Termination of Employment, Disability or Death on Incentive Stock
Options
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(a) Termination of Employment. In the event that any Optionee's
employment or other service provided to the Corporation shall
terminate for any reason, other than Permanent and Total
Disability (as such term is defined in Section 22(e)(3) of the
Code) or death, all of any such Optionee's Options, and all of
any such Optionee's rights to purchase or receive Shares of
Common Stock pursuant thereto, shall automatically terminate on
the earlier of (i) the respective expiration dates of any such
Option or (ii) the expiration of not more than three (3) months
after the date of such termination of employment or such service,
but only if, and to the extent that, the Optionee was entitled to
exercise any such option at the date of such termination. In the
event of a termination for due cause, as hereinafter defined, the
Option shall automatically terminate on the date of such
termination. For the purpose of this Paragraph, "due cause" shall
mean:
(i) the willful failure by the Employee to substantially perform
the Employee's material duties other than any such failure
resulting from the Employee's incapacity due to physical or
mental illness;
(ii) conviction of a felony;
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(iii) the willful violation by the Employee of any of the
provisions of any agreement or terms of employment;
(iv) the willful violation by the Employee of material
Corporation policy as formally expressed by the Board of
Directors; or
(v) the violation of state or federal banking, tax or financial
laws, regulations or rules in the Employee's own conduct or in
the operation of the Corporation, the result of which is
materially adverse to the Corporation.
In the event that a subsidiary ceases to be a subsidiary of the
Corporation, the employment of all of its employees who are not
immediately thereafter employees of the Corporation shall be
deemed to terminate upon the date such subsidiary so ceases to be
a Subsidiary of the Corporation.
(b) Disability. In the event that any Optionee's employment or other
service with the Corporation shall terminate as the result of the
Permanent and Total Disability of such Optionee, such Optionee
may exercise any options granted to him pursuant to the Plan at
any time prior to the earlier of (i) the respective expiration
dates of any such Options or (ii) the date which is six (6)
months after the date of such termination of employment, but only
if, and to the extent that, the Optionee was entitled to exercise
any such Options at the date of such termination.
(c) Death. In the event of the death of an Optionee, any Options
granted to such Optionee may be exercised by the person or
persons to whom the Optionee's rights under any such Options pass
by will or by the laws of descent and distribution (including the
Optionee's estate during the period of administration) at any
time prior to the earlier of (i) the respective expiration dates
of any such Options or (ii) the date which is six (6) months
after the date of death of such Optionee but only if, and to the
extent that, the Optionee was entitled to exercise any such
Options at the date of death. For purposes of this Section 9(c),
any Option held by an Optionee shall be considered exercisable at
the date of his death if the only unsatisfied condition precedent
to the exercisability of such Option at the date of death is the
passage of a specified period of time. At the discretion of the
Committee, upon exercise of such Options in the event of death,
such persons may receive Shares or cash or combination thereof.
If cash shall be paid in lieu of Shares, such cash shall be equal
to the difference between the fair market value of such Shares
and the exercise price of such Options on the exercise date.
(d) Incentive Stock Options Deemed Exercisable. For purposes of
Sections 8(a), 8(b), and 8(c) above, any Incentive Stock Option
held by any Optionee shall be considered exercisable at the date
of termination of his employment if any such Incentive Stock
Option would have been exercisable at such date of termination of
employment.
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(e) Termination of Incentive Stock Options. To the extent that any
Incentive Stock Option granted under the Plan to any Optionee
whose employment with the Corporation terminates shall not
have been exercised within the applicable period set forth in
this Section 8, any such Incentive Stock Option, and all
rights to purchase or receive Shares of Common Stock pursuant
thereto, as the case may be, shall terminate on the last day
of the applicable period.
9. Right of Repurchase, First Refusal and Restrictions and Disposition
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The Committee, in its sole discretion, may include, as a term of any
Incentive Stock Option, the right of the Corporation, but not the
obligation, to repurchase all or any amount of the Shares acquired by
an Optionee pursuant to the exercise of any such Options (the
"Repurchase Right") or the right of first refusal to acquire Shares
which an Optionee shall desire to sell (the "Right of First Refusal").
The intent of the Repurchase Right is to encourage the continued
employment of the Optionee. The Repurchase Right may provide for, among
other things, a specified duration of the Repurchase Right, a specified
price per Share to be paid upon the exercise of the Repurchase Right
and a restriction on the disposition of the Shares by the Optionee
during the period of the Repurchase Right. The Right of First Refusal
may provide for, among other things, the right under certain
circumstances or during certain periods to acquire Shares which the
Optionee desires to sell at the price offered by a bona fide purchaser
of such shares. The Repurchase Right or the Right of First Refusal may
permit the Bank to transfer or assign such right to another party. The
Bank may exercise the Repurchase Right or the Right of First Refusal
only to the extent permitted by applicable law.
10. Recapitalization, Merger, Consolidation, Change in Control and Similar
Transactions
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(a) Adjustment. Subject to any required action by the stockholders of the
Corporation, within the sole discretion of the Committee, the
aggregate number of Shares of Common Stock for which Options may be
granted hereunder, the number of Shares of Common Stock covered by
each outstanding Option, and the exercise price per Share of Common
Stock of each such Option, shall all be proportionately adjusted for
any increase or decrease in the number of issued and outstanding
Shares of Common Stock resulting from a subdivision or consolidation
of Shares (whether by reason of merger, consolidation,
recapitalization, reclassification, split up, combination of shares,
or otherwise) or the payment of a stock dividend (but only on the
Common Stock) or any other increase or decrease in the number of such
Shares of Common Stock effected without the receipt of consideration
by the Corporation (other than Shares held by dissenting
stockholders).
(b) Change in Control. All outstanding Awards shall become immediately
exercisable in the event of a change in control or imminent change in
control of the Bank or Corporation, as determined by the Committee. In
the event of such change in control or imminent change in control, the
Optionee shall, at the discretion of the Committee, be entitled to
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receive cash in an amount equal to the fair market value of
the Common Stock subject to the Incentive Stock Option over
the Option Price of such Shares, in exchange for the surrender
of such Options by the Optionee on that date. For purposes of
this Section 10, "change in control" shall be deemed to have
taken place if, as the result of a tender offer, exchange
offer, merger, consolidation, transfer of stock, sale of
assets, contested election or any combination of the forgoing
transactions (a "Transaction"), either (a) more than 15% of
the outstanding stock of the Corporation changes direct or
indirect beneficial ownership, (b) an event occurs that would
require a Securities and Exchange Commission registered
Corporation to file a Form 8-K pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934 (even though the
Corporation may or may not be required to file the form 8-K
with the Securities Exchange Commission or the appropriate
Banking Regulators); (c) substantially all of the
Corporation's assets and/or operations are sold or otherwise
disposed of; (d) any person becomes beneficial owner directly
or indirectly of securities of the Corporation with combined
voting power in sufficient amount to gain majority control of
the Board of Directors; or (e) at any times during any
twenty-four (24) consecutive months, when a majority of the
members of the Corporation's Board of Directors are
individuals who were not members of the Board of Directors at
the beginning of such period, unless such change results from
death or retirement. For purposes of this paragraph, "person"
and "beneficial owner" shall have the meaning ascribed to them
pursuant to the Securities Exchange Act of 1934, as amended,
and the regulations promulgated pursuant thereto. The decision
of the Committee as to whether a change in control or imminent
change in control has occurred shall be conclusive and
binding.
(c) Extraordinary Corporate Actions. Subject to any required
action by the stockholders of the Corporation, in the event of
any change in control, recapitalization, merger,
consolidation, exchange of Shares, spin-off, reorganization,
tender offer, liquidation or other extraordinary corporate
action or event, the Committee, in its sole discretion, shall
have the power, prior or subsequent to such action or event
to:
(i) appropriately adjust the number of Shares of Common Stock
subject to each Option, the exercise price per Share of Common
Stock, and the consideration to be given or received by the
Corporation upon the exercise of any outstanding Option;
(ii) cancel any or all previously granted Options, provided
that appropriate consideration is paid to the Optionee in
Connection therewith; and/or
(iii) make such other adjustments in connection with the Plan
as the committee, in its sole discretion, deems necessary,
desirable, appropriate or advisable, provided, however, that
no action shall be taken by the Committee which would cause
Incentive Stock Options granted pursuant to the Plan to fail
to meet the requirements of Section 422 of the Code. Except as
expressly provided in Section 10(a) and 10(b) hereof, no
Optionee shall have any rights by reason of the occurrence of
any of the events described in this Section 10.
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(d) Acceleration. The Committee shall at all times have the power
to accelerate the exercise date of Options previously granted
under the Plan.
11. Time of Granting Options
------------------------
The date of grant of an Option under the Plan shall, for all purposes,
be the date on which the Committee makes the determination of granting
such Option. Except, however, for purposes of compliance with Section
16 of the Securities Exchange Act of 1934, the date of grant of an
Option shall be deemed the later of the date of grant or the date of
stockholder approval of the Plan. Notice of the determination of the
grant of an Option shall be given to each individual to whom an Option
is so granted within a reasonable time after the date of such grant in
a form determined by the Committee.
12. Effective Date
--------------
The Plan shall become effective as of December 27, 1994, subject to the
approval by the holders of the majority of the Common Stock present and
represented at the annual meeting of the stockholders held on or before
December 26, 1995. Options may be granted prior to ratification of the
Plan by the stockholders if the exercise of such Options is subject to
such stockholder ratification.
13. Approval by Stockholders
------------------------
The Plan shall be approved by stockholders of the Corporation within
twelve (12) months before or after the date the Plan becomes effective.
14. Modification of Options
-----------------------
At any time and from time to time, the Board may authorize the
Committee to direct the execution of an instrument providing for the
modification of any outstanding Option, provided no such modification,
extension or renewal shall confer on the holder of said Option any
right or benefit which could not be conferred on him by the grant of a
new Option at such time, or shall not materially decrease the
Optionee's benefits under the Option without the consent of the holder
of the Option, except as otherwise permitted under Section 15 hereof.
Notwithstanding anything herein to the contrary, the Committee shall
have the authority to cancel outstanding Options with the consent of
the Optionee and to reissue new Options at a lower exercise price, but
in no event less than the then fair market value per share of Common
Stock, in the event that the fair market value per share of Common
Stock at any time prior to the date of exercise of outstanding Options
falls below the exercise price of such Options.
15. Amendment and Termination of the Plan
-------------------------------------
(a) Action by the Board. The Board may alter, suspend or
discontinue the Plan, except that no action of the Board may
increase (other than as provided in Section 10 hereof) the
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maximum number of Shares permitted to be optioned under the
Plan, materially increase the benefits accruing to
participants under the Plan or materially modify the
requirements for eligibility for participation in the Plan
unless such action of the Board shall be subject to approval
or ratification by the stockholders of the Corporation.
(b) Change in Applicable Law. Notwithstanding any other provision
contained in the Plan, in the event of a change in any federal
or state law, rule or regulation which would make the exercise
of all or part of any previously granted Incentive Stock
Option unlawful or subject the Corporation to any penalty, the
Committee may restrict any such exercise without the consent
of the Optionee or other holder thereof in order to comply
with any such law, rule or regulation or to avoid any such
penalty.
16. Conditions Upon Issuance of Shares
----------------------------------
Shares shall not be issued with respect to any Option granted under the
Plan unless the issuance and delivery of such Shares shall all 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.
The inability of the Corporation to obtain from any regulatory body or
authority deemed by the Corporation's counsel to be necessary to the
lawful issuance and sale of any Shares hereunder shall relieve the
Corporation of any liability in respect of the non-issuance or sale of
such Shares.
As a condition to the exercise of an Option, the Corporation 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.
17. Reservations of Shares
----------------------
During the term of the Plan, the Corporation will reserve and keep
available a number of Shares sufficient to satisfy the requirements of
the Plan.
18. Unsecured Obligations
---------------------
No Participant under the Plan shall have any interest in any fund or
special asset of the Corporation by reason of the Plan or the grant of
any Incentive Stock Option under the Plan. No trust fund shall be
created in connection with the Plan or any grant of any Incentive Stock
Option hereunder and there shall be no required funding of amounts
which may become payable to any Participant.
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19. Withholding Tax
---------------
Where a Participant or other person is entitled to receive Shares
pursuant to the exercise of an Option 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, or, in
lieu thereof, to retain, or sell without notice, a number of such
Shares sufficient to cover the amount required to be withheld.
20. Miscellaneous
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(a) No Right to Employment. Nothing in this Plan or in any
agreement entered into pursuant to it shall confer upon any
Optionee the right to continue in the employ of the
Corporation or affect any right which the Bank may have to
terminate the employment or other relationship of such
Optionee.
(b) No Right as Shareholders. Recipients of Options under the Plan
shall have no rights as shareholders of the Corporation with
respect thereto unless and until certificates for shares of
Common Stock are issued to them.
21. Governing Law
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The Plan shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania, except to the extent that federal
law shall be deemed to apply.
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