WEDGESTONE FINANCIAL
1995 STOCK OPTION PLAN
42
TABLE OF CONTENTS
Page
SECTION 1. General Purpose of Plan;
Definitions..............................................1
SECTION 2. Administration...........................................2
SECTION 3. Stock Subject to Plan....................................3
SECTION 4. Eligibility..............................................3
SECTION 5. Stock Options............................................3
SECTION 6. Amendments and Termination...............................7
SECTION 7. Unfunded Status of Plan..................................7
SECTION 8. General Provisions.......................................7
SECTION 9. Effective Date of Plan...................................8
SECTION 10. Long-Term Capital Gains..................................8
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WEDGESTONE FINANCIAL
1995 STOCK OPTION PLAN
SECTION 1. General Purpose of Plan; Definitions.
The name of this plan is the Wedgestone Financial 1995 Stock
Option Plan (the "Plan"). The purpose of the Plan is to enable Wedgestone
Financial (the "Company") to retain and attract employees and other significant
non-employees who contribute to the Company's success by their ability,
ingenuity and industry, and to enable such individuals to participate in the
long-term success and growth of the Company by giving them a proprietary
interest in the Company.
For purposes of the Plan, the following terms shall be defined as
set forth below:
a. "Board" means the Board of Directors of the Company.
b. "Cause" means a felony conviction of a participant or the failure
of a participant to contest prosecution for a felony, or a
participant's willful misconduct or dishonesty, which is directly
and materially harmful to the business or reputation of the
Company.
c. "Code" means the Internal Revenue Code of 1986, as amended.
d. "Committee" means the Committee referred to in Section 2 of the
Plan. If at any time no Committee shall be in office, then the
functions of the Committee specified in the Plan shall be
exercised by the Board.
e. "Company" means Wedgestone Financial, a business trust organized
under the laws of the State of Massachusetts.
f. "Disability" means permanent and total disability under standards
established by the Committee.
g. "Disinterested Person" shall have the meaning set forth in Rule
16b-3(d) (3) as promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, or any
successor definition adopted by the Commission.
h. "Early Retirement" means retirement, with consent of the Committee
at the time of retirement, from active employment with the
Company.
i. "Fair Market Value" means the value of the Stock on a given date
as determined by the Committee in accordance with the applicable
Treasury Department regulations under Section 422 of the Code with
respect to "incentive stock portions."
j. "Incentive Stock Option" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of
Section 422 of the Code.
k. "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option, and is intended to be and is designated as
a "Non-Qualified Stock Option."
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i. "Normal Retirement" means retirement from active employment with
the Company and any Subsidiary or Parent Corporation of the
Company on or after age 65.
m. "Retirement" means Normal Retirement or Early Retirement.
n. "Stock" means the Common Stock of the Company.
o. "Stock Option" means any option to purchase shares of stock
granted pursuant to Section 5 below.
SECTION 2. Administration.
The Plan shall be administered by the Board of Directors or by a
Committee of not less than three Disinterested Persons, who shall be appointed
by the Board of Directors of the Company and who shall serve at the pleasure of
the Board.
The Committee shall, to the extent delegated by the Board, have
the power and authority to grant Stock Options, to eligible employees and
non-employees, pursuant to the terms of the Plan.
In particular, the Committee shall have the authority:
(a) to select the officers, key employees of the Company and key
non-employees to whom Stock Options from time to time may be
granted hereunder;
(b) to determine whether and to what extent Incentive Stock Options or
Non-Qualified Stock Options or a combination of the two, are to be
granted hereunder;
(c) to determine the number of shares to be covered by each such award
granted hereunder;
(d) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder (including, but
not limited to, any restriction on any Stock Option and/or the
shares of Stock relating thereto);
(e) to determine whether, to what extent and under what circumstances
Stock and other amounts payable with respect to an award under
this Plan shall be deferred either automatically or at the
election of the participant.
The Committee shall have the authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan as it
shall, from time to time, deem advisable; to interpret the terms and provisions
of the Plan and any award issued under the Plan (and any agreements relating
thereto); and to otherwise supervise the administration of the Plan.
All decisions made by the Committee pursuant to the provisions of
the Plan shall be final and binding on all persons, including the Company and
Plan participants.
SECTION 3. Stock Subject to Plan.
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The total number of shares of Stock reserved and available for
distribution under the Plan shall be 1,000,000. Such shares may consist, in
whole or in part, of authorized and unissued shares.
If any shares that have been optioned cease to be subject to
Options, such shares shall again be available for distribution in connection
with future awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, other change in corporate structure affecting
the Stock, or spin-off or other distribution of assets to shareholders, such
substitution or adjustment shall be made in the aggregate number of shares
reserved for issuance under the Plan, and in the number and option price of
shares subject to outstanding options granted under the Plan, as may be
determined to be appropriate by the Committee, in its sole discretion, provided
that the number of shares subject to any award shall always be a whole number.
SECTION 4. Eligibility.
Officers, other key employees of the Company and other significant
non-employees who are responsible for or contribute to the management, growth
and/or profitability of the business of the Company are eligible to be granted
Stock Options under the Plan. The optionees under the Plan shall be selected
from time to time by the Committee, in its sole discretion, from among those
eligible, and the Committee shall determine, in its sole discretion, the number
of shares covered by each award.
SECTION 5. Stock Options.
Any Stock Option granted under the Plan shall be in such form as
the Committee may from time to time approve.
The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) NonQualified Stock Options. No Incentive Stock
Options shall be granted under the Plan ten (10) years from the date the Plan is
adopted by the Board of Directors.
The Committee shall have the authority to grant any optionee
Incentive Stock Options, Non-Qualified Stock Options, or both types of options.
To the extent that any option does not qualify as an Incentive Stock Option, it
shall constitute a separate Non-Qualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of
this Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify either the Plan or any Incentive Stock Option
under Section 422 of the Code. The preceding sentence shall not preclude any
modification or amendment to an outstanding Incentive Stock Option, whether or
not such modification or amendment results in disqualification of such Option as
an Incentive Stock Option, provided the optionee consents in writing to the
modification or amendment.
Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
(a) Option Price. The option price per share of Stock purchasable
under a Stock Option shall be determined by the Committee at the
time of grant. In no event shall the option price per share of
Stock purchasable
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under an Incentive Stock Option be less than 100% of the Fair
Market Value of the Stock on the date of the grant of the option.
In no event shall the option price per share of a Non-Qualified
Stock Option be less than 85% of the Fair Market Value of the
Stock on the date of the grant of the option. If an employee owns
or is deemed to own (by reason of the attribution rules applicable
under Section 425 (d) or the Code) more than 10% of the combined
voting power of all classes of stock of the Company and an
Incentive Stock Option is granted to such employee, the option
price shall be no less than 110% of the Fair Market Value of the
Stock on the date the option is granted. The Fair Market Value of
the shares of Stock of the Company means the average of the
closing prices of the sales of the Stock on any securities
exchange on which the stock may at the time be listed, or the
average of the representative bid and asked prices quoted in the
NASDAQ Small-Cap Market. If at any time the Stock is not listed on
a Securities Exchange or quoted on the NASDAQ Small-Cap Market,
the Fair Market Value of the Stock shall be determined by the
Committee.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more
than ten (10) years after the date the option is granted. If an
employee owns or is deemed to own (by reason of the attribution
rules of Section 425(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company and an
Incentive Stock Option is granted to such employee, the term of
such option shall be no more than five (5) years from the date of
grant.
(c) Exercisability. Stock Options shall be exercisable at such time or
times as determined by the Committee. If the Committee provides,
in its discretion, that any option is exercisable only in
installments, the Committee may waive such installment exercise
provisions at any time. Notwithstanding the foregoing, unless the
Stock Option Agreement provides otherwise, any Stock Option
granted under this Plan shall be exercisable in full, without
regard to any installment exercise provisions, for a period
specified by the Company, but not to exceed sixty (60) days, prior
to the occurrence of any of the following events: (i) dissolution
or liquidation of the Company other than in conjunction with a
bankruptcy of the Company or any similar occurrence, (ii) any
merger, consolidation, acquisition, separation, reorganization, or
similar occurrence, where the Company will not be the surviving
entity or (iii) the transfer of substantially all of the assets of
the Company or 51% or more of the outstanding Stock of the
Company.
(d) Methods of Exercise. Subject to any installment exercise
provisions to which they are subject, Stock Options may be
exercised in whole or in part at any time during the option period
by giving written notice of exercise to the Company specifying the
number of shares to be purchased. Such notice shall be accompanied
by payment in full of the purchase price, either by certified or
bank check, or by any other form of legal consideration deemed
sufficient by the Committee and consistent with the Plan's purpose
and applicable law, including promissory notes or a properly
executed exercise notice together with irrevocable instructions to
a broker acceptable to the Company to promptly deliver to the
Company the amount of sale or loan proceeds to pay the exercise
price. As determined by the Committee, in its sole discretion,
payment in full or in part may also be made in the form of
unrestricted Stock already owned by the optionee (based, on the
Fair Market Value of the Stock on the date the option is
exercised, as determined by the Committee), provided, however,
that, in the case of an Incentive Stock Option, the right to make
a payment in the form of already owned shares may be authorized
only at the time the option is granted. If the terms of an option
so permit, an optionee may elect to pay all or part of the option
exercise price by having the Company withhold from the shares of
Stock that would otherwise be issued upon exercise that number of
shares of Stock having a Fair Market Value
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equal to the aggregate option exercise price for the shares with
respect to which such election is made. No shares of Stock shall
be issued until full payment therefor has been made. Unless
provided otherwise in the Stock Option Agreement, an optionee
shall generally have the right to dividends and other rights of a
shareholder with respect to shares subject to the Stock Option
when the optionee has given written notice of exercise, has paid
in full for such shares, and, if requested, has given the
representation described in Section 8(a).
(e) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws
of descent and distribution, and all Stock Options shall be
exercisable, during the optionee's lifetime, only by the optionee.
(f) Termination by Death. If an optionee's employment by the Company
terminates by reason of death, the Stock Option may thereafter be
immediately exercised, to the extent then exercisable (or on such
accelerated basis as the Committee shall determine), by the legal
representative of the estate or by the legatee of the optionee
under the will of the optionee, for a period of three years (or
such shorter period as the Committee shall specify at grant) from
the date of such death or until the expiration of the stated term
of the option, whichever period is shorter.
(g) Termination by Reason of Disability. If an optionee's employment
by the Company terminates by reason of Disability, any Stock
Option held by such optionee may thereafter be exercised, to the
extent it was exercisable at the time of termination due to
Disability (or on such accelerated basis as the Committee shall
determine), but may not be exercised after three years (or such
shorter period as the Committee shall specify at grant) from the
date of such termination of employment by reason of Disability or
the expiration of the stated term of the option, whichever period
is the shorter. In the event of termination of employment by
reason of Disability, if an Incentive Stock Option is exercised
after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, the option will thereafter be
treated as a Non-Qualified Stock Option.
(h) Termination by Reason of Retirement. If an optionee's employment
by the Company terminates by reason of Retirement, any Stock
Option held by such optionee may thereafter be exercised to the
extent it was exercisable at the time of such Retirement (or on
such accelerated basis as the Committee shall determine), but may
not be exercised after three years (or such shorter period as
Committee shall specify at grant) from the date of such
termination of employment or the expiration of the stated term of
the option, whichever period is the shorter. In the event of
termination of employment by reason of Retirement, if an Incentive
Stock Option is exercised after the expiration of the exercise
periods that apply for purposes of Section 422 of the Code the
option will thereafter be treated as a Non-Qualified Stock Option.
(i) Other Termination. Unless otherwise determined by the Committee,
if an optionee's employment by the Company terminates for any
reason other than death, Disability or Retirement, the Stock
Option shall thereupon terminate, except that the option may be
exercised to the extent it was exercisable at such termination for
the lesser of three months or the balance of the option's term if
the optionee is involuntarily terminated without Cause by the
Company.
(j) Annual Limit on Incentive Stock Options. The aggregate Fair Market
Value (determined as of the time the Stock Option is granted) of
the common Stock with respect to which an
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Incentive Stock Option under this Plan or any other plan of the
Company is exercisable for the first time by an optionee during
any calendar year shall not exceed $100,000.
(k) No Equity Interest. An optionee shall have no equity interest in
the Company or any voting, dividend, liquidation, or dissolution
rights with respect to any Stock of the Company solely by reason
of having a Stock Option. Furthermore, prior to the exercise of an
optionee's Stock Option, that optionee shall have no interest in,
or any voting, dividend, liquidation or dissolution rights with
respect to, the Common Stock relating to that Stock Option.
SECTION 6. Amendments and Termination.
The Board may amend, alter, or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made (i) which impairs the
rights of an optionee or participant under a Stock Option granted, without the
optionee's consent, or (ii) which without the approval of the stockholders of
the Company would cause the Plan to no longer comply with Section 422 of the
Code or any other regulatory requirements.
The Committee may amend the terms of any award or option
theretofore granted, prospectively or retroactively, but, subject to Section 3
above, no such amendment shall impair the rights of any holder without his or
her consent. The Committee may also substitute new Stock Options for previously
granted options, including previously granted options having higher option
prices.
SECTION 7. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for
incentive compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder, provided, however, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.
SECTION 8. General Provisions.
(a) The Committee may require each person purchasing shares pursuant
to a Stock Option under the Plan to represent to and agree with
the Company in writing that the optionee is acquiring the shares
without a view to distribution thereof. The certificates for such
shares may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock delivered under the Plan
pursuant to any Stock Option shall be subject to such stock
transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations, and other requirements of
the Securities and Exchange Commission, any stock exchange upon
which the Stock is then listed, and any applicable Federal or
state securities laws, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate
reference to such restrictions.
(b) Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such
arrangements may be either generally applicable or applicable only
in specific cases. The adoption of the Plan shall not
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confer upon any employee of the Company any right to continued
employment with the Company, as the case may be, nor shall it
interfere in any way with the right of the Company to terminate
the employment of any of its employees at any time.
(c) Each participant shall, no later than the date as of which any
part of the value of an award first becomes includable as
compensation in the gross income of the participant for Federal
income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any Federal,
state, or local taxes of any kind required by law to be withheld
with respect to the award. The obligations of the Company under
the Plan shall be conditional on such payment or arrangements and
the Company shall, to the extent permitted by law, have the right
to deduct any such taxes from any payment of any kind otherwise
due to the participant. With respect to any award under the Plan,
if the terms of such award so permit, a participant may elect by
written notice to the Company to satisfy part or all of the
withholding tax requirements associated with the award by (i)
authorizing the Company to retain from the number of shares of
Stock that would otherwise be deliverable to the participant, or
(ii) delivering to the Company from shares of Stock already owned
by the participant, that number of shares having an aggregate Fair
Market Value equal to part or all of the tax payable by the
participant under this Section 8(c). Any such election shall be in
accordance with, and subject to, applicable tax and securities
laws, regulations and rulings.
SECTION 9. Effective Date of Plan.
The Plan shall be effective on the date it is approved by a vote
of the holders of a majority of the Stock present and entitled to vote (whether
in person or by proxy) at a meeting of the Company's shareholders.
SECTION 10. Long-Term Capital Gains.
Incentive Stock Options granted pursuant to this Plan are intended
to qualify for long-term capital gains treatment available, under the provisions
of Sections 421(a) and 422 of the Code. As of January 1, 1994, eligibility for
such tax treatment required that no disposition of shares of Stock be made by
the optionee (i) within two (2) years from the date the Incentive Stock Option
is granted, or (ii) within one (1) year of the date the Stock underlying the
Incentive Stock Option is transferred to him.
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