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HALLMARK CAPITAL CORP.
1993 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
[AS AMENDED ON OCTOBER 22, 1996,
(TO BE EFFECTIVE ON NOVEMBER 1, 1996);
AS AMENDED ON AUGUST 26, 1997
(TO BE EFFECTIVE ON OCTOBER 30, 1997)]
I. PURPOSE.
The purpose of the Hallmark Capital Corp. (the "Holding Company") 1993
Stock Option Plan for Outside Directors (the "Directors' Option Plan") is to
promote the growth and profitability of the Holding Company and West Allis
Savings Bank (the "Bank") by providing Outside Directors of the Holding Company
and its affiliates (including the Bank) with an incentive to achieve long-term
objectives of the Holding Company and to attract and retain non-employee
directors of outstanding competence by providing such Outside Directors with an
opportunity to acquire an equity interest in the Holding Company.
II. GRANT OF OPTIONS.
(a) Initial Grant. Each Outside Director (for purposes of this
Directors' Option Plan, the term "Outside Director" shall mean a member of the
Board of Directors of the Holding Company or any of its affiliates not also
serving as an employee of the Holding Company or any of its affiliates),
serving in such capacity on the date of the Holding Company's initial public
offering and at the effective date of this Directors' Option Plan, shall be
granted non-statutory stock options to purchase shares of the common stock of
the Holding Company ("Common Stock") subject to adjustment as provided in
Section V hereof. All Outside Directors shall be granted options for 12,031
shares of Common Stock issued in connection with the conversion of the Bank to
stock form ("Conversion"). The purchase price per share of the Common Stock
deliverable upon the exercise of each non-statutory stock option shall be the
initial public offering price of the Common Stock sold in connection with the
Conversion. The effective date of these initial grants shall be the effective
date of the Directors' Option Plan as defined in Section VI hereof ("Effective
Date").
All specific references provided in this Section II(a) with respect to
grants or total options available are based on the assumption that 1,375,000
shares of Common Stock of the Company will be issued in the Conversion. In the
event of issuance of a greater or lesser number of Common Shares, all specific
references to numbers of option grants or total options shall be increased or
decreased proportionately.
(b) Subsequent Grants to Outside Directors. To the extent options
are available for grant under the Directors' Option Plan, the Board of
Directors shall have the authority to grant options to one or more Outside
Directors in its discretion. The purchase price per share shall equal the Fair
Market Value of the Common Stock on the date the option is granted as
determined under paragraph (d) of this Section II.
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(c) Ineligibility. An option under the Directors' Option Plan
shall not be granted to any Outside Director who at any previous time was an
employee of either the Holding Company or the Bank and in such capacity was
eligible to receive any options to purchase Common Stock.
(d) Fair Market Value. For purposes of the Directors' option
Plan, when used in connection with Common Stock on a certain date, Fair Market
Value means the average of the bid and ask prices of the Common Stock as
reported by the National Association of Securities Dealers Automated Quotation
System (as published by the Wall Street Journal "NASDAQ", if published) on the
effective date of the grant, or if the Common Stock was not traded on such
date, on the next preceding day on which the Common Stock was traded thereon.
For purposes of the grant of options in the Conversion as defined in Section VI
hereof, of the Bank, Fair Market Value shall mean the initial public offering
price of the Common Stock.
(e) Disability. The permanent and total inability by reason of
mental or physical infirmity, or both, of an Outside Director to perform the
work customarily assigned to him.
III. EARNING OF OPTIONS.
(a) General Rules.
(i) Initial Grants. Options shall be earned by
an Outside Director at the rate of thirty-three and one third
percent (33 1/3%) of the aggregate number of Options granted
at the end of each full twelve months of consecutive service
with the Bank or the Holding Company after the date of the
grant. If the service of a Director is terminated prior to
the third anniversary of the date of grant of the Option for
any reason (except as specifically provided in Subsections (b)
and (c) below), the Outside Director shall forfeit the right
to earn any options which have not theretofore been earned.
(ii) Subsequent Grants. To the extent options are
available for subsequent grants under the Directors' Option
Plan, and the Board of Directors authorizes grants to Outside
Directors under paragraph (b) of Section II, the Board of
Directors shall have the authority to determine the vesting
schedule applicable to such grants in its sole discretion.
(iii) Rounding. In determining the number of
Options which are earned, fractional shares shall be rounded
down to the nearest whole number, provided that such
fractional shares shall be aggregated and earned, on the last
anniversary in which the Option vests.
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(b) Exception for Terminations Due to Death or Disability.
Notwithstanding the general rule contained in Section (a) above, all Options
held by an Outside Director whose service as a Director with the Bank or
Holding Company terminates due to death or Disability, shall be deemed earned
as of the Outside Director's last day of service as a Director with the Bank or
the Holding Company.
(c) Exception for Terminations After a Change in Control.
Notwithstanding the general rule contained in Section (a) above, all Options
held by a Director whose service on the Board of Directors of the Bank or
Holding Company terminates following a change in control of the Bank or Holding
Company, shall be deemed earned as of the Outside Director's last day of
service as an Outside Director with the Bank or the Holding Company. For
purposes of determining under the Plan whether there has been a change in
control of the Bank or the Holding Company, a "Change in Control" of the Bank
or the Holding Company means a "Change in Control" of a nature that (i) would
be required to be reported in response to Item 1 of the current report on Form
8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); or (ii)
results in a Change in Control of the Bank or the Holding Company within the
meaning of the Home Owners Loan Act of 1933 and the Rules and Regulations
promulgated by the Office of Thrift Supervision (or its predecessor agency), as
in effect on the effective date of this Plan; or (iii) without limitation such
a Change in Control shall be deemed to have occurred at such time as (a) any
"person" (as the term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Bank or the Holding
Company representing 20% or more of the Bank's or the Holding Company's
outstanding securities ordinarily having the right to vote at the election of
directors except for any securities of the Bank purchased by the Holding
Company in connection with the conversion of the Bank to the stock form and any
securities purchased by the Bank's employee stock benefit plans; or (b)
individuals who constitute the Board on the date hereof (the "Incumbent
Board"), cease for any reason to constitute at least a majority thereof,
provided that any person becoming a director subsequent to the date hereof
whose election was approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board, or whose nomination for election by
the Holding Company's shareholders was approved by the same Nominating
Committee serving under an Incumbent Board, shall be, for purposes of this
clause (b), considered as though he were a member of the Incumbent Board; or
(c) a Plan of reorganization, a merger, consolidation, sale or substantially
all the assets of the Bank or the Holding Company or similar transaction in
which the Bank or Holding Company is not the surviving institution occurs; or
(d) a proxy statement soliciting proxies from stockholders of the Holding
Company, by someone other than the current management of the Holding Company,
seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Holding Company or the Bank or similar transaction with
one or more corporations as a result of which the outstanding shares of the
class of securities then subject to such plan or transaction are exchanged for
or converted into cash or property or securities not issued by the Bank or the
Holding Company shall be distributed; or (e) a tender offer is made for 20% or
more of the voting securities of the Bank or the Holding Company.
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IV. TERMS AND CONDITIONS.
(a) Option Agreement. Each option shall be evidenced by a written
option agreement between the Holding Company and the Outside Director
specifying the number of shares of Common Stock that may be acquired through
its exercise and containing such other terms and conditions which are not
inconsistent with the terms of this plan.
(b) Termination of Options. Each option shall expire upon the
earlier of (i) one hundred and twenty (120) months following the date of grant,
or (ii) one (1) year following the date on which the Outside Director ceases to
serve in such capacity for any reason other than removal for cause; provided,
however, that if the Participant's service on the Board of Directors is
terminated prior to the date the Plan initially is presented to the
shareholders of the Company for ratification, the option may not be exercised
prior to the date of the shareholders meeting regarding such ratification but
shall remain exercisable for a period of one year from the date of such
meeting. If the Outside Director dies before fully exercising any portion of
an option then exercisable, such option may be exercised by such Outside
Director's personal representative(s), heir(s) or devisee(s) at any time within
the one (1) year period following his or her death; provided, however, that in
no event shall the option be exercisable: (i) more than one hundred and twenty
(120) months after the date of its grant; or (ii) more than one year following
the date on which the outside director ceases to serve in that capacity other
than removal for cause. If the Outside Director is removed for cause all
options awarded to him shall expire immediately upon such removal.
(c) Manner of Exercise. The option may be exercised from time to
time, in whole or in part, by delivering a written notice of exercise to the
Chief Executive Officer of the Holding Company. Such notice is irrevocable and
must be accompanied by full payment of the exercise price (as determined in
Section II(d) hereof) in cash or shares of previously acquired Common Stock of
the Holding Company at the Fair Market Value of such shares determined on the
exercise date by the manner described in Section II(d) above or by such other
means as determined by the Board of Directors. If previously acquired shares
of Common Stock are tendered in payment of all or part of the exercise price,
the value of such shares shall be determined as of the date of such exercise.
(d) Transferability. Options granted hereunder may be exercised
only during an Outside Director's lifetime by the Outside Director, the Outside
Director's guardian or legal representative or by a permissible transferee.
Options shall be transferable by Outside Directors pursuant to the laws of
descent and distribution upon an Outside Director's death, and during an
Outside Director's lifetime, options shall be transferable by Outside Directors
to members of their immediate family, trusts for the benefit of members of
their immediate family and charitable institutions ("permissible transferees")
to the extent permitted under Section 16 of the Exchange Act, and subject to
federal and state securities laws. The term "immediate family" shall mean any
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
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mother-in-law, father-in-law, son-in-law, brother-in-law, or sister-in-law and
shall include adoptive relationships.
Options also shall be transferable by Outside Directors other than to
permissible transferees with the prior approval of the Board of Directors which
shall have the authority to approve such transfers of options on a case-by-case
basis in its sole discretion.
The Board of Directors shall have the authority to establish rules and
regulations specifically governing the transfer of options granted hereunder as
it deems necessary and advisable.
V. COMMON STOCK SUBJECT TO THE DIRECTORS' OPTION PLAN.
The shares which shall be issued and delivered upon exercise of
options granted under the Directors' Option Plan may be either authorized and
unissued shares of Common Stock or authorized and issued shares of Common Stock
held by the Holding Company as Treasury stock. The number of shares of Common
Stock reserved for issuance under the Directors' Option Plan shall not exceed
76,990 shares of the Common Stock of the Holding Company, par value $l.00 per
share, issued in connection with the Conversion of the Bank from the mutual to
the stock form of ownership, subject to adjustments pursuant to this Section V.
Any shares of Common Stock subject to an option which for any reason either
terminates unexercised or expires, shall again be available for issuance under
the Directors' Option Plan.
In the event of any change or changes in the outstanding Common Stock
of the Holding Company by reason of any stock dividend or split,
recapitalization, reorganization, merger, consolidation, spin-off, combination
or any similar corporate change, or other increase or decrease in such shares
effected without receipt or payment of consideration by the Company, the number
of shares of Common Stock which may be issued under this Directors' Option
Plan, the number of shares of Common Stock subject to options granted under
this Directors' Option Plan and the option price of such options, shall be
automatically adjusted to prevent dilution or enlargement of the rights granted
to an Outside Director under the Directors' Option Plan.
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VI. EFFECTIVE DATE OF THE PLAN; SHAREHOLDER RATIFICATION.
The Directors' Option Plan after adoption by the Board of Directors
shall become effective upon the conversion of the Bank from the mutual to
capital stock form of ownership and the acquisition of the Bank by the Holding
Company (the "Conversion"). Following Conversion, the Directors' Option Plan
shall be presented to shareholders of the Company for ratification for purposes
of (i) obtaining favorable treatment under Section 16(b) of the Exchange Act;
and (ii) maintaining listing on the NASDAQ National Market System; provided,
however, that the failure to obtain shareholder ratification shall not affect
the validity of this Plan and the options granted hereunder.
VII. TERMINATION OF THE PLAN.
The right to grant options under the Directors' Option Plan will
terminate ten years after the Effective Date of the Plan. A majority of the
outstanding shares of the Common Stock entitled to vote is required to
terminate the Directors' Option Plan. No termination pursuant to Article VII
shall, without the consent of the affected individual, affect such individual's
rights under a previously granted option.
VIII. AMENDMENT OF THE PLAN.
The Directors' Option Plan may be amended from time to time by the
Board of Directors of the Company provided that Section II hereof, "Grant of
Options" shall not be amended more than once every six months other than to
comport with the Internal Revenue Code of 1986, as amended, or the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder.
Except as provided in Section V hereof, rights and obligations under any option
granted before an amendment shall not be altered or impaired by such amendment
without the written consent of the optionee. The Board of Directors may
determine that shareholder approval of an amendment to the Directors' Option
Plan may be advisable for any reason, including but not limited to, for the
purpose of obtaining or retaining any statutory or regulatory benefits under
tax, securities or other laws or satisfying applicable stock exchange listing
requirements.
IX. APPLICABLE LAW.
The Plan will be administered in accordance with the laws of the State
of Wisconsin.
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X. COMPLIANCE WITH SECTION 16.
With respect to persons subject to Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successor under the Exchange Act. To the
extent any provision of the Plan or action by the Board of Directors fails to
so comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Board of Directors of the Holding Company.
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Date Adopted By Board Signature
[Title]
------------------------
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Date Ratified By Shareholders Signature
[Title]
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October 22, 1996 (to be ------------------------
effective November 1, 1996) Signature
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Date Amended
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August 26, 1997 (to be ------------------------
effective October 30, 1997) Signature
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Date Amended -----------------
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