Exhibit 10.1
HMN FINANCIAL, INC.
2001 OMNIBUS STOCK PLAN
INCENTIVE STOCK OPTION AGREEMENT
Full Name of Optionee:
No. of Shares Covered: Date of Grant:
Exercise Price Per Share: Expiration Date:
Exercise Schedule pursuant to Section 4:
No. of Shares as to Which Option
Date of Vesting Becomes Exercisable
This is an INCENTIVE STOCK OPTION AGREEMENT (this "Agreement") between HMN
Financial, Inc., a Delaware corporation (the "Company"), and the optionee
identified above (the "Optionee") effective as of the date of grant specified
above.
RECITALS
WHEREAS, the Company maintains the HMN Financial, Inc. 2001 Omnibus Stock
Plan (the "Plan");
WHEREAS, the Board of Directors of the Company has appointed the
Compensation Committee (the "Committee") with the authority to determine the
awards to be granted under the Plan; and
WHEREAS, the Committee or its designee has determined that the Optionee is
eligible to receive an award under the Plan in the form of a Incentive Stock
Option (the "Option") and has set the terms thereof;
NOW, THEREFORE, the Company hereby grants this Option to the Optionee
under the terms set by the Committee as follows:
TERMS*
1. GRANT. Subject to the terms of the Plan, the Optionee is granted this
Option to purchase the number of Shares specified at the beginning of this
Agreement on the terms set forth herein.
2. EXERCISE PRICE. The price to the Optionee of each Share subject to this
Option is the exercise price specified at the beginning of this Agreement.
3. INCENTIVE STOCK OPTION. This Option is intended to be an "incentive stock
option" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code").
4. EXERCISE SCHEDULE. Subject to the terms of the Plan and Section 8 of this
Agreement, the Option shall become exercisable as to the number of Shares
and on the dates specified in the exercise schedule at the beginning of
this Agreement. The exercise schedule shall be cumulative; thus, to the
extent the Option has not already been exercised and has not expired,
terminated, or been canceled, the Optionee may at any time, and from time
to time, purchase any portion of the Shares then purchasable under the
exercise schedule.
This Option may be exercised in full (notwithstanding the exercise
schedule) under the circumstances described in Section 8 of this Agreement
if it has not expired prior thereto.
5. EXPIRATION. This Option shall expire at 4:00 p.m. Central Time on the
earliest of:
(a) the expiration date specified at the beginning of this Agreement
(which date may not be later than ten years after the date of grant
or, if the Optionee owns or is deemed to own stock possessing more
than 10% of the combined voting power of all classes of stock of the
Company, five years after the date of grant);
(b) the last day of the period as of or following the termination of
employment of the Optionee during which this Option can be exercised
(as specified in Section 7 of this Agreement); or
(c) the date (if any) fixed for cancellation pursuant to Section 8
of this Agreement.
No one may exercise this Option after it has expired, notwithstanding any
other provision of this Agreement.
6. PROCEDURE TO EXERCISE OPTION.
Notice of Exercise. Subject to the terms of this Agreement, this Option
may be exercised by delivering written notice of exercise to the Company
at its headquarters in the form
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* Unless the context indicates otherwise, capitalized terms that are not
defined in this Agreement have the meanings set forth in the Plan as it
currently exists or as it may be amended in the future.
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attached to this Agreement or a similar form containing substantially the
same information and addressed or delivered to the President. The notice
shall state the election to exercise the Option, the number of Shares to
be purchased, and shall be signed by the person exercising this Option. If
the person exercising this Option is not the Optionee, he or she also must
submit appropriate proof of his or her right to exercise this Option.
Tender of Payment. Any notice of exercise shall be accompanied by:
(a) payment (by check, bank draft, or money order
payable to the Company) of the full purchase price of the
Shares being purchased;
(b) To the extent permitted by law, a broker-assisted cashless
exercise in which the Optionee irrevocably instructs a broker
to deliver proceeds of a sale of all or a portion of the
Shares to be issued pursuant to the exercise (or a loan
secured by such Shares) to the Company in payment of the
purchase price of such Shares;
(c) By delivery to the Company of unencumbered Shares having an
aggregate Fair Market Value (as defined in the Plan) on the
date of exercise equal to the purchase price of such Shares;
or
(d) any combination of (a), (b), or (c).
Notwithstanding the other terms of this subparagraph, the Optionee shall
not be permitted to pay any portion of the purchase price of the Shares
being purchased with Shares if the Committee believes that payment in such
manner is undesirable.
Delivery of Certificates. As soon as practicable after the Company
receives a properly executed notice and the purchase price provided for
above, it shall deliver to the person exercising the Option, in the name
of such person, one or more certificates representing the Shares being
purchased. The Company shall pay any original issue or transfer taxes with
respect to the issue or transfer of the Shares and all fees and expenses
incurred by it in connection therewith. All Shares so issued shall be
fully paid and nonassessable. Notwithstanding anything to the contrary in
this Agreement, the Company shall not be required to issue or deliver any
Shares before the completion of such registration or other qualification
of such Shares under any state law, rule, or regulation as the Company
determines to be necessary or desirable.
7. EMPLOYMENT REQUIREMENT. This Option may be exercised only while the
Optionee remains employed with the Company or an Affiliate, and only if
the Optionee has been continuously so employed since the date of this
Agreement; provided that:
(a) This Option may be exercised for three months following the day the
Optionee's employment by the Company ceases if such cessation of
employment is for a reason other than death or disability, but only
to the extent that it was exercisable immediately prior to
termination of employment.
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(b) This Option may be exercised in full within one year after the
Optionee's employment by the Company ceases if such cessation of
employment is because of death, and the Optionee's employment by the
Company has been continuous between the date of this Option and a
date not more than three months prior to death.
(c) This Option may be exercised in full within one year after the
Optionee's employment by the Company ceases if such cessation of
employment is because of disability, and Optionee's employment by
the Company has been continuous between the date of this Option and
the date of such disability.
(d) If the Optionee's employment terminates after a declaration made
pursuant to Section 8 of this Agreement, this Option may be
exercised at any time permitted by such declaration.
Notwithstanding the above, this Option may not be exercised after it
has expired.
8. ACCELERATION OF OPTION.
Disability. This Option may be exercised in full (notwithstanding the
exercise schedule) if the Optionee's employment with the Company or an
Affiliate terminates because of disability, and Optionee's employment by
the Company or its Affiliates has been continuous between the date of this
Option and the date of such disability.
Death. This Option may be exercised in full (notwithstanding the exercise
schedule) if the Optionee dies while employed by the Company or an
Affiliate, and the Optionee's employment by the Company or its Affiliates
has been continuous between the date of this Option and a date not more
than three months prior to death.
Fundamental Change. At least 10 days before a Fundamental Change, the
Committee may, but shall not be obligated to, declare, and provide written
notice to the Optionee of the declaration, that this Option shall be
cancelled at the time of, or immediately before the occurrence of, the
Fundamental Change (unless it is exercised before the Fundamental Change)
in exchange for payment to the Optionee, within 10 days after the
Fundamental Change, of cash equal to the amount, for each Share covered by
the cancelled Option, by which the event proceeds per share (as defined
below) exceeds the exercise price per Share covered by this Option. This
Option may be exercised in full (notwithstanding the exercise schedule) at
any time after such declaration and before the time of cancellation of
this Option. This Option, to the extent it has not been exercised before
the Fundamental Change, shall be cancelled at the time of, or immediately
before, the Fundamental Change, as provided in the declaration, and this
Agreement shall terminate at the time of such cancellation, subject to the
payment obligations of the Company provided in this paragraph.
Notwithstanding the foregoing, no person holding an Option shall be
entitled to the payment or vesting provided for in this Section 8 if the
Option has terminated, expired, or been cancelled pursuant to this
Agreement.
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In the case of a Fundamental Change that consists of the merger or
consolidation or statutory share exchange, the Committee, instead of the
declaration above, may make appropriate provision for the protection of
this Option by the substitution, in lieu of this Option, of an option to
purchase appropriate voting common stock or appropriate voting common
stock of the corporation surviving any such merger or consolidation or, if
appropriate, the parent corporation of the Company or such surviving
corporation.
For purposes of the preceding paragraphs, the "event proceeds per share"
is the cash plus the fair market value (as determined in good faith by the
Committee) of the non-cash consideration to be received per Share by the
shareholders of the Company upon the occurrence of the Fundamental Change.
9. LIMITATION ON TRANSFER. While the Optionee is alive, only the Optionee (or
his or her legal representative) may exercise this Option. This Option may
not be assigned or transferred other than by will or the laws of descent
and distribution or pursuant to a qualified domestic relations order as
defined by the Code, or Title I of ERISA, or the rules thereunder, and
shall not be subject to pledge, hypothecation, execution, attachment, or
similar process. Any attempt to assign, transfer, pledge, hypothecate, or
otherwise dispose of this Option contrary to the provisions hereof, and
the levy of any attachment or similar process upon this Option, shall be
void.
10. NO STOCKHOLDER RIGHTS BEFORE EXERCISE. No person shall have any of the
rights of a stockholder of the Company with respect to any Share subject
to this Option until the Share actually is issued to him upon exercise of
this Option.
11. DISCRETIONARY ADJUSTMENT. The Committee may make appropriate adjustments
in the number of Shares subject to this Option and in the purchase price
per Share to give effect to any adjustments made in the number of
outstanding Shares through a Fundamental Change, recapitalization,
reclassification, stock dividend, stock split, stock combination or other
relevant change; provided that, fractional Shares shall be rounded to the
nearest whole Share.
12. TAX WITHHOLDING. Delivery of Shares upon exercise of this Option shall be
subject to any required withholding taxes. As a condition precedent to
receiving Shares upon exercise of this Option, the Optionee may be
required to pay to the Company, in accordance with the provisions of the
Plan, an amount equal to the amount of any required withholdings.
13. INTERPRETATION OF THIS AGREEMENT. All decisions and interpretations made
by the Committee with regard to any question arising hereunder or under
the Plan shall be binding and conclusive upon the Company and the
Optionee. If there is any inconsistency between the provisions of this
Agreement and the Plan, the provisions of the Plan shall govern.
14. DISCONTINUANCE OF EMPLOYMENT. This Agreement shall not give the Optionee a
right to continued employment with the Company or any Affiliate, and the
Company or Affiliate employing the Optionee may terminate his or her
employment and otherwise deal with the Optionee without regard to the
effect it may have upon him under this Agreement.
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15. OBLIGATION TO RESERVE SUFFICIENT SHARES. The Company shall at all times
during the term of this Option reserve and keep available a sufficient
number of Shares to satisfy this Agreement.
16. BINDING EFFECT. This Agreement shall be binding in all respects on the
heirs, representatives, successors and assigns of the Optionee.
17. CHOICE OF LAW. This Agreement is entered into under the laws of the State
of Delaware and shall be construed and interpreted thereunder (without
regard to its conflict-of-law principles).
18. ENTIRE AGREEMENT. This Agreement and the Plan set forth the entire
agreement and understanding of the parties hereto with respect to the
grant and exercise of this Option and the administration of the Plan and
supersede all prior agreements, arrangements, plans, and understandings
relating to the grant and exercise of this Option and the administration
of the Plan.
19. AMENDMENT AND WAIVER. Except as provided in the Plan, this Agreement may
be amended, waived, modified, or canceled only by a written instrument
executed by the parties or, in the case of a waiver, by the party waiving
compliance.
20. ACKNOWLEDGMENT OF RECEIPT OF COPY. By execution hereof, the Optionee
acknowledges having received a copy of the Plan.
IN WITNESS WHEREOF, the Optionee and the Company have executed this
Agreement as of the ___ day of _______________, 2004.
HMN FINANCIAL, INC. OPTIONEE
By ________________________________ ___________________________________
Its ____________________________ Optionee
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ATTACHMENT 1
_________________________, ________
HMN Financial, Inc.
1016 Civic Center Drive Northwest
Rochester, MN 55901
Attention: President
Ladies and Gentlemen:
I hereby exercise the following option (the "Option") granted to me with
respect to the number of shares of Common Stock, par value $0.01 ("Shares"), of
HMN Financial, Inc. (the "Company"), indicated below:
NAME: ____________________________
DATE OF GRANT OF OPTION: ____________________________
EXERCISE PRICE PER SHARE: ____________________________
NUMBER OF SHARES WITH RESPECT TO
WHICH THE OPTION IS HEREBY EXERCISED: ____________________________
TOTAL EXERCISE PRICE: ____________________________
[ ] Enclosed with this letter is a check, bank draft or money
order in the amount of the Total Exercise Price.
[ ] I hereby agree to pay the Total Exercise Price within five
business days of the date hereof and, as stated in the attached
Broker's Letter, I have delivered irrevocable instructions to
__________________________________ to promptly deliver to the
Company the amount of sale or loan proceeds from the Shares to be
issued pursuant to this exercise necessary to satisfy my obligation
hereunder to pay the Total Exercise Price.
[ ] Enclosed with this letter is a certificate evidencing
unencumbered Shares (duly endorsed in blank) having an aggregate
Fair Market Value equal to or in excess of the Total Exercise Price.
If I am enclosing Shares with this letter, I hereby represent and warrant
that I am the owner of such Shares free and clear of all liens, security
interests and other restrictions or encumbrances. I agree that I will pay any
required withholding taxes in connection with this exercise.
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Please issue a certificate (the "Certificate") for the number of Shares
with respect to which the Option is being exercised in the name of the person
indicated below and deliver the Certificate to the address indicated below:
NAME IN WHICH TO ISSUE CERTIFICATE: ____________________________
ADDRESS TO WHICH CERTIFICATE SHOULD
BE DELIVERED: ____________________________
____________________________
____________________________
____________________________
PRINCIPAL MAILING ADDRESS FOR HOLDER
OF THE CERTIFICATE (IF DIFFERENT
FROM ABOVE): ____________________________
____________________________
____________________________
____________________________
Very truly yours,
_______________________________
Signature
_______________________________
Name, please print
_______________________________
Social Security Number
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_____________________, ________
HMN Financial, Inc.
1016 Civic Center Drive Northwest
Rochester, MN 55901
Attention: President
Ladies and Gentlemen:
NAME OF OPTIONEE: ____________________________
DATE OF GRANT OF OPTION: ____________________________
EXERCISE PRICE PER SHARE: ____________________________
NUMBER OF SHARES WITH RESPECT TO
WHICH THE OPTION IS TO BE EXERCISED: ____________________________
TOTAL EXERCISE PRICE: ____________________________
The above Optionee has requested that we finance the exercise of the above
Option to purchase Shares of common stock of HMN Financial, Inc. (the "Company")
and has given us irrevocable instructions to promptly deliver to the Company the
amount of sale or loan proceeds from the Shares to be issued pursuant to such
exercise to satisfy the Optionee's obligation to pay the Total Exercise Price.
Very truly yours,
____________________________________
Broker Name
By _________________________________
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