1
EXHIBIT 4(a)
POTTERS FINANCIAL CORPORATION
1998 STOCK OPTION AND INCENTIVE PLAN
1. PURPOSE. The purpose of the Potters Financial Corporation 1998 Stock
Option and Incentive Plan (this "Plan") is to promote and advance the interests
of Potters Financial Corporation (the "Company") and its shareholders by
enabling the Company to attract, retain and reward directors, managerial and
other key employees of the Company and any Subsidiary (hereinafter defined), and
to strengthen the mutuality of interests between such directors and employees
and the Company's shareholders by providing such persons with a proprietary
interest in pursuing the long-term growth, profitability and financial success
of the Company.
2. DEFINITIONS. For purposes of this Plan, the following terms shall
have the meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended, or
any successor thereto, together with rules, regulations and
interpretations promulgated thereunder.
(c) "Committee" means the Committee of the Board constituted as
provided in Section 3 of this Plan.
(d) "Common Shares" means the common shares, without par value, of
the Company or any security of the Company issued in substitution, in
exchange or in lieu thereof.
(e) "Company" means Potters Financial Corporation, an Ohio
corporation, or any successor corporation.
(f) "Employment" means regular employment with the Company or a
Subsidiary and does not include service as a director only.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute.
(h) "Fair Market Value" shall be determined as follows:
(i) If the Common Shares are traded on a national securities
exchange at the time of grant of the Stock Option, then the Fair
Market Value shall be the average of the highest and the lowest
selling price on such exchange on the date such Stock Option
is granted or, if there were no sales on such date, then on the
next prior business day on which there was a sale.
(ii) If the Common Shares are quoted on The Nasdaq Stock
Market at the time of the grant of the Stock Option, then the Fair
Market Value shall be the mean between the closing bid and closing
asked quotation with respect to a Common Share on such date on The
Nasdaq Stock Market.
(iii) If the Common Shares are not traded on a national
securities exchange or quoted on The Nasdaq Stock Market, then the
Fair Market Value shall be as determined by the Committee.
(i) "Incentive Stock Option" means any Stock Option granted
pursuant to the provisions of Section 6 of this Plan that is intended
to be and is specifically designated as an "incentive stock option"
within the meaning of Section 422 of the Code.
(j) "Non-Qualified Stock Option" means any Stock Option granted
pursuant to the provisions of Section 6 of this Plan that is not an
Incentive Stock Option.
(k) "OTS" means the Office of Thrift Supervision, Department of the
Treasury.
2
(l) "Participant" means an employee or director of the Company or a
Subsidiary who is granted a Stock Option under this Plan.
Notwithstanding the foregoing, for the purposes of the granting of any
Incentive Stock Option under this Plan, the term "Participant" shall
include only employees of the Company or a Subsidiary.
(m) "Plan" means the Potters Financial Corporation 1998 Stock Option
and Incentive Plan, as set forth herein and as it may be hereafter
amended from time to time.
(n) "Stock Option" means an award to purchase Common Shares granted
pursuant to the provisions of Section 6 of this Plan.
(o) "Subsidiary" means any corporation or entity in which the
Company directly or indirectly controls 50% or more of the total voting
power of all classes of its stock having voting power and includes,
without limitation, Potters Savings and Loan Company.
(p) "Terminated for Cause" means any removal of a director or
discharge of an employee for the personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of a
material provision of any law, rule or regulation (other than traffic
violations or similar offenses) or a material violation of a final
cease-and-desist order or for any other action of a director or
employee which results in a substantial financial loss to the Company
or a Subsidiary.
3. ADMINISTRATION.
(a) This Plan shall be administered by the Committee to be comprised
of not fewer than three of the members of the Board. The members of the
Committee shall be appointed from time to time by the Board. Members of
the Committee shall serve at the pleasure of the Board, and the Board
may from time to time remove members from, or add members to, the
Committee. A majority of the members of the Committee shall constitute
a quorum for the transaction of business. An action approved in writing
by all of the members of the Committee then serving shall be fully as
effective as if the action had been taken by unanimous vote at a
meeting duly called and held.
(b) The Committee is authorized to construe and interpret this Plan
and to make all other determinations necessary or advisable for the
administration of this Plan. The Committee may designate persons other
than members of the Committee to carry out its responsibilities under
such conditions and limitations as it may prescribe. Any determination,
decision or action of the Committee in connection with the
construction, interpretation, administration or application of this
Plan shall be final, conclusive and binding upon all persons
participating in this Plan and any person validly claiming under or
through persons participating in this Plan. The Company shall effect
the granting of Stock Options under this Plan, in accordance with the
determinations made by the Committee, by execution of instruments in
writing in such form as approved by the Committee.
4. DURATION OF, AND COMMON SHARES SUBJECT TO, THIS PLAN.
(a) Term. This Plan shall terminate on the date which is ten (10)
years from the effective date of the Plan, except with respect to Stock
Options then outstanding. Notwithstanding the foregoing, no Incentive
Stock Option may be granted under this Plan after the date which is ten
(10) years from the date on which this Plan is adopted by the Board or
the date on which this Plan is approved by the shareholders of the
Company, whichever is earlier.
(b) Common Shares Subject to Plan. The maximum number of Common
Shares in respect of which Stock Options may be granted under this
Plan, subject to adjustment as provided in Section 9 of this Plan,
shall be 48,820 Common Shares.
For the purpose of computing the total number of Common Shares
available for Stock Options under this Plan, there shall be counted against the
foregoing limitations the number of Common Shares subject to issuance upon
exercise or settlement of Stock Options as of the dates on which such Stock
Options are granted. If any Stock Options are forfeited,
-2-
3
terminated or exchanged for other Stock Options, or expire unexercised, the
Common Shares which were theretofore subject to such Stock Options shall again
be available for Stock Options under this Plan to the extent of such forfeiture,
termination or expiration of such Stock Options.
Common Shares that may be issued under this Plan may be either
authorized and unissued shares or issued shares which have been reacquired by
the Company. No fractional shares shall be issued under this Plan.
5. ELIGIBILITY AND GRANTS. Persons eligible for Stock Options under
this Plan shall consist of directors and managerial and other key employees of
the Company or a Subsidiary who hold positions with significant responsibilities
or whose performance or potential contribution, in the judgment of the
Committee, will benefit the future success of the Company or a Subsidiary. In
selecting the directors and employees to whom Stock Options will be awarded and
the number of shares subject to such Stock Options, the Committee shall consider
the position, duties and responsibilities of the eligible directors and
employees, the value of their services to the Company and the Subsidiaries and
any other factors the Committee may deem relevant.
6. STOCK OPTIONS. Stock Options granted under this Plan may be in the
form of Incentive Stock Options or Non-Qualified Stock Options, and such Stock
Options shall be subject to the following terms and conditions and in such form
as the Committee may from time to time approve and shall contain such additional
terms and conditions as the Committee shall deem desirable, not inconsistent
with the express provisions of the Plan:
(a) Grant. Stock Options may be granted under this Plan on terms and
conditions not inconsistent with the provisions of this Plan.
(b) Stock Option Price. The per share option exercise price of a
Stock Option shall be determined by the Committee at the time of grant;
provided, however, that in no event shall the exercise price of a Stock
Option be less than 100% of the Fair Market Value of the Common Shares
on the date of the grant of such Stock Option. Notwithstanding the
foregoing, in the case of a Participant who owns Common Shares
representing more than 10% of the outstanding Common Shares at the time
an Incentive Stock Option is granted, the option exercise price shall
in no event be less than 110% of the Fair Market Value of the Common
Shares at the time such Incentive Stock Option is granted.
(c) Stock Option Terms. Subject to the right of the Company to
provide for earlier termination in the event of any merger, acquisition
or consolidation involving the Company, the term of each Stock Option
shall be fixed by the Committee; provided, however, that the term of
Incentive Stock Options will not exceed ten years after the date the
Incentive Stock Option is granted; provided further, however, that in
the case of a Participant who owns a number of Common Shares
representing more than 10% of the Common Shares outstanding at the time
the Incentive Stock Option is granted, the term of the Incentive Stock
Option shall not exceed five years.
(d) Exercisability. Except as set forth in Section 6(f) and Section
7 of this Plan or as designated by the Committee at the time of grant,
Stock Options awarded under this Plan shall be immediately exercisable
in full.
(e) Method of Exercise. A Stock Option may be exercised, in whole or
in part, by giving written notice of exercise to the Company specifying
the number of Common Shares to be purchased. Such notice shall be
accompanied by payment in full of the purchase price in cash or, if
acceptable to the Committee in its sole discretion, in Common Shares
already owned by the Participant, or by surrendering outstanding Stock
Options. The Committee may also permit Participants, either on a
selective or aggregate basis, to simultaneously exercise Stock Options
and sell Common Shares thereby acquired, pursuant to a brokerage or
similar arrangement, approved in advance by the Committee, and use the
proceeds from such sale as payment of the purchase price of such
shares.
(f) Special Rule for Incentive Stock Options. With respect to
Incentive Stock Options granted under this Plan, to the extent the
aggregate Fair Market Value (determined as of the date the Incentive
Stock Option is granted) of the number of shares with respect to which
Incentive Stock Options are exercisable under all plans of the Company
or a Subsidiary for the first time by a Participant during any calendar
year exceeds $100,000, or such
-3-
4
other limit as may be required by the Code, such Stock Options shall be
Non-Qualified Stock Options to the extent of such excess.
7. TERMINATION OF EMPLOYMENT OR DIRECTORSHIP.
(a) Except in the event of the death or disability of a Participant,
upon the resignation, removal or retirement from the board of directors
of any Participant who is a director of the Company or a Subsidiary or
upon the termination of Employment of a Participant who is not a
director of the Company or a Subsidiary, any Stock Option which has not
yet become exercisable shall thereupon terminate and be of no further
force or effect, and, unless the Committee shall specifically state
otherwise at the time a Stock Option is granted, any Stock Option which
has become exercisable shall terminate if it is not exercised within
three months of such resignation, removal, retirement or termination of
Employment.
(b) Unless the Committee shall specifically state otherwise at the
time a Stock Option is granted, all Stock Options granted under this
Plan shall become exercisable in full on the date of termination of a
Participant's employment or directorship with the Company or a
Subsidiary because of his death or disability, and, subject to
extension by the Committee, all Stock Options shall terminate if not
exercised within 12 months of the Participant's death or disability.
(c) Unless the Committee shall specifically state otherwise at the
time a Stock Option is granted, in the event the Employment or the
directorship of a Participant is Terminated for Cause, any Stock Option
that has not yet become exercisable shall thereupon terminate and be of
no further force or effect and any stock option that has become
exercisable shall terminate if it is not exercised within three months
of such Termination for Cause.
8. NON-TRANSFERABILITY OF STOCK OPTIONS. No Stock Option under this
Plan, and no rights or interests therein, shall be assignable or transferable by
a Participant except by will or the laws of descent and distribution. During the
lifetime of a Participant, Stock Options are exercisable only by, and payments
in settlement of Stock Options will be payable only to, the Participant or his
or her legal representative.
9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
(a) The existence of this Plan and the Stock Options granted
hereunder shall not affect or restrict in any way the right or power of
the Board or the shareholders of the Company to make or authorize the
following: any adjustment, recapitalization, reorganization or other
change in the Company's capital structure or its business; any merger,
acquisition or consolidation of the Company; any issuance of bonds,
debentures, preferred or prior preference stocks ahead of or affecting
the Company's capital stock or the rights thereof; the dissolution or
liquidation of the Company or any sale or transfer of all or any part
of its assets or business; or any other corporate act or proceeding,
including any merger or acquisition which would result in the exchange
of cash, stock of another company or options to purchase the stock of
another company for any Stock Option outstanding at the time of such
corporate transaction or which would involve the termination of all
Stock Options outstanding at the time of such corporate transaction.
(b) In the event of any change in capitalization affecting the
Common Shares of the Company, such as a stock dividend, stock split,
recapitalization, merger, consolidation, spin-off, split-up,
combination or exchange of shares or other form of reorganization, or
any other change affecting the Common Shares, including a distribution
(other than normal cash dividends) of company assets to shareholders,
such proportionate adjustments, if any, as the Board in its discretion
may deem appropriate to reflect such change shall be made with respect
to the aggregate number of Common Shares for which Stock Options in
respect thereof may be granted under this Plan, the maximum number of
Common Shares which may be sold or awarded to any Participant, the
number of Common Shares covered by each outstanding Stock Option, and
the exercise price per share in respect of outstanding Stock Options.
10. AMENDMENT AND TERMINATION OF THIS PLAN. Without further approval of
the shareholders, the Board may at any time terminate this Plan, or may amend it
from time to time in such respects as the Board may deem advisable, except
-4-
5
that the Board may not, without approval of the shareholders, make any amendment
which would (a) increase the aggregate number of Common Shares which may be
issued under this Plan (except for adjustments pursuant to Section 9 of this
Plan), (b) materially modify the requirements as to eligibility for
participation in this Plan, or (c) materially increase the benefits accruing to
Participants under this Plan. The above notwithstanding, the Board may amend
this Plan to take into account changes in applicable securities, federal income
tax and other applicable laws.
11. MODIFICATION OF OPTIONS. The Board may authorize the Committee to
direct the execution of an instrument providing for the modification of any
outstanding Stock Option which the Board believes to be in the best interests of
the Company; provided, however, that no such modification, extension or renewal
shall confer on the holder of such Stock Option any right or benefit which could
not be conferred on him by the grant of a new Stock Option at such time and
shall not materially decrease the Participant's benefits under the Stock Option
without the consent of the holder of the Stock Option, except as otherwise
permitted under this Plan.
12. MISCELLANEOUS.
(a) Tax Withholding. The Company shall have the right to deduct from
any settlement, including the delivery or vesting of Common Shares,
made under this Plan any federal, state or local taxes of any kind
required by law to be withheld with respect to such payments or to take
such other action as may be necessary in the opinion of the Company to
satisfy all obligations for the payment of such taxes. If Common Shares
are used to satisfy tax withholding, such shares shall be valued based
on the Fair Market Value when the tax withholding is required to be
made.
(b) No Right to Employment. Neither the adoption of this Plan nor
the granting of any Stock Option shall confer upon any employee of the
Company or a Subsidiary any right to continued Employment with the
Company or a Subsidiary, as the case may be, nor shall it interfere in
any way with the right of the Company or a Subsidiary to terminate the
Employment of any of its employees at any time, with or without cause.
(c) Annulment of Stock Options. The grant of any Stock Option
payable in Common Shares is provisional until the Participant becomes
entitled to the certificate in settlement thereof. In the event the
Employment or the directorship of a Participant is Terminated for
Cause, any Stock Option which is provisional shall be annulled as of
the date of such termination.
(d) Other Company Benefit and Compensation Programs. Payments and
other benefits received by a Participant under a Stock Option made
pursuant to this Plan shall not be deemed a part of a Participant's
regular, recurring compensation for purposes of the termination,
indemnity or severance pay law of any country and shall not be included
in, nor have any effect on, the determination of benefits under any
other employee benefit plan or similar arrangement provided by the
Company or a Subsidiary unless expressly so provided by such other plan
or arrangement, or except where the Committee expressly determines that
a Stock Option or portion of a Stock Option should be included to
accurately reflect competitive compensation practices or to recognize
that a Stock Option has been made in lieu of a portion of competitive
annual cash compensation. Stock Options under this Plan may be made in
combination with or in tandem with, or as alternatives to, grants,
stock options or payments under any other plans of the Company or a
Subsidiary. This Plan notwithstanding, the Company or any Subsidiary
may adopt such other compensation programs and additional compensation
arrangements as it deems necessary to attract, retain and reward
directors and employees for their service with the Company and its
Subsidiaries.
(e) Securities Law Restrictions. No Common Shares shall be issued
under this Plan unless counsel for the Company shall be satisfied that
such issuance will be in compliance with applicable federal and state
securities laws. Certificates for Common Shares delivered under this
Plan may be subject to such stop-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 Common Shares are then listed, and any
applicable federal or state securities law. The Committee may cause a
legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
-5-
6
(f) Stock Option Agreement. Each Participant receiving a Stock
Option under this Plan shall enter into an agreement with the Company
in a form specified by the Committee agreeing to the terms and
conditions of the Stock Option and such related matters as the
Committee shall, in its sole discretion, determine.
(g) Cost of Plan. The costs and expenses of administering this Plan
shall be borne by the Company.
(h) Governing Law. This Plan and all actions taken hereunder shall
be governed by and construed in accordance with the laws of the State
of Ohio, except to the extent that federal law shall be deemed
applicable.
(i) Effective Date. This Plan shall be effective upon the later of
adoption by the Board and approval by the Company's shareholders. This
Plan shall be submitted to the shareholders of the Company for approval
at an annual or special meeting of shareholders to be held no later
than twelve months after the date of adoption by the Board.
-6-