EXHIBIT 4
FREDERICK COUNTY BANK
2001 STOCK OPTION PLAN
(ASSUMED AS OF SEPTEMBER 30, 2003 AS THE
FREDERICK COUNTY BANCORP, INC. 2001 STOCK OPTION PLAN IN CONNECTION
WITH ITS ESTABLISHMENT AS THE HOLDING COMPANY FOR FREDERICK COUNTY BANK)
(ALL REFERENCES TO FREDERICK COUNTY BANK OR BANK SHALL BE DEEMED TO
BE REFERENCES TO FREDERICK COUNTY BANCORP, INC.)
1. PURPOSE OF THE PLAN. The purpose of this Frederick County Bank 2001 Stock
Option Plan (the "Plan") is to advance the interests of the Bank by providing
directors and selected key employees of the Bank, and its Affiliates with the
opportunity to acquire Shares. By encouraging stock ownership, the Bank seeks to
attract, retain and motivate the best available personnel for positions of
substantial responsibility; to provide additional incentive to directors and key
employees of the Bank and its Affiliates to promote the success of the business
as measured by the value of its Shares; and generally to increase the
commonality of interests among directors, key employees, and other shareholders.
2. DEFINITIONS. In this Plan:
(a) "Affiliate" means any "parent corporation" or "subsidiary corporation"
of the Bank as such terms are defined in Section 424(e) and (f),
respectively, of the Code.
(b) "Agreement" means a written agreement entered into in accordance with
Paragraph 5(c).
(c) "Bank" means Frederick County Bank.
(d) "Board" means the Board of Directors of the Bank.
(e) "Change in Control" means any one of the following events occurring after
the Effective Date: (1) the acquisition of ownership, holding or power
to vote more than 25% of the Bank's voting stock, (2) the acquisition
of the power to control the election of a majority of the Bank's
directors, (3) the exercise of a controlling influence over the
management or policies of the Bank by any person or by persons acting
as a "group" (within the meaning of Section 13(d) of the Securities
Exchange Act of 1934), or (4) the failure of Continuing Directors to
constitute at least two-thirds of the Board during any period of two
consecutive years. For purposes of this Plan, "Continuing Directors"
shall include only those individuals who were members of the Board at
the Effective Date and those other individuals whose election or
nomination for election as a member of the Board was approved by a
vote of at least two-thirds of the Continuing Directors then in
office. For purposes of this subparagraph only, the term "person"
refers to an individual or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not
specifically listed herein. The decision of the Committee as to
whether a Change in Control has occurred shall be conclusive and
binding.
(f) "Code" means the Internal Revenue Code of 1986, as amended to date or
hereafter.
(g) "Committee" means the Stock Option Committee appointed by the Board in
accordance with Paragraph 5(a) hereof.
(h) "Common Stock" means the common stock, par value $10.00 per share, of the
Bank.
(i) "Continuous Service" means the absence of any interruption or termination
of service as an Employee of the Bank or an Affiliate. Continuous
Service shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence approved by the Bank or
in the case of transfers between payroll locations of the Bank or
between the Bank, an Affiliate or a successor.
(j) "Director" means a member of the Board.
(k) "Effective Date" means the date specified in Paragraph 14 hereof.
(l) "Employee" means any person employed by the Bank or by an Affiliate.
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(m) "Exercise Price" means the price per Optioned Share at which an Option may
be exercised.
(n) "ISO" means an option to purchase Common Stock that meets the requirements
set forth in the Plan, and which is intended to be and is identified
as an "incentive stock option" within the meaning of Section 422 of
the Code.
(o) "Just Cause" has the meaning set forth for "cause", "just cause" or
similar phrase, in any unexpired employment or severance agreement
between the Participant and the Bank and/or any Affiliate, or, in the
absence of any such agreement, means termination because of the
Participant's personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule
or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order.
(p) "Market Value" means the fair market value of the Common Stock, as
determined under Paragraph 7(b) hereof.
(q) "Non-Employee Director" means any member of the Board who, at the time
discretion under the Plan is exercised, is a "Non-Employee Director"
within the meaning of Rule 16b-3.
(r) "Non-ISO" means an option to purchase Common Stock that meets the
requirements set forth in the Plan but which is not intended to be,
and is not identified as, an ISO.
(s) "Option" means an ISO or Non-ISO.
(t) "Optioned Shares" means Shares subject to an Option granted pursuant to
this Plan.
(u) "Outstanding Shares" means the total shares of Common Stock which have
been issued and which (a) are not held as treasury shares, and (b)
have not been cancelled or retired by the Bank.
(v) "Participant" means any person who receives an Option pursuant to the
Plan.
(w) "Permanent and Total Disability" mean "permanent and total disability" as
defined in Section 22(e)(3) of the Code.
(x) "Plan" means the Frederick County Bank 2001 Stock Option Plan.
(y) "Rule 16b-3" means Rule 16b-3 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended.
(z) "Share" means one share of Common Stock.
(aa) "Transaction" means (i) the liquidation or dissolution of the Bank, (ii) a
merger or consolidation in which the Bank is not the surviving entity,
or (iii) the sale or disposition of all or substantially all of the
Bank's assets.
3. TERM OF THE PLAN AND OPTIONS.
(a) Term of the Plan. The Plan shall continue in effect for a term of ten
years from the Effective Date unless sooner terminated pursuant to Paragraph
17. No Option may be granted under the Plan after ten years from the Effective
Date.
(b) Term of Options. The Committee shall establish the term of each Option
granted under the Plan. No Option may have a term that exceeds 10 years. No ISO
granted to an Employee who owns Shares representing more than 10% of the
outstanding shares of Common Stock at the time an ISO is granted may have a term
that exceeds five years.
4. SHARES SUBJECT TO THE PLAN. Except as otherwise required by the provisions
of Paragraph 11, no more than 71,524 may be issued upon exercise of Options.
Optioned Shares may either be authorized but unissued Shares or Shares held in
treasury to the extent allowed by Maryland law. If Options should expire, become
unexercisable or be forfeited for any reason without having been exercised or
become vested in full, the Optioned Shares shall be available for the grant of
additional Options under the Plan, unless the Plan shall have been terminated.
5. ADMINISTRATION OF THE PLAN.
(a) Composition of the Committee. The Plan shall be administered by the
Committee, which shall consist of not less than three (3) members of the Board
who are Non-Employee Directors. Members of the Committee shall serve at the
pleasure of the Board. In the absence at any time of a duly appointed Committee,
the Plan shall be administered by the Board.
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(b) Powers of the Committee. Except as limited by the express provisions of
the Plan or by resolutions adopted by the Board, the Committee shall have sole
and complete authority and discretion (i) to select Participants and grant
Options, (ii) to determine the form and content of Options to be issued in the
form of Agreements under the Plan, (iii) to interpret the Plan,
(iv) to prescribe, amend and rescind rules and regulations relating to the Plan,
and (v) to make other determinations necessary or advisable for the
administration of the Plan. The Committee 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, or
acts approved in writing by a majority of the Committee without a meeting, shall
be deemed the action of the Committee.
(c) Agreement. Each Option shall be evidenced by a written agreement
containing such provisions as may be approved by the Committee. Each such
Agreement shall constitute a binding contract between the Bank and the
Participant, and every Participant, upon acceptance of such Agreement, shall be
bound by the terms and restrictions of the Plan and of such Agreement. The terms
of each such Agreement shall be in accordance with the Plan, but each Agreement
may include such additional provisions and restrictions determined by the
Committee, in its discretion, provided that such additional provisions and
restrictions are not inconsistent with the terms of the Plan. In particular, the
Committee shall set forth in each Agreement (i) the Exercise Price of an Option,
(ii) the number of Shares subject to, and the expiration date of, the Option,
(iii) the manner, time and rate (cumulative or otherwise) of exercise or vesting
of such Option, and (iv) the restrictions, if any, to be placed upon such
Option, or upon Shares which may be issued upon exercise of such Option. The
Chairman of the Committee and such other officers as shall be designated by the
Committee are hereby authorized to execute Agreements on behalf of the Bank and
to cause them to be delivered to the recipients of Options.
(d) Effect of the Committee's Decisions. All decisions, determinations,
and interpretations of the Committee shall be final and conclusive on all
persons affected thereby.
(e) Indemnification. In addition to such other rights of indemnification as
they may have, the members of the Committee shall be indemnified by the Bank in
connection with any claim, action, suit or proceeding relating to any action
taken or failure to act under or in connection with the Plan or any Option,
granted hereunder to the full extent provided for under the Bank's Articles of
Incorporation or Bylaws with respect to the indemnification of Directors.
6. GRANT OF OPTIONS.
(a) General Rule. The Committee, in its sole discretion, may grant ISOs or
Non-ISOs to Employees of the Bank or its Affiliates and may grant Non-ISOs
to Bank Directors or directors of Affiliates.
(b) Special Rules for ISOs. The aggregate Market Value, as of the date the
Option is granted, of the Shares with respect to which ISOs are exercisable for
the first time by an Employee during any calendar year (under all incentive
stock option plans, as defined in Section 422 of the Code, of the Bank or any
present or future "parent" or "Subsidiary" of the Bank) shall not exceed
$100,000. Notwithstanding the prior provisions of this paragraph, the Committee
may grant Options in excess of the foregoing limitations, in which case such
Options granted in excess of such limitation shall be Options which are
Non-ISOs.
7. EXERCISE PRICE FOR OPTIONS.
(a) Limits on Committee Discretion. The Exercise Price as to any particular
Option granted under the Plan shall not be less than the Market Value of the
Optioned Shares on the date of grant. In the case of an Employee who owns Shares
representing more than 10% of the Bank's Outstanding Shares of Common Stock at
the time an ISO is granted, the Exercise Price shall not be less than 110% of
the Market Value of the Optioned Shares at the time the ISO is granted.
(b) Standards for Determining Exercise Price. If the Common Stock is listed
on a national securities exchange (including the NASDAQ National Market) on the
date in question, then the Market Value per Share shall be not less than the
last reported selling price on such exchange on such date, or if there were no
sales on such date, then the Exercise Price shall be not less than the mean
between the closing bid and asked prices on such date. If the Common Stock is
traded otherwise than on a national securities exchange on the date in question,
then the Market Value per Share shall be not less than the mean between the
closing bid and asked price on such date, or, if there is no bid and asked price
on such 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 Market Value
per Share shall be its fair market value as determined by the Committee, in its
sole and absolute discretion.
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(c) Reissuance of Options. Notwithstanding anything herein to the contrary,
the Committee shall have the authority to cancel outstanding Options with the
consent of the Participant and to reissue new Options at a lower Exercise Price
equal to the then Market Value per share of Common Stock in the event that the
Market Value per share of Common Stock at any time prior to the date of exercise
of outstanding Options falls below the Exercise Price.
8. EXERCISE OF OPTIONS.
(a) Generally. Any Option shall be exercisable at such times and under such
conditions as shall be permissible under the terms of the Plan and of the
Agreement. An Option may not be exercised for a fractional Share.
(b) Procedure for Exercise. A Participant may exercise Options, subject to
provisions relative to its termination and limitations on its exercise, only by
(1) written notice of intent to exercise the Option with respect to a specified
number of Shares, and (2) payment to the Bank (contemporaneously with delivery
of such notice) in cash, in Common Stock, or a combination of cash and Common
Stock, of the amount of the Exercise Price for the number of Shares with respect
to which the Option is then being exercised. Each such notice (and payment where
required) shall be delivered, or mailed by prepaid registered or certified mail,
addressed to the Treasurer of the Bank at the Bank's executive offices. Common
Stock utilized in full or partial payment of the Exercise Price for Options
shall be valued at its Market Value at the date of exercise. In connection with
the exercise of Options, a Participant shall also deliver to the Bank, in
accordance with the provisions of Section 19 hereof, an amount sufficient to
satisfy all applicable federal, state and local income and employment tax
withholding obligations.
(c) Period of Exercisability-ISOs. An ISO may be exercised by a Participant
only while the Participant is an Employee and has maintained Continuous Service
from the date of the grant of the ISO, or within three months after termination
of such Continuous Service (but not later than the date on which the Option
would otherwise expire), except if the Employee's Continuous Service terminates
by reason of -
(1) Just Cause, in which case the Participant's rights to exercise such
ISO shall expire on the date of such termination;
(2) death, in which case, to the extent that the Participant would have
been entitled to exercise the ISO immediately prior to his death,
such ISO of the deceased Participant may be exercised within two
years from the date of his death (but not later than the date on
which the Option would otherwise expire) by the personal
representatives of his estate or person or persons to whom his
rights under such ISO shall have passed by will or by laws of
descent and distribution;
(3) Permanent and Total Disability, in which case, to the extent that
the Participant would have been entitled to exercise the ISO
immediately prior to his termination of service as a result of
Permanent and Total Disability, such ISO may be exercised within
one year from the date of such termination of service as a result
of Permanent and Total Disability, but not later than the date on
which the ISO would otherwise expire.
(d) Period of Exercisability-Non-ISOs. A Non-ISO may be exercised by a
Participant only while the Participant is an Employee or Director and has
maintained Continuous Service from the date of the grant of the Non-ISO, or
within three months after termination of such Continuous Service in the case of
an Employee who is not a Director, or one year after termination of Continuous
Service in the case of a Director (and in any case not later than the date on
which the Option would otherwise expire), except if the Continuous Service
terminates by reason of -
(1) Just Cause, in which case the Participant's rights to exercise such
Non-ISO shall expire on the date of such termination;
(2) death, in which case, to the extent that the Participant would have
been entitled to exercise the Non-ISO immediately prior to his
death, such Non-ISO of the deceased Participant may be exercised
within two years from the date of his death (but not later than the
date on which the Option would otherwise expire) by the personal
representatives of his estate or person or persons to whom his
rights under such Non-ISO shall have passed by will or by laws of
descent and distribution;
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(3) Permanent and Total Disability, in which case, to the extent that
the Participant would have been entitled to exercise the Non-ISO
immediately prior to his termination of service as a result of
Permanent and Total Disability, such Non-ISO may be exercised
within two years from the date of termination of service as a
result of such Permanent and Total Disability, but not later than
the date on which the Non-ISO would otherwise expire.
(e) Exercisability at Death or Permanent and Total Disability.
Notwithstanding the provisions of any Option that provides for its exercise in
installments as designated by the Committee, such Option shall become
immediately exercisable upon the Participant's death or termination of service
as a result of Permanent and Total Disability.
(f) Effect of the Committee's Decisions. The Committee's determination
whether a Participant's Continuous Service has ceased, and the effective date
thereof shall be final and conclusive on all persons affected thereby.
9. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Compliance with Securities Laws. Shares of Common Stock shall not be
issued with respect to any Option unless the issuance and delivery of such
Shares shall 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
Plan is intended to comply with Rule 16b-3, and any provision of the Plan that
the Committee determines in its sole and absolute discretion to be inconsistent
with said Rule shall, to the extent of such inconsistency, be inoperative and
null and void, and shall not affect the validity of the remaining provisions of
the Plan.
(b) Special Circumstances. The inability of the Bank to obtain approval
from any regulatory body or authority deemed by the Bank's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder shall relieve
the Bank of any liability in respect of the non-issuance or sale of such Shares.
As a condition to the exercise of an Option, the Bank may require the person
exercising the Option to make such representations and warranties as the
Committee determines may be necessary to assure the availability of an exemption
from the registration requirements of federal or state securities law.
(c) Committee Discretion. The Committee shall have the discretionary
authority to impose in Agreements such restrictions on Shares as it may deem
appropriate or desirable, including but not limited to the authority to impose a
right of first refusal, to establish repurchase rights or both of these
restrictions, or to provide for the mandatory exercise or forfeiture of any
outstanding Options in the event that the Bank's primary federal regulator
directs the Bank to so require if the Bank does not meet minimum regulatory
capital requirements.
10. INTENTIONALLY OMITTED.
11. EFFECT OF CHANGES IN CONTROL AND CHANGES IN COMMON STOCK SUBJECT TO THE
PLAN.
(a) Effects of Change in Control.
(1) Notwithstanding the provisions of any Option that provides for its
exercise or vesting in installments, all Options shall be
immediately exercisable and fully vested upon a Change in Control.
(2) At the time of a Change in Control which does not constitute a
Transaction, any or all outstanding Options may be cancelled, in
exchange for which cancellation the Participant shall receive a
cash payment in an amount equal to the excess of the Market Value
at the time of the Change in Control of the Shares subject to such
Option over the Exercise Price of such Options provided that in no
event may an Option be cancelled in exchange for cash within the
six-month period following the date of its grant.
(3) In the event there is a Transaction, all outstanding Options shall
be surrendered. With respect to each Option so surrendered, the
Committee shall in its sole and absolute discretion determine
whether the holder of each Option so surrendered shall receive--
(A) for each Share then subject to an outstanding Option, an Option
for the number and kind of shares (or amount of cash or other
property, or combination thereof) into which each Outstanding
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Share (other than Shares held by dissenting shareholders) is
changed or exchanged, together with an appropriate adjustment
to the Exercise Price; or
(B) the number and kind of shares (or amount cash or other
property, or combination thereof) into which each Outstanding
Share (other than Shares held by dissenting shareholders) is
changed or exchanged in the Transaction that are equal in
market value to the excess of the Market Value on the date of
the Transaction of the Shares subject to the Option, over the
Exercise Price of the Option; or
(C) a cash payment (from the Bank or the successor corporation), in
an amount equal to the excess of the Market Value on the date
of the Transaction of the Shares subject to the Option, over
the Exercise Price of the Option.
(b) Recapitalizations; Stock Splits, Etc. The number and kind of shares
reserved for issuance under the Plan, and the number and kind of shares subject
to outstanding Options and the Exercise Price thereof, shall be proportionately
adjusted for any increase, decrease, change or exchange of Shares for a
different number or kind of shares or other securities of the Bank which results
from a merger, consolidation, recapitalization, reorganization,
reclassification, stock dividend, split-up, combination of shares, or similar
event in which the number or kind of shares is changed without the receipt or
payment of consideration by the Bank.
(c) Holding Company Formation. Notwithstanding anything to the contrary
contained herein, in the event that the Bank converts into the holding company
form of ownership, by means of a merger, share exchange or other transaction,
immediately following the consummation of which the holders of Common Stock
immediately preceding the consummation of such transaction, hold the same
percentage ownership interest in such holding company as they held in the Bank,
subject only to adjustments necessary to reflect the elimination of Common Stock
interests held by holders of Common Stock exercising their rights as objecting
or dissenting shareholders, and/or the elimination of fractional share interests
resulting from the use of an exchange ratio other than one share of holding
company common stock for each share of Bank common stock, then such transaction
shall not constitute a Change in Control. Following consummation of such
transaction, said holding company shall be deemed to have assumed this Plan and
the Options outstanding hereunder as successor to the Bank, and each reference
to the Bank herein shall be read to refer to said holding company, and each
reference to the Common Stock shall be read to refer to the common stock of said
holding company.
(d) Special Rule for ISOs. Any adjustment made pursuant to subparagraphs
(a)(3)(A) or (b) of this paragraph shall be made in such a manner as not to
constitute a modification, within the meaning of Section 424(h) of the Code, of
outstanding ISOs.
(e) Conditions and Restrictions on New, Additional, or Different Shares or
Securities. If, by reason of any adjustment made pursuant to this Paragraph, a
Participant becomes entitled to new, additional, or different shares of stock or
securities, such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and restrictions which were
applicable to the Shares pursuant to the Option before the adjustment was made.
(f) Other Issuances. Except as expressly provided in this Paragraph, the
issuance by the Bank or an Affiliate of shares of stock of any class, or of
securities convertible into Shares or stock of another class, for cash or
property or for labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, shall not affect, and no adjustment
shall be made with respect to, the number, class, or Exercise Price of Shares
then subject to Options or reserved for issuance under the Plan.
12. NON-TRANSFERABILITY OF OPTIONS.
(a) ISOs may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution.
(b) Non-ISOs may not be sold, pledged, assigned, hypothecated, transferred
or disposed of in any manner other than by will or by the laws of descent and
distribution, pursuant to the terms of a "qualified domestic relations order"
(within the meaning of Section 414(p) of the Code and the regulations and
rulings thereunder), or, in the sole discretion of the Committee, in connection
with a transfer for estate or retirement planning purposes to a trust
established for such purposes.
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13. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for all
purposes, be the later of the date on which the Committee makes the
determination of granting such Option and the Effective Date. Notice of the
determination shall be given to each Participant to whom an Option is so granted
within a reasonable time after the date of such grant.
14. EFFECTIVE DATE. The Plan shall be effective as of October 18, 2001. Option
grants may be made prior to approval of the Plan by the shareholders of the
Bank, if the exercise of Options is conditioned upon shareholder approval of the
Plan.
15. APPROVAL BY STOCKHOLDERS. The Plan shall be approved by shareholders of the
Bank within twelve (12) months before or after the Effective Date.
16. MODIFICATION OF OPTIONS. At any time, and from time to time, the Board may
authorize the Committee to direct execution of an instrument providing for the
modification of any outstanding Option, provided no such modification 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 impair the Option
without the consent of the holder of the Option.
17. AMENDMENT AND TERMINATION OF THE PLAN. The Board may from time to time
amend the terms of the Plan and, with respect to any Shares at the time not
subject to Options, suspend or terminate the Plan; provided that shareholder
approval shall be required to increase the number of Shares subject to the Plan
provided in Paragraph 4 or to extend the terms of the Plan. No amendment,
suspension, or termination of the Plan shall, without the consent of any
affected holders of an Option, alter or impair any rights or obligations under
any Option theretofore granted.
18. RESERVATION OF SHARES. The Bank, during the term of the Plan, will reserve
and keep available a number of Shares sufficient to satisfy the requirements of
the Plan.
19. WITHHOLDING TAX. The Bank's obligation to deliver Shares upon exercise of
Options (or such earlier time that the Participant makes an election under
Section 83(b) of the Code) shall be subject to the Participant's satisfaction of
all applicable federal, state and local income and employment tax withholding
obligations. The Committee, in its discretion, may permit the Participant to
satisfy the obligation, in whole or in part, by irrevocably electing to have the
Bank withhold Shares, or to deliver to the Bank Shares that he already owns,
having a value equal to the amount required to be withheld. The value of Shares
to be withheld, or delivered to the Bank, shall be based on the Market Value of
the Shares on the date the amount of tax to be withheld is to be determined. As
an alternative, the Bank may retain, or sell without notice, a number of such
Shares sufficient to cover the amount required to be withheld.
20. NO EMPLOYMENT OR OTHER RIGHTS. In no event shall a Director's or Employee's
eligibility to participate or participation in the Plan create or be deemed to
create any legal or equitable right of the Director or Employee or any other
party to continue service with the Bank or any Affiliate of such corporations.
No Director or Employee shall have a right to be granted an Option or, having
received an Option, the right to be granted an additional Option.
21. GOVERNING LAW. The Plan shall be governed by and construed in accordance
with the laws of the State of Maryland, except to the extent that federal law
shall be deemed to apply.
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