SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional
Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Market Financial Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined)
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
MARKET FINANCIAL CORPORATION
7522 Hamilton Avenue
Mt. Healthy, Ohio 45231
(513) 521-9772
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Notice is hereby given that a Special Meeting of Shareholders of Market
Financial Corporation ("MFC") will be held at the offices of MFC, 7522 Hamilton
Avenue, Mt. Healthy, Ohio 45231, on June 30, 1998, at 10:00 a.m., Eastern Time
(the "Special Meeting"), for the following purposes, all of which are more
completely set forth in the accompanying Proxy Statement:
1. To approve the Market Financial Corporation 1998 Stock Option and
Incentive Plan, a copy of which is attached hereto as Exhibit A;
2. To approve the Market Financial Corporation Recognition and
Retention Plan and Trust Agreement, a copy of which is attached
hereto as Exhibit B; and
3. To transact such other business as may properly come before the
Special Meeting or any adjournments thereof.
Only shareholders of MFC of record at the close of business on May 21,
1998, will be entitled to receive notice of and to vote at the Special Meeting
and at any adjournments thereof. Whether or not you expect to attend the Special
Meeting, we urge you to consider the accompanying Proxy Statement carefully and
to SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY SO THAT YOUR SHARES MAY BE
VOTED IN ACCORDANCE WITH YOUR WISHES AND THE PRESENCE OF A QUORUM AT THE SPECIAL
MEETING MAY BE ASSURED. The giving of a proxy does not affect your right to vote
in person in the event you attend the Special Meeting.
By Order of the Board of Directors
Mt. Healthy, Ohio John T. Larimer, President
May 28, 1998
Market Financial Corporation
7522 Hamilton Avenue
Mt. Healthy, Ohio 45231
(513) 521-9772
PROXY STATEMENT
PROXIES
The enclosed proxy is being solicited by the Board of Directors of
Market Financial Corporation, an Ohio corporation ("MFC"), for use at a Special
Meeting of Shareholders of MFC to be held at the offices of MFC, 7522 Hamilton
Avenue, Mt. Healthy, Ohio 45231, on June 30, 1998, at 10:00 a.m., Eastern Time,
and at any adjournments thereof (the "Special Meeting"). Without affecting any
vote previously taken, the proxy may be revoked by a shareholder by executing a
later dated proxy which is received by MFC before the proxy is exercised or by
giving notice of revocation to MFC in writing or in open meeting before the
proxy is exercised. Attendance at the Special Meeting will not, of itself,
revoke a proxy.
Each properly executed proxy received prior to the Special Meeting and
not revoked will be voted as specified thereon or, in the absence of specific
instructions to the contrary, will be voted:
FOR the approval of the Market Financial Corporation 1998 Stock
Option and Incentive Plan (the "Stock Option Plan"), a copy of
which is attached hereto as Exhibit A; and
FOR the approval of the Market Financial Corporation Recognition
and Retention Plan and Trust Agreement (the "RRP"), a copy of
which is attached hereto as Exhibit B.
Proxies may be solicited by the directors, officers and other employees
of MFC and The Market Building and Saving Company, a savings and loan
association incorporated under Ohio law (the "Association"), in person or by
telephone, telecopy, telegraph or mail, only for use at the Special Meeting.
Such proxies will not be used for any other meeting.
The cost of soliciting proxies will be borne by MFC.
Only shareholders of record as of the close of business on May 21, 1998
(the "Voting Record Date"), are entitled to vote at the Special Meeting. Each
such shareholder will be entitled to cast one vote for each share owned. MFC's
records disclose that, as of the Voting Record Date, there were 1,335,725 votes
entitled to be cast at the Special Meeting.
This Proxy Statement is first being mailed to the shareholders of MFC
on or about May 28, 1998.
VOTE REQUIRED
Approval of the Stock Option Plan and the RRP
The affirmative vote of the holders of at least a majority of the
outstanding shares of MFC is necessary to approve the Stock Option Plan and the
RRP. Generally, shares which are held by a nominee for a beneficial owner and
which are represented in person or by proxy at the Annual Meeting but not voted
with respect to such proposals ("Non-votes") will have the same effect as a vote
against the approval of the Stock Option Plan and the RRP. If, however, a
shareholder has signed and dated a proxy in the form of the enclosed Proxy but
has not voted on the approval of the Stock Option Plan or the RRP by checking
the appropriate block on the Proxy, such person's shares will be voted FOR the
adoption of the Stock Option Plan or the RRP and will not be considered
Non-votes.
VOTING SECURITIES AND OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
only person known to MFC to own beneficially more than five percent of the
outstanding common shares of MFC as of March 31, 1998:
Amount and Nature of Percent of
Name and Address Beneficial Ownership Shares Outstanding
First Bankers Trust Company, N.A.
1201 Broadway 106,858 8.00%
Quincy, Illinois 62301
----------------------------
(1) Consists of shares held by First Bankers Trust Company, N.A. (the
"Trustee"), as the Trustee for the Market Financial Corporation
Employee Stock Ownership Plan (the "ESOP"). The Trustee has voting
power over shares that have not been allocated to an ESOP participant
and shares that have been allocated to an ESOP participant but as to
which no voting instructions are given by the recipient. The Trustee
has limited shared investment power over all ESOP shares.
The following table sets forth certain information with respect to the
number of common shares of MFC beneficially owned by each director of MFC and
the Association and by all directors and executive officers of MFC and the
Association as a group as of April 30, 1998:
Amount and Nature of
Beneficial Ownership
Sole Voting and/or Shared Voting and/or Percent of
Name and Address (1) Investment Power Investment Power Shares Outstanding
- -------------------- ---------------- ---------------- ------------------
Robert Gandenberger - 2,500 0.19%
John T. Larimer 23,450 (2) - 1.76
Rae Skirvin Larimer 21,700 (3) - 1.62
Edgar H. May 5,000 - 0.37
L. Craig Martin (4) 16,028 35,000 3.82
R. C. Meyerenke - 2,500 0.19
Wilbur H. Tisch 5,000 - 0.37
Una E. Schaeperklaus (4) 8,500 - 0.64
Kathleen A. White - 1,000 0.07
All directors of and executive officers
of MFC and the Association as a group
(10 people) 83,178 41,000 9.30%
- ----------------------------
(1) Each of the persons listed in this table may be contacted at the address of
MFC.
(Footnotes continued on next page.)
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(2) Does not include 21,700 shares owned by Mr. Larimer's spouse, Rae Skirvin
Larimer.
(3) Does not include 23,450 shares owned by Ms. Larimer's spouse, John T.
Larimer.
(4) Mr. Martin and Ms. Schaeperklaus are directors of the Association but are
not directors of MFC.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Executive Compensation
The following table presents certain information regarding the cash
compensation received by the President and Chief Executive Officer of MFC and
the Association. No executive officer of MFC or the Association received
compensation in excess of $100,000 during the fiscal years ended September 30,
1997 and 1996:
SUMMARY COMPENSATION TABLE
- -------------------------------------------------------------------
Annual Compensation
-----------------------------
Name and Year Salary ($) Bonus ($)
Principal
Position
- -------------------------------------------------------------------
John T. Larimer 1997 $94,500 (1) $4,835
President and Chief 1996 70,703 (2) _
Executive Officer
- -------------------------------------------------------------------
(1) Does not include amounts attributable to other miscellaneous benefits
received by executive officers. The cost to MFC or the Association of
providing such benefits to Mr. Larimer was less than 10% of his cash
compensation.
(2) Includes salary of $56,078 and directors' fees of $14,625. Does not
include amounts attributable to other miscellaneous benefits received
by executive officers. The cost to the Association of providing such
benefits to Mr. Larimer was less than 10% of his cash compensation.
Director Compensation
Each director of MFC who is not a director of the Association receives an
annual fee of $10,000. Each director of the Association currently receives a fee
of $19,500 per year. Mr. Larimer does not receive director's fees from MFC or
the Association.
Employment Agreements
On April 1, 1998, the Association entered into an employment agreement with
Mr. Larimer (the "Employment Agreement").
The Employment Agreement provides for a term of three years, a salary of
not less than $99,800 and a performance review by the Board of Directors not
less often than annually. The Employment Agreement also provides for the
inclusion of Mr. Larimer in any formally established employee benefit, bonus,
pension and profit-sharing plans for which senior management personnel are
eligible.
The Employment Agreement is terminable by the Association at any time. In
the event of termination by the Association for "just cause," as defined in the
Employment Agreement, Mr. Larimer will have no right to receive any compensation
or other benefits for any period after such termination. In the event of
termination by the Association before the end of the term of the Employment
Agreement other than for just cause, or in connection with a "change of
control," as defined in the Employment Agreement, Mr. Larimer will be entitled
3
to a continuation of salary payments for a period of time equal to the term of
the Employment Agreement and a continuation of benefits substantially equal to
those being provided at the date of termination of employment until the earliest
to occur of the end of the term of the Employment Agreement or the date on which
Mr. Larimer becomes employed full-time by another employer.
The Employment Agreement also contains provisions with respect to the
occurrence of the following within one year of a "change of control": (1) the
termination of employment of Mr. Larimer for any reason other than just cause,
retirement or termination at the end of the term of the Employment Agreement;
(2) a material change in the capacity or circumstances in which Mr. Larimer is
employed; or (3) a material reduction in his responsibilities, authority,
compensation or other benefits provided under the Employment Agreement. In the
event of any such occurrence, Mr. Larimer will be entitled to receive an amount
equal to three times his average annual compensation for the three taxable years
immediately preceding the termination of employment. In addition, Mr. Larimer
will be entitled to continued coverage under all benefit plans until the
earliest of the end of the term of the Employment Agreement or the date on which
he is included in another employer's benefit plans as a full-time employee. The
maximum which Mr. Larimer may receive under such provisions, however, is limited
to an amount that will not result in the imposition of a penalty tax pursuant to
Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended (the
"Code"), and an amount that will not violate applicable restrictions of the
Office of Thrift Supervision (the "OTS"). A "change of control," as defined in
the Employment Agreement, generally refers to the acquisition by any person or
entity of the ownership or power to vote 25% or more of the voting stock of the
Association or MFC, the control of the election of a majority of the directors
of the Association or MFC or the exercise of a controlling influence over the
management or policies of the Association or MFC.
PROPOSAL ONE - APPROVAL OF THE MARKET FINANCIAL CORPORATION
1998 STOCK OPTION AND INCENTIVE PLAN
General. The following is a summary of the terms of the Stock Option Plan
and is qualified in its entirety by reference to the full text of the Stock
Option Plan, a copy of which is attached hereto as Exhibit A.
Purpose. The purpose of the Stock Option Plan is to promote and advance the
interests of MFC and its shareholders by enabling MFC to attract, retain and
reward directors, managerial and other key employees of MFC and any subsidiary,
including the Association, by facilitating their purchase of a stock interest in
MFC. Pursuant to the Stock Option Plan, 133,572 common shares have been reserved
for issuance by MFC upon the exercise of options to be granted to certain
directors, officers and employees of MFC and the Association from time to time
under the Stock Option Plan.
Administration and Eligibility. The Stock Option Plan will be administered
by a committee of directors composed of at least three directors of MFC who are
not employees of MFC (the "Stock Option Committee"). The Stock Option Committee
may grant options under the Stock Option Plan at such times as they deem most
beneficial to the Association and MFC on the basis of the individual
participant's position and duties and the value of the individual's services and
responsibilities to the Association and MFC.
Without further approval of the shareholders, the Board of Directors may at
any time terminate the Stock Option Plan or may amend it from time to time in
such respects as the Board of Directors may deem advisable, except that the
Board of Directors may not, without the approval of the shareholders, make any
amendment which would (a) increase the aggregate number of common shares which
may be issued under the Stock Option Plan (except for adjustments to reflect
certain changes in the capitalization of MFC), (b) materially modify the
requirements as to eligibility for participation in the Stock Option Plan, or
(c) materially increase the benefits accruing to participants under the Stock
Option Plan. Notwithstanding the foregoing, the Board of Directors may amend the
Stock Option Plan to take into account changes in applicable securities, federal
income tax and other applicable laws.
Option Terms. Options granted to the officers and employees under the Stock
Option Plan may be "incentive stock options" ("ISOs") within the meaning of
Section 422 of the Code, or may be options which do not qualify under Section
422 of the Code ("Non-Qualified Stock Options"). Options granted under the Stock
Option Plan to directors who are not employees of MFC or the Association will be
Non-Qualified Stock Options.
The exercise price of each option granted under the Stock Option Plan will
be determined by the Stock Option Committee at the time the option is granted;
provided, however, that the exercise price of an option may not be less than
4
100% of the fair market value of the shares on the date of the grant. In
addition, the exercise price of an ISO may not be less than 110% of the fair
market value of the shares on the date of the grant if the recipient owns more
than 10% of the outstanding common shares of MFC. The Stock Option Committee
will fix the term of each option, except that an ISO will not be exercisable
after the expiration of ten years from the date it is granted; provided,
however, that if a recipient of an ISO owns a number of shares representing more
than 10% of MFC shares outstanding at the time the ISO is granted, the term of
the ISO will not exceed five years. If the fair market value of shares awarded
pursuant to ISOs that are exercisable for the first time during any calendar
year by a participant under the Stock Option Plan exceeds $100,000, the ISOs
will be considered Non-Qualified Stock Options to the extent of such excess.
An option recipient cannot transfer or assign an option other than by will
or in accordance with the laws of descent and distribution. Termination of an
option recipient's employment for cause, as defined in the Stock Option Plan,
will result in the annulment of any outstanding exercisable options. Any
outstanding options which have not yet been exercised will terminate upon the
resignation, removal or retirement of a director of MFC or the Association, or
upon the termination of employment of an officer or employee of MFC or the
Association, except in the case of death, disability or retirement at or after
age 65 of the recipient or a change in control of MFC or the Association.
MFC will receive no monetary consideration for the granting of options
under the Stock Option Plan. Upon the exercise of options, MFC will receive
payment of cash or, if acceptable to the Stock Option Committee, common shares
of MFC or outstanding awarded stock options. The market value of the common
shares underlying the options reserved for the Stock Option Plan is
approximately $1,936,794, based upon the number of shares reserved, multiplied
by the $14.50 per share closing sales price of shares of MFC on May 18, 1998, as
quoted on the Nasdaq SmallCap Market.
Tax Treatment of Incentive Stock Options. An optionee who is granted an ISO
will not recognize taxable income either on the date of grant or on the date of
exercise, although the difference between the fair market value of the shares at
the time of exercise and the exercise price is a tax preference item potentially
subject to the alternative minimum tax.
Upon disposition of shares acquired from the exercise of an ISO, capital
gain or loss is generally recognized in an amount equal to the difference
between the amount realized on the sale or disposition and the exercise price.
However, if the optionee disposes of the shares within two years of the date of
grant or within one year from the date of the issuance of the shares to the
optionee (a "Disqualifying Disposition"), then the optionee will recognize
ordinary income, as opposed to capital gain, at the time of disposition. In
general, the amount of ordinary income recognized will be equal to the lesser of
(i) the amount of gain realized on the disposition, or (ii) the difference
between the fair market value of the shares received on the date of exercise and
the exercise price. Any remaining gain or loss is treated as a short-term,
mid-term or long-term capital gain or loss, depending upon the period of time
the shares have been held.
MFC will not be entitled to a tax deduction upon either the exercise of an
ISO or the disposition of shares acquired pursuant to such exercise, except to
the extent that the optionee recognizes ordinary income in a Disqualifying
Disposition. Ordinary income from a Disqualifying Disposition will constitute
compensation but will not be subject to tax withholding, nor will it be
considered wages for payroll tax purposes.
If the holder of an ISO pays the exercise price, in whole or in part, with
previously acquired shares, the exchange should not affect the ISO tax treatment
of the exercise. Upon such exchange, and except for Disqualifying Dispositions,
no gain or loss is recognized by the optionee upon delivering previously
acquired shares to MFC, and shares received by the optionee equal in number to
the previously acquired common shares exchanged therefor will have the same
basis and holding period for long-term or mid-term capital gain purposes as the
previously acquired shares. (The optionee, however, will not be able to utilize
the prior holding period for the purpose of satisfying the ISO statutory holding
period requirements for avoidance of a Disqualifying Disposition.) Shares
received by the optionee in excess of the number of shares previously acquired
will have a basis of zero and a holding period which commences as of the date
the shares are transferred to the optionee upon exercise of the ISO. If an ISO
is exercised using shares previously acquired through the exercise of an ISO,
the exchange of such previously acquired shares will be considered a disposition
of such shares for the purpose of determining whether a Disqualifying
Disposition has occurred.
Tax Treatment of Non-Qualified Stock Options. A recipient of a
Non-Qualified Stock Option does not recognize taxable income on the date of
grant of the option, provided that the option does not have a readily
ascertainable fair market value at the time it is granted. In general, the
optionee must recognize ordinary income at the time of exercise of a
5
Non-Qualified Stock Option in the amount of the difference between the fair
market value of the shares on the date of exercise and the option exercise
price. The ordinary income recognized will constitute compensation for which tax
withholding by MFC generally will be required. The amount of ordinary income
recognized by an optionee will be deductible by MFC in the year that the
optionee recognizes the income if MFC complies with any applicable withholding
requirement.
If the sale of the shares could subject the optionee to liability under
Section 16(b) of the Securities Exchange Act of 1934, the optionee generally
will recognize ordinary income only on the date that the optionee is no longer
subject to such liability in an amount equal to the fair market value of the
shares on such date less the option exercise price. Nevertheless, the optionee
may elect under Section 83(b) of the Code, within 30 days of the date of
exercise, to recognize ordinary income as of the date of exercise, without
regard to the restriction of Section 16(b).
Shares acquired upon the exercise of a Non-Qualified Stock Option will have
a tax basis equal to their fair market value on the exercise date or other
relevant date on which ordinary income is recognized, and the holding period for
the shares generally will begin on the date of exercise or such other relevant
date. Upon subsequent disposition of the shares, the optionee will recognize
long-term capital gain or loss if the optionee has held the shares for more than
eighteen months prior to disposition, mid-term capital gain or loss if the
optionee has held the shares for at least one year but less than eighteen months
prior to disposition, or short-term capital gain or loss if the optionee has
held the shares for one year or less prior to disposition.
If an optionee with a Non-Qualified Stock Option pays the exercise price,
in whole or in part, with previously acquired shares, the optionee will
recognize ordinary income in the amount by which the fair market value of the
shares received exceeds the exercise price. The optionee will not recognize gain
or loss upon delivering such previously acquired shares to MFC. Shares received
by an optionee equal in number to the previously acquired shares exchanged
therefor will have the same basis and holding period as such previously acquired
shares. Shares received by an optionee in excess of the number of such
previously acquired shares will have a basis equal to the fair market value of
such additional shares as of the date ordinary income is recognized. The holding
period for such additional shares will commence as of the date of exercise or
such other relevant date.
Proposed Awards. The Board of Directors of MFC will adopt the Stock Option
Plan on June 30, 1998, if the shareholders approve the Stock Option Plan. The
Stock Option Committee expects to grant the following options to the executive
officers and directors of MFC and the Association:
Name of Recipient Shares Subject to Options
Robert Gandenberger 5,008
John T. Larimer 33,393
Rae Skirvin Larimer 5,008
Edgar H. May 5,008
L. Craig Martin 5,008
R.C. Meyerenke 5,008
Wilbur H. Tisch 5,008
Una E. Schaeperklaus 5,008
Kathleen A. White 5,008
Julie M. Bertsch 13,357
Options to purchase 26,712 common shares will also be granted to the employees
of MFC and the Association who are not executive officers. No determination has
yet been made with respect to the extent to which the options granted to
employees will be ISOs.
The Stock Option Committee may grant options under the Stock Option Plan to
the directors, officers and employees of MFC and the Association in the future
at such times as they deem most beneficial to MFC and the Association on the
basis of the individual participant's responsibility, tenure and future
potential.
6
The Board of Directors of MFC recommends that the shareholders of MFC
approve the Stock Option Plan.
Accordingly, the shareholders of MFC will be asked to approve the
following resolution at the Special Meeting:
RESOLVED, that the Market Financial Corporation 1998 Stock
Option and Incentive Plan be, and it hereby is, approved.
PROPOSAL TWO - APPROVAL OF THE MARKET FINANCIAL CORPORATION
RECOGNITION AND RETENTION PLAN AND TRUST AGREEMENT
General. The following is a summary of the terms of the RRP and is
qualified in its entirety by reference to the full text of the RRP, a copy of
which is attached hereto as Exhibit B.
Purpose. MFC has proposed the RRP to reward and retain directors, officers
and certain key employees of MFC and the Association by providing them with an
ownership interest in MFC. MFC expects to contribute sufficient funds to enable
the RRP to purchase up to 53,429 common shares of MFC.
Administration and Eligibility. The RRP will be administered by a committee
of directors composed of at least three directors of MFC or the Association who
are not employees of the Association or MFC (the "RRP Committee"). The RRP
Committee will determine which directors and employees of MFC and the
Association will be awarded shares under the RRP and the number of shares
awarded. The shares to be awarded pursuant to the RRP may be purchased by MFC on
the open market or may consist of authorized but unissued shares of MFC. In the
event that all 53,429 shares which may be awarded under the RRP consist of
authorized but unissued shares of MFC, the interests of current shareholders
will be diluted by approximately 4.0%.
Terms. Unless the RRP Committee specifies a longer period of time,
one-fifth of the number of shares awarded to an individual will become earned
and non-forfeitable on each of the first five anniversaries of the date of such
award. Compensation expense in the amount of the fair market value of the RRP
shares will be recognized as the shares are earned. Until shares awarded are
earned by the participant, such shares will be forfeited in the event that the
participant ceases to be either a director of MFC or the Association or an
employee of the Association or MFC, except that in the event of the death,
disability or retirement at or after age 65 of a participant or of a change in
control of MFC or the Association, the participant's shares will be deemed to be
earned and non-forfeitable.
The shares, together with any cash dividends or distributions paid thereon,
will be distributed as soon as practicable after they are earned. A participant
may direct the voting of all shares awarded to him or her which have been earned
but have not yet been distributed to him or her. Shares that have been awarded
but not earned will be voted in the discretion of the RRP Trustee to be
appointed by the RRP Committee. Shares that have been awarded but not earned may
not be transferred.
Tax Treatment of Shares Awarded Under the RRP. Persons receiving shares
under the RRP generally will not recognize income upon the award of such shares,
but will recognize ordinary income when and to the extent the restrictions on
such shares lapse, in an amount equal to the fair market value of the shares at
the time such restrictions lapse plus the amount of any dividends distributed to
the participant with respect to such shares. If applicable withholding
requirements are satisfied, the Association will be entitled to a deduction each
year in an amount equal to the income, if any, recognized by participants for
such year.
Under Section 83(b) of the Code, a participant may elect, within 30 days
after the shares are awarded, to recognize ordinary income on the date the
shares are awarded based on the fair market value of the shares on such date. If
the election is made, the Association would be entitled to a deduction for an
equivalent amount. A participant making such an election will have a tax basis
in the shares equal to the amount of ordinary income recognized, and the
participant's holding period for capital gains purposes for such shares will
commence on the date the shares are awarded. If a Section 83(b) election is
made, however, and the shares are subsequently forfeited, the participant will
not be entitled to either a deduction of the amount previously recognized as
income with respect to such shares or a refund of any tax paid thereon.
7
Proposed Awards . The Boards of Directors of MFC and the Association will
adopt the RRP on June 30, 1998, if the shareholders approve the RRP. MFC expects
to contribute sufficient funds to the RRP Trust to enable the RRP Trust to
purchase up to 53,429 common shares of MFC at the market price at the time of
such purchase. After such purchase, the RRP Committee expects to make the
following awards to the executive officers and directors of MFC and the
Association:
Name of Recipient Shares to be Awarded
Robert Gandenberger 2,003
John T. Larimer 13,357
Rae Skirvin Larimer 2,003
Edgar H. May 2,003
L. Craig Martin 2,003
R.C. Meyerenke 2,003
Wilbur H. Tisch 2,003
Una E. Schaeperklaus 2,003
Kathleen A. White 2,003
Julie M. Bertsch 5,343
The RRP Committee also intends to award 10,685 common shares to the employees of
the Association who are not executive officers. The RRP Committee may award
shares under the RRP to the directors, officers and key employees of MFC and the
Association in the future at such times as they deem most beneficial to MFC and
the Association on the basis of the individual participant's responsibility,
tenure and future potential.
The Board of Directors of MFC recommends that the shareholders of MFC
approve the RRP.
Accordingly, the shareholders of MFC will be asked to approve the
following resolution at the Annual Meeting:
RESOLVED, that the Market Financial Corporation Recognition
and Retention Plan and Trust Agreement be, and it hereby is,
approved.
NEW PLAN BENEFITS
The following table sets forth certain information with respect to the
options expected to be granted pursuant to the Stock Option Plan and the awards
expected to be made pursuant to the RRP to the directors, executive officers and
employees of the Association and MFC. MFC does not currently have any employees.
Stock Option Plan RRP
Name and position Shares Subject to Options Dollar Value ($) (1) Shares (#)
- ----------------- ------------------------- -------------------- ----------
John T. Larimer, President 33,393 $193,677 13,357
All executive officers, as a group (6
persons) 66,782 387,324 26,712
All directors who are not executive
officers, as a group (4 persons) 20,032 116,174 8,012
All employees who are not executive
officers, as a group (4 persons) 26,712 154,933 10,685
- ----------------------------------
(1) Based upon the number of shares awarded multiplied by the $14.50 per share
closing sales price quoted by The Nasdaq Stock Market on May 18, 1998.
8
PROPOSALS OF SHAREHOLDERS AND OTHER MATTERS
Any proposals of shareholders intended to be included in the proxy
statement for the 1999 Annual Meeting of Shareholders of MFC should be sent to
MFC by certified mail and must be received by MFC not later than August 31,
1998.
Management knows of no other business which may be brought before the
Special Meeting. It is the intention of the persons named in the enclosed Proxy
to vote such Proxy in accordance with their best judgment on any other matters
which may be brought before the Special Meeting.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO FILL IN, SIGN AND
RETURN THE PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE.
By Order of the Board of Directors
Mt. Healthy, Ohio John T. Larimer, President
May 28, 1998
9
EXHIBIT A
MARKET FINANCIAL CORPORATION
1998 STOCK OPTION AND INCENTIVE PLAN
1. Purpose. The purpose of the Market Financial Corporation 1998 Stock
Option and Incentive Plan (this "Plan") is to promote and advance the interests
of Market 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 Market 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) "ERISA" means the Employment Retirement Income Security Act,
as amended, or any successor thereto, together with rules, regulations
and interpretations promulgated thereunder.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute.
(i) "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 high bid and low 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.
(j) "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.
(k) "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.
(l) "OTS" means the Office of Thrift Supervision, Department of
the Treasury.
(m) "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.
(n) "Plan" means the Market Financial Corporation 1998 Stock
Option and Incentive Plan, as set forth herein and as it may be
hereafter amended from time to time.
(o) "Stock Option" means an award to purchase Common Shares
granted pursuant to the provisions of Section 6 of this Plan.
(p) "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, The Market Building and Saving Company.
(q) "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), a material
violation of a final cease-and-desist order or 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, which shall
be comprised of not fewer than three of the members of the Board who
are not employees of the Company. 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 a
majority 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 date on which this Plan is adopted by the Board, 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 ten percent of the total Common Shares sold in connection
with the conversion of The Market Building and Saving Company from
mutual to stock form.
For the purpose of computing the total number of Common Shares
available for Stock Options under this Plan, there shall be counted against the
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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, 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, to the extent permissible under Rule 16b-3
promulgated under the Exchange Act, or any successor rule or regulation thereto
as in effect from time to time.
Common Shares which 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 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 option exercise price per Common Share
purchasable under 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 an Incentive Stock Option be less than 100% of the Fair Market
Value of the Common Shares on the date of the grant of such Incentive Stock
Option, and 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 the Incentive Stock Option is granted to such Participant.
(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 otherwise specified by the Committee, Stock Options
awarded under this Plan shall become exercisable on the date of grant of
the Stock Option and shall be subject to such other terms and conditions as
shall be determined by the Committee at the date of grant.
(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
3
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 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. Effect of Termination of Employment, Disability, Death or Change in
Control .
(a) Except in the event of the death, disability or retirement at or
after age 65 of a Participant, or as otherwise permitted by the Committee,
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, subject to extension by the Committee, any Stock Option which has
become exercisable shall terminate if it is not exercised within twelve
(12) months of such resignation, removal or retirement.
(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, disability or retirement at or after age 65, and,
subject to extension by the Committee, all Stock Options shall terminate if
not exercised within twelve (12) months of the Participant's death,
disability or retirement.
(c) In the event the Employment or the directorship of a Participant
is Terminated for Cause, any Stock Option which has not been exercised
shall terminate as of the date the Participant is Terminated for Cause.
(d) All outstanding Incentive Stock Options shall become immediately
exercisable in the event of a change in control or imminent change in
control of the Company or The Market Building and Saving Company, as
determined by the Committee. For purposes of this Section 7, "change in
control" shall mean: (i) the execution of an agreement for the sale of all,
or a material portion, of the assets of the Company or The Market Building
and Saving Company; (ii) the execution of an agreement for a merger or
recapitalization of the Company or The Market Building and Saving Company
or any merger or recapitalization whereby the Company or The Market
Building and Saving Company is not the surviving entity; (iii) a change of
control of the Company or The Market Building and Saving Company, as
defined or determined by the OTS; or (iv) the acquisition, directly or
indirectly, of the beneficial ownership (within the meaning of the term
"beneficial ownership" as defined under Section 13(d) of the Exchange Act
and the rules promulgated thereunder) of twenty-five percent (25%) or more
of the outstanding voting securities of the Company or The Market Building
and Saving Company by any person, trust, entity or group. For purposes of
this Section 7, "imminent change in control" shall refer to any offer or
announcement, oral or written, by any person or any persons acting as a
group, to acquire control of the Company or The Market Building and Saving
Company as to which an application or notice has been filed with the OTS
and such application has been approved or such notice has not been
disapproved.
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.
4
(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, 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 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 made under this Plan, including the delivery or
vesting of Common Shares, 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 obligation 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
under this Plan payable in cash is provisional until cash is paid in
settlement thereof. 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.
5
(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.
(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
sooner than six months after the effective date of the Conversion.
6
EXHIBIT B
MARKET FINANCIAL CORPORATION
RECOGNITION AND RETENTION PLAN
AND TRUST AGREEMENT
ARTICLE I
DEFINITIONS
The following words and phrases when used in this Agreement with an initial
capital letter shall have the meanings set forth below, unless the context
clearly indicates otherwise. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural:
1.01 "Agreement" means the Market Financial Corporation Recognition and
Retention Plan and Trust Agreement.
1.02 "Association" means The Market Building and Saving Company, a savings
and loan association incorporated under the laws of the State of Ohio.
1.03 "Award" means a right granted to a Director or an Employee under this
Plan to receive Plan Shares.
1.04 "Beneficiary" means the person or persons designated by a Recipient to
receive any benefits payable under this Plan in the event of such Recipient's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Recipient's estate.
1.05 "Board" means the Board of Directors of the Corporation.
1.06 "Committee" means the Recognition and Retention Plan Committee
appointed by the Board pursuant to Article IV hereof.
1.07 "Common Shares" means common shares of the Corporation.
1.08 "Conversion" means the conversion of the Association from mutual to
stock form.
1.09 "Corporation" means Market Financial Corporation, a savings and loan
holding company incorporated under the laws of the State of Ohio for the purpose
of holding all of the common shares of the Association issued in connection with
the Conversion, or any successor thereto.
1.10 "Director" means any person who is a member of the Board of Directors
of the Corporation, the Association or a Subsidiary.
1.11 "Employee" means any person who is employed by the Corporation, the
Association or a Subsidiary.
1.12 "OTS" means the Office of Thrift Supervision, Department of the
Treasury.
1.13 "Person" means an individual, corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specifically listed herein.
1.14 "Plan" means the Recognition and Retention Plan established by this
Agreement.
1.15 "Plan Shares" means the Common Shares held pursuant to the Trust and
which are awarded or issuable to a Recipient pursuant to the Plan.
1.16 "Plan Share Reserve" means the Common Shares held by the Trustee
pursuant to Sections 5.02 and 5.03 of this Agreement.
1.17 "Recipient" means any Director or Employee who receives an Award under
the Plan.
1.18 "Subsidiaries" means subsidiaries of the Corporation or the
Association which, with the consent of the Board, agree to participate in the
Plan.
1.19 "Trust" means the trust established by this Agreement.
1.20 "Trustee(s)" means the person(s) or entity approved by the Board
pursuant to Sections 4.01 and 4.02 to hold legal title to the Plan assets for
the purposes set forth herein.
ARTICLE II
ESTABLISHMENT OF THE PLAN AND TRUST
2.01 The Corporation hereby establishes a Recognition and Retention Plan
and Trust upon the terms and subject to the conditions set forth in this
Agreement.
2.02 The Trustee hereby accepts the Trust and agrees to hold the Trust
assets existing on the date of this Agreement and all additions and accretions
thereto upon the terms and conditions of this Agreement.
ARTICLE III
PURPOSE OF THE PLAN
3.01 The purpose of the Plan is to reward and retain the Directors and
Employees of the Corporation, the Association and the Subsidiaries who are in
key positions of responsibility by providing such Directors and Employees with
an equity interest in the Corporation as reasonable compensation for their
contributions to the Corporation, the Association and the Subsidiaries.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Role of the Committee. The Plan shall be administered and interpreted
by the Committee, which shall consist of not less than three members of the
Board who are not employees of the Corporation or the Association. The Committee
shall have all of the powers set forth in this Plan. The interpretation and
construction by the Committee of any provisions of this Agreement or of any
Award granted hereunder shall be final, conclusive and binding. The Committee
shall act by the vote, or the written consent, of a majority of its members. The
Committee shall report actions and decisions with respect to the Plan to the
Board upon request by the Board.
4.02 Role of the Board. The members of the Committee and the Trustee(s)
shall be appointed or approved by and will serve at the pleasure of the Board.
The Board may in its discretion from time to time remove members from or add
members to the Committee and may remove, replace or add Trustee(s). The Board,
in its absolute discretion, may take any action under or with respect to the
Plan which the Committee is authorized to take and may reverse or override any
action taken or decision made by the Committee under or with respect to the Plan
or take any other action reserved to the Board under this Agreement; provided,
however, that the Board may not revoke any Award already granted under this
Agreement. All decisions, determinations and interpretations of the Board shall
be final, conclusive and binding upon all parties having an interest in the
Plan.
2
4.03 Limitation on Liability. No member of the Board or the Committee, nor
any Trustee, shall be liable for any determination made in good faith with
respect to the Plan or any Plan Shares or Awards granted under the Plan. If a
member of the Board or of the Committee or any Trustee is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of anything done or not done by such member in such capacity under or
with respect to this Plan, the Corporation shall indemnify such member against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such member in connection with
such action, suit or proceeding if such member acted in good faith and in a
manner such member reasonably believed to be in or not opposed to the best
interests of the Corporation, the Association and the Subsidiaries and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
such member's conduct was unlawful.
ARTICLE V
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 Amount and Timing of Contributions. The Board shall determine the
amounts (or the method of computing the amounts) to be contributed by the
Corporation to the Trust. Such amounts shall be paid to the Trustee at the time
of contribution. No contributions to the Trust by Directors or Employees shall
be permitted.
5.02 Investment of Trust Assets. Except as otherwise permitted by Section
8.02 of this Agreement, the Trustee shall invest all of the Trust's assets,
after providing for any required withholding as needed for tax purposes,
exclusively in Common Shares; provided, however, that the Trust shall not
purchase a number of Common Shares equal to more than 3% of the number of Common
Shares issued in connection with the Conversion, except that if the
Association's tangible capital exceeds 10%, the Trust may purchase a number of
Common Shares equal to up to 4% of the Common Shares issued in connection with
the Conversion. After such investment, the Common Shares shall be held by the
Trustee in the Plan Share Reserve until such Common Shares are subject to one or
more Awards. Any funds held by the Trust before purchasing Common Shares shall
be invested by the Trustee in such interest-bearing account or accounts at the
Association as the Trustee shall determine to be appropriate.
5.03 Effect of Allocations, Returns and Forfeitures Upon Plan Share
Reserves. Upon the allocation of Awards under Section 6.02 of this Agreement, or
the decision of the Committee to return Plan Shares to the Corporation, the Plan
Share Reserve shall be reduced by the number of Plan Shares so allocated or
returned. Any Plan Shares subject to an Award which is subject to forfeiture by
the Recipient pursuant to Section 7.01 of this Agreement shall be retained in
the Plan Share Reserve.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 Eligibility. Directors and Employees are eligible to receive Awards
within the sole discretion of the Committee.
6.02 Allocations. The Committee will determine which of the Directors and
Employees will be granted Awards and the number of Plan Shares covered by each
Award. In the event Plan Shares are forfeited for any reason or additional Plan
Shares are purchased by the Trustee, the Committee may, from time to time,
determine which of the Officers and Employees will be granted additional Awards
to be awarded from forfeited or additional Plan Shares.
3
In selecting the Directors and the Employees to whom Awards will be granted
and the number of shares covered by such Awards, the Committee shall consider
the position, duties and responsibilities of the eligible Directors and
Employees, the value of their services to the Corporation, the Association and
the Subsidiaries and any other factors the Committee may deem relevant. All
allocations by the Committee shall be subject to review and approval or
rejection by the Board.
6.03 Form of Allocation. As promptly as practicable after a determination
is made pursuant to Section 6.02 of this Agreement that an Award is to be made,
the Committee shall notify the Recipient in writing of the grant of the Award,
the number of Plan Shares covered by the Award and the terms upon which the Plan
Shares subject to the Award may be earned. The date on which the Committee
determines that an Award is to be made or a later date designated by the
Committee shall be considered the date of grant of the Awards. The Committee
shall maintain records as to all grants of Awards under the Plan.
6.04 Allocations Not Required. None of the Directors or Employees, either
individually or as a group, shall have any right or entitlement to receive an
Award under the Plan. The Committee may, with the approval of the Board, and
shall, if so directed by the Board, return all Common Shares and other assets in
the Plan Share Reserve to the Corporation at any time and thereafter cease
issuing Awards.
6.05 Shareholder Approval. This Agreement shall be submitted to the
shareholders of the Corporation at an annual or special meeting to be held no
sooner than six months after the effective date of the Conversion.
Notwithstanding anything to the contrary in this Agreement, no Awards shall be
granted hereunder until the shareholders of the Corporation approve this
Agreement.
ARTICLE VII
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earning Plan Shares; Forfeitures.
(a) General Rules. Unless the Committee shall specifically state a
longer period of time over which Awards shall be earned and non-forfeitable
at the time an Award is granted, Plan Shares shall be earned and
non-forfeitable by a Recipient over a period of five years at the rate of
one-fifth per year commencing on the date which is one year after the date
of the grant of such Award. As Plan Shares become earned and
non-forfeitable, any cash dividends, returned capital and earnings thereon
shall also be earned and non-forfeitable.
(b) Revocation. Unless otherwise permitted by applicable laws and
regulations, any Plan Shares and any cash dividends, returned capital and
earnings thereon that have not been earned and are not non-forfeitable in
accordance with Section 7.01(a) of this Agreement shall be forfeited in the
event that (i) a Recipient who is a Director ceases to serve on the Board
of Directors of the Corporation or the Association or (ii) a Recipient who
is not a Director of the Corporation or the Association ceases to be an
Employee of the Corporation or the Association, except as otherwise
provided in subsection (c) or subsection (d) of this Section 7.01.
(c) Exception for Terminations Due Death, Disability or Retirement.
All Plan Shares and cash dividends, returned capital and earnings thereon
subject to an Award held by a Recipient whose service as a Director or
Employee of the Corporation, the Association or a Subsidiary terminates due
to (i) death, (ii) disability (as determined by the Committee), or (iii)
retirement at or after age 65 shall be deemed fully earned and
non-forfeitable as of the later of the Recipient's last day of service as a
Director or as an Employee and shall be distributed as soon as practicable
thereafter.
(d) Exception for a Change in Control. Nothwithstanding any other
provision of this Agreement, all Plan Shares subject to an Award held by a
Recipient shall be deemed to be immediately 100% earned and non-forfeitable
in the event of a change in control or imminent change in control of the
Corporation or the Association and shall be distributed as soon as
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practicable thereafter. For purposes of this Section 7.01(d), "change in
control" shall mean: (i) the execution of an agreement for the sale of all,
or a material portion, of the assets of the Corporation or the Association;
(ii) the execution of an agreement for a merger or recapitalization of the
Corporation or the Association or any merger or recapitalization whereby
the Corporation or the Association is not the surviving entity; (iii) a
change of control of the Corporation or the Association, as defined or
determined by the OTS; or (iv) the acquisition, directly or indirectly, of
the beneficial ownership (within the meaning of the terms "beneficial
ownership" as defined under Section 13(d) of the Securities Exchange Act of
1934 and the rules promulgated thereunder) of twenty-five percent (25%) or
more of the outstanding voting securities of the Corporation or the
Association by any person, trust, entity or group. For purposes of this
Section 7.01(d), "imminent change in control" shall refer to any offer or
announcement, oral or written, by any person or any persons acting as a
group, to acquire control of the Corporation or the Association as to which
an application or notice has been filed with the OTS and such application
has been approved or such notice has not been disapproved.
7.02 Distribution of Plan Shares.
(a) Timing of Distributions: General Rule. Except as otherwise
provided in this Agreement, Plan Shares shall be distributed to the
Recipient or his Beneficiary, as the case may be, as soon as practicable
after they have been earned, together with any cash dividends, returned
capital and earnings thereon with respect to Plan Shares that have been
earned.
(b) Form of Distribution. All distributions of Plan Shares, together
with any shares representing stock dividends, shall be distributed in the
form of Common Shares. No fractional shares shall be distributed. Payments
representing cash dividends, returned capital and earnings thereon shall be
made in cash.
(c) Withholding. The Trustee may withhold from any cash payment made
under this Plan sufficient amounts to cover any applicable withholding and
employment taxes and, if the amount of such cash payment is not sufficient,
the Trustee may require the Recipient or Beneficiary to pay to the Trustee
the amount required to be withheld as a condition of delivering the Plan
Shares. The Trustee shall pay over to the Corporation, the Association or
the Subsidiary which employs or employed such Recipient or which the
Recipient serves or served as a Director, any such amount withheld from or
paid by the Recipient or Beneficiary.
(d) Regulatory Exceptions. Notwithstanding anything to the contrary in
this Agreement, no Plan Shares, upon becoming fully earned and
non-forfeitable, shall be distributed unless and until all of the
requirements of all applicable laws and regulations shall have been met.
7.03 Voting of Plan Shares. All Common Shares held by the Trustee in the
Plan Share Reserve which have not yet been earned by a Recipient pursuant to
Section 7.01 of this Agreement shall be voted by the Trustee. A Recipient shall
be entitled to direct the voting of Plan Shares which have been earned pursuant
to Section 7.01 of this Agreement but have not yet been distributed to him.
ARTICLE VIII
TRUST
8.01 Trust. The Trustee shall receive, hold, administer, invest and make
distributions and disbursements from the Trust in accordance with the provisions
of the Plan and the Trust and the applicable directions, rules, regulations,
procedures and policies established by the Committee pursuant to this Agreement.
8.02 Management of Trust. The Trustee shall have complete authority and
discretion with respect to the management, control and investment of the Trust,
and the Trustee shall invest all assets of the Trust, except those attributable
to cash dividends paid with respect to Plan Shares not held in the Plan Share
Reserve, in Common Shares to the fullest extent practicable, and except to the
extent that the Trustee determines that the holding of monies in cash or cash
equivalents is necessary to meet the obligations of the Trust. The Trustee shall
have the power to do all things and execute such instruments as may be deemed
necessary or proper, including the following powers:
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(a) To invest up to 100% of all Trust assets in Common Shares without
regard to any law now or hereafter in force limiting investments for
Trustees or other fiduciaries. The investment authorized herein may
constitute the only investment of the Trust, and, in making such
investment, the Trustee is authorized to purchase Common Shares from the
Corporation or from any other source. Such Common Shares so purchased may
be outstanding, newly issued or treasury shares;
(b) To invest any Trust assets not otherwise invested in accordance
with Section 8.02(a) of this Agreement in such deposit accounts and
certificates of deposit (including those issued by the Association),
obligations of the United States government or its agencies or such other
investments as shall be considered the equivalent of cash;
(c) To sell, exchange or otherwise dispose of any property at any time
held or acquired by the Trust;
(d) To cause stocks, bonds or other securities to be registered in the
name of a nominee, without the addition of words indicating that such
security is an asset of the Trust (but accurate records shall be maintained
showing that such security is an asset of the Trust);
(e) To hold cash without interest in such amounts as may be
reasonable, in the opinion of the Trustee, for the proper operation of the
Plan and the Trust;
(f) To employ brokers, agents, custodians, consultants and
accountants;
(g) To hire counsel to render advice with respect to the Trustee's
rights, duties and obligations hereunder, and such other legal services or
representation as the Trustee may deem desirable; and
(h) To hold funds and securities representing the amounts to be
distributed to a Recipient or his Beneficiary as a consequence of a dispute
as to the disposition thereof, whether in a segregated account or held in
common with other assets of the Trust.
Notwithstanding anything herein contained to the contrary, the Trustee shall not
be required to make any inventory, appraisal or settlement or report to any
court, or to secure any order of court for the exercise of any power herein
contained, or to give bond.
8.03 Records and Accounts. The Trustee shall maintain accurate and detailed
records and accounts of all transactions of the Trust, which shall be available
at all reasonable times for inspection by any legally entitled person or entity
to the extent required by applicable law, or any other person determined by the
Committee.
8.04 Earnings. All earnings, gains and losses with respect to Trust assets
shall be allocated, in accordance with a reasonable procedure adopted by the
Committee, to bookkeeping accounts for Recipients or to the general account of
the Trust, depending on the nature and allocation of the assets generating such
earnings, gains and losses. Without limiting the generality of the foregoing,
any earnings on cash dividends or returned capital received with respect to
Common Shares shall be allocated (a) to accounts for Recipients, if such shares
are the subject of outstanding Awards, and shall become earned and be
distributed as specified in Article VII of this Agreement, or (b) otherwise to
the Plan Share Reserve if such Plan Shares are not the subject of outstanding
awards.
8.05 Expenses. All costs and expenses incurred in the operation and
administration of the Plan shall be paid by the Association.
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ARTICLE IX
MISCELLANEOUS
9.01 Adjustments for Capital Changes. The aggregate number of Plan Shares
available for issuance pursuant to the Awards and the number of Plan Shares to
which any Award relates shall be proportionately adjusted for any increase or
decrease in the total number of outstanding Common Shares issued subsequent to
the effective date of the Plan if such increase or decrease resulted from any
split, subdivision or consolidation of shares or other capital adjustment, or
other increase or decrease in such shares effected without receipt or payment of
consideration by the Corporation.
9.02 Amendment and Termination of Plan. The Board may, by resolution, at
any time amend or terminate the Plan. The power to amend or terminate the Plan
shall include the power to direct the Trustee to return to the Corporation all
or any part of the assets of the Trust, including Common Shares held in the Plan
Share Reserve, as well as Common Shares and other assets subject to Awards which
have not yet been earned by the Directors or Employees to whom they are
allocated; provided, however, that the termination of the Trust shall not affect
a Recipient's right to earn Awards and to the distribution of Common Shares
relating thereto, including earnings thereon, in accordance with the terms of
this Agreement and the grant by the Committee or the Board.
9.03 Nontransferable. Awards shall not be transferable by a Recipient.
During the lifetime of the Recipient, an Award may only be earned by and paid to
the Recipient who was notified in writing of the Award by the Committee pursuant
to Section 6.03 of this Agreement. No Recipient or Beneficiary shall have any
right in or claim to any assets of the Plan or the Trust, nor shall the
Corporation, the Association or any Subsidiary be subject to any claim for
benefits hereunder.
9.04 Directorship Rights. Neither this Agreement nor any grant of an Award
hereunder nor any action taken by the Trustee, the Committee or the Board in
connection with the Plan shall create any right, either express or implied, on
the part of any Director to continue to serve as a Director of the Association
or a Subsidiary.
9.05 Employment Rights. Neither this Agreement nor any grant of an Award
hereunder nor any action taken by the Trustee, the Committee or the Board in
connection with the Plan shall create any right, either express or implied, on
the part of any Employee to continue in the employ of the Corporation, the
Association or a Subsidiary.
9.06 Voting and Dividend Rights. No Recipient shall have any voting or
dividend rights or other rights of a shareholder in respect of any Plan Shares
covered by an Award, except as expressly provided in Sections 7.01, 7.02 and
7.03 of this Agreement, prior to the time such Plan Shares are actually
distributed to such Recipient.
9.07 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of Ohio, except to the extent that federal law shall be
deemed applicable.
9.08 Effective Date. Subject to Section 6.05 of this Agreement, this
Agreement shall be effective as of the 30th day of June, 1998.
9.09 Term of Plan. The Plan shall remain in effect until the earlier of (a)
the termination of the Plan by the Board or (b) the distribution of all assets
from the Trust. The termination of the Plan shall not affect any Awards
previously granted and such Awards shall remain valid and in effect until they
have been earned and paid or by their terms expire or are forfeited.
9.10 Tax Status of Trust. It is intended that the trust established hereby
be treated as a grantor trust of the Association under the provisions of Section
671, et seq., of the Internal Revenue Code of 1986, as amended (26 U.S.C. ss.
671 et seq.).
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IN WITNESS WHEREOF, the following Trustees execute this Agreement,
accepting and binding themselves to undertake and perform the obligations and
duties of the Trustee hereunder and consenting to the foregoing Agreement
effective the ___ day of ____________, 1998.
By: ___________________________ (Trustee)
By: ___________________________ (Trustee)
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officer and duly attested, all as of the ___ day
of ____________, 1998.
MARKET FINANCIAL CORPORATION
By: ___________________________
John T. Larimer
its President
ATTEST:
_________________________
_________________________
its: ____________________
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