Easton Bancorp, Inc.
AMENDED AND RESTATED
NON-QUALIFIED STOCK OPTION
THIS AMENDED AND RESTATED NON-QUALIFIED STOCK OPTION (this Option) is
effective as of May 1, 1999 by and between Easton Bancorp, Inc and R. ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇. (the "Optionee").
WHEREAS, the purpose of this Option is to promote the growth of Easton Bank
and Trust and Easton Bancorp, Inc (the Bank) by providing the Optionee with an
incentive to achieve objectives of the Bank; and
WHEREAS, the Board of Directors of Easton Bancorp, Inc has approve the
grant to the Qptionee of a non-qualified stock option to purchase up to 56,000
shares of Common Stock of Easton Bancorp, Inc, subject to and in accordance with
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and covenants and
agreements hereinafter set forth, the parties hereto hereby mutually covenant
and agree as follows:
1. Definitions.
-----------
(a) "Cause" means an intentional failure to perform personal
stated duties, personal dishonesty which results in a loss to the Bank or one of
its affiliates, a willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or an intentional or grossly negligent
act which directly leads to a final order which results in substantial loss to
the Bank or one of its affiliates.
(b) "Common Stock" means the Common Stock of Easton Bancorp, Inc,
par value $.10 per share.
(c) "Disability" means the permanent and total inability by reason
of mental or physical infirmity, or both, of the Optionee to perform work
customarily assigned to him. Additionally, a medical doctor selected or approved
by the Board of Directors must advise the Bank that it is either not possible to
determine when such disability will terminate or that it appears probable that
such Disability will be permanent during the remainder of the Optionee's
lifetime.
(d) "Market Value" means when used in connection with the Common
Stock on a certain date, the average of the bid and asked price of the Common
Stock reported in the over-the-counter market, or if not so reported, the
average of the bid and asked prices of the market maker(s) for the Common Stock.
If no firm is making a market in the Common Stock on a certain date, then the
"Market Value" will be determined by the Board of Directors in its sole
discretion.
2. Grant of Option.
-----------------
(a) Subject to the terms and conditions set forth herein, the Bank
hereby grants to the Optionee during the period commencing May 1, 1999 and
ending on the applicable date specified in Paragraph 6 ( the "Option Period")
the option to purchase from the Bank an aggregate of 56,000 shares of Common
Stock, such number being subject to adjustment as provided herein. The Common
Stock issuable upon exercise of the Option are referred to herein as the "Option
Shares."
3. Exercise Price.
---------------
(a) The exercise price per Option Share shall be $10.00 with
respect to any full or partial exercise of the Option.
4. Vesting and Exercisability of Options.
-----------------------------------------
(a) Except as set forth in this Paragraph and in Paragraph 6, ten
percent (10%) of the Option Shares shall vest and be exercisable at any time on
or after May 1, 1999, and an additional ten percent (10%) of the Option Shares
shall vest and be exercisable at any time on or after each subsequent May 1, on
a cumulative basis.
(b) In the event of a Change in Control of the Bank, this Option
shall become immediately exercisable with respect to all Option Shares at any
time on or after such event. For purposes of this Option, a "Change in Control"
means any of the following:
(1) at any time after the effective date of this Option:
(i) any "person" (as such term is used in Section 14(d)
of the Securities Exchange Act of 1934 [the "Exchange Act"]) is or becomes the
beneficial owner, directly or indirectly, of securities of the Bank representing
thirty percent (30%) or more of the combined voting power of the then
outstanding securities of the Bank; or
(ii) a change in the composition of a majority of the
Board of Directors within twelve 12 months after any "person" (as defined above)
is or becomes the beneficial owner, directly or indirectly, of securities of the
Bank representing thirty percent (30%) of the combined voting power of the
securities of the then outstanding securities of the Bank; or
(iii) a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as in effect on the
date of this Option: or
(2) there shall be consummated:
2
(i) any consolidation or merger or share exchange of the
Bank in which the Bank is not the continuing or surviving corporation or
pursuant to which shares of the Bank's Common Stock would be converted into
cash, securities or other property, other than a merger of the Bank in which the
holders of the Bank's Common Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving entity immediately
after the merger, or
(ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or a substantial
portion, of the assets of the Bank other than to its wholly-owned subsidiaries;
or
(3) the stockholders of the Bank approve a plan or proposal
for the complete or partial liquidation, dissolution or divisive reorganization
of the Bank.
(c) Notwithstanding any other provision to the contrary the
Optionee must be in the employment of the Bank on the relevant vesting date set
forth in Subparagraph (a) hereof in order for vesting to occur.
5. Method of Exercising Options and Payment of Option Price.
----------------------------------------------------------------
(a) This Option may be exercised by the Optionee from time to
time, in whole or in part, by written notice delivered by the Optionee or his
successor, personal representative or beneficiary. A form of written notice is
attached hereto as exhibit 1. Such notice shall state the number of Option
Shares of Common Stock with respect to which this Option is being exercised and
the Exercise Price for such Option Shares and shall include the written
covenants, agreements and representations as may from time to time be necessary
or desirable in order to ensure compliance with applicable laws, regulations of
governmental authorities and the requirements of any exchange or stock market
upon which the Common Stock is listed or traded. Such notice shall be
accompanied by payment of the full Exercise Price for the number of Option
Shares which are being purchased hereunder and all applicable withholding taxes.
(b) Payment of the Exercise Price shall be made in cash or by
check,or, in whole or in part, through the surrender of shares of Common Stock,
which shares shall be valued at the Market Value on the date of the exercise of
this Option. The Board of Directors may, in its sole discretion, place
limitations on the extent to which shares of Common Stock of the Bank may be
tendered by the Optionee as payment of the Exercise Price.
(c) In no event shall this Option be exercisable for a fractional
share.
(d) The Optionee shall execute the following agreement at the
election of the Bank:
I hereby represent and warrant that I am purchasing said shares
solely with a view to bona fide investment for my own individual
3
account and not with any present intention to resell the same. I
further represent and warrant that I will dispose of said shares
only in compliance with the applicable laws or regulations relating
to the sale of securities.
(e) After receipt of a properly completed exercise form and full
payment of the Exercise Price, the Bank shall deliver a certificate or
certificates representing the number of shares of Common Stock with respect to
which this Option was exercised in the name of the person or persons exercising
this Option at the election of the Bank, the certificate may bear the following
legend:
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
transferred unless a registration statement has become and is then
effective with respect to the proposed sale or transfer of shares
or an opinion that the proposed sale or transfer is exempt from
registration under the Act has been rendered by counsel for the
Bank.
(f) If the Optionee could be subject to liability under Section
16B of the Securities Exchange Act of 1934, and the Option makes an election in
a timely manner under Section 83(b) of the Internal Revenue Code to recognize
income for tax purposes when this Option is first exercised, the Optionee shall
notify the Bank within ten days of making such election.
6. Termination.
-----------
This Option shall terminate and be of no further force or effect
from and after December 31 2009 unless terminated prior to such time as provided
below .
If the Optionee ceases employment with the Bank, this Option shall
terminate or be exercisable as follows:
(a) Termination of Emplovment. In the event that the Optionee's
---------------------------
employment is terminated without Cause, the right to purchase the Option Shares
that have vested as of the date of termination shall be exercisable by the
Optionee or the Optionee's representatives for a period of ninety (90) days
after such termination, but in no event after the expiration of the Option
Period. If the Optionee's terminated for Cause, this Option shall expire
immediately upon such removal.
(b) Disability. In the event that the Optionee's employment is
----------
terminated due to a Disability, the right to purchase the Option Shares that
have vested as of the date of Disability shall be exercisable by the Optionee or
the Optionee's representatives or beneficiaries (as applicable) at any time upon
or after such an event until the expiration of the Option Period.
(c) Death. In the event the Optionee dies while in the employment
-----
of the Bank, the Optionee's estate, personal representative or beneficiary (as
applicable) shall have the right to purchase the Option Shares that have vested
as of the date of the Optionee's Death at any time upon or after such event and
until the expiration of the Option Period or within such shorter time as may be
provided by law.
4
7. Optionee. Whenever the word "Optionee" is used in any provision of
--------
this Option under circumstances where the provision should logically be
construed to apply to the estate, personal representative or beneficiary to whom
this option may be transferred by will or by laws of descent and distribution,
the word "0ptionee" shall be deemed to include such person.
8. Assignability. Except as otherwise provided herein, this Option is
-------------
not transferable by the Optionee otherwise than by will or the laws of descent
and distribution and is exercisable during the Optionee's lifetime only by the
Optionee. No assignment or transfer of this Option, or of the rights represented
thereby, whether voluntary or involuntary, by operation of law or otherwise,
except by will or the 1aws of descent and distribution, shall vest in the
assignee or transferee any interest or right herein whatsoever, but immediately
upon an attempt to assign or transfer this option the same shall terminate and
be of no force or effect.
9. Rights as a Stockholder. The Optionee shall not be deemed for any
--------------------------
purpose to be a stockholder of the Bank with respect to the shares represented
by this Option until this Option shall have been properly exercised.
10. The Bank's Rights. The existence of this Option shall not affect
-------------------
in any way the right or power of the Bank or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or other
changes in the Bank's capital structure or its business, or any merger or
consolidation of the Bank, or any issue of bonds, debentures, preferred or other
stock with preference ahead of or convertible in to, or otherwise affecting the
Common Stock of the Bank or the rights thereof, or the dissolution or
liquidation of the Bank, or any sale or transfer of all or any part of the
Bank's assets or business, or any other corporate act or proceedings, whether of
a similar character or otherwise.
11. Recapitalization; Dissolution or Liquidation.
-----------------------------------------------
(a) If the shares of the Bank's Common Stock as a whole are
increased, decreased or changed into, or exchanged for, a different number or
kind of shares or securities of the Bank, whether through merger, consolidation,
reorganization, recapitalization, reclassification, stock dividend, stock split,
combination of shares, exchange of shares, change in corporate structure or the
like, an appropriate and proportionate adjustment shall be made in the number of
kinds of shares subject to this Option and in the number and per share exercise
price of shares subject to this option. Any such adjustment, however, shall be
made without a change in the total price applicable to the unexercised portion
of this Option, but with a corresponding adjustment in the price for each share
of stock covered by this Option. No fractional shares shall be issued as a
result of any such adjustment.
(b) Upon dissolution or liquidation of the Bank, this Option shall
be exercisable in full for all Option Shares that have vested for at least
30days prior to the effective date of such dissolution or liquidation, whether
or not otherwise exercisable during such period, but in no event after the
expiration of the Option Period.
5
12. Preemption by Applicable Laws or Regulations. Anything in this
-------------------------------------------------
Option to the contrary notwithstanding, if, at any time specified herein for the
issue of Common Stock to the Optionee, any law, regulation or requirements of
any governmental authority having appropriate jurisdiction shall require either
the Bank or the Optionee to take any action prior to or in connection with the
Common Stock, the issuance of such Common Stock shall be deferred until such
action shall be taken.
13. Optionee Acknowledgment. The Optionee hereby acknowledges that
-------------------------
all decisions, determinations and interpretation of the Board of Directors
of the Bank, or a designated committee thereof, in respect of this Option shall
be final and conclusive.
14. Notice. Any notice required or permitted under this Agreement
------
shall be deemed given when delivered in person or when mailed by registered mail
with return receipt requested to the Bank addressed to ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, attention: Office of the Secretary, and to the Optionee or
beneficiary at his or address in the records of the Bank.
15. Modification and Waiver. This Option cannot be changed,
-------------------------
modified, amend, discharged, terminated or waived orally or by any course of
dealing or purported course of dealing, but only by an agreement in writing
signed by the Optionee or the Optionee's personal representative and the Bank.
The waiver of or failure to enforce a breach of this Option shall not be deemed
to be a waiver or acquiescence in any other breech thereof.
16. Tax Withholding. The Bank may deduct from any distribution the
-----------------
amount required by any governmental authority to be withheld for income and
withholding tax purposes.
17. Fractional Shares. Any fractional shares which would otherwise
------------------
result from the exercise of all or a part of this Option shall be eliminated at
the time of exercise by rounding down for fractions of less than and
rounding up for fractions of equal to or more than . No cash settlements
shall be made with respect to fractional shares eliminated by rounding.
18. Governing Law. All matters relating to this Agreement shall be
---------------
governed by the State of Maryland, without regard to principles of conflict of
laws except to the extent preempted by the laws of the United States.
19. Non-qualified Nature of Option. This Option is intended to be an
--------------------------------
agreement concerning a Stock Option arrangement which is not qualified under
Section 422A of the Code, and this Option shall be so construed.
20. General. The Bank shall at all times during the term of this
--------
Option reserve and keep available such number of shares of Common Stock as will
be sufficient to satisfy the requirements herein, shall pay all original issue
and transfer taxes with respect to the issue and transfer of shares pursuant
hereto and all other fees and expenses necessarily incurred by the Bank in
connection herewith, and will from time to time use all reasonable efforts to
6
comply with all laws and regulations which, in the opinion of counsel for the
Bank, shall be applicable thereto.
IN WITNESS WHEREOF, the Bank has caused this Option to be executed by its
duly authorized officer and its seal to be affixed hereto, and the Optionee has
hereunto set the Optionee's hand and seal, effective on the day and year first
above written.
Attest: Easton Bancorp, Inc.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ W. ▇▇▇▇▇ ▇▇▇▇
------------------------ ------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
Chairman of the Board
7
Easton Bancorp, Inc
Non-Qualified Stock Option
Exercise for Subscription
At this time, I wish to purchase______shares of the Common Stock of Easton
Bancorp, Inc. at an Exercise Price of $_________ per share through the
exercise of the Non-Qualified Stock Option effective May 1, 1999.
Please issue this stock in the following manner and mail the certificate(s)
to the following address, which will also be the mailing address for dividends.
Name
Street
City
State
Zip Code
I hereby represent and warrant that I am purchasing said share view to bona
fide investment for my own individual account and not with any immediate
intention to resell the same. I further represent and warrant that I will
dispose of said shares only in compliance with the applicable laws or
regulations relating to the sale of securities.
I understand that at the option of the Bank, the certificate deliver the
exercise of the Non-Qualified Stock Option may bear the following legend:
The Shares represented by this certificate have no t been
registered under the Securities Act of 1944, as amended, and may not
be sold or transferred unless a registration statement has become and is
then effective with respect to the proposed sale or transfer of shares
or a opinion that the proposed sale or transfer is exempt from
registration under the Act has been rendered by counsel for the Bank.
My Social Security Number is __________ I am attaching my check payable to
Easton Bancorp, Inc., and/or _____ number of shares of Common Stock in payment
for the stock, along with my copy of the Non-Qualified Stock Option for notation
of this purchase and return.
Very truly yours,
---------------------------------
Signature Date
---------------------------------
Optionee's Name