EXHIBIT 10.(ii)
1999 MANAGEMENT STOCK OPTION PLAN
OF
MONROE BANCORP
ARTICLE I
Introduction
1.1. Purpose. The 1999 Management Stock Option Plan of Monroe Bancorp
(the "Plan") is designed to promote the interests of the Company and its
Subsidiaries by encouraging their officers and key employees, upon whose
judgment, initiative and industry the Company and its Subsidiaries are largely
dependent for the successful conduct and growth of their businesses, to continue
their association with the Company and its Subsidiaries by providing additional
incentive and opportunity for unusual industry and efficiency through stock
ownership, and by increasing their proprietary interest in the Company and their
personal interest in its continued success and progress. The Plan provides for
the granting of (i) incentive stock options ("ISO's") and (ii) nonqualified
stock options ("NSO's").
1.2. Effective Date and Duration. The Effective Date of the Plan is
January 1, 1999. Options may be granted under the Plan for a period of ten (10)
years commencing January 1, 1999; however, no options may be exercised until the
Plan has been approved by a majority of the shares of the Company represented at
the shareholders' meeting at which approval of the Plan is considered. No
options shall be granted after December 31, 2009. Upon that date, the Plan shall
expire except as to outstanding options, which options shall remain in effect
until they have been exercised or terminated or have expired. ISO's must be
granted within ten (10) years of the date the Plan is adopted by the Board of
Directors or approved by the shareholders of the Company, whichever is earlier.
1.3. Administration. The Plan shall be administered by the Committee.
The Committee, from time to time, may adopt any rule or procedure it deems
necessary or desirable for the proper and efficient administration of the Plan
provided it is consistent with the terms of the Plan. The decision of a majority
of the Committee members shall constitute the decision of the Committee. Subject
to the provisions of the Plan, the Committee is authorized (a) to grant ISO's
and NSO's; (b) to determine the officers and employees to be granted ISO's and
NSO's; (c) to determine the option period, the option price and, subject to the
limitations of Section 3.1, the number of shares subject to each option; (d) to
determine the time or times at which options will be granted; (e) to determine
the time or times at which each option becomes exercisable and the duration of
the exercise period; (f) to permit, in its discretion, the limited
transferability of NSOs granted to an optionee; (g) to determine other
conditions and limitations, if any, applicable to the exercise of each option;
and (h) to determine the nature and duration of the restrictions, if any, to be
imposed upon the sale or other disposition of shares acquired by any optionee
upon exercise of an option, and the nature of the events, if any, and the
duration of the period, in or with respect to which any optionee's rights to
shares acquired upon exercise of an option may be forfeited. Each option granted
under the Plan shall be evidenced by a written stock option agreement containing
terms
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and conditions established by the Committee consistent with the provisions of
the Plan, including such terms as the Committee shall deem advisable in order
that each ISO shall constitute an "incentive stock option" within the meaning of
Section 422 of the Code. The Committee's determinations and interpretations with
respect to the Plan shall be final and binding on all interested parties. Any
notice or document required to be given to or filed with the Committee will be
properly given or filed if delivered or mailed by certified mail, postage
prepaid, to the Committee at 210 East Kirkwood Avenue, Bloomington, Indiana
47408. In the event a Committee member is eligible to receive grants of ISOs and
NSOs under the Plan, he or she shall refrain from taking any action or
exercising any discretion with respect to establishing the terms and conditions
of such option.
1.4. Definitions. For purposes of the Plan, unless a different meaning
is clearly required by the context:
(a) "Board of Directors" means the board of directors of the
Company.
(b) The term "Change in Control of the Company" means (i) any
merger or consolidation of the Company or any Subsidiary irrespective of which
party is the surviving entity; (ii) any sale, lease, exchange, transfer or other
disposition of all or any substantial part of the assets of the Company or any
Subsidiary; (iii) any tender offer, exchange offer or other purchase offer
and/or agreement to purchase as much as (or more than) twenty percent (20%) of
the outstanding common stock of the Company or any Subsidiary; (iv) during any
period of two (2) consecutive years during the term of the Plan specified in
Section 2, individuals who at the date of the adoption of the Plan constitute
the Board of Directors of the Company cease for any reason to constitute at
least a majority thereof, unless the election of each Director at the beginning
of such period has been approved by Directors representing at least a majority
of the Directors then in office who were Directors on the date of the adoption
of the Plan; or (v) a majority of the Board of Directors or a majority of the
shareholders of the Company approve, adopt, agree to recommend, or accept any
agreement, contract, offer or other arrangement providing for, or any series of
transactions resulting in, any of the transactions described above.
Notwithstanding the foregoing, a Change in Control of the Company (A) shall not
occur as a result of the issuance of stock by the Company in connection with any
public offering of its stock, or (B) be deemed to have occurred with respect to
any transaction unless such transaction has been approved or tendered by a
majority of the shareholders who are not Section 16 grantees. For this purpose,
a Section 16 grantee is a person subject to potential liability under Section
16(b) of the Securities Exchange Act of 1934, as amended with respect to
transactions involving equity securities of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Committee" means the Executive Committee of the Board
of Directors of the Company.
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(e) "Company" means Monroe Bancorp.
(f) "Effective Date" means January 1, 1999.
(g) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(h) "Fair Market Value" means the per share closing price for
the Company's common stock on the last trading day prior to the date on which
the option is granted upon the principal securities exchange on which such
shares are traded or, if such shares are not then traded on any exchange, at the
average of the low bid and high asked price of such securities on such trading
day in the over-the-counter market. If the Company's stock is not traded in the
over-the-counter market, Fair Market Value shall mean the amount determined by
the Committee in its discretion and in good faith taking into account such
factors as the Committee deems relevant.
(i) "For Cause" means (i) the willful and continued failure of
an optionee to perform his required duties as an officer or employee of the
Company or any Subsidiary, (ii) any action by an optionee which involves willful
misfeasance or gross negligence, (iii) the requirement of or direction by a
federal or state regulatory agency which has jurisdiction over the Company or
any Subsidiary to terminate the employment of an optionee, (iv) the conviction
of an optionee of the commission of any criminal offense which involves
dishonesty or breach of trust, or (v) any intentional breach by an optionee of a
material term, condition or covenant of any agreement between the optionee and
the Company or any Subsidiary.
(j) "Permanent and Total Disability" or "Permanently and
Totally Disabled" means any disability that would qualify as a disability under
Code Section 22(c)(3).
(k) "Plan" means the stock option plan embodied herein, as
amended from time to time, known as the 1999 Management Stock Option Plan of
Monroe Bancorp.
(l) "Section 16 Grantee" means a person subject to potential
liability under Section 16(b) of the Exchange Act with respect to transactions
involving equity securities of the Company.
(m) "Subsidiary" or "Subsidiaries" means any banking
institution or other corporation more than fifty percent (50%) of whose total
combined voting stock of all classes is held by the Company or by another
corporation qualifying as a Subsidiary within this definition.
ARTICLE II
Eligibility and Participation
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Officers and senior management employees of the Company or of any of
its Subsidiaries, as selected by the Committee, shall be eligible to receive
grants of ISO's and NSO's under the Plan.
ARTICLE III
Benefits
3.1. Shares Covered by the Plan. The stock to be subject to options
under the Plan shall be shares of authorized common stock of the Company and may
be unissued shares or reacquired shares (including shares purchased in the open
market), or a combination of the two, as the Committee may from time to time
determine. Subject to the provisions of Section 4.2, the maximum number of
shares to be delivered upon exercise of all options granted under the Plan shall
not exceed Four Hundred Twenty-Seven Thousand (427,000) shares. If the exercise
price of any stock option granted under the Plan is satisfied by tendering
shares to the Company (by either actual delivery or by attestation), only the
number of shares issued net of the shares tendered shall be deemed delivered for
purposes of determining the maximum number of shares available for delivery
under the Plan. Shares covered by an option that are forfeited due to
termination of service or that remain unpurchased or undistributed upon
expiration of the option may be made subject to further options.
3.2. Grant of Options. The Committee shall be responsible for granting
all options under the Plan. The Committee shall also determine, in its sole
discretion, with respect to each optionee, whether the options granted shall be
ISO's or NSO's, or a combination of the two; and whether any employee shall be
given discretion to determine whether any options granted to him shall be ISO's
or NSO's or a combination of the two.
3.3. Option Price.
(a) ISO Option Price. The option price per share of stock
under each ISO shall be not less than one hundred percent (100%) of the Fair
Market Value of the share on the date on which the option is granted; provided,
however, as to officers and key employees who, at the time an ISO is granted,
own, within the meaning of Code Section 425(d), more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
Subsidiary (referred to as "Shareholder-Employees"), the purchase price per
share of stock under each ISO shall be not less than one hundred ten percent
(110%) of the Fair Market Value of the stock on the date on which the option is
granted.
(b) NSO Option Price. The option price per share of stock
under each NSO shall be determined by the Committee in its discretion; provided,
however, the option price per
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share shall not be less than one hundred percent (100%) of the Fair Market Value
of the share on the date on which the option is granted.
3.4. Option Period. No option period shall exceed ten (10) years;
provided, however, the option period with respect to ISO's granted to
Shareholder-Employees shall not exceed five (5) years.
3.5. Special Calendar Year Limitation on Shares Subject to ISO's. The
aggregate Fair Market Value (determined at the time of the grant of the ISO's)
of the stock with respect to which ISO's are exercisable for the first time by
an eligible employee during any calendar year (under all plans providing for the
grant of incentive stock options of the Company or any of its Subsidiaries)
shall not exceed One Hundred Thousand Dollars ($100,000.00).
3.6. Sequence of Exercising Incentive Stock Options. Any ISO granted to
an employee pursuant to the Plan shall be exercisable even if there are
outstanding previously granted but unexercised ISO's with respect to such
employee.
3.7 Vesting of Options. All options granted under the Plan shall vest,
and thereby become exercisable, at such time or times as shall be determined by
the Committee in its sole discretion. The stock option agreement between the
Company and the optionee shall include the schedule under which the option shall
vest. The Committee may, in its sole discretion, amend such schedule in a manner
which causes options previously granted under the Plan to vest under a more
rapid schedule. The Committee shall not amend such schedule to provide for the
slower vesting of any options previously granted under the Plan.
3.8 Vesting on Change in Control or Death, Retirement or Disability of
Optionee. Notwithstanding the provisions of Section 3.7, in the event of a
Change in Control of the Company or upon the death, Permanent and Total
Disability or retirement on or after attaining age sixty-five (65) of the
optionee, any options granted under the Plan may be exercised in full without
regard to any restrictions on the vesting of the options contained in the option
agreement between the Company and the optionee.
3.9. Early Termination of Option.
(a) Termination of Employment. Subject to the other provisions
of this Section 3.9, all rights to exercise an option shall terminate thirty
(30) days after the effective date of the optionee's termination of employment
with the Company and its Subsidiaries, but not later than the date the option
expires pursuant to its terms, unless such termination is For Cause or is on
account of the Permanent and Total Disability, death or retirement (as described
in subsection (c)), of the optionee or a Change in Control of the Company.
Transfer of employment from the Company to a Subsidiary, or vice versa, or from
one Subsidiary to another, shall not be deemed a termination of employment. The
Committee shall have the authority to determine in each case
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whether a leave of absence on military or government service shall be deemed a
termination of employment for purposes of this subsection (a).
(b) For Cause Termination. Unless the Committee determines
otherwise in its sole discretion, if an optionee's employment with the Company
and its Subsidiaries is terminated For Cause, no previously unexercised option
granted hereunder may be exercised. Rather, all unexercised options shall
terminate effective on the date the Company notifies the optionee of his
termination For Cause.
(c) Permanent and Total Disability, Death or Retirement of
Optionee. If an optionee's employment with the Company and its Subsidiaries
terminates due to Permanent and Total Disability, death or retirement on or
after attaining age sixty-five (65), his option shall terminate ninety (90) days
after termination of his employment due to his Permanent and Total Disability,
death or retirement (but not later than the date the option expires pursuant to
its terms). During such period, subject to the limitations of the Plan and the
option agreement between the Company and the optionee, the optionee, his
guardian, attorney-in-fact or personal representative, as the case may be, may
exercise the option in full.
(d) Change in Control of the Company. If an optionee's
employment with the Company and its Subsidiaries terminates within one (1) year
after a Change in Control of the Company, in the case of NSOs, or within thirty
(30) days of a Change in Control of the Company, in the case of ISOs, his option
shall terminate within such respective one (1) year or thirty (30) day period,
as the case may be, but not later than the date the option expires pursuant to
its terms.
3.10. Payment for Stock. Full payment for shares purchased hereunder
shall be made at the time the option is exercised. Payment may be made by
delivering to the Company (a) cash; (b) at the discretion of the Committee,
whole shares of common stock of the Company ("Delivered Stock") which (i) has
been owned by the optionee for more than six (6) months and has been paid for,
within the meaning of Securities Exchange Commission Rule 144 (and, if such
stock was purchased from the Company by use of a promissory note, such note has
been fully paid with respect to such stock), or (ii) was obtained by the
optionee in the public market or otherwise than through the exercise of an
option under this Plan or under any other stock option plan involving Company
stock; (c) at the discretion of the Committee, a combination of cash and
Delivered Stock; or (d) provided that a public market for the Company's common
stock exists, (i) through a "same day sale" commitment from the optionee and a
broker-dealer that is a member of the National Association of Securities Dealers
("NASD Dealer") whereby the optionee irrevocably elects to exercise the option
and to sell a portion of the common stock so purchased in order to pay the
option price, and whereby the NASD Dealer irrevocably commits upon receipt of
such stock to forward the option price directly to the Company; or (ii) through
a "margin" commitment from the optionee and an NASD Dealer whereby the optionee
irrevocably elects to exercise the option and to pledge the stock so purchased
to the NASD Dealer in a margin account as security for a loan from the NASD
Dealer in the amount of the option price and whereby the NASD Dealer irrevocably
commits upon receipt of such stock to forward the option price directly
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to the Company. Delivered Stock shall be valued by the Committee at its Fair
Market Value determined as of the date of the exercise of the option. No shares
shall be issued until full payment for them has been made, and an optionee shall
have none of the rights of a shareholder with respect to any shares until they
are issued to him. Upon payment of the full purchase price, and any required
withholding taxes, the Company shall issue a certificate or certificates to the
optionee evidencing ownership of the shares purchased pursuant to the exercise
of the option which contain(s) such terms, conditions and provisions as may be
required and as are consistent with the terms, conditions and provisions of the
Plan and the stock option agreement between the Company and the optionee. For
purposes of this Section 3.10, payment for shares purchased hereunder may be
delivered to the Company through such attestation or certification procedures as
may be established by the Committee from time to time in its sole discretion.
3.11. Income and Employment Tax Withholding.
(a) Payment by Optionee. The optionee shall be solely
responsible for paying to the Company all required federal, state, city and
local taxes applicable to his (i) exercise of an NSO under the Plan and (ii)
disposition of shares acquired pursuant to the exercise of an ISO in a
disqualifying disposition of the shares under Code Section 422(a)(1).
(b) NSO Withholding With Company Stock. Notwithstanding the
provisions of subsection (a), with respect to stock to be issued pursuant to the
exercise of an NSO, the Committee, in its discretion and subject to such rules
as it may adopt, may permit the optionee to satisfy, in whole or in part, any
withholding tax obligation which may arise in connection with the exercise of
the NSO by having the Company retain shares of stock which would otherwise be
issued in connection with the exercise of the NSO or accept delivery from the
optionee of shares of Company stock which have a Fair Market Value, determined
as of the date of the delivery of such shares, equal to the amount of the
withholding tax to be satisfied by that retention or delivery.
(c) ISO Disqualifying Disposition; Withholding With Company
Stock. Notwithstanding the provisions of subsection (a), with respect to shares
of stock to be issued pursuant to the exercise of any ISO, the Committee, in its
discretion and subject to such rules as it may adopt, may permit the optionee to
satisfy, in whole or in part, any withholding tax obligation which may arise in
connection with the disqualifying disposition of the shares under Code Section
422(a)(1) by having the Company accept delivery from the optionee of shares of
stock having a Fair Market Value, determined as of the date of the delivery of
such shares, equal to the amount of the withholding tax to be satisfied by that
delivery.
3.12. Notice of Disqualifying Disposition. Any ISO granted hereunder
shall require the optionee to notify the Committee of any disposition of any
stock issued pursuant to the exercise of the ISO under the circumstances
described in Section 421(b) of the Code (relating to certain disqualifying
dispositions), within ten (10) days of such disposition.
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ARTICLE IV
Amendment, Termination and Interpretation
4.1. Amendment and Termination. The Board of Directors or the Committee
may, at any time, without the approval of the stockholders of the Company
(except as otherwise required by applicable law, rule or regulations, or listing
requirements of any National Securities Exchange on which are listed any of the
Company's equity securities, including without limitation any shareholder
approval requirement of Rule 16b-3 or any successor safe harbor rule promulgated
under the Exchange Act ), alter, amend, modify, suspend or discontinue the Plan,
but may not, without the consent of the holder of an option, make any alteration
which would adversely affect an option previously granted under the Plan or,
without the approval of the stockholders of the Company, make any alteration
which would: (a) increase the aggregate number of shares subject to options
under the Plan, except as provided in Section 4.2; (b) decrease the minimum
option price, except as provided in Section 4.2; (c) extend the term of the Plan
or the term during which any option may be exercised; (d) change the
restrictions on the transferability of options; (e) change the manner of
determining the option price; (f) change the class of individuals eligible for
options; or (g) withdraw administration of the Plan from the Committee or the
Board of Directors.
4.2. Changes in Stock.
(a) Substitution of Stock and Assumption of Plan. In the event
of any change in the common stock of the Company through stock dividends,
split-ups, recapitalizations, reclassifications, conversions, or otherwise, or
in the event that other stock shall be converted into or substituted for the
present common stock of the Company as the result of any merger, consolidation,
reorganization or similar transaction which results in a Change in Control of
the Company, then the Committee may make appropriate adjustment or substitution
in the aggregate number, price and kind of shares available under the Plan and
in the number, price and kind of shares covered under any options granted or to
be granted under the Plan. The Committee's determination in this respect shall
be final and conclusive. Provided, however, that the Company shall not, and
shall not permit its Subsidiaries to, recommend, facilitate or agree or consent
to a transaction or series of transactions which would result in a Change of
Control of the Company unless and until the person or persons or the entity or
entities acquiring or succeeding to the assets or capital stock of the Company
or any of its Subsidiaries as a result of such transaction or transactions
agrees to be bound by the terms of the Plan so far as it pertains to options
theretofore granted but unexercised and agrees to assume and perform the
obligations of the Company hereunder. Notwithstanding the foregoing provisions
of this subsection (a), no adjustment shall be made which would operate to
reduce the option price of any ISO below the Fair Market Value of the stock
(determined on the date the option was granted) which is subject to an ISO.
(b) Conversion of Stock. In the event of a Change in Control
of the Company pursuant to which another person or entity acquires control of
the Company (such other person or
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entity being the "Successor"), the kind of shares of common stock which shall be
subject to the Plan and to each outstanding option, shall, automatically by
virtue of such Change in Control of the Company, be converted into and replaced
by shares of common stock, or such other class of securities having rights and
preferences no less favorable than common stock of the Successor, and the number
of shares subject to the option and the purchase price per share upon exercise
of the option shall be correspondingly adjusted, so that, by virtue of such
Change in Control of the Company, each optionee shall have the right to purchase
(i) that number of shares of common stock of the Successor which have a Fair
Market Value equal, as of the date of such Change in Control of the Company, to
the Fair Market Value, as of the date of such Change in Control, of the shares
of common stock of the Company theretofore subject to his option, and (ii) for a
purchase price per share which, when multiplied by the number of shares of
common stock of the Successor subject to the option, shall equal the aggregate
exercise price at which the optionee could have acquired all of the shares of
common stock of the Company previously optioned to the optionee.
4.3. Information to be Furnished by Optionees. Optionees, or any other
persons entitled to benefits under the Plan, must furnish to the Committee such
documents, evidence, data or other information as the Committee considers
necessary or desirable for the purpose of administering the Plan. The benefits
under the Plan for each optionee, and each other person who is entitled to
benefits hereunder, are to be provided on the condition that he furnish full,
true and complete data, evidence or other information, and that he will promptly
sign any document reasonably related to the administration of the Plan requested
by the Committee.
4.4. Employment Rights. Neither the Plan nor any stock option agreement
executed under the Plan shall constitute a contract of employment and
participation in the Plan will not give an optionee the right to be rehired or
retained in the employ of the Company, nor will participation in the Plan give
any optionee any right or claim to any benefit under the Plan, unless such right
or claim has specifically accrued under the terms of the Plan.
4.5. Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person relying
thereon considers pertinent and reliable, and signed, made or presented by the
proper party or parties.
4.6. Gender and Number. Where the context admits, words in the
masculine gender shall include the feminine gender, the plural shall include the
singular and the singular shall include the plural.
4.7. Action by Company. Any action required of or permitted by the
Company under the Plan shall be by resolution of the Board of Directors or by a
person or persons authorized by resolution of the Board of Directors.
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4.8. Controlling Laws. Except to the extent superseded by laws of the
United States, the laws of Indiana, without reference to the choice of law
principles thereof, shall be controlling in all matters relating to the Plan.
4.9. Mistake of Fact. Any mistake of fact or misstatement of fact
shall be corrected when it becomes known and proper adjustment made by reason
thereof.
4.10. Severability. In the event any provisions of the Plan shall be
held to be illegal or invalid for any reason, such illegality or invalidity
shall not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if such illegal or invalid provisions had never been
contained in the Plan.
4.11. Effect of Headings. The descriptive headings of the sections of
this Plan are inserted for convenience of reference and identification only and
do not constitute a part of this Plan for purposes of interpretation.
4.12. Nontransferability. No option shall be transferable, except by
the optionee's will or the laws of descent and distribution. During the
optionee's lifetime, his option shall be exercisable (to the extent exercisable)
only by him. The option and any rights and privileges pertaining thereto shall
not be transferred, assigned, pledged or hypothecated by him in any way, whether
by operation of law or otherwise and shall not be subject to execution,
attachment or similar process.
4.13. Liability. No member of the Board of Directors or the Committee
or any officer or employee of the Company or its Subsidiaries shall be
personally liable for any action, omission or determination made in good faith
in connection with the Plan. Each optionee, in the stock option agreement
between him and the Company, shall agree to release and hold harmless the
Company, the Board of Directors, the Committee and all officers and employees of
the Company and its Subsidiaries from and against any tax liability, including
without limitation interest and penalties, incurred by the optionee in
connection with his participation in the Plan.
4.14. Investment Representations. Unless the shares subject to an
option are registered under the Securities Act of 1933, each optionee, in the
stock option agreement between the Company and the optionee, shall agree for
himself and his legal representatives that any and all shares of common stock
purchased upon the exercise of the option shall be acquired for investment and
not with a view to, or for sale in connection with, any distribution of those
shares. Any share issued pursuant to an exercise of an option subject to this
investment representation shall bear a legend evidencing this restriction.
4.15. Use of Proceeds. The proceeds received by the Company from the
sale of stock pursuant to the Plan will be used for general corporate purposes.
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MONROE BANCORP
DATED:_________________________ By:___________________________________
Charles G. Conville, President
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