EXHIBIT 4.1
HAWTHORNE FINANCIAL CORPORATION
1994 STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
"Administrator" shall mean the Board or, at the discretion of the Board, the
Committee.
"Affiliate" means any "subsidiary corporation" or "parent corporation," as
such terms are defined in Section 424 of the Code, of the Company.
"Agreement" means a written agreement (including any amendment or supplement
thereto) between the Company and a Participant specifying the terms and
conditions of an award of an Option granted to such Participant.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, and any amendments thereto.
"Committee" means a committee which may from time to time be appointed by the
Board to administer the Plan, whose members shall serve at the pleasure of
the Board.
"Common Stock" means the Common Stock, par value $.01 per share, of the
Company.
"Company" means Hawthorne Financial Corporation.
"Date of Grant" means the date upon which an Option is awarded.
"Exchange Act" means the Securities Exchange Act of 1934, and any amendments
thereto.
"Fair Market Value", unless otherwise determined by the Administrator in good
faith, means with respect to a share of Common Stock as of any given date (i)
the weighted average of the closing sale prices of a share of Common Stock as
reported on the national securities exchange or transaction reporting system
on or through which actual sale prices are regularly reported for the Common
Stock as reported for the ten most recent trading days preceding the Date of
Grant; or (ii) if the Common Stock is not traded on a national securities
exchange or transaction reporting system on or through which actual sale
prices are reported, the weighted average of the mean of the closing bid and
asked prices of a share of Common Stock, in either case as reported for the
ten most recent trading days preceding the date the determination is made.
"Option" means a stock option granted under this Plan.
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"Participant" means a person who holds an outstanding Option.
"Plan" means the Hawthorne Financial Corporation 1994 Stock Option Plan set
forth herein.
"SEC" means the Securities and Exchange Commission or any successor agency.
ARTICLE II
PURPOSE
The Plan is intended to assist the Company and its Affiliates in recruiting
and retaining directors and employees with ability and initiative by enabling
directors and employees to participate in the Company's future success and to
associate their interests with those of the Company and its shareholders. The
Plan is intended to permit the grant of Options not qualifying under Section
422 of the Code ("nonqualified stock options"). The proceeds received by the
Company from the sale of Common Stock pursuant to the Plan shall be used for
general corporate purposes.
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Administrator. The Administrator shall
have authority to grant Options upon such terms (not inconsistent with the
provisions of the Plan) as the Administrator may consider appropriate. Such
terms may include conditions (in addition to those contained in the Plan) on
the exercisability of all or any part of an Option. Notwithstanding any such
conditions, the Administrator may, in its discretion, accelerate the time at
which any Option may be exercised. In addition, the Administrator shall have
complete authority to interpret all provisions of the Plan; to prescribe the
form of Agreements; to adopt, amend, and rescind rules and regulations
pertaining to the administration of the Plan; and to make all other
determinations necessary or advisable for the administration of the Plan. The
express grant in the Plan of any specific power to the Administrator shall
not be construed as limiting any power or authority of the Administrator. Any
decision made, or action taken, by the Administrator in connection with the
administration of the Plan shall be final. No member of the Administrator
shall be liable for any act done in good faith with respect to the Plan or
any Agreement or Option award. All expenses of administering the Plan shall
be borne by the Company.
The Administrator, in its discretion, may delegate to one or more officers of
the Company all or part of the Administrator's authority and duties with
respect to Participants who are not subject to the reporting and other
provisions of Section 16 of the Exchange Act, as in effect from time to time.
In the event of such delegation, and as to matters encompassed by the
delegation, references in the Plan to the Administrator shall be interpreted
as a reference to the Administrator's delegate or delegates. The
Administrator may revoke or amend the terms of
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a delegation at any time but such action shall not invalidate any prior
actions of the Administrator's delegate or delegates that were consistent
with the terms of the Plan.
ARTICLE IV
ELIGIBILITY
Any director or employee of the Company or Affiliate (including any
corporation that becomes an Affiliate after the adoption of the Plan) is
eligible to participate in the Plan. A director or employee may be granted
one or more Options.
ARTICLE V
STOCK SUBJECT TO PLAN
5.01 SOURCE OF SHARES - Upon the exercise of any Option, the Company may
deliver to the Participant (or the Participant's broker if the
Participant so directs), authorized but unissued shares of Common
Stock or issued shares of Common Stock that have been reacquired by
the Company.
5.02 MAXIMUM NUMBER OF SHARES - The maximum aggregate number of shares of
Common Stock with respect to which Options may be granted under the
Plan and which may be issued pursuant to the exercise thereof shall be
800,000 shares, subject to increases and adjustments as provided in
this Article V and Article VIII.
5.03 FORFEITURES, ETC. - Shares related to Options that expire unexercised
or are forfeited, surrendered, terminated, canceled or settled in cash
in lieu of the issuance of shares of Common Stock shall again be
available for additional awards under the Plan, except for shares of
Common Stock withheld or surrendered to satisfy tax withholding
obligations.
ARTICLE VI
STOCK OPTIONS
6.01 GRANTS - The Administrator will designate individuals to whom Options
are to be granted and will specify the number of shares of Common
Stock subject to each Option and the additional terms thereof. All
Options granted under the Plan shall be evidenced by Agreements which
shall be subject to the applicable provisions of the Plan and to such
other provisions as the Administrator may adopt. The Administrator may
provide that Options granted under the Plan shall become exercisable
in one or more installments or upon such other conditions as it shall
deem appropriate.
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6.02 OPTION PRICE - The exercise price per share for Common Stock purchased
on the exercise of an Option shall not be less than the Fair Market
Value of a share of Common Stock on the Date of Grant.
6.03 MAXIMUM OPTION PERIOD - The maximum period in which an Option may be
exercised is ten years from the Date of Grant. The terms of any Option
my provide that it is exercisable for a period less than such maximum
period.
6.04 MAXIMUM NUMBER SHARES - No Participant may receive more than 800,000
shares under the Plan.
ARTICLE VII
EXERCISE OF OPTIONS
7.01 EXERCISE - An Option may be exercised, as to all or any portion of the
shares of Common Stock as to which the Option is then exercisable, by
giving written notice to the Secretary of the Company prior to the
date on which the Option expires; provided, however, that an Option
may only be exercised with respect to whole shares of Common Stock.
Such notice shall specify the number of shares of Common Stock to be
purchased and shall be accompanied by payment of the Option Price for
such shares (and, if required by the Administrator, any applicable
withholding taxes) in such form and manner as the Administrator may
from time to time approve.
7.02 INSTALLMENT PAYMENT - Section 7.01 to the contrary notwithstanding, if
an Agreement so provides, the Company shall lend the Participant such
amount as shall be permitted under applicable law, up to 100% of the
exercise price of the shares to be acquired on exercise of the Option
to which the Agreement relates, for the purpose of enabling the
Participant to exercise the Option, with the principal amount of such
loan to be repayable in not more than three annual installments;
PROVIDED, that the terms of any such loan, including the amount and
maturity thereof, shall conform to any applicable requirements of the
regulations of the Board of Governors of the Federal Reserve System
relating to margin credit and to any other applicable laws and
regulations.
The Participant shall pay interest on the unpaid principal balance of
any such loan at the minimum rate necessary to avoid imputed interest
or original issue discount under the Code. All shares of Common Stock
acquired with cash borrowed from the Company shall be pledged to the
Company as security for the repayment thereof. In the discretion of
the Administrator, shares of Common Stock may be released from such
pledge proportionately as payments of the note (together with
interest) are made, provided that the release of such shares complies
with the then applicable regulations of the Federal Reserve System
relating to securities credit transactions. While shares are so
pledged, and so long as there has been no default in the installment
payments, such shares shall remain registered in the name of the
Participant, and the Participant shall have the right to vote such
shares and to receive all dividends thereon.
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7.03 TERMINATION OF EMPLOYMENT - In the event that the terms of any Option
provide that it may be exercised only during employment or within a
specified period of time after termination of employment, the
Administrator may decide to what extent leaves of absence for
governmental or military service, illness, temporary disability, or
other reasons shall not be deemed interruptions of continuous
employment.
Unless provided otherwise by the Administrator, a Participant's
Options shall expire on the Participant's termination of employment,
subject to the following:
(a) If the Participant terminates employment with the Company and
its Affiliates on account of retirement at or after attaining
age 55, the Participant's Options may be exercised, to the
extent then vested, for a period of three months following such
termination, but not later than the Options' expiration date.
(c) If the Participant terminates employment with the Company and
its Affiliates by reason of death, any Options which the
Participant was entitled to exercise on the date of his death
shall be exercisable by the person or persons to whom that right
passes by will or by the laws of descent and distribution for a
period of twelve months after the date of death, but not later
than the Option's expiration date.
7.04 TAX WITHHOLDING - The Company shall have the right to deduct or
otherwise effect a withholding of any amount required by federal or
state tax laws to be withheld with respect to the grant, exercise or
surrender of an Option, including any withholding required in order
for the Company to obtain a tax deduction as a consequence of such
grant, exercise or surrender. Such amounts may be deducted or
withheld, at the Company's discretion, from shares issuable or amounts
payable in respect of an Option or from any other payments, including
regular compensation, to be made by the Company to the Participant. If
Common Stock is used to satisfy any such tax withholding requirement,
such Common Stock shall be valued based on its Fair Market Value as of
the date it is withheld.
ARTICLE VIII
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The maximum number of shares of Common Stock which are allocated for
issuance under the Plan shall be proportionately adjusted, and the
terms of outstanding Options shall be adjusted, as the Administrator
shall determine to be equitably required to preserve the value of
benefits awarded or to be awarded to Participants under the Plan, in
the event that (a) the Company (i) effects one or more stock
dividends, stock split-ups, subdivisions or consolidations of shares
or (ii) engages in a transaction to which Section 424 of the Code
applies or (b) the Company issues shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or
property, or for labor or services, either upon direct sale or upon
exercise of rights or warrants to subscribe therefor, or upon
conversion
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of shares or merger, reorganization or obligations of the Company
convertible into such shares or other securities or (c) there occurs
any other event which, in the judgment of the Administrator,
necessitates such action. Any determination made under this Article
VIII by the Administrator shall be final and conclusive.
The Administrator may grant Options, in connection with a transaction
described in the first paragraph of this Article VIII. Notwithstanding
any provision of the Plan (other than the limitation of Article V),
the terms of such substituted Option grants shall be as the
Administrator, in its discretion, determines is appropriate.
ARTICLE IX
ADJUSTMENT UPON CHANGE IN CONTROL
Upon the effective date of the dissolution or liquidation of the
Company, or a reorganization, merger or consolidation of the Company
with one or more other entities in which the Company is not the
surviving entity, or of the transfer of substantially all of the
assets or shares of the Company (any such transaction being referred
to herein as a "Terminating Event"), the Plan and any Option granted
hereunder shall terminate unless provision is made in writing in
connection with such Terminating Event for the continuance of the Plan
and for the assumption of Options theretofore granted hereunder, or
the substitution for such Options of new options issued by the
successor corporation, or the parent corporation thereof, with such
appropriate adjustments as may be determined or approved by the
Administrator or its successor, in which event the Plan and the
Options theretofore granted or substituted therefor, shall continue in
the manner and under the terms so provided. Upon the occurrence of a
Terminating Event in which provision is not made for the continuance
of the Plan and for the assumption of Options theretofore granted or
the substitution for such Options of new options issued by the
successor corporation or the parent corporation thereof: (i) each
Participant to whom an Option has been granted under the Plan shall be
entitled to exercise, in whole or in part, such Participant's rights
under any such Option without regard to any restrictions on exercise
that would otherwise apply, effective as of the effective date of the
Terminating Event, and (ii) in the event a Participant shall not,
prior to the effective date of such a Terminating Event, fully
exercise an Option granted under the Plan, such Option, to the extent
not previously exercised, shall be deemed surrendered by the
Participant as of the effective date of the Terminating Event and such
Participant shall receive in exchange therefor a cash payment equal to
the difference, if a positive amount, between the Fair Market Value as
of the effective date of the Terminating Event of the shares of stock
then subject to the Option and the aggregate exercise price therefor.
To the extent that a Participant has the right to exercise, surrender
or receive payment under any Option solely on account of a Terminating
Event, such exercise, surrender or payment shall be contingent upon
the consummation of such Terminating Event.
The determination as to which party to a merger or consolidation is
the "surviving entity" shall be made on the basis of the relative
equity interests of the shareholders in the entity
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existing after the merger or consolidation, as follows: if following
any merger or consolidation the holders of outstanding voting
securities of the Company immediately prior to the merger or
consolidation own equity securities possessing more than fifty percent
(50%) of the voting power of the surviving entity, then for purposes
of this Plan, the Company shall be the surviving corporation. In all
other cases, the Company shall not be the surviving corporation. In
making the determination of ownership by the shareholders of an entity
immediately after the merger or consolidation, of equity securities
pursuant to this Article IX, equity securities which the shareholders
owned immediately before the merger or consolidation as shareholders
of another party to the transaction shall be disregarded. Further, for
purposes of this Article IX only, outstanding voting securities of an
entity shall be calculated by assuming the conversion of all equity
securities convertible (immediately or at some future time) into
shares entitled to vote.
Upon a "change in control" of the Company, a Participant shall have
the right, notwithstanding any restrictions that would otherwise
apply, to exercise any Option theretofore granted to such Participant
unless: (i) the Board shall have approved, authorized or consented to
the change of control and shall not have expressly permitted
acceleration of vesting of Options, or (ii) the Option Agreement
relating to the Option shall provide otherwise. To the extent a
Participant has the right to exercise an Option solely on account of a
change in control, such right to exercise shall be contingent upon the
consummation of such change in control. Unless otherwise defined by
the Administrator in Agreements relating to particular Options, a
"change in control" shall be deemed to have occurred if any "person"
(as such term as used in Sections 13(d) and 14(d) of the Exchange Act
and the regulations of the SEC thereunder, each as in effect on the
effective date of this Plan, and including any such persons that may
be deemed to be acting in concert with respect to the Company or the
acquisition, ownership or voting of Company securities) becomes,
directly or indirectly, the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act and the regulations of the SEC
thereunder, each as in effect on the effective date of this Plan) of
outstanding securities of the Company representing more than 50% of
the combined voting power of the Company's then outstanding
securities.
ARTICLE X
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
No Option shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no
payment shall be made under the Plan other than in compliance with all
applicable federal and state laws and regulations (including, without
limitation, withholding tax requirements) and the rules of all
domestic stock exchanges on which the Company's shares may be listed.
The Company shall have the right to rely on an opinion of its counsel
as to such compliance. Any share certificate issued to evidence Common
Stock for which an Option is exercised may bear such legends and
statements as the Administrator may deem advisable to assure
compliance with federal and state laws and regulations. No Option
shall be exercisable, no Common Stock shall
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be issued, no certificate for shares shall be delivered, and no
payment shall be made under the Plan until the Company has obtained
such consents and approvals as the Administrator may deem advisable
from regulatory bodies having jurisdiction over such matters.
ARTICLE XI
GENERAL PROVISIONS
11.01 EFFECT ON EMPLOYMENT - Neither the adoption of the Plan, its
operation, nor any documents describing or referring to the Plan (or
any part thereof) shall confer upon any employee any right to continue
in the employ of the Company or an Affiliate or in any way affect any
right or power of the Company or an Affiliate to terminate the
employment of any employee at any time with or without assigning a
reason therefor.
11.02 SHAREHOLDER STATUS - No award to a Participant under the Plan shall
create any rights in such Participant as a shareholder of the Company
until shares of Common Stock are registered in the name of the
Participant.
11.03 RULES OF CONSTRUCTION - Headings are given to the articles and
sections of the Plan solely as a convenience to facilitate reference.
The reference to any statute, regulation, or other provision of law
shall be construed to refer to any amendment to or successor of such
provision of law.
11.04 NONTRANSFERABILITY - Any Option granted under the Plan shall be
nontransferable except by will or by laws of descent and distribution.
During the lifetime of the Participant to whom the Option is granted,
the Option may be exercised only by such Participant. No right or
interest of a Participant in any Option shall be liable for, or
subject to, any lien, obligation, or liability of such Participant.
ARTICLE XII
AMENDMENT
The Board may, at any time and in any manner, amend, suspend or
terminate the Plan or any award outstanding under the Plan; provided,
however, that no such amendment or discontinuance shall:
(a) increase the number of shares reserved under the Plan without
shareholder approval;
(b) be made without shareholder approval to the extent such approval
is required by law, agreement or the rules of any exchange or
automated quotation system upon which the Common Stock is listed
or quoted;
(c) alter or impair the rights of Participants with respect to
awards previously made
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under the Plan without the consent of the holder thereof; or
(d) make any changes that would disqualify the Plan, which is
intended to be so qualified, from the exemption provided by Rule
16b-3 adopted by the SEC pursuant to the Exchange Act.
ARTICLE XIII
DURATION OF PLAN
No Option may be granted under the Plan after December 31, 2007. Options
granted before that date shall remain valid in accordance with their terms.
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