CUMBERLAND MOUNTAIN BANCSHARES, INC.
MANAGEMENT RECOGNITION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
1.01 The Company hereby establishes this Plan upon the
terms and conditions hereinafter stated.
1.02 Through acceptance of their appointment to the
Committee, each member of the Committee hereby accepts his or
her appointment hereunder upon the terms and conditions
hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to reward and retain
personnel of experience and ability in key positions of
responsibility by providing Employees and Directors of the
Company, the Bank, and their Affiliates with a proprietary
interest in the Company, and as compensation for their past
contributions to the Bank, and as an incentive to make such
contributions in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Plan
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.
3.01 "Affiliate" shall mean any "parent corporation" or
"subsidiary corporation" of the Company, as such terms are
defined in Section 424(e) and (f), respectively, of the Internal
Revenue Code of 1986, as amended.
3.02 "Bank" means Middlesboro Federal Bank, Federal
Savings Bank.
3.03 "Beneficiary" means the person or persons designated
by a Participant to receive any benefits payable under the Plan
in the event of such Participant'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
Participant's surviving spouse, if any or if none, his estate.
3.04 "Board" means the Board of Directors of the Company.
3.05 "Change in Control" means any one of the following
events: (1) the acquisition of ownership, holding or power to
vote more than 25% of the Bank's or the Company's voting stock,
(2) the acquisition of the ability to control the election of a
majority of the Bank's or the Company's directors, (3) the
acquisition of a controlling influence over the management or
policies of the Bank or the Company by any person or by persons
acting as a "group" (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934), (4) the acquisition of control
of the Bank or the Company within the meaning of 12 C.F.R. Part
574 or its applicable equivalent (except in the case of (1),
(2), (3) and (4) hereof, ownership or control of the Bank by the
Company itself shall not constitute a "Change in Control"), or
(5) during any period of two consecutive years, individuals (the
"Continuing Directors") who at the beginning of such period
constitute the Board of Directors of the Company or the Bank
(the "Existing Board") cease for any reason to constitute at
least two-thirds thereof, provided that any individual whose
election or nomination for election as a member of the Existing
Board was approved by a vote of at least two-thirds of the
Continuing Directors then in office shall be considered a
Continuing Director. For purposes of this subparagraph only,
the term "person" refers to an individual or a corporation,
partnership, trust, association, joint venture, pool, syndicate,
sole
proprietorship, unincorporated organization or any other
form of entity not specifically listed herein. The decision of
the Committee as to whether a change in control has occurred
shall be conclusive and binding.
3.06 "Committee" means the Management Recognition Plan
Committee appointed by the Board pursuant to Article IV hereof.
3.07 "Common Stock" means shares of the common stock of
the Company.
3.08 "Company" means Cumberland Mountain Bancshares, Inc.
3.09 "Continuous Service" shall mean the absence of any
interruption or termination of service as an Employee or
Director of the Company or an Affiliate. Continuous Service
shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence approved by the
Company in the case of transfers between payroll locations of
the Company or between the Company, an Affiliate or a successor,
or in the case of a Director's performance of services in an
emeritus or advisory capacity.
3.10 "Date of Conversion" means the date of the
conversion of Cumberland Mountain Bancshares, MHC from mutual to
stock form.
3.11 "Director" shall mean any member of the Board, and
any member of the board of directors of any Affiliate whose
directors the Board has by resolution designated as being
eligible for participation in this Plan.
3.12 "Disability" shall mean a physical or mental
condition, which in the sole and absolute discretion of the
Committee, is reasonably expected to be of indefinite duration
and to substantially prevent a Participant from fulfilling his
or her duties or responsibilities to the Company or an
Affiliate.
3.13 "Effective Date" means the date on which the Plan
first becomes effective, as determined under Section 8.07
hereof.
3.14 "Employee" means any person who is employed by the
Company or an Affiliate.
3.15 "Non-Employee Director" shall have the meaning
provided in Rule 16b-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended.
3.16 "Participant" means an Employee or Director who
holds a Plan Share Award.
3.17 "Plan" means this Cumberland Mountain Bancshares,
Inc. Management Recognition Plan.
3.18 "Plan Shares" means shares of Common Stock held in
the Trust which are awarded or issuable to a Participant
pursuant to the Plan.
3.19 "Plan Share Award" means a right granted under this
Plan to receive Plan Shares.
3.20 "Plan Share Reserve" means the shares of Common
Stock held by the Trustee pursuant to Sections 5.02 and 5.03.
3.21 "Trust" and "Trust Agreement" mean that agreement
entered into pursuant to the terms hereof between the Company
and the Trustee, and "Trust" means the trust created thereunder.
3.22 "Trustee" means that person(s) or entity appointed
by the Board pursuant to the Trust Agreement to hold legal title
to the Plan assets for the purposes set forth herein.
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3.23 "Year of Service" shall mean a full twelve-month
period, measured from the date of a Plan Share Award and each
annual anniversary of that date, during which a Participant's
Continuous Service has not terminated for any reason.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 ROLE AND POWERS OF THE COMMITTEE. The Plan shall be
administered and interpreted by the Committee, which shall
consist of not less than two members of the Board who are Non-
Employee Directors. In the absence at any time of a duly
appointed Committee, the Plan shall be administered by those
members of the Board who are Non-Employee Directors, and by the
Board if there are less than two Non-Employee Directors.
The Committee shall have all of the powers allocated to it
in this and other Sections of the Plan. Except as limited by
the express provisions of the Plan or by resolutions adopted by
the Board, the Committee shall have sole and complete authority
and discretion (i) to make Plan Share Awards to such Employees
as the Committee may select, (ii) to determine the form and
content of Plan Share Awards to be issued under the Plan, (iii)
to interpret the Plan, (iv) to prescribe, amend and rescind
rules and regulations relating to the Plan, and (v) to make
other determinations necessary or advisable for the
administration of the Plan. The Committee shall have and may
exercise such other power and authority as may be delegated to
it by the Board from time to time. Subject to Section 4.02, the
interpretation and construction by the Committee of any
provisions of the Plan or of any Plan Share Award granted
hereunder shall be final and binding. The Committee shall act
by vote or written consent of a majority of its members, and
shall report its actions and decisions with respect to the Plan
to the Board at appropriate times, but in no event less than one
time per calendar year. The Committee may recommend to the
Board one or more persons or entity to act as Trustee(s) in
accordance with the provisions of this Plan and the Trust.
4.02 ROLE OF THE BOARD. The members of the Committee
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. The Board shall have all of the powers allocated to
it in this and other Sections of the Plan, 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, provided, however, that the Board may not revoke any Plan
Share Award already made or impair a participant's vested rights
under a Plan Share Award. With respect to all actions taken by
the Board in regard to the Plan, such action shall be taken by a
majority of the Board where such a majority of the directors
acting in the matter are Non-Employee Directors.
4.03 LIMITATION ON LIABILITY. No member of the Board or
the Committee or the Trustee(s) shall be liable for any
determination made in good faith with respect to the Plan or any
Plan Shares or Plan Share Awards granted under it. If a member
of the Board or 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 him in such capacity under or with respect to the
Plan, the Company shall indemnify such member against expenses
(including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he or she
acted in good faith and in a manner he or she reasonably
believed to be in the best interests of the Company and its
Affiliates and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his 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 Company to the Trust, provided that the
Bank may also make
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contributions to the Trust. Such amounts shall be paid to the
Trustee at the time of contribution. No contributions to the
Trust by Employees shall be permitted.
5.02 INVESTMENT OF TRUST ASSETS; MAXIMUM PLAN SHARE
AWARDS. The Trustee shall invest Trust assets only in
accordance with the Trust Agreement; provided that the Trust
shall not purchase, and Plan Share Awards shall not be made with
respect to, more than 17,589 Shares sold to the public in the
Company's stock offering on the Date of Conversion. Such Shares
may be newly issued Shares, Shares held in Treasury, or Shares
held in a grantor trust.
5.03 EFFECT OF ALLOCATIONS, RETURNS AND FORFEITURES UPON
PLAN SHARE RESERVES. Upon the allocation of Plan Share Awards
under Section 6.02, the Plan Share Reserve shall be reduced by
the number of Shares subject to the Awards so allocated. Any
Shares subject or attributable to an Award which may not be
earned because of a forfeiture by the Participant pursuant to
Section 7.01 shall be added to the Plan Share Reserve.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 ELIGIBILITY. The Committee shall make Plan Share
Awards only to Employees. In selecting those Employees to whom
Plan Share 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 Employees,
the value of their services to the Company and its Affiliates,
and any other factors the Committee may deem relevant.
6.02 ALLOCATIONS. The Committee will determine which
Employees will be granted discretionary Plan Share Awards, and
the number of Shares covered by each Plan Share Award, provided
that in no event shall any Awards be made which will violate the
governing instruments of the Bank or its Affiliates or any
applicable federal or state law or regulation. In the event
Plan Shares are forfeited for any reason or additional shares of
Common Stock are purchased by the Trustee, the Committee may,
from time to time, determine which of the Employees referenced
in Section 6.01 above will be granted additional Plan Share
Awards to be awarded from the forfeited or acquired Plan Shares.
6.03 FORM OF ALLOCATION. As promptly as practicable
after a determination is made pursuant to Section 6.02 that a
Plan Share Award is to be made, the Committee shall notify the
Participant 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 so notifies the Participant shall be
considered the date of grant of the Plan Share Awards. The
Committee shall maintain records as to all grants of Plan Share
Awards under the Plan.
6.04 AUTOMATIC GRANTS. On the Effective Date, each of
the following individuals shall receive a Plan Share Award as to
the number of Plan Shares listed below, provided that such award
shall not be made to an individual who is not an Employee on the
Effective Date:
Participant Shares Subject to Plan Share Award
----------- ----------------------------------
James J. Shoffner 4,221
Diana Miracle 1,408
J.D. Howard 1,407
Plan Share Awards received under the provisions of this
Section shall become vested and nonforfeitable according to the
general rules set forth in subsections (a) and (b) of Section
7.01, and the Committee shall have no
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discretion to alter said vesting requirements. Unless otherwise
inapplicable or inconsistent with the provisions of this
Section, the Plan Share Awards to be granted hereunder shall be
subject to all other provisions of this Plan.
6.06 ALLOCATIONS NOT REQUIRED. Notwithstanding anything
to the contrary in Sections 6.01 and 6.02, but subject to
Section 6.04, no Employee or Director shall have any right or
entitlement to receive a Plan Share Award hereunder, such Awards
being at the total discretion of the Committee, nor shall any
Employees or Directors as a group have such a right. The
Committee may, with the approval of the Board (or, if so
directed by the Board) return all Common Stock in the Plan Share
Reserve to the Company at any time, and cease issuing Plan Share
Awards.
ARTICLE VII
EARNINGS AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 EARNING PLAN SHARES; FORFEITURES.
(a) GENERAL RULES. Unless the Committee specifically
eliminates any vesting requirement or imposes a different
vesting schedule, 33 1/3% of the Plan Shares subject to a Plan
Share Award shall be earned and become non-forfeitable upon the
Participant's completion of each of three Years of Service
after the date of the Award.
(b) ACCELERATION FOR TERMINATIONS DUE TO DEATH,
DISABILITY, OR CHANGE IN CONTROL. Notwithstanding the general
rule contained in Section 7.01(a) above: (i) all Plan Shares
subject to a Plan Share Award held by a Participant whose
service with the Company or an Affiliate terminates due to the
Participant's death or Disability shall be deemed earned and
100% vested as of the Participant's last day of service with the
Company or an Affiliate, and (ii) all Plan Shares subject to a
Plan Share Award held by a Participant shall be deemed earned
and 100% vested as of a Change in Control or, if earlier, the
execution of an agreement to effect a Change in Control.
7.02 ACCRUAL OF DIVIDENDS. Whenever Plan Shares are paid
to a Participant or Beneficiary under Section 7.03, such
Participant or Beneficiary shall also be entitled to receive,
with respect to each Plan Share paid, an amount equal to any
cash dividends (including special large and nonrecurring
dividends, including one that has the effect of a return of
capital to the Company's stockholders) and a number of shares of
Common Stock equal to any stock dividends, declared and paid
with respect to a share of Common Stock between the date the
relevant Plan Share Award was initially granted to such
Participant and the date the Plan Shares are being distributed.
There shall also be distributed an appropriate amount of net
earnings, if any, of the Trust with respect to any cash
dividends so paid out.
7.03 DISTRIBUTION OF PLAN SHARES.
(a) TIMING OF DISTRIBUTIONS: General Rule. Except as
provided in Subsections (c), and (d) below, the Trustee shall
distribute Plan Shares and accumulated cash from dividends and
interest to the Participant or his Beneficiary, as the case may
be, as soon as practicable after they have been earned. No
fractional shares shall be distributed.
(b) FORM OF DISTRIBUTION. The Trustee shall distribute
all Plan Shares, together with any shares representing stock
dividends, in the form of Common Stock. One share of Common
Stock shall be given for each Plan Share earned. Payments
representing cash dividends (and earnings thereon) shall be made
in cash.
(c) WITHHOLDING. The Trustee shall 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 shall
require the Participant 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 Company or
Affiliate which employs or employed such Participant any such
amount withheld from or paid by the Participant or Beneficiary.
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(d) TIMING: EXCEPTION FOR 10% SHAREHOLDERS.
Notwithstanding Subsections (a) and (b) above, no Plan Shares
may be distributed prior to the date which is three (3) years
from the Date of Conversion to the extent the Participant or
Beneficiary, as the case may be, would after receipt of such
Shares own in excess of ten percent (10%) of the issued and
outstanding shares of Common Stock unless such action is
approved in advance by a majority vote of Non-employee Directors
of the Board. To the extent this limitation would delay the
date on which a Participant receives Plan Shares, the
Participant may elect to receive from the Trust, in lieu of such
Plan Shares, the cash equivalent thereof. Any Plan Shares
remaining undistributed solely by reason of the operation of
this Subsection (d) shall be distributed to the Participant or
his Beneficiary on the date which is five years from the Date of
Conversion.
(e) REGULATORY EXCEPTIONS. No Plan Shares shall be
distributed unless and until all of the requirements of all
applicable law and regulation shall have been fully complied
with, including the receipt of approval of the Plan by the
stockholders of the Company by such vote, if any, as may be
required by applicable law and regulations.
7.04 VOTING OF PLAN SHARES. All shares of Common Stock
held by the Trust (whether or not subject to a Plan Share Award)
shall be voted by the Trustee in the same proportion as the
trustee of the Company's Employee Stock Ownership Plan votes
Common Stock held in the trust associated therewith, and in the
absence of any such voting, shall be voted in the manner
directed by the Board.
7.05. DEFERRAL ELECTIONS BY PARTICIPANTS.
(a) ELECTIONS TO DEFER. At any time prior to December
31st of any year prior to the date on which a Participant
becomes vested in any shares subject to his or her Plan Share
Award, a Participant who is a member of a select group of
management or highly compensated employees (within the meaning
of the Employees' Retirement Income Security Act of 1973) may
irrevocably elect, on the form attached hereto as Exhibit "A"
(the "Election Form"), to defer the receipt of all or a
percentage of the Plan Shares that would otherwise be
transferred to the Participant upon the vesting of such award
(the "Deferred Shares").
(b) RECORDKEEPING; HOLDING OF DEFERRED SHARES. The
MRP Committee shall establish and maintain an individual account
in the name of each Participant who files an Election Form for
the purpose of tracking deferred earnings attributable to cash
dividends paid on Deferred Shares (the "Cash Account"). On the
last day of each fiscal year of the Company, the Committee shall
credit to the Participant's Cash Account earnings on the balance
of the Cash Account at a rate equal to the dividend-adjusted
total return on Common Stock, as determined from time to time by
the MRP Committee in its sole discretion. The Trustees shall
hold each Participant's Deferred Shares and Deferred Earnings in
the Trust until distribution is required pursuant to the
election set forth in the Participant's Election Form.
(c) DISTRIBUTIONS OF DEFERRED SHARES. The Trustee shall
distribute a Participant's Deferred Shares and Deferred Earnings
in accordance with the Participant's Election Form. All
distributions made by the Company and/or the Trustees pursuant
to elections made hereunder shall be subject to applicable
federal, state, and local tax withholding and to such other
deductions as shall at the time of such payment be required
under any income tax or other law, whether of the United States
or any other jurisdiction, and, in the case of payments to a
beneficiary, the delivery to the Committee and/or Trustees of
all necessary waivers, qualifications and other documentation.
Within 90 days after receiving notice of a Participant's death,
the Trustee shall distribute any balance of the Participant's
Deferred Shares and Deferred Earnings to the Participant's
designated beneficiary, if living, or if such designated
beneficiary is deceased or the Participant failed to designate a
beneficiary, to the Participant's estate. If, on the other
hand, a Participant's Continuous Service terminates for a reason
other than the Participant's death, Disability, early
retirement, or normal retirement, the Participant's Deferred
Shares and Deferred Earnings shall be distributed to the
Participant in a lump sum occurring as soon as reasonably
practicable. The distribution provisions of a Participant's
Election Form shall become irrevocable on the date that occurs
(i) one year before the Participant's termination of Continuous
Service for a reason other than death, and (ii) on the
Participant's death if that terminates the Participant's
Continuous Service.
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(d) HARDSHIP WITHDRAWALS. Notwithstanding any other
provision of the Plan or a Participant's Election Form, in the
event the Participant suffers an unforeseeable emergency
hardship within the contemplation of this paragraph, the
Participant may apply to the Committee for an immediate
distribution of all or a portion of his Deferred Shares and
Deferred Earnings. The hardship must result from a sudden and
unexpected illness or accident of the Participant or a dependent
of the Participant, casualty loss of property, or other similar
conditions beyond the control of the Participant. Examples of
purposes which are not considered hardships include post-
secondary school expenses or the desire to purchase a residence.
In no event will a distribution be made to the extent the
hardship could be relieved through reimbursement or compensation
by insurance or otherwise, or by liquidation of the
Participant's nonessential assets to the extent such liquidation
would not itself cause a severe financial hardship. The amount
of any distribution hereunder shall be limited to the amount
necessary to relieve the Participant's financial hardship. The
determination of whether a Participant has a qualifying hardship
and the amount which qualifies for distribution, if any, shall
be made by the Committee in its sole discretion. The Committee
may require evidence of the purpose and amount of the need, and
may establish such application or other procedures as it deems
appropriate.
(e) RIGHTS TO DEFERRED SHARES AND EARNINGS. A
Participant may not assign his or her claim to Deferred Shares
and Deferred Earnings during his or her lifetime, except in
accordance with Section 8.03 of this Plan. A Participant's right
to Deferred Shares and Deferred Earnings shall at all times
constitute an unsecured promise of the Company to pay benefits
as they come due. The right of the Participant or his or her
beneficiary to receive benefits hereunder shall be solely an
unsecured claim against the general assets of the Company.
Neither the Participant nor his or her beneficiary shall have
any claim against or rights in any specific assets or other fund
of the Company, and any assets in the Trust shall be deemed
general assets of the Company.
ARTICLE VIII
MISCELLANEOUS
8.01 ADJUSTMENTS FOR CAPITAL CHANGES.
(a) RECAPITALIZATIONS; STOCK SPLITS, ETC. The number
and kind of shares which may be purchased under the Plan, and
the number and kind of shares subject to outstanding Plan Share
Awards, shall be proportionately adjusted for any increase,
decrease, change or exchange of shares of Common Stock for a
different number or kind of shares or other securities of the
Company which results from a merger, consolidation, recapita-
lization, reorganization, reclassification, stock dividend,
split-up, combination of shares, or similar event in which the
number or kind of shares is changed without the receipt or
payment of consideration by the Company.
(b) TRANSACTIONS IN WHICH THE COMPANY IS NOT THE
SURVIVING ENTITY. In the event of (i) the liquidation or
dissolution of the Company, (ii) a merger or consolidation in
which the Company is not the surviving entity, or (iii) the sale
or disposition of all or substantially all of the Company's
assets (any of the foregoing to be referred to herein as a
"Transaction"), all outstanding Plan Share Awards shall be
adjusted for any change or exchange of shares of Common Stock
for a different number or kind of shares or other securities
which results from the Transaction.
(c) CONDITIONS AND RESTRICTIONS ON NEW, ADDITIONAL, OR
DIFFERENT SHARES OR SECURITIES. If, by reason of any adjustment
made pursuant to this Section, a Participant becomes entitled to
new, additional, or different shares of stock or securities,
such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and
restrictions which were applicable to the shares pursuant to the
Plan Share Award before the adjustment was made. In addition,
the Committee shall have the discretionary authority to impose
on the Shares subject to Plan Share Awards to Employees such
restrictions as the Committee may deem appropriate or desirable,
including but not limited to a right of first refusal, or
repurchase option, or both of these restrictions.
(d) OTHER ISSUANCES. Except as expressly provided in
this Section, the issuance by the Company or an Affiliate of
shares of stock of any class, or of securities convertible into
shares of Common Stock or stock of
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another class, for cash or property or for labor or services
either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, shall not affect, and no
adjustment shall be made with respect to, the number or class of
shares of Common Stock then subject to Plan Share Awards or
reserved for issuance under the Plan.
8.02 AMENDMENT AND TERMINATION OF PLAN. The Board may,
by resolution, at any time amend or terminate the Plan; provided
that no amendment or termination of the Plan shall, without the
written consent of a Participant, impair any rights or
obligations under a Plan Share Award theretofore granted to the
Participant.
The power to amend or terminate the Plan in accordance
with this Section 8.02 shall include the power to direct the
Trustee to return to the Company all or any part of the assets
of the Trust, including shares of Common Stock held in the Plan
Share Reserve. However, the termination of the Trust shall not
affect a Participant's right to earn Plan Share Awards and to
receive a distribution of Common Stock relating thereto,
including earnings thereon, in accordance with the terms of this
Plan and the grant by the Committee or the Board.
8.03 NONTRANSFERABILITY. Plan Share Awards may not be
sold, pledged, assigned, hypothecated, transferred or disposed
of in any manner other than by will or by the laws of descent
and distribution. Notwithstanding the foregoing, or any other
provision of this Plan, a Participant who holds Plan Share
Awards may transfer such Awards to his or her spouse, lineal
ascendants, lineal descendants, or to a duly established trust
for the benefit of one or more of these individuals. Plan Share
Awards so transferred may thereafter be transferred only to the
Participant who originally received the grant or to an
individual or trust to whom the Participant could have initially
transferred the Awards pursuant to this Section 8.03. Plan
Share Awards which are transferred pursuant to this Section 8.03
shall be exercisable by the transferee according to the same
terms and conditions as applied to the Participant.
8.04 NO EMPLOYMENT OR OTHER RIGHTS. Neither the Plan nor
any grant of a Plan Share Award or Plan Shares 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 or Director to continue
in the service of the Company, the Bank, or an Affiliate
thereof.
8.05 VOTING AND DIVIDEND RIGHTS. No Participant shall
have any voting or dividend rights or other rights of a
stockholder in respect of any Plan Shares covered by a Plan
Share Award prior to the time said Plan Shares are actually
distributed to him.
8.06 GOVERNING LAW. The Plan and Trust shall be governed
and construed under the laws of the State of Tennessee to the
extent not preempted by Federal law.
8.07 EFFECTIVE DATE. The Plan shall become August 18,
1999; provided that the effectiveness of the Plan and any Plan
Share Award shall be absolutely contingent upon the Plan's
approval by a favorable vote of stockholders of the Company who
own at least a majority of the total votes cast at a duly called
meeting of the Company's stockholders held in accordance with
applicable laws. In no event shall Plan Share Awards be made
within one year of the Date of Conversion.
8.08 TERM OF PLAN. This Plan shall remain in effect
until the earlier of (i) termination by the Board, or (ii) the
distribution of all assets of the Trust. Termination of the
Plan shall not affect any Plan Share 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.
8.09 TAX STATUS OF TRUST. It is intended that (i) the
Trust associated with the Plan be treated as a grantor trust of
the Company under the provisions of Section 671 et seq. of the
Code, as the same may be amended from time to time, and (ii)
that in accordance with Revenue Procedure 92-65 (as the same may
be amended from time to time), Participants have the status of
general unsecured creditors of the Company, the Plan constitutes
a mere unfunded
8
promise to make benefit payments in the future, the Plan is
unfunded for tax purposes and for purposes of Title I of the
Employee Retirement Income Security Act of 1974, as amended, and
the Trust has been and will continue to be maintained in
conformity with Revenue Procedure 92-64 (as the same may be
amended from time to time).
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CUMBERLAND MOUNTAIN BANCSHARES, INC.
GRANTOR TRUST AGREEMENT
PREAMBLE. This Trust Agreement made this day of
________, 1999, by and between Cumberland Mountain Bancshares,
Inc. (the "Company"), and the undersigned individuals (when
acting by majority, the "Trustee") who are currently directors
of the Company but are acting here in their individual capacity.
WHEREAS, the Company maintains the Cumberland Mountain
Bancshares, Inc. Management Recognition Plan, the Cumberland
Mountain Bancshares, Inc. 1993 Stock Option Plan, and the
Cumberland Mountain Bancshares, Inc. 1998 Stock Option and
Incentive Plan (collectively, the "Plans"); and
WHEREAS, the Company has entered into, and may in the
future enter into, employment and severance agreements
("Executive Agreements") with select key employees; and
WHEREAS, the Company has incurred or expects to incur
liability under the terms of the Plans and Executive Agreements
(collectively, the "Arrangements") with respect to the benefits
payable thereunder to individuals or their named beneficiaries
or their estates (collectively, the "Beneficiaries"); and
WHEREAS, the Company wishes to establish this trust (the
"Trust") and to contribute assets to the Trust that shall be
held therein, subject to the claims of the Company's general
creditors in the event of Insolvency, as defined in Section 3(a)
hereof, until paid to Beneficiaries in such manner and at such
times as specified in the Arrangements; and
WHEREAS, it is the intention of the parties that this Trust
shall constitute an unfunded Arrangements and shall not affect
the status of the Arrangements as unfunded plans maintained for
the purpose of providing deferred compensation to a select group
of management or other highly compensated employees for purposes
of Title I of the Employee Retirement Income Security Act of
1974, as amended from time to time; and
WHEREAS, it is the intention of the Company to make
contributions to the Trust to provide itself with a source of
funds to assist it in the meeting of its liabilities under the
Arrangements.
WHEREAS, the Company desires to establish a fund,
consisting of the cash dividends that have accumulated from the
shares held in the Trust, for the payment of discretionary cash
bonuses to employees of the Company and its subsidiaries.
NOW, THEREFORE, the undersigned parties do hereby establish
this Trust and agree that the Trust shall be comprised, held and
disposed of as follows:
Section 1. Establishment of Trust
---------------------------------
(a) The Company hereby deposits, or will shortly hereafter
deposit with the Trustee an amount expected to be sufficient to
permit the Trust to purchase up to 85,556 shares of the
Company's common stock ("Common Stock") either directly from the
Company or through open market purchases. Said amount shall
become the initial principal of the Trust to be held,
administered, and dispersed by the Trustee as provided for in
this Trust Agreement.
(b) The Trust shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which
the Company is the grantor, within the meaning of subpart E,
part I, subchapter J, chapter 1, subtitle A of the Internal
Revenue Code of 1986, as amended (the "Code"), and shall be
construed accordingly. In the event the Trust is determined by
the Internal Revenue Service or by counsel
to the Company not to be a "grantor trust" within the meaning of
the Code, (with the result that the income of the Trust assets
is not treated as income of the Company or that the funding of,
or realization of income by, the Trust results in income to the
Beneficiaries prior to the date that such funds are actually
distributed or made available to them hereunder), then the
Trustee, upon receipt of written direction from the Company,
shall make payments from the Trust assets to such Beneficiaries,
in such manner and in such amounts as the Company shall direct,
for purposes of (i) paying the amount of Federal, state and
local tax and interest and any penalties thereon which such
Beneficiaries may incur arising out of any such determination,
or (ii) distributing the interests of Beneficiaries in the Trust
assets.
(d) The principal of the Trust, and any earnings thereon,
shall be held separate and apart from other funds of the Company
and shall be used exclusively as herein set forth.
Beneficiaries shall have no preferred claim on, or any
beneficial ownership interest in, any assets of the Trust. Any
rights created under the Arrangements and this Trust Agreement
shall be mere unsecured contractual rights of Beneficiaries
against the Company. Any assets held by the Trust will be
subject to the claims of the Company's general creditors under
federal and state law in the event of Insolvency, as defined in
Section 3(a) herein.
(e) The Company, in its sole discretion, may at any time,
or from time to time, make additional contributions of cash or
other assets to the Trustee, to augment the principal to be
held, administered and disposed of by Trustee as provided in
this Trust Agreement. Neither the Trustee nor any Beneficiary
shall have any right to compel such additional contributions.
(f) As soon as possible but in no event longer than ten
business days after the Change in Control within the meaning of
Section 13(g) hereof, the Company shall make an irrevocable
contribution to this Trust in an amount that is projected to be
sufficient to pay each Beneficiary the benefits to which he or
she is entitled pursuant to the Arrangements as of the date of
the Change in Control.
Section 2. Payments to Beneficiaries
------------------------------------
(a) The Company shall deliver to the Trustee a schedule
(the "Payment Schedule") that indicates the amounts payable in
respect of each Beneficiary, that provides a formula or other
instructions acceptable to the Trustee for determining the
amounts so payable, the form in which such amount is to be paid
(as provided for or available under the Agreement), and the time
of commencement for payment of such amounts. Except as
otherwise provided herein, the Trustee shall make payments to
Beneficiaries in accordance with such Payment Schedule. The
Trustee shall make provision for the reporting and withholding
of any Federal, state or local taxes that may be required to be
withheld with respect to the payment of benefits pursuant to the
terms of the Arrangements and shall pay amounts withheld to the
appropriate taxing authorities or determine that such amounts
have been reported, withheld and paid by the Company.
(b) The entitlement of a Beneficiary to benefits under the
Arrangements or this Trust Agreement shall be determined by the
Company or such party as it shall designate under the
Arrangements, and any claim for such benefits shall be
considered and reviewed under the procedures set out in the
Arrangements.
(c) The Company may make payment of benefits directly to
Beneficiaries as they become due under the terms of the
Arrangements. The Company shall notify the Trustee of its
decision to make direct payment of benefits prior to the time
amounts are payable to Beneficiaries. In addition, if the
principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the
terms of the Arrangements, the Company shall be jointly and
severally liable to make the balance of each such payment as it
falls due. The Trustee shall notify the Company when principal
and earnings of the Trust are not sufficient to continue
payments to the Beneficiaries.
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Section 3. Trustee Responsibility Regarding Payments to
-------------------------------------------------------
Trust Beneficiary When Company is Insolvent
- -------------------------------------------
(a) The Trustee shall cease payment of benefits to
Beneficiaries if the Company is Insolvent. The Company shall be
considered "Insolvent" for purposes of this Trust Agreement if
(i) the Company is unable to pay its debts as they become due,
or (ii) the Company becomes subject to a pending proceeding as a
debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section l(d) hereof, the principal and income of the
Trust shall be subject to claims of general creditors of the
Company under federal and state law as set forth below.
(c) The Company's Board of Directors and its Chief
Executive Officer shall have the duty to inform the Trustee in
writing of the Company's Insolvency. If a person claiming to be
a creditor of the Company alleges in writing to the Trustee that
the Company has become Insolvent, the Trustee shall determine
whether the Company is Insolvent by informing the Company's
Board of Directors and its Chief Executive Officer of such
written notice and, pending such determination, the Trustee
shall discontinue payment of benefits to Beneficiaries.
(1) Unless the Trustee has actual knowledge of the
Company's Insolvency, or has received notice from the Company or
a person claiming to be a creditor alleging that the Company is
Insolvent, the Trustee shall have no duty to inquire whether the
Company is Insolvent. The Trustee may in all events rely on
such evidence concerning the Company's solvency as may be
furnished to the Trustee and that provides the Trustee with a
reasonable basis for making a determination concerning the
Company's solvency.
(2) If at any time the Trustee has determined that
the Company is Insolvent, the Trustee shall discontinue payments
to Beneficiaries, shall liquidate the Trust's investment in
common stock ("Common Stock") of the Company (or its holding
company if one exists), and shall hold the assets of the Trust
for the benefit of the Company's general creditors. Nothing in
this Trust Agreement shall in any way diminish any rights of
Beneficiaries as general creditors of the Company with respect
to benefits due under the Arrangements or otherwise.
(3) The Trustee shall resume the payment of benefits
to Beneficiaries in accordance with Section 2 of this Trust
Agreement only after the Trustee has received a certification in
writing from the Company's Board of Directors and its Chief
Executive Officer that the Company is not Insolvent (or is no
longer Insolvent).
(d) Provided that there are sufficient assets, if the
Trustee discontinues the payment of benefits from the Trust
pursuant to Section 3(b) hereof and subsequently resumes such
payments, the first payment following such discontinuance shall
include the aggregate amount of all payments due to
Beneficiaries under the terms of the Arrangements for the period
of such discontinuance, less the aggregate amount of any
payments made to Beneficiaries by the Company in lieu of the
payments provided for hereunder during any such period of
discontinuance.
Section 4. Payments to the Company
----------------------------------
Except as provided in Section 3 hereof, after the Trust has
become irrevocable, the Company shall not have the right or
power to direct the Trustee to return to the Company or to
divert to others any of the Trust assets before all payment of
benefits have been made to Beneficiaries pursuant to the terms
of the Arrangements.
Section 5. Investment Authority
-------------------------------
(a) The Trustee shall have the sole discretion as to the
investment of Trust assets, except that to the extent reasonably
practicable, the Trustee shall invest all assets of the Trust in
Common Stock; provided that the Trust shall not purchase, in the
aggregate, more than 85,556 shares of Common Stock. The Company
may direct the Trustee in writing with respect to the investment
and management of the Trust assets.
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(b) All rights associated with assets of the Trust,
including voting rights with respect to Common Stock, shall be
exercised by the Trustee in the manner directed in writing by
the Company, and shall in no event be exercisable by or rest
with Beneficiaries.
(c) Subject to applicable federal and state securities
laws, the Trustee shall offer to sell any shares of Common
Stock held by the Trust, on substantially similar terms, to the
following purchasers, listed here by order of priority: first,
the Company; second, any benefit Arrangements maintained by the
Company; third, directors of the Company; fourth, officers of
the Company; fifth, members of the general public.
Section 6. - Disposition of Income
----------------------------------
During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and
reinvested in the manner directed by the Company or Investment
Manager(s).
Section 7. Accounting By Trustee
--------------------------------
The Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions
required to be made, including such specific records as shall be
agreed upon in writing between the Company and the Trustee.
Within 120 days following the close of each calendar year and
within 20 days after the removal or resignation of the Trustee,
the Trustee shall deliver to the Company a written account of
its administration of the Trust during such year or during the
period from the close of the last preceding year to the date of
such removal or resignation, setting forth all investments,
receipts, disbursements and other transactions effected by it,
including a description of all securities and investments
purchased and sold with the cost or net proceeds of such
purchases or sales (accrued interest paid or receivable being
shown separately), and showing all cash, securities and other
property held in the Trust at the end of such year or as of the
date of such removal or resignation, as the case may be.
Section 8. Responsibility of Trustee
------------------------------------
(a) The Trustee and each Investment Manager shall act with
the care, skill, prudence and diligence under the circumstances
then prevailing that a prudent person acting in like capacity
and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims; provided,
however, that the Company shall hold the Trustee harmless
against any liability to any person for any action taken
pursuant to a direction, request or approval given by the
Company or Investment Manager(s) which is contemplated by, and
in conformity with, the terms of the Arrangements or this Trust
Agreement and is given in writing by the Company. In the event
of a dispute between the Company or Investment Manager(s) and a
party, the Trustee may apply to a court of competent
jurisdiction to resolve the dispute.
(b) If the Trustee undertakes or defends any litigation
arising in connection with this Trust, the Company agrees to
indemnify the Trustee against Trustee's costs, expenses and
liabilities (including, without limitation, attorneys' fees and
expenses) relating thereto and to be primarily liable for such
payments, except inn those cases where the Trustee shall have
been found by a court of competent jurisdiction to have acted
with gross negligence or willful misconduct. If the Company
does not pay such costs, expenses and liabilities in a
reasonably timely manner, the Trustee may obtain payment from
the Trust.
(c) The Trustee may consult with legal counsel with
respect to any of its duties or obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other
professionals to assist it in performing any of its duties or
obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers
conferred on trustees by applicable law, unless expressly
provided otherwise herein; provided, however, that if an
insurance policy is held as an asset of the Trust, the
4
Trustee shall have no power to name a beneficiary of the policy
other than the Trust, to assign the policy (as distinct from
conversion of the policy to a different form) other than to a
successor the Trustee, or to loan to any person the proceeds of
any borrowing against such policy.
(f) Notwithstanding any powers granted to the Trustee
pursuant to this Trust Agreement or to applicable law, the
Trustee shall not have any power that could give this Trust the
objective of carrying on a business and dividing the gains
therefrom, within the meaning of Section 301.7701-2 of the
Procedure and Administrative Regulations promulgated pursuant to
the Code.
Section 9. Compensation and Expenses of Trustee
-----------------------------------------------
The Company shall pay all administrative expenses and the
Trustee's fees and expenses relating to the Arrangements and
this Trust. If not so paid, the fees and expenses shall be paid
from the Trust.
Section 10. Resignation and Removal of Trustee
----------------------------------------------
The Trustee may resign at any time by written notice to the
Company, which resignation shall be effective 60 days after the
Company receives such notice (unless the Company and the Trustee
agree otherwise). The Trustee may be removed by the Company on
60 days notice or upon shorter notice accepted by the Trustee
but only if the Beneficiaries of 80% or more of the Trust's
assets consent in writing to such removal.
If the Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the
effective date of resignation or removal under this section. If
no such appointment has been made, the Trustee may apply to a
court of competent jurisdiction for appointment of a successor
or for instructions. All expenses of the Trustee in connection
with the proceeding shall be allowed as administrative expenses
of the Trust. Upon resignation or removal of the Trustee and
appointment of a successor trustee, all assets shall
subsequently be transferred to the successor trustee. The
transfer shall be completed within 60 days after receipt of
notice of resignation, removal or transfer, unless the Company
extends the time limit.
Section 11. Appointment of Successor
------------------------------------
If the Trustee resigns or is removed in accordance with
Section 10 hereof, the Company may appoint any other party as a
successor to replace the Trustee upon resignation or removal.
The appointment shall be effective when accepted in writing by
the new trustee, who shall have all of the rights and powers of
the former trustee. The former trustee shall execute any
instrument necessary or reasonably requested by the Company or
the successor trustee to evidence the transfer. Notwithstanding
the foregoing, if the Trustee resigns or is removed following a
Change in Control, (i) the Trustee that has resigned or is being
removed shall nominate as its successor a third party financial
institution that has trust powers and is independent of and
unrelated to the entity that has acquired or otherwise obtained
control of the Bank or the Company, and (ii) the appointment of
any particular successor trustee is approved in writing by the
Beneficiaries of 80% or more of the Trust's assets.
A successor trustee need not examine the records and acts
of any prior trustee and may retain or dispose of existing Trust
assets, subject to Sections 7 and 8 hereof. The successor
trustee shall not be responsible for, and the Company shall
indemnify and defend the successor trustee from, any claim or
liability resulting from any action or inaction of any prior
trustee or from any other past event, or any condition existing
at the time it becomes successor trustee.
Section 12. Amendment or Termination
------------------------------------
(a) This Trust Agreement may be amended by a written
instrument executed by the Company and the Trustee, provided
that no such amendment shall make the Trust revocable. In
addition, no such amendment shall be made that affects the
duties or responsibilities of the Trustee without its written
consent, or that adversely, affects the Company without its
consent. Amendments shall become effective upon delivery to the
Trustee of a written instrument of amendment, duly executed and
acknowledged by the Company and accompanied by a certified copy
of a resolution
5
of the Board of Directors of the Company authorizing such
amendment. The Company also shall deliver to the Trustee a
copy of any modification or amendment to the Arrangements.
(b) Notwithstanding subsection (a) hereof, the provisions
of this Trust Agreement and the trust created thereby may not be
amended without the written consent of the Beneficiaries of 80%
or more of the Trust's assets.
(c) The Trust shall not terminate until the date on which
no Beneficiary is entitled to benefits pursuant to the terms
hereof or of the Arrangements. Upon termination of the Trust,
the Trustee shall return any assets remaining in the Trust to
the Company.
(d) Upon written approval of the Beneficiaries if they are
then entitled to payment of benefits, the Company may terminate
this Trust prior to the time all benefit payments under the
Arrangements have been made. All assets in the Trust at
termination shall be returned to the Company.
Section 13. Miscellaneous
-------------------------
(a) Any action required by any provision of this Trust
Agreement to be taken by the Board of Directors of the Company
shall be evidenced by a resolution of its Board of Directors,
certified to the Trustee by the Secretary or an Assistant
Secretary of the Company under its corporate seal, and the
Trustee shall be fully protected in relying upon any resolution
so certified to it. Unless other evidence with respect thereto
has been specifically prescribed in this Trust Agreement, any
other action of the Company under any provision of this Trust
Agreement shall be evidenced by a certificate signed by an
officer of the Company, and the Trustee shall be fully protected
in relying upon such certificate. The Trustee may accept a
certificate signed by an officer of the Company as proof of any
fact or matter than it deems necessary or desirable to have
established in the administration of the Trust (unless other
evidence of such fact or matter is expressly prescribed herein),
and the Trustee shall be fully protected in relying upon the
statements in the certificate.
(b) Any provision of this Trust Agreement prohibited by
law shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
(c) Benefits payable to Beneficiaries under this Trust
Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to
attachment, garnishment, levy, execution or other legal or
equitable process, except pursuant to the terms of the
Arrangements and this Trust Agreement.
(d) This Trust Agreement shall bind and inure to the
benefit of the successors and assigns of the Company and the
Trustee, respectively.
(e) This Trust Agreement shall be governed by and
construed in accordance with the laws of Kentucky.
(f) The Trustee agrees to be bound by the terms of the
Arrangements, as in effect from time to time.
(g) "Change in Control" as defined in the Company's
Management Recognition Plan (the "MRP") is defined in the same
manner for purposes of this Trust. Any amendment to the MRP
that modifies said definition shall be deemed to apply with
equal force, effect, and timing to the definition of Change in
Control for purposes of this Trust, except that a modification
that may adversely affect a Beneficiary shall be ineffectual as
to the Beneficiary unless he or she consents in writing to be
bound by the modification.
(i) Until notice is given to the contrary, communications
to the Trustee shall be sent to each trustee at his home
address; communications to the Company shall be sent to it at
its office at 1431 Cumberland Avenue, Middlesboro, Kentucky
40965.
6
Section 14. Effective Date.
---------------------------
The effective date of this Trust Agreement shall be the
date referenced in its Preamble.
IN WITNESS WHEREOF, the Company, by its duly authorized
officer, has caused this Trust Agreement to be executed, and its
corporate seal affixed, and the Trustees have executed this
Trust Agreement, this on the date referenced in the Preamble
hereof.
"COMPANY"
CUMBERLAND MOUNTAIN BANCSHARES, INC.
Attest:
/s/ J.D. Howard By: /s/ James J. Shoffner
- ------------------------- ---------------------------
Its President
"TRUSTEE"
Attest:
/s/ James J. Shoffner /s/ Barry Litton
- ------------------------- ---------------------------
Barry Litton
Attest:
- ------------------------- ---------------------------
Robert R. Long
Attest:
/s/ J.D. Howard /s/ Raymond C. Walker
- ------------------------- ---------------------------
Raymond C. Walker
7