Exhibit 10
Middlesboro Federal Bank, Federal Savings Bank
1993 Stock Option plan
1. Purpose of the Plan.
The purpose of this Middlesboro Federal Bank, Federal Savings Bank 1993
Stock Option Plan (the "Plan") is to advance the interests of Middlesboro
Federal Bank, Federal Savings Bank through providing select key Employees and
Directors of the Savings Bank with the opportunity to purchase shares of Common
Stock of the Savings Bank. By encouraging such stock ownership, the Savings Bank
seeks to attract, retain and motivate the best available personnel for positions
of substantial responsibility and to provide additional incentive to key
Employees and Directors of the Savings Bank or any present or future Parent or
Subsidiary of the Savings Bank to promote the success of the business. It is
intended that options issued pursuant to this Plan may constitute either ISOs or
Non-ISOs.
2. Definitions.
As used herein, the following definitions shall apply.
(a) "Savings Bank" shall mean the Middlesboro Federal Bank, Federal
Savings Bank, Middlesboro, Kentucky.
(b) "Board" shall mean the Board of Directors of the Savings Bank.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Committee" shall mean the Stock Option Committee appointed by the
Board in accordance with paragraph 4(a) of the Plan hereof.
(e) "Common Stock" shall mean the common stock, par value $.0l per share,
of the Savings Bank.
(f) "Continuous Employment" or "Continuous Status as an Employee" shall
mean the absence of any interruption or termination of employment by the Savings
Bank or any present or future Parent or Subsidiary of the Savings Bank.
Employment shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence, approved by the Savings Bank or in
the case of transfers between payroll locations of the Savings Bank, its
Parent, its Subsidiaries or a successor.
(g) "Director" shall mean any member of the Board of Directors.
(h) "Effective Date" shall mean the date specified in paragraph 12 hereof.
(i) "Employee" shall mean any person employed by the Savings Bank or any
present or future Parent or Subsidiary of the Savings Bank.
(j) "Option" shall mean an option to purchase Shares granted pursuant to
the Plan, whether the option is an incentive stock option within the meaning of
Section 422 of the Code (an "ISO"), or an option that does not so qualify
(a "Non-ISO")
(k) "Option Price" shall mean the price per Option Share at which an
Option may be exercised.
(l) "Optioned Shares" shall mean Shares subject to an Option granted
pursuant to this Plan.
(m) "Optionee" shall mean any person who receives an Option pursuant to
the Plan.
(n) "Parent" shall mean any present or future corporation which would be a
"parent corporation" as defined in Subsections 424(e) and (g) of the Code.
(o) "Plan" shall mean the Middlesboro Federal Bank, Federal Savings Bank
1993 Stock Option Plan.
(p) "Share" shall mean one share of Common Stock.
(q) "Subsidiary" shall mean any present or future corporation which would
be a "subsidiary corporation" as defined in Subsections 424(f) and (g) of the
Code.
3. Shares Subject to the Plan.
Except as otherwise required by the provisions of paragraph 11 hereof,
the aggregate number of Shares deliverable upon the exercise of Options pursuant
to the Plan shall not exceed _____/1/ Shares. Such Shares may either be
authorized but unissued Shares or Shares held in treasury.
If Options should expire, become unexercisable or be forfeited for any
reason without having been exercised in full, the Option Shares shall, unless
the Plan shall have been terminated, be available for the grant of additional
Options under the Plan.
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/1/ Equal to 10% of the total number of shares of Common Stock sold in the
formation of a mutual holding company by the Savings Bank.
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4. Administration of the Plan.
(a) Composition of Committee. The Plan shall be administered by the
Committee, which shall consist of not less than three (3) Directors appointed by
the Board. All persons designated as members of the Committee shall be
"disinterested persons" within the meaning of Rule 16b-3 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended ("Rule
16b-3"). Members of the Committee shall serve at the pleasure of the Board. In
the absence at any time of a duly appointed Committee, the Plan shall be
administered by those Directors who are "disinterested persons" within the
meaning of Rule 16b-3.
(b) Powers of the Committee. The Committee shall have discretionary
authority (but only to the extent not contrary to the express provisions of the
Plan or to resolutions adopted by the Board) to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the form and content of Options to be issued under the Plan and to
make other determinations necessary or advisable for the administration of the
Plan, and shall have and may exercise such other power and authority as may be
delegated to it by the Board from time to time. A majority of the entire
Committee shall constitute a quorum and the action of a majority of the members
present at any meeting at which a quorum is present shall be deemed the action
of the Committee.
(c) Effect of Committee's Decision. All decisions, determinations and
interpretations of the Committee shall be final and conclusive on all persons
affected thereby.
5. Eligibility.
(a) General Rule. In its sole discretion, the Committee may grant Options
to Employees of the Savings Bank, or any present or future Parent or Subsidiary.
Each nonemployee director shall be granted Non-ISOs only in accordance with
paragraph 11 hereof. An Optionee who has been granted an Option may, if
otherwise eligible, be granted an additional Option or Options. However, no
Employee or Director shall have a right to be granted an Option or, having
received an option, the right to again be granted an Option.
(b) Special Rules. The aggregate fair market value (determined in
accordance with paragraph 7 hereof), as of the date the Option is granted, of
the Shares with respect to which incentive stock options are exercisable for the
first time by an Employee during any calendar year (under all incentive stock
option plans, as defined in Section 422 of the Code, of the Savings Bank or any
present or future Parent or Subsidiary of the Savings Bank) shall not exceed
$100,000. Notwithstanding the prior provisions of this paragraph, the Committee
may grant Options in excess of the foregoing limitations, in which case such
Options granted in excess of such limitation shall be Options which are not
incentive stock options, as defined in Section 422 of the Code, pursuant to
Section 422(d) of the Code. Furthermore, in no event shall Shares subject to
Options granted to non-employee Directors under this Plan exceed in the
aggregate more than 20% of the total number of Shares authorized for issuance
pursuant to paragraph 3 hereof.
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6. Term of Plan; Term of Options.
(a) The Plan shall continue in effect for a term of ten years from the
Effective Date, unless sooner terminated pursuant to paragraph 17 hereof. No
Option shall be granted under the Plan after ten years from the Effective Date.
(b) The term of each Option granted under the Plan shall be established by
the Committee, but shall not exceed 10 years; provided, however, that in the
case of an Employee who owns Shares representing more than 10% of the
outstanding Common Stock at the time the Option is granted, the term of such
Option shall not exceed five (5) years.
7. Option Price.
(a) The Option Price as to any particular Option granted under the Plan
shall not be less than the fair market value of the Optioned Shares on the date
of grant. In the case of an Employee who owns Shares representing more than 10%
of the Savings Bank's outstanding Shares of Common Stock at the time an ISO is
granted, the Option Price shall not be less than 110% of the fair market value
of the Optioned Shares at the time the ISO is granted.
(b) Determination of Option Price. If the Common Stock is traded otherwise
than on a national securities exchange at the time of the granting of an Option,
then the Option Price per Share shall be not less than the mean between the bid
and asked price on the date the Option is granted or, if there is no bid and
asked price on said date, then on the next prior business day on which there was
a bid and asked price. If no such bid and asked price is available, then the
Option Price per Share shall be determined by the Committee, in its sole and
absolute discretion. If the Common Stock is listed on a national securities
exchange (including the NASDAQ National Market System) at the time of granting
an Option, then the Option Price per share shall be not less than the average of
the highest and lowest selling price on such exchange on the date such Option
is granted or if there were no sales on said date, then the Option Price shall
be not less than the mean between the bid and asked price on such date.
(c) Reissuance of Options. Notwithstanding anything herein to the
contrary, the Committee shall have the authority to cancel outstanding Options
with the consent of the Optionee and to reissue new Options at a lower Option
Price equal to the then fair market value per share of Common Stock in the event
that the fair market value per share of Common Stock at any time prior to the
date of exercise of outstanding Options falls below the Option Price of such
Options; provided that the Option Price, of the reissued Options shall in no
event be less than 75% of the Option Price of the Option when first issued.
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8. Exercise of Option.
(a) Procedure for Exercise. Any Option granted hereunder shall be
exercisable at such times and under such conditions as shall be permissible
under the terms of the Plan and of the Option granted to an Optionee. An Option
may not be exercised for a fractional Share.
An Optionee may exercise Options granted pursuant to the Plan, subject to
provisions relative to its termination and limitations on its exercise, only by
(l) written notice of intent to exercise the Option with respect to a specified
number of Shares, and (2) payment to the Savings Bank (contemporaneously with
delivery of such notice) in cash, in Common Stock, or a combination of cash and
Common Stock, of the amount of the Option Price for the number of Shares with
respect to which the Option is then being exercised. Each such notice and
payment shall be delivered, or mailed by prepaid registered or certified mail,
addressed to the Treasurer of the Savings Bank at the Savings Bank's executive
offices. Common Stock utilized in full or partial payment of the Option Price
shall be valued at its fair market value at the date of exercise.
(b) Exercise During Employment or Following Death or Disability. Except as
may be specifically provided for by the terms of an Option as may be authorized
by the Committee at the time of such grant, an Option may be exercised by an
Optionee only while he is an Employee and has maintained Continuous Status as an
Employee since the date of the grant of the Option or within three months after
termination of status as an Employee (but not later than the date on which the
Option would otherwise expire), except if the Savings Bank terminates his
Continuous Employment by reason of (1) "Just Cause" (which for purposes hereof
shall have the same meaning as defined in the then existing employment agreement
between the Optionee and the Savings Bank or any of its Parent or Subsidiaries
and, in the absence of any such agreement, shall have the meaning defined in
12 C.F.R. (S)563.39(b)(l) as in effect on the Effective Date), then the
Optionee's rights to exercise such Option shall expire on the date of such
termination; (2) death, then to the extent that the Optionee would have been
entitled to exercise the Option immediately prior to his death, such Option of
the deceased Optionee may be exercised within two years from the date of his
death (but not later than the date on which the option would otherwise expire)
by the personal representatives of his estate or person or persons to whom his
rights under such Option shall have passed by will or by laws of descent and
distribution; or (3) Permanent and Total Disability (as such term is defined in
Section 22(e)(3) of the Code), then to the extent that the Optionee would have
been entitled to exercise the Option immediately prior to his Permanent and
Total Disability, such Option may be exercised within one year from the date of
such Permanent and Total Disability, but not later than the date on which the
Option would otherwise expire. Notwithstanding the provisions of any Option
which provides for its exercise in installments as designated by the Committee,
such Option shall become immediately exercisable upon death or Permanent and
Total Disability, as defined herein, of the Optionee.
The Committee's determination whether an Optionee's Continuous Employment
has ceased, and the effective date thereof shall be final and conclusive on all
persons affected thereby.
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(c) Notwithstanding anything herein to the contrary, in no event shall any
Option granted pursuant to the Plan be exercisable for six months from the date
of grant, except in the event of the death, retirement or Permanent and Total
Disability of the Optionee.
9. Change in Control.
Notwithstanding the provisions of any Option which provides for its
exercise in installments as designated by the Committee, such Option shall
become immediately exercisable in the event of a change in control (or
immediately prior to the occurrence of a change in control of the Savings Bank
if such change would cause the optionee's rights under the Option to be
extinguished for any reason). At such time, the Optionee shall, at the
discretion of the Committee, be entitled to receive cash in an amount equal to
the excess of the fair market value of the Common Stock (determined in
accordance with paragraph 7) subject to such Option over the Option Price of
such shares, in exchange for the surrender of such Options by the Optionee. For
purposes of this paragraph, "change in control" shall mean the acquisition of
the beneficial ownership (as that term is defined in Rule 13d-3 of the General
Rules and Regulations under the Securities Exchange Act of 1934) of 25% or more
of the voting securities of the Savings Bank by any person or by persons acting
as a group within the meaning of Section 13(d) of the Securities Exchange Act of
1934. A change in control shall not be deemed to have occurred with respect to a
transaction in which the Savings Bank forms a holding company without change in
the respective beneficial ownership interests of its stockholders other than
pursuant to the exercise of any dissenter and appraisal rights or the purchase
of shares by underwriters in connection with a public offering. 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, or offer to effect
a change in control, has occurred shall be conclusive and binding.
10. Non-Transferability of Options.
Options granted under the Plan may not be sold, pledged, as signed,
hypothecated, transferred or disposed of in any manner other than by will or by
the laws of descent and distribution. An Option may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Grants for Nonemployee Directors.
(a) Grants to Nonemployee Directors. Notwithstanding any other provisions
of this Plan, each Director who is not an Employee at the Effective Date shall
receive on the Effective Date, Options to purchase _____/2/ Shares of Common
Stock at an Option Price equal to the initial offering price of such Common
Stock, and each Director who is not an Employee and who first joins the
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/2/ To be determined as follows: 20% of the aggregate number of Shares
subject to the Plan, pursuant to paragraph 3, shall be divided in equal numbers
between all Directors who are not Employees at the Effective Date.
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Board after the Effective Date shall receive, or the date he became a Director,
Options to purchase 100 Shares of common Stock at an Option Price equal to the
then fair market value of such Common Stock
(b) Terms of Exercise. Options received under the provisions of this
paragraph may be exercised by (l) written notice of intent to exercise the
Option with respect to a specified number of Shares, and (ii) payment to the
Savings Bank (contemporaneously with the delivery of such notice) in cash, in
Common Stock, or a combination of cash and Common Stock, of the amount of the
Option Price for the number of Shares with respect to which the Option is then
being exercised. Each such notice and payment shall be delivered, or mailed by
prepaid registered or certified mail, addressed to the Treasurer of the Savings
Bank at the Savings Bank's executive offices A nonemployee Director who
exercises Options pursuant to this paragraph may satisfy all applicable federal,
state and local income and employment tax withholding obligations, in whole or
in part, by irrevocably electing to have the Savings Bank withhold shares of
Common Stock, or to deliver to the Savings Bank shares of Common Stock that he
already owns, having a value equal to the amount required to be withheld;
provided that to the extent not inconsistent herewith, such election otherwise
complies with those requirements or Paragraphs 8(a) or 20 hereof. Such Options
may be exercised only while the Optionee is a Director of the Savings Bank, or
within one year after termination of the Optionee's status as a Director but not
later than the date on which such Options would otherwise expire, or in the
event of such person's death during the term of his directorship, by the
personal representatives of his estate or person or persons to whom his rights
under such Option shall have passed by will or by laws of descent and
distribution. Such Options of a deceased Director may be exercised within two
years from the date of his death, but not later than the date on which the
Option would otherwise expire. Unless otherwise inapplicable, or inconsistent
with the provisions of this paragraph, the Options to be granted to Directors
hereunder shall be subject to all other provisions of this Plan.
12. Effect or Change in Common Shares Subject to the Plan.
In the event that each of the outstanding shares of Common Stock (other
than Shares held by dissenting shareholders) shall be changed into or exchanged
for a different number or kind of shares of capital stock of the Savings Bank or
of another corporation (whether by reason of merger, consolidation,
recapitalization, reclassification, stock dividend, split-up, combination of
shares, or otherwise), then there shall be substituted for each Share of Common
Stock then under Option or available for Option the number and kind of shares of
capital stock into which each outstanding Share of Common Stock (other than
Shares held by dissenting stockholders) shall be so changed or for which each
such Share shall be so exchanged, together with an appropriate adjustment of the
Option Price.
In the event there shall be any change in the number of, or kind of, issued
shares of Common Stock, or of any capital stock or other securities into which
such Common Stock shall have been changed, or for which it shall have been
exchanged, then if the Committee shall, in its discretion, determine that such
change equitably requires an adjustment in the number, or kind, or Option Price
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of Shares then subject to an Option or available for Option, such adjustment
shall be made by the Board and shall be effective and binding for a11 purposes
of the Plan.
13. Time or Granting Options.
The date of grant of an Option under the Plan shall, for all purposes, be
the date on which the Committee makes the determination of granting such Option.
Notice of the determination shall be given to each Optionee to whom an Option is
so granted within a reasonable time after the date of such grant.
14. Effective Date.
The Plan shall become effective upon the effective date of the formation of
the Mutual Holding Company by the Savings Bank. Options may be granted prior to
approval of the Plan by the stockholders of the Savings Bank if the exercise of
such Options is subject to such stockholder approval of the Plan. The Plan shall
continue in effect for a term of ten years from the Effective Date, unless
sooner terminated under paragraph 17 hereof.
15. Approval by Stockholders.
The Plan shall be approved by stockholders of the Savings Bank within
twelve (12) months before or after the Effective Date.
16. Modification of Options.
At any time, and from time to time, the Board may authorize the Committee
to direct execution of an instrument providing for the modification of any
outstanding Option, provided no such modification, extension or renewal shall
confer on the holder of said Option any right or benefit which could not be
conferred on him by the grant of a new Option at such time, or impair the Option
without the consent of the holder of the Option.
17. Amendment and Termination of the Plan.
The Board may from time to time amend, modify or terminate the Plan, except
that no action of the Board may materially increase (other than as provided in
Paragraph 12) the maximum number of Shares permitted to be optioned or become
available for the granting of Options under the Plan, materially increase the
benefits accruing to Optionees, or materially modify the requirements for
eligibility for participation in the Plan, unless such action of the Board shall
be subject to approval or ratification by the stockholders of the Savings Bank.
No amendment, suspension or termination of the Plan shall, without the
consent of any affected Optionee, alter or impair any rights or obligations
under any Option theretofore granted to such Optionee under the Plan.
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18. Conditions Upon Issuance shares.
Shares of Common Stock shall not be issued with respect to any Option
granted under the Plan unless the issuance and delivery of such Shares shall
comply with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, any applicable state securities law, and the requirements of any
stock exchange upon which the Shares may then be listed.
The inability of the Savings Bank to obtain approval from any regulatory
body or authority deemed by the Savings Bank's counsel to be necessary to the
lawful issuance and sale of any Shares hereunder shall relieve the Savings Bank
of any liability in respect of the non-issuance or sale of such Shares. As a
condition to the exercise of an Option, the Savings Bank may require the person
exercising the Option to make such representations and warranties as may be
necessary to assure the availability of an exemption from the registration
requirements of federal or state securities law.
19. Reservation or Shares.
The Savings Bank, during the term of the Plan, will reserve and keep
available a number of Shares sufficient to satisfy the requirements of the Plan.
20. Withholding Tax.
The Savings Bank's obligation to deliver shares of Common Stock upon
exercise of Options, in whole or in part, shall be subject to the Optionee's
satisfaction of all applicable federal, state and local income and employment
tax withholding obligations. The Committee, in its discretion, may permit the
Optionee to satisfy the obligation, in whole or in part, by irrevocably electing
to have the Savings Bank withhold shares of Common Stock, or to deliver to the
Savings Bank shares of Common Stock that he already owns, having a value equal
to the amount required to be withheld. The value of shares to be withheld, or
delivered to the Savings Bank, shall be based on the fair market value of the
shares as determined in accordance with procedures to be established by the
Committee, on the date the amount of tax to be withheld is to be determined,
(the "Tax Date"). The Optionee's election to have shares withheld, or delivered
to the Savings Bank, for this purpose will be subject to the following
restrictions:
(l) the election must be made prior to the Tax Date,
(2) the election must be irrevocable,
(3) the election will be subject to the disapproval of the Committee, and
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(4) if an optionee is a person whose transactions in stock of the Savings
Bank are subject to Section 16(b) of the Securities Exchange Act of 1934
and the Plan is then intended to qualify under Rule 16b-3, such election
may not be made within six months of the date the Option is granted and
must be made during the period beginning on the third business day and
ending on the twelfth business day that follows the release of the Savings
Bank's quarterly or annual summary statement of sales and earnings.
21. Governing Law.
The Plan shall be governed by and construed in accordance with the laws of
the State of Kentucky, except to the extend preempted by federal law as now or
hereafter in effect.
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