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LEEDS FEDERAL SAVINGS BANK
AND
LEEDS FEDERAL BANKSHARES, M.H.C.
1994 INCENTIVE STOCK OPTION PLAN
1. PURPOSE
The purpose of Leeds Federal Savings Bank and Leeds Federal
Bankshares, M.H.C. 1994 Incentive Stock Option Plan (the "Plan") is to
advance the interests of Leeds Federal Savings Bank (the "Bank") and Leeds
Federal Bankshares, M.H.C. (the "Company") by providing officers and key
employees of the Bank and its affiliates, including the Company, upon whose
judgment, initiative and efforts the successful conduct of the business of
the Bank and its affiliates largely depends, with an additional incentive
to perform in a superior manner as well as to attract people of experience
and ability.
2. DEFINITIONS
"AFFILIATE" means any "parent corporation" or "subsidiary corporation"
of the Bank or the Company, as such terms are defined in Section 424(e) or
424(f), respectively, of the Internal Revenue Code of 1986, as amended.
"AWARD" means an Award of Non-statutory Stock Options, Incentive Stock
Options, and/or Limited Rights granted under the provisions of the Plan.
"BENEFICIARY" means the person or persons designated by a Recipient to
receive any benefits payable under the Plan in the event of such
Recipient'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 Recipient's surviving
spouse, if any, or if none, his estate.
"BOARD OF DIRECTORS" means the Board of Directors of the Bank or the
Company, as applicable.
"CHANGE IN CONTROL" means:
(1) a reorganization, merger, merger conversion, consolidation or
sale of all or substantially all of the assets of the Bank, the Company or
the Stock Holding Company, or a similar transaction in which the Bank, the
Company or the Stock Holding Company is not the resulting entity and that
is not approved by a majority of the Board of Directors of the Bank, the
Company or the Stock Holding Company;
(2) individuals who constitute the Incumbent Board of the Bank,
the Company, or the Stock Holding Company cease for any reason to
constitute a majority thereof; or
(3) a change in control within the meaning of 12 C.F.R. Section
574.4, as determined by the board of directors of the Bank or the Company;
provided, however, that a change in control shall not be deemed to occur if
the transaction(s) constituting a change in control is approved by a
majority of the board of directors of the Bank or the Company, as the case
may be.
(4) In the event that the Company converts to the Stock Holding
Company on a stand-alone basis, a "change in control" of the Bank or the
Stock Holding Company (a) shall mean an event of a nature that would be
required to be reported in response to Item 1 of the current report on Form
8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act"), or results in a
Change
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in Control of the Bank or the Stock Holding Company within the meaning of
the Home Owners' Loan Act of 1933 and the Rules and Regulations promulgated
by the Office of Thrift Supervision (or its predecessor agency), as in
effect on the date hereof, (b) without limitation shall be deemed to have
occurred at such time as (i) any "person" (as the term is used in Section
13(d) and 14(d) of the Exchange Act) other than the Stock Holding Company
is or becomes a "beneficial owner" (as defined in Rule 13-d under the
Exchange Act) directly or indirectly, of securities of the Bank
representing 25% or more of the Bank's outstanding securities ordinarily
having the right to vote at the election of directors except for any
securities of the Bank received by the Stock Holding Company in connection
with the Reorganization and any securities purchased by the Bank's employee
stock ownership plan and trust shall not be counted in determining whether
such plan is the beneficial owner of more than 25% of the Bank's
securities, (ii) a proxy statement soliciting proxies from stockholders of
the Bank, by someone other than the current management of the Bank, seeking
stockholder approval of a plan of reorganization, merger or consolidation
of the Stock Holding Company or the Bank or similar transaction with one or
more corporations as a result of which the outstanding shares of the class
of securities then subject to the plan or transaction are exchanged or
converted into cash or property or securities not issued by the Bank or the
Stock Holding Company, or (iii) a tender offer is made for 25% or more of
the voting securities of the Bank and the shareholders owning beneficially
or of record 25% or more of the outstanding securities of the Bank have
tendered or offered to sell their shares pursuant to such tender offer and
such tendered shares have been accepted by the tender offeror.
Notwithstanding, the foregoing, a "Change in Control" of the Bank or
the Company shall not be deemed to have occurred if the Company ceases to
own at least 51% of all outstanding shares of stock of the Bank in
connection with a conversion of the Company from mutual to stock form.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means a Committee of the Board consisting of at least
three Outside Directors of the Bank and/or the Company, all of whom are and
must be "disinterested directors" as that term is defined under Rule 16b-3
under the Securities Exchange Act of 1934, as amended.
"COMMON STOCK" means the common stock of the Bank.
"CONVERSION TRANSACTION" means the conversion of the Company from the
mutual to stock form of organization either on a stand-alone basis or in
the context of a merger conversion, as contemplated by regulations of the
OTS or any successor thereof.
"DATE OF GRANT" means the actual date on which an Award is granted by
the Committee.
"DIRECTOR" means a director of the Bank and/or the Company.
"DISABILITY" means the permanent and total inability by reason of
mental or physical infirmity, or both, of an employee to perform the work
customarily assigned to him. Additionally, a medical doctor selected or
approved by the Board of Directors must advise the Committee that it is
either not possible to determine when such Disability will terminate or
that it appears probable that such Disability will be permanent during the
remainder of such employee's lifetime.
"FAIR MARKET VALUE" means, when used in connection with the Common
Stock on a certain date, the reported closing price of the Common Stock as
reported by the National Bank of Securities Dealers Automated Quotation
("Nasdaq") National Market (as published by the Wall Street Journal, if
published) on the day prior to such date, or if the Common Stock was not
traded on such date, on the next preceding day on which the Common Stock
was traded thereon; provided, however, that if the Common Stock is not
reported on the Nasdaq National Market, Fair Market Value shall mean the
average sale price of all shares of Common Stock sold during the 30-day
period immediately preceding the date on which such stock option was
granted, and if no shares of stock have been sold within such 30-day
period, the average sale price of the last three sales of Common Stock sold
during the 90-day
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period immediately preceding the date on which such stock option was
granted. In the event Fair Market Value cannot be determined in the manner
described above, then Fair Market Value shall be determined by the
Committee. The Committee shall be authorized to obtain an independent
appraisal to determine the Fair Market Value of the Common Stock.
"INCENTIVE STOCK OPTION" means an Option granted by the Committee to a
Participant, which Option is designated as an Incentive Stock Option
pursuant to Section 8.
"INCUMBENT BOARD" means, in the case of (i) the Company or the Stock
Holding Company, or (ii) the Bank, the Board of Directors of the Company or
the Bank, respectively, on the date hereof, provided that any person
becoming a director subsequent to the date hereof whose election was
approved by a vote of at least three-quarters of the directors comprising
the Incumbent Board, or whose nomination for election by members or
stockholders was approved by the same nominating committee serving under an
Incumbent Board, shall be considered as though he were a member of the
Incumbent Board.
"LIMITED RIGHT" means the right to receive an amount of cash based
upon the terms set forth in Section 9.
"NON-STATUTORY STOCK OPTION" means an Option granted by the Committee
to a participant and which is not designated by the Committee as an
Incentive Stock Option, or (ii) fails to satisfy the requirements of an
Incentive Stock Option as set forth in Section 422 of the Code and the
regulations thereunder.
"NORMAL RETIREMENT" means retirement at the normal or early retirement
date as set forth in the Bank's Employee Stock Ownership Plan, or any
successor plan.
"OPTION" means an Award granted under Section 7 or Section 8.
"OUTSIDE DIRECTOR" means a Director who: (a) is not a current employee
of the Bank or an Affiliate, (b) has not at any time been an officer of the
Bank or an Affiliate, (c) is not receiving compensation for prior services
as an employee of the Bank or an Affiliate, and (d) is not receiving
compensation for services in any capacity other than as a director (e.g.,
is not receiving compensation for services as a consultant to the Bank or
an Affiliate).
"PARTICIPANT" means an employee of the Bank or its Affiliates chosen
by the Committee to participate in the Plan.
"REORGANIZATION" means the reorganization of Leeds Federal Savings and
Loan Association as a mutual holding company and the establishment of the
Bank as its majority-owned subsidiary.
"STOCK HOLDING COMPANY" means the holding company resulting from a
stock conversion of the Company in a Conversion Transaction.
"STOCK OFFERING" means the initial public offering of the Bank's
Common Stock.
"TERMINATION FOR CAUSE" means the termination of employment caused by
the individual's personal dishonesty, willful misconduct, any breach of a
fiduciary duty involving personal profit, or intentional failure to perform
stated duties or willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or final cease-and-desist
order, any of which results in material loss to the Bank, the Company, or
one of its Affiliates.
3. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee is
authorized, subject to the provisions of the Plan, to establish such rules
and regulations as it deems necessary for the proper administration of the
Plan and
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to make whatever determinations and interpretations in connection with the
Plan it deems necessary or advisable. All determinations and
interpretations made by the Committee shall be binding and conclusive on
all Participants in the Plan and on their legal representatives and
beneficiaries.
4. TYPES OF AWARDS
Awards under the Plan may be granted in any one or a combination of
(a) Incentive Stock Options; (b) Non-Statutory Stock Options; and (c)
Limited Rights as defined herein in Sections 7-9.
5. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 14, the maximum number of
shares subject to the Plan is 6% of the shares of Common Stock of the Bank
sold in connection with the Stock Offering (or 72,000 shares). The shares
of Common Stock represented by such options may be either authorized but
unissued shares or shares previously issued and reacquired by the Bank or
stock purchased by the Bank or the Company on the open market, provided,
however, that in the event any such purchase by the Bank would result in
the recapture of bad debt reserves pursuant to Section 593(c) of the Code,
the Boards of the Bank and the Company may determine that such purchase
shall be made by the Company. To the extent that options or rights granted
under the Plan are exercised, the shares covered will be unavailable for
future grants under the Plan; to the extent that options together with any
related rights granted under the Plan terminate, expire or are cancelled
without having been exercised or, in the case of Limited Rights exercised
for cash, new Awards may be made with respect to these shares.
6. ELIGIBILITY
Officers and other employees of the Bank or its Affiliates shall be
eligible to receive Incentive Stock Options, Non-Statutory Stock Options
and/or Limited Rights under the Plan. Directors who are not employees or
officers of the Bank or its affiliates shall not be eligible to receive
Awards under the Plan.
7. NON-STATUTORY STOCK OPTIONS
7.1 GRANT OF NON-STATUTORY STOCK OPTIONS
The Committee may, from time to time, grant Non-Statutory Stock
Options to eligible employees of the Bank or an Affiliate and, upon such
terms and conditions as the Committee may determine, grant Non-Statutory
Stock Options in exchange for and upon surrender of previously granted
Awards under this Plan. Non-Statutory Stock Options granted under this
Plan are subject to the following terms and conditions:
(a) Option Agreement. Each Option shall be evidenced by a written
option agreement between the Bank and the employee specifying the number of
shares of Common Stock that may be acquired through its exercise and
containing such other terms and conditions that are not inconsistent with
the terms of this grant. The maximum number of shares subject to a
Non-Statutory Option that may be awarded under the Plan to any employee
shall be 72,000.
(b) Price. The purchase price per share of Common Stock
deliverable upon the exercise of each Non-Statutory Stock Option shall be
determined by the Committee on the date the Option is granted. Except as
provided below, such purchase price shall not be less than 100% of the Fair
Market Value of the Bank's Common Stock on the date the Option is granted.
The purchase price per share of Common Stock deliverable upon the exercise
of each Non-Statutory Stock Option granted in exchange for and upon
surrender of previously granted awards shall be not less than 85% of the
Fair Market Value of the Bank's Common Stock on the date the Option is
granted, but in no event may the purchase price of any Non-Statutory Stock
Option be less than the par value of the Common Stock. Shares may be
purchased only upon full payment of the purchase price. Payment of the
purchase price may
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be made, in whole or in part, through the surrender of shares of the
Common Stock of the Bank at the Fair Market Value of such shares determined
in the manner described in Section 2(j).
(c) Manner of Exercise. The Option may be exercised from time to
time, in whole or in part, by delivering a written notice of exercise to
the President or Chief Executive Officer of the Bank, provided, however,
that no Options shall be exercisable prior to approval of the Plan by
stockholders. Such notice is irrevocable and must be accompanied by full
payment of the purchase price in cash or shares of previously acquired
Common Stock of the Bank. If previously acquired shares of Common Stock
are tendered in payment of all or part of the exercise price, the value of
such shares shall be determined as of the date of exercise of the
Non-Statutory Option.
(d) Terms of Options. The term during which each Non-Statutory
Stock Option may be exercised shall be determined by the Committee, but in
no event shall a Non-Statutory Stock Option be exercisable in whole or in
part more than 10 years and one day from the Date of Grant. The
Non-Statutory Stock Options shall be exercisable in installments, as
determined by the Committee. The Committee also shall determine the date
on which each installment shall become exercisable. The shares comprising
each installment may be purchased in whole or in part at any time after
such installment becomes exercisable. The Committee, in its sole
discretion, may accelerate the time at which any Non-statutory Stock Option
may be exercised in whole or in part. Notwithstanding the above, in the
event of a Change in Control of the Bank or the Company, all Non-Statutory
Stock Options shall become immediately exercisable.
(e) Termination of Employment. Upon the termination of an
employee's service for any reason other than Disability, Normal Retirement,
death or Termination for Cause, the employee's Non-Statutory Stock Options
shall be exercisable only as to those shares that were immediately
purchasable by the employee at the date of termination and only for a
period of one year following termination. In the event of Termination for
Cause, all rights under his Non-Statutory Stock Options shall expire upon
termination. In the event of the death, Disability or Normal Retirement of
any employee, all Non-Statutory Stock Options held by such employee,
whether or not exercisable at such time, shall be exercisable by such
employee or his legal representatives or beneficiaries for one year
following the date of his death, Normal Retirement or cessation of
employment due to Disability, provided that in no event shall the period
extend beyond the expiration of the Non-Statutory Stock Option term.
8. INCENTIVE STOCK OPTIONS
8.1 GRANT OF INCENTIVE STOCK OPTIONS
The Committee, from time to time, may grant Incentive Stock Options to
eligible employees of the Bank or an Affiliate. Incentive Stock Options
granted pursuant to the Plan shall be subject to the following terms and
conditions:
(a) Option Agreement. Each Option shall be evidenced by a written
option agreement between the Bank and the employee specifying the number of
shares of Common Stock that may be acquired through its exercise and
containing such other terms and conditions that are not inconsistent with
the terms of this grant.
(b) Price. The purchase price per share of Common Stock
deliverable upon the exercise of each Incentive Stock Option shall be not
less than 100% of the Fair Market Value of the Bank's Common Stock on the
date the Incentive Stock Option is granted. However, if an employee owns
stock possessing more than 10% of the total combined voting power of all
classes of Common Stock of the Bank (or under Section 424(d) of the Code,
is deemed to own stock representing more than 10% of the total combined
voting power of all classes of common stock of the Bank or its Affiliates
by reason of the ownership of such classes of stock directly or indirectly,
by or for any brother, sister, spouse, ancestor or lineal descendant of
such employee or by or for any corporation, partnership, estate or trust of
which such employee is a shareholder, partner or beneficiary), the purchase
price per share of Common Stock deliverable upon the exercise of each
Incentive Stock Option shall not be less than 110% of the Fair Market Value
of the Bank's Common Stock on the date the Incentive Stock Option is
granted. Shares may be purchased only upon
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payment of the full purchase price. Payment of the purchase price may be
made, in whole or in part, through the surrender of shares of the Common
Stock of the Bank. If previously acquired shares of Common Stock are
tendered in payment of all or part of the exercise price, the value of such
shares shall be determined as of the date of exercise of the Incentive
Stock Option.
(c) Manner of Exercise. The Option may be exercised from time to
time, in whole or in part, by delivering a written notice of exercise to
the President or Chief Executive Officer of the Bank, provided, however,
that no Option shall be exercisable prior to approval of the Plan by
stockholders. Such notice is irrevocable and must be accompanied by full
payment of the purchase price in cash or shares of previously acquired
Common Stock of the Bank. If previously acquired shares of Common Stock
are tendered in payment of all or part of the exercise price, the value of
such shares shall be determined as of the date of such exercise of the
Incentive Stock Option.
(d) Amount of Options. Incentive Stock Options may be granted to
any eligible employee in such amounts as determined by the Committee;
provided that the amount granted is consistent with the terms of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
Notwithstanding the above, the maximum number of shares that may be subject
to an Incentive Stock Option awarded under the Plan to any employee shall
be 72,000. In granting Incentive Stock Options the Committee shall
consider the position and responsibilities of the eligible employee, the
length and value of his or her service to the Bank, the compensation paid
to the employee and the Committee's evaluation of the performance of the
Bank according to measurements that include, among others, key financial
ratios, levels of classified assets, and independent audit findings. In
the case of an option intended to qualify as an Incentive Stock Option, the
aggregate Fair Market Value (determined as of the time the option is
granted) of the Common Stock with respect to which Incentive Stock Options
granted are exercisable for the first time by the Participant during any
calendar year (under all plans of the Participant's employer corporation
and its parent and subsidiary corporations) shall not exceed $100,000. The
provisions of this Section 8.1(d) shall be construed and applied in
accordance with Section 422(d) of the Code and the regulations, if any,
promulgated thereunder.
(e) Term of Options. The term during which each Incentive Stock
Option may be exercised shall be determined by the Committee, but in no
event shall an Incentive Stock Option be exercisable in whole or in part
more than 10 years from the Date of Grant. If any employee, at the time an
Incentive Stock Option is granted to him, owns Common Stock representing
more than 10% of the total combined voting power of the Bank or its
Affiliates (or, under Section 424(d) of the Code, is deemed to own Common
Stock representing more than 10% of the total combined voting power of all
such classes of Common Stock, by reason of the ownership of such classes of
Common Stock, directly or indirectly, by or for any brother, sister,
spouse, ancestor or lineal descendent of such employee, or by or for any
corporation, partnership, estate or trust of which such employee is a
shareholder, partner or beneficiary), the Incentive Stock Option granted to
him shall not be exercisable after the expiration of five years from the
Date of Grant. No Incentive Stock Option granted under this Plan is
transferable except by will or the laws of descent and distribution and is
exercisable during his lifetime only by the employee to which it is
granted.
The Committee shall determine the date on which each Incentive Stock
Option shall become exercisable and may provide that an Incentive Stock
Option shall become exercisable in installments. The shares comprising
each installment may be purchased in whole or in part at any time after
such installment becomes purchasable, provided that the amount able to be
first exercised in a given year is consistent with the terms of Section 422
of the Code. To the extent required by Section 422 of the Code, the
aggregate fair market value (determined at the time the Option is granted)
of the Common Stock for which Incentive Stock Options are exercisable for
the first time by a Participant during any calendar year (under all plans
of the Bank and its Affiliates) shall not exceed $100,000. The Committee,
in its sole discretion, may accelerate the time at which any Incentive
Stock Option may be exercised in whole or in part; provided that it is
consistent with the terms of Section 422 of the Code. Notwithstanding the
above, in the event of a Change in Control of the Bank, all Incentive Stock
Options that have been awarded shall become immediately exercisable unless
the fair market value of the amount exercisable as a result of a Change in
Control shall exceed $100,000 (determined as of the date of grant). In
such event, the first $100,000 of Incentive Stock Options (determined as of
the date of grant) shall be exercisable as Incentive Stock Options and any
excess shall be exercisable as Non-Statutory Stock Options.
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(f) Termination of Employment. Upon the termination of an
employee's employment for any reason other than Disability, Normal
Retirement, Change in Control, death or Termination for Cause, his
Incentive Stock Options shall be exercisable only as to those shares which
were immediately purchasable by him at the date of termination and only for
a period of three months following termination. In the event of
Termination for Cause all rights under his Incentive Stock Options shall
expire upon termination.
In the event of death or Disability of any employee, all Incentive
Stock Options held by such employee, whether or not exercisable at such
time, shall be exercisable by such employee or his legal representatives or
beneficiaries for one year following the date of his death or cessation of
employment due to Disability. Upon termination of an employee's service
due to Normal Retirement, or a Change in Control, all Incentive Stock
Options held by such employee, whether or not exercisable at such time,
shall be exercisable for a period of one year following the date of his
cessation of employment; provided, however, that such Option shall not be
eligible for treatment as an Incentive Stock Option in the event such
Option is exercised more than three months following the date of his Normal
Retirement or the Change in Control. In no event shall the exercise period
extend beyond the expiration of the Incentive Stock Option term.
(g) Compliance with Code. The Options granted under this Section
8 of the Plan are intended to qualify as incentive stock options within the
meaning of Section 422 of the Code, but the Bank makes no warranty as to
the qualification of any Option as an incentive stock option within the
meaning of Section 422 of the Code. If an Option granted hereunder fails
for whatever reason to comply with the provisions of Section 422 of the
Code and such failure is not or cannot be cured, such Option shall be a
Non-Statutory Stock Option.
9. LIMITED RIGHTS
9.1 GRANT OF LIMITED RIGHTS
The Committee may grant a Limited Right simultaneously with the grant
of any Option, with respect to all or some of the shares covered by such
Option. Limited Rights granted under this Plan are subject to the
following terms and conditions:
(a) Terms of Rights. In no event shall a Limited Right be
exercisable in whole or in part before the expiration of six months from
the date of grant of the Limited Right. A Limited Right may be exercised
only in the event of a Change in Control of the Bank.
The Limited Right may be exercised only when the underlying Option is
eligible to be exercised, provided that the Fair Market Value of the
underlying shares on the day of exercise is greater than the exercise price
of the related Option.
Upon exercise of a Limited Right, the related Option shall cease to be
exercisable. Upon exercise or termination of an Option, any related
Limited Rights shall terminate. The Limited Rights may be for no more than
100% of the difference between the exercise price and the Fair Market Value
of the Common Stock subject to the underlying Option. The Limited Right is
transferable only when the underlying Option is transferable and under the
same conditions.
(b) Payment. Upon exercise of a Limited Right, the holder shall
promptly receive from the Bank an amount of cash equal to the difference
between the Fair Market Value on the Date of Grant of the related Option
and the Fair Market Value of the underlying shares on the date the Limited
Right is exercised, multiplied by the number of shares with respect to
which such Limited Right is being exercised. In the event of a Change in
Control in which pooling accounting treatment is a condition to the
transaction, the Limited Right shall be exercisable solely for shares of
stock of the Company, or in the event of a merger transaction, for shares
of the acquiring corporation or its parent, as applicable. The number of
shares to be received on the exercise of such Limited Right shall be
determined by
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dividing the amount of cash that would have been available under the first
sentence above by the Fair Market Value at the time of exercise of the
shares underlying the Option subject to the Limited Right.
10. SURRENDER OF OPTION
In the event of a Participant's termination of employment as a result
of death, Disability or Retirement, the Participant (or his personal
representative(s), heir(s), or devisee(s)) may, in a form acceptable to the
Committee, make application to surrender all or part of the Options held by
such Participant in exchange for a cash payment from the Bank of an amount
equal to the difference between the Fair Market Value of the Common Stock
on the date of termination of employment and the exercise price per share
of the Option on the Date of Grant. Whether the Bank accepts such
application or determines to make payment, in whole or part, is within its
absolute and sole discretion, it being expressly understood that the Bank
is under no obligation to any Participant whatsoever to make such payments.
In the event that the Bank accepts such application and determines to make
payment, such payment shall be in lieu of the exercise of the underlying
Option and such Option shall cease to be exercisable.
11. RIGHTS OF A SHAREHOLDER; NON-TRANSFERABILITY
An optionee shall have no rights as a shareholder with respect to any
shares covered by a Non-Statutory and/or Incentive Stock Option until the
date of issuance of a stock certificate for such shares. Nothing in this
Plan or in any Award granted confers on any person any right to continue in
the employ of the Bank or its Affiliates or to continue to perform services
for the Bank or its Affiliates or interferes in any way with the right of
the Bank or its Affiliates to terminate his services as an officer or other
employee at any time.
No Award under the Plan shall be transferable by the optionee other
than by will or the laws of descent and distribution and may only be
exercised during his lifetime by the optionee, or by a guardian or legal
representative.
12. AGREEMENT WITH PARTICIPANTS
Each Award of Options, and/or Limited Rights will be evidenced by a
written agreement, executed by the Participant and the Bank or its
Affiliates that describes the conditions for receiving the Awards including
the date of Award, the purchase price if any, applicable periods, and any
other terms and conditions as may be required by the Board of Directors or
applicable securities law.
13. DESIGNATION OF BENEFICIARY
A Participant, with the consent of the Committee, may designate a
person or persons to receive, in the event of death, any Option or Limited
Rights Award to which he would then be entitled. Such designation will be
made upon forms supplied by and delivered to the Bank and may be revoked in
writing. If a Participant fails effectively to designate a Beneficiary,
then his estate will be deemed to be the Beneficiary.
14. DILUTION AND OTHER ADJUSTMENTS
In the event of any change in the outstanding shares of Common Stock
of the Bank by reason of any stock dividend or split, recapitalization,
merger, consolidation, spin-off, reorganization, combination or exchange of
shares, or other similar corporate change, or other increase or decrease
in such shares without receipt or payment of consideration by the Bank, the
Committee will make such adjustments to previously granted Awards, to
prevent dilution or enlargement of the rights of the Participant, including
any or all of the following:
(a) adjustments in the aggregate number or kind of shares of
Common Stock which may be awarded under the Plan;
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(b) adjustments in the aggregate number or kind of shares of
Common Stock covered by Awards already made under the Plan;
(c) subject to Section 8.1(b) hereof, adjustments in the purchase
price of outstanding Incentive and/or Non-Statutory Stock Options, or
any Limited Rights attached to such options.
No such adjustments, however, may change materially the value of
benefits available to a Participant under a previously granted Award.
15. LIMITATIONS UPON EXERCISE OF OPTIONS
Notwithstanding any other provision of the Plan, so long as the
Company remains in the mutual form of organization, and so long as any
applicable statute or regulation requires the Company to own at least a
majority of the outstanding Common Stock of the Bank, an Option granted
under this Plan may not be exercised if the exercise of such an Option
would result in the Company owning less than a majority of the Common Stock
of the Bank. Nothing herein shall preclude the Bank from issuing
additional authorized but unissued shares of Common Stock to the Company to
allow for the exercise of options which would otherwise have resulted in
the Company owning less than a majority of the Common Stock of the Bank.
16. TREATMENT OF OPTIONS IN THE EVENT OF A CONVERSION TRANSACTION
In the event that the Company converts to stock form in a Conversion
Transaction ("Stock Holding Company"), any Options outstanding shall, at
the Option of the holder, (i) be convertible into Options for Common Stock
of the Stock Holding Company, or (ii) be exercised by the holder prior to
the effective date of the Conversion Transaction and the holder shall be
entitled to exchange, in the same manner as other minority stockholders of
the Bank, the shares of Common Stock of the Bank received upon such
exercise for shares of Common Stock of the Stock Holding Company. If for
any reason such Options are not to be converted or such shares are not
exchanged, the holders of Options under this plan shall receive cash
payment for the shares of stock represented by the Options in an amount
equal to the fair market value of the shares underlying the Options or the
initial offering price of the number of shares of common stock of the Stock
Holding Company for which the Common Stock underlying the options would
otherwise be exchanged, in both cases less the original exercise price of
such options and, with respect to options that have been exercised for
shares which are not exchanged, the Stock Holding Company shall redeem such
shares for cash in the same manner as such redemption would occur for other
minority stockholders of the Bank. Any exchange, conversion of Options, or
cash payment for shares shall be subject to applicable federal and state
regulations and, if necessary, subject to the approval of the appropriate
regulatory authorities.
17. WITHHOLDING
There may be deducted from each distribution of cash and/or Common
Stock distributed in exercise of a Non-Statutory Stock Option under the
Plan the amount of tax required by any governmental authority to be
withheld. No amounts shall be required to be withheld on the exercise of
an Incentive Stock Option unless, in conjunction with such exercise, the
Participant immediately sells the shares that were subject to such Option.
In such event, the Option shall be treated as a Non-Statutory Option.
18. AMENDMENT OF THE PLAN
The Board of Directors may at any time, and from time to time, modify
or amend the Plan in any respect; provided, however, that if necessary to
continue to qualify the Plan under the Securities and Exchange Commission
Rule 16b-3, the approval by a majority of the shares represented in person
or by proxy shall be required for any such modification or amendment that:
10
(a) increases the maximum number of shares for which options may
be granted under the Plan (subject, however, to the provisions
of Section 14 hereof);
(b) reduces the exercise price at which Awards may be granted
(subject, however, to the provisions of Sections 8.1(b) and 14
hereof):
(c) extends the period during which options may be granted or
exercised beyond the times originally prescribed (subject,
however, to the provisions of Section 8.1(e) hereof); or
(d) changes the persons eligible to participate in the Plan.
Failure to ratify or approve amendments or modifications to
subsections (a) through (d) of this Section 18 by shareholders shall be
effective only as to the specific amendment or modification requiring such
ratification. Other provisions, sections, and subsections of this Plan
will remain in full force and effect.
No such termination, modification or amendment may affect the rights
of a Participant's outstanding Award.
19. APPROVAL BY STOCKHOLDERS
No Incentive Stock Options shall be granted pursuant to the Plan prior
to stockholder approval.
20. EFFECTIVE DATE OF PLAN
The Plan shall become effective upon the date adopted by the Board of
the Bank and the Company following the approval of stockholders (the
"Effective Date").
21. TERMINATION OF THE PLAN
The right to grant Awards under the Plan will terminate upon the
earlier of ten (10) years after the Effective Date of the Plan or the date
on which the exercise of Options or related rights equaling the maximum
number of shares reserved under the Plan occurs as set forth in Section 5
hereof. The Board of Directors has the right to suspend or terminate the
Plan at any time; provided that no such action will, without the consent of
a Participant, affect adversely his rights under a previously granted
Award.
21. APPLICABLE LAW
The Plan will be administered in accordance with the laws of the State
of Maryland.
IN WITNESS WHEREOF, the Bank and the Company have adopted this Plan
and caused it to be executed by its duly authorized officers and the
corporate seals to be affixed and duly attested, as of the 28th day of
October, 1994.
Approved by stockholders on October 26, 1994.
ATTEST: LEEDS FEDERAL SAVINGS BANK
\s\ Joan H. McCleary \s\ Gordon E. Clark
------------------------------ ----------------------------------
Joan H. McCleary, Secretary Gordon E. Clark, President and
Chief Executive Officer
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ATTEST: LEEDS FEDERAL BANKSHARES, M.H.C.
\s\ Joan H. McCleary \s\ Gordon E. Clark
------------------------------ -------------------
Joan H. McCleary, Secretary Gordon E. Clark, President and
Chief Executive Officer