First Federal Savings Bank
1987 - AMENDED EMPLOYEE STOCK OPTION PLAN
1. PURPOSE
This Stock Option Plan (the "Option Plan") is intended to encourage stock
ownership by officers and other employees of First Federal Savings Bank (the
"Bank") or of subsidiary corporations, as defined in Section 425(f) of the
Internal Revenue Code of 1986, as amended (the "Code"), or as may be defined
pursuant to regulations that may be approved under Section 44A of the Puerto
Rico Income Tax Act of 1954, as amended (the "Act"), of the Bank (the
"Subsidiaries"), so that the person to whom the option is granted (the
"Optionee") may acquire or increase his or her propietary interest in the
success of the Bank, and to encourage the Optionee to remain in the employ of
the Bank or of its Subsidiaries.
At the time this Option Plan was established, the Act, as amended up to
date, did not contain any specific provisions with respect to stock options. On
October 6, 1987, the Act was amended by Act No. 2 which, among other things,
added Section 44A to the Act to provide specific provisions with respect to the
Puerto Rico income taxation of certain stock option plans. The Option Plan is
being restated in order to comply with the requirements of said Section 44A of
the Act.
2. ADMINISTRATION
(a) The Option Plan shall be administered by a committee of not less than
three directors of the Bank, none of whom is an officer or other salaried
employee of the Bank. The members of this committee (the "Compensation
Committee") shall be appointed by the Board of Directors and shall be
"disinterested persons" within the meaning of Rule 16b-3(b), - 3(d)(3) and -
3(e) of the Securities Exchange Act of 1934 (the "Act"). No person shall serve
as a member of the Compensation Committee if such person is then eligible, or
has been eligible at any time during the prior twelve months, to receive stock,
stock options or stock appreciation rights under the Option Plan or any other
option, stock purchase or similar plan of the Bank or its Subsidiaries, except
that eligibility to participate in the Stock Option Plan for Non-Employee
Directors of the Bank shall not disqualify such person from serving on the
Compensation Committee. A majority vote of the members of the Compensation
Committee shall be required for all its actions.
(b) the Compensation Committee shall have the power, subject to, and within
the limits of, the express provisions of the Option Plan and in furtherance of
its purposes;
(i) To determine from time to time which of the eligible persons shall be
granted options under the Option Plan and the time or times when, and the number
of shares for which, an option or options shall be granted to such persons;
(ii) To prescribe the other terms and provisions (which need no be
identical) of each option granted under the Option Plan to eligible persons;
(iii) To construe and interpret the Option Plan and options granted under
it, and to establish, amend, and revoke rules and regulations for its
administration. The Compensation Committee, in the exercise of this power, may
correct any defect or supply any omission, or reconcile any inconsistency in the
Option Plan, or in any option agreement, in the manner and to the extent it
shall deem necessary or expedient to make the Option Plan fully effective. In
exercising this power the Compensation Committee may retain counsel at the
expense of the Bank. All decisions and determinations by the Compensation
Committee in exercising this power shall be final and binding upon the Bank and
the Optionee;
(iv) To determine the duration and purpose of leaves of absence which may
be granted to an Optionee without constituting a termination of his or her
employment for purpose of the Option Plan; and
(v) Generally, to exercise such powers and to perform such acts as are
deemed necessary or expedient to promote the best interests of the Bank with
respect to the Option Plan.
(c) In the case of options granted after October 6, 1987 (date of
enhancement of Section 44A of the Act), the aggregate fair market value of the
shares, determined as of the time the option is granted, with respect to which
stock options granted under all stock option plans of the Bank and its
subsidiaries corporations are exercisable for the first time by an employee
during any calendar year, shall not exceed $100,000.
With respect to options granted prior to October 7, 1987, the Compensation
Committe is authorized and empowered, with the written consent of the person to
whom such option were granted, to vary the terms of said options comply with the
requirements of the preceding paragraph, if such action is necessary in order
for the provisions of Section 44A nof the Act to apply to such options."
3. STOCK
(a) The stock subject to the options shall be shares of the Bank's
authorized but unissued common stock, par value $0.01 per share (the "Common
Stock"). The number of shares for which options may be granted hereunder, and
under any other stock option plan of the Bank, whether or not an "incentive" or
"qualified" option under the Code, excluding the shares involved in the
unexercised portion of any canceled, terminated or expired options, shall not
exceed an aggregate of twenty percent (20%) of the number of shares of Common
Stock outstanding as of January 21, 1987, date upon which conversion of the Bank
from mutual to the stock form and the completion of the subscription and public
offerings were effective
(b) Whenever any outstanding option under the Option Plan expires, is
canceled or is otherwise terminated, the shares of Common Stock allocable to the
unexercised portion of such option may again be the subject of options under the
Option Plan, except for options surrendered as provided by Section 7 hereof.
4. ELIGIBILITY
(a) The persons who shall be eligible to receive options hereunder shall be
officers and other employees (i.e. persons employed 1,000 or more hours per
year) of the Bank or its Subsidiaries. Subject to the following provisions, the
Compensation Committee may from time to time grant options to one or more
eligible persons. An optionee may hold more than one option.
(b) No person shall be eligible to receive any option if, at the date of
grant, such person beneficially, directly or indirectly, owns in excess of ten
percent (10%) of the outstanding Common Stock of the Bank, and no option will be
granted to any other person to the extent such option, if exercised, would
increase the ownership of such person to an amount in excess of ten percent
(10%).
5. TERMS OF THE OPTION AGREEMENTS
Each option agreement shall contain such provisions as the Compensation
Committee shall from time to time deem appropriate. Option Agreements need not
be identical, but each option agreement by appropriate language shall include
the substance of all the following provisions:
(a) An option shall expire on the date specified in the option
agreement, which date shall not be later than the tenth anniversary of the date
on which the option was granted. All options must be granted by the tenth
anniversary of the effective date of the Option Plan.
(b) The minimum number of shares with respect to which an option may be
exercised at any one time shall be 100 shares, unless the number purchased is
the total number at the time available for purchase under the option.
(c) Each option shall be exercisable in such installments (which need
not be equal) and at such times as designated by the Compensation Committee. To
the extent not exercised, installments shall accumulate and be exercisable, in
whole or in part, at any time after becoming exercisable, but not later than the
date the option expires. No option granted hereunder shall be exercisable unless
and until the Option Plan has been ratified by the stockholders as specified in
Section 15 hereof.
(d) The purchase price per share of Common Stock under each option shall be
not less than the fair market value of the Common Stock subject to the option on
the date the option is granted. For this purpose, the fair market value of the
Common Stock shall be determined by the Compensation Committee, however, that
(i) with respect to the grant of options on the effective date of the
Conversion, fair market value shall be the initial public offering price of the
Common Stock in the Conversion, (ii) if the Common Stock is admitted to
quotation on he National Association of Securities Dealers Automated Quotation
System (the "NASDAQ System") on the date the option is granted, fair market
value shall not be less than the average of the highest bid and lowest asked
prices of Common Stock on the NASDAQ System on such date, or (iii) if the Common
Stock is admitted to trading on a national securities exchange on the date the
option is granted, fair market value shall not be less than the last sale price
reported for the Common Stock on such exchange on such date or on the last date
preceding such date on which a sale was reported.
(e) The Optionee shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares of Common Stock subject to
such option unless and until the option shall have been exercised pursuant to
the terms thereof, the Bank shall have issued and delivered the shares to the
Optionee, and the Optionee's name shall have been entered as a stockholder of
record on the books of the Bank. Thereupon, the Optionee shall have full voting,
dividend and other ownership rights with respect to such shares of Common Stock.
(f) Except as provided in Section l0 hereof:
(i) All options granted pursuant to an Option Plan shall not
be transferable, except by will or the laws of descent and distribution, and
shall be exercisable during the Optionee's lifetime only by the Optionee; and
(ii) No assignment or transfer of an option, or of the rights
represented thereby, whether voluntary or involuntary, by operation of law or
otherwise, shall vest in the assignee or transferee any interest or right in the
option whatsoever, but immediately upon any attempt to assign or transfer an
option, the same shall terminate and be of no force or effect.
(g) The option shall be subject to any provision necessary to assure
compliance with the securities laws of the United States, the Commonwealth of
Puerto Rico, or any state.
(h) For purposes of the Option Plan, the term "change in control" shall
be deemed to have taken place if: (i) an acquirer is deemed to have acquired
control of the Bank under the provisions of Section 574.4(a) of the regulations
of the Federal Home Loan Bank Board (the "Bank Board"); or (ii) as the result
of, or in connection with, any cash tender or exchange offer, merger or other
business combination, sale of assets or contested election, or any combination
of the foregoing transactions, the persons who were directors of the Bank before
such transaction shall cease to constitute a majority of the Board of Directors
of the Bank or of any successor institution.
6. METHOD OF EXERCISE, PAYMENT OF PURCHASE PRICE
(a) An option may be exercised by the Optionee delivering to the
Compensation Committee on any business day a written notice specifying the
number of shares of Common Stock the Optionee desires to purchase (the
"Notice").
(b) Payment for the shares of Common Stock purchased pursuant to the
exercise of an option shall be either in (i) cash in an amount equal to the
purchase price per share multiplied by the number of shares specified in the
Notice (the "Total Option Price"), or (ii) in the discretion of the Compensation
Committee, shares of Common Stock of the Bank, valued at the then fair market
value, determined as provided in Section 5 hereof, equal to or less than the
total Option Price, plus cash in an amount equal to the amount, if any, by which
the Total Option Price exceeds the fair market value of the Common Stock.
7. STOCK APPRECIATION RIGHTS, RELEASE OF FINANCIAL INFORMATION
(a) The Compensation Committee may, but shall not be obligated to,
grant the stock appreciation rights provided in this Section 7 at any time
subsequent to the grant of an option under the Option Plan. Subsequent to such
grant of the stock appreciation rights, if any, the Compensation Committee may,
but shall not be obligated to, authorize, on such terms and conditions as it
deems appropriate in each case, the Bank to accept the surrender by the Optionee
of the right to exercise an option granted under the Option Plan or portion
thereof in consideration for payment by the Bank of an amount equal to the
excess of the fair market value of the shares of Common Stock subject to such
option or portion thereof surrendered over the Total Option Price of such
shares. Such payment, at the discretion of the Compensation Committee, may be
made in shares of Common Stock valued at the then fair market value thereof,
determined as provided in Section 5 hereof, or in cash, or partly in cash and
partly in shares of Common Stock.
(b) Any election by an Optionee to exercise the stock appreciation
rights provided in this Section shall be made during the period beginning on the
third business day following the release for publication of quarterly or annual
financial information and ending on the twelfth business day following such
date. This condition shall be deemed to be satisfied when the specified
financial data appears on or in a wire service, financial news service or
newspaper of general circulation or is otherwise first made publicly available.
No stock appreciation rights may be exercised within six months of the date it
is granted except that this limitation shall not apply in the event death or
disability of the Optionee occurs prior to the expiration of the six-month
period. For purpose of this Section, the stock appreciation rights shall be
deemed to have been granted as of the date specified by the Compensation
Committee.
(c) A copy of the Bank's annual report to stockholders shall be
delivered to each Optionee. Upon request, the Bank shall furnish each optionee a
copy of its most recent annual report on FDIC Form 10-K and each quarterly
report and current report filed under the Act or with the Bank Board since the
end of the Bank's prior fiscal year.
(d) Any option surrendered as provided in this Section 7 shall be
canceled by the Bank and the shares subject to the option shall not be eligible
for further grants under the Option Plan.
8. USE OF PROCEEDS FROM STOCK
Proceeds from the sale of Common Stock pursuant to options granted
under the Option Plan shall constitute general funds of the Bank.
9. ADJUSTMENTS UPON CHANGE IN CAPITALIZATION
a) If the shares of the Bank's Common Stock as a whole are increased,
decreased or changed into, or exchanged for, a different number or kind of
shares or securities of the Bank, whether through merger, consolidation,
reorganization, recapitalization, reclassification, stock dividend, stock split,
combination of shares, exchange of shares, change in corporate structure or the
like, an appropriate and proportionate adjustment shall be made in the number
and kinds of shares subject to the Option Plan and in the number, kinds and per
share exercise price of shares subject to unexercised options or portions
thereof granted prior to any such change. Any such adjustment in an outstanding
option, however, shall be made without change in the total price applicable to
the unexercised portion of the option but with a corresponding adjustment in the
price for each share of Common Stock covered by the option.
(b) Upon dissolution or liquidation of the Bank, or upon
reorganization, merger or consolidation in which the Bank is not the surviving
corporation, or upon the sale of substantially all of the property of the Bank
to another corporation, the Option Plan and the options issued thereunder shall
terminate unless provision is made in connection with such transaction for the
assumption of options therefore granted, or the substitution for such options of
new options of the successor employer corporation or a parent or subsidiary
thereof, with appropriate adjustment as to the number and kind of shares and the
per share exercise prices. In the event of such termination, all outstanding
options shall be exercisable in full at least 30 days prior to the termination
date whether or not otherwise exercisable during such period.
(c) Adjustments under this Section shall be made by the Compensation
Committee, whose determination as to what adjustments shall be made, and the
extent thereof, shall be conclusive. The Compensation Committee shall have the
discretion and power in any such event to determine and to make effective
provisions for the acceleration of the time during which the option may be
exercised, notwithstanding the provisions of the option setting forth the date
or dates on which all or any part of it may be exercised. No fractional shares
of Common Stock shall be issued under the Option Plan on account of any
adjustment specified above.
10. TERMINATION OF EMPLOYMENT OR SERVICE
(a) In the event of the death of an Optionee while in the employ of the
Bank:
(i) The options, whether or not exercisable at the time of the
death of the Optionee, may be exercised, as provided in Section 6 hereof, by the
estate of the Optionee or by a person who acquired the right to exercise such
option by bequest or inheritance from such Optionee, within one year after the
date of such death but not later that the date on which the option would
otherwise expire; or
(ii) The Compensation Committee may, but shall not be obligated to, grant
if not theretofore granted, the stock appreciation rights provided in Section 7
hereof and may, but shall not be obligated to, authorize, if not theretofore
authorized, the Bank to accept surrender of the right to exercise an option or
any portion thereof under Section 7 of this Option Plan by the estate of the
Optionee, or by a person who acquired the right to exercise such option by
bequest or inheritance from such Optionee, within one year after the date of
such death but no later than the date on which the option would otherwise
expire.
(b) If the employment of an Optionee is terminated by reason of disability,
as determined by the Compensation Committee, the options held by such Optionee
may be exercised, whether or not exercisable at the time of such termination of
employment, within one year after such termination but not later than the date
on which such options would otherwise expire.
(c) If the employment of the Optionee is terminated for any reason other
than death or disability, options held by such Optionee shall, to the extent not
theretofore exercised, be canceled upon such termination and shall not
thereafter be exercisable: provided, however, that an Optionee whose employment
is terminated by retirement in accordance with the Bank's normal retirement
policies as determined by the Compensation Committee, or who is voluntarily or
involuntarily terminated within one year after a change in control of the Bank,
as defined in Section 5 (h) hereof, shall be permitted to exercise such options,
whether or not exercisable at the time of such termination, within three months
after the date of such termination but not later than the date on which the
options would otherwise expire.
(d) Notwithstanding the provisions of subsections (a), (b) and (c)
above, no option granted hereunder shall be exercisable prior to stockholders
ratification, as provided in Section 15 hereof.
11. AMENDMENT OF THE OPTION PLAN
The Board of Directors at any time, and from time to time, may amend
the Option Plan subject to any required regulatory approval and subject to the
limitation that, except as provided in Section 9 hereof, no amendment shall be
effective unless approved by vote of a majority of the total votes cast by the
stockholders of the Bank at an annual or special meeting held within twelve
months before or after the date of such amendment's adoption where such
amendment will:
(a) Increase the number of shares of Common Stock as to which options may
be granted under the Option Plan; (b) Change in substances Section 4 hereof
relating to eligibility to participate in the Option Plan; (c) Change the
minimum purchase price; or (d) Increase the maximum term of options as provided
herein.
Except as provided in Section 9 hereof, rights and obligations under
any option granted before amendment of the Option Plan shall not be altered or
impaired by amendment of the Option Plan, except with the consent of the person
to whom the option was granted.
12. TERMINATION OR SUSPENSION OF THE OPTION PLAN
The Board of Directors at any time may terminate or suspend the Option
Plan. Unless sooner terminated, the Option Plan shall terminate on the tenth
anniversary of the effective date specified in Section 15 hereof, but such
termination shall not affect any option theretofore granted. An option may not
be granted while the Option Plan is suspended or after it is terminated.
Rights and obligations under any option granted while the Option Plan
is in effect shall not be altered nor impaired by suspension or termination of
the Option Plan under this Section 12 except with the consent of the Optionee.
13. NON EXCLUSIVlTY OF THE PLAN
Neither the adoption of the Option Plan by the Board of Directors nor
the submission of the Plan to the stockholders of the Bank for approval shall be
construed as creating any limitations on the power of the Board of Directors to
adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of stock options otherwise than under the
Option Plan, and such arrangements may be either applicable generally or only in
specific cases.
14. GOVERNMENT AND OTHER REGULATIONS, GOVERNING LAW
(a) The obligation of the Bank to sell and deliver shares of Common
Stock under options granted under the Option Plan shall be subject to all
applicable laws, rules and regulations and the obtaining of all such approvals
by governmental agencies as may be deemed necessary or appropriate by the Board
of Directors of the Bank.
(b) The Option Plan shall be governed by federal law.
(c) The Option Plan is intended to comply with Rule 16b-3 under the Act.
Any provision inconsistent with such Rule shall be inoperative and shall not
affect the validity of the Option Plan.
(d) Reference herein to the Code shall be deemed to include reference to
comparable provisions of Puerto Rico law, if any.
15. EFFECTIVE DATE OF OPTION PLAN, STOCKHOLDER APPROVAL
The Option Plan shall be effective upon commencement of the public
offering in connection with the conversion of the Bank or, if no public offering
is held, upon consummation of the Conversion; provided, however, that the Option
Plan shall be subject to the approval of the stockholders of the Bank by vote of
a majority of the total votes cast by its stockholders at an annual or special
meeting held within twelve months of such effective date. No options granted
under the Option Plan prior to such stockholder approval may be exercised until
such approval has been obtained.