EXHIBIT 10
FIRST FINANCIAL SERVICE
CORPORATION
2006 STOCK OPTION AND INCENTIVE COMPENSATION PLAN
First Financial Service Corporation
(the “Company”) hereby establishes a stock option and
incentive plan for the benefit of the employees and directors of
the Company and of its subsidiaries.
Section 1—
PURPOSE
The Company adopts this compensation
program for certain key employees to (a) increase the
profitability and growth of the Company; (b) provide
competitive compensation to employees; (c) attract and retain
exceptional personnel and encourage excellence in the performance
of individual responsibilities; and (d) motivate key employees
and directors to contribute to the Company’s
success.
Section 2—
DEFINITIONS
For purposes of the Plan, the
following terms shall have the meanings below unless the context
clearly indicates otherwise:
2.1 “ Award
” means an Incentive Stock Option, a Nonqualified Stock
Option, a Stock Appreciation Right, a Restricted Stock Award, or a
Performance Share Award granted under the Plan.
2.2 “ Award
Agreement ” means a certificate of grant or, if there are
promises required of the recipient of an Award, a written
agreement, in such form as the Committee prescribes from time to
time, setting forth the terms and conditions of an
Award.
2.3 “ Board
” means the Board of Directors of the Company.
2.4 “ Change of
Control ” means (i) an event or series of events
which have the effect of any “person” as such term
is used in Section 13(d) and 14(d) of the Exchange
Act, other than any trustee or other fiduciary holding securities
of the Company under any employee benefit plan of the Company,
becoming the “beneficial owner” as defined in
Rule 13d-3 under the Exchange Act, directly or indirectly, of
securities of the Company representing 50% or more of the combined
voting power of the Company’s then outstanding stock;
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board cease for
any reason to constitute a majority thereof, unless the election,
or the nomination for election by the stockholders, of each new
director was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning
of the period; (iii) the shareholders of the Company approve a
definitive agreement to merge or consolidate the Company with or
into another company (other than a merger or consolidation that
would result in the voting securities of the Company outstanding
immediately prior to such transaction continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such transaction) or
to sell or otherwise transfer all or substantially all of the
Company’s assets or to adopt a plan of liquidation.
A
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Change of Control shall also be
deemed to occur if (i) the Company enters into an agreement,
the consummation of which would result in the occurrence of a
Change of Control, (ii) any person (including the Company)
publicly announces an intention to take actions which upon
consummation would constitute a Change of Control, or
(iii) the Board adopts a resolution to the effect that a
Change of Control for purposes of this Plan has occurred. Provided,
however, that the Committee may provide in an Award Agreement that
it believes may constitute “deferred compensation”
pursuant to Code Section 409A for “Change of
Control” to have the meaning given in guidance from the
Internal Revenue Service construing that term for purposes of
allowable triggers for payment of deferred compensation.
2.5 “ Code
” means the Internal Revenue Code of 1986, as it may be
amended from time to time.
2.6 “
Committee ” means, for purposes of Plan administration
and interpretation, a committee appointed by the Board which shall
consist of two or more members of the Board, each of whom is both
and an “outside director” and a “non-employee
director.” For purposes of this Section,
(A) ”outside director” means a Director of the
Company who either (i) (a) is not a current employee of
the Company or an “affiliated corporation” (within the
meaning of Treasury Regulations promulgated under Code
Section 162(m)), (b) is not a former employee of the
Company or an “affiliated corporation” who still
receives compensation for prior services (other than benefits under
a tax-qualified retirement plan), or was not an employee during any
prior period within the time defined under Exchange Act
rules or the rules of any stock exchange on which the
Stock is then traded, (c) was not an officer of the Company or
an “affiliated corporation” at any time, and
(d) does not currently receive remuneration from the Company
or an “affiliated corporation,” either directly or
indirectly, in any capacity other than as a Director, or
(ii) is otherwise considered an “outside director”
for purposes of Code Section 162(m); and
(B) ”non-employee director” means a Director of
the Company who (i) is not a current employee or officer of
the Company or its parent or a subsidiary, (ii) does not
receive compensation (directly or indirectly) from the Company or
its parent or a subsidiary for services rendered as a consultant or
in any capacity other than as a Director (except for an amount as
to which disclosure would not be required under Item 404(a) of
Regulation S-K promulgated pursuant to the Securities Act
(“Regulation S-K”)), (iii) does not possess an
interest in any other transaction as to which disclosure would be
required under Item 404(a) of Regulation S-K and (iv) is
not engaged in a business relationship as to which disclosure would
be required under Item 404(b) of Regulation S-K. The number of
Committee members shall be determined by the Board. The Board shall
add or remove members from the Committee as the Board sees fit, and
vacancies shall be filled by the Board.
2.7 “
Company ” shall mean First Financial Service
Corporation and its successors.
2.8
“Director” means a voting member of the Board
excluding any person who serves solely in an advisory capacity or
as a director emeritus.
2.9 “
Disability ” means permanent disability within the
meaning of Section 22(e)(3) of the Code.
2.10 “ Effective Date
” shall have the meaning set forth in
Section 14.
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2.11 “ Employee ”
means an employee of the Company or a Subsidiary.
2.12 “ Exchange Act
” means the Securities Exchange Act of 1934, as
amended.
2.13 “ Fair Market
Value ” means the closing sale price of a share of Stock
as reported on the date as of which Fair Market Value is to be
determined, or, if no trades were reported on that date, the
closing price on the most recent trading day immediately preceding
such date for which closing price information is
available.
2.14 “Grant Date”
means, with respect to an Award, the date as of which the Award is
granted as stated in the Award Agreement, which shall not be
earlier than the date on which the Committee approves the grant.
The grant of an Award must be communicated to the recipient of the
Award promptly after the Grant Date.
2.15 “ Incentive Stock
Option ” means an option to purchase Stock granted under
Section 6 of the Plan that is designated by the Committee as
an Incentive Stock Option and is intended to meet the requirements
of Section 422 of the Code.
2.16 “ Named Executive
” means any individual who, on the last day of the
Company’s fiscal year, is the chief executive officer of the
Company (or is acting in such capacity) or is among the four most
highly compensated officers of the Company (other than the chief
executive officer), and any other person for whom executive
compensation disclosure is required under the Exchange Act or for
whom short-term trading reports are required under
Section 16(a) of the Exchange Act.
2.17 “ Nonqualified Stock
Option ” means an option to purchase Stock granted under
Section 6 of the Plan that is not intended to be an Incentive
Stock Option.
2.18 “ Option ”
means an Incentive Stock Option or a Nonqualified Stock
Option.
2.19 “ Option Period
” means the period from the Grant Date of an Option to the
date the period for exercise of the Option expires as stated in the
Award Agreement.
2.20 “ Participant
” means an Employee or Director who has been granted an Award
under the Plan.
2.21 “ Performance Share
Award ” means an Award granted pursuant to
Section 10 under which, upon the satisfaction of predetermined
performance measures, cash, shares of Stock, or a combination
thereof is paid to the Participant.
2.22 “ Plan ”
means this First Financial Service Corporation 2006 Stock Option
and Incentive Compensation. Plan.
2.23 “ Restriction
Period ” means the period of time from the Grant Date of
a Restricted Stock Award to the date when the restrictions placed
on the Stock in the Award Agreement lapse.
2.24 “ Restricted Stock
Award ” or “ Restricted Stock ”
means Stock which is granted under Section 9 of the Plan,
subject to a Restriction Period and/or condition which, if not
satisfied, may result in the complete or partial forfeiture of such
Stock.
2.25 “ Retirement
” means a Participant’s Termination of Employment with
the Company or a Subsidiary after attaining
age 60.
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2.26 “ Stock ”
means the Company’s voting common stock of no par value per
share, or such other securities into which the Stock may be
converted, by merger or otherwise.
2.27 “ Stock Appreciation
Right ” or “ SAR ” means a
Stock Appreciation Right granted under Section 7 of the
Plan.
2.28 “ Subsidiary
” means any corporation which at the time qualifies as a
subsidiary of the Company under the definition of “subsidiary
corporation” in Section 424(f) of the
Code.
2.29 “ Termination of
Employment ” or “ Service ”
shall be deemed to have occurred at the close of business on the
last day on which an Employee is carried as an active employee on
the records of the Company or a Subsidiary. With respect to a
Director, it shall be deemed to occur on a Director’s
cessation of service on the board of directors of both the Company
and any Subsidiary. The Committee shall determine whether an
authorized leave of absence, or other absence on military or
government service, constitutes severance of the employment
relationship between the Company or a Subsidiary and the Employee
in accordance with Section 12.4. No termination shall be
deemed to occur if (i) the Participant is a Director who
becomes an Employee, or (ii) the Participant is an Employee
who becomes a Director, except in the latter case Incentive Stock
Options shall become Nonqualified Stock Options if not exercised
within the time period following employment termination provided
for in Section 8.
Section 3— STOCK
SUBJECT TO THE PLAN
3.1 Available
Stock.
(a) Subject to
adjustment as provided in Sections 3.2 and 3.3, the aggregate
number of shares of Stock that may be issued pursuant to Awards
under the Plan, shall be (A) (i) 500,000 shares, plus
(ii) up to 35,000 shares of Stock remaining available for
issuance as of the Effective Date of the Plan under the
Company’s 1998 Stock Option and Incentive Compensation Plan
(the “1998 Plan”), or (B) if greater, 12% of the
Stock outstanding from time to time and shall be increased
automatically upon increase of the outstanding shares of Stock,
provided that the number of shares that may be issued pursuant to
Incentive Stock Option Awards shall not exceed 535,000 shares. The
aggregate number of shares of Stock that may be issued hereunder
shall not be decreased except pursuant to Section 3.2 or an
amendment to this Plan. When adopted by the Company’s
shareholders, this Plan shall amend the 1998 Plan to immediately
terminate the right to make additional grants under the 1998
Plan.
(b) The maximum number
of shares of Stock that may be subject to all Awards granted under
the Plan during the term of the Plan to any one Participant is
200,000 from the total set forth in subparagraph
(a) above.
3.2 Changes in
Capitalization. In the event of any merger,
reorganization, consolidation, recapitalization, separation,
liquidation, stock dividend, split-up, share combination, or other
change in the corporate structure of the Company affecting the
number of shares of Stock or the kind of shares or securities
issueable upon exercise of an Option or payment of another Award,
an appropriate and proportionate adjustment shall be made by the
Committee in the number and kind of shares which may be delivered
under the Plan, and in the number and kind or price of shares
subject to outstanding Awards, so that no Award shall be diluted or
increased; provided that the number of shares subject to any Award
shall always be a whole
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number. Any adjustment of an
Incentive Stock Option under this Section shall be made in
such a manner so as not to constitute a “modification”
within the meaning of Section 424(h) of the Code and
adjustments to other Awards shall be made in a manner consistent
with that Section, as if it applied to non-Incentive Stock Options
as well, so as not to trigger taxes under Code Section 409A.
Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of
shares of Stock subject to an Award.
3.3 Adjustments for
Awards. The Committee shall have sole discretion
to determine the manner in which shares of Stock available for
grant of Awards under the Plan are counted. Without limiting the
discretion of the Committee under this Section 3.3, unless
otherwise determined by the Committee, the following
rules shall apply for the purpose of determining the number of
shares of Stock available for grant of Awards under the
Plan:
(a) The grant of
Options, Restricted Stock and Performance Share Awards to be
settled in Stock shall initially reduce the number of shares of
Stock available for grant of Awards under the Plan by the number of
shares of Stock subject to such an Award, and that number shall
remain unavailable (even after exercise or maturity of that Award),
except as provided in (c) or (d) below.
(b) The grant of SARs
that may be paid or settled only in Stock shall reduce the number
of shares available for grant of Awards under the Plan by the
number of shares subject to such an Award; provided, however, that
upon the exercise of SARs, the excess of the number of shares of
Stock with respect to which the Award is exercised over the number
of shares of Stock issued upon exercise of the Award shall again be
available for grant of Awards under the Plan.
(c) If any Award
referred to in Sections 3.3(a) or (b), is wholly or partly
canceled or forfeited, or terminates, expires or lapses, for any
reason, the number of shares with respect to which the Award can no
longer be exercised or realized by the Participant shall again be
available for grant of Awards under the Plan.
(d) If previously
acquired shares of Stock are used to pay the exercise price of an
Award, the number of shares available for grant of Awards under the
Plan shall be increased by the number of shares delivered as
payment of such exercise price. If previously acquired shares of
Stock are used to pay withholding taxes payable upon exercise,
vesting or payment of an Award, or shares of Stock that would be
acquired upon exercise, vesting or payment of an Award are withheld
to pay withholding taxes payable upon exercise, vesting or payment
of such Award, the number of shares available for grant of Awards
under the Plan shall be increased by the number of shares so
delivered or withheld.
3.4 Change of
Control.
(a) Options and
SARs. In the event of a Change of Control,
(i) Awards of Options and SARs under the Plan shall become
exercisable in full whether or not otherwise exercisable at such
time, and any such Option or SAR shall remain exercisable in full
thereafter until it expires pursuant to its terms; and
(ii) the Restriction Period for Restricted Stock Awards shall
lapse. In addition, in the event of a Change of Control, each
outstanding Option and SAR shall be assumed or an equivalent option
or right shall be substituted by the successor
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corporation or a parent or
Subsidiary of the successor corporation. Except where such
discretion would be prohibited under Section 409A of the Code,
the Committee shall have the discretion to revoke or limit the
acceleration of exercisability of an Option or SAR at any time
before and within 20 business days following the date a Change of
Control is approved by the Board or otherwise occurs. Unless the
Committee believes that cash payment would make an Option or SAR
subject to and non-compliant with Code Section 409A as
“deferred compensation”, in the discretion of the
Committee, a Participant may be entitled to receive, in lieu of the
exercise of any Option or SAR, a cash payment in an amount equal to
the difference between the exercise price of the Option or SAR and
(A) in the case of a tender offer or cash exchange offer, the
final offer price paid per share of Stock, multiplied by the number
of shares of Stock covered by the Option or SAR, or (B) in the
case of any other Change of Control, the aggregate Fair Market
Value of the shares of Stock covered by the Option.
(b) Restricted
Stock. The Committee, in its discretion, may
provide in an Award Agreement that in the event of a Change of
Control, the Restriction Period of any Restricted Stock Award shall
lapse.
(c) Assumption of
Option or SAR. For purposes of (a) above, an
Option or SAR shall be considered assumed if the Committee
determines, at the time of issuance of the stock or other
consideration upon such Change of Control, that the holder of the
Option or SAR would be entitled to receive upon exercise the same
number and kind of shares of stock or the same amount of property,
cash or securities as the holder would have been entitled to
receive after the effective time of the transaction if the holder
had been, immediately before the effective time of the transaction,
the holder of the number of shares of Stock covered by the Option
or SAR at such time (whether or not the Option or SAR was then
exercisable and after giving effect to any adjustments in the
number of Shares covered by the Option or SAR as provided in
Section 3.2). If the consideration to be received in a Change
of Control transaction is not solely common stock of the successor
corporation or its parent, the Committee shall provide for the
consideration to be received upon exercise of the Option or SAR to
be solely common stock of the successor corporation or its parent
equal to the Fair Market Value of the consideration per share
received by holders of Stock in the transaction.
Section 4—
ADMINISTRATION
4.1 Committee
Governance. This Plan shall be administered by the
Committee. The Committee shall select one of its members as the
chairperson of the Committee and shall hold meetings at such times
and places as it may determine. The Committee may appoint a
secretary and, subject to the provisions of the Plan and to
policies determined by the Board, may make such rules and
regulations for the conduct of its business as it shall deem
advisable. Written action of the Committee may be taken by a
majority of its members, and actions so taken shall be fully
effective as if taken by a vote of a majority of the members at a
meeting duly called and held. A majority of Committee members shall
constitute a quorum for purposes of meeting. The act of a majority
of the members present at any meeting for which there is a quorum
shall be a valid act of the Committee.
4.2 Committee to
Interpret Plan. Subject to the provisions of the
Plan, the Committee shall have the power to (i) construe and
interpret the Plan; (ii) establish, amend or waive
rules and regulations for its administration;
(iii) determine and accelerate the exercisability
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of any Award or the termination of
any Restriction Period; (iv) correct inconsistencies in the
Plan or in any Award Agreement, or any other instrument relating to
an Award; and (v) subject to the provisions of
Section 11, to amend the terms and conditions of any Award to
the extent such terms and conditions are within the discretion of
the Committee as provided in the Plan. Notwithstanding the
foregoing, no action of the Committee may, without the consent of
the person or persons entitled to exercise any outstanding Award,
adversely affect the rights of such person or persons. All
constructions of this Plan shall be made in a manner the Committee
believes consistent with Awards under the Plan not
constituting “deferred compensation” within the meaning
of Section 409A of the Code or to comply with that Code
Section’s requirements, and with respect to Incentive Stock
Options, consistent with the Code and Regulations governing the
preservation of their tax treatment. Constructions, interpretations
and rules for administration of the Plan by the entire Board
shall take precedence over and control any construction or
interpretation by the Committee.
4.3 Liability;
Indemnification. No member of the Committee, nor
any person to whom it has delegated authority, shall be personally
liable for any action, interpretation or determination made in good
faith with respect to the Plan or Awards granted hereunder, and
each member of the Committee (or delegatee of the Committee) shall
be fully indemnified and protected by the Company with respect to
any liability he may incur with respect to any such action,
interpretation or determination, to the maximum extent permitted by
applicable law.
4.4 Selection of
Participants. The Committee shall have the
exclusive authority to grant Awards from time to time to such
Employees and Directors as may be selected by it in its sole
discretion. The grants shall not be deemed made, nor the Fair
Market Value of the underlying shares of Stock of an Award (if
necessary) determined, until (i) a Committee written action is
unanimously signed, or (ii) a Committee resolution is duly
adopted at a meeting called in conformance with the
rules governing the Committee’s operation, and Award
Agreements shall be promptly prepared and delivered to the Award
recipient(s).
4.5 Decisions
Binding. All determinations and decisions made by
the Committee or the Board pursuant to the Plan, including factual
determinations, shall be final, conclusive and binding on all
persons, including the Company, its Subsidiaries, its shareholders,
Participants and their estates and assignees.
4.6 Award
Agreements. Each Award under the Plan shall be
evidenced by an Award Agreement which shall be signed by the
Chairman or Secretary of the Committee or by an officer of the
Company authorized by the Committee, and shall contain such terms
and conditions as may be approved by the Committee, which need not
be the same in all cases. Any Award Agreement may be supplemented
or amended in writing from time to time as approved by the
Committee, provided that the terms of the Agreement as amended or
supplemented, as well as the terms of the original Award Agreement,
are not inconsistent with the provisions of the Plan. An Employee
or Director who receives an Award under the Plan shall not, with
respect to the Award, be deemed to have become a Participant, or to
have any rights with respect to the Award, unless and until the
Award Agreement has been signed by the Chairman or Secretary of the
Committee or by an officer of the Company authorized by the
Committee and, if required by its terms, by the Employee or
Director and delivered to the Committee or its designee, and the
Employee or Director has otherwise complied with the applicable
terms and conditions of the Award. The Committee may
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condition any Award upon the
agreement by the Participant to such confidentiality,
non-competition, and non-solicitation covenants as the Committee
deems appropriate.
4.7 Administration
With Respect To Named Executives.
(a) The per-share
exercise price of an Option granted to a Named Executive shall,
like all other Options hereunder, be no less than 100% of the Fair
Market Value per share on the Grant Date and such Option shall
thereby qualify as performance-based compensation under
Section 162(m) of the Code. With respect to other Awards
granted to Named Executives, the Plan may (but need
