**EXHIBIT 10(a)-1998 STOCK OPTION AND INCENTIVE COMPENSATION PLAN**

 

 

**FIRST FINANCIAL SERVICE CORPORATION**

**1998 STOCK OPTION AND INCENTIVE COMPENSATION PLAN**

 

                First FinancialService Corporation (the “Company”) hereby establishes a stock option andincentive plan for the benefit of its employees and the employees of itssubsidiaries as set forth below.

 

 **Section 1 —  PURPOSE**

 

                The Company adoptsthis compensation program for certain key employees to (a) increase theprofitability and growth of the Company; (b) provide competitive  compensation to employees while obtaining thebenefits of tax deferral, (c) attract and retain exceptional personnel and encourage excellence in the performanceof individual responsibilities; and (d) motivate key employees to contribute tothe Company’s success.

 

**Section 2 —  DEFINITIONS**

 

                For purposes ofthe Plan, the following terms shall have the meanings below unless the contextclearly indicates otherwise:

 

                2.1           “**Award**”means an Incentive Stock Option, a Nonqualified Stock Option, a StockAppreciation Right, a Restricted Stock Award, or a Performance Share Awardgranted under the Plan.

 

                2.2           “**AwardAgreement**” means a written agreement between a Participant and theCompany covering the specific terms and conditions of an Award.

 

                2.3           “**Board**”means the Board of Directors of the Company.

 

                2.4           “**Changeof Control**” of the Company means (i) an event or series of eventswhich have the effect of any “person” as such term is used inSection 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended(the “Exchange Act”), other than any trustee or other fiduciary holdingsecurities of the Company under any employee benefit plan of the Company,becoming the “beneficial owner” as defined in Rule 13d-3 under theExchange Act, directly or indi­rectly, of securities of the Company repre­senting50% or more of the combined voting power of the Company’s then outstandingstock;  (ii) during any period oftwo consecutive years, individuals who at the beginning of such periodconstitute the Board cease for any reason to constitute a majority thereof,unless the election, or the nomina­tion for election by the stockholders, ofeach new director was approved by a vote of at least two-thirds of thedirectors then still in office who were directors at the beginning of theperiod; (iii)  the shareholders of the Company approve a definitiveagreement to merge or consolidate the Company with or into another company(other than a merger or consolidation that would result in the voting securitiesof the Company outstanding immediately prior to such transaction continuing torepresent (either by remaining outstanding or by being converted into votingsecurities of the surviving entity) more than 50% of the combined voting powerof the voting securities of the Company or such surviving entity outstandingimmediately after such transaction) or to sell or otherwise ­­­­­transfer allor substantially all of the Company’s assets or to adopt a plan ofliquidation.  A Change of Control shallalso be deemed to occur if (i) the Company enters into an agreement, theconsummation of which would result in the occurrence of a Change of Control,(ii) any person (including the Company) publicly announces an intention totake actions which upon consummation would constitute a Change of Con­trol, or(iii) the Board adopts a resolu­tion to the effect that a Change ofControl for purposes of this Plan has occurred.

 

 

                2.5           “**Code**”means the Internal Revenue Code of 1986, as it may be amended from time totime.

 

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2.6           “**Committee**” means the committee appointed bythe Board pursuant to Section 4.1 to administer the Plan.

 

2.7           “**Company**” shall mean First Financial ServiceCorporation and its successors.

 

2.8           **“Director”** means a voting member of theboard of directors of the Company, excluding any person who serves solely in anadvisory capacity or as a director emeritus.

 

2.9           “**Disability**” means permanent disabilitywithin the meaning of Section 22(e)(3) of the Code.

 

2.10         “**Effective Date**” shall have the meaning setforth in Section 15.

 

2.11         “**Employee**” means a salaried employee of theCompany or a Subsidiary.

 

2.12         “**Fair Market Value**” means the closing marketprice per share of Stock as reported on the date as of which Fair Market Valueis to be determined, or, if no trades were reported on that date, the closingprice on the most recent trading day immediately preceding such date for whichclosing price information is available.

 

2.13         **“Grant Date”** means, with respect to anAward, the date as of which the Award is granted as stated in the AwardAgreement.

 

2.14         “**Incentive Stock Option**” means an option topur­chase Stock granted under Section 6 of the Plan which is desig­nated by theCommittee as an Incentive Stock Option and is intended to meet the requirementsof Section 422 of the Code.

 

2.15    **“IndependentDirector”** means a Director who is not a current or former employeeor officer of the Company or a Subsidiary and who does not receive anyremuneration from the Company or any Subsidiary for service to the Company or aSubsidiary in any capacity other than as a Director.

 

 

2.16         “**Nonqualified Stock Option**” means an optionto purchase Stock granted under Sections 6 or 11 of the Plan which is notintended to be an Incentive Stock Option.

 

2.17         “**Option**” means an Incentive Stock Option or aNonqualified Stock Option.

 

2.18         “**Option Period**”means the period from the Grant Date of an Option to the date the period forexercise of the Option expires as stated in the Award Agreement.

 

2.19         “**Participant**” means an Employee who has beengranted an Award under the Plan.

 

2.20         “**Performance Share**”means the grant of con­tingent shares of Stock under Section 10 of the Plan.

 

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|                                                                                                                                                                                                                                                                                                                                                                                                    |   | 2.21   |   | “**Plan**” means this First Financial Service  Corporation 1998 Stock Option and Incentive .                 |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------|
| Compensation                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                                                                                                                    |   | 2.22   |   | “**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.                                                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                    |   | 2.23   |   | “**Restricted Stock Award**” **or** “**Restricted  Stock**” means a Restricted Stock Award granted |
| under  Section 9 of the Plan.                                                                                                                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                    |   | 2.24   |   | “**Retirement**” means a Participant’s  Termination of Employment with the Company or a                 |
| Subsidiary  after attaining age 60 (or earlier with the Company’s or the Subsidiary’s  consent).                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                    |   | 2.25   |   | “**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.                                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                    |   | 2.26   |   | “**Stock Appreciation Right**”**or**“**SAR**”  means a Stock Appreciation Right granted under      |
| Section  7 of the Plan.                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                    |   | 2.27   |   | “**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.                                                                                                                                                                                                                                                                                                     |
|                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                    |   | 2.28   |   | “**Termination of Employment**” 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.  The Committee shall deter­mine in  accordance with Section 12.2 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. |
|                                                                                                                                                                                                                                                                                                                                                                                                         |        |        |        |                                                                                                                        |  |  |

 

**Section 3 — STOCK SUBJECT TO THE PLAN**

 

                3.1           **AuthorizedStock. **Subject to adjustmentas provided in Section 3.3, the aggregate number of shares of Stock that may beissued pursuant to Awards under the Plan shall be equal to the greater of166,000 shares or 4% of the Stock outstanding from time to time (the “AggregateMaximum”), and shall be increased automatically upon increase of theoutstanding shares of Stock, provided that the number of shares that may beissued pursuant to Incentive Stock Option Awards shall not exceed 166,000shares.  The Aggregate Maximum shall notbe decreased except pursuant to Section 3.3 or an amendment to this Plan.  To the extent that any shares of Stocksubject to an Award are not delivered because the Award is settled in cash,such shares shall not be deemed to have been issued for purposes of determiningthe Aggregate Maximum.  Stock deliveredunder the Plan may consist, in whole or in part, of authorized and unissuedshares or shares acquired from shareholders upon such terms as the Board deemsappropriate for reserve in connection with exercise hereunder.

 

                3.2           **Effectof Expirations. **If any Awardgranted under the Plan expires or terminates without exercise, the Stock nolonger subject to such Award shall be available to be re-awarded under thePlan.

 

                3.3           **Adjustmentsin Authorized Shares. **In theevent of any merger, reorganization, consolidation, recapitalization,separation, liquidation, stock dividend, split-up, share combina­tion, or otherchange in the corporate structure of the Company affecting the number of sharesof Stock or the kind of shares or securities issuable upon exercise of anAward, an appropriate and proportionate adjustment shall be made by theCommittee in the number and kind of shares which may be delivered under thePlan, and in the number and kind of or price of shares subject to outstandingAwards, so that no Award shall be diluted or increased; provided that thenumber of shares subject to any Award shall always be a whole number.  Any adjust­ment of an Incentive Stock Optionunder 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.  If the Company shall at any time merge,consolidate with or into another corporation or association, or enter into astatutory share exchange or any other similar transaction in which shares ofStock are converted as a matter of law into securities and/or other property,each Participant will thereafter receive, upon the exercise of an Award, thesecurities or property to which a holder of the number of shares of Stock thendeliverable upon the exercise of such Award would have been entitled if suchAward had been exercised immediately prior to such merger, consolidation, orshare exchange and the Company shall take such steps in connection with suchmerger, consolidation or share exchange as may be necessary to assure that theprovisions of this Plan shall thereafter be applicable, as nearly as is reason­ablypossible, in relation to any securities or property thereafter deliverable uponthe exercise of such Award.  Anyrestrictions applicable under a Restricted Stock Award Agreement shall apply toany

 

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replacement shares received by a Participant under this Section 3.3 asa result of a reorganization, merger, consolidation or similar transaction.

 

**Section 4 —  ADMINISTRATION**

 

                4.1           **CommitteeGovernance.  **This Plan shallbe adminis­tered by the Committee which shall consist of two or moreIndependent Directors appointed by the Board. The number of Committee members shall be determined by the Board. TheBoard shall add or remove members from the Committee as the Board sees fit, andvacancies shall be filled by the Board. The Committee shall select one of its mem­bers as the chairperson of theCommittee 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 shalldeem advisable.  Writ­ten action of theCommittee may be taken by a majority of its mem­bers, and actions so takenshall be fully effective as if taken by a vote of a majority of the members ata meeting duly called and held.  Amajority of Committee members shall constitute a quorum for purposes ofmeeting.  The act of a majority of themembers present at any meeting for which there is a quorum shall be a valid actof the Committee.

 

                4.2           **Committeeto Interpret Plan. **Subject tothe provi­sions of the Plan and the approval of the Board, the Committee shallhave the power to (i) construe and interpret the Plan; (ii) establish, amend orwaive rules and regulations for its administration; (iii) to determine andaccelerate the exercisability of any Award or the termination of anyRestriction Period; (iv) to correct inconsistencies in the Plan or in any AwardAgreement, or any other instrument relating to an Award; and (v) subject to theprovisions of Section 11, to amend the terms and conditions of any Award to theextent such terms and conditions are within the discretion of the Committee asprovided in the Plan.  Notwithstandingthe foregoing, no action of the Committee may, without the consent of theperson or persons entitled to exercise any outstanding Award, adversely affectthe rights of such person or persons.

 

                4.3           **Exculpation. **No member of the Board or theCommittee shall be liable for actions or determinations made in good faith withrespect to the Plan, or for Awards under it.

 

                4.4           **Selectionof Participants. **The Boardshall have the exclusive authority to grant Awards from time to time to suchEmployees as may be selected by the Board or recommended by the Committee.

 

                4.5           **DecisionsBinding.  **All determinationsand decisions made by 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 andassignees.

 

                4.6           **AwardAgreements. **Each Award underthe Plan shall be evidenced by an Award Agreement, which shall be signed by theChairman or Secretary of the Committee and by the Participant and shall containsuch terms and conditions as may be recommended by the Committee and approvedby the Board, which need not be the same in all cases.  Any Award Agreement may be supplemented oramended in writing from time to time as recommended by the Committee andapproved by the Board, provided that the terms of the Agreement as amended orsupplemented, as well as the terms of the original Award Agreement, are notinconsistent with the provisions of the Plan. An Employee who receives an Award under the Plan shall not, with respectto the Award, be deemed to have become a Participant, or to have any rightswith respect to the Award, unless and until the Award Agreement has been signedby the Chairman or Secretary of the Committee and by the Employee and deliveredto the Committee, and the Employee has otherwise complied with the applicableterms and conditions of the Award.  AnyAward may be conditioned upon the agreement by the Participant to suchconfidentiality, non-competition, and non-solicitation covenants as theCommittee deems appropriate.

 

                4.7           **Limitationon Awards.  **No part of anyOption or SAR Award may be exercised, no Performance Share shall be issued, andno Restriction Period will lapse to the extent the exercise, issuance or lapsewould cause the Participant to have compensation from the Company and itsaffiliated companies for any year in excess of one million dollars and which isnondeductible by the Company and its affiliated companies pursuant to CodeSection 162(m).  Any portion of an Awardthat is not exercisable, not issued or for which a Restriction Period does notlapse because of this limitation shall continue to be exercisable or shall beissued, or the Restriction Period shall lapse, in any subsequent year in whichthe exercise, issuance or lapse would not cause the loss of the Company’s orits affiliated companies’ compensation tax deduction, provided such exercise orissuance occurs before the Award expires, and otherwise complies with the termsand conditions of the Plan and the Award Agreement

 

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**Section 5  —  AWARDS UNDER THE PLAN**

 

                Subject to thelimitations of the Plan, the Board may in its sole and absolute discretiongrant Awards in such numbers, upon such terms and at such times as the Boardshall determine, based on the recommendation of the Committee.  Employees who are expected to contributesubstantially to the growth and profit­ability of the Company or a Subsidiaryare eligible for selection by the Board under Section 4.4 to receive Awards.

 

**Section 6 — STOCK OPTIONS**

 

                6.1           **Grant. **Both Incentive Stock Options andNonqualified Stock Options may be granted under the Plan.  If an Option is designated as an IncentiveStock Option but does not qualify as such under Section 422 of the Code, theOption (or portion thereof) shall be treated as a Nonqualified Stock Option,and governed by Section 83 of the Code. All Options granted under the Planshall be evidenced by an Award Agreement in such form as the Committee may fromtime to time approve.  All Options aresubject to the terms and conditions of this Section 6 and such additional termsand conditions contained in the Award Agreement, which need not be the same ineach case, not inconsistent with the provisions of the Plan, as the Committeefinds desirable and the Board approves pursuant to Section 5.

 

                6.2           **ExercisePrice.  **The exercise priceper share of Stock covered by an Option shall be determined by the Committee,provided that the exercise price for an Incentive Stock Option shall not beless than 100% of the Fair Market Value of the Stock on the Grant Date, unlessthe Incentive Stock Option granted to a person who on the Grant Date owns(within the meaning of Sec­tion 424 of the Code) stock possessing more than 10%of the total combined voting power of all classes of stock of the Com­pany orany Subsidiary, in which case the exercise price shall be at least 110% of theFair Market Value of the Stock on the Grant Date.

 

                6.3           **OptionPeriod. **The OptionPeriod  shall be determined by theCommittee, and unless otherwise specifically provided in the Award Agreement,no Option shall be exercisable later than ten years from the Grant Date.   No Incentive Stock Option shall be exercisablelater than ten years from the Grant Date, provided that in the case of anEmployee who on the Grant Date owns or is deemed to own (within the meaning ofSection 425(d) of the Code) more than 10% of the total combined voting power ofall classes of stock of the Company or any Subsidiary, the Incentive StockOption shall not be exercisable later than five years from the Grant Date.   Options may expire prior to the end of theOption Period due to the Participant’s Termination of Employment or Terminationof Service as provided in Section 8, or in accordance with any provision of theAward Agreement.  No Option may beexercised at any time unless the Option is valid and outstanding.

 

                6.4           **Limitationon Amount of Incentive Stock Options.  **Theaggregate Fair Market Value (determined as of each Option Grant Date) of Stockwith respect to which a Participant’s Incentive Stock Options are exercisablefor the first time during any calendar year (under this and all other stockoption plans of the Company and any Subsidiary) shall not exceed $100,000.

 

                6.5           **Nontransferabilityof Options. **Except asotherwise provided in this Section 6.5, no Option shall be transferable by aParticipant otherwise than by will or the laws of descent and distribution, andan Option shall be exer­cisable, during the Participant’s lifetime, only by theParticipant (or, in the event of the Participant’s legal incapacity orincompetency, the Participant’s guardian or legal representative).  The Committee may in an Award Agreement allowa Participant, subject to any restrictions under Section 16(b) of the ExchangeAct, to transfer all or part of a Nonqualified Stock Option to (i) theParticipant’s spouse or lineal descendants (“Immediate Family Members”), (ii)trusts for the exclusive benefit of the Participant and/or his Immediate FamilyMembers, or (iii) a partnership or limited liability company in which theParticipant and/or his Immediate Family Members are the only partners ormembers, as applicable.  Such transfermay be made by a Participant only if there is no consideration for thetransfer, and subsequent transfers of any Option shall be prohibited other thanin accordance with this Section 6.5 and by will or the laws of descent anddistribution.  Following a transfer of anOption, the Option shall continue to be subject to the same terms andconditions as were applicable immediately before the transfer, and Terminationof Employment or Service, Retirement, Disability, satisfaction of servicerequirements or performance objectives, and other conditions to exercise of anOption shall be applied with respect to the original Participant.  However, for purposes of exercising theOption, the term Participant shall refer to the transferee.  In addition, for purposes of the death benefitprovisions of Section 8, the Participant’s Representative shall be deemed torefer to

 

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the transferee, the personal representative of the transferee’s estate,or after final settlement of the transferee’s estate, the successor orsuccessors entitled thereto by law.

 

                6.6           **Exercise.  **An Option may be exercised, solong as it is valid and outstanding, from time to time in part or as a whole,subject to any limitations with respect to the number of shares for which theOption may be exercised at a particular time and to such other conditions (e.g.,exercise could be condi­tioned on performance) as the Committee in itsdiscretion may specify upon granting the Option or as otherwise provided inthis Section 6.

 

                6.7           **Methodof Exercise. **To exercise an Option,the Participant or the other person(s) entitled to exercise the Option shalldeliver to the Committee (i) a written notice of exercise in such form as theCommittee may prescribe, specifying the number of full shares to be purchased;(ii) payment in full of the exercise price in accordance with Section 6.8; and(iii) in the case of Nonqualified Stock Options, any required withholding taxesas provided in Section 13.  No shares ofStock shall be issued unless the Participant has fully complied with theprovisions of this Section 6.7.

 

                6.8           **Paymentof Exercise Price.   **To theextent provided in the Award Agreement for an Option and subject to the rulesof Section 16 of the Exchange Act and any exchange on which the Stock is tradedat any relevant time, payment of the exercise price may be made (i) in cash;(ii) in shares of Stock (based on the Fair Market Value of the Stock on thedate the Option is exercised) acceptable to the Committee and owned by theParticipant (or jointly by the Participant and his spouse) for at least sixmonths evidenced by negotiable certificates or by a written attestation ofownership and consent to issuance, in satisfaction of the Option or portionthereof being exercised, of only the net shares of Stock (those equal in valueto the difference between the exercise price and the then Fair Market Value);(iii) by a written election to have the Company retain that number of shares ofStock subject to the Option having an aggregate Fair Market Value equal to theaggregate exercise price of the Option, provided that for Incentive StockOptions, this right must be granted by the Committee at the time the Option isgranted and may not be added in any modification of the Award Agreement; or(iv) by any combination thereof.  Ifpermitted in the Award Agreement, Restricted Stock (valued as if it were notsubject to restrictions on transfer or possibilities of forfeiture) issued tothe Participant may be tendered as payment of the exercise price of an Option.  If Restricted Stock is tendered as theexercise price of an Option, a number of shares of Stock issued on exercise ofsuch Option, equal to the number of shares of Restricted Stock tendered asconsideration thereof, shall be subject to the same restrictions as theRestricted Stock so tendered and shall be held by the secretary of the Companypursuant to Section 9.1.

 

**Section 7 —  STOCK APPRECIATION RIGHTS**

 

                7.1           **Grant. **All Stock Appreciation Rights (“SAR’s”)granted under the Plan shall be evidenced by an Award Agreement in such form asthe Committee may from time to time approve. All SARs are subject to the terms and conditions of this Section 7 andsuch additional terms and conditions contained in the Award Agreement, whichneed not be the same in each case, not inconsistent with the Plan, as theCommittee finds desirable and the Board shall approve pursuant to Section 5.

 

                7.2           **ExercisePrice. **The exercise price pershare of Stock subject to a SAR shall be determined by the Committee at thetime of grant and specified in the Award Agreement.

 

                7.3           **ExercisePeriod.  **The exercise periodshall be determined by the Committee, and unless otherwise specified in theAward Agreement, no SAR shall be exercisable later than ten years from theGrant Date.  No SAR may be exercised atany time unless such SAR is valid and outstanding as provided in this Section7.

 

                7.4           **Nontransferability.** No SAR shall  be transferable other than by will or by thelaws of descent and distribution, and SAR’s shall be exer­cisable, during theParticipant’s lifetime, only by the Participant (or, in the event of theParticipant’s legal incapacity or incompetency, the Participant’s guardian orlegal representative).

 

                7.5           **Exercise. **An SAR may be exercised, so longas it, is valid and outstanding, from time to time in part or as a whole,subject to any limitations with respect to the number of shares for which theSAR may be exercised at a particular time and to such other conditions (e.g.,exercise could be condi­tioned on performance) as the Committee in its discretionmay specify upon granting the SAR or as otherwise provided in this Section 7.

 

                7.6           **Methodof Exercise. **To exercise anSAR, the Participant or the other person(s) entitled to exercise the SAR shallgive written notice of exercise to the Committee, specifying the number of fullshares with respect to which the

 

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SAR is being exercised, and, if the Award Agreement provides that theParticipant may elect the method of payment, whether the SAR is to be paid incash or Stock.

 

                7.7             **PaymentUpon Exercise. **Upon theexercise of an SAR, a Participant shall be entitled to receive an amount, incash or whole shares of Stock (or a com­bination thereof) as provided in theAward Agreement, equal to the amount by which the then Fair Market Value of oneshare of Stock exceeds the exercise price per share specified in the AwardAgreement, multiplied by the number of shares with respect to which the SAR isexercised. The number of shares of Stock to be delivered to the Participantupon exercise of an SAR shall be based on the Fair Market Value of the Stock onthe date of exercise.  Payment of an SARshall be made in cash, shares of Stock, or a combination of cash and shares ofStock, as provided in the Award Agreement, which may provide the Participant achoice regarding the form of payment.  Acertificate or certificates for shares of Stock acquired upon exercise of anSAR shall be issued in the name of the Participant and distributed to theParticipant as soon as practicable following exercise, subject to Section 12.3.  No fractional shares of Stock will beissuable upon exercise of an SAR and, unless otherwise provided in the AwardAgreement, the Participant will receive cash in lieu of fractional shares.

 

**Section 8 — LIMITATIONS ON EXERCISE OF OPTIONS ANDSARs**

**AFTER TERMINATION OF EMPLOYMENT OR SERVICE**

 

                8.1           **ExerciseAfter Termination. **After aParticipant’s Termination of Employment, an Option or SAR may be exercised,subject to adjustment as provided in Section 3.3, only to the extent that theOption or SAR was exercisable immediately before the Termination of Employment,but in no event after the expiration date of the Option or SAR as specified inthe Award Agreement. Except to the extent that shorter or longer periods areprovided in the Award Agreement, a Participant’s right to exercise an Option orSAR upon Termi­nation of Employment shall terminate:

 

                                                (i)            At the expiration of three months(Incen­tive Stock Options) or one year (Nonqualified Stock Options and SARs)after the Participant’s Retirement; provided, however, if an Incentive StockOption is not exercised after three months, it will remain exercisable as if itwere a Nonqualified Stock Option and will be a Nonqualified Stock Option whenexercised; or

 

                                                (ii)           At the expiration of one year in theevent of Disability of the Participant; or

 

                                                (iii)         At the expiration of one yearafter the Participant’s death if the Participant’s Termination of Employmentoccurs by reason of death; any Option or SAR exercised under this subparagraph(iii) may be exercised by the legal representative of the estate of theParticipant or by the person or persons who acquire the right to exercise suchOption or SAR by bequest or inheritance; or

 

                                                (iv)          No later than three months after theParticipant’s Termination of Employment for any reason other than thosedescribed in (i) through (iii) above or termination for “Cause” as described inSection 8.2.

 

                8.2           **Terminationfor Cause. **In the event theCommittee determines that an Employee’s employment has been terminated forCause, the Employee shall forfeit any and all unexercised Option and StockAppreciation Rights Awards immediately upon the Termination of Employment.  For purposes of this Plan, “Cause” shall meanthe Employee’s (i) willful failure to substantially perform such Employee’sreasonably assigned duties, (ii) repeated gross negligence in performingsuch Employee’s duties, (iii) illegal conduct in performing such Employee’sduties, (iv) willful actions contrary to the Company’s interest, (v) repeatedrefusal to comply with the reasonable and lawful instructions of management ofthe Company or a Subsidiary, or (vi) violation of the obligations imposed onthe Employee under any confidentiality or solicitation covenants to which theEmployee is bound under the terms of the Stock Option Agreement or otherwise.

 

**Section 9 — RESTRICTED STOCK AWARDS**

 

                9.1           **Grant. **All Restricted Stock Awardsgranted under the Plan shall be evidenced by an Award Agreement in such form asthe Committee may from time to time approve. All Restricted Stock Awards aresubject to the terms and conditions in this Section 9, and such additionalterms and conditions contained in the Award Agreement, which need not be thesame in each case, not inconsistent with the provisions of the Plan, as theCommittee finds desirable and the Board approves pursuant to Section 5.   The Company shall issue, in the name of eachParticipant who is granted a Restricted Stock Award, a certificate for theshares of Stock granted in the Award (subject to Section 13.3), as soon aspracticable after the

 

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Grant Date.  The Secretary of theCompany shall hold such certificates for the Participant’s benefit until theRestriction Period lapses or the Restricted Stock is forfeited to the Companyin accordance with the Award Agreement.

 

                9.2           **RestrictionPeriod. **The RestrictionPeriod shall be determined by the Committee, and shall commence on the GrantDate and expire at the time spec­ified in the Award Agreement.  The Committee may provide in an AwardAgreement that a Restriction Period that has not otherwise expired will expireimmediately upon the Retirement, death or Disability of the Participant.   Unless otherwise provided in the AwardAgreement, in the event of a Participant’s Termination of Employment during theRestriction Period for any reason, the Par­ticipant’s rights to the Stocksubject to the Restricted Stock Award shall be forfeited and all such Stockshall immediately be****surrenderedto the Company.

 

                9.3           **Rightsof Participant. **During theRestriction Period, the Participant may not sell, transfer, pledge, assign orotherwise dispose of shares of Restricted Stock.  Any attempt by a Participant to sell,transfer, pledge, assign or otherwise dispose of Restricted Stock shall causeimmediate forfeiture of the Award. Except as provided in the previous sentence and as otherwise provided inthe Award Agreement, a Participant shall have, with respect to RestrictedStock, all of the rights of a stockholder of the Company, including the rightto vote the shares and the right to receive all dividends and otherdistributions with respect to such shares, provided that the Participant hasbecome the holder of record of the Stock. The Committee may provide in an Award Agreement that dividends paid onRestricted Stock must be reinvested in shares of Stock, which may or may not besubject to the same Restriction Period applicable to the original RestrictedStock Award.  In the event of anyadjustment as provided in Section 3.3 or if any securities are received as adividend on Restricted Stock, new or additional shares or securities shall besubject to the same terms and conditions as the original Restricted Stock.

 

                9.4           **Expirationof Restriction Period. **At theexpiration of the Restriction Period, the restrictions contained in Section 9.3and in the Award Agreement shall, except as otherwise specifically provided inthe Award Agreement, expire, and the Company shall, subject to the provi­sionsof Section 12.3 and the Award Agreement, deliver to the Participant acertificate evidencing the Participant’s ownership of the Stock free of therestrictions.

 

                9.5           **Nontransferability.  **No Restricted Stock Award shallbe transferable other than by will or the laws of descent and distributionuntil any restrictions applicable to such Award have lapsed and a certificateevidencing the Participant’s ownership of the stock free of restrictions hasbeen issued.

 

**Section 10 — PERFORMANCE SHARE AWARDS**

 

10.1                         **Grant.  **AllPerformance Share Awards granted under the Plan shall be evidenced by an AwardAgreement in such form as the Committee may from time to time approve.  All Performance Share Awards are subject tothe terms and****conditions of thisSection 10 and such additional terms and conditions contained in the AwardAgreement, which terms and conditions need not be the same in each case, notinconsistent with the Plan, as the Committee finds desirable and the Boardapproves pursuant to Section 5.

 

                10.2         **PerformanceCriteria. **The performancecriteria for each Performance Share Award shall be determined by the Committee,and shall consist of service requirements and any measures of performance ofthe Com­pany or any Subsidiary or such other criteria as the Committeespecifies.   At the times specified inthe Award Agreement, the Committee shall evaluate actual performance duringsuch performance period com­pared to the performance criteria established forthe Award, and shall determine the extent to which a cash or stock payment isto be made pursuant to the Performance Share Award.  The Committee may provide in an AwardAgreement that one or more performance criteria under an Award will be deemedto have been met upon the Retirement, death or Disability of theParticipant.   Unless otherwise providedin the Award Agreement, in the event of a Participant’s Termination of Employ­mentor Termination of Service for any reason before performance criteria have beenmet, the Par­ticipant’s rights to payment of a Performance Share Award shall beforfeited.

 

                10.3         **Payment. **Performance Share Awards will bepaid only after the Committee determines, in its sole discretion, that theperformance criteria established under Section 10.2  have been achieved, subject to such otherterms and conditions as may be included in the Award Agreement and to theCommittee’s right to waive any performance criteria in its discretion.  Payment shall be made, as provided in theAward Agreement (which may provide the Participant a choice regarding the formof payment), in cash or whole shares of Stock (or a combination thereof) havinga Fair Market Value equal to the number of shares of Stock represented by thePerformance Share Award.  A certificateor certificates for shares of Stock to be issued pursuant to a PerformanceShare Award shall be issued in the name of the Participant and distributed to

 

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the Participant as soon as practicable following the Committee’sdetermination that performance criteria have been met, subject to Section12.3.  No fractional shares of Stock willbe issued in connection with a Performance Share Award and, unless otherwiseprovided in the Award Agreement, the Participant will receive cash in lieu offractional shares.

 

                10.4         **Rightsof Participant. **A Participantshall not, with respect to a Performance Share Award or any Stock that may inthe future be issued under it, have any rights as a stockholder of the Company,such as the right to vote the shares or the right to receive dividends andother distributions, at any time before the Participant has become the holderof record of the Stock.

 

                10.5         **Nontransferability.**  No Performance Share Award shall  be transferable other than by will or by thelaws of descent and distribution.

 

**Section 11 — AMENDMENTS AND TERMINATION**

 

                11.1         **Amendmentsand Termination.**The Committee or the Board may terminate, suspend,amend or alter the Plan, but no action of the Committee or the Board may:

 

                                (a)           Impair or adversely affect the rightsof a Participant under an outstanding Award thereto­fore granted, without theParticipant’s consent, other than as provided in Section 12.3; or,

 

                                (b)           Without the approval of thestockholders:

 

(i)            Increase the totalamount of Stock which may be delivered under the Plan pursuant to IncentiveStock Options, except as is provided in Section 3.3 of the Plan;

(ii)           Decrease theexercise price of any Incentive Stock Option to less than the exercise price onthe date the Option was granted;

 

(iii)          Change the class ofEmployees eligible to receive Incentive Stock Option Awards under the Plan; or

 

(iv)                              Extend theperiod during which Incentive Stock Option Awards may be granted, as specifiedin Section 15.

 

                11.2         **Conditionson Awards. **Subject to theapproval of the Board, in granting an Award, the Com­mittee may establish anyconditions that it determines are con­sistent with the purposes and provisionsof the Plan, including, without limitation, a condition that the granting of anAward is subject to the surrender for cancellation of any or all outstand­ingAwards held by the Participant. Any new Award****made under this Section may contain such terms and conditions as theCommit­tee may determine, including an exercise price that is lower than thatof any surrendered Award.

 

                11.3         **SelectiveAmendments. **Any amendment oralteration of the Plan may be limited to, or may exclude from its effect, par­ticularclasses of Participants.

 

**Section 12 —  GENERAL PROVISIONS**

 

                12.1         **UnfundedStatus of Plan.**The Plan is intended to constitute an “unfunded”plan for incentive compensation, and the Plan is not intended to constitute aplan subject to the provi­sions of the Employee Retirement Income Security Actof 1974, as amended, and shall not extend, with respect to any payments not yetmade to a Participant, any rights that are greater than those of a generalcreditor of the Company.

 

                12.2         **Transfers,Leaves of Absence and Other Changes in Employment Status. **For purposes of the Plan (i) atransfer of an Employee from the Company to a Subsidiary or vice versa, or fromone Subsidiary to another, or (ii) a leave of absence not in excess of 90 daysduly authorized in writing by the Company or a Subsidiary for mili­taryservice, sickness or any other purpose approved by the Company or a Subsidiary,shall not be Termination of Employment. The Committee, in its sole discretionsubject to the terms of the Award Agreement, shall determine the disposition ofall Awards made under the Plan in all cases involving any substantial change inemployment status other than an event described in this Section 12.2.

 

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                12.3         **Restrictionson Distribution of Stock. **TheCommittee may require Participants receiving Stock pursuant to any Award underthe Plan to represent to and agree with the Com­pany in writing that theParticipant is acquiring the Stock for investment without a view todistribution thereof. No Stock shall be issued or transferred pursuant to anAward unless the Committee determines, in its sole discretion, that suchissuance or transfer complies with all relevant provisions of law, includingbut not limited to, the (i) limitations, if any, imposed in the state ofissuance or transfer, (ii) restrictions, if any, imposed by the Securities Actof 1933, as amended, the Exchange Act, and the rules and****regulations promulgated thereunder, and(iii) requirements of any stock exchange upon which the Stock may then belisted. The certificates for Stock issued pursuant to an Award may include anylegend that the Committee deems appropriate to reflect any restrictions ontransfer.  The Company shall not beobligated to register any securities covered hereby or to take any affirmativeaction in order to cause the issuance of Stock pursuant to an Award to complywith any law or regulation of any governmental authority.

 

                12.4         **AssignmentProhibited. **Subject to theprovisions of the Plan and the Award Agreement, no Award shall be assigned,transferred, pledged or otherwise encumbered by the Participant otherwise thanby will or by the laws of descent and distribu­tion, and an Award shall beexercisable, during the Partici­pant’s lifetime, only by the Participant.  Awards shall not be pledged or hypothecatedin any way, and shall not be subject to any execution, attachment, or similarprocess.  Any attempted transfer,assignment, pledge, hypothecation or other disposition of an Award contrary tothe provisions of the Plan, or the levy of any process upon an Award, shall benull, void and without effect.

 

                12.5         **OtherCompensation Plans. **Nothingcontained in the Plan shall prevent the Company from adopting othercompensation arrangements, subject to stockholder approval if such approval isrequired.

 

12.6       **Limitation of Authority. **No person shall at any time haveany right to receive an Award hereunder and no per­son other than a dulyauthorized member of the Committee shall have authority to enter into anagreement on behalf of the Company for the granting of an Award or to make any****represen­tation or warranty with respectthereto.  Participants shall have norights in respect****to any Awardexcept as set forth in the Plan and the applicable Award Agreement.

 

                12.7         **NoRight to Employment. **Neitherthe action of the Company in establishing the Plan, nor any action taken by itor by the Board or the Committee under the Plan or any Award Agreement, nor anyprovision of the Plan, shall be con­strued as giving to any person the right tobe retained in the employ or service of the Company or any other entity as anemployee, director or independent contractor or to interfere in any way withthe right of the Company or any other entity to terminate any person’s serviceor employment at any time.

 

                12.8         **Changeof Control.  **In the event of aChange of Control, (i) Awards of Options and SARs under the Plan shall becomeexercisable in full whether or not otherwise exercisable at such time, and anysuch Option or SAR shall remain exercisable in full thereafter until it expirespursuant to its terms; and (ii) the Restriction Period for Restricted StockAwards shall lapse.

 

                12.9         **Pooling. **Notwithstanding anything in thePlan to the contrary, if any right under or feature of the Plan would cause tobe ineligible for the pooling of interests accounting method a transaction thatwould, but for the right or feature hereunder, be eligible for such accountingmethod, the Board, upon  recommendationof the Committee, may modify or adjust the right or feature so that thetransaction will be eligible for pooling of interest accounting.  Such modification or adjustment may includepayment of cash or issuance to a Participant of Stock having a Fair MarketValue equal to the cash value of such right or feature.

 

                12.10       **Not aShareholder. **The person orpersons entitled to exercise, or who have exercised, an Option or SAR shall notbe entitled to any rights as a shareholder of the Company with respect to anyStock to be issued upon such exercise until such persons or persons shall have become the holder of record ofsuch Stock.

 

                12.11       **Severability. **If any provision of this Plan isfound to be illegal or unenforceable by any court of law in any jurisdiction,the remaining provisions hereof and thereof shall be severable and enforceablein accordance with their terms, and all provisions shall remain enforceable inany other jurisdiction.

 

                12.12       **Headings. **The headings in this Plan havebeen inserted solely for convenience of reference and shall not be consideredin the interpretation or construction of this Plan.

 

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                12.13       **GoverningLaw. **The validity,interpretation, construction and administration of this Plan shall be governedby the laws of the Company’s state of incorporation, as it may change from timeto time.

 

**Section 13 —  TAXES**

 

                13.1         **TaxWithholding. **All Participantsshall make arrangements sat­isfactory to the Committee to pay to the Company ora Subsidiary, any federal, state or local taxes required to be withheld withrespect to an Award issued under the Plan at the time such taxes are requiredto be withheld.  If a Participant failsto make such tax payments, the Company and its Sub­sidiary shall, to the extentpermitted by law, have the right to deduct any such taxes from any payment ofany kind otherwise due to the Participant, including a payment related to anyAward under the Plan.

 

                13.2         **ShareWithholding. **If permitted bythe Committee in an Award Agreement, a tax withholding obligation may besatisfied by the Company retaining shares of Stock with a fair market valueequal to the amount required to be withheld. Any Stock so withheld will not be counted against the number of sharesavailable for issuance under Section 3.1 of the Plan.

 

**Section 14 —  EFFECTIVE DATE OF PLAN**

 

                The Plan shall beeffective on the date (the “Effective Date”) when the Board adopts the Plan,subject to****approval of the Plan bya majority of the total votes eligible to be cast at a meeting of shareholdersfollowing by Effective Date, which vote shall be taken within 12 months of theEffective Date.  Awards may be grantedbefore obtaining shareholder approval of the Plan,****but any such Awards shall be contingent upon such shareholderapproval being obtained and may not be exercised before such approval.

 

 **Section 15 —  TERM OF PLAN**

 

                ThePlan has no termination date, provided that no Incentive Stock Option may beissued on or after the tenth anniversary of the Effective Date as defined inSection 14.

 

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