**EXHIBIT 10 (b) FORM OF STOCK OPTION AGREEMENT**

 

 

**FIRST FINANCIAL SERVICE CORPORATION**

 

**1998 STOCK OPTION AND INCENTIVE COMPENSATION PLAN**

**STOCK OPTION AGREEMENT**

 

 

This is a STOCK OPTIONAGREEMENT (the “Agreement”) dated as of                                     ,20    , by and between First Financial Service Corporation(f/k/a First Federal Financial Corporation of Kentucky) (the “Company”) and                                                                     (the “Optionee”).

    

**Recitals**

 

A.                                   The Board ofDirectors of the Company (the “Board”) adopted the First Federal FinancialCorporation of Kentucky 1998 Stock Option and Incentive Compensation Plan (the “Plan”).

 

B.                                     The Board ofDirectors (the “Board”) has determined that it is in the best interests of theCompany and appropriate to the stated purposes of the Plan that the Companygrant to the Optionee an option to purchase shares of the Company’s commonstock (“Shares”) pursuant and subject to the terms, definitions, and conditionsof the Plan.

 

C.                                     Any capitalizedterms used but not defined herein shall have the respective meanings given themin the Plan, a copy of which is attached hereto and incorporated by referenceherein in its entirety.

 

**Agreement**

 

                **NOW, THEREFORE**, the Company and the Optionee do hereby agreeas follows:

 

SECTION1 — GRANT OF OPTION

 

Subject to the terms andconditions of this Agreement, the Company hereby grants to the Optionee anoption (the “Option”) to purchase all or any part from time to time of Sharesas set forth below:

 
| **TYPE OF OPTION**         | ** ** | **NUMBER OF SHARES** | ** ** |
|----------------------------|------------|----------------------|------------|
|                       |       |                 |       |
| Incentive Stock Options    |       | —               |       |
| Nonqualified Stock Options |       | —               |       |

 

 

SECTION 2 —  OPTION PRICE

 

The option price hereunder is $              per Share, which equals 100% of the fair market value of a Share as determined inaccordance with the Plan.

 

 

SECTION 3 — DURATION OFOPTION

 

Subject to acceleration upon a Change in Control and subject to suchshorter period as might be provided in Section 8 of this Agreement (related toTermination of Employment or Service), the Option shall be exercisable asfollows:

 

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| **Dates Options are Eligible For Exercise** | ** ** | **Percentage of Total Share Subject to Option  Which May Be Exercised** | ** ** |
|---------------------------------------------|------------|-------------------------------------------------------------------------|------------|
|                                        |       |                                                                    |       |
| [Immediately]                               |       | 20                                                                      | %          |
| [1st anniversary]                           |       | 20                                                                      | %          |
| [2nd anniversary]                           |       | 20                                                                      | %          |
| [3rd anniversary]                           |       | 20                                                                      | %          |
| [4th anniversary]                           |       | 20                                                                      | %          |

 

                The Optionee’sunexercised right to purchase shares of Option Stock shall cumulate andcarry-over to subsequent twelve month periods.

 

SECTION 4 — EXERCISE OFOPTION

 

During the Option Period,the Optionee may exercise the Option upon compliance with the followingadditional terms:

 

(a)           Method of Exercise. The Optionee shall exercise portions of the Option by written notice,which shall:

 

(i)            state the election to exercise the Option, the number ofShares in respect of which it is being exercised, the person in whose name thestock certificate or certificates for such shares of Common Stock is to beregistered, and his address and Social Security Number (or if more than one,the names, addresses and Social Security Numbers of such persons);

 

(ii)           contain such representations and agreements, if any, asthe Board or the Committee may require concerning the holder’s investmentintent regarding such Shares;

 

(iii)          acknowledge and accept the restrictions on transfer of theOption Stock as required by Section 9 of the Plan;

 

(iv)          be signed by the Optionee and, if the Option is beingexercised by any person or persons other than the Optionee, be accompanied byproof, satisfactory to counsel for the Company, of the right of such person orpersons to exercise the Option; and

 

(v)           be in writing and delivered in person or by certified mailto the Treasurer of the Company on behalf of the Committee.

 

(b)           Cashless Exercise.  By a written election, Optionee may haveCompany retain that number of shares subject to the Option having an aggregatefair market value equal to:

 

                ý            The aggregate exercise price of thenonqualified options (mandatory);

 

                o            The aggregate exercise price of theincentive stock options; or

 

                o            The total amount of tax required tobe withheld.

 

(c)           Payment UponExercise of Option.  Payment of thefull Option Price for Shares upon which the Option is exercised shall be madein one of the following manners: (1) in cash; (2) in shares owned by theParticipant for at least six months (or by deemed transfer at such shares),with approval of the Committee; (3) in accordance with Section 4(b); or (4) inany combination thereof, all in accordance with Section 6.8 of the Plan.  The Optionee shall make arrangements forincome and employment tax withholding (if applicable), which are consistentwith Section 4(b) and are satisfactory to the Company.  The Company shall cause to be issued anddelivered to the Optionee the certificate(s) representing such Shares as soonas practicable following the receipt of notice and payment described above.

 

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SECTION 5 — NONTRANSFERABILITY OF OPTION

 

Except for certain transfers to Immediate Family Members and certainentities for their benefit pursuant to Section 6.5 of the Plan, the Optionshall not be transferable or assignable by the Optionee.  The Option shall be exercisable, during theOptionee’s lifetime, only by him.  TheOption shall not be pledged or hypothecated in any way, and shall not besubject to execution, attachment or similar process.  Any attempted transfer, assignment, pledge,hypothecation or other disposition of the Option contrary to the provisionshereof, and the levy of any process upon the Option, shall be null, void andwithout effect.

 

SECTION 6 — EFFECT OF AMENDMENT, SUSPENSION

OR TERMINATION OF EXISTING OPTIONS

 

No amendment, suspension or termination of the Plan shall, without theOptionee’s written consent, alter or impair the Option granted under the termsof this Agreement.

 

SECTION 7 — RESTRICTIONS ON ISSUING SHARES

 

Shares shall not be issued pursuant to the exercise of the Option,unless the issuance and transferability of the Shares shall comply with allrelevant provisions of law, including, but not limited to, the (i) limitations,if any, imposed by applicable state law; and (ii) restrictions, if any, imposedby the Securities Act of 1933, as amended, the Securities Exchange Act of 1934,as amended, and the rules and regulations promulgated thereunder by the UnitedStates Securities and Exchange Commission. The Committee may, in its discretion, determine if such restrictions orsuch issuance of shares so complies with all relevant provisions of law.

 

SECTION 8 — EXERCISE AFTER TERMINATION OF EMPLOYMENT

 

After an Employee’s Termination of Employment other than by the Companyfor Cause (as defined in the Plan), an Option may be exercised with respect tothe number of Shares which the Employee could have acquired by an exercise ofthe Option immediately before the Termination of Employment but in no eventafter the expiration date of the Option as specified in Section 3.  The right to exercise will expire at theearlier of the expiration of the Option Period or one year after the Employee’sdeath, or Disability.  Any Optionexercised under this Section may be exercised by the legal representative ofthe estate of the Employee or by the person or persons who acquire the right toexercise such Option by bequest or inheritance.

 

Absent death, Disability, or a finding of Cause, the Option shallremain exercisable for the shorter of the Option Period or three monthsfollowing Termination of Employment, provided that if the Optionee terminatesemployment voluntarily on account of Retirement on or after age 60, the optionwill remain exercisable for the shorter of the Option Period or one yearfollowing termination, but any Incentive Stock Option will be treated as aNonqualified Stock Option if not exercised within three months.

 

SECTION 9 — ACKNOWLEDGEMENTS

 

The Optionee acknowledges receipt contemporaneously herewith of a copyof the Plan, and the Optionee represents that he is familiar with the terms andprovisions thereof and hereby accepts the Option subject to all the terms andprovisions thereof.  Any capitalized termused herein and not otherwise defined shall have the meaning given in thePlan.  The Optionee acknowledges thatnothing contained in the Plan or this Agreement shall (a) confer upon theOptionee any additional rights to continued employment by the Company or anycorporation related to the Company; or (b) interfere in any way with the rightof the Company to terminate the Optionee’s employment or change the Optionee’scompensation at any time.

 

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SECTION10 — TERM OF AGREEMENT

 

This Agreement shall terminate upon the earlier of (i) completeexercise or termination of the Option; (ii) mutual agreement of the parties; or(iii) expiration of the Option Period.

 

                **IN WITNESS WHEREOF**, the parties have executed and deliveredthis Agreement as of the date set forth in the preamble hereto, but actually onthe dates set forth below.

 

 
|     |   | By:    |   |                       |
|----------|--------|--------|--------|----------------------------|
| Optionee |   |   |   | Chairman, Stock Option and |
|     |   |   |   | Incentive Plan Committee   |
|     |   |   |   |
| Date:    |   |   | Date:  |                       |
|          |        |        |        |                            |  |  |

 

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