Document:

serpbsb.htm

AMENDED AND RESTATED

SUPPLEMENTAL RETIREMENT AGREEMENT

THIS AMENDED AND RESTATED SUPPLEMENTAL RETIREMENT AGREEMENT (“Agreement”) is entered into as of February 12, 2014, by and between Belmont Savings Bank, a Massachusetts savings bank with its principal place of business in Belmont, Massachusetts ( “Bank”), and John A. Citrano ( “Executive”):

WHEREAS, the Executive is employed as an executive employee of the Bank; and

WHEREAS, the Bank and the Executive previously entered into a Restated Supplemental Executive Retirement Agreement dated December 23, 2008 (“Prior Plan”); and

WHEREAS, the Bank and the Executive wish to amend and restate the Prior Plan in its entirety,  as set forth herein; and

NOW, THEREFORE, in consideration of the premises and of the mutual promises contained herein, the Prior Plan is hereby replaced in its entirety by this to read as follows:

1.           Benefits Fully Vested.  Effective February 12, 2014, the Executive is fully vested in his Accrued Benefit under this Agreement.  For this purpose, the “Accrued Benefit” is the benefit accrued in accordance with APB 12 in accordance with generally accepted accounting principles in order to provide Executive with a “Supplemental Retirement Benefit” at age 65 equal to 51% of his projected final Average Compensation.

2.           Rights on Death or Termination of Employment.

a.           Death. If the Executive should die prior to attainment of age 55 while employed by the Bank and prior to the termination of this Agreement, the Bank shall pay the Executive’s designated beneficiary or estate his Accrued Benefit in a lump sum no later than sixty (60) days after the Executive’s date of death.  In the event Executive should die on or after attainment of age 55 while employed by the Bank and prior to termination of this Agreement, the Bank shall pay Executive’s designated beneficiary or estate the lump sum present value of his Supplemental Retirement Benefit, calculated in the manner set forth on Exhibit A.  Such payment shall be made no later than sixty (60) days after Executive’s death.  Upon the receipt of such payment, this Agreement shall terminate with respect to the Executive.

b.           Termination of Employment Prior to Age 55 or With Fewer Than Ten (10) Years of Service. If the Executive’s employment with the Bank should terminate for any reason other than his death or disability at a time when the Executive has not both (i) attained age 55 and (ii) completed ten (10) Years of Service with the Bank, the Executive shall be entitled to the following benefit:

(i)           If the Executive voluntarily terminates his employment with the Bank other than for Good Reason as defined below, the Bank shall pay to the Executive in a lump sum not later than sixty (60) days after the date the Executive’s employment so terminates an amount equal to Executive’s Accrued Benefit.

 

  

  

  

(ii)           If the Executive’s employment with the Bank is terminated by the Bank without cause (as defined below) or by the Executive for Good Reason (as defined below), the Executive shall be entitled to receive an amount equal to the greater of (i) Executive’s Accrued Benefit hereunder, or (ii) the sum of the then total cash surrender value of certain policies of life insurance (“Policies”) which the Bank owns on Executive’s life, plus an amount equal to the aggregate Federal and State income taxes that would be payable by the Executive with respect to such payment (grossed up to reflect the taxes payable on the entire payment) as estimated by the public accountants utilized by the Bank taking into account the tax rates which will be applied to the amount of such payment for the Executive for the year in which such payment is received; provided, however, the amount of taxable income of the Executive to which the initial portion of the grossed-up payment will apply shall not exceed the aggregate amount of premiums paid on the Policies by the Bank. Such benefit shall be paid to the Executive not later than sixty (60) days following the date his employment with the Bank terminated. Upon the receipt of such payment, this Agreement shall terminate with respect to the Executive.  Notwithstanding anything herein to the contrary, nothing herein shall be construed to require the Bank to actually transfer any such Policies to Executive, rather sub-section “(ii)” above shall only represent the formula for determining the maximum cash payment to be made to Executive under this Section.

(iii)           A voluntary termination of employment by the Executive shall be deemed to have been for Good Reason if the Executive’s action results from a material negative change to his service relationship by the Bank, such as the duties to be performed, the conditions under which such duties are to be performed, or the compensation to be received for performing such services. For the purposes of determining whether a material negative change has been made, such material negative change shall be deemed to have occurred in the event of any one of the following events:

 

                                         (a)         a material diminution in the Executive’s base compensation;

 

(b)           a material diminution in the Executive’s authority, duties,

 

(c)           a material diminution in the authority, duties, or responsibilities of the supervisor to whom the Executive is required to report;

 

(d)           a material diminution in the budget over which the Executive retains authority,

  

  

  

(e)           a change of more than thirty-five (35) miles in the geographic location at which the Executive must perform services for the Bank; or

 

(f)           any other action or inaction of the Bank that constitutes a material breach by the Bank of any agreement under which the Executive provides services to the Bank.

 

In no event, however, shall a termination of employment for Good Reason occur unless such termination occurs not later than one year from the date the material negative change becomes effective. Further, however, the Executive must provide notice to the Bank of any such material negative change which would permit the Executive to terminate his employment for Good Reason, such notice to be given not later than ninety (90) days of the initial existence of the material negative change. The Bank shall have a period of thirty (30) days following receipt of said notice during which it may remedy the material negative change; and, if it does so remedy said material negative change, the Executive shall not be entitled to terminate his employment for Good Reason.

c.           Termination of Employment After Age 55 With Ten (10) or More Years of Service. If the Executive’s employment with the Bank should terminate for any reason other than for Cause (as defined below) or his death at a time when the Executive (i) has attained age 55 and (ii) has completed ten (10) or more Years of Service with the Bank, the actuarial value of the Supplemental Retirement Benefit computed in the manner set forth on Exhibit A hereto shall be determined and such Benefit shall be paid to the Executive not later than sixty (60) days following the date his employment with the Bank terminated.

d.           Termination by Reason of Disability. If the Executive’s employment with the Bank should terminate by reason of Disability prior to his attaining both age 55 and completing ten (10) Years of Service with the Bank, the Executive shall be deemed for purposes of this Agreement to have retired upon attaining age 55 and with ten (10) Years of Service with his Compensation increased by six percent (6%) per calendar year for the years beginning with the year in which he becomes disabled and ending with the year in which he would attain age 55. The provisions of paragraph (c) of this Section shall apply to the determination of the Executive’s benefit.

Disability is defined as a physical or mental impairment that prevents the Executive from performing all or substantially all of the functions of his position with the Bank. At the Bank’s request, the Executive agrees to be examined by a physician selected by the Bank for the purpose of determining the existence of a Disability. The Bank shall pay all costs incurred with respect to such examination.

e.           Benefits Not Payable While Executive Employed bv the Bank or Prior to the Time the Executive Incurs a Separation from Service with the Bank. Notwithstanding anything to the contrary, at no time shall any benefits be provided to the Executive pursuant to this Section 2 unless the Executive’s employment with the Bank has terminated; that is, the Executive shall have no right to receive any benefit under this Section 2 while employed by the Bank. Further, at no time shall any benefits be provided to the Executive, his beneficiary(ies) or his estate until such time as the Executive has incurred a separation from service from the Bank which shall have the same meaning as a separation from service under Section 409A, of the Internal Revenue Code, as amended, and any regulations or guidance issued thereunder by the Internal Revenue Service.

  

  

  

f.           Discount Rate. For the purpose of actuarially converting the Supplemental Retirement Benefit of the Executive to a lump-sum payment, the named fiduciary shall utilize the discount rate then utilized by the Savings Banks Employees Retirement Association in connection with the qualified retirement plans then offered by the Savings Banks Employees Retirement Association to its members.

g.           Termination for Cause. For the purposes of Section 2(b)(ii) of this Agreement, termination for cause shall be defined as a termination of the employment of the Executive by the Bank for any one or more of the following reasons:

(i)           Willful and intentional violation of any material state or federal laws, or of the by-laws, rules, policies or resolutions of the Bank or the rules or regulations of any regulatory agency or governmental authority having jurisdiction over the Bank, which in the reasonable opinion of the Board of Investment of the Bank has or might have a material adverse effect upon the Bank;

 

(ii)           Conviction of the Executive of a felony involving fraud or dishonesty, or the Executive’s willful and intentional commission of a fraudulent or dishonest act in connection with his duties to the Bank for which the Bank suffers a material loss;

 

(iii)           An intentional failure to carry out material, lawful instructions issued to the Executive by the Board of Investment of the Bank or the President and Chief Executive Officer of the Bank, which failure, in the reasonable opinion of the Board of Investment of the Bank, causes material loss to the Bank, or which failure is not cured within ten (10) days of receipt of a notice of such failure from the Bank prior to the Bank suffering a material loss;

 

(iv)           Gross neglect of the duties of the Executive to the Bank hereunder, (provided such neglect does not arise as the result of the physical or mental disability of the Executive), which gross neglect is not cured by the Executive within fifteen (15) days of receipt of a notice of such neglect from the Bank; and

 

(v)           The Executive’s willful and intentional disclosure, without authority, of any secret or confidential information concerning the Bank or any customer of the Bank, or the taking of any action which the Bank’s Board of Investment determines, in its sole discretion and subject to good faith, fair dealing and reasonableness, constitutes unfair competition with or induces any customer to breach any contract with the Bank.

  

  

  

 

h.           Termination for Cause. For the purposes of Section 2(c) of this Agreement, termination for cause shall be defined as the termination of the employment of the Executive by the Bank as a result of the conviction of the Executive of a felony involving fraud or dishonesty, or the Executive’s willful and intentional commission of a fraudulent or dishonest act in connection with his duties to the Bank for which the Bank suffers a material loss.

4.           Termination of the Agreement During the Executive’s Lifetime . This Agreement shall terminate upon the termination of the Executive’s employment; in such event, after compliance with the relevant provisions of Section 2, the Bank shall have no further obligations hereunder.

5.           Post Termination Obligations.

(a)           Executive hereby covenants and agrees that, in consideration for the payment set forth in Section 2.b., for a period of eighteen (18) months following his termination of employment with the Bank, provided such termination occurs prior to the date on which Executive reaches age fifty-five (55) under conditions that would entitle him to a payment under Section 2.b., he shall not, without the written consent of the Bank:

(i)           Directly or indirectly, in one or a series of transactions, own, manage, operate, control, invest or acquire an interest in, or otherwise engage or participate in, whether as a proprietor, partner, stockholder, lender, director, officer, employee, loan originator, loan officer, joint venturer, investor, agent, consultant or representative, in any Competitive Business (as hereafter defined); or

 

(ii)           Solicit or induce, or attempt to solicit or induce, any other employee or independent contractor of the Bank or any other person who shall otherwise be in the service of the Bank, to terminate his or her employment with or otherwise cease his or her relationship with the Bank; or

 

(iii)           Solicit, divert, take away or accept, or attempt to solicit, divert, take away or accept, the business or patronage of any of the clients, customers (whether any such customer has done business with the Bank once or more than once), suppliers or accounts, or prospective clients, customers, suppliers or accounts, of the Bank.

 

For purposes of this Agreement, (i) the term “Competitive Business” means any business that engages in an activity of a type that competes with the business of the Bank or any of its affiliates (A) within thirty (30) miles of the Bank’s principal administrative office, or (B) outside such thirty (30) mile radius, in any of the communities in which the Bank or any of its affiliates maintains a place of business or engages in any banking activity as of the Executive’s date of termination; and (ii) Executive agrees that Executive will be deemed to have solicited or induced a person to cease such person’s relationship with the Bank if such former service provider to the Bank is subject to supervision by Executive in employment following such person’s separation from service with the Bank.

  

  

  

(b)           At all times, both during the Executive’s employment with the Bank and after its termination, the Executive will keep in confidence and trust all such Confidential Information, and will not use or disclose any such Confidential Information without the written consent of the Bank, except as may be necessary in the ordinary course of performing the Executive’s duties to the Bank.  As used in this Agreement, “Confidential Information” means information belonging to the Bank which is of value to the Bank in the course of conducting its business and the disclosure of which could result in a competitive or other disadvantage to the Bank. Confidential Information includes, without limitation, financial information, reports, and forecasts; inventions, improvements and other intellectual property; trade secrets; know-how; designs, processes or formulae; software; market or sales information or plans; customer lists; and business plans, prospects and opportunities (such as possible acquisitions or dispositions of businesses or facilities) which have been discussed or considered by the management of the Bank. Confidential Information includes information developed by the Executive in the course of the Executive’s employment by the Bank, as well as other information to which the Executive may have access in connection with the Executive’s employment. Confidential Information also includes the confidential information of others with which the Bank has a business relationship. Notwithstanding the foregoing, Confidential Information does not include information in the public domain.  The Executive understands and agrees that the Executive’s employment creates a relationship of confidence and trust between the Executive and the Bank with respect to all Confidential Information.

(c)           Executive shall, upon reasonable notice, furnish such information and assistance to the Bank as may reasonably be required by the Bank, in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party; provided, however, that Executive shall not be required to provide information or assistance with respect to any litigation between the Executive and the Bank or any of its subsidiaries or affiliates.

(d)           All payments and benefits to Executive under this Agreement shall be subject to Executive’s compliance with this Section.  The parties hereto, recognizing that irreparable injury will result to the Bank, its business and property in the event of Executive’s breach of this Section, agree that, in the event of any such breach by Executive, the Bank will be entitled, in addition to any other remedies and damages available (which would include a return of any payment made hereunder), to an injunction to restrain the violation hereof by Executive and all persons acting for or with Executive. Executive represents and admits that Executive’s experience and capabilities are such that Executive can obtain employment in a business engaged in other lines and/or of a different nature than the Bank, and that the enforcement of a remedy by way of injunction will not prevent Executive from earning a livelihood.  Nothing herein will be construed as prohibiting the Bank or the Company from pursuing any other remedies available to them for such breach or threatened breach, including the recovery of damages from Executive.

  

  

  

6.           Named Fiduciary, Determination of Benefits, Claims Procedure and Administration.

a.           The Bank is hereby designated as the named fiduciary under this Agreement. The named fiduciary shall have authority to control and manage the operation and administration of this Agreement, and it shall be responsible for establishing and carrying out a funding policy and method consistent with the objectives of this Agreement.

(i)           Claim.

A person who believes that he or she is being denied a benefit to which he or she is entitled under this Agreement (hereinafter referred to as a “Claimant”) may file a written request for such benefit with the Bank, setting forth his or her claim, The request must be addressed to the President of the Bank at the Bank’s then principal place of business.

(ii)           Claim Decision.

Upon receipt of a claim, the Bank shall advise the Claimant that a reply will be forthcoming within ninety (90) days and shall, in fact, deliver such reply within such period The Bank may, however, extend the reply period for an additional ninety (90) days for reasonable cause. If the claim is denied, in whole or in part, the Bank shall adopt a written opinion, using language calculated to be understood by the Claimant, setting forth: (i) the specific reason or reasons for such denial; (ii) the specific reference to pertinent provisions of this Agreement on which such denial is based; (iii) a description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation why such material or such information is necessary; (iv) appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review; and (v) the time limits for requesting a review under subsection (iii) and for review under subsection (iv) hereof.

(iii)           Request for Review

Within sixty (60) days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Board of Investment of the Bank review the determination of the Bank. Such request must be addressed to the Board of Investment of the Bank, at the Bank’s principal place of business. The Claimant or his or her duly authorized representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the Board. If the Claimant does not request a review of the Bank’s determination by the Board of Investment of the Bank within such sixty (60) day period, he or she shall be barred and estopped from challenging the Bank’s, determination.

  

  

  

(iv)           Review of Decision.

Within sixty (60) days after the Board of Investment’s receipt of a request for review, the Board of Investment of the Bank will review the Bank’s determination. After considering all materials presented by the Claimant, the Board of Investment will render a written opinion, written in a manner calculated to be understood by the Claimant, setting forth the specific reasons for the decision and containing specific references to the pertinent provisions of this Agreement on which the decision is based. If special circumstances require that the sixty (60) day time period be extended, the Board of Investment will so notify the Claimant and will render the decision as soon as possible, but no later than one hundred twenty (120) days after receipt of the request for review.

   7.           Amendment. This Agreement may not be amended, altered or modified, except by a written instrument signed by the parties: hereto, or their respective successors or assigns, and may not be otherwise terminated except as provided herein. This Agreement further amends the Supplemental Retirement Agreement entered into by and between the Bank and the Executive dated December 1, 1994, as thereafter amended in its entirety by an Agreement dated December 23, 2003, which was thereafter amended on February 11, 2004, February 27, 2007 and restated April 9, 2008 and December 23, 2008. All provisions of the prior Agreement, as previously amended, shall, except to the extent expressly set forth herein, be of no further force or effect.

   8.           Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Bank and its successors and assigns, and the Executive, the beneficiary(ies), and their respective successor, assigns, heirs, executors, administrators and beneficiaries.

    9.           Notice. Any notice, consent or demand required or permitted to be given under the provisions of this Agreement shall be in writing, and shall be signed by the party giving or making the same. If such notice, consent or demand is mailed to a patty hereto, it shall be sent by United States certified mail, postage prepaid, addressed to such party’s last known address as shown on the records of the Bank. The date of such mailing shall be deemed the date of notice, consent of demand.

10.           Governing Law. This Agreement, and the rights of the parties hereunder, shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts.

a.           The Bank shall require any successor to the business and/or assets of the Bank in connection with any merger or other acquisition of the business of the Bank to assume and agree to perform the Bank’s obligations under this Supplemental Retirement Agreement in writing.

  

  

  

b.           The Executive shall rely solely on the unsecured promises of the Bank as set forth herein to furnish benefits. Nothing in this Agreement shall give, or be construed to give, the Executive any right, title, interest or claim in or to any specific asset, fund, reserve, account, or property of any kind whatsoever owned by the Bank or in which it may have any right, title, or interest now or in the future; but the Executive shall have the right to enforce such rights to the same extent and to the same manner as any other unsecured creditors of the Bank.

c.           The provisions of this Agreement shall be deemed to constitute a separate “top-hat” plan as described in Sections 201(2) and 301(a)(3) of the Employee Retirement Income Security Act of 1974, as amended.

d.           Any payment made to the Executive or beneficiary pursuant to this Agreement is subject to and conditioned upon its compliance with l2 U.S.C. Section 1828(k), any regulation promulgated thereunder, or any other applicable banking statute, regulation or order.

11.           Payment to Specified Employee. In the event that a payment becomes due hereunder to the Executive who, at the time his employment with the Bank terminates is a Specified Employee (meaning a key employee as defined in Section 416(i) of the Code without regard to paragraph 5 thereof) of the Bank when any stock of the Bank is publicly traded on an established securities market or otherwise, then, solely to the extent required by Code Section 409A to avoid penalties under Code Section 409A, such payment may not be made earlier than six (6) months after the date that his employment terminates. In the event that this Section is applicable to the Executive, any distribution which would otherwise be paid to him within the first six (6) months following the termination of his employment shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh full calendar month following the termination of his employment.

 

  

  

  

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in duplicate as of the day and year first above written.

 

                                                                                                     BELMONT SAVINGS BANK

February 12, 2014                                                                       By:   /s/Robert J. Morrissey

Date                                                                                                      Robert J. Morrissey

 

 

                                                                                                     EXECUTIVE

 

February 12, 2014                                                                              /s/John A. Citrano

Date                                                                                                     John A. Citrano

  

  

  

 

EXHIBIT A

To

Amended and Restated

Supplemental Retirement Agreement

By and Between Belmont Savings Bank and John A. Citrano

Retirement Benefit

For the purposes of this Agreement, Applicable Percentage shall be determined based on the Retirement Age (determined as of the last birthday of the Executive prior to his retirement from the Bank) and the Applicable Percentage set forth in the following table:

	
Retirement Age

	
Applicable Percentage

	
55

	
37%

	
56

	
38%

	
57

	
40%

	
58

	
41%

	
59

	
42%

	
60

	
43%

	
61

	
44%

	
62

	
46%

	
63

	
48%

	
64

	
49%

	
65

	
51%

In the event that the Executive becomes disabled as defined in Section 2(d) of this Agreement prior to attaining age 55, the Applicable Percentage shall be that set forth above for retirement at age 55 and his Compensation shall be increased as provided for in Section 2(d). of the Agreement.

Average Compensation means the average of the Executive’s highest three consecutive Plan Years of Compensation prior to his termination of employment.

Compensation means the annual rate of salary for the Executive as approved by the Board of Trustees of the Bank, plus any, bonuses paid to the Executive for the applicable year (including, without limitation, the Executive’s share of the profit sharing pool for such year), without reducing the aggregate of said amounts by the amount of such salary and/or bonuses which are not paid to the Executive for such year as a result of a salary reduction agreement between the Executive and the Bank pursuant to any benefit plan which the Bank maintains, including its deferred compensation agreement with the Executive, any tax qualified plan maintained under Section 401(k) of the Internal Revenue Code, any Cafeteria Plan maintained pursuant to Section 125 of the Internal Revenue Code and the like.

  

  

  

Plan Year means the l2-month period ending on any December 31.

Years of Service shall be determined utilizing the 12-month period ending on each December 31 in which the Executive attains at least 1,000 hours of service for the Bank utilizing the definition of an Hour of Service set forth in Section 410(a)(3)(C) of the Internal Revenue Code of 1986, as amended.

Calculation of Retirement Benefit for the purposes of this Agreement, the Supplemental Retirement Benefit shall be equal to the Actuarial Equivalent of a 20-year certain and continuous annuity, payable monthly commencing on the first business day of the month following the Executive’s termination of employment in an annual amount equal to the Applicable Percentage of the Executive’s Average Compensation as defined above.

  

  

  

 

EXHIBIT B

BELMONT SAVINGS BANK

INSURED:                                                      John A. Citrano

POLICY:                                                        John Hancock Life Insurance Company

                                                                           Policy No. FV 3234372

OWNER:                                                        Belmont Savings Bank

BENEFICIARY:                                            Part A:Belmont Savings Bank

______________________________________________________________________________

INSURED:                                                      John A. Citrano

POLICY:                                                        New York Life Insurance Company

                                                                          Policy No. 56022619

OWNER:                                                        Belmont Savings Bank

BENEFICIARY:                                            Part A:Belmont Savings Bankexh101_020314.htm

Stock Option

Granted by

MADISON COUNTY FINANCIAL, INC.

under the

MADISON COUNTY FINANCIAL, INC.

2013 EQUITY INCENTIVE PLAN

This stock option agreement (“Option” or “Agreement”) is and will be subject in every respect to the provisions of the 2013 Equity Incentive Plan (the “Plan”) of Madison County Financial, Inc. (the “Company”) which are incorporated herein by reference and made a part hereof, subject to the provisions of this Agreement.  A copy of the Plan has been provided to each person granted a stock option pursuant to the Plan.  The holder of this Option (the “Participant”) hereby accepts this Option, subject to all the terms and provisions of the Plan and this Agreement, and agrees that all decisions under and interpretations of the Plan and this Agreement by the Committee appointed to administer the Plan (“Committee”) or the Board will be final, binding and conclusive upon the Participant and the Participant’s heirs, legal representatives, successors and permitted assigns.  Capitalized terms used herein but not defined will have the same meaning as in the Plan.

 

1. Name of Participant: ___________________

 

2. Date of Grant:  __________ __, 201__

 

3. Total number of shares of Company common stock, $0.01 par value per share, that may be acquired pursuant to this Option:

 

______________ (subject to adjustment pursuant to Section 10 hereof).  The Option will be an Incentive Stock Option to the maximum extent permitted under the tax laws, which means that up to $100,000 of Options that vest in any one calendar year will be Incentive Stock Options (based on the exercise price of the Option).

 

Example:  A participant is granted 37,500 Options that vest in equal installments of 7,500 Options per year over a 5-year period.  The exercise price is $15.50, which is equal to the fair market value of the stock on the date of grant.  Since $15.50 multiplied by 7,500 (the number of Options that vest each year) is $116,250.00,  some of the Options that vest each year will not be Incentive Stock Options.  Based on a $15.50 exercise price, the maximum number of Incentive Stock Options that can vest for any one year is 6,451 ($100,000 ÷ $15.50 = 6,451 (fractional shares are not included)).  The remainder will be Non-Statutory Stock Options.

 

Please note that for purposes of determining the maximum number of Options that can vest in any one calendar year as Incentive Stock Options, the Options granted to you in this Agreement that vest in a calendar year will be aggregated with any earlier Option award that you received that vest in the same calendar year.  If you vest in the maximum number of Incentive Stock Options in which you are permitted to vest for a calendar year under a prior Option award, all Options that you receive under this Agreement that vest in the same calendar year will be considered Non-Statutory Stock Options.

  

  

  

  

 

    4.           Exercise price per share:     $_________ (subject to adjustment pursuant to Section 10 below).

 

    5.   Expiration Date of Option:__________ ___, 202__, subject to earlier expiration of the event of Termination of Service.

    6.   Vesting Schedule.  Except as otherwise provided in this Agreement, this Option first becomes exercisable, subject to the Option’s expiration date, in accordance with the vesting schedule specified herein.

 

        The Options granted under this Agreement shall vest in five (5) equal annual installments, with the first installment becoming exercisable on the first anniversary of the date of grant, or __________ __, 201__, and succeeding installments on each anniversary thereafter, through ___________

    __, 201__.  To the extent the Options awarded to me are not equally divisible by “5,” any excess Options shall vest on _______________ __, 201__.

    This Option may not be exercised at any time on or after the Option’s expiration date. Vesting will automatically accelerate pursuant to Section 2.6, 2.9 and 4.1 of the Plan (in the event of death or Disability or Involuntary Termination of Employment following a Change in Control).

 

   7.          Exercise Procedure.

 

	
  

	
7.1

	
Delivery of Notice of Exercise of Option.  This Option will be exercised in whole or in part by the Participant’s delivery to the Company of written notice (the “Notice of Exercise of Option” attached hereto as Exhibit A) setting forth the number of shares with respect to which this Option is to be exercised, together with payment by cash or other means acceptable to the Committee, including:

 

	
(i)  

	
by tendering shares of Common Stock valued at Fair Market Value (as defined in Section 7.2 hereof) as of the day of exercise;

 

	
(ii)  

	
by irrevocably authorizing a third party, acceptable to the Committee, to sell shares of Common Stock (or a sufficient portion of the shares) acquired upon exercise of the Option and to remit to the Company a sufficient portion of the sale proceeds to pay the entire exercise price and any tax withholding resulting from such exercise;

	
(iii)  

	
by a “net settlement” of the Option, using a portion of the shares obtained      on exercise in payment of the Exercise Price of the Option.

	
(iv)  

	
by personal, certified or cashier’s check;

                      (v)  by other property deemed acceptable by the Committee; or

       (vi)  by any combination thereof.

 

	
  

	
7.2

	
“Fair Market Value” shall have the meaning set forth in Section 8.1(r) of the Plan.

 

 

  

  

  

    8.           Delivery of Shares.

	
  

	
8.1

	
Delivery of Shares.  Delivery of shares of Common Stock upon the exercise of this Option will comply with all applicable laws (including the requirements of the Securities Act) and the applicable requirements of any securities exchange or similar entity.

    9.           Change in Control.

	
  

	
9.1

	
In the event of the Participant’s Involuntary Termination of Employment following a Change in Control, all Options held by the Participant, whether or not exercisable at such time, will become fully exercisable, subject to the expiration provisions otherwise applicable to the Option.

	
  

	
9.2

	
A “Change in Control” will be deemed to have occurred as provided in Section 4.2 of the Plan.

 

 

    10.           Adjustment Provisions.

 

	
  

	
This Option, including the number of shares subject to the Option and the exercise price, will be adjusted upon the occurrence of the events specified in, and in accordance with the provisions of Section 3.4 of the Plan.

 

    11.           Termination of Option and Accelerated Vesting.

 

This Option will terminate upon the expiration date, except as set forth in the following  provisions:

 

	
(i)  

	
Death.  This Option will become exercisable as to all shares subject to an outstanding Award, whether or not then exercisable, in the event of the Participant’s Termination of Service by reason of the Participant’s death.  This Option may thereafter be exercised by the Participant’s legal representative or beneficiaries for the lesser of a period of one year following Termination of Service due to death.

 

	
(ii)  

	
Disability.  This Option will become exercisable as to all shares subject to an outstanding Award, whether or not then exercisable, in the event of the Participant’s Termination of Service by reason of the Participant’s Disability. This Option may thereafter be exercised for a period of one year following Termination of Service due to Disability.

 

	
(iii)  

	
Retirement.  If the Participant’s Service terminates due to Retirement (as defined in Section 8.1(bb) of the Plan, unless specifically provided otherwise by the Committee, this Option may thereafter be exercised, to the extent it was exercisable at the time of such termination, for a period of three months following termination, subject to termination on the Option’s expiration date, if earlier.  All unvested Options will be forfeited.

	
(iv)  

	
Termination for Cause.  If the Participant’s Service has been terminated for Cause, all Options that have not been exercised will expire and be forfeited.

   

	
(v)  

	
Other Termination.  If the Participant’s Service terminates for any reason other than due to death, Disability or for Cause, this Option may thereafter be exercised, to the extent it was exercisable at the time of such termination, for a period of three months following termination, subject to termination on the Option’s expiration date, if earlier.  All unvested Options will be forfeited.

 

               (vi)  Incentive Option Treatment. The Incentive Stock Options granted hereunder are subject to the requirements of Section 421 of the Internal Revenue Code. 

                                               No Option will be eligible for treatment as an Incentive Stock Option in the event such Optopn is exercised more than three months following Termination

                                               of Service (except in the case of Termination of Service due to Disability). In order to obtain Incentive Stock Option treatment for Options exercised by 

                                               heirs or devisees of the Participant, the Participant's death must have occurred while the Participant was employed or within three months of Termination 

                                               of Service.

 

  

  

  

    12.           Miscellaneous.

 

      12.1   No Option will confer upon the Participant any rights as a stockholder of the Company prior to the date on which the individual fulfills all conditions for receipt of 

            such rights.

 

       12.2    This Agreement may not be amended or otherwise modified unless evidenced in writing and signed by the Company and the Participant.

 

       12.3    Except as otherwise provided by the Committee, Incentive Stock Options under the Plan are not transferable except (1) as designated by the Participant by will or by

             the laws of descent and distribution, (2) to a trust established by the Participant, or (3) between spouses incident to a divorce

           or pursuant to a domestic relations order, provided, however,  that in the case of a transfer described under (3), the Option 

            will not qualify as an Incentive Stock Option as of the day of such transfer.

 

       12.4    This Option will be governed by and construed in accordance with the laws of the State of Nebraska.

 

       12.5    The granting of this Option does not confer upon the Participant any right to be retained in the employ of the Company or any subsidiary.

 

         	12.6          	
An Option that is exercised as an Incentive Stock Option is not subject to ordinary income taxes so long as it is held for the requisite holding period, e.g., two (2) years from the date of grant of the Option and one (1) year from the date of exercise, whichever is later.  A Non-Qualified Stock Option will be subject to income tax withholding at the time of exercise.  Upon the exercise of a Non-Statutory Stock Option, the Participant shall have the right to direct the Company to satisfy the minimum required federal, state and local tax withholding by reducing the number of shares of Stock subject to the Non-Qualified Stock Option (without issuance of such shares of Stock to the Stock Option holder) by a number equal to the quotient of (a) the total minimum amount of required tax withholding divided by (b) the excess of the Fair Market Value of a share of Stock on the exercise date over the Exercise Price per share of Stock.

 

 

  

  

  

IN WITNESS WHEREOF, the Company has caused this instrument to be executed in its name and on its behalf as of the date of grant of this Option set forth above.

 

MADISON COUNTY FINANCIAL, INC.

 

By:________________________                                                                

Its:________________________                                                                

 

 

PARTICIPANT’S ACCEPTANCE

 

The undersigned hereby accepts the foregoing Option and agrees to the terms and conditions hereof, including the terms and provisions of the 2013 Equity Incentive Plan.  The undersigned hereby acknowledges receipt of a copy of the Company’s 2013 Equity Incentive Plan.

 

PARTICIPANT

 

 

_______________________

                                                         

  

  

  

EXHIBIT A

NOTICE OF EXERCISE OF OPTION

(BY EMPLOYEE)

I hereby exercise the stock option (the “Option”) granted to me by Madison County Financial, Inc. (the “Company”) or its affiliate, subject to all the terms and provisions set forth in the Stock Option Agreement (the “Agreement”) and the Madison County Financial, Inc. 2013 Equity Incentive Plan (the “Plan”) referred to therein, and notify you of my desire to purchase __________________ shares of common stock of the Company (“Common Stock”) for a purchase price of $_______ per share.

I wish to pay the purchase price by (check one or more, as applicable):

[Any payment to be delivered must accompany this Notice of Exercise of Option]

	
  

	
___

	
Cash or personal, certified or cashier’s check in the sum of $_______, in full/partial payment of the purchase price.

 

	
  

	
___

	
Stock of the Company with a fair market value of $______ in full/partial payment of the purchase price.*

 

	
  

	
___

	
A “net settlement” of the Option whereby I direct the Company to withhold a sufficient number of shares to satisfy the purchase price.

 

	
  

	
___

	
A check (personal, certified or cashier’s) in the sum of $_______ and stock of the Company with a fair market value of $______, in full payment of the purchase price.*

 

	
  

	
___

	
Please sell ______ shares from my Option shares through my broker in full/partial payment of the purchase price.  If my broker requires additional forms in order to consummate this “broker cashless exercise,” I have included them with this election.

 

I understand that after this exercise, ____________ shares of Common Stock remain subject to the Option, subject to all terms and provisions set forth in the Agreement and the Plan.

 

I hereby represent that it is my intention to acquire these shares for the following purpose:

 

___           investment

___           resale or distribution

Please note: if your intention is to resell (or distribute within the meaning of Section 2(11) of the Securities Act of 1933) the shares you acquire through this Option exercise, the Company or transfer agent may require an opinion of counsel that such resale or distribution would not violate the Securities Act of 1933 prior to your exercise of such Option.

 

Date: ____________, _____.                                                            _________________________________________

                   Participant’s signature

*           If I elect to exercise by exchanging shares I already own, I will constructively return shares that I already own to purchase the new option shares.  If my shares are in certificate form, I must attach a separate statement indicating the certificate number of the shares I am treating as having been exchanged.  If the shares are held in “street name” by a registered broker, I must provide the Company with a notarized statement attesting to the number of shares owned that will be treated as having been exchanged.  I will keep the shares that I already own and treat them as if they are shares acquired by the option exercise.  In addition, I will receive additional shares equal to the difference between the shares I constructively exchange and the total new option shares that I acquire.

 

 

  

  

  

EXHIBIT B

 

 

ACKNOWLEDGMENT OF RECEIPT OF SHARES

 

 

 

I hereby acknowledge the delivery to me by Madison County Financial, Inc. (the “Company”) or its affiliate on _____________________________, of stock certificates for ____________________ shares of common stock of the Company purchased by me pursuant to the terms and conditions of the Stock Option Agreement and the Madison County Financial, Inc. 2013 Equity Incentive Plan, as applicable, which shares were transferred to me on the Company’s stock record books on ____________________.

 

Date:______________________                                                   __________________________

Participant’s signature

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