Document:

exv10w2

 

Exhibit 10.2

SFSB, INC.

2005 RECOGNITION AND RETENTION PLAN

1. Establishment of the Plan

     SFSB, Inc. hereby establishes the SFSB, Inc. 2005 Recognition and Retention Plan (the
“Plan”) upon the terms and conditions hereinafter stated in the Plan.

2. Purpose of the Plan

     The purpose of the Plan is to advance the interests of the Company and its stockholders
by providing Key Employees and Outside Directors of the Company and its Affiliates, including
Slavie Federal Savings Bank, upon whose judgment, initiative and efforts the successful conduct of
the business of the Company and its Affiliates largely depends, with compensation for their
contributions to the Company and its Affiliates and an additional incentive to perform in a
superior manner, as well as to attract people of experience and ability.

3. Definitions

     The following words and phrases when used in this Plan with an initial capital letter,
unless the context clearly indicates otherwise, shall have the meanings set forth below. Wherever
appropriate, the masculine pronoun shall include the feminine pronoun and the singular shall
include the plural:

     “Affiliate” means any “parent corporation” or “subsidiary corporation” of the Company or the
Bank, as such terms are defined in Section 424(e) and (f), respectively, of the Code, or a
successor to a parent corporation or subsidiary corporation.

     “Award” means the grant by the Committee of Restricted Stock, as provided in the Plan.

     “Bank” means Slavie Federal Savings Bank, or a successor corporation.

     “Beneficiary” means the person or persons designated by a Recipient to receive any benefits
payable under the Plan in the event of such Recipient’s death. Such person or persons shall be
designated in writing on forms provided for this purpose by the Committee and may be changed from
time to time by similar written notice to the Committee. In the absence of a written designation,
the Beneficiary shall be the Recipient’s surviving spouse, if any,
or if none, his estate.

 

 

     “Board” or “Board of Directors” means the Board of Directors of the Company or an Affiliate,
as applicable. For purposes of Section 4 of the Plan, “Board” shall refer solely to the Board of
the Company.

     “Cause” means personal dishonesty, incompetence, willful misconduct, any breach of fiduciary
duty involving personal profit, intentional failure to perform stated duties, or the willful
violation of any law, rule or regulation (other than traffic violations or similar offenses) or a
final cease-and-desist order, any of which results in a material loss to the Company or an
Affiliate.

     “Change in Control” means a transaction:

     (i) that would be required to be reported in response to Item 5.01 of the current report on
Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”); or

     (ii) that results in a Change in Control of the Bank or the Company within the meaning of the
Home Owners’ Loan Act, as amended (“HOLA”), and applicable rules and regulations promulgated
thereunder, as in effect at the time of the Change in Control; or

     (i) in which:

	 	(a)	 	any “person” (as the term is used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 25% or more of the combined voting power of Company’s
outstanding securities except for any securities purchased by the Bank’s
employee stock ownership plan or trust; or
	 
	 	(b)	 	individuals who constitute the Board on the date hereof (the
“Incumbent Board”) cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the date
hereof whose election was approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board, or whose nomination for election by
the Company’s stockholders was approved by the same Nominating Committee
serving under an Incumbent Board, shall be, for purposes of this clause (b),
considered as though he were a member of the Incumbent Board; or
	 
	 	(c)	 	a plan of reorganization, merger, consolidation, sale of all
or substantially all the assets of the Bank or the Company or similar
transaction in which the Bank or Company is not the surviving institution
occurs; or

 

 

	 	(d)	 	a proxy statement soliciting proxies from stockholders of the
Company, by someone other than the current management of the Company, seeking
stockholder approval of a plan of reorganization, merger or consolidation of
the Company or similar transaction with one or more corporations as a result
of which the outstanding shares of the class of securities then subject to the
Plan are to be exchanged for or converted into cash or property or securities
not issued by the Company; or
	 
	 	(e)	 	a tender offer is made for 25% or more of the voting
securities of the Company and the shareholders owning beneficially or of
record 25% or more of the outstanding securities of the Company have tendered
or offered to sell their shares pursuant to such tender offer and such
tendered shares have been accepted by the tender offeror.

     Notwithstanding anything in this subsection to the contrary, a change in control shall not be
deemed to have occurred in the event of a conversion of the Company’s or the Bank’s mutual holding
company to stock form, or in connection with any reorganization used to effect such a conversion or
other similar transaction.

     “Code” means the Internal Revenue Code of 1986, as amended.

     “Committee” means a Committee of the Board consisting of either (i) at least two Non-Employee
Directors of the Company, or (ii) the entire Board of the Company.

     “Common Stock” means shares of the common stock of the Company, par value $.01 per share.

     “Company” means SFSB, Inc. the stock holding company of the Bank, or a successor corporation.

“Continuous Service” means employment as a Key Employee and/or service as an Outside
Director without any interruption or termination of such employment and/or service with the
Company, the Bank or an Affiliate. Continuous Service shall also mean a continuation as a
member of the Board of Directors following a cessation of employment as a Key Employee. In
the case of a Key Employee, employment shall not be considered interrupted in the case of
sick leave, military leave or any other leave of absence approved by the Company, the Bank
or their affiliates, or in the case of transfers between the Company, the Bank or their
affiliates.

“Director” means a member of the Board.

     “Disability” means the permanent and total inability by reason of mental or physical
infirmity, or both, of an employee to perform the work customarily assigned to

 

 

him, or of a Director to serve as such. Additionally, in the case of an employee, a medical
doctor selected or approved by the Board must advise the Committee that it is either not possible
to determine when such Disability will terminate or that it appears probable that such Disability
will be permanent during the remainder of such employee’s lifetime.

     “Effective Date” means the date of approval of the Plan by the Company’s stockholders.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

     “Key Employee” means any person who is currently employed by the Company or an Affiliate who
is chosen by the Committee to participate in the Plan.

     “Non-Employee Director” means, for purposes of the Plan, a Director who (a) satisfies such
requirements as the Securities and Exchange Commission may establish for non-employee directors
administering plans intended to qualify for exemption under Rule 16b-3 (or its successor) of the
Securities Exchange Act of 1934, as amended, and (ii) if considered appropriate by the Board, such
requirements as the Internal Revenue Service may establish for outside directors acting under plans
intended to qualify for exemption under Section 162 of the Code.

     “Normal Retirement” means for a Key Employee, retirement at the normal or early retirement
date set forth in the Bank’s Employee Stock Ownership Plan, or any successor plan. Normal
Retirement for an Outside Director means a cessation of service on the Board of Directors for any
reason other than removal for Cause, after reaching 65 years of age and maintaining at least 10
years of Continuous Service.

     “Outside Director” means a Director of the Company or an Affiliate who is not an employee of
the Company or an Affiliate.

     “Recipient” means a Key Employee or Outside Director of the Company or its Affiliates who
receives or has received an Award under the Plan.

     “Restricted Period” means the period of time selected by the Committee for the purpose of
determining when restrictions are in effect under Section 6 with respect to Restricted Stock
awarded under the Plan.

     “Restricted Stock” means shares of Common Stock that have been contingently awarded to a
Recipient by the Committee subject to the restrictions referred to in Section 6, so long as such
restrictions are in effect.

	4.	 	Administration of the Plan.

     4.1 Role of the Committee. The Plan shall be administered and interpreted by the
Committee, which shall have all of the powers allocated to it in the
Plan. The interpretation and construction by the Committee of any provisions of the Plan or of any Award
granted hereunder shall be final and binding. The Committee shall act by vote or written consent of
a majority of its members. Subject to the express provisions and limitations of the Plan, the
Committee may adopt such rules and procedures as it deems appropriate for the conduct of its
affairs. The Committee shall report its actions and decisions with respect to the Plan to the Board
at appropriate times, but in no event less than one time per calendar year.

 

 

     4.2 Plan Administration Restrictions. All transactions involving a grant, award or other
acquisition from the Company shall:

	 	(a)	 	be approved by the Company’s full Board or by the Committee; or
	 
	 	(b)	 	be approved, or ratified, in compliance with Section 14 of the Exchange Act
(if applicable), by either the affirmative vote of the holders of a majority of the
            shares present, or represented and entitled to vote at a meeting duly held in
accordance with the laws under which the Company is incorporated or the written
consent of the holders of a majority of the securities of the issuer entitled to vote
provided that such ratification occurs no later than the date of the next annual
meeting of shareholders; or
	 
	 	(c)	 	result in the acquisition of Common Stock that is held by the Recipient for a
period of six months following the date of such acquisition.

     4.3 Limitation on Liability. No member of the Board or the Committee shall be liable for any
determination made in good faith with respect to the Plan or any Awards granted under it. If a
member of the Board or the Committee is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of anything done or not done by him in such capacity
under or with respect to the Plan, the Bank or the Company shall indemnify such member against
expense (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in the best interests of the Bank and the
Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful.

	5.	 	Eligibility; Awards

     5.1 Eligibility. Key Employees and Outside Directors are eligible to receive Awards.

     5.2 Awards to Key Employees and Outside Directors. The Committee may determine which of the
Key Employees and Outside Directors referenced in Section 5.1 will be granted Awards and the number
of shares covered by each Award; provided, however, that in no event shall any Awards be made that
will violate the Bank’s Charter

 

 

and Bylaws, the Company’s Charter and Bylaws, or any applicable federal or state law or
regulation. Shares of Restricted Stock that are awarded by the Committee shall, on the date of the
Award, be registered in the name of the Recipient and transferred to the Recipient, in accordance
with the terms and conditions established under the Plan. The aggregate number of shares that shall
be issued under the Plan is 58,322. Awards issued under the Plan may be issued by the Company from
authorized but unissued shares, treasury shares or acquired by the Company in open market
purchases.

     In the event Restricted Stock is forfeited for any reason, the Committee, from time to time,
may determine which of the Key Employees and Outside Directors will be granted additional Awards to
be awarded from forfeited Restricted Stock.

     In selecting those Key Employees and Outside Directors to whom Awards will be granted and the
amount of Restricted Stock covered by such Awards, the Committee shall consider such factors as it
deems relevant, which factors may include, among others, the position and responsibilities of the
Key Employees and Outside Directors, the length and value of their services to the Company and its
Affiliates, the compensation paid to the Key Employees or fees paid to the Outside Directors, and
the Committee may request the written recommendation of the Chief Executive Officer and other
senior executive officers of the Bank, the Company and its Affiliates or the recommendation of the
full Board.

     No Restricted Stock shall be earned unless the Recipient maintains Continuous Service with the
Company or an Affiliate until the restrictions lapse.

     5.3 Manner of Award. As promptly as practicable after a determination is made pursuant to
Section 5.2 to grant an Award, the Committee shall notify the Recipient in writing of the grant of
the Award, the number of shares of Restricted Stock covered by the Award, and the terms upon which
the Restricted Stock subject to the Award may be earned. Upon notification of an Award of
Restricted Stock, the Recipient shall execute and return to the Company a restricted stock
agreement (the “Restricted Stock Agreement”) setting forth the terms and conditions under which the
Recipient shall earn the Restricted Stock, together with a stock power or stock powers endorsed in
blank. Thereafter, the Recipient’s Restricted Stock and stock power shall be deposited with an
escrow agent specified by the Company (“Escrow Agent”) who shall hold such Restricted Stock under
the terms and conditions set forth in the Restricted Stock Agreement. Each certificate in respect
of shares of Restricted Stock Awarded under the Plan shall be registered in the name of the
Recipient.

     5.4 Treatment of Forfeited Shares. In the event shares of Restricted Stock are forfeited by a
Recipient, such shares shall be returned to the Company and shall be held and accounted for
pursuant to the terms of the Plan until such time as the Restricted Stock is re-awarded to another
Recipient, in accordance with the terms of the Plan and the applicable state and federal laws,
rules and regulations.

 

 

	6.	 	Terms and Conditions of Restricted Stock

     The Committee shall have full and complete authority, subject to the limitations of the
Plan, to grant awards of Restricted Stock to Key Employees and Outside Directors and, in addition
to the terms and conditions contained in Sections 6.1 through 6.8, to provide such other terms and
conditions (which need not be identical among Recipients) in respect of such Awards, and the
vesting thereof, as the Committee shall determine.

     6.1 General Rules. At the time of an Award of Restricted Stock, the Committee shall establish
for each Participant a Restricted Period during which or at the expiration of which (as the
Committee shall determine and provide for in the agreement referred to in Section 5.3), the Shares
awarded as Restricted Stock shall vest. The Committee shall have the authority, in its discretion,
to accelerate the time at which any or all of the restrictions shall lapse with respect to a
Restricted Stock Award, or to remove any or all of such restrictions. Subject to any such other
terms and conditions as the Committee shall provide with respect to Awards, shares of Restricted
Stock may not be sold, assigned, transferred (within the meaning of Code Section 83), pledged or
otherwise encumbered by the Recipient, except as hereinafter provided, during the Restricted
Period.

     6.2 Continuous Service; Forfeiture. Except as provided in Section 6.3, if a Recipient ceases
to maintain Continuous Service for any reason (other than death, Disability, Change in Control or
Normal Retirement), unless the Committee shall otherwise determine, all shares of Restricted Stock
theretofore awarded to such Recipient and which at the time of such termination of Continuous
Service are subject to the restrictions imposed by Section 6.1 shall upon such termination of
Continuous Service be forfeited. Any stock dividends or declared but unpaid cash dividends
attributable to such shares of Restricted Stock shall also be forfeited.

     6.3 Exception for Termination Due to Death, Disability, Normal Retirement or following a
Change in Control. Notwithstanding the general rule contained in Section 6.1, Restricted Stock
awarded to a Recipient whose employment with, or service on, the Board of the Company or an
Affiliate terminates due to death, Disability, Normal Retirement or following a Change in Control
shall be deemed earned as of the Recipient’s last day of employment with the Company or an
Affiliate, or last day of service on the Board of the Company or an Affiliate; provided that
Restricted Stock awarded to a Key Employee who at any time also serves as a Director, shall not be
deemed earned until both employment and service as a Director have been terminated.

     6.4 Revocation for Cause. Notwithstanding anything hereinafter to the contrary, the Board may
by resolution immediately revoke, rescind and terminate any Award, or portion thereof, previously
awarded under the Plan, to the extent Restricted Stock has not been redelivered by the Escrow Agent
to the Recipient, whether or not yet earned, in the case of a Key Employee whose employment is
terminated by the Company or an Affiliate or an Outside Director whose service is terminated by the
Company or an Affiliate for Cause or who is discovered after termination of employment or service on the
Board to have engaged in conduct that would have justified termination for Cause.

 

 

     6.5 Restricted Stock Legend. Each certificate in respect of shares of Restricted Stock awarded
under the Plan shall be registered in the name of the Recipient and deposited by the Recipient,
together with a stock power endorsed in blank, with the Escrow Agent and shall bear the following
(or a similar) legend:

     “The transferability of this certificate and the shares of stock represented hereby are
subject to the terms and conditions (including forfeiture) contained in the SFSB, Inc. 2005
Recognition and Retention Plan. Copies of such Plan are on file in the offices of the Secretary of
SFSB, Inc. 1614 Churchville Road, Bel Air, Maryland 21015.”

     6.6 Payment of Dividends and Return of Capital. After an Award has been granted but before
such Award has been earned, the Recipient shall receive any cash dividends paid with respect to
such shares, or shall share in any pro-rata return of capital to all shareholders with respect to
the Common Stock. Stock dividends declared by the Company and paid on Awards that have not yet been
earned shall be subject to the same restrictions as the Restricted Stock and the certificate(s) or
other instruments representing or evidencing such shares shall be legended in the manner provided
in Section 6.5 and shall be delivered to the Escrow Agent for distribution to the Recipient when
the Restricted Stock upon which such dividends were paid are earned. Unless the Recipient has made
a election under Section 83(b) of the Code, cash dividends or other amounts so paid on shares that
have not yet been earned by the Recipient shall be treated as compensation income to the Recipient
when paid. If dividends are paid with respect to shares of Restricted Stock under the Plan that
have been forfeited and returned to the Company or to a trust established to hold issued and
unawarded or forfeited shares, the Committee can determine to award such dividends to any Recipient
or Recipients under the Plan, to any other employee or director of the Company or the Bank, or can
return such dividends to the Company.

     6.7 Voting of Restricted Shares. After an Award has been granted, the Recipient as conditional
owner of the Restricted Stock shall have the right to vote such shares.

     6.8 Delivery of Earned Shares. At the expiration of the restrictions imposed by Section 6.1,
the Escrow Agent shall redeliver to the Recipient (or where the relevant provision of Section 6.3
applies in the case of a deceased Recipient, to his Beneficiary) the certificate(s) and any
remaining stock power deposited with it pursuant to Section 5.3 and the shares represented by such
certificate(s) shall be free of the restrictions referred to Section 6.1.

	7.	 	Adjustments Upon Changes in Capitalization

     In the event of any change in the outstanding shares subsequent to the Effective Date by
reason of any reorganization, recapitalization, stock split, stock dividend,

 

 

combination or exchange of shares, or any merger, consolidation or any change in the corporate
structure or shares of the Company, without receipt or payment of consideration by the Company, the
maximum aggregate number and class of shares as to which Awards may be granted under the Plan shall
be appropriately adjusted by the Committee, whose determination shall be conclusive. Any shares
of stock or other securities received, as a result of any of the foregoing, by a Recipient with
respect to Restricted Stock shall be subject to the same restrictions and the certificate(s) or
other instruments representing or evidencing such shares or securities shall be legended and
deposited with the Escrow Agent in the manner provided in Section 6.5.

	8.	 	Assignments and Transfers

     No Award nor any right or interest of a Recipient under the Plan in any instrument
evidencing any Award under the Plan may be assigned, encumbered or transferred (within the meaning
of Code Section 83) except, in the event of the death of a Recipient, by will or the laws of
descent and distribution until such Award is earned.

	9.	 	Key Employee Rights Under the Plan

     No Key Employee shall have a right to be selected as a Recipient nor, having been so
selected, to be selected again as a Recipient and no Key Employee or other person shall have any
claim or right to be granted an Award under the Plan or under any other incentive or similar plan
of the Company or any Affiliate. Neither the Plan nor any action taken thereunder shall be
construed as giving any Key Employee any right to be retained in the employ of the Company or any
Affiliate.

	10.	 	Outside Director Rights Under the Plan

     Neither the Plan nor any action taken thereunder shall be construed as giving any Outside
Director any right to be retained in the service of the Company or any Affiliate.

	11.	 	Withholding Tax

     Upon the termination of the Restricted Period with respect to any shares of Restricted
Stock (or at any such earlier time that an election is made by the Recipient under Section 83(b) of
the Code, or any successor provision thereto, to include the value of such shares in taxable
income), the Bank or the Company shall have the right to require the Recipient or other person
receiving such shares to pay the Bank or the Company the amount of any taxes that the Bank or the
Company is required to withhold with respect to such shares, or, in lieu thereof, to retain or sell
without notice, a sufficient number of shares held by it to cover the minimum amount of tax
required to be withheld by an governmental authority. The Bank or the Company shall have the right
to deduct from all dividends paid with respect to shares of Restricted Stock the amount of any
taxes which the Bank or the Company is required to withhold with respect to such dividend payments.

 

 

	12.	 	Amendment or Termination

     The Board of the Company may at any time, and from time to time, terminate, modify or
amend the Plan in any respect, or modify or amend an Award received by Key Employees and/or Outside
Directors; provided, however, that no such termination, modification or amendment, shall impair the
rights of any Recipient, without his consent, in any Award theretofore made pursuant to the Plan.
Notwithstanding anything to the contrary contained in the Plan, the Board may not amend or modify
the Plan without stockholder approval where such approval is required by applicable law or by the
rules of any securities exchange or quotation system (e.g., Nasdaq) on which the Common Stock is
listed or traded. Furthermore, notwithstanding anything to the contrary contained in the Plan, the
Board or the Committee may not amend or modify any Award if such amendment or modification would
require the approval of the stockholders if the amendment or modification were made to the Plan.

	13.	 	Effective Date of the Plan

     The Plan shall become effective on the date of approval of the Plan by the Company’s
stockholders.

	14.	 	Termination of the Plan

     The Plan shall continue in effect until the earlier of (i) ten years from the Effective
Date unless sooner terminated under Section 12 hereof, or (ii) the date on which all shares of
Common Stock available for award hereunder have vested in the Recipients of such Awards.

[remainder of page is intentionally left blank]

 

 

     IN WITNESS WHEREOF, the Company has caused the Plan to be executed by its duly authorized
officers, as of the ___day of ___, 2005.

Date Approved by Shareholders:                                        

Effective Date:                                                            

	 	 	 	 	 	 	 
	ATTEST:

	 	 	 	SFSB, INC.	 	 
	 
	 	 	 	 	 	 
	 

Secretary

	 	 	 	 

President and Chief Executive Officerexv10w3

 

Exhibit 10.3

SFSB, Inc.

EMPLOYEE STOCK OPTION AGREEMENT

     This Stock Option Agreement is entered into as of the ___day of ___, 2005 by and
between SFSB, Inc. (the “Company”), a Maryland corporation, and ______(“Grantee”).

ARTICLE 1

DEFINITIONS

     Definitions. As used in this Agreement, in addition to the terms defined elsewhere
herein, the following terms have the following meanings when used herein with initial capital
letters:

     (a) “Agreement” shall mean this Stock Option Agreement and shall include the applicable
provisions of any Plan which are hereby incorporated into and made a part of the Agreement.

     (b) “Common Stock” shall mean shares of common stock of the Company, par value $.01 per share,
or any security into which such Common Stock may be changed by reason of any transaction or event
of the type referred to in Section 17 of the Plan.

     (c) “Grant Date” shall mean the date on which the Committee formally acts to grant an Option
to Grantee.

     (d) “Incentive Stock Option” shall mean an Option that is intended to be an “incentive stock
option” within the meaning of Section 422 of the Code.

     (e) “Option Price” shall mean the price per share of Common Stock at which the Option may be
exercised.

     (f) “Plan” or “2005 Option Plan” shall mean the SFSB, Inc. 2005 Stock Option Plan (the “2005
Option Plan”), a copy of which is attached hereto as Exhibit C.

     In addition, other capitalized terms used but not defined herein shall have the meaning
ascribed to such terms in the Plan.

 

 

ARTICLE 2

GRANT OF OPTION

     Section 2.1 Grant of Options. The Company, pursuant to the 2005 Option Plan, hereby
grants to Grantee, as of the date hereof, the following Options:

	 	 	 	 	 
	Grant Date

	 	Number of Options
	 	Option Price

 

The Option Price is equal to the Fair Market Value of a share of Common Stock on the Grant Date.

     Section 2.2 Type of Option. The Options granted pursuant to Section 2.1 is intended
to be an Incentive Stock Option.

     Section 2.3 Term of Option. The Option granted pursuant to Sections 2.1 shall expire
on the tenth anniversary of its grant date, unless the Option terminates earlier pursuant to other
provisions of this Agreement or the Plan.

     Section 2.4 Vesting. Subject to the terms of the Plan with respect to vesting, the
Options granted pursuant to Section 2.1 shall vest and become exercisable in accordance with the
vesting schedule set forth on Exhibit A, attached hereto and incorporated by reference
herein. The extent to which the Options are vested and exercisable as of a particular vesting date
shall be rounded down to the nearest whole share. However, vesting is rounded up to the nearest
whole share on the last vesting date. Notwithstanding the foregoing, in no event may a vested
Option be exercised until at least one year after the date of this Grant Date.

     Section 2.5 Compliance with Regulations of the OTS; Forfeiture. Subject to the terms
of the Plan, the grant of Options made hereby are subject to the provision of the regulation
promulgated by the Office of Thrift Supervision (the “OTS”). In addition, in accordance with the
rules and regulation of the OTS applicable to the Company, the Options granted herby must be
exercised or forfeited in the event the Company, or its affiliates, including Slavie Federal
Savings Bank, becomes critically undercapitalized (as defined in 12 C.F.R. §565.4, or any successor
law or regulation), is subject to OTS enforcement action, or receives a capital directive under 12
C.F.R § 565.7 or any successor law or regulation.

2

 

ARTICLE 3

EXERCISE OF OPTION

     Section 3.1 Manner of Exercise. The Option may be exercised, in whole or in part, by
delivering written notice to the Secretary of the Company in such form as the Board of Directors
may require from time to time. Such notice shall specify the number of shares of Common Stock
subject to the Option as to which the Option is being exercised, and shall be accompanied by full
payment of the Option Price of the shares of Common Stock as to which the Option is being
exercised. In addition, if the shares subject to the Plan are not registered under the Securities
Act of 1933, as amended, or are not otherwise exempt from such registration, such notice shall be
accompanied by a written statement that the shares are purchased for investment and not with a view
to distribution and acknowledgment of restrictions on the transferability of the shares. Payment
of the Option Price shall be made as provided in the Plan. The Option may be exercised only in
multiples of whole shares and no partial shares of Common Stock shall be issued. A form of notice
is attached hereto as Exhibit B.

     Section 3.2 Issuance of Shares and Payment of Option Price Upon Exercise. Upon
exercise of the Option, in whole or in part, in accordance with the terms of this Agreement and
upon payment of the Option Price for the shares of Common stock as provided in the 2005 Stock
Option Plan, the Company shall issue to Grantee the number of shares of Common Stock paid for, in
the form of fully paid and non-assessable Common Stock.

ARTICLE 4

TERMINATION OF OPTION

     Unless the Option has been terminated earlier pursuant to the provisions of this Agreement,
the Option granted to Grantee hereunder shall terminate as provided in the Plan.

ARTICLE 5

MISCELLANEOUS

     Section 5.1 Non-Guarantee of Employment. Nothing in the Plan or in this Agreement
shall confer upon any Grantee the right to continue in the employ or service of the Company or any
Subsidiaries, to be entitled to any remuneration or benefits not set forth in the Plan or this
Agreement or to interfere with or limit in any way the right of the Company or any Subsidiary to
terminate such Grantee’s employment.

     Section 5.2 No Rights of Stockholder. Grantee shall not have any of the rights of a
stockholder with respect to the shares of Common Stock that may be issued upon the exercise of the
Option until such shares of Common Stock have been issued to him or her upon the due exercise of
the Option.

3

 

     Section 5.3 Agreement Subject to Charter and By-Laws. This Agreement is subject to
the Charter and By-Laws of the Company, and any applicable federal or state laws, rules or
regulations.

     Section 5.4 Gender. As used herein the masculine shall include the feminine as the
circumstances may require.

     Section 5.5 Headings. The headings in the Agreement are for reference purposes only
and shall not affect the meaning or interpretation of the Agreement.

     Section 5.6 Notices. All notices and other communications made or given pursuant to
the Agreement shall be in writing and shall be sufficiently made or given if hand delivered or
mailed by certified mail, addressed to Grantee at the address contained in the records of the
Company or an affiliate, and to the Company for the attention of its Secretary at its principal
office.

     Section 5.7 Tax Withholding. The Company shall have the right to deduct from all
Options granted any federal, state, local or employment taxes which it deems are required by law to
be withheld with respect to such grants. In addition, the Company shall have the right to require
a Grantee, upon grant or exercise of an option, to pay to the Company the minimum amount of any
federal or state taxes, including payroll taxes, if any, that the Company is required to withhold.

     Section 5.8 Notice of Disqualifying Disposition. If Grantee makes a disposition (as
that term is defined in Section 424(c) of the Code) of any shares of Common Stock acquired pursuant
to the exercise of an Incentive Stock Option within two (2) years of the Grant Date or within one
(1) year after the shares of Common Stock are transferred to Grantee, Grantee shall notify the
Board of Directors or the Committee of such disposition in writing.

ARTICLE 6

SCOPE OF AGREEMENT

     Section 6.1 Entire Agreement; Modification. The Agreement, along with the Plan,
contains the entire agreement between the parties with respect to the subject matter contained
herein and supersedes all prior agreements or understandings between the parties with respect to
the Option described in this Agreement. This Agreement may not be modified or amended except as
provided in the Plan or in a written document signed by each of the parties hereto.

     Section 6.2 Conformity with Plan. This Agreement is intended to conform in all
respects with, and is subject to all applicable provisions of, the Plan, which is incorporated
herein by reference. In the event of any inconsistencies between this Agreement and the Plan, the
Plan shall control.

     Section 6.3 Counterparts. The Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.

4

 

     Section 6.4 Acknowledgment. BEFORE SIGNING HEREUNDER, THE GRANTEE SHOULD READ AND
THOROUGHLY REVIEW THE PLAN ATTACHED HERETO AS EXHIBIT C. BY SIGNING HEREUNDER, THE GRANTEE
ACKNOWLEDGES RECEIPT OF THE PLAN AND REPRESENTS THAT GRANTEE HAS READ AND THOROUGHLY REVIEWED THE
PLAN.

     IN WITNESS WHEREOF, the parties have executed the Agreement as of the date first above
written.

	 	 	 	 	 	 	 
	ATTEST:	 	SFSB, Inc	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 
	 	 
	 
	 	 	 	 	 	 
	WITNESS:	 	GRANTEE	 	 
	 
	 	 	 	 	 	 
	 
	 	 
	 	 

5

 

EXHIBIT A

VESTING SCHEDULE

1/5 — _________, 20___;

1/5 — _________, 20___;

1/5 — _________, 20___;

1/5 — _________, 20___; and

1/5 —
_________, 20___.

6

 

EXHIBIT B

SFSB, Inc.

1614 Churchville Road

Bel Air, Maryland 21015

Attn: Secretary

Dear Secretary:

     I hereby exercise the Option granted to me on                     , by SFSB, Inc. (the “Company”), subject to all
the terms and provisions of that certain Stock Option Agreement between me and the SFSB, Inc. 2005
Stock Option Plan (the “Plan”), and notify you of my desire to purchase _________
shares of Common Stock of
the Company at a price of $_________
per share pursuant to the exercise of said Option.

Total Amount Enclosed: $                    

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Date:

	 	 	 	 	 	 	 	 	 	 	 	(Optionee)	 	 
	 	 	 
	 	 	 	 
	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Received by SFSB, Inc on	 	 	.	 	 	 
	 

	 	 	 	 	 	 	 	 	 	

		 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 

 

 

EXHIBIT C

SFSB, INC.

2005 STOCK OPTION PLAN

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