<PAGE>
<PAGE>
As filed with the Securities and Exchange Commission
on February 13, 1997.
Registration No. 333-_____
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
_____________________________________________
FIRST LANCASTER BANCSHARES, INC.
- ---------------------------------------------------------------
(Exact name of Registrant as Specified in Its Charter)
Delaware 61-1297318
- ---------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
208 Lexington Street
Lancaster, Kentucky 40444
(606) 792-3368
- -----------------------------------------------------------------
(Address of Principal Executive Offices)
First Lancaster Bancshares, Inc. 1996 Stock Option and Incentive Plan
First Lancaster Federal Savings Bank Management Recognition Plan
- -----------------------------------------------------------------
(Full Title of the Plan)
Gary R. Bronstein, Esquire
Joel E. Rappoport, Esquire
Housley Kantarian & Bronstein, P.C.
1220 19th Street N.W., Suite 700
Washington, D.C. 20036
- -----------------------------------------------------------------
(Name and Address of Agent For Service)
(202) 822-9611
- ----------------------------------------------------------------
(Telephone number, including area code, of agent for service)
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================
<S> <C> <C> <C> <C>
Title of each Proposed Maximum Proposed Maximum Amount of
class of Securities Amount to be Offering Price Aggregate Offering Registration
to be registered registered Per Share Price Fee
- ------------------------------------------------------------------------------------
Common Stock,
$0.01 par value 134,233 (1) $(2) $2,024,581.375 (2) $613.51
=====================================================================================
<FN>
(1) Maximum number of shares issuable under First Lancaster Federal Savings
Bank Management Recognition Plan (38,352 shares) and First Lancaster Bancshares,
Inc. 1996 Stock Option and Incentive Plan (95,881 shares), as such amounts may
be increased in accordance with said plan in the event of a merger,
consolidation, recapitalization, stock split, stock dividend or similar event
involving the Registrant.
(2) Under Rule 457(h) the registration fee may be calculated, inter alia, based
upon the price at which the options may be exercised. 134,233 shares are being
registered hereby, of which 71,910 are under option at a weighted average
exercise price of $14.9375 per share ($1,074,155.625 in the aggregate). The
remainder of such shares, which are not presently subject to option (62,323
shares), are being registered based upon the average of the bid and asked price
of the common stock of the Registrant as reported on the Nasdaq SmallCap Market
("SmallCap") on February 10, 1997 of $15.25 per share ($950,428.75 in the
aggregate). Therefore, the total amount of the offering being registered herein
is $2,024,581.375.
</FN>
/TABLE
<PAGE>
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION
10(a) PROSPECTUS
ITEM 1. PLAN INFORMATION*
- ------
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL
- ------ INFORMATION*
*Documents containing the information required by Part I of
this Registration Statement will be sent or given to participants
in the First Lancaster Federal Savings Bank Management
Recognition Plan and First Lancaster Bancshares, Inc. 1996 Stock
Option and Incentive Plan (together, the "Plans") in accordance
with Rule 428(b)(1). In accordance with Note to Part I of Form
S-8, such documents are not filed with the Securities and
Exchange Commission (the "Commission") either as part of this
Registration Statement or as prospectuses or prospectus
supplements.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
- ------
First Lancaster Bancshares, Inc. (the "Company") is
subject to the informational requirements of the Securities
Exchange Act of 1934 (the "1934 Act") and, accordingly, files
periodic reports and other information with the Commission.
Reports, proxy statements and other information concerning the
Company filed with the Commission may be inspected and copies may
be obtained (at prescribed rates) at the Commission's Public
Reference Section, Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549. The Commission also maintains a Web site that
contains reports, proxy and information statements and other
information regarding registrants that file electronically with
the Commission, including the Company. The address for the
Commission's Web site is "http://www.sec.gov".
The following documents are incorporated by reference in
this Registration Statement:
(a) The Company's Annual Report on Form 10-KSB for the
fiscal year ended June 30, 1996 as filed with the Commission on
September 7, 1996 (Commission File No. 0-20899).
(b) The Company's Quarterly Report on Form 10QSB for the
quarter ended September 30, 1996, as filed with the Commission on
November 13, 1996 (Commission File No. 0-20899).
(c) The Company's Quarterly Report on Form 10QSB for the
quarter ended December 31, 1996, as filed with the Commission on
February 13, 1997 (Commission File No. 0-20899).
(d) The description of the Company's securities as
contained in the Registration Statement on Form SB-2, as filed
with the Commission on March 15, 1996 and as amended on May 2,
1996 (Registration No. 333-2468).
ALL DOCUMENTS FILED BY THE COMPANY PURSUANT TO SECTIONS
13(A), 13(C), 14, AND 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 AFTER THE DATE HEREOF AND PRIOR TO THE FILING OF A POST-
EFFECTIVE AMENDMENT WHICH INDICATES THAT ALL SHARES OF COMMON
STOCK, PAR VALUE $0.01 PER SHARE ("COMMON STOCK") OFFERED HAVE
BEEN SOLD OR WHICH DEREGISTERS ALL SHARES OF COMMON STOCK THEN
REMAINING UNSOLD SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE
IN THIS REGISTRATION STATEMENT AND TO BE A PART HEREOF FROM THE
DATE OF FILING OF SUCH DOCUMENTS.
ITEM 4. DESCRIPTION OF SECURITIES
- ------
Not applicable, as the Common Stock is registered under
Section 12 of the Securities Exchange Act of 1934.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
- ------
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
- ------
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Directors, officers and employees of the Company and/or
First Lancaster Federal Savings Bank ("the Bank") may be entitled
to benefit from the indemnification provisions contained in the
Delaware General Corporation Law (the "DGCL"),
-1-<PAGE>
<PAGE>
the Company's Certificate of Incorporation, and federal
regulations applicable to the Bank. The general effect of these
provisions is summarized below:
DELAWARE GENERAL CORPORATION LAW
Section 145 of the DGCL permits a Delaware corporation to
indemnify any person who was or is a party or is threatened to be
made a party to any proceeding of any type, (other than an action
by or in the right of the corporation) by reason of the fact that
he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, against expenses (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 or not opposed to the best interests
of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, may not, of itself, create a
presumption that these standards have not been met.
A Delaware corporation may also indemnify any person who was
or is a party or is threatened to be made a party to any
proceeding by or in the right of the corporation by reason of the
fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation. However, no indemnification
may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought
determines upon application that such person is fairly and
reasonably entitled to be indemnified.
To the extent that a director, officer, employee or agent of
a corporation has been successful on the merits or otherwise in
defense of any proceeding described above indemnification against
expenses (including attorneys' fees) actually and reasonably
incurred by him is mandatory.
Any determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in
subsections (a) and (b) must be made by a majority of the board
of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or
proceeding, or if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or by the
stockholders.
Expenses (including attorneys' fees) incurred by an officer
or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of or proceeding
upon receipt of an undertaking by or on behalf of such director
or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the
corporation.
The indemnification and advancement of expenses provided by,
or granted pursuant to, the other subsections of this section is
not exclusive.
In addition, a corporation shall have power to purchase and
maintain insurance against any liability of individuals whom the
corporation is required to indemnify.
Article XVII of the Certificate of Incorporation of the Company
- ---------------------------------------------------------------
In addition to the statutory provision described above,
Article XVII of the Company's Certificate of Incorporation also
provides for indemnification. With certain exceptions, the
indemnification provided for by Article XVII is identical to the
statutory provision. Article XVII states explicitly, however,
that the indemnification provided by the Article shall
-2-<PAGE>
<PAGE>
be deemed to be a contract between the Company and the persons
entitled to indemnification thereunder and further provides the
indemnification and advance payment of expenses provided
thereunder continues even after the individual ceases to hold a
position with the Company and inures to the benefit of his or her
heirs, executors and administrators.
Federal Regulations Providing for Indemnification of Directors
and Officers of First Lancaster Federal Savings Bank
- --------------------------------------------------------------
Federal regulations require that the Bank indemnify any
person against whom an action is brought by reason of that
person's role as a director or officer of the Bank for (i) any
judgments resulting from the action; (ii) reasonable costs and
expenses (including attorney's fees) incurred in connection with
the defense or settlement of such action; and (iii) reasonable
costs and expenses (including attorney's fees) incurred in
connection with enforcing the individual's indemnification rights
against the Bank, assuming a final judgment is obtained in his
favor.
The mandatory indemnification provided for by federal
regulations is limited to (i) actions where a final judgment on
the merits is in favor of the officer or director and (ii) in the
case of a settlement, final judgment against the director or
officer or final judgment not on the merits, except as to where
the director or officer is found negligent or to have committed
misconduct in the performance of his or her duties, where a
majority of the Board of Directors of the Bank determines that
the director or officer was acting in good faith within what he
was reasonably entitled to believe was the scope of his or her
employment or authority for a purpose that was in the best
interests of the Bank or its members or stockholders.
In addition, the Bank has a directors' and officers'
liability policy providing for insurance against certain
liabilities incurred by directors and officers of the Bank while
serving in their capacities as such.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
- ------
Not Applicable.
ITEM 8. EXHIBITS
- ------
For a list of all exhibits filed or included as part of this
Registration Statement, see "Index to Exhibits" at the end of
this Registration Statement.
ITEM 9. UNDERTAKINGS
- ------
1. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement --
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the registration
statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such
information in the registration statement;
-3-<PAGE>
<PAGE>
provided, however, that paragraphs (a)(i) and (a)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8,
and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports
filed by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(b) That, for the purpose of determining any liability
under the Securities Act of 1934, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
(d) If the registrant is a foreign private issuer, to
file a post-effective amendment to the registration statement to
include any financial statements required by Rule 3-19 of
Regulation S-X at the start of any delayed offering or throughout
a continuous offering.
2. The undersigned registrant hereby undertakes that,
for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
3. The undersigned registrant hereby undertakes to
deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual
report to security holders that is incorporated by reference in
the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information
required to be presented by Article 3 of Regulation S-X is not
set forth in the prospectus, to deliver, or cause to be delivered
to each person to whom the prospectus is sent or given, the
latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial
information.
4. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
-4-<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, the registrant certifies that it has reasonable
grounds to believe that it meets all of the requirements for
filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the City of Lancaster, Commonwealth of
Kentucky, on January 9, 1997.
FIRST LANCASTER BANCSHARES, INC.
By: /s/ Virginia R. S. Stump
-------------------------------------
Virginia R. S. Stump
President and Chief Executive Officer
(Duly Authorized Representative)
POWER OF ATTORNEY
We, the undersigned Directors of First Lancaster Bancshares,
Inc., hereby severally constitute and appoint Virginia R. S.
Stump, with full power of substitution, our true and lawful
attorney and agent, to do any and all things in our names in the
capacities indicated below which said Virginia R. S. Stump may
deem necessary or advisable to enable First Lancaster Bancshares,
Inc. to comply with the Securities Act of 1933, as amended, and
any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with the registration on Form
S-8 of First Lancaster Bancshares, Inc. common stock that may be
awarded pursuant to the First Lancaster Bancshares, Inc. Stock
Option and Incentive Plan or the First Lancaster Federal Savings
Bank Management Recognition Plan, including specifically, but not
limited to, power and authority to sign for us in our names in
the capacities indicated below, the registration statement and
any and all amendments (including post-effective amendments)
thereto; and we hereby ratify and confirm all that said Virginia
R. S. Stump shall do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ----------- ----- -----
<S> <C> <C>
/s/ Virginia R.S. Stump Chairman of the Board, January 9, 1997
- ----------------------- President and Chief
Virginia R. S. Stump Executive Officer
(Principal Executive, Financial
and Accounting Officer)
/s/ Tony A. Merida Vice Chairman of the Board January 9, 1997
- ----------------------- and Executive Vice President
Tony A. Merida
/s/ David W. Gay Director January 9, 1997
- ----------------------
David W. Gay
/s/ Roger S. Grubbs Director January 9, 1997
- ----------------------
Roger S. Grubbs
/s/ Jane G. Simpson Director January 9, 1997
- ----------------------
Jane G. Simpson
/s/ Ronald L. Sutton Director January 9, 1997
- ----------------------
Ronald L. Sutton
/s/ Jack C. Zanone Director January 9, 1997
- ---------------------
Jack C. Zanone
</TABLE>
February 13, 1997
Board of Directors
First Lancaster Bancshares, Inc.
208 Lexington Street
Lancaster, Kentucky 40444
Re: Registration Statement on Form S-8
------------------------------------------------------
First Lancaster Federal Savings Bank Management
Recognition Plan and First Lancaster Bancshares, Inc.
1996 Stock Option and Incentive Plan
Dear Board Members:
We have acted as special counsel to First Lancaster
Bancshares, Inc., a Delaware Corporation (the "Company"), in
connection with the preparation of the Registration Statement on
Form S-8 filed with the Securities and Exchange Commission (the
"Registration Statement") under the Securities Act of 1933, as
amended, relating to 134,233 shares of common stock, par value
$.01 per share (the "Common Stock") of the Company which may be
issued pursuant to the First Lancaster Federal Savings Bank
Management Recognition Plan and the First Lancaster Bancshares,
Inc. 1996 Stock Option and Incentive Plan (together, the
"Plans"), all as more fully described in the Registration
Statement. You have requested the opinion of this firm with
respect to certain legal aspects of the proposed offering.
We have examined such documents, records and matters of law
as we have deemed necessary for purposes of this opinion and
based thereon, we are of the opinion that the Common Stock when
issued pursuant to and in accordance with the terms of the Plans
will be legally issued, fully paid, and nonassessable.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement on Form S-8 and to
references to our firm included under the caption "Legal Opinion"
in the Prospectus which is part of the Registration Statement.
Very truly yours,
Housley Kantarian & Bronstein, P.C.
By: /s/ Gary R. Bronstein
---------------------------------
Gary R. Bronstein, Esquire
Consent of Independent Accountants
We consent to the incorporation by reference in this registration statement on
Form S-8 of our report dated July 29, 1996, on our audits of the consolidated
financial statements of First Lancaster Bancshares, Inc. and Subsidiary as of
June 30, 1996 and 1995, and the related consolidated statements of income,
changes in stockholders' equity, and cash flow for the years then ended, which
report was included in First Lancaster Bancshares, Inc. Annual Report on Form
10-KSB for the year ended June 30, 1996. We also consent to the reference to
our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Lexington, Kentucky
February 11, 1997
<
<PAGE>
FIRST LANCASTER FEDERAL SAVINGS BANK
MANAGEMENT RECOGNITION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
1.01 The Bank hereby establishes this Plan upon the
terms and conditions hereinafter stated.
1.02 Through acceptance of their appointment to the
Committee, each member of the Committee hereby accepts his or her
appointment hereunder upon the terms and conditions hereinafter
stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to reward and retain
personnel of experience and ability in key positions of
responsibility by providing Employees and Directors of the
Company, the Bank, and their Affiliates with a proprietary
interest in the Company, and as compensation for their past
contributions to the Bank, and as an incentive to make such
contributions in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Plan with
an initial capital letter, shall have the meanings set forth
below unless the context clearly indicates otherwise. Wherever
appropriate, the masculine pronoun shall include the feminine
pronoun and the singular shall include the plural.
3.01 "Affiliate" shall mean any "parent corporation" or
"subsidiary corporation" of the Bank, as such terms are defined
in Section 424(e) and (f), respectively, of the Internal Revenue
Code of 1986, as amended.
3.02 "Bank" means First Lancaster Federal Savings Bank.
3.03 "Beneficiary" means the person or persons
designated by a Participant to receive any benefits payable under
the Plan in the event of such Participant'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
Participant's surviving spouse, if any or if none, his estate.
3.04 "Board" means the Board of Directors of the Bank.
3.05 "Committee" means the Management Recognition Plan
Committee appointed by the Board pursuant to Article IV hereof.
3.06 "Common Stock" means shares of the common stock of
the Company.
3.07 "Company" means First Lancaster Bancshares, Inc.
3.08 "Continuous Service" shall mean the absence of any
interruption or termination of service as an Employee or Director
of the Bank or an Affiliate. Continuous Service shall not be
considered interrupted in the case of sick leave, military leave
or any other leave of absence approved by the Bank in the case of
transfers between
1<PAGE>
<PAGE>
payroll locations of the Bank or between the Bank, an Affiliate
or a successor, or in the case of a Director's performance of
services in an emeritus or advisory capacity.
3.09 "Date of Conversion" means the date of the
conversion of the Bank from mutual to stock form.
3.10 "Director" means a member of the Board.
3.11 "Disability" means a physical or mental condition
of a Participant resulting from bodily injury, disease, or mental
disorder which renders him incapable of continuing any gainful
occupation and which condition constitutes total disability under
the Federal Social Security Acts.
3.12 "Effective Date" means the date on which the Plan
first becomes effective, as determined under Section 8.07 hereof.
3.13 "Employee" means any person who is employed by the
Bank or an Affiliate.
3.14 "Non-employee Director" shall have the meaning
provided in Rule 16b-3 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended.
3.15 "OTS" shall mean the Office of Thrift Supervision
of the United States Department of the Treasury.
3.16 "Participant" means an Employee or Director who
holds a Plan Share Award.
3.17 "Plan" means this First Lancaster Federal Savings
Bank Management Recognition Plan.
3.18 "Plan Shares" means shares of Common Stock held in
the Trust which are awarded or issuable to a Participant pursuant
to the Plan.
3.19 "Plan Share Award" means a right granted under this
Plan to receive Plan Shares.
3.20 "Plan Share Reserve" means the shares of Common
Stock held by the Trustee pursuant to Sections 5.02 and 5.03.
3.21 "Trust" and "Trust Agreement" mean that agreement
entered into pursuant to the terms hereof between the Bank and
the Trustee, and "Trust" means the trust created thereunder.
3.22 "Trustee" means that person(s) or entity appointed
by the Board pursuant to the Trust Agreement to hold legal title
to the Plan assets for the purposes set forth herein.
3.23 "Year of Service" shall mean a full twelve-month
period, measured from the date of a Plan Share Award and each
annual anniversary of that date, throughout which the
Participant's continuous service has not terminated for any
reason.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 ROLE AND POWERS OF THE COMMITTEE. The Plan shall
be administered and interpreted by the Committee, which shall
consist of not less than two members of the Board who are Non-
employee Directors. In the absence at any time of a duly
appointed Committee, the Plan shall be administered by those
members of the Board who are Non-employee Directors and by the
Board if there are less than two Non-employee Directors.
2<PAGE>
<PAGE>
The Committee shall have all of the powers allocated to it
in this and other Sections of the Plan. Except as limited by the
express provisions of the Plan or by resolutions adopted by the
Board, the Committee shall have sole and complete authority and
discretion, subject to applicable OTS regulations (i) to make
Plan Share Awards to such Employees as the Committee may select,
(ii) to determine the form and content of Plan Share Awards to be
issued under the Plan, (iii) to interpret the Plan, (iv) to
prescribe, amend and rescind rules and regulations relating to
the Plan, and (v) to make other determinations necessary or
advisable for the administration of the Plan. The Committee
shall have and may exercise such other power and authority as may
be delegated to it by the Board from time to time. Subject to
Section 4.02, the interpretation and construction by the
Committee of any provisions of the Plan or of any Plan Share
Award granted hereunder shall be final and binding. The
Committee shall act by vote or written consent of a majority of
its members, and 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. The Committee may
recommend to the Board one or more persons or entity to act as
Trustee(s) in accordance with the provisions of this Plan and the
Trust.
4.02 ROLE OF THE BOARD. The members of the Committee
shall be appointed or approved by, and will serve at the pleasure
of, the Board. The Board may in its discretion from time to time
remove members from, or add members to, the Committee. The Board
shall have all of the powers allocated to it in this and other
Sections of the Plan, may take any action under or with respect
to the Plan which the Committee is authorized to take, and may
reverse or override any action taken or decision made by the
Committee under or with respect to the Plan, provided, however,
that the Board may not take any action that would constitute a
violation of OTS regulations or revoke any Plan Share Award
already made or impair a participant's vested rights under a Plan
Share Award except as provided in Section 8.02 herein. Members
of the Board who are eligible for or who have been granted Plan
Share Awards (other than pursuant to Section 6.04) may not vote
on any matters affecting the administration of the Plan or the
grant of Plan Shares or Plan Share Awards (although such members
may be counted in determining the existence of a quorum at any
meeting of the Board during which actions with regard thereto are
taken). Further, with respect to all actions taken by the Board
in regard to the Plan, such action shall be taken by a majority
of the Board where such a majority of the directors acting in the
matter are Non-employee Directors.
4.03 LIMITATION ON LIABILITY. No member of the Board or
the Committee or the Trustee(s) shall be liable for any
determination made in good faith with respect to the Plan or any
Plan Shares or Plan Share Awards granted under it. If a member
of the Board or the Committee or any Trustee 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 shall, subject to the indemnification provisions
of 12 C.F.R. Section 545.121, indemnify such member against
expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
him or her in connection with such action, suit or proceeding if
he or she acted in good faith and in a manner he or she
reasonably believed to be in the best interests of the Bank and
its Affiliates and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful.
ARTICLE V
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 AMOUNT AND TIMING OF CONTRIBUTIONS. The Board
shall determine the amounts (or the method of computing the
amounts) to be contributed by the Bank to the Trust. Such
amounts shall be paid to the Trustee at the time of contribution
and shall not exceed amounts permitted under OTS regulations. No
contributions to the Trust by Employees shall be permitted.
5.02 INVESTMENT OF TRUST ASSETS. The Trustee shall
invest Trust assets only in accordance with the Trust Agreement;
provided that the Trust shall not purchase more than four percent
(4%) of the number of shares of Common Stock issued on the Date
of Conversion. Common Stock purchased by the Trust may be
acquired on the open market or in the form of shares newly issued
by the Company.
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5.03 EFFECT OF ALLOCATIONS, RETURNS AND FORFEITURES UPON
PLAN SHARE RESERVES. Upon the allocation of Plan Share Awards
under Section 6.02, the Plan Share Reserve shall be reduced by
the number of Shares subject to the Awards so allocated. Any
Shares subject or attributable to an Award which may not be
earned because of a forfeiture by the Participant pursuant to
Section 7.01 shall be added to the Plan Share Reserve.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 ELIGIBILITY. Only Employees shall be eligible to
receive discretionary Plan Share Awards. In selecting those
Employees to whom Plan Share Awards will be granted and the
number of shares covered by such Awards, the Committee shall
consider the position, duties and responsibilities of the
eligible Employees, the value of their services to the Bank and
its Affiliates, and any other factors the Committee may deem
relevant. Notwithstanding the foregoing, (i) the Committee shall
automatically make the Plan Share Awards specified in Sections
6.04 and 6.05 hereof; and (ii) no Employee shall receive Plan
Share Awards relating to more than 25% of the Plan Shares
reserved under Section 5.02, and no non-employee Director shall
receive Plan Share Awards relating to more than 5% of the Plan
Shares reserved under Section 5.02, with all non-employee
Directors as a group receiving Plan Share Awards relating to no
more than 30% of the Plan Shares reserved under Section 5.02.
6.02 ALLOCATIONS. The Committee will determine which
Employees will be granted discretionary Plan Share Awards, and
the number of Shares covered by each Plan Share Award, provided
that in no event shall any Awards be made which will violate the
governing instruments of the Bank or its Affiliates or any
applicable federal or state law or regulation. In the event Plan
Shares are forfeited for any reason or additional shares of
Common Stock are purchased by the Trustee, the Committee may,
from time to time, determine which of the Employees referenced in
Section 6.01 above will be granted additional Plan Share Awards
to be awarded from the forfeited or acquired Plan Shares.
6.03 FORM OF ALLOCATION. As promptly as practicable
after a determination is made pursuant to Section 6.02 that a
Plan Share Award is to be made, the Committee shall notify the
Participant in writing of the grant of the Award, the number of
Plan Shares covered by the Award, and the terms upon which the
Plan Shares subject to the Award may be earned. The date on
which the Committee so notifies the Participant shall be
considered the date of grant of the Plan Share Awards. The
Committee shall maintain records as to all grants of Plan Share
Awards under the Plan.
6.04 AUTOMATIC GRANTS TO NON-EMPLOYEE DIRECTORS.
Notwithstanding any other provisions of this Plan, each Director
who is not an Employee but is a Director on the Effective Date
shall receive, on said date, a Plan Share Award for a number of
Shares equal to the lesser of five (5%) of the number of Plan
Shares which the Trust is authorized to purchase pursuant to
Section 5.02 of the Plan and the quotient obtained by dividing --
(i) Thirty percent (30%) of the number of Plan Shares
which the Trust is authorized to purchase pursuant to
Section 5.02 of the Plan, by
(ii) the number of Directors entitled to receive Plan Share
Awards on the Effective Date, pursuant to this Section
6.04.
Each Director who joins the Board after the Effective Date
shall receive, on said date, a Plan Share Award of two percent
(2%) of the number of Plan Shares which the Trust is authorized
to purchase pursuant to Section 5.02 of the Plan (or such lesser
number as are available hereunder for Plan Share Awards).
Notwithstanding the foregoing, in no event shall a Plan Share
Award be granted pursuant to this Section 6.04 to the extent that
it would result in non-Employee Directors as a group receiving
more than 30% of the Plan Shares reserved under Section 5.02.
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Plan Share Awards received under the provisions of this
Section shall become vested and nonforfeitable according to the
general rules set forth in subsections (a), and (b) of Section
7.01, and the Committee shall have no discretion to alter or
accelerate said vesting requirements. Unless otherwise
inapplicable or inconsistent with the provisions of this Section,
the Plan Share Awards to be granted hereunder shall be subject to
all other provisions of this Plan.
6.05 AUTOMATIC GRANTS TO EMPLOYEES. On the Effective
Date, each of the following individuals shall receive a Plan
Share Award as to the number of Plan Shares listed below,
provided that such award shall not be made to an individual who
is not an Employee on the Effective Date:
Percentage of Plan Shares Authorized
Employee for Purchase under Plan Subsection 502
-------- ------------------------------------
Virginia Stump 25%
ony Merida 25%
Plan Share Awards received under the provisions of this
Section shall become vested and nonforfeitable according to the
general rules set forth in subsections (a) and (b) of Section
7.01, and the Committee shall have no discretion to alter said
vesting requirements. Unless otherwise inapplicable or
inconsistent with the provisions of this Section, the Plan Share
Awards to be granted hereunder shall be subject to all other
provisions of this Plan.
6.06 ALLOCATIONS NOT REQUIRED. Notwithstanding anything
to the contrary in Sections 6.01 and 6.02, but subject to
Sections 6.04 and 6.05, no Employee or Director shall have any
right or entitlement to receive a Plan Share Award hereunder,
such Awards being at the total discretion of the Committee, nor
shall any Employees or Directors as a group have such a right.
The Committee may, with the approval of the Board (or, if so
directed by the Board) return all Common Stock in the Plan Share
Reserve to the Bank at any time, and cease issuing Plan Share
Awards.
ARTICLE VII
EARNINGS AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 EARNING PLAN SHARES; FORFEITURES.
(a) GENERAL RULES. Twenty percent (20%) of the
Plan Shares subject to a Plan Share Award shall be earned and
become non-forfeitable by a Participant upon his or her
completion of each of five Years of Service.
(b) EXCEPTION FOR TERMINATIONS DUE TO DEATH OR
DISABILITY. Notwithstanding the general rule contained in
Section 7.01(a) above, all Plan Shares subject to a Plan Share
Award held by a Participant whose service with the Bank or an
Affiliate terminates due to the Participant's death or
Disability, shall be deemed earned as of the Participant's last
day of service with the Bank or an Affiliate and shall be
distributed as soon as practicable thereafter.
(c) SIX-MONTH HOLDING PERIOD. In no event may
Plan Shares be sold within the six-month period following the
date of the underlying Plan Share Award, except in the event of
the Participant's death or Disability, or such other event as the
Board may specifically deem appropriate.
7.02 ACCRUAL OF DIVIDENDS. Whenever Plan Shares are
paid to a Participant or Beneficiary under Section 7.03, such
Participant or Beneficiary shall also be entitled to receive,
with respect to each Plan Share paid, an amount equal to any cash
dividends (including special large and nonrecurring dividends,
including one that has the effect of a return of capital to the
Company's stockholders) and a number of shares of Common Stock
equal to any stock dividends, declared and paid with respect to a
share of Common Stock between the date the relevant Plan
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Share Award was initially granted to such Participant and the
date the Plan Shares are being distributed. There shall also be
distributed an appropriate amount of net earnings, if any, of the
Trust with respect to any cash dividends so paid out.
7.03 DISTRIBUTION OF PLAN SHARES.
(a) Timing of Distributions: General Rule.
Except as provided in Subsections (c), and (d) below, the Trustee
shall distribute Plan Shares and accumulated cash from dividends
and interest to the Participant or his Beneficiary, as the case
may be, as soon as practicable after they have been earned. No
fractional shares shall be distributed.
(b) FORM OF DISTRIBUTION. The Trustee shall
distribute all Plan Shares, together with any shares representing
stock dividends, in the form of Common Stock. One share of
Common Stock shall be given for each Plan Share earned. Payments
representing cash dividends (and earnings thereon) shall be made
in cash.
(c) WITHHOLDING. The Trustee shall withhold from
any cash payment made under this Plan sufficient amounts to cover
any applicable withholding and employment taxes, and if the
amount of such cash payment is not sufficient, the Trustee shall
require the Participant or Beneficiary to pay to the Trustee the
amount required to be withheld as a condition of delivering the
Plan Shares. The Trustee shall pay over to the Bank or Affiliate
which employs or employed such Participant any such amount
withheld from or paid by the Participant or Beneficiary.
(d) TIMING: EXCEPTION FOR 10% SHAREHOLDERS.
Notwithstanding Subsections (a) and (b) above, no Plan Shares may
be distributed prior to the date which is five (5) years from the
Date of Conversion to the extent the Participant or Beneficiary,
as the case may be, would after receipt of such Shares own in
excess of ten percent (10%) of the issued and outstanding shares
of Common Stock unless such action is approved in advance by a
majority vote of Non-employee Directors of the Board. To the
extent this limitation would delay the date on which a
Participant receives Plan Shares, the Participant may elect to
receive from the Trust, in lieu of such Plan Shares, the cash
equivalent thereof. Any Plan Shares remaining undistributed
solely by reason of the operation of this Subsection (d) shall be
distributed to the Participant or his Beneficiary on the date
which is five years from the Date of Conversion, provided that
the Participant is vested as to those Plan Shares pursuant to
Section 7.01(a) hereof.
(e) REGULATORY EXCEPTIONS. No Plan Shares shall
be distributed unless and until all of the requirements of all
applicable law and regulation shall have been fully complied
with, including the receipt of approval of the Plan by the
stockholders of the Bank by such vote, if any, as may be required
by applicable law and regulations.
7.04 VOTING OF PLAN SHARES. All shares of Common Stock
held by the Trust (whether or not subject to a Plan Share Award)
shall be voted by the Trustee in the same proportion as the
trustee of the Company's Employee Stock Ownership Plan votes
Common Stock held in the trust associated therewith, and in the
absence of any such voting, shall be voted in the manner directed
by the Board.
ARTICLE VIII
MISCELLANEOUS
8.01 ADJUSTMENTS FOR CAPITAL CHANGES.
(a) RECAPITALIZATIONS; STOCK SPLITS, ETC. The
number and kind of shares which may be purchased under the Plan,
and the number and kind of shares subject to outstanding Plan
Share Awards, shall be proportionately adjusted for any increase,
decrease, change or exchange of shares of Common Stock for a
different
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number or kind of shares or other securities of the Company which
results from a merger, consolidation, recapitalization,
reorganization, reclassification, stock dividend, split-up,
combination of shares, or similar event in which the number or
kind of shares is changed without the receipt or payment of
consideration by the Company.
(b) TRANSACTIONS IN WHICH THE COMPANY IS NOT THE
SURVIVING ENTITY. In the event of (i) the liquidation or
dissolution of the Company, (ii) a merger or consolidation in
which the Company is not the surviving entity, or (iii) the sale
or disposition of all or substantially all of the Company's
assets (any of the foregoing to be referred to herein as a
"Transaction"), all outstanding Plan Share Awards shall be
adjusted for any change or exchange of shares of Common Stock for
a different number or kind of shares or other securities which
results from the Transaction.
(c) CONDITIONS AND RESTRICTIONS ON NEW, ADDITIONAL,
OR DIFFERENT SHARES OR SECURITIES. If, by reason of any
adjustment made pursuant to this Section, a Participant becomes
entitled to new, additional, or different shares of stock or
securities, such new, additional, or different shares of stock or
securities shall thereupon be subject to all of the conditions
and restrictions which were applicable to the shares pursuant to
the Plan Share Award before the adjustment was made. In
addition, the Committee shall have the discretionary authority to
impose on the Shares subject to Plan Share Awards such
restrictions as the Committee may deem appropriate or desirable,
including but not limited to a right of first refusal, or
repurchase option, or both of these restrictions.
(d) OTHER ISSUANCES. Except as expressly provided
in this Section, the issuance by the Bank or an Affiliate of
shares of stock of any class, or of securities convertible into
shares of Common Stock or stock of another class, for cash or
property or for labor or services either upon direct sale or upon
the exercise of rights or warrants to subscribe therefor, shall
not affect, and no adjustment shall be made with respect to, the
number or class of shares of Common Stock then subject to Plan
Share Awards or reserved for issuance under the Plan.
8.02 AMENDMENT AND TERMINATION OF PLAN. The Board may,
by resolution, at any time amend or terminate the Plan; provided
that no amendment or termination of the Plan shall, without the
written consent of a Participant, impair any rights or
obligations under a Plan Share Award theretofore granted to the
Participant.
The power to amend or terminate the Plan in accordance with
this Section 8.02 shall include the power to direct the Trustee
to return to the Bank all or any part of the assets of the Trust,
including shares of Common Stock held in the Plan Share Reserve.
However, the termination of the Trust shall not affect a
Participant's right to earn Plan Share Awards and to receive a
distribution of Common Stock relating thereto, including earnings
thereon, in accordance with the terms of this Plan and the grant
by the Committee or the Board.
8.03 NONTRANSFERABILITY. Plan Share Awards may not be
sold, pledged, assigned, hypothecated, transferred or disposed of
in any manner other than by will or by the laws of descent and
distribution. Notwithstanding the foregoing, or any other
provision of this Plan, a Participant who holds Plan Share Awards
may transfer such Awards to his or her spouse, lineal ascendants,
lineal descendants, or to a duly established trust for the
benefit of one or more of these individuals. Plan Share Awards
so transferred may thereafter be transferred only to the
Participant who originally received the grant or to an individual
or trust to whom the Participant could have initially transferred
the Awards pursuant to this Section 8.03. Plan Share Awards
which are transferred pursuant to this Section 8.03 shall be
exercisable by the transferee according to the same terms and
conditions as applied to the Participant.
8.04 NO EMPLOYMENT OR OTHER RIGHTS. Neither the Plan
nor any grant of a Plan Share Award or Plan Shares hereunder nor
any action taken by the Trustee, the Committee or the Board in
connection with the Plan shall create any right, either express
or implied, on the part of any Employee or Director to continue
in the service of the Company, the Bank, or an Affiliate thereof.
7<PAGE>
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8.05 VOTING AND DIVIDEND RIGHTS. No Participant shall
have any voting or dividend rights or other rights of a
stockholder in respect of any Plan Shares covered by a Plan Share
Award, except as expressly provided in Section 7.03 above, prior
to the time said Plan Shares are actually distributed to him.
8.06 GOVERNING LAW. The Plan and Trust shall be
governed and construed under the laws of the Commonwealth of
Kentucky to the extent not preempted by Federal law.
8.07 EFFECTIVE DATE. The Plan shall become effective
immediately upon its approval by a favorable vote of stockholders
of the Company who own at least a majority of the total votes
eligible to be cast at a duly called meeting of the Company's
stockholders held in accordance with applicable laws, provided
that the Plan shall not be submitted for such approval within the
six-month period after the Date of Conversion. In no event shall
Plan Share Awards be made prior to the Effective Date.
8.08 TERM OF PLAN. This Plan shall remain in effect
until the earlier of (i) termination by the Board, or (ii) the
distribution of all assets of the Trust. Termination of the Plan
shall not affect any Plan Share Awards previously granted, and
such Awards shall remain valid and in effect until they have been
earned and paid, or by their terms expire or are forfeited.
8.09 TAX STATUS OF TRUST. It is intended that (i) the
Trust associated with the Plan be treated as a grantor trust of
the Bank under the provisions of Section 671 et seq. of the Code,
as the same may be amended from time to time, and (ii) that in
accordance with Revenue Procedure 92-65 (as the same may be
amended from time to time), Participants have the status of
general unsecured creditors of the Bank, the Plan constitutes a
mere unfunded promise to make benefit payments in the future, the
Plan is unfunded for tax purposes and for purposes of Title I of
the Employee Retirement Income Security Act of 1974, as amended,
and the Trust has been and will continue to be maintained in
conformity with Revenue Procedure 92-64 (as the same may be
amended from time to time).
8<PAGE>
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TRUST AGREEMENT FOR THE
FIRST LANCASTER FEDERAL SAVINGS BANK
GRANTOR TRUST
This Agreement made this _____ day of _________, 1996 by and
between First Lancaster Federal Savings Bank (the "Bank") and
______________________ (the "Trustee").
WHEREAS, the Bank maintains the First Lancaster Federal
Savings Bank Management Recognition Plan and the First Lancaster
Savings Bank Retirement Plan for Non-employee Directors, and has
entered into separate employment and supplemental executive
retirement agreements with Virginia R.S. Stump and Tony A. Merida
(such plans and agreements collectively hereinafter referred to
as the "Arrangements"); and
WHEREAS, the Bank has incurred or expects to incur liability
under the terms of the Arrangements with respect to the
individuals benefiting from the Arrangements (the
"Participants"); and
WHEREAS, the Bank wishes to establish a trust (the "Trust")
and to contribute to the Trust assets that shall be held therein,
subject to the claims of the Bank's general creditors in the
event of Insolvency, as defined in Section 3(a) hereof, until
paid to Participants and their beneficiaries in such manner and
at such times as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust
shall constitute an unfunded arrangement and shall not affect the
status of the Plan as an unfunded plan maintained for the purpose
of providing deferred compensation for a select group of
management or highly compensated employees for purposes of Title
I of the Employee Retirement Income Security Act of 1974;
WHEREAS, it is the intention of the Bank to make
contributions to the Trust to provide itself with a source of
funds to assist it in the meeting of its liabilities under the
Plan;
NOW, THEREFORE, the parties do hereby establish this Trust
and agree that the Trust shall be comprised, held and disposed of
as follows:
Section 1. Establishment of Trust
__________________________________
(a) The Bank hereby deposits, or will shortly hereafter
deposit, with the Trustee in trust (i) a number of shares of the
Company's common stock ("Common Stock") equal to four percent
(4%) of the number of shares of Common Stock issued by the
Company in connection with the conversion of First Lancaster
Federal Savings Bank (the "Bank") from mutual-to-stock form, or
(ii) an amount expected to be sufficient to permit the Trust to
purchase said shares. Said shares or amount shall become the
initial principal of the Trust to be held, administered and
disposed of by the Trustee as provided in this Trust Agreement.
(b) The Trust shall become irrevocable upon the
effective date of the Plan.
(c) The Trust is intended to be a grantor trust, of
which the Bank is the grantor, within the meaning of subpart E,
part I, subchapter J, chapter 1, subtitle A of the Internal
Revenue Code of 1986, as amended (the "Code"), and shall be
construed accordingly.
(d) The principal of the Trust, and any earnings
thereon, shall be held separate and apart from other funds of the
Bank and shall be used exclusively for the uses and purposes of
Participants and general creditors as
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herein set forth. Participants and their beneficiaries shall
have no preferred claim on, or any beneficial ownership interest
in, any assets of the Trust. Any rights created under the Plan
and this Trust Agreement shall be mere unsecured contractual
rights of Participants and their beneficiaries against the Bank.
Any assets held by the Trust will be subject to the claims of the
Bank's general creditors under federal and state law in the event
of Insolvency, as defined in Section 3(a) herein.
(e) The Bank, in its sole discretion, may at any time,
or from time to time, make additional deposits of cash or other
property in trust with the Trustee to augment the principal to be
held, administered and disposed of by Trustee as provided in this
Trust Agreement. Neither the Trustee nor any Participant or
beneficiary shall have any right to compel such additional
deposits.
Section 2. Payments to Plan Participants and Their
Beneficiaries.
____________________________________________________
(a) The Bank shall deliver to the Trustee a schedule
(the "Payment Schedule") that indicates the amounts payable in
respect of each Participant (and his or her beneficiaries), that
provides a formula or other instructions acceptable to the
Trustee for determining the amounts so payable, the form in which
such amount is to be paid (as provided for or available under the
Plan), and the time of commencement for payment of such amounts.
Except as otherwise provided herein, the Trustee shall make
payments to Participants and their beneficiaries in accordance
with such Payment Schedule. The Trustee shall make provision for
the reporting and withholding of any federal, state or local
taxes that may be required to be withheld with respect to the
payment of benefits pursuant to the terms of the Plan and shall
pay amounts withheld to the appropriate taxing authorities or
determine that such amounts have been reported, withheld and paid
by the Bank.
(b) The entitlement of a Participant or his or her
beneficiaries to benefits under the Plan shall be determined by
the Bank or such party as it shall designate under the Plan, and
any claim for such benefits shall be considered and reviewed
under the procedures set out in the Plan.
(c) The Bank may make payment of benefits directly to
Participants or their beneficiaries as they become due under the
terms of the Plan. The Bank shall notify the Trustee of its
decision to make payment of benefits directly prior to the time
amounts are payable to Participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in
accordance with the terms of the Plan, the Bank shall make the
balance of each such payment as it falls due. The Trustee shall
notify the Bank where principal and earnings are not sufficient.
Section 3. Trustee Responsibility Regarding Payments to
Trust Beneficiary When Bank Is Insolvent.
________________________________________________________
(a) The Trustee shall cease payment of benefits to
Participants and their beneficiaries if the Bank is Insolvent.
The Bank shall be considered "Insolvent" for purposes of this
Trust Agreement if (i) the Bank is unable to pay its debts as
they become due, or (ii) the Bank becomes subject to a pending
proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust,
as provided in Section 1(d) hereof, the principal and income of
the Trust shall be subject to claims of general creditors of the
Bank under federal and state law as set forth below.
(c) The Board of Directors and the Chief Executive
Officer of the Bank shall have the duty to inform the Trustee in
writing of the Bank's Insolvency. If a person claiming to be a
creditor of the Bank alleges in writing to the Trustee that the
Bank has become Insolvent, the Trustee shall determine whether
the Bank is Insolvent and, pending such determination, the
Trustee shall discontinue payment of benefits to Participants or
their beneficiaries.
(1) Unless the Trustee has actual knowledge of the
Bank's Insolvency, or has received notice from the Bank or a
person claiming to be a creditor alleging that the Bank is
Insolvent, the Trustee shall have no
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duty to inquire whether the Bank is Insolvent. The Trustee may
in all events rely on such evidence concerning the Bank's
solvency as may be furnished to the Trustee and that provides the
Trustee with a reasonable basis for making a determination
concerning the Bank's solvency.
(2) If at any time the Trustee has determined that
the Bank is Insolvent, the Trustee shall discontinue payments to
Plan participants or their beneficiaries, shall liquidate the
Trust's investment in Common Stock, and shall hold the assets of
the Trust for the benefit of the Bank's general creditors.
Nothing in this Trust Agreement shall in any way diminish any
rights of Participants or their beneficiaries as general
creditors of the Bank with respect to benefits due under the Plan
or otherwise.
(3) The Trustee shall resume the payment of
benefits to Participants or their beneficiaries in accordance
with Section 2 of this Trust Agreement only after the Trustee has
determined that the Bank is not Insolvent (or is no longer
Insolvent).
(d) Provided that there are sufficient assets, if the
Trustee discontinues the payment of benefits from the Trust
pursuant to Section 3(b) hereof and subsequently resumes such
payments, the first payment following such discontinuance shall
include the aggregate amount of all payments due to Participants
or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments
made to Participants or their beneficiaries by the Bank in lieu
of the payments provided for hereunder during any such period of
discontinuance.
Section 4. Payments to the Bank.
________________________________
Except as provided in Section 3 hereof, after the Trust has
become irrevocable, the Bank shall have no right or power to
direct the Trustee to return to the Bank or to divert to others
any of the Trust assets before all payment of benefits have been
made to Plan Participants and their beneficiaries pursuant to the
terms of the Plan.
Section 5. Investment Authority.
________________________________
(a) The Trustee shall have sole discretion as to the
investment of Trust assets, except that to the extent reasonably
practicable, the Trustee shall invest all assets of the Trust in
Common Stock provided that the Trust shall not purchase from time
to time a number of shares of Common Stock exceeding __% of the
shares of Common Stock issued in the Bank's mutual-to-stock
conversion.
(b) All rights associated with assets of the Trust shall be
exercised by the Trustee or the person designated by the Trustee,
and shall in no event be exercisable by or rest with
Participants, except that voting rights with respect to Common
Stock will be exercised in accordance with the terms of the Plan.
(c) Subject to applicable federal and state securities
laws, if for any reason the Trustee will be selling shares of
Common Stock, the Trustee shall sell such shares by (i) giving
each Beneficiary 20 business days within which to purchase, at
fair market value, all or part of the shares of Common Stock that
the Trustee holds for the benefit of the Beneficiary, and (ii) to
the extent purchases by Beneficiaries are insufficient to
eliminate the Trusts' excess holdings of Common Stock, to offer
to sell, and to sell, all or any part of the excess shares held
by the Trust to the following purchasers, listed here by order of
priority: first, the Bank; second, any benefit plan maintained
by the Bank or the Bank; third, directors of the Bank; fourth,
officers of the Bank; fifth, members of the general public.
Section 6. - Disposition of Income.
__________________________________
During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and
reinvested.
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Section 7. Accounting by Trustee.
__________________________________
The Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions
required to be made, including such specific records as shall be
agreed upon in writing between the Bank and the Trustee. Within
60 days following the close of each calendar year and within 20
days after the removal or resignation of the Trustee, the Trustee
shall deliver to the Bank a written account of its administration
of the Trust during such year or during the period from the close
of the last preceding year to the date of such removal or
resignation, setting forth all investments, receipts,
disbursements and other transactions effected by it, including a
description of all securities and investments purchased and sold
with the cost or net proceeds of such purchased and sold with the
cost or net proceeds of such purchases or sales (accrued interest
paid or receivable being shown separately), and showing all cash,
securities and other property held in the Trust at the end of
such year or as of the date of such removal or resignation, as
the case may be.
Section 8. Responsibility of Trustee.
______________________________________
(a) The Trustee shall act with the care, skill, prudence
and diligence under the circumstances then prevailing that a
prudent person acting in like capacity and familiar with such
matters would use in the conduct of an enterprise of a like
character and with like aims, provided, however, that Trustee
shall incur no liability to any person for any action taken
pursuant to a direction, request or approval given by the Bank
which is contemplated by, and in conformity, the terms of the
Plan or this Trust and is given in writing by the Bank. In the
event of a dispute between the Bank and a party, the Trustee may
apply to a court of competent jurisdiction to resolve the
dispute.
(b) If the Trustee undertakes or defends any litigation
arising in connection with this Trust, the Bank agrees to
indemnify the Trustee against Trustee's costs, expenses and
liabilities (including, without limitation, attorneys' fees and
expenses) relating thereto and to be primarily liable for such
payments, except in those cases where the Trustee shall have been
found by a court of competent jurisdiction to have acted with
gross negligence or willful misconduct. If the Bank does not pay
such costs, expenses and liabilities in a reasonably timely
manner, the Trustee may obtain payment from the Trust.
(c) The Trustee may consult with legal counsel with
respect to any of its duties or obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other professionals
to assist it in performing any of its duties or obligations
hereunder.
(e) The Trustee shall have, without exclusion, all
powers conferred on trustees by applicable law, unless expressly
provided otherwise herein, provided, however, that if an
insurance policy is held as an asset of the Trust, the Trustee
shall have no power to name a beneficiary of the policy other
than the Trust, to assign the policy (as distinct from conversion
of the policy to a different form) other than to a successor the
Trustee, or to loan to any person the proceeds of any borrowing
against such policy.
(f) Notwithstanding any powers granted to the Trustee
pursuant to this Trust Agreement or to applicable law, the
Trustee shall not have any power that could give this Trust the
objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the
Procedure and Administrative Regulations promulgated pursuant to
the Code.
5<PAGE>
<PAGE>
Section 9. Compensation and Expenses of Trustee.
_________________________________________________
The Bank shall pay all administrative expenses and the
Trustee's fees and expenses relating to the Plan and this Trust.
If not so paid, the fees and expenses shall be paid from the
Trust.
Section 10. Resignation and Removal of Trustee.
________________________________________________
The Trustee (or any individual serving as one of the
trustees who act by majority as the Trustee) may resign at any
time by written notice to the Bank, which resignation shall be
effective 30 days after the Bank receives such notice (unless the
Bank and the Trustee agree otherwise). The Trustee (or any
individual serving as one of the trustees who act by majority as
the Trustee) may be removed by the Bank on 30 days notice or
upon shorter notice accepted by the Trustee.
If the Trustee (or any individual serving as one of the
trustees who act by majority as the Trustee) resigns or is
removed, a successor shall be appointed, in accordance with
Section 11 hereof, by the effective date or resignation or
removal under this section. If no such appointment has been
made, the Trustee may apply to a court of competent jurisdiction
for appointment of a successor or for instructions. All expenses
of the Trustee in connection with the proceeding shall be allowed
as administrative expenses of the Trust. Upon resignation or
removal of the Trustee and appointment of a successor trustee,
all assets shall subsequently be transferred to the successor
trustee. The transfer shall be completed within 60 days after
receipt of notice of resignation, removal or transfer, unless the
Bank extends the time limit.
Section 11. Appointment of Successor.
______________________________________
If the Trustee resigns or is removed in accordance with
Section 10 hereof, the Bank may appoint any other party as a
successor to replace the Trustee upon resignation or removal.
The appointment shall be effective when accepted in writing by
the new trustee, who shall have all of the rights and powers of
the former trustee, including ownership rights in the Trust
assets. The former trustee shall execute any instrument
necessary or reasonably requested by the Bank or the successor
trustee to evidence the transfer.
A successor trustee need not examine the records and acts of
any prior trustee and may retain or dispose of existing Trust
assets, subject to Sections 7 and 8 hereof. The successor
trustee shall not be responsible for, and the Bank shall
indemnify and defend the successor trustee from, any claim or
liability resulting from any action or inaction of any prior
trustee or from any other past event, or any condition existing
at the time it becomes successor trustee.
Section 12. Amendment or Termination.
______________________________________
(a) This Trust Agreement may be amended by a written
instrument executed by the Trustee and the Bank, provided that no
such amendment shall make the Trust revocable.
(b) The Trust shall not terminate until the date on
which Participants and their beneficiaries are no longer entitled
to benefits pursuant to the terms hereof. Upon termination of
the Trust, the Trustee shall return any assets remaining in the
Trust to the Bank.
(c) Upon written approval of all Participants (or their
beneficiaries if they are then entitled to payment of benefits),
the Bank may terminate this Trust prior to the time all benefit
payments under the Plan have been made. All assets in the Trust
at termination shall be returned to the Bank.
6<PAGE>
<PAGE>
Section 13. Miscellaneous.
___________________________
(a) Any provision of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
(b) Benefits payable to Participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process, except pursuant to
the terms of the Plan.
(c) This Trust Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Kentucky, to
the extent not preempted by federal law.
(d) The Trustee agrees to be bound by the terms of the
Plan, as in effect from time to time.
(e) The Trustee shall act by vote or written consent of a
majority of its duly-appointed members.
IN WITNESS WHEREOF, the Bank, by its duly authorized
officer, has caused this Agreement to be executed, and its
corporate seal affixed, and the Trustees have executed this
Agreement, this 11th day of January, 1997.
ATTEST: FIRST LANCASTER FEDERAL SAVINGS BANK
/s/ Kathy G. Johnica By: /s/ Virginia R. Stump
- -------------------- --------------------------------
Its President
ATTEST:
/s/ Kathy G. Johnica /s/ David W. Gay
-------------------------------
Trustee
7
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FIRST LANCASTER BANCSHARES, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
1. PURPOSE OF THE PLAN.
The purpose of this Plan (the "Plan") is to advance the
interests of the Company through providing select key Employees
and Directors of the Bank, the Company, and their Affiliates with
the opportunity to acquire Shares. By encouraging such stock
ownership, the Company seeks to attract, retain and motivate the
best available personnel for positions of substantial respon-
sibility and to provide additional incentives to Directors and
key Employees of the Company or any Affiliate to promote the
success of the business.
2. DEFINITIONS.
As used herein, the following definitions shall apply.
(a) "Affiliate" shall mean any "parent corporation" or
"subsidiary corporation" of the Company, as such terms are
defined in Section 424(e) and (f), respectively, of the Code.
(b) "Agreement" shall mean a written agreement entered
into in accordance with Paragraph 5(c).
(c) "Awards" shall mean, collectively, Options and SARs,
unless the context clearly indicates a different meaning.
(d) "Bank" shall mean First Lancaster Federal Savings
Bank.
(e) "Board" shall mean the Board of Directors of the
Company.
(f) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(g) "Committee" shall mean the Stock Option Committee
appointed by the Board in accordance with Paragraph 5(a) hereof.
(h) "Common Stock" shall mean the common stock of the
Company.
(i) "Company" shall mean First Lancaster Bancshares,
Inc.
(j) "Continuous Service" shall mean the absence of any
interruption or termination of service as an Employee or Director
of the Company or an Affiliate. Continuous Service shall not be
considered interrupted in the case of sick leave, military leave
or any other leave of absence approved by the Company, in the
case of transfers between payroll locations of the Company or
between the Company, an Affiliate or a successor, or in the case
of a Director's performance of services in an emeritus or
advisory capacity.
(k) "Director" shall mean any member of the Board, and
any member of the board of directors of any Affiliate that the
Board has by resolution designated as being eligible for
participation in this Plan.
(l) Disability" means a physical or mental condition of
a Participant resulting from bodily injury, disease, or mental
disorder which renders him incapable of continuing any gainful
occupation and which condition constitutes total disability under
the Federal Social Security Acts.
(m) "Effective Date" shall mean the date specified in
Paragraph 14 hereof.
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<PAGE>
(n) "Employee" shall mean any person employed by the
Company, the Bank, or an Affiliate.
(o) "Exercise Price" shall mean the price per Optioned
Share at which an Option or SAR may be exercised.
(p) "ISO" means an option to purchase Common Stock which
meets the requirements set forth in the Plan, and which is
intended to be and is identified as an "incentive stock option"
within the meaning of Section 422 of the Code.
(q) "Market Value" shall mean the fair market value of
the Common Stock, as determined under Paragraph 7(b) hereof.
(r) "Non-employee Director" shall have the meaning
provided in Rule 16b-3.
(s) "Non-ISO" means an option to purchase Common Stock
which meets the requirements set forth in the Plan but which is
not intended to be and is not identified as an ISO.
(t) "OTS" means the Office of Thrift Supervision of the
United States Department of the Treasury.
(u) "Option" means an ISO and/or a Non-ISO.
(v) "Optioned Shares" shall mean Shares subject to an
Award granted pursuant to this Plan.
(w) "Participant" shall mean any person who receives an
Award pursuant to the Plan.
(x) "Plan" shall mean this First Lancaster Bancshares,
Inc. 1996 Stock Option and Incentive Plan.
(y) "Rule 16b-3" shall mean Rule 16b-3 of the General
Rules and Regulations under the Securities Exchange Act of 1934,
as amended.
(z) "Share" shall mean one share of Common Stock.
(aa) "SAR" (or "Stock Appreciation Right") means a right
to receive the appreciation in value, or a portion of the
appreciation in value, of a specified number of shares of Common
Stock.
(bb) "Year of Service" shall mean a full twelve-month
period, measured from the date of an Award and each annual
anniversary of that date, during which a Participant has not
terminated Continuous Service for any reason.
3. TERM OF THE PLAN AND AWARDS.
(a) Term of the Plan. The Plan shall continue in
effect for a term of ten years from the Effective Date, unless
sooner terminated pursuant to Paragraph 16 hereof. No Award
shall be granted under the Plan after ten years from the Effec-
tive Date.
(b) Term of Awards. The term of each Award granted
under the Plan shall be established by the Committee, but shall
not exceed 10 years; provided, however, that in the case of an
Employee who owns Shares representing more than 10% of the
outstanding Common Stock at the time an ISO is granted, the term
of such ISO shall not exceed five years. This subsection 3(b)
shall not be construed to cause the acceleration of the vesting
of Awards.
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<PAGE>
4. SHARES SUBJECT TO THE PLAN.
(a) General Rule. Except as otherwise required by the
provisions of Paragraph 11 hereof, the aggregate number of Shares
deliverable pursuant to Awards shall not exceed 95,881 Shares,
which equals 10% of the Shares issued by the Company in
connection with the Bank's conversion from mutual to stock form.
Such Shares may either be (i) authorized but unissued Shares,
(ii) Shares held in treasury, or (iii) Shares held in a grantor
trust maintained by the Company. If any Awards should expire,
become unexercisable, or be forfeited for any reason without
having been exercised, the Optioned Shares shall, unless the Plan
shall have been terminated, be available for the grant of
additional Awards under the Plan.
(b) Special Rule for SARs. The number of Shares with
respect to which an SAR is granted, but not the number of Shares
which the Company delivers or could deliver to an Employee or
individual upon exercise of an SAR, shall be charged against the
aggregate number of Shares remaining available under the Plan;
provided, however, that in the case of an SAR granted in
conjunction with an Option, under circumstances in which the
exercise of the SAR results in termination of the Option and vice
versa, only the number of Shares subject to the Option shall be
charged against the aggregate number of Shares remaining
available under the Plan. The Shares involved in an Option as to
which option rights have terminated by reason of the exercise of
a related SAR, as provided in Paragraph 10 hereof, shall not be
available for the grant of further Options under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) Composition of the Committee. The Plan shall be
administered by the Committee, which shall consist of not less
than two (2) members of the Board who are Non-employee Directors.
Members of the Committee shall serve at the pleasure of the
Board. In the absence at any time of a duly appointed Committee,
the Plan shall be administered by those members of the Board who
are Non-employee Directors.
(b) Powers of the Committee. Except as limited by the
express provisions of the Plan or by resolutions adopted by the
Board, the Committee shall have sole and complete authority and
discretion, subject to applicable OTS regulations (i) to select
Participants and grant Awards, (ii) to determine the form and
content of Awards to be issued in the form of Agreements under
the Plan, (iii) to interpret the Plan, (iv) to prescribe, amend
and rescind rules and regulations relating to the Plan, and (v)
to make other determinations necessary or advisable for the
administration of the Plan. The Committee shall have and may
exercise such other power and authority as may be delegated to it
by the Board from time to time. A majority of the entire
Committee shall constitute a quorum and the action of a majority
of the members present at any meeting at which a quorum is
present, or acts approved in writing by a majority of the
Committee without a meeting, shall be deemed the action of the
Committee.
(c) Agreement. Each Award shall be evidenced by a
written agreement containing such provisions as may be approved
by the Committee. Each such Agreement shall constitute a binding
contract between the Company and the Participant, and every
Participant, upon acceptance of such Agreement, shall be bound by
the terms and restrictions of the Plan and of such Agreement.
The terms of each such Agreement shall be in accordance with the
Plan, but each Agreement may include such additional provisions
and restrictions determined by the Committee, in its discretion,
provided that such additional provisions and restrictions are not
inconsistent with the terms of the Plan. In particular, the
Committee shall set forth in each Agreement (i) the Exercise
Price of an Option or SAR, (ii) the number of Shares subject to,
and the expiration date of, the Award, (iii) the manner, time and
rate (cumulative or otherwise) of exercise or vesting of such
Award, and (iv) the restrictions, if any, to be placed upon such
Award, or upon Shares which may be issued upon exercise of such
Award.
The Chairman of the Committee and such other Directors and
officers as shall be designated by the Committee are hereby
authorized to execute Agreements on behalf of the Company and to
cause them to be delivered to the recipients of Awards.
-3-<PAGE>
<PAGE>
(d) Effect of the Committee's Decisions. All deci-
sions, determinations and interpretations of the Committee shall
be final and conclusive on all persons affected thereby.
(e) Indemnification. In addition to such other rights
of indemnification as they may have, the members of the Committee
shall be indemnified by the Company in connection with any claim,
action, suit or proceeding relating to any action taken or
failure to act under or in connection with the Plan or any Award,
granted hereunder to the full extent provided for under the
Company's governing instruments with respect to the
indemnification of Directors.
6. GRANT OF OPTIONS.
(a) General Rule. Only Employees shall be eligible to
receive discretionary Awards. In selecting those Employees to
whom Awards will be granted and the number of shares covered by
such Awards, the Committee shall consider the position, duties
and responsibilities of the eligible Employees, the value of
their services to the Company and its Affiliates, and any other
factors the Committee may deem relevant. Notwithstanding the
foregoing, the Committee shall automatically make the Awards
specified in Sections 6(b) and 9 hereof, and (ii) no Employee
shall receive Options to purchase more than 25% of the Shares
reserved under Paragraph 4(a), and no non-Employee Director shall
receive Options to purchase more than 5% of the Shares reserved
under Paragraph 4(a), with all non-Employee Directors as a group
receiving Options to purchase no more than 30% of the Shares
reserved under Paragraph 4(a).
(b) Automatic Grants to Employees. On the Effective
Date, each of the following Employees shall receive an Option (in
the form of an ISO, to the extent permissible under the Code) to
purchase the number of Shares listed below, at an Exercise Price
per Share equal to the Market Value of a Share on the Effective
Date; provided that such grant shall not be made to an Employee
whose Continuous Service terminates on or before the Effective
Date:
Percentage of Shares
Participant Reserved under Paragraph 4(a)
----------- -----------------------------
Virginia Stump 25%
Tony Merida 25%
With respect to each of the above-named Participants,
the Option granted to the Participant hereunder (i) shall vest in
accordance with the general rule set forth in Paragraph 8(a) of
the Plan, (ii) shall have a term of ten years from the Effective
Date, and (iii) shall be subject to the general rule set forth in
Paragraph 8(c) with respect to the effect of a Participant's
termination of Continuous Service on the Participant's right to
exercise his Options.
(c) Special Rules for ISOs. The aggregate Market
Value, as of the date the Option is granted, of the Shares with
respect to which ISOs are exercisable for the first time by an
Employee during any calendar year (under all incentive stock
option plans, as defined in Section 422 of the Code, of the
Company or any present or future Affiliate of the Company) shall
not exceed $100,000. Notwithstanding the foregoing, the
Committee may grant Options in excess of the foregoing
limitations, in which case such Options granted in excess of such
limitation shall be Options which are Non-ISOs.
7. EXERCISE PRICE FOR OPTIONS.
(a) Limits on Committee Discretion. The Exercise Price
as to any particular Option shall not be less than 100% of the
Market Value of the Optioned Shares on the date of grant. In the
case of an Employee who owns Shares representing more than 10% of
the Company's outstanding Shares of Common Stock at the time an
ISO is granted, the Exercise Price shall not be less than 110% of
the Market Value of the Optioned Shares at the time the ISO is
granted.
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<PAGE>
(b) Standards for Determining Exercise Price. If the
Common Stock is listed on a national securities exchange
(including the NASDAQ National Market System) on the date in
question, then the Market Value per Share shall be the average of
the highest and lowest selling price on such exchange on such
date, or if there were no sales on such date, then the Exercise
Price shall be the mean between the bid and asked price on such
date. If the Common Stock is traded otherwise than on a national
securities exchange on the date in question, then the Market
Value per Share shall be the mean between the bid and asked price
on such date, or, if there is no bid and asked price on such
date, then on the next prior business day on which there was a
bid and asked price. If no such bid and asked price is
available, then the Market Value per Share shall be its fair
market value as determined by the Committee, in its sole and
absolute discretion.
8. EXERCISE OF OPTIONS.
(a) Generally. Each Option shall become exercisable
with respect to twenty percent (20%) of the Optioned Shares upon
the Participant's completion of each of five Years of Service,
provided that an Option shall become fully (100%) exercisable
immediately upon termination of the Participant's Continuous
Service due to the Participant's Disability or death. An Option
may not be exercised for a fractional Share.
(b) Procedure for Exercise. A Participant may exercise
Options, subject to provisions relative to its termination and
limitations on its exercise, only by (1) written notice of intent
to exercise the Option with respect to a specified number of
Shares, and (2) payment to the Company (contemporaneously with
delivery of such notice) in cash, in Common Stock, or a
combination of cash and Common Stock, of the amount of the
Exercise Price for the number of Shares with respect to which the
Option is then being exercised. Each such notice (and payment
where required) shall be delivered, or mailed by prepaid
registered or certified mail, addressed to the Treasurer of the
Company at the Company's executive offices. Common Stock
utilized in full or partial payment of the Exercise Price for
Options shall be valued at its Market Value at the date of
exercise, and may consist of Shares subject to the Option being
exercised. Upon a Participant's exercise of an Option, the
Company may, in the discretion of the Committee, pay to the
Participant a cash amount up to but not exceeding the amount of
dividends, if any, declared on the underlying Shares between the
date of grant and the date of exercise of the Option.
(c) Period of Exercisability. Except to the extent
otherwise provided in the terms of an Agreement, an Option may be
exercised by a Participant only while he is an Employee and has
maintained Continuous Service from the date of the grant of the
Option, or within three months after termination of such
Continuous Service (but not later than the date on which the
Option would otherwise expire), except if the Employee's
Continuous Service terminates by reason of --
(1) "Just Cause" which for purposes hereof shall
have the meaning set forth in any unexpired employment
or severance agreement between the Participant and the
Bank and/or the Company (and, in the absence of any such
agreement, shall mean termination because of the
Employee's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties,
willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or final
cease-and-desist order, then the Participant's rights to
exercise such Option shall expire on the date of such
termination;
(2) death, then to the extent that the
Participant would have been entitled to exercise the
Option immediately prior to his death, such Option of
the deceased Participant may be exercised within two
years from the date of his death (but not later than the
date on which the Option would otherwise expire) by the
personal representatives of his estate or person or
persons to whom his rights under such Option shall have
passed by will or by laws of descent and distribution;
-5-<PAGE>
<PAGE>
(3) Disability, then to the extent that the
Participant would have been entitled to exercise the
Option immediately prior to his or her Disability, such
Option may be exercised within one year from the date of
termination of employment due to Disability, but not
later than the date on which the Option would otherwise
expire.
(d) Effect of the Committee's Decisions. The
Committee's determination whether a Participant's Continuous
Service has ceased, and the effective date thereof, shall be
final and conclusive on all persons affected thereby.
(e) Six-Month Holding Period. Notwithstanding any
other provision of this Plan to the contrary, common stock of the
Company that is purchased upon exercise of an Option or SAR may
not be sold within the six-month period following the grant date
of that Option or SAR, except in the event of the Participant's
death or Disability.
9. Grants of Options to Non-employee Directors.
(a) Automatic Grants. Notwithstanding any other
provisions of this Plan, each Director who is not an Employee but
is a Director on the Effective Date shall receive, on said date,
Non-ISOs to purchase a number of Shares equal to the lesser of
five percent (5%) of the number of Shares reserved under
Paragraph 4(a) hereof, and the quotient obtained by dividing --
(i) 30 percent (30%) of the number of Shares
reserved under Paragraph 4(a) hereof, by
(ii) the number of Directors entitled to receive an
Option on the Effective Date, pursuant to this
Paragraph 9(a).
Such Non-ISOs shall have an Exercise Price per Share equal
to the Market Value of a Share on the date of grant. Each
Director who joins the Board after the Effective Date and who is
not then an Employee shall receive, on the date of joining the
Board, Non-ISOs to purchase 2% of the Shares reserved under
Paragraph 4(a) of the Plan (or such lesser number of Shares as
are available hereunder), at an Exercise Price per Share equal to
its Market Value on the date of grant. Notwithstanding the
foregoing, in no event shall an Option be granted pursuant to
this Paragraph 9(a) to the extent that it would result in all
non-Employee Directors as a group receiving more than 30% of the
Shares reserved pursuant to Paragraph 4(a).
(b) Terms of Exercise. Options received under the
provisions of this Paragraph may be exercised from time to time
by (a) written notice of intent to exercise the Option with
respect to all or a specified number of the Optioned Shares, and
(b) payment to the Company (contemporaneously with the delivery
of such notice), in cash, in Common Stock, or a combination of
cash and Common Stock, of the amount of the Exercise Price for
the number of the Optioned Shares with respect to which the
Option is then being exercised. Each such notice and payment
shall be delivered, or mailed by prepaid registered or certified
mail, addressed to the Treasurer of the Company at the Company's
executive offices. Upon a Director's exercise of an Option, the
Company may, in the discretion of the Committee (which may not be
utilized to pay out such dividends unless the Plan would maintain
conformity with Rule 16b-3), pay to the Director a cash amount up
to but not exceeding the amount of dividends, if any, declared on
the underlying Shares between the date of grant and the date of
exercise of the Option. A Director who exercises Options
pursuant to this Paragraph may satisfy all applicable federal,
state and local income and employment tax withholding
obligations, in whole or in part, by irrevocably electing to have
the Company withhold shares of Common Stock, or to deliver to the
Company shares of Common Stock that he already owns, having a
value equal to the amount required to be withheld; provided that
to the extent not inconsistent herewith, such election otherwise
complies with those requirements of Paragraphs 8 and 19 hereof.
Options granted under this Paragraph shall have a term of
ten years; provided that Options granted under this Paragraph
shall (i) become exercisable in accordance with paragraph 8(a) of
the Plan, and (ii) expire one year
-6-<PAGE>
<PAGE>
after the date on which a Director terminates Continuous Service
on the Board, but in no event later than the date on which such
Options would otherwise expire. In the event of such Director's
death during the term of his directorship, Options granted under
this Paragraph shall become immediately exercisable, and may be
exercised within two years from the date of his death by the
personal representatives of his estate or person or persons to
whom his rights under such Option shall have passed by will or by
laws of descent and distribution, but in no event later than the
date on which such Options would otherwise expire. In the event
of such Director's Disability during his or her directorship, the
Director's Option shall become immediately exercisable, and such
Option may be exercised within one year of the termination of
directorship due to Disability, but not later than the date that
the Option would otherwise expire. Unless otherwise inapplicable
or inconsistent with the provisions of this Paragraph, the
Options to be granted to Directors hereunder shall be subject to
all other provisions of this Plan.
(c) Effect of the Committee's Decisions. The
Committee's determination whether a Participant's Continuous
Service has ceased, and the effective date thereof, shall be
final and conclusive on all persons affected thereby.
10. SARS (STOCK APPRECIATION RIGHTS).
(a) Granting of SARs. In its sole discretion, the
Committee may from time to time grant SARs to Employees either in
conjunction with, or independently of, any Options granted under
the Plan. An SAR granted in conjunction with an Option may be an
alternative right wherein the exercise of the Option terminates
the SAR to the extent of the number of shares purchased upon
exercise of the Option and, correspondingly, the exercise of the
SAR terminates the Option to the extent of the number of Shares
with respect to which the SAR is exercised. Alternatively, an
SAR granted in conjunction with an Option may be an additional
right wherein both the SAR and the Option may be exercised. An
SAR may not be granted in conjunction with an ISO under
circumstances in which the exercise of the SAR affects the right
to exercise the ISO or vice versa, unless the SAR, by its terms,
meets all of the following requirements:
(1) The SAR will expire no later than the ISO;
(2) The SAR may be for no more than the difference
between the Exercise Price of the ISO and the
Market Value of the Shares subject to the ISO at
the time the SAR is exercised;
(3) The SAR is transferable only when the ISO is
transferable, and under the same conditions;
(4) The SAR may be exercised only when the ISO may
be exercised; and
(5) The SAR may be exercised only when the Market
Value of the Shares subject to the ISO exceeds
the Exercise Price of the ISO.
(b) Exercise Price. The Exercise Price as to any
particular SAR shall not be less than the Market Value of the
Optioned Shares on the date of grant.
(c) Timing of Exercise. Any election by a Participant
to exercise SARs shall be made during the period beginning on the
third business day following the release for publication of
quarterly or annual financial information and ending on the 12th
business day following such date. This condition shall be deemed
to be satisfied when the specified financial data is first made
publicly available. In no event, however, may an SAR be
exercised within the six-month period following the date of its
grant.
The provisions of Paragraph 8 regarding vesting and the
period of exercisability of Options are incorporated by reference
herein, and shall determine the vesting and the period of
exercisability of SARs.
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<PAGE>
(d) Exercise of SARs. An SAR granted hereunder shall be
exercisable at such times and under such conditions as shall be
permissible under the terms of the Plan and of the Agreement
granted to a Participant, provided that an SAR may not be
exercised for a fractional Share. Upon exercise of an SAR, the
Participant shall be entitled to receive, without payment to the
Company except for applicable withholding taxes, an amount equal
to the excess of (or, in the discretion of the Committee if
provided in the Agreement, a portion of) the excess of the then
aggregate Market Value of the number of Optioned Shares with
respect to which the Participant exercises the SAR, over the
aggregate Exercise Price of such number of Optioned Shares. This
amount shall be payable by the Company, in the discretion of the
Committee, in cash or in Shares valued at the then Market Value
thereof, or any combination thereof.
(e) Procedure for Exercising SARs. To the extent not
inconsistent herewith, the provisions of Paragraph 8(b) as to the
procedure for exercising Options are incorporated by reference,
and shall determine the procedure for exercising SARs.
11. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.
(a) Recapitalizations; Stock Splits, Etc. The number
and kind of shares reserved for issuance under the Plan, and the
number and kind of shares subject to outstanding Awards, and the
Exercise Price thereof, shall be proportionately adjusted for any
increase, decrease, change or exchange of Shares for a different
number or kind of shares or other securities of the Company which
results from a merger, consolidation, recapitalization,
reorganization, reclassification, stock dividend, split-up,
combination of shares, or similar event in which the number or
kind of shares is changed without the receipt or payment of
consideration by the Company.
(b) Transactions in which the Company is Not the Surviving
Entity. In the event of (i) the liquidation or dissolution of
the Company, (ii) a merger or consolidation in which the Company
is not the surviving entity, or (iii) the sale or disposition of
all or substantially all of the Company's assets (any of the
foregoing to be referred to herein as a "Transaction"), all
outstanding Awards, together with the Exercise Prices thereof,
shall be equitably adjusted for any change or exchange of Shares
for a different number or kind of shares or other securities
which results from the Transaction.
(c) Special Rule for ISOs. Any adjustment made pursuant
to subparagraphs (a) or (b) hereof shall be made in such a manner
as not to constitute a modification, within the meaning of
Section 424(h) of the Code, of outstanding ISOs.
(d) Conditions and Restrictions on New, Additional, or
Different Shares or Securities. If, by reason of any adjustment
made pursuant to this Paragraph, a Participant becomes entitled
to new, additional, or different shares of stock or securities,
such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and
restrictions which were applicable to the Shares pursuant to the
Award before the adjustment was made.
(e) Other Issuances. Except as expressly provided in
this Paragraph, the issuance by the Company or an Affiliate of
shares of stock of any class, or of securities convertible into
Shares or stock of another class, for cash or property or for
labor or services either upon direct sale or upon the exercise of
rights or warrants to subscribe therefor, shall not affect, and
no adjustment shall be made with respect to, the number, class,
or Exercise Price of Shares then subject to Awards or reserved
for issuance under the Plan.
(f) Certain Special Dividends. The Exercise Price of
shares subject to outstanding Awards shall be proportionately
adjusted upon the payment of a special large and nonrecurring
dividend that has the effect of a return of capital to the
stockholders, except that this subparagraph (f) shall not apply
to any dividend which is paid to the Participant pursuant to
Paragraph 8(b) or 9(b) hereof.
-8-<PAGE>
<PAGE>
12. NON-TRANSFERABILITY OF AWARDS.
Awards may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by
the laws of descent and distribution. Notwithstanding the
foregoing, or any other provision of this Plan, a Participant who
holds Awards may transfer such Awards (but not ISOs) to his or
her spouse, lineal ascendants, lineal descendants, or to a duly
established trust for the benefit of one or more of these
individuals. Awards so transferred may thereafter be transferred
only to the Participant who originally received the grant or to
an individual or trust to whom the Participant could have
initially transferred the Awards pursuant to this Paragraph 12.
Awards which are transferred pursuant to this Paragraph 12 shall
be exercisable by the transferee according to the same terms and
conditions as applied to the Participant.
13. TIME OF GRANTING AWARDS.
The date of grant of an Award shall, for all purposes, be
the later of the date on which the Committee makes the determina-
tion of granting such Award, and the Effective Date. Notice of
the determination shall be given to each Participant to whom an
Award is so granted within a reasonable time after the date of
such grant.
14. EFFECTIVE DATE.
The Plan shall become effective immediately upon its
approval by a favorable vote of stockholders owning at least a
majority of the total votes eligible to be cast at a duly called
meeting of the Company's stockholders held in accordance with
applicable laws, provided that the Plan shall not be submitted
for such approval within the six-month period after the Bank
completes its mutual-to-stock conversion. No Awards may be made
prior to approval of the Plan by the stockholders of the Company.
15. MODIFICATION OF AWARDS.
At any time, and from time to time, subject to OTS
regulations, the Board may authorize the Committee to direct
execution of an instrument providing for the modification of any
outstanding Award, provided no such modification shall confer on
the holder of said Award any right or benefit which could not be
conferred on him by the grant of a new Award at such time, or
impair the Award without the consent of the holder of the Award.
16. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend the terms of the Plan
and, with respect to any Shares at the time not subject to
Awards, suspend or terminate the Plan.
No amendment, suspension or termination of the Plan shall,
without the consent of any affected holders of an Award, alter or
impair any rights or obligations under any Award theretofore
granted.
17. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Compliance with Securities Laws. Shares of Common
Stock shall not be issued with respect to any Award unless the
issuance and delivery of such Shares shall comply with all
relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law, and
the requirements of any stock exchange upon which the Shares may
then be listed.
(b) Special Circumstances. The inability of the Company
to obtain approval from any regulatory body or authority deemed
by the Company's counsel to be necessary to the lawful issuance
and sale of any Shares hereunder shall relieve the Company of any
liability in respect of the non-issuance or sale of such Shares.
As a condition to the exercise of an Option or SAR, the Company
may require the person exercising the Option or SAR to make such
representations and warranties as may be necessary to assure the
availability of an exemption from the registration requirements
of federal or state securities law.
-9-<PAGE>
<PAGE>
(c) Committee Discretion. Subject to OTS regulations,
the Committee shall have the discretionary authority to impose in
Agreements such restrictions on Shares as it may deem appropriate
or desirable, including but not limited to the authority to
impose a right of first refusal or to establish repurchase rights
or both of these restrictions.
18. RESERVATION OF SHARES.
The Company, during the term of the Plan, will reserve and
keep available a number of Shares sufficient to satisfy the
requirements of the Plan.
19. WITHHOLDING TAX.
The Company's obligation to deliver Shares upon exercise of
Options and/or SARs shall be subject to the Participant's
satisfaction of all applicable federal, state and local income
and employment tax withholding obligations. The Committee, in
its discretion, may permit the Participant to satisfy the
obligation, in whole or in part, by irrevocably electing to have
the Company withhold Shares, or to deliver to the Company Shares
that he already owns, having a value equal to the amount required
to be withheld. The value of the Shares to be withheld, or
delivered to the Company, shall be based on the Market Value of
the Shares on the date the amount of tax to be withheld is to be
determined. As an alternative, the Company may retain, or sell
without notice, a number of such Shares sufficient to cover the
amount required to be withheld.
20. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall an Employee's or Director's eligibility to
participate or participation in the Plan create or be deemed to
create any legal or equitable right of the Employee, Director, or
any other party to continue service with the Company, the Bank,
or any Affiliate of such corporations. Except to the extent
provided in Paragraphs 6(b) and 9(a), no Employee or Director
shall have a right to be granted an Award or, having received an
Award, the right to again be granted an Award. However, an
Employee or Director who has been granted an Award may, if
otherwise eligible, be granted an additional Award or Awards.
21. GOVERNING LAW.
The Plan shall be governed by and construed in accordance
with the laws of the Commonwealth of Kentucky, except to the
extent that federal law shall be deemed to apply.
-10-
<PAGE>
<PAGE>
TRUST AGREEMENT
UNDER THE FIRST LANCASTER BANCSHARES, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
This Agreement made this _____ day of _________, 1996, by
and between First Lancaster Bancshares, Inc. (the "Company") and
_______________ (the "Trustee").
WHEREAS, the Company maintains the First Lancaster
Bancshares, Inc. 1996 Stock Option and Incentive Plan (the
"Plan"); and
WHEREAS, the Company has incurred or expects to incur
liability under the terms of the Plan with respect to the
individuals participating in the Plan ("Participants"); and
WHEREAS, the Company wishes to establish a trust (the
"Trust") and to contribute to the Trust assets that shall be held
therein, subject to the claims of the Company's general creditors
in the event of Insolvency, as defined in Section 3(a) hereof,
until paid to Participants and their beneficiaries in such manner
and at such times as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust
shall constitute an unfunded arrangement and shall not affect the
status of the Plan as an unfunded plan maintained for the purpose
of providing compensation for a select group of management or
other employees for purposes of Title I of the Employee
Retirement Income Security Act of 1974;
WHEREAS, it is the intention of the Company to make
contributions to the Trust to provide itself with a source of
funds to assist it in the meeting of its liabilities under the
Plan;
NOW, THEREFORE, the parties do hereby establish this Trust
and agree that the Trust shall be comprised, held and disposed of
as follows:
Section 1. Establishment of Trust
----------------------------------
(a) The Company hereby deposits, or will from time to time
deposit, with the Trustee in trust an amount expected to be
sufficient to permit the Trust to purchase up to 10% of the
number of shares of the Company's common stock ("Common Stock")
issued in the conversion of First Lancaster Federal Savings Bank
(the "Bank") from mutual to stock form (the "Conversion"). Said
amount shall become the initial principal of the Trust to be
held, administered and disposed of by the Trustee as provided in
this Trust Agreement.
(b) The Trust shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of
which the Company is the grantor, within the meaning of subpart
E, part I, subchapter J, chapter 1, subtitle A of the Internal
Revenue Code of 1986, as amended (the "Code"), and shall be
construed accordingly.
<PAGE>
<PAGE>
(d) The principal of the Trust, and any earnings
thereon, shall be held separate and apart from other funds of the
Company and shall be used exclusively for the uses and purposes
of Participants and general creditors as herein set forth.
Participants and their beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets of
the Trust. Any rights created under the Plan and this Trust
Agreement shall be mere unsecured contractual rights of
Participants and their beneficiaries against the Company. Any
assets held by the Trust will be subject to the claims of the
Company's general creditors under federal and state law in the
event of Insolvency, as defined in Section 3(a) herein.
(e) The Company, in its sole discretion, may at any
time, or from time to time, make additional deposits of cash or
other property in trust with the Trustee to augment the principal
to be held, administered and disposed of by Trustee as provided
in this Trust Agreement. Neither the Trustee nor any Participant
or beneficiary shall have any right to compel such additional
deposits.
Section 2. Payments to Plan Participants and Their
--------------------------------------------------
Beneficiaries.
- -------------
(a) The Company shall deliver to the Trustee a schedule
(the "Payment Schedule") that indicates the amounts payable in
respect of each Participant (and his or her beneficiaries), that
provides a formula or other instructions acceptable to the
Trustee for determining the amounts so payable, the form in which
such amount is to be paid (as provided for or available under the
Plan, and including transfers of Common Stock from the Trust to
Participants), and the time of commencement for payment of such
amounts. Except as otherwise provided herein, the Trustee shall
make payments to Participants and their beneficiaries in
accordance with such Payment Schedule. The Trustee shall make
provision for the reporting and withholding of any federal, state
or local taxes that may be required to be withheld with respect
to the payment of benefits pursuant to the terms of the Plan and
shall pay amounts withheld to the appropriate taxing authorities
or determine that such amounts have been reported, withheld and
paid by the Company.
(b) The entitlement of a Participant or his or her
beneficiaries to benefits under the Plan shall be determined by
the Company or such party as it shall designate under the Plan,
and any claim for such benefits shall be considered and reviewed
under the procedures set out in the Plan.
(c) The Company may make payment of benefits directly to
Participants or their beneficiaries as they become due under the
terms of the Plan. The Company shall notify the Trustee of its
decision to make payment of benefits directly prior to the time
amounts are payable to Participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in
accordance with the terms of the Plan, the Company shall make the
balance of each such payment as it falls due. The Trustee shall
notify the Company where principal and earnings are not
sufficient.
2<PAGE>
<PAGE>
Section 3. Trustee Responsibility Regarding Payments to
--------------------------------------------------------
Trust Beneficiary When Company Is Insolvent.
- -------------------------------------------
(a) The Trustee shall cease payment of benefits to
Participants and their beneficiaries if the Company is Insolvent.
The Company shall be considered "Insolvent" for purposes of this
Trust Agreement if (i) the Company is unable to pay its debts as
they become due, or (ii) the Company becomes subject to a pending
proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust,
as provided in Section 1(d) hereof, the principal and income of
the Trust shall be subject to claims of general creditors of the
Company under federal and state law as set forth below.
(c) The Board of Directors and the Chief Executive
Officer of the Company shall have the duty to inform the Trustee
in writing of the Company's Insolvency. If a person claiming to
be a creditor of the Company alleges in writing to the Trustee
that the Company has become Insolvent, the Trustee shall
determine whether the Company is Insolvent and, pending such
determination, the Trustee shall discontinue payment of benefits
to Participants or their beneficiaries.
(1) Unless the Trustee has actual knowledge of the
Company's Insolvency, or has received notice from the Company or
a person claiming to be a creditor alleging that the Company is
Insolvent, the Trustee shall have no duty to inquire whether the
Company is Insolvent. The Trustee may in all events rely on such
evidence concerning the Company's solvency as may be furnished to
the Trustee and that provides the Trustee with a reasonable basis
for making a determination concerning the Company's solvency.
(2) If at any time the Trustee has determined that
the Company is Insolvent, the Trustee shall discontinue payments
to Plan participants or their beneficiaries, shall liquidate the
Trust's investment in Common Stock, and shall hold the assets of
the Trust for the benefit of the Company's general creditors.
Nothing in this Trust Agreement shall in any way diminish any
rights of Participants or their beneficiaries as general
creditors of the Company with respect to benefits due under the
Plan or otherwise.
(3) The Trustee shall resume the payment of
benefits to Participants or their beneficiaries in accordance
with Section 2 of this Trust Agreement only after the Trustee has
determined that the Company is not Insolvent (or is no longer
Insolvent).
(d) Provided that there are sufficient assets, if the
Trustee discontinues the payment of benefits from the Trust
pursuant to Section 3(b) hereof and subsequently resumes such
payments, the first payment following such discontinuance shall
include the aggregate amount of all payments due to Participants
or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments
made to Participants or their beneficiaries by the Company in
lieu of the payments provided for hereunder during any such
period of discontinuance.
3<PAGE>
<PAGE>
Section 4. Payments to the Company.
-----------------------------------
Except as provided in Section 3 hereof, the Company shall
have no right or power to direct the Trustee to return to the
Company or to divert to others any of the Trust assets before all
payments of benefits have been made to Plan Participants and
their beneficiaries pursuant to the terms of the Plan.
Section 5. Investment Authority.
--------------------------------
(a) The Trustee shall have sole discretion as to the
investment of Trust assets, except that to the extent reasonably
practicable, the Trustee shall invest all assets of the Trust in
Common Stock; provided that the Trust shall not purchase, in the
aggregate, more than 10% of the number of shares of Common Stock
issued in the Conversion.
(b) All rights associated with assets of the Trust shall be
exercised by the Trustee or the person designated by the Trustee,
and shall in no event be exercisable by or rest with
Participants, except that voting rights with respect to Common
Stock will be exercised in accordance with the terms and
conditions for the exercise of voting rights of unallocated
shares under the Company's Employee Stock Ownership Plan, as in
effect on the date hereof.
(c) Subject to applicable federal and state securities
laws, if for any reason the Trustee will be selling shares of
Common Stock (other than pursuant to the exercise of a stock
option granted under the Plan), the Trustee shall sell such
shares by (i) giving each Participant 20 business days within
which to purchase, at fair market value, all or part of any
shares of Common Stock that the Trustee holds for the benefit of
the Participant, and (ii) to the extent purchases by Participants
are insufficient to eliminate the Trust's excess holdings of
Common Stock, to offer to sell, and to sell, all or any part of
the excess shares held by the Trust to the following purchasers,
listed here by order of priority: first, the Company; second, any
benefit plan maintained by the Company or the Bank; third,
directors of the Bank; forth, officers of the Bank; fifth,
members of the general public (through sales on the open market).
Section 6. - Disposition of Income.
-----------------------------------
During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and
reinvested.
Section 7. Accounting by Trustee.
---------------------------------
The Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions
required to be made, including such specific records as shall be
agreed upon in writing between the Company and the Trustee.
Within 60 days following the close of each calendar year and
within 20 days after the removal or resignation of the Trustee,
the Trustee shall deliver to the Company a written account of its
administration of the Trust during such year or during the period
from the close of the last preceding year to the date of such
removal or resignation, setting forth all investments, receipts,
disbursements and other
4<PAGE>
<PAGE>
transactions effected by it, including a description of all
securities and investments purchased and sold with the cost or
net proceeds of such purchased and sold with the cost or net
proceeds of such purchases or sales (accrued interest paid or
receivable being shown separately), and showing all cash,
securities and other property held in the Trust at the end of
such year or as of the date of such removal or resignation, as
the case may be.
Section 8. Responsibility of Trustee.
-------------------------------------
(a) The Trustee shall act with the care, skill, prudence
and diligence under the circumstances then prevailing that a
prudent person acting in like capacity and familiar with such
matters would use in the conduct of an enterprise of a like
character and with like aims, provided, however, that Trustee
shall incur no liability to any person for any action taken
pursuant to a direction, request or approval given by the Company
which is contemplated by, and in conformity, the terms of the
Plan or this Trust and is given in writing by the Company. In
the event of a dispute between the Company and a party, the
Trustee may apply to a court of competent jurisdiction to resolve
the dispute.
(b) If the Trustee undertakes or defends any litigation
arising in connection with this Trust, the Company agrees to
indemnify the Trustee against Trustee's costs, expenses and
liabilities (including, without limitation, attorneys' fees and
expenses) relating thereto and to be primarily liable for such
payments, except in those cases where the Trustee shall have been
found by a court of competent jurisdiction to have acted with
gross negligence or willful misconduct. If the Company does not
pay such costs, expenses and liabilities in a reasonably timely
manner, the Trustee may obtain payment from the Trust.
(c) The Trustee may consult with legal counsel with
respect to any of its duties or obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other professionals
to assist it in performing any of its duties or obligations
hereunder.
(e) The Trustee shall have, without exclusion, all
powers conferred on trustees by applicable law, unless expressly
provided otherwise herein, provided, however, that if an
insurance policy is held as an asset of the Trust, the Trustee
shall have no power to name a beneficiary of the policy other
than the Trust, to assign the policy (as distinct from conversion
of the policy to a different form) other than to a successor the
Trustee, or to loan to any person the proceeds of any borrowing
against such policy.
(f) Notwithstanding any powers granted to the Trustee
pursuant to this Trust Agreement or to applicable law, the
Trustee shall not have any power that could give this Trust the
objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the
Procedure and Administrative Regulations promulgated pursuant to
the Code.
5<PAGE>
<PAGE>
Section 9. Compensation and Expenses of Trustee.
------------------------------------------------
The Company shall pay all administrative expenses and the
Trustee's fees and expenses relating to the Plan and this Trust.
If not so paid, the fees and expenses shall be paid from the
Trust.
Section 10. Resignation and Removal of Trustee.
-----------------------------------------------
The Trustee may resign at any time by written notice to the
Company, which resignation shall be effective 30 days after the
Company receives such notice (unless the Company and the Trustee
agree otherwise). The Trustee may be removed by the Company on
30 days notice or upon shorter notice accepted by the Trustee.
If the Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the effective
date or resignation or removal under this section. If no such
appointment has been made, the Trustee may apply to a court of
competent jurisdiction for appointment of a successor or for
instructions. All expenses of the Trustee in connection with the
proceeding shall be allowed as administrative expenses of the
Trust. Upon resignation or removal of the Trustee and
appointment of a successor trustee, all assets shall subsequently
be transferred to the successor trustee. The transfer shall be
completed within 60 days after receipt of notice of resignation,
removal or transfer, unless the Company extends the time limit.
Section 11. Appointment of Successor.
-------------------------------------
If the Trustee resigns or is removed in accordance with
Section 10 hereof, the Company may appoint any other party as a
successor to replace the Trustee upon resignation or removal.
The appointment shall be effective when accepted in writing by
the new trustee, who shall have all of the rights and powers of
the former trustee, including ownership rights in the Trust
assets. The former trustee shall execute any instrument
necessary or reasonably requested by the Company or the successor
trustee to evidence the transfer.
A successor trustee need not examine the records and acts of
any prior trustee and may retain or dispose of existing Trust
assets, subject to Sections 7 and 8 hereof. The successor
trustee shall not be responsible for, and the Company shall
indemnify and defend the successor trustee from, any claim or
liability resulting from any action or inaction of any prior
trustee or from any other past event, or any condition existing
at the time it becomes successor trustee.
Section 12. Amendment or Termination.
-------------------------------------
(a) This Trust Agreement may be amended by a written
instrument executed by the Trustee and the Company, provided that
no such amendment shall make the Trust revocable.
(b) The Trust shall not terminate until the date on
which no Participant or his or her beneficiaries is entitled to
benefits pursuant to the terms hereof. Upon termination of the
Trust, the Trustee shall return any assets remaining in the Trust
to the Company.
6<PAGE>
<PAGE>
(c) Upon written approval of all Participants (or their
beneficiaries if they are then entitled to payment of benefits),
the Company may terminate this Trust prior to the time all
benefit payments under the Plan have been made. All assets in
the Trust at termination shall be returned to the Company.
Section 13. Miscellaneous.
--------------------------
(a) Any provision of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
(b) Benefits payable to Participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process, except pursuant to
the terms of the Plan.
(c) This Trust Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Kentucky, to
the extent not preempted by federal law.
(d) The Trustee agrees to be bound by the terms of the
Plan, as in effect from time to time.
(e) The Trustee shall act by vote or written consent of a
majority of its then duly-appointed members.
Section 14. Effective Date.
---------------------------
The effective date of this Trust shall be the date of
execution designated below.
7<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Company, by its duly authorized
officer, has caused this Agreement to be executed, and its
corporate seal affixed, and the undersigned Trustees have
executed this Agreement, this 15 day of February, 1996.
ATTEST: FIRST LANCASTER BANCSHARES, INC.
/s/ Kathy G. Johnica By /s/ Virginia R. Stump
- -------------------- ---------------------------
Its President
ATTEST:
/s/ Kathy G. Johnica David W. Gay
- -------------------- -------------------------
Trustee
8
<PAGE>
STOCK OPTION AGREEMENT
FOR INCENTIVE STOCK OPTIONS UNDER SECTION 422
OF THE INTERNAL REVENUE CODE
PURSUANT TO THE
FIRST LANCASTER BANCSHARES, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
STOCK OPTION for a total of _________ shares of Common
Stock, par value $0.01 per share, of First Lancaster Bancshares,
Inc. (the "Company"), which Option is intended to qualify as an
incentive stock option under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), is hereby granted to
____________________ (the "Optionee") at the price set forth
herein, and in all respects subject to the terms, definitions and
provisions of the First Lancaster Bancshares, Inc. 1996 Stock
Option and Incentive Plan (the "Plan") which was adopted by the
Company and which is incorporated by reference herein, receipt of
which is hereby acknowledged.
1. Option Price. The option price is $________ for
each share, being 100% * of the fair market value, as determined
by the Committee, of the Common Stock on the date of grant of
this Option.
2. Exercises of Option. This Option shall be exercisable
in accordance with provisions of the Plan as follows:
(i) Schedule of rights to exercise.
------------------------------
Years of Continuous Percentage of Total Shares
Employment After Subject to Option Which May
Date of Grant of Option Be Exercised
- ----------------------- ---------------------------
Upon Grant 0%
1 year but less than 2 years 20%
2 years but less than 3 years 40%
3 years but less than 4 years 60%
4 years but less than 5 years 80%
5 years or More 100%
_____________
* 110% in the case of an Optionee who owns shares representing
more than 10% of the outstanding common stock of the Company on
the date of grant of this Option.
<PAGE>
<PAGE>
(ii) Method of Exercise. This Option shall be
exercisable by a written notice by the Optionee which shall:
(a) state the election to exercise the Option, the
number of shares with respect to which it is being
exercised, the person in whose name the stock certificate or
certificates for such shares of Common Stock is to be
registered, his address and Social Security Number (or if
more than one, the names, addresses and Social Security
Numbers of such persons);
(b) contain such representations and agreements as to
the holder's investment intent with respect to such shares
of Common Stock as may be satisfactory to the Company's
counsel;
(c) be signed by the person or persons entitled to
exercise the Option and, if the Option is being exercised by
any person or persons other than the Optionee, be
accompanied by proof, satisfactory to counsel for the
Company, of the right of such person or persons to exercise
the Option; and
(d) be in writing and delivered in person or by
certified mail to the Treasurer of the Company.
Payment of the purchase price of any shares with respect to
which the Option is being exercised shall be by cash, Common
Stock, or such combination of cash and Common Stock as the
Optionee elects. The certificate or certificates for shares of
Common Stock as to which the Option shall be exercised shall be
registered in the name of the person or persons exercising the
Option.
(iii) Restrictions on exercise. This Option may not be
exercised if the issuance of the shares upon such exercise would
constitute a violation of any applicable federal or state
securities or other law or valid regulation. As a condition to
the Optionee's exercise of this Option, the Company may require
the person exercising this Option to make any representation and
warranty to the Company as may be required by any applicable law
or regulation.
3. Withholding. The Optionee hereby agrees that the
exercise of the Option or any installment thereof will not be
effective, and no shares will become transferable to the
Optionee, until the Optionee makes appropriate arrangements with
the Company for such tax withholding as may be required of the
Company under federal, state, or local law on account of such
exercise.
<PAGE>
<PAGE>
4. Non-transferability of Option. This Option may not
be transferred in any manner otherwise than by will or the laws
of descent or distribution, or pursuant to a "qualified domestic
relations order" (within the meaning of Section 414(p) of the
Code and the regulations and rulings thereunder). The terms of
this Option shall be binding upon the executors, administrators,
heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may not be exercisable
for more than ten ** years from the date of grant of this Option,
as stated below, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
FIRST LANCASTER BANCSHARES, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
COMMITTEE
By _____________________________
_________________
Date of Grant Attest: ________________________ (Seal)
____________
** Five years in the case of an Optionee who owns shares
representing more than 10% of the outstanding common stock of the
Company on the date of grant of this Option.
<PAGE>
<PAGE>
INCENTIVE STOCK OPTION EXERCISE FORM
PURSUANT TO THE
FIRST LANCASTER BANCSHARES, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
_________________
Date
Treasurer
First Lancaster Bancshares, Inc.
208 Lexington Street
Lancaster, Kentucky 40444
Re: First Lancaster Bancshares, Inc. 1996 Stock Option
and Incentive Plan
---------------------------------------------------
Dear Sir:
The undersigned elects to exercise the Incentive Stock
Option to purchase ___________ shares, par value $0.01, of Common
Stock of First Lancaster Bancshares, Inc. under and pursuant to
a Stock Option Agreement dated _____________, 199__.
Delivered herewith is a certified or bank cashier's or
teller's check and/or shares of Common Stock, valued at the fair
market value of the stock on the date of exercise, as set forth
below.
$_______ of cash or check
_______ ____ shares of Common Stock, valued
at $____ per share
$ Total
========
The name or names to be on the stock certificate or
certificates and the address and Social Security Number of such
person(s) is as follows:
Name _________________________________________________________
Address ______________________________________________________
Social Security Number _______________________________________
Very truly yours,
____________________________
<PAGE>
STOCK OPTION AGREEMENT
FOR NON-INCENTIVE STOCK OPTIONS PURSUANT TO THE
FIRST LANCASTER BANCSHARES, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
STOCK OPTION for a total of ____________ shares of Common
Stock, par value $0.01 per share, of First Lancaster Bancshares,
Inc. (the "Company") is hereby granted to _____________ (the
"Optionee") at the price set forth herein, and in all respects
subject to the terms, definitions and provisions of the First
Lancaster Bancshares, Inc. 1996 Stock Option and Incentive Plan
(the "Plan") which has been adopted by the Company and which is
incorporated by reference herein, receipt of which is hereby
acknowledged. Such Stock Options do not comply with Options
granted under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
1. Option Price. The option price is $____________ for
each share, being 100% of the fair market value, as determined by
the Committee, of the Common Stock on the date of grant of this
Option.
2. Exercise of Option. This Option shall be exercisable in
accordance with provisions of the Plan as follows:
(i) Schedule of rights to exercise.
-------------------------------
Years of Continuous Percentage of Total Shares
Employment After Subject to Option Which May
Date of Grant of Option Be Exercised
- ----------------------- ---------------------------
Upon Grant 0%
1 year but less than 2 years 20%
2 years but less than 3 years 40%
3 years but less than 4 years 60%
4 years but less than 5 years 80%
5 years or More 100%
(ii) Method of Exercise. This Option shall be exercisable
by a written notice which shall:
(a) state the election to exercise the Option, the number
of shares with respect to which it is being exercised, the
person in whose name the stock certificate or certificates
for<PAGE>
<PAGE>
such shares of Common Stock is to be registered, his
address and Social Security Number (or if more than one,
the names, addresses and Social Security Numbers of such
persons);
(b) contain such representations and agreements as to the
holders' investment intent with respect to such shares of
Common Stock as may be satisfactory to the Company's
counsel;
(c) be signed by the person or persons entitled to
exercise the Option and, if the Option is being exercised
by any person or persons other than the Optionee, be
accompanied by proof, satisfactory to counsel for the
Company, of the right of such person or persons to exercise
the Option; and
(d) be in writing and delivered in person or by certified
mail to the Treasurer of the Company.
Payment of the purchase price of any shares with respect to
which the Option is being exercised shall be by cash, Common
Stock, or such combination of cash and Common Stock as the
Optionee elects. The certificate or certificates for shares of
Common Stock as to which the Option shall be exercised shall be
registered in the name of the person or persons exercising the
Option.
(iii) Restrictions on exercise. The Option may not be
exercised if the issuance of the shares upon such exercise would
constitute a violation of any applicable federal or state
securities or other law or valid regulation. As a condition to
his exercise of this Option, the Company may require the person
exercising this Option to make any representation and warranty to
the Company as may be required by any applicable law or
regulation.
3. Withholding. The Optionee hereby agrees that the
exercise of the Option or any installment thereof will not be
effective, and no shares will become transferable to the
Optionee, until the Optionee makes appropriate arrangements with
the Company for such tax withholding as may be required of the
Company under federal, state, or local law on account of such
exercise.
4. Non-transferability of Option. This Option may not
be transferred in any manner otherwise than by will or the laws
of descent or distribution, or pursuant to a "qualified domestic
relations order" (within the meaning of Section 414(p) of the
Code and the regulations and rulings thereunder). The terms of
this Option shall be binding upon the executors, administrators,
heirs, successors and assigns of the Optionee. Notwithstanding
any other terms of this agreement, to the extent permissible
under Rule 16b-3 of the Securities Exchange Act of 1934, as
amended, this Option may be transferred to the Optionee's spouse,
lineal ascendants, lineal descendants, or to a duly established
trust, provided that such transferee shall be permitted to
exercise this Option subject to the same terms and conditions
applicable to the Optionee.
<PAGE>
<PAGE>
5. Term of Option. This Option may not be exercisable for
more than ten years from the date of grant of this Option, as set
forth below, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
FIRST LANCASTER BANCSHARES, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
COMMITTEE
By _____________________________
_________________
Date of Grant Attest: ________________________ (Seal)
<PAGE>
<PAGE>
NON-INCENTIVE STOCK OPTION EXERCISE FORM
PURSUANT TO THE
FIRST LANCASTER BANCSHARES, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
________________
Date
Treasurer
First Lancaster Bancshares, Inc.
208 Lexington Street
Lancaster, Kentucky 40444
Re: First Lancaster Bancshares, Inc.
-------------------------------------------
1996 Stock Option and Incentive Plan
Dear Sir:
The undersigned elects to exercise his Non-Incentive Stock
Option to purchase ___________ shares, par value $0.01, of Common
Stock of First Lancaster Bancshares, Inc. under and pursuant to
a Stock Option Agreement dated ________________, 199__.
Delivered herewith is a certified or bank cashier's or
tellers check and/or shares of Common Stock, valued at the fair
market value of the stock on the date of exercise, as set forth
below.
$________ of cash or check
________ ____ shares of Common Stock, valued at
$____ per share
$ Total
========
The name or names to be on the stock certificate or
certificates and the address and Social Security Number of such
person is as follows:
Name _________________________________________________________
Address ______________________________________________________
Social Security Number _______________________________________
Very truly yours,
____________________________
<PAGE>
FIRST LANCASTER BANCSHARES, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
Stock Appreciation Rights Agreement
Not In Tandem with Stock Option
On the date of grant specified below, the Stock Option
Committee of First Lancaster Bancshares, Inc. (the "Company")
hereby grants to ________________ (the "Optionee") a total of
_______ Stock Appreciation Rights (SARs), subject to the terms
and conditions set forth in the First Lancaster Bancshares, Inc.
1996 Stock Option and Incentive Plan (the "Plan") (a copy of
which is available to the Optionee upon request). The terms and
conditions of the Plan are incorporated herein by reference.
(a) The exercise price is $____ for each share, such
price being 100% of the fair market value, as determined by the
Committee, of the Common Stock on the date of grant of this
option.
(b) The SAR shall be exercisable to the extent permitted
in the Plan.
(c) The SAR shall be accepted for surrender by the
Optionee in consideration for the payment by the Company of an
amount equal to the excess of the fair market value on the date
of exercise of the Shares of Common Stock subject to such SAR
over the exercise price specified in Paragraph (a) hereof.
(d) Payment hereunder shall be made in shares of Common
Stock or in cash as provided in the Plan.
(e) The SAR is nontransferable, except in accordance
with Section 12 of the Plan.
(f) The SAR may be exercised only in accordance with
Sections 8 and 10 of the Plan, and only when there is a positive
spread, i.e., when the market price of the Common Stock subject
to the SAR exceeds the exercise price of the SAR.
(g) In the event of any inconsistency or conflict
between this Agreement and the Plan, the Plan shall be
controlling and supercede any conflicting or inconsistent
provision of the Agreement.
FIRST LANCASTER BANCSHARES, INC.
1996 STOCK OPTION AND INCENTIVE
COMMITTEE
By: _____________________________
Date of Grant: ATTEST:
________________ __________________________________
<PAGE>
FIRST LANCASTER FEDERAL SAVINGS BANK
MANAGEMENT RECOGNITION PLAN COMMITTEE
NOTICE OF AWARD
---------------
WHEREAS, the Board of Directors of First Lancaster
Bancshares, Inc. (the "Company") has previously adopted the First
Lancaster Federal Savings Bank Management Recognition Plan (the
"Plan"); and
WHEREAS, the Board of Directors of the Company has
previously appointed Directors Gay, Sutton, and Zanone as members
of the Management Recognition Plan Committee (the "Committee")
pursuant to the terms of the Plan; and
WHEREAS, the Plan became effective on January __, 1997, upon
its receipt of stockholder approval, and Sections 6.04 and 6.05
of the Plan provide for automatic awards on the Plan effective
date, including the award referenced below.
PLEASE TAKE NOTICE, that the following individual be granted
an award under the Plan ("Plan Share Award"), effective
__________________________:
Number of Shares Subject to
Recipient Plan Share Award
_________________ _______________
AND BE IT FURTHER RESOLVED, that the Plan Share Award
specified herein shall be subject to the restrictions and other
provisions of Section 7.01 of the Plan.
Date of Notice:
_____________, 199__
FIRST LANCASTER FEDERAL SAVINGS BANK
MANAGEMENT RECOGNITION PLAN
COMMITTEE
By: _________________________
Its Chairman
<PAGE>
M E M O R A N D U M
TO: Participants in the First Lancaster Federal Savings Bank
(the "Bank")
Management Recognition Plan
DATE: January ___, 1997
FROM: First Lancaster Federal Savings Bank
RE: Taxation of MRP Awards
=================================================================
* * * * * * * * * * * * * * * * *
THIS DOCUMENT CONSTITUTES PART OF
A PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933
* * * * * * * * * * * * * * * * *
This memorandum concerns the taxation of the awards that
will automatically occur under the Company's Management
Recognition Plan (the "MRP") upon its receipt of stockholder
approval. To facilitate your review, the discussion below is
divided as follows:
Part I: General Tax Principles and Application to the MRP
Part II: Accelerated Taxation under Section 83(b)
Please understand that this memorandum is merely designed to
summarize the tax rules generally applicable to MRP awards. We
could provide individual tax advice to the recipients of MRP
awards ("Participants"), should anyone desire assistance.
The deadline for making a Section 83(b) election is 30 days
after the award date -- or February 10, 1997 with respect to
awards occurring on the MRP's receipt of stockholder approval.<PAGE>
<PAGE>
Taxation of MRP Awards
Page 2
PART I:
GENERAL TAX PRINCIPLES
Section 83 -- Generally. Section 83 of the Internal Revenue
Code (the "Code") controls the federal income taxation of
property that is transferred in connection with the performance
of services. In the absence of the Section 83(b) election
described in Part II, the recipient of restricted property (such
as an MRP award) recognizes income not on the date of the award
but on the date that his or her interest vests. The amount of
the recipient's taxable income will equal the fair market value
of the restricted property when vesting occurs. (1) Subsequent
gain or loss is treated as capital gain, with the amount that is
included in the recipient's ordinary income determining his or
her basis in the property.
Operation of the MRP. The Bank's MRP will generally work as
follows for Recipients who do not make Section 83(b) elections:
Date Event
---- -----
Stockholder
Approval The MRP should provide a "Notice of the MRP
of Award" to each Recipient. The notice
will specify the number of shares subject
to the award.
Recipients will not receive shares of the
Company's common stock, or be subject to
federal income taxation as the result of
receiving an award.
The First Five The MRP trusts will transfer to each
Anniversary Recipient a number of unrestricted Shares
Dates of the MRP's equal to one-fifth of the number of shares
Receipt of Approval subject to the award, plus any dividends
attributable to those shares (provided that
the Recipient has not previously terminated
service).
As you may recall, vesting would accelerate to 100% upon a
Recipient's termination of service due to death or disability,
and that special rules apply if a transfer of Common Stock would
cause the Recipient to own in excess of 10% of the Common Stock.
Tax Withholding. In the case of Recipients who are non-
employee directors, federal income tax withholding is not
required when their MRP awards give rise to taxable income. On
the other hand, Recipients who are employees must satisfy federal
income tax withholding not
____________________
(1) This contrasts with the financial accounting treatment for
MRP awards (i.e., expense recognition is determined by the fair
market on the date of the award).<PAGE>
<PAGE>
Taxation of MRP Awards
Page 3
only at the time their MRP awards generate taxable income, but
also before they may receive shares of Common Stock from the MRP
trust.
IRS Reporting. We understand that in the case of an
employee, the ordinary income arising from the vesting of MRP
awards and from the payment of tax bonuses is reportable on Form
W-2, in Box 11, and that in the case of a non-employee director,
such income is reportable on Form 1099-MISC, in Box 7.
PART II:
ACCELERATED TAXATION UNDER SECTION 83(B)
Section 83(b) Generally. Within 30 days after receiving an
MRP Award, a Recipient may make a special, irrevocable election
under Code Section 83(b), and thereby accelerate ordinary income
taxation to the date that the property transfer occurred. The
amount of the Recipient's ordinary income would equal the fair
market value of the Common Stock subject to the MRP award as of
the date on which the award occurred. Subsequent gain (or loss,
if the award is forfeited or depreciates) would be long- or
short-term capital gain, not ordinary income.
Procedural Requirements. Section 83(b) elections must
include the information set forth in the form of Section 83(b)
election that we have attached hereto. Further, Section 83(b)
elections must be filed with the IRS Service Center where the
Recipient files his or her return (both within 30 days after the
transfer occurs, and as an attachment to his or her tax return
for the year to which the Section 83(b) election relates). A
copy of the Section 83(b) election must also be filed with the
Company.
Tax Caveat. In several recent private letter rulings (which,
while not binding precedent, are indicative of current IRS
policy), the Internal Revenue Service has taken the position
that, for purposes of Section 83 of the Code, no "transfer" of
property occurs when an individual receives an interest in an
employer's grantor trust. Because the trust associated with the
MRP is a grantor trust (by design, in order to secure deferred
taxation of awards), these rulings suggest that the IRS could
question whether Section 83(b) elections may be made with respect
to MRP awards. While we do not believe that this theoretical
possibility involves a substantial tax risk for Recipients, each
Recipient should contact his or her personal tax counsel for
independent advice about this issue.
Tax Reporting and Withholding. The rules described in Part
I would apply, as though vesting occurred on the date of the
Recipient's Section 83(b) election.
CONCLUSION
Whether or not a Recipient should make a Section 83(b)
election depends on a variety of factors, including the
Recipient's expectations as to (i) the short-term and long-term
future value <PAGE>
<PAGE>
Taxation of MRP Awards
Page 4
of the Common Stock, (ii) the length of time the Recipient is
likely to hold the Common Stock, (iii) future tax rates -- as to
both income and capital gain, (iv) the risk of forfeiture, and
(v) the Recipient's ability to pay the taxes associated with the
MRP award.
<PAGE>
<PAGE>
FIRST LANCASTER BANCSHARES, INC.
MANAGEMENT RECOGNITION PLAN
___________________________________________________________
Election to Include Value of Restricted Stock in Gross Income
in Year of Transfer Under Code Section 83(b)
____________________________________________________________
* * * * * * * * * * * * * * * * *
THIS DOCUMENT CONSTITUTES PART OF
A PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933
* * * * * * * * * * * * * * * * *
The undersigned hereby makes the election permitted under
Section 83(b) of the Internal Revenue Code of 1986, as amended,
with respect to the property described below, and supplies the
following information in accordance with the regulations
promulgated thereunder:
1. The name, address, and taxpayer identification or social
security number of the undersigned are:
Name: _______________________________
Address: _______________________________
_______________________________
I.D. No. _______________________________
2. Description of the property with respect to which the
election is being made:
____________________( ) shares of common stock, par
value $0.01 per share, of First Lancaster Bancshares, Inc.
(hereinafter, the "Common Stock").
3. The date on which the Common Stock was transferred is
______________ ___, 19__. The taxable year to which this
election relates is calendar year 19__.
4. The nature of the restrictions to which the Common Stock is
subject is as follows:
The Common Stock is forfeitable until it is earned in
accordance with Article VII of the First Lancaster
Bancshares, Inc. Management Recognition Plan (the
"Plan"). Generally, the Common Stock becomes earned and
nonforfeitable by<PAGE>
<PAGE>
the undersigned at the rate of one-fifth per year of
service. For special rules regarding the vesting of the
undersigned's interest in the Common Stock, see Section
7.01 of the Plan.
The Common Stock is non-transferable until the
undersigned's interest therein becomes vested and
nonforfeitable, pursuant to Section 8.03 of the Plan.
5. Fair market value:
The fair market value at the time of transfer (determined
without regard to any restrictions other then
restrictions which by their terms will never lapse) of
the stock with respect to which this election is being
made is $_____ per share.
6. Amount paid for Common Stock:
The amount paid by taxpayer for said Common Stock is
$0.00 per share.
7. Furnishing statement to employer:
A copy of this statement has been furnished to First
Lancaster Bancshares, Inc.
8. Notice:
Nothing contained herein shall be held to alter, vary or
affect any of the terms, provisions or conditions of the
Plan, or the award made thereunder to the undersigned.
Dated: ____________ __, 199__.
______________________________
Taxpayer/Plan Participant
