<PAGE>
<PAGE>
Registration No. 333-______
As filed with the Securities and Exchange Commission on
December 30, 1999
================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
_______________________________________
CUMBERLAND MOUNTAIN BANCSHARES, INC.
______________________________________________________
(Exact name of Registrant as Specified in Its Charter)
TENNESSEE 31-1499488
- -------------------------------- ---------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or organization) Identification No.)
1431 CUMBERLAND AVENUE
MIDDLESBORO, KENTUCKY 40965
(606) 248-4584
--------------------------------------------------
(Address of Principal Executive Offices)
CUMBERLAND MOUNTAIN BANCSHARES, INC. MANAGEMENT RECOGNITION PLAN
CUMBERLAND MOUNTAIN BANCSHARES, INC. 1998 STOCK OPTION
AND INCENTIVE PLAN
- ----------------------------------------------------------------
(Full Title of the Plans)
JAMES J. SHOFFNER, PRESIDENT
CUMBERLAND MOUNTAIN BANCSHARES, INC.
1431 CUMBERLAND AVENUE
MIDDLESBORO, KENTUCKY 40965
-------------------------------------------------
(Name and Address of Agent for Service)
(606) 248-4585
- --------------------------------------------------------------
(Telephone Number, Including Area Code, of Agent for Service)
COPIES TO:
GARY R. BRONSTEIN, ESQUIRE
James C. Stewart, Esquire
Joan S. Guilfoyle, Esquire
Housley Kantarian & Bronstein, P.C.
1220 19th Street N.W., Suite 700
Washington, D.C. 20036
(202) 822-9611
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================
Title of Securities Proposed Maximum Proposed Maximum Amount Of
To Be Amount To Be Offering Price Aggregate Offering Registration
Registered Registered (1) Per Share (2) Price (2) Fee
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$.01 par value 61,562 $(2) $783,096 $207.00
================================================================================================
<FN>
(1) Maximum number of shares issuable under the Cumberland Mountain Bancshares, Inc. Management
Recognition Plan (17,589 shares) and the Cumberland Mountain Bancshares, Inc. 1998 Stock
Option and Incentive Plan (43,973 shares), as such amounts may be increased in accordance
with said plans in the event of a merger, consolidation, recapitalization, stock dividend,
stock split 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. Of the shares being registered hereby, 32,975 are
under option at a weighted average exercise price of $16.00 per share ($527,600 in the
aggregate). The remainder of such shares, which are not presently subject to option (28,587
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 OTC "Electronic Bulletin Board" on
December 29, 1999 of $8.9375 per share ($255,496 in the aggregate). Therefore, the
total amount of the offering being registered herein is $783,096.
</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 Cumberland Mountain Bancshares, Inc.
Management Recognition Plan and the Cumberland Mountain
Bancshares, Inc. 1998 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
- ------
Cumberland Mountain Bancshares, Inc. (the "Company") is
subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and, accor-
dingly, 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 main-
tains 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, 1999 (Commission File No. 0-22287).
(b) The Company's Quarterly Report on Form 10-QSB for
the quarter ended September 30, 1999 (Commission File No.
0-22287).
(c) The description of the Company's securities
contained in the Company's Form 8-A, as filed with the
Commission on March 25, 1997 (Commission File No. 0-22287).
ALL DOCUMENTS FILED BY THE COMPANY PURSUANT TO SECTIONS
13(a), 13(c), 14, AND 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED, PRIOR TO THE FILING OF A POST-EFFECTIVE
AMENDMENT WHICH INDICATES THAT ALL SECURITIES OFFERED HAVE BEEN
SOLD OR WHICH DEREGISTERS ALL SECURITIES 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.
1
<PAGE>
<PAGE>
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
- ------
The directors and officers of the Company are entitled to
indemnification in certain circumstances. Such indemnification
arises from Article XIII of the Company's Charter, separate
indemnification agreements entered into between the Company and
the Bank and the directors, and the Tennessee Business
Corporation Act. In addition, the Bank currently maintains a
directors and officers liability policy to which the Company
will become party. These provisions and contracts are described
briefly below.
ARTICLE XIII OF THE CHARTER
Article XIII of the Company's Charter provides that
directors, officers, employees and agents may be indemnified in
certain circumstances against liability which they may incur in
their capacities. Article XIII requires that the Company
indemnify any director who is made a party to any threatened,
pending, or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative ("proceeding"),
because he is or was a director against liability incurred in
such proceeding as long as he conducted himself in good faith,
he reasonably believed, (i) in the case of conduct in his
official capacity with the Company, that his conduct was in the
Company's best interests and (ii) in all other cases, that his
conduct was at least not opposed to its best interests; and, in
the case of any criminal proceeding, he had no reasonable cause
to believe his conduct was unlawful. The Company must also
indemnify any director and any officer who is not a director if
he was wholly successful, on the merits or otherwise, in the
defense of any proceedings to which he was a party because he is
or was a director or officer of the Company against reasonable
expenses incurred by him in connection with the proceeding.
However, the Company may not indemnify a director in connection
with a proceeding by or in the right of the Company in which the
director was adjudged liable to the Company or in connection
with any other proceeding charging improper personal benefit to
him, whether or not involving action in his official capacity,
in which he was adjudged liable on the basis that personal
benefit was improperly received by him.
Article XIII permits the Company to pay the reasonable
expenses incurred by a director who is a party to a proceeding
in advance of final disposition of the proceeding as long as:
(1) the director furnishes the Company a written affirmation of
his good faith belief that he has met the requisite standard of
conduct; (2) he provides the Company with a written undertaking
to repay such amounts if it is ultimately determined that he is
not entitled to indemnification; and (3) a determination is made
based on the facts then known, that indemnification is
permissible.
The Company may not indemnify a director unless
authorized in the specific case after a determination has been
made that indemnification of the director is permissible in the
circumstances because he has met the required standards. The
determination must be made: (1) by the board of directors by
majority vote of a quorum consisting of directors not at the
time parties to the proceeding; (2) if a quorum cannot be
obtained, by majority vote of a committee duly designated by the
board of directors (in which designation directors who are
parties may participate), consisting solely of two or more
directors not at the time parties to the proceeding; (3) by
independent special legal counsel; or (4) by the shareholders,
but shares owned by or voted under the control of directors who
are at the time parties to the proceeding may not be voted on
the determination.
The Company may indemnify and advance expenses to an
officer, employee or agent of the Company who is not a director
to the same extent as a director.
<PAGE>
INDEMNIFICATION AGREEMENTS
The Company and the Bank have entered into written
indemnification agreements (the "Indemnification Agreements")
with each director of the Company and the Bank pursuant to which
the Company and the Bank will indemnify such individuals against
any and all expenses incurred by such individuals in connection
with any proceeding of any type to which such individual is made
or threatened to be made a party, as a result of or in connec-
tion with any action or inaction on the part of a director while
the director was or is a director or while the director was or
is serving at the request of the Company or the Bank as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or
other enterprise. Expenses covered by such agreements include,
without limitation, any judgment, amounts paid in settlement of
a proceeding, reasonable attorney's fees actually paid and
incurred in connection with a proceeding and reasonable
attorneys's fees, costs and expenses, if any, actually paid or
incurred in connection with a proceeding to enforce his rights
under the Indemnification Agreement. The Indemnification
Agreements also provide for the prompt advancement of expenses
to the director in connection with investigating, defending or
being a witness in any proceeding. The Indemnification
2
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<PAGE>
Agreements further provide a mechanism through which a director
may seek court relief in the event that the Company's or the
Bank's Board of Directors (or other person appointed by the
Board) determines that the directors would not be permitted to
be indemnified under applicable law.
Notwithstanding the foregoing, no indemnification may be
made under the Indemnification Agreements for any of the
following: (i) any act or omission for which the Bank is
prohibited to provide indemnification under federal law; (ii) to
the extent indemnification is prohibited by applicable regula-
tion or order properly issued by the FDIC or OTS under Section
18(k) of the Federal Deposit Insurance Act; (iii) to the extent
either the Bank or the Company has received a written objection
from the OTS to indemnification of the director, which written
objection is authorized by applicable law, regulation or order
relating specifically to indemnification, until such time as it
is permitted by the OTS; (iv) for any proceeding for which the
director is adjudged in a proceeding to be liable to the Bank or
the Company in the performance of his duty to the Bank, the
Company or their stockholders unless, and only to the extent
that, the court in which such proceeding is or was pending
determines that, in view of the circumstances, the director is
fairly and reasonably entitled to indemnity; (v) proceedings or
claims initiated or brought voluntarily by the director and not
by way of defense, except with respect to proceedings brought to
establish or enforce a right to indemnification under the
Indemnification Agreement or any other statute or law unless
otherwise determined by the Board of Directors; and (vi) any
amounts which have been paid directly to the director by an
insurance carrier under a policy of directors' liability
insurance maintained by the Bank or the Company.
TENNESSEE BUSINESS CORPORATION ACT
The Tennessee Business Corporation Act requires Tennessee
corporations such as the Company to indemnify a director who was
wholly successful, on the merits or otherwise, in the defense of
any proceeding to which he was a party because he is or was a
directors of the corporation against reasonable expenses
incurred by him, unless the corporation's charter provides
otherwise. The Tennessee Business Corporation Act also
generally permits Tennessee corporations to indemnify directors
and officers in the same manner as Article XIII of the Company's
Charter provides. In no event, however, may a Tennessee
corporation indemnify a director if a judgment or other final
adjudication adverse to the director establishes his liability:
(i) for any breach of the duty of loyalty to the corporation or
its stockholders; (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation
of law; or (iii) for the approval of unlawful distributions.
DIRECTORS AND OFFICERS LIABILITY INSURANCE
Pursuant to its Charter and Tennessee law, the Company is
permitted to purchase and maintain insurance on behalf of an
individual who is or was a director, officer, employee, or agent
of the Company. The Bank currently maintains such a policy and
it is intended that the Company will become a party to such
policy.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
- ------
Not Applicable.
Item 8. EXHIBITS
- ------
The exhibits scheduled to be filed as part of this
Registration Statement are as follows:
5.1 Opinion of Housley Kantarian & Bronstein, P.C.
as to the validity of the Common Stock being
registered
23.1 Consent of Housley Kantarian & Bronstein, P.C.
(appears in their opinion filed as Exhibit 5)
23.2 Consent of Marr, Miller & Myers, PSC
24 Power of Attorney (contained in the signature
page to this registration statement)
99.1 Cumberland Mountain Bancshares, Inc.
Management Recognition Plan and associated
Grantor Trust Agreement
99.2 Cumberland Mountain Bancshares, Inc. 1998
Stock Option and Incentive Plan
<PAGE>
<PAGE>
99.3 1999 Amendment to the Cumberland Bancshares,
Inc. 1998 Stock Option and Incentive Plan
99.4 Form of Stock Option Agreement to be entered
into with Optionees with respect to Incentive
Stock Options granted under the Cumberland
Mountain Bancshares, Inc. 1998 Stock Option
and Incentive Plan
99.5 Form of Stock Option Agreement to be entered
into with Optionees with respect to
Non-Incentive Stock Options granted under the
Cumberland Mountain Bancshares, Inc. 1998
Stock Option and Incentive Plan
99.6 Form of Agreement to be entered into with
Optionees with respect to Stock Appreciation
Rights granted under the Cumberland Mountain
Bancshares, Inc. 1998 Stock Option and
Incentive Plan
99.7 Notice of MRP Award
99.8 Memorandum concerning taxation of MRP Awards,
and associated election form
ITEM 9. UNDERTAKINGS
- ------
1. The undersigned registrant hereby undertakes:
(a) To file, during any period in which it offers
or sells securities, 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 which, individually or together, represent a fundamental
change in the information in the registration statement. Not-
withstanding 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 end 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 aggre-
gate, the changes in volume and price represent no more than a
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 additional or changed
material information on the plan of distribution.
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 1933, each such
post-effective amendment shall be deemed to be a new regis-
tration statement relating to the securities offered therein,
and the offering of the 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
this chapter at the start of any delayed offering or throughout
a continuous offering. Financial statements and information
otherwise required by Section 10(a)(3) of the Act need not be
furnished, provided, that the registrant includes in the
prospectus, by means of a post-effective amendment, financial
statements required pursuant to this paragraph and other
information necessary to ensure that all other information in
the prospectus is at least as current as the date of those
financial statements. Notwithstanding the foregoing, with
respect to registration statements on Form F-3, a post-effective
amendment need not be filed to include financial statements and
information required by Section 10(a)(3) of the Act or Rule 3-19
of this chapter if such financial statements and information are
contained in periodic reports filed with or furnished to the
Commission
4
<PAGE>
<PAGE>
by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incor-orated by
reference in the Form F-3.
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 are 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 incor-
porated 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 indemni-
fication by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
5
<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 Middlesboro,
Commonwealth of Kentucky, on December 29, 1999.
CUMBERLAND MOUNTAIN BANCSHARES, INC.
By: /s/James J. Shoffner
--------------------------------
James J. Shoffner
President and Chief Managing Officer
(Duly Authorized Representative)
POWER OF ATTORNEY
We, the undersigned Directors of Cumberland Mountain
Bancshares, Inc., hereby severally constitute and appoint J. Roy
Shoffner and James J. Shoffner, either of whom may act, 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 J. Roy Shoffner and James J.
Shoffner, either of whom may act, may deem necessary or
advisable to enable Cumberland Mountain 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 of
Cumberland Mountain Bancshares, Inc. common stock, 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 J. Roy Shoffner and James J. Shoffner
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/J. Roy Shoffner Chairman of the Board and December 29, 1999
- ----------------------- Chief Executive Officer
J. Roy Shoffner (Principal Executive Officer)
/s/James J. Shoffner President and December 29, 1999
- ----------------------- Chief Managing Officer;
James J. Shoffner Director
/s/J. D. Howard Senior Vice President; December 29, 1999
- ----------------------- Chief Financial Officer; Corporate
J. D. Howard Secretary and Treasurer (Principal
Financial and Accounting Officer)
/s/Reccie Stagnolia, Jr. Vice President; Branch December 29, 1999
- ----------------------- Manager; Director
Reccie Stagnolia, Jr.
/s/Barry Litton Director December 29, 1999
- -----------------------
Barry Litton
/s/Raymond C. Walker Director December 29, 1999
- -----------------------
Raymond C. Walker
</TABLE>
<PAGE>
December 30, 1999
Board of Directors
Cumberland Mountain Bancshares, Inc.
1431 Cumberland Avenue
Middlesboro, Kentucky 40965
Re: Registration Statement on Form S-8
-----------------------------------------------------
Management Recognition Plan and 1998 Stock Option
and Incentive Plan
Ladies and Gentlemen:
We have acted as special counsel to Cumberland Mountain
Bancshares, Inc., a Tennessee 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 61,562 shares of common stock, par value
$.01 per share (the "Common Stock") of the Company which may be
issued pursuant to the Cumberland Mountain Bancshares, Inc.
Management Recognition Plan and the Cumberland Mountain
Bancshares, Inc. 1998 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/ Joan S. Guilfoyle
Joan S. Guilfoyle
<PAGE>
[LETTERHEAD OF MARR, MILLER & MYERS, PSC]
INDEPENDENT AUDITORS' CONSENT
December 29, 1999
Board of Directors
Cumberland Mountain Bancshares, Inc.
1431 Cumberland Avenue
Middlesboro, Kentucky 40965
Re: Registration Statement on Form S-8
----------------------------------
Cumberland Mountain Bancshares, Inc. Management
Recognition Plan and Cumberland Mountain
Bancshares, Inc. 1998 Stock Option and Incentive
Plan
Gentlemen:
We hereby consent to the incorporation by reference in
this Registration Statement on Form S-8 of our report dated July
23, 1999, on our audits of the consolidated balance sheets of
Cumberland Mountain Bancshares, Inc. and subsidiaries as of June
30, 1999, 1998 and 1997, and the related consolidated statements
of income, stockholders' equity, and cash flows for the years
then ended, which reports were included in Cumberland Mountain
Bancshares, Inc. Annual Report on Form 10-KSB for the fiscal
year ended June 30, 1999. We also consent to the reference to
our firm under the caption "Experts" in the Prospectus which is
part of the Registration Statement.
/s/ Marr, Miller & Myers, PSC
_____________________________
Marr, Miller & Myers, PSC
Corbin, Kentucky
<PAGE>
CUMBERLAND MOUNTAIN BANCSHARES, INC.
MANAGEMENT RECOGNITION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
1.01 The Company 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 Company, 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 Middlesboro Federal Bank, 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 Company.
3.05 "Change in Control" means any one of the following
events: (1) the acquisition of ownership, holding or power to
vote more than 25% of the Bank's or the Company's voting stock,
(2) the acquisition of the ability to control the election of a
majority of the Bank's or the Company's directors, (3) the
acquisition of a controlling influence over the management or
policies of the Bank or the Company by any person or by persons
acting as a "group" (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934), (4) the acquisition of control
of the Bank or the Company within the meaning of 12 C.F.R. Part
574 or its applicable equivalent (except in the case of (1),
(2), (3) and (4) hereof, ownership or control of the Bank by the
Company itself shall not constitute a "Change in Control"), or
(5) during any period of two consecutive years, individuals (the
"Continuing Directors") who at the beginning of such period
constitute the Board of Directors of the Company or the Bank
(the "Existing Board") cease for any reason to constitute at
least two-thirds thereof, provided that any individual whose
election or nomination for election as a member of the Existing
Board was approved by a vote of at least two-thirds of the
Continuing Directors then in office shall be considered a
Continuing Director. For purposes of this subparagraph only,
the term "person" refers to an individual or a corporation,
partnership, trust, association, joint venture, pool, syndicate,
sole
<PAGE>
<PAGE>
proprietorship, unincorporated organization or any other
form of entity not specifically listed herein. The decision of
the Committee as to whether a change in control has occurred
shall be conclusive and binding.
3.06 "Committee" means the Management Recognition Plan
Committee appointed by the Board pursuant to Article IV hereof.
3.07 "Common Stock" means shares of the common stock of
the Company.
3.08 "Company" means Cumberland Mountain Bancshares, Inc.
3.09 "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.
3.10 "Date of Conversion" means the date of the
conversion of Cumberland Mountain Bancshares, MHC from mutual to
stock form.
3.11 "Director" shall mean any member of the Board, and
any member of the board of directors of any Affiliate whose
directors the Board has by resolution designated as being
eligible for participation in this Plan.
3.12 "Disability" shall mean a physical or mental
condition, which in the sole and absolute discretion of the
Committee, is reasonably expected to be of indefinite duration
and to substantially prevent a Participant from fulfilling his
or her duties or responsibilities to the Company or an
Affiliate.
3.13 "Effective Date" means the date on which the Plan
first becomes effective, as determined under Section 8.07
hereof.
3.14 "Employee" means any person who is employed by the
Company or an Affiliate.
3.15 "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.
3.16 "Participant" means an Employee or Director who
holds a Plan Share Award.
3.17 "Plan" means this Cumberland Mountain Bancshares,
Inc. 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 Company
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.
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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, during which a 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.
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 (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 revoke any Plan
Share Award already made or impair a participant's vested rights
under a Plan Share Award. 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 Company shall 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 Company and its
Affiliates and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful.
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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 Company to the Trust, provided that the
Bank may also make
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contributions to the Trust. Such amounts shall be paid to the
Trustee at the time of contribution. No contributions to the
Trust by Employees shall be permitted.
5.02 INVESTMENT OF TRUST ASSETS; MAXIMUM PLAN SHARE
AWARDS. The Trustee shall invest Trust assets only in
accordance with the Trust Agreement; provided that the Trust
shall not purchase, and Plan Share Awards shall not be made with
respect to, more than 17,589 Shares sold to the public in the
Company's stock offering on the Date of Conversion. Such Shares
may be newly issued Shares, Shares held in Treasury, or Shares
held in a grantor trust.
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. The Committee shall make Plan Share
Awards only to Employees. 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 Company and its Affiliates,
and any other factors the Committee may deem relevant.
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. 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:
Participant Shares Subject to Plan Share Award
----------- ----------------------------------
James J. Shoffner 4,221
Diana Miracle 1,408
J.D. Howard 1,407
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
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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
Section 6.04, 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 Company 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. Unless the Committee specifically
eliminates any vesting requirement or imposes a different
vesting schedule, 33 1/3% of the Plan Shares subject to a Plan
Share Award shall be earned and become non-forfeitable upon the
Participant's completion of each of three Years of Service
after the date of the Award.
(b) ACCELERATION FOR TERMINATIONS DUE TO DEATH,
DISABILITY, OR CHANGE IN CONTROL. Notwithstanding the general
rule contained in Section 7.01(a) above: (i) all Plan Shares
subject to a Plan Share Award held by a Participant whose
service with the Company or an Affiliate terminates due to the
Participant's death or Disability shall be deemed earned and
100% vested as of the Participant's last day of service with the
Company or an Affiliate, and (ii) all Plan Shares subject to a
Plan Share Award held by a Participant shall be deemed earned
and 100% vested as of a Change in Control or, if earlier, the
execution of an agreement to effect a Change in Control.
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 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 Company or
Affiliate which employs or employed such Participant any such
amount withheld from or paid by the Participant or Beneficiary.
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(d) TIMING: EXCEPTION FOR 10% SHAREHOLDERS.
Notwithstanding Subsections (a) and (b) above, no Plan Shares
may be distributed prior to the date which is three (3) 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.
(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 Company 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.
7.05. DEFERRAL ELECTIONS BY PARTICIPANTS.
(a) ELECTIONS TO DEFER. At any time prior to December
31st of any year prior to the date on which a Participant
becomes vested in any shares subject to his or her Plan Share
Award, a Participant who is a member of a select group of
management or highly compensated employees (within the meaning
of the Employees' Retirement Income Security Act of 1973) may
irrevocably elect, on the form attached hereto as Exhibit "A"
(the "Election Form"), to defer the receipt of all or a
percentage of the Plan Shares that would otherwise be
transferred to the Participant upon the vesting of such award
(the "Deferred Shares").
(b) RECORDKEEPING; HOLDING OF DEFERRED SHARES. The
MRP Committee shall establish and maintain an individual account
in the name of each Participant who files an Election Form for
the purpose of tracking deferred earnings attributable to cash
dividends paid on Deferred Shares (the "Cash Account"). On the
last day of each fiscal year of the Company, the Committee shall
credit to the Participant's Cash Account earnings on the balance
of the Cash Account at a rate equal to the dividend-adjusted
total return on Common Stock, as determined from time to time by
the MRP Committee in its sole discretion. The Trustees shall
hold each Participant's Deferred Shares and Deferred Earnings in
the Trust until distribution is required pursuant to the
election set forth in the Participant's Election Form.
(c) DISTRIBUTIONS OF DEFERRED SHARES. The Trustee shall
distribute a Participant's Deferred Shares and Deferred Earnings
in accordance with the Participant's Election Form. All
distributions made by the Company and/or the Trustees pursuant
to elections made hereunder shall be subject to applicable
federal, state, and local tax withholding and to such other
deductions as shall at the time of such payment be required
under any income tax or other law, whether of the United States
or any other jurisdiction, and, in the case of payments to a
beneficiary, the delivery to the Committee and/or Trustees of
all necessary waivers, qualifications and other documentation.
Within 90 days after receiving notice of a Participant's death,
the Trustee shall distribute any balance of the Participant's
Deferred Shares and Deferred Earnings to the Participant's
designated beneficiary, if living, or if such designated
beneficiary is deceased or the Participant failed to designate a
beneficiary, to the Participant's estate. If, on the other
hand, a Participant's Continuous Service terminates for a reason
other than the Participant's death, Disability, early
retirement, or normal retirement, the Participant's Deferred
Shares and Deferred Earnings shall be distributed to the
Participant in a lump sum occurring as soon as reasonably
practicable. The distribution provisions of a Participant's
Election Form shall become irrevocable on the date that occurs
(i) one year before the Participant's termination of Continuous
Service for a reason other than death, and (ii) on the
Participant's death if that terminates the Participant's
Continuous Service.
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(d) HARDSHIP WITHDRAWALS. Notwithstanding any other
provision of the Plan or a Participant's Election Form, in the
event the Participant suffers an unforeseeable emergency
hardship within the contemplation of this paragraph, the
Participant may apply to the Committee for an immediate
distribution of all or a portion of his Deferred Shares and
Deferred Earnings. The hardship must result from a sudden and
unexpected illness or accident of the Participant or a dependent
of the Participant, casualty loss of property, or other similar
conditions beyond the control of the Participant. Examples of
purposes which are not considered hardships include post-
secondary school expenses or the desire to purchase a residence.
In no event will a distribution be made to the extent the
hardship could be relieved through reimbursement or compensation
by insurance or otherwise, or by liquidation of the
Participant's nonessential assets to the extent such liquidation
would not itself cause a severe financial hardship. The amount
of any distribution hereunder shall be limited to the amount
necessary to relieve the Participant's financial hardship. The
determination of whether a Participant has a qualifying hardship
and the amount which qualifies for distribution, if any, shall
be made by the Committee in its sole discretion. The Committee
may require evidence of the purpose and amount of the need, and
may establish such application or other procedures as it deems
appropriate.
(e) RIGHTS TO DEFERRED SHARES AND EARNINGS. A
Participant may not assign his or her claim to Deferred Shares
and Deferred Earnings during his or her lifetime, except in
accordance with Section 8.03 of this Plan. A Participant's right
to Deferred Shares and Deferred Earnings shall at all times
constitute an unsecured promise of the Company to pay benefits
as they come due. The right of the Participant or his or her
beneficiary to receive benefits hereunder shall be solely an
unsecured claim against the general assets of the Company.
Neither the Participant nor his or her beneficiary shall have
any claim against or rights in any specific assets or other fund
of the Company, and any assets in the Trust shall be deemed
general assets of the Company.
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 number or kind of shares or other securities of the
Company which results from a merger, consolidation, recapita-
lization, 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 to Employees 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 Company or an Affiliate of
shares of stock of any class, or of securities convertible into
shares of Common Stock or stock of
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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 Company 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.
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 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 State of Tennessee to the
extent not preempted by Federal law.
8.07 EFFECTIVE DATE. The Plan shall become August 18,
1999; provided that the effectiveness of the Plan and any Plan
Share Award shall be absolutely contingent upon the Plan's
approval by a favorable vote of stockholders of the Company who
own at least a majority of the total votes cast at a duly called
meeting of the Company's stockholders held in accordance with
applicable laws. In no event shall Plan Share Awards be made
within one year of the Date of Conversion.
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 Company 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 Company, the Plan constitutes
a mere unfunded
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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).
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CUMBERLAND MOUNTAIN BANCSHARES, INC.
GRANTOR TRUST AGREEMENT
PREAMBLE. This Trust Agreement made this day of
________, 1999, by and between Cumberland Mountain Bancshares,
Inc. (the "Company"), and the undersigned individuals (when
acting by majority, the "Trustee") who are currently directors
of the Company but are acting here in their individual capacity.
WHEREAS, the Company maintains the Cumberland Mountain
Bancshares, Inc. Management Recognition Plan, the Cumberland
Mountain Bancshares, Inc. 1993 Stock Option Plan, and the
Cumberland Mountain Bancshares, Inc. 1998 Stock Option and
Incentive Plan (collectively, the "Plans"); and
WHEREAS, the Company has entered into, and may in the
future enter into, employment and severance agreements
("Executive Agreements") with select key employees; and
WHEREAS, the Company has incurred or expects to incur
liability under the terms of the Plans and Executive Agreements
(collectively, the "Arrangements") with respect to the benefits
payable thereunder to individuals or their named beneficiaries
or their estates (collectively, the "Beneficiaries"); and
WHEREAS, the Company wishes to establish this trust (the
"Trust") and to contribute assets to the Trust 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 Beneficiaries in such manner and at such
times as specified in the Arrangements; and
WHEREAS, it is the intention of the parties that this Trust
shall constitute an unfunded Arrangements and shall not affect
the status of the Arrangements as unfunded plans maintained for
the purpose of providing deferred compensation to a select group
of management or other highly compensated employees for purposes
of Title I of the Employee Retirement Income Security Act of
1974, as amended from time to time; and
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
Arrangements.
WHEREAS, the Company desires to establish a fund,
consisting of the cash dividends that have accumulated from the
shares held in the Trust, for the payment of discretionary cash
bonuses to employees of the Company and its subsidiaries.
NOW, THEREFORE, the undersigned 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 shortly hereafter
deposit with the Trustee an amount expected to be sufficient to
permit the Trust to purchase up to 85,556 shares of the
Company's common stock ("Common Stock") either directly from the
Company or through open market purchases. Said amount shall
become the initial principal of the Trust to be held,
administered, and dispersed by the Trustee as provided for 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. In the event the Trust is determined by
the Internal Revenue Service or by counsel
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to the Company not to be a "grantor trust" within the meaning of
the Code, (with the result that the income of the Trust assets
is not treated as income of the Company or that the funding of,
or realization of income by, the Trust results in income to the
Beneficiaries prior to the date that such funds are actually
distributed or made available to them hereunder), then the
Trustee, upon receipt of written direction from the Company,
shall make payments from the Trust assets to such Beneficiaries,
in such manner and in such amounts as the Company shall direct,
for purposes of (i) paying the amount of Federal, state and
local tax and interest and any penalties thereon which such
Beneficiaries may incur arising out of any such determination,
or (ii) distributing the interests of Beneficiaries in the Trust
assets.
(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 as herein set forth.
Beneficiaries shall have no preferred claim on, or any
beneficial ownership interest in, any assets of the Trust. Any
rights created under the Arrangements and this Trust Agreement
shall be mere unsecured contractual rights of 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 contributions of cash or
other assets to 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 Beneficiary
shall have any right to compel such additional contributions.
(f) As soon as possible but in no event longer than ten
business days after the Change in Control within the meaning of
Section 13(g) hereof, the Company shall make an irrevocable
contribution to this Trust in an amount that is projected to be
sufficient to pay each Beneficiary the benefits to which he or
she is entitled pursuant to the Arrangements as of the date of
the Change in Control.
Section 2. Payments to Beneficiaries
------------------------------------
(a) The Company shall deliver to the Trustee a schedule
(the "Payment Schedule") that indicates the amounts payable in
respect of each Beneficiary, 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 Agreement), and the time
of commencement for payment of such amounts. Except as
otherwise provided herein, the Trustee shall make payments to
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 Arrangements 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 Beneficiary to benefits under the
Arrangements or this Trust Agreement shall be determined by the
Company or such party as it shall designate under the
Arrangements, and any claim for such benefits shall be
considered and reviewed under the procedures set out in the
Arrangements.
(c) The Company may make payment of benefits directly to
Beneficiaries as they become due under the terms of the
Arrangements. The Company shall notify the Trustee of its
decision to make direct payment of benefits prior to the time
amounts are payable to 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 Arrangements, the Company shall be jointly and
severally liable to make the balance of each such payment as it
falls due. The Trustee shall notify the Company when principal
and earnings of the Trust are not sufficient to continue
payments to the Beneficiaries.
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
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 l(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 Company's Board of Directors and its Chief
Executive Officer 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 by informing the Company's
Board of Directors and its Chief Executive Officer of such
written notice and, pending such determination, the Trustee
shall discontinue payment of benefits to 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 Beneficiaries, shall liquidate the Trust's investment in
common stock ("Common Stock") of the Company (or its holding
company if one exists), 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
Beneficiaries as general creditors of the Company with respect
to benefits due under the Arrangements or otherwise.
(3) The Trustee shall resume the payment of benefits
to Beneficiaries in accordance with Section 2 of this Trust
Agreement only after the Trustee has received a certification in
writing from the Company's Board of Directors and its Chief
Executive Officer 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
Beneficiaries under the terms of the Arrangements for the period
of such discontinuance, less the aggregate amount of any
payments made to Beneficiaries by the Company in lieu of the
payments provided for hereunder during any such period of
discontinuance.
Section 4. Payments to the Company
----------------------------------
Except as provided in Section 3 hereof, after the Trust has
become irrevocable, the Company shall not have the right or
power to direct the Trustee to return to the Company or to
divert to others any of the Trust assets before all payment of
benefits have been made to Beneficiaries pursuant to the terms
of the Arrangements.
<PAGE>
Section 5. Investment Authority
-------------------------------
(a) The Trustee shall have the 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 85,556 shares of Common Stock. The Company
may direct the Trustee in writing with respect to the investment
and management of the Trust assets.
3
<PAGE>
<PAGE>
(b) All rights associated with assets of the Trust,
including voting rights with respect to Common Stock, shall be
exercised by the Trustee in the manner directed in writing by
the Company, and shall in no event be exercisable by or rest
with Beneficiaries.
(c) Subject to applicable federal and state securities
laws, the Trustee shall offer to sell any shares of Common
Stock held by the Trust, on substantially similar terms, to the
following purchasers, listed here by order of priority: first,
the Company; second, any benefit Arrangements maintained by the
Company; third, directors of the Company; fourth, officers of
the Company; 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 in the manner directed by the Company or Investment
Manager(s).
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 120 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 transactions effected by it,
including a description of all securities and investments
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 and each Investment Manager 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 the Company shall hold the Trustee harmless
against any liability to any person for any action taken
pursuant to a direction, request or approval given by the
Company or Investment Manager(s) which is contemplated by, and
in conformity with, the terms of the Arrangements or this Trust
Agreement and is given in writing by the Company. In the event
of a dispute between the Company or Investment Manager(s) 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 inn 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
4
<PAGE>
<PAGE>
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.
Section 9. Compensation and Expenses of Trustee
-----------------------------------------------
The Company shall pay all administrative expenses and the
Trustee's fees and expenses relating to the Arrangements 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 60 days after the
Company receives such notice (unless the Company and the Trustee
agree otherwise). The Trustee may be removed by the Company on
60 days notice or upon shorter notice accepted by the Trustee
but only if the Beneficiaries of 80% or more of the Trust's
assets consent in writing to such removal.
If the Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the
effective date of 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. The former trustee shall execute any
instrument necessary or reasonably requested by the Company or
the successor trustee to evidence the transfer. Notwithstanding
the foregoing, if the Trustee resigns or is removed following a
Change in Control, (i) the Trustee that has resigned or is being
removed shall nominate as its successor a third party financial
institution that has trust powers and is independent of and
unrelated to the entity that has acquired or otherwise obtained
control of the Bank or the Company, and (ii) the appointment of
any particular successor trustee is approved in writing by the
Beneficiaries of 80% or more of the Trust's assets.
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.
<PAGE>
Section 12. Amendment or Termination
------------------------------------
(a) This Trust Agreement may be amended by a written
instrument executed by the Company and the Trustee, provided
that no such amendment shall make the Trust revocable. In
addition, no such amendment shall be made that affects the
duties or responsibilities of the Trustee without its written
consent, or that adversely, affects the Company without its
consent. Amendments shall become effective upon delivery to the
Trustee of a written instrument of amendment, duly executed and
acknowledged by the Company and accompanied by a certified copy
of a resolution
5
<PAGE>
<PAGE>
of the Board of Directors of the Company authorizing such
amendment. The Company also shall deliver to the Trustee a
copy of any modification or amendment to the Arrangements.
(b) Notwithstanding subsection (a) hereof, the provisions
of this Trust Agreement and the trust created thereby may not be
amended without the written consent of the Beneficiaries of 80%
or more of the Trust's assets.
(c) The Trust shall not terminate until the date on which
no Beneficiary is entitled to benefits pursuant to the terms
hereof or of the Arrangements. Upon termination of the Trust,
the Trustee shall return any assets remaining in the Trust to
the Company.
(d) Upon written approval of the 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
Arrangements have been made. All assets in the Trust at
termination shall be returned to the Company.
Section 13. Miscellaneous
-------------------------
(a) Any action required by any provision of this Trust
Agreement to be taken by the Board of Directors of the Company
shall be evidenced by a resolution of its Board of Directors,
certified to the Trustee by the Secretary or an Assistant
Secretary of the Company under its corporate seal, and the
Trustee shall be fully protected in relying upon any resolution
so certified to it. Unless other evidence with respect thereto
has been specifically prescribed in this Trust Agreement, any
other action of the Company under any provision of this Trust
Agreement shall be evidenced by a certificate signed by an
officer of the Company, and the Trustee shall be fully protected
in relying upon such certificate. The Trustee may accept a
certificate signed by an officer of the Company as proof of any
fact or matter than it deems necessary or desirable to have
established in the administration of the Trust (unless other
evidence of such fact or matter is expressly prescribed herein),
and the Trustee shall be fully protected in relying upon the
statements in the certificate.
(b) 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.
(c) Benefits payable to 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
Arrangements and this Trust Agreement.
(d) This Trust Agreement shall bind and inure to the
benefit of the successors and assigns of the Company and the
Trustee, respectively.
(e) This Trust Agreement shall be governed by and
construed in accordance with the laws of Kentucky.
(f) The Trustee agrees to be bound by the terms of the
Arrangements, as in effect from time to time.
(g) "Change in Control" as defined in the Company's
Management Recognition Plan (the "MRP") is defined in the same
manner for purposes of this Trust. Any amendment to the MRP
that modifies said definition shall be deemed to apply with
equal force, effect, and timing to the definition of Change in
Control for purposes of this Trust, except that a modification
that may adversely affect a Beneficiary shall be ineffectual as
to the Beneficiary unless he or she consents in writing to be
bound by the modification.
(i) Until notice is given to the contrary, communications
to the Trustee shall be sent to each trustee at his home
address; communications to the Company shall be sent to it at
its office at 1431 Cumberland Avenue, Middlesboro, Kentucky
40965.
6
<PAGE>
<PAGE>
Section 14. Effective Date.
---------------------------
The effective date of this Trust Agreement shall be the
date referenced in its Preamble.
IN WITNESS WHEREOF, the Company, by its duly authorized
officer, has caused this Trust Agreement to be executed, and its
corporate seal affixed, and the Trustees have executed this
Trust Agreement, this on the date referenced in the Preamble
hereof.
"COMPANY"
CUMBERLAND MOUNTAIN BANCSHARES, INC.
Attest:
/s/ J.D. Howard By: /s/ James J. Shoffner
- ------------------------- ---------------------------
Its President
"TRUSTEE"
Attest:
/s/ James J. Shoffner /s/ Barry Litton
- ------------------------- ---------------------------
Barry Litton
Attest:
- ------------------------- ---------------------------
Robert R. Long
Attest:
/s/ J.D. Howard /s/ Raymond C. Walker
- ------------------------- ---------------------------
Raymond C. Walker
7
<PAGE>
CUMBERLAND MOUNTAIN BANCSHARES, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
1. PURPOSE OF THE PLAN.
The purpose of this 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 Middlesboro Federal Bank, Federal
Savings Bank.
(e) "Board" shall mean the Board of Directors of the
Company.
(f) "Change in Control" shall mean any one of the
following events: (1) the acquisition of ownership, holding or
power to vote more than 25% of the Bank's or the Company's
voting stock, (2) the acquisition of the ability to control the
election of a majority of the Bank's or the Company's directors,
(3) the acquisition of a controlling influence over the
management or policies of the Bank or the Company by any person
or by persons acting as a "group" (within the meaning of Section
13(d) of the Securities Exchange Act of 1934), (4) the
acquisition of control of the Bank or the Company within the
meaning of 12 C.F.R. Part 574 or its applicable equivalent
(except in the case of (1), (2), (3) and (4) hereof, ownership
or control of the Bank by the Company itself shall not
constitute a "Change in Control"), or (5) during any period of
two consecutive years, individuals (the "Continuing Directors")
who at the beginning of such period constitute the Board of
Directors of the Company or the Bank (the "Existing Board")
cease for any reason to constitute at least two-thirds thereof,
provided that any individual whose election or nomination for
election as a member of the Existing Board was approved by a
vote of at least two-thirds of the Continuing Directors then in
office shall be considered a Continuing Director. For purposes
of this subparagraph only, the term "person" refers to an
individual or a corporation, partnership, trust, association,
joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not
specifically listed herein. The decision of the Committee as to
whether a change in control has occurred shall be conclusive and
binding.
(g) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(h) "Committee" shall mean the Stock Option Committee
appointed by the Board in accordance with Paragraph 5(a) hereof.
(i) "Common Stock" shall mean the common stock of the
Company.
(j) "Company" shall mean Cumberland Mountain Bancshares,
Inc.
<PAGE>
<PAGE>
(k) "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.
(l) "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.
(m) "Disability" shall mean a physical or mental
condition, which in the sole and absolute discretion of the
Committee, is reasonably expected to be of indefinite duration
and to substantially prevent a Participant from fulfilling his
or her duties or responsibilities to the Company or an
Affiliate.
(n) "Effective Date" shall mean the date specified in
Paragraph 14 hereof.
(o) "Employee" shall mean any person employed by the
Company, the Bank, or an Affiliate.
(p) "Exercise Price" shall mean the price per Optioned
Share at which an Option or SAR may be exercised.
(q) "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.
(r) "Market Value" shall mean the fair market value of
the Common Stock, as determined under Paragraph 7(b) hereof.
(s) "Non-Employee Director" shall have the meaning
provided in Rule 16b-3.
(t) "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.
(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 1998 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.
-2-
<PAGE>
<PAGE>
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 Effective 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.
4. SHARES SUBJECT TO THE PLAN.
(a) General Rule. Except as otherwise required under
Section 11, the aggregate number of Shares deliverable pursuant
to Awards shall not exceed 43,973 Shares. Such Shares may
either be authorized but unissued Shares, Shares held in
treasury, or Shares held in a grantor trust created 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 (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.
-3-
<PAGE>
<PAGE>
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.
(d) Effect of the Committee's Decisions. All decisions,
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 and Directors shall be
eligible to receive 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 Paragraph 6(b) hereof.
(b) Automatic Grants. On the Effective Date, each of
the following Employees and Directors 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 or Director whose Continuous Service terminates
on or before the Effective Date:
Participant Optioned Shares
----------- ---------------
James J. Shoffner 10,993
Diana Miracle 5,496
J.D. Howard 5,496
J. Roy Shoffner 2,199
Robert R. Long 2,199
Raymond C. Walker 2,199
Reecie Stagnolia, Jr. 2,199
Barry Litton 2,199
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.
-4-
<PAGE>
<PAGE>
(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.
(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. Unless the Committee specifically
eliminates any vesting requirement or imposes a different
vesting schedule in an Agreement granting an Option, each Option
shall become exercisable with respect to 33 1/3% of the Optioned
Shares upon the Participant's completion of each of three Years
of Service after the date of the Award, provided that an Option
shall become fully (100%) exercisable immediately upon
termination of the Participant's Continuous Service due to the
Participant's retirement at or after age 65, Disability, or
death, as well as immediately upon a Change in Control or
execution of a written agreement to effect a Change in Control
of the Bank or the Company. 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 its 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.
(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 or
Director and has maintained Continuous Service from the date of
the grant of the Option, or within one year after termination of
such Continuous Service (but not later than the date on which
the Option would otherwise expire), except if the Employee's or
Director's Continuous Service terminates by reason of --
-5-
<PAGE>
<PAGE>
(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.
(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) Mandatory Six-Month Holding Period. Notwithstanding
any other provision of this Plan to the contrary, Common Stock
that is purchased upon exercise of an Option or SAR may not be
sold within the six-month period following the grant of that
Option or SAR (except in the event of a Participant's death or
Disability).
9. [RESERVED FOR FUTURE USE]
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.
-6-
<PAGE>
<PAGE>
(c) Timing of Exercise. Any election by a Participant
to exercise SARs shall be made during the period beginning on
the 3rd 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(c) regarding the period of
exercisability of Options are incorporated by reference herein,
and shall determine the period of exercisability of SARs.
(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, recapita-
lization, 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)(1) 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.
<PAGE>
(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
-7-
<PAGE>
<PAGE>
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.
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 Incentive
Stock Options) 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
determination 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 August 18, 1999, provided
that the effectiveness of the Plan and any Option shall be
absolutely contingent upon the Plan's approval by a favorable
vote of stockholders owning at least a majority of the total
votes cast at a duly called meeting of the Company's
stockholders held in accordance with applicable laws. 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, 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.
-8-
<PAGE>
<PAGE>
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.
(c) Committee Discretion. 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. A Participant may
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 State of Tennessee, except to the extent
that federal law shall be deemed to apply.
-9-
<PAGE>
CUMBERLAND MOUNTAIN BANCSHARES, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
_____________________
1999 Amendment
_____________________
WHEREAS, Cumberland Mountain Bancshares, Inc. (the
"Company") maintains the Cumberland Mountain Bancshares, Inc.
1998 Stock Option and Incentive Plan (the "Plan") and the
Company's Board of Directors (the "Board") desires to amend the
Plan in order to address certain financial reporting
considerations; and
WHEREAS, Paragraph 16 of the Plan authorizes the Board to
amend the Plan.
NOW, THEREFORE, the Plan is hereby amended as follows,
effective immediately:
1. Paragraph 8(b) of the Plan shall be amended in its
entirety to provide as follows:
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 owned for more than six months, or a
combination of cash and Common Stock owned for more
than six months, 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 its
executive offices. Common Stock owned for more than
six months utilized in full or partial payment of
the Exercise Price for Options shall be valued at
its Market Value at the date of exercise.
2. Paragraph 19 of the Plan shall be amended by adding
the following sentence at the end thereof:
The amount of the withholding requirement shall be
applicable statutory minimum federal, state or local
income tax with respect to the award on the date
that the amount of tax is to be held.
3. Nothing contained herein shall be held to alter,
vary or affect any of the terms, provisions, or conditions of
the Plan or any Option entered into thereunder, other than as
stated above.
<PAGE>
<PAGE>
WHEREFORE, on this ____ day of ______________, 1999, the
Company hereby executes this 1999 Amendment to the Plan.
CUMBERLAND MOUNTAIN BANCSHARES, INC.
By /s/ James J. Shoffner
_________________________
Its President
__________________ Attest: /s/ J.D. Howard
Date ______________________ (Seal)
<PAGE>
CUMBERLAND MOUNTAIN BANCSHARES, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
____________________________________
Agreement for
Incentive Stock Options
____________________________________
STOCK OPTION (the "Option") for a total of ___________
shares of Common Stock, par value $.01 per share, of Cumberland
Mountain 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 1998 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. Exercise Price. The exercise price per share is
--------------
$______, which equals 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 the Plan and the following
provisions:
(i) Schedule of rights to exercise.
------------------------------
Percentage of Total Shares
Years of Continuous Employment Subject to Option Which May
After Date of Grant of Option Be Exercised
- ------------------------------- ---------------------------
Upon Grant 0%
1 year but less than 2 years 33 1/3%
2 years but less than 3 years 33 1/3%
3 years or more 33 1/3%
__________
*/ 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>
ISO Agreement
Page 2
(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. In addition, the Optionee may elect to pay for
all or part of the exercise price of the shares by having the
Company withhold a number of shares having a fair market value
equal to the exercise price. 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.
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. The terms of this Option shall be
binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
<PAGE>
<PAGE>
ISO Agreement
Page 3
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.
_______________________
Date of Grant CUMBERLAND MOUNTAIN BANCSHARES, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
COMMITTEE
By: __________________________________
Authorized Member of the Committee
Witness: _________________________
___________
**/ 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>
CUMBERLAND MOUNTAIN BANCSHARES, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
____________________________
Form for Exercise of
Incentive Stock Options
____________________________
Treasurer
Cumberland Mountain Bancshares, Inc.
1431 Cumberland Avenue
Middlesboro, Kentucky 40965
Re: 1998 Stock Option and Incentive Plan
------------------------------------
Dear Sir:
The undersigned elects to exercise the Incentive Stock
Option to purchase ________ shares, par value $.01, of Common
Stock of Cumberland Mountain 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
$______ in the form of _______ shares of Common
Stock, valued at $____ per share
$______ in the form of the Company's withholding
of _______ shares of Common Stock,
valued at $ ____ per share, that are
subject to this Option
$ 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 ______________________________________
_____________________
Date
Very truly yours,
__________________________
<PAGE>
CUMBERLAND MOUNTAIN BANCSHARES, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
____________________________
Agreement for
for Non-incentive Stock Options
____________________________
STOCK OPTION (the "Option") for a total of __________
shares of Common Stock, par value $.01 per share, of
Cumberland Mountain 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 Cumberland Mountain
Bancshares, Inc. 1998 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. Exercise Price. The exercise price per share is
--------------
$______, which equals 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 the Plan and the following
provisions:
(i) Schedule of rights to exercise.
------------------------------
Percentage of Total Shares
Years of Continuous Employment Subject to Option Which May
After Date of Grant of Option Be Exercised
- ------------------------------- ---------------------------
Upon Grant 0%
1 year but less than 2 years 33 1/3%
2 years but less than 3 years 33 1/3%
3 years or more 33 1/3%
<PAGE>
<PAGE>
NON-ISO Agreement
Page 2
(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 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. In addition, the Optionee may elect to pay for
all or part of the exercise price of the shares by having the
Company withhold a number of shares having a fair
market value equal to the exercise price. 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. 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
<PAGE>
<PAGE>
NON-ISO Agreement
Page 3
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.
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.
_______________________
Date of Grant CUMBERLAND MOUNTAIN BANCSHARES, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
COMMITTEE
By: __________________________________
Authorized Member of the Committee
Witness: _________________________
<PAGE>
<PAGE>
CUMBERLAND MOUNTAIN BANCSHARES, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
_____________________________
Form for Exercise of
Non-incentive Stock Options
_____________________________
Treasurer
Cumberland Mountain Bancshares, Inc.
1431 Cumberland Avenue
Middlesboro, Kentucky 40965
Re: 1998 Stock Option and Incentive Plan
------------------------------------
Dear Sir:
The undersigned elects to exercise his Non-Incentive Stock
Option to purchase ___________ shares, par value $.01, of
Common Stock of Cumberland Mountain 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
$______ in the form of _______ shares of Common
Stock, valued at $____ per share
$______ in the form of the Company's withholding
of _______ shares of Common Stock,
valued at $ ____ per share, that are
subject to this Option
$ 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 ______________________________________
_____________________
Date
Very truly yours,
__________________________
<PAGE>
CUMBERLAND MOUNTAIN BANCSHARES, INC.
1998 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 Cumberland Mountain 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 Cumberland Mountain
Bancshares, Inc. 1998 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, 10, and 12 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.
CUMBERLAND MOUNTAIN BANCSHARES, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
COMMITTEE
By: ________________________________
Date of Grant: ATTEST:
__________________ ____________________________________
CUMBERLAND MOUNTAIN BANCSHARES, INC.
MANAGEMENT RECOGNITION PLAN COMMITTEE
NOTICE OF AWARD
---------------
WHEREAS, the Board of Directors of Cumberland Mountain
Bancshares, Inc. (the "Company") has previously adopted the
Cumberland Mountain Bancshares, Inc. Management Recognition Plan
(the "Plan"); and
WHEREAS, the Board of Directors of the Company has
previously appointed Directors Barry Litton and Raymond C.
Walker as members of the Management Recognition Plan Committee
(the "Committee") pursuant to the terms of the Plan, and by
resolution dated _______________, 19__ the Committee made awards
under the Plan.
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__
CUMBERLAND MOUNTAIN BANCSHARES, INC.
MANAGEMENT RECOGNITION PLAN
COMMITTEE
By: _________________________
Its Chairman
<PAGE>
* * * * * * * * * * * * * * * * * * * * * * * * * *
THIS DOCUMENT CONSTITUTES PART OF
A PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933
* * * * * * * * * * * * * * * * * * * * * * * * * *
TO: Participants in the Cumberland Mountain Bancshares,
Inc. (the "Company") Management Recognition Plan
DATE: _______ __, 1999
FROM: Cumberland Mountain Bancshares, Inc.
RE: Taxation of MRP Awards
==============================================================
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 strongly encourage each recipient ("Recipient") of an MRP
award to consult a professional tax advisor for personal
assistance with this matter.
The deadline for making a Section 83(b) election is 30
days after the award date.
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
<PAGE>
<PAGE>
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 MRP will generally work as
follows for Recipients who do not make Section 83(b) elections:
Date Event
Award Date Each Recipient will receive a
"Notice of the MRP of Award" that
identifies the number of shares
subject to the award, and the terms
according to which vesting occurs.
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.
Each Vesting Date The MRP trusts will transfer to each
Recipient a number of unrestricted
shares equal to the number of shares
that have become vested, plus any
dividends attributable to those
shares (provided that the Recipient
has not previously terminated
service).
Vesting will accelerate to 100% upon a Recipient's
termination of service due to death, disability, or upon the
earlier of a change in control or the execution of an agreement
to effect a change in control. 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 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. 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. In
the case of a non-employee director, such income is reportable
on Form 1099-MISC, in Box 7.
__________
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>
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 will
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 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>
CUMBERLAND MOUNTAIN 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
Cumberland Mountain 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
Cumberland Mountain Bancshares, Inc.
Management Recognition Plan (the "Plan").
Generally, the Common Stock becomes
<PAGE>
<PAGE>
earned and nonforfeitable by the undersigned at the
rate of ___% on the Plan award date and on each of
the next _____ annual anniversary dates
thereof. 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
Cumberland Mountain 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 Recipient
