CAMDEN NATIONAL CORP
S-8, 2000-01-21
NATIONAL COMMERCIAL BANKS
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<PAGE>

   As filed with the Securities and Exchange Commission on January 21, 2000
                                                 Registration Statement No. 333-
================================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                            _______________________

                                   FORM S-8
                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933

                            _______________________

                          CAMDEN NATIONAL CORPORATION
            (Exact name of Registrant as Specified in Its Charter)

         Maine                                            01-0413282
(State of Incorporation)                      (I.R.S. Employer Identification #)

                                Two Elm Street
                             Camden, Maine  04843
                                (207) 236-8821
  (Address, including zip code, and telephone number, including area code, of
                   Registrant's principal executive offices)

              KSB Bancorp, Inc. 1993 Incentive Stock Option Plan
         KSB Bancorp, Inc. 1998 Long-Term Incentive Stock Benefit Plan
                           (Full Title of the Plan)

                            _______________________

                               Robert W. Daigle
                             President and C.E.O.
                          Camden National Corporation
                                Two Elm Street
                             Camden, Maine  04843
                                (207) 236-8821
(Name, address, including zip code, and telephone number, including area code,
                             of agent for service)

                                With copies to:
                           William Pratt Mayer, Esq.
                         Goodwin, Procter & Hoar, LLP
                                Exchange Place
                          Boston, Massachusetts 02109
                                (617) 570-1000

                            _______________________

                        CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
====================================================================================================================
Title of Securities Being      Amount to be        Proposed Maximum           Proposed Maximum           Amount of
       Registered             Registered (1)  Offering Price Per Share    Aggregate Offering Price   Registration Fee
- ---------------------------------------------------------------------------------------------------------------------
<S>                           <C>             <C>                         <C>                        <C>
Common Stock, no par value        30,659 (2)           15.594 (4)                 $1,718,132           $454 (5)
                                  79,520 (3)
=====================================================================================================================
</TABLE>

(1) Plus such additional number of shares as may be required in the event of a
    stock dividend, stock split, split-up, recapitalization or other similar
    event.
(2) This Registration Statement relates to 30,659 shares of common stock of
    Camden National Corporation ("Camden") common stock that may be issued upon
    the exercise of options issued under the KSB Bancorp, Inc. 1993 Incentive
    Stock Option Plan, which was assumed by Camden upon consummation of the
    merger of KSB Bancorp, Inc. with and into Camden with Camden as the
    surviving corporation, on December 20, 1999.
(3) This Registration Statement relates to 79,520 shares of Camden's common
    stock that may be issued upon the exercise of options issued under the KSB
    Bancorp, Inc. 1998 Long-Term Incentive Stock Benefit Plan, which was assumed
    by Camden upon consummation of the merger of KSB Bancorp, Inc. with and into
    Camden, with Camden as the surviving corporation, on December 20, 1999.
(4) This estimate is based on the average of the high and low sales prices on
    the American Stock Exchange of the common stock of Camden on January 14,
    2000, pursuant to Rule 457(c) and (h) under the Securities Act of 1933, as
    amended, and is made solely for the purposes of determining the registration
    fee.
(5) In connection with the filing of its Registration Statement on Form S-4
    (File No. 333-88433), Camden paid a registration fee on an aggregate of
    1,800,000 shares of common stock, calculated in accordance with Rule
    457(f)(1), including 110,179 shares of Camden's common stock issuable upon
    exercise of the options under the KSB Bancorp, Inc. 1993 Incentive Stock
    Option Plan and KSB Bancorp, Inc. 1998 Long-Term Incentive Stock Benefit
    Plan.  Accordingly, pursuant to Rule 457(b), Camden is applying $495, the
    portion of the fee paid under the Form S-4 Registration Statement for the
    common stock issuable upon exercise of such options, against the fee payable
    for the securities registered hereunder.

================================================================================
<PAGE>

                                    PART II

               INFORMATION REQUIRED IN THE REGISTRATION STATEMENT


Item 3.  Incorporation of Certain Documents by Reference.
         -----------------------------------------------

   Camden National Corporation ("Camden") hereby incorporates by reference the
following documents which have been previously filed with the Securities and
Exchange Commission (the "Commission"):

    (a)  The annual report filed on Form 10-K for the fiscal year ended December
         31, 1998, filed with the Commission on April 1, 1999, as amended by
         Form 10-K/A filed with the Commission on December 29, 1999 pursuant to
         the Securities Exchange Act of 1934, as amended (the "Exchange Act");

    (b)  Camden's Quarterly Reports on Form 10-Q for the fiscal quarter ended
         March 31, 1999, filed with the Commission on May 14, 1999, Form 10-Q
         for the fiscal quarter ended June 30, 1999, filed with the Commission
         on August 13, 1999, as amended by Form 10-Q/A filed with the
         Commission on November 15, 1999 and Form 10-Q for the fiscal quarter
         ended September 30, 1999, filed with the Commission on November 15,
         1999.

    (c)  Camden's Current Report on Form 8-K, filed with the Commission on
         August 9, 1999.

    (d)  Camden's Current Report on Form 8-K, filed with the Commission on
         January 3, 2000, as amended by Form 8-K/A filed with the Commission on
         January 7, 2000.

    (c)  The description of Camden's Common Stock contained in its Registration
         Statement on Form 8-A, filed with the Commission on August 1, 1997, as
         amended, under Section 12 of the Exchange Act and any amendments or
         reports filed for the purpose of updating such description.

    In addition, all documents subsequently filed with the Commission by Camden
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment which indicates that all securities
offered hereunder 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.  Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein or in any
other subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement.  Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Registration Statement.

Item 4.  Description of Securities.
         -------------------------

      Not Applicable.

Item 5.  Interests of Named Experts and Counsel.
         --------------------------------------

    Certain legal matters in connection with the issuance of the Common Stock
offered by this Registration Statement are being passed upon for Camden by
Rendle A. Jones, Esq., Chairman of the Board and General Counsel of Camden.
<PAGE>

Item 6. Indemnification of Directors and Officers.
        -----------------------------------------

        The Maine Business Corporation Act ("MBCA") permits a corporation to
indemnify a director who is threatened to be made party to any threatened,
pending or completed actions, suit or proceeding, whether civil, criminal,
administrative or investigative, in connection with any proceeding to which they
may be made a party by reason of their service in that capacity if: (1) the
director acted honestly, (2) the director reasonably believed that his or her
conduct, in an official capacity with the corporation, was in the best interests
of the corporation and, in all other cases, the conduct was at least not opposed
to its best interests, and (3) the director had no reasonable cause to believe
his or her conduct was unlawful. Notwithstanding the foregoing, a corporation
may not indemnify a director if the director was adjudged liable to the
corporation in a proceeding by or in the right of a corporation.

     As permitted by the MBCA, Camden's bylaws provide that Camden shall
indemnify its directors and officers, including the advancement of expenses.  In
addition, Camden's bylaws contain the procedures pursuant to which such
indemnification is effectuated.

     The MBCA imposes liability on a director of aMaine corporation who votes
foror assents to (i) the declaration of any dividends or other distribution of
assets of a the corporation contrary to the provisions of the MBCA, (ii) the
purchase or redemption of its shares contrary to the MBCA, and (iii) the
distribution of assets of a corporation to its shareholders during the
liquidation of the corporation without the payment and discharge of all known or
reasofably ascertainable debts, obligations and liabilities of the corporation.
The MBCA does permit a Maine corporation if the director (i) relied and acted
reasonably and in good faith upon financial statements which were certified in
writing by an independent public or certified public accountant or (ii) the
director considered reasonably and in good faith that the assets were of their
book value, in determining the amount available for any such dividend, purchase,
redemption or distribution.

     As permitted by the MBCA, Camden maintains directors and officers liability
insurance in amounts and on terms which the Camden Board of Directors deems
reasonable.  In the ordinary course of business, the Camden Board of Directors
regularly reviews the scope and adequacy of such insurance coverage.


Item 7. Exemption from Registration Claimed.
        -----------------------------------

     Not Applicable.

<PAGE>

Item 8.     Exhibits.
            --------

    (a)     The following is a complete list of exhibits filed or incorporated
by reference as part of this Registration Statement.

Exhibit
- -------

    5.1     Opinion of Rendle A. Jones as to the legality of the securities
            being registered.
    23.1    Consent of Berry, Dunn, McNeil & Parker, LLC.
    23.2    Consent of Counsel, Rendle A. Jones (included in Exhibit 5.1
            hereto).
    24.1    Power of Attorney (included on the signature page hereto).
    99.1    KSB Bancorp, Inc. 1993 Incentive Stock Option Plan.
    99.2    Amendment No. 1 to KSB Bancorp, Inc. 1993 Incentive Stock Option
            Plan.
    99.3    KSB Bancorp, Inc. 1998 Long-Term Incentive Stock Benefit Plan
            (Incorporated by reference to Appendix A of the Proxy Statement of
            KSB Bancorp, Inc. relating to its May 13, 1998 annual meeting of
            stockholders).

Item 9.     Undertakings.
            ------------

    (a)     The undersigned Registrant hereby undertakes:

            (1)    To file, during any period in which offers or sales are being
            made, a post-effective amendment to this registration statement:

                      (i)   To include any prospectus required by Section
                            10(a)(3) of the Securities Act of 1933;

                     (ii)   To reflect in the prospectus any facts or events
                            arising after the effective date of the registration
                            statement (or the most recent post-effective
                            amendment thereof) which, individually or in the
                            aggregate, represent a fundamental change in the
                            information set forth in the registration statement.
                            Notwithstanding the foregoing, any increase or
                            decrease in volume of securities offered (if the
                            total dollar value of securities offered would not
                            exceed that which was registered) and any deviation
                            from the low or high 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 aggregate, the changes in
                            volume and price represent no more than 20 percent
                            change in the maximum aggregate offering price set
                            forth in the "Calculation of Registration Fee" table
                            in the effective registration statement; and

                    (iii)   To include any material information with respect to
                            the plan of distribution not previously disclosed in
                            the registration statement or any material change to
                            such information in the registration statement.

     PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) herein do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or furnished to
the Commission by Camden pursuant to Section 13 or Section 15(d) of the Exchange
Act that are incorporated by reference in the registration statement.

            (2)    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 registration statement relating to the securities
            offered therein, and the offering of such securities at that time
            shall be deemed

<PAGE>

            to be the initial bona fide offering thereof; and


            (3)    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.

    (b)     The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
Camden's annual report pursuant to Section 13(a) or 15(d) of the 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.

    (c)     Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of Camden pursuant to the foregoing provisions, or otherwise, Camden has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Camden of
expenses incurred or paid by a director, officer or controlling person of Camden
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, Camden will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.

<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, Camden National
Corporation 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 (the "Registration Statement") to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Camden, Maine, on
this 18th day of January 2000.

                                    Camden National Corporation



                                    By:/s/ Robert W. Daigle
                                       -------------------------------
                                       Robert W. Daigle
                                       President and Chief Executive Officer


                               POWER OF ATTORNEY

     KNOW ALL BY THESE PRESENTS, that each individual whose signature appears
below hereby severally constitutes and appoints Robert W. Daigle, such person's
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for such person and in such person's name, place and stead, in
any and all capacities, to sign this Registration Statement and any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto each said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as such person might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and
agent or any substitute or substitutes of any of them may lawfully do or cause
to be done by virtue hereof.

     Pursuant to the requirements of the Securities and Exchange Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.


<TABLE>
<CAPTION>
      Signature                                   Capacity                                  Date
      ---------                                   --------                                  ----
<S>                                               <C>                                   <C>
/s/ Rendle A. Jones                               Chairman of the Board                 January 18, 2000
- -------------------------------
Rendle A. Jones

/s/ Robert W. Daigle                              Director, President and               January 18, 2000
- -------------------------------                   Chief Executive Officer
Robert W. Daigle                                  (Principal Executive Officer)

/s/ Peter T. Allen                                Director                              January 18, 2000
- -------------------------------
Peter T. Allen

/s/ Ann W. Bresnahan                              Director                              January 18, 2000
- -------------------------------
Ann W. Bresnahan

/s/ Robert J. Gagnon                              Director                              January 18, 2000
- -------------------------------
Robert J. Gagnon

</TABLE>

<PAGE>

<TABLE>
<S>                                               <C>                                   <C>
/s/ John W. Holmes                                Director                              January 18, 2000
- -------------------------------
John W. Holmes

/s/ John S. McCormick, Jr.                        Director                              January 18, 2000
- -------------------------------
John S. McCormick, Jr.

/s/ Richard N. Simoneau                           Director                              January 18, 2000
- -------------------------------
Richard N. Simoneau

/s/ Susan M. Westfall                             Treasurer and Chief Financial         January 18, 2000
- -------------------------------                   Officer (Principal Financial and
Susan M. Westfall                                 Accounting Officer)
</TABLE>


<PAGE>

                                 EXHIBIT INDEX


Exhibit No.    Description
- ----------     -----------

     5.1       Opinion of Rendle A. Jones as to the legality of the securities
               being registered.
    23.1       Consent of Berry, Dunn, McNeil & Parker, LLC.
    23.2       Consent of Counsel, Rendle A. Jones (included in Exhibit 5.1
               hereto).
    24.1       Power of Attorney (included on the signature page hereto).
    99.1       KSB Bancorp, Inc. 1993 Incentive Stock Option Plan.
    99.2       Amendment No. 1 to KSB Bancorp, Inc. 1993 Stock Option Plan.
    99.3       KSB Bancorp, Inc. 1998 Long-Term Incentive Stock Benefit Plan.
               (Incorporated by reference to Appendix A of the Proxy Statement
               of KSB Bancorp, Inc. relating to its May 13, 1998 annual meeting
               of stockholders)

<PAGE>

                                                                     EXHIBIT 5.1


                          CAMDEN NATIONAL CORPORATION


January 18, 2000


Camden National Corporation
Two Elm Street
Camden, Maine 04843

REGISTRATION STATEMENT ON FORM S-8

To Whom It May Concern:

I am General Counsel and Chairman of the Board for Camden National Corporation,
a Maine corporation (the "Company"), and have represented it in connection with
a Registration Statement on Form S-8 which was filed by the Company under the
Securities Act of 1933, as amended, (the "Registration Statement"), and which
registers 110,179 shares of the Common Stock, no par value, of the Company (the
"Shares") to be issued pursuant to the KSB Bancorp, Inc. 1993 Incentive Stock
Option Plan and KSB Bancorp, Inc. 1998 Long-Term Incentive Stock Benefit Plan
(the "Plans").  In that capacity, I have reviewed the articles of incorporation
and by-laws of the Company, the Registration Statement, the corporate action
taken by the Company that provides for the issuance or delivery of the Shares to
be issued or delivered pursuant to the Plans and such other materials and
matters as I have deemed necessary for the issuance of this opinion.

Based upon the foregoing, I am of the opinion that the Shares have been duly and
validly authorized and upon issuance, delivery and receipt of full consideration
therefor as contemplated in the Registration Statement, will be, under the
general corporation law of the State of Maine, legally issued, fully paid, and
non-assessable.

I consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to me and to my opinion in the Registration
Statement.

Very truly yours,



/s/ Rendle A. Jones, Esq.
- -------------------------
Rendle A. Jones, Esq.
General Counsel and Chairman of the Board

<PAGE>

                                                                    Exhibit 23.1


                   Consent of Independent Public Accountants


    As independent public accountants, we hereby consent to the incorporation by
reference in this S-8 Registration Statement of our report dated January 22,
1999 on our audit of the consolidated financial statements of Camden National
Corporation's Annual Report on Form 10-K for the year ended December 31, 1998
and to all references to our Firm included in this S-8 Registration Statement.



                            /s/ Berry, Dunn, McNeil & Parker, LLC

Portland, Maine
January 18, 2000

<PAGE>

                                                                    EXHIBIT 99.1

                               KSB BANCORP, INC.

                       1993 INCENTIVE STOCK OPTION PLAN


1.   PURPOSE.
     -------

     The purpose of KSB Bancorp, Inc. (the "Company") 1993 Incentive Stock
Option Plan (the "Plan") is to advance the interests of the Company and its
shareholders by providing key employees of the Company and its affiliates,
including Kingfield Savings Bank (the "Bank"), upon whose judgment, initiative
and efforts the successful conduct of the business of the Company and its
affiliates largely depends, with an additional incentive to perform in a
superior manner as well as to attract people of experience and ability.

2.   DEFINITIONS.
     -----------

     (a)  "Board of Directors" means the Board of Directors of the Company.

     (b)  "Affiliate" means (i) a member of a controlled group of corporations
of which the Company is a member or (ii) an unincorporated trade or business
which is under common control with the Company as determined in accordance with
Section 414(c) of the Internal Revenue Code (the "Code") and the regulations
issued thereunder. For purposes hereof, a "controlled group of corporations"
shall mean a controlled group of corporations as defined in Section 1563(a) of
the Code determined without regards to Section 1563(a)(4) and (e)(3)(C).

     (c)  "Award" means a grant of Non-statutory Stock Options or Incentive
Stock Options.

     (d)  "Committee" means a Committee designated by the Board of Directors
consisting of only Outside Directors all of whom are "disinterested directors"
as such term is defined under Rule 16b-3 under the Securities Exchange Act of
1934, as amended, as promulgated by the Securities and Exchange Commission.

     (e)  "Plan Year or Years" means a calendar year or years commencing on or
after December 31, 1992.

     (f)  "Date of Grant" means the actual date on which an Award is granted by
the Committee.

     (g)  "Common Stock" means the Common Stock of the Company, par value, $.01
per share.

     (h)  "Fair market Value" means, when used in connection with the Common
Stock on a certain date, the reported closing, or last sale, price, or the
average of the closing bid and ask price, of the Common Stock as reported by the
National Association of Securities Dealers Automated Quotation System (as
published by the Wall Street Journal, if published) on that date.

                                      A-1
<PAGE>

or if the Common Stock was not traded on such date, on the next preceding day on
which the Common Stock was traded thereon.

     (i)  "Disability" means disability as defined in the Bank's Retirement
Plan.

     (j)  "Termination for Cause" means termination because of a material loss
to the Company or one of its affiliates caused by the Participant's personal
dishonesty, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties or the willful violation of
any law, rule or regulation or final cease-and-desist order.

     (k)  "Participant" means an employee of the Company or its affiliates
chosen by the Committee to participate in the Plan.

     (l) "Change in Control" of the Holding Company means a Change in Control of
a nature that: (i) would be required to be reported in response to Item 1(a) of
the current report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act");
or (ii) results in a Change in Control of the Bank or the Company within the
meaning of the Change In Bank Control Act and the Rules and Regulations
promulgated by the Federal Reserve Board, as in effect on the effective date of
this Plan; or (iii) without limitation such a Change in Control shall be deemed
to have occurred at such time as (a) any "person" (as the term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner"(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Bank or the Company representing 20% or more of the Bank's
or the Company's outstanding securities ordinarily having the right to vote at
the election of directors except for any securities of the Bank purchased by the
Company in connection with the conversion of the Bank to the stock form and any
securities purchased by the Company's employee stock benefit plans; or (b)
individuals who constitute the Board on the date hereof (the "Incumbent Board")
cease for any reason to constitute at least a majority thereof, provided that
any person becoming a director subsequent to the date hereof whose election was
approved by a vote of at least three-quarters of the directors comprising the
Incumbent Board, or whose nomination for election by the Company's shareholders
was approved by the same Nominating Committee serving under an Incumbent Board,
shall be, for purposes of this clause (b), considered as though he were a member
of the Incumbent Board; or (c) a plan of reorganization, a merger,
consolidation, sale of all or substantially all the assets of the Bank or the
Company or similar transaction in which the Bank or Company is not the surviving
institution occurs.

     (m)  "Normal Retirement" means retirement at age 65.

3.   ADMINISTRATION.
     --------------

     The Plan shall be administered by the Committee. The Committee is
authorized, subject to the provisions of the Plan, to establish such rules and
regulations as it sees necessary for the proper administration of the Plan and
to make whatever determinations and interpretations in connection with the Plan
it sees as necessary or advisable. All determinations and interpretations

                                      A-2
<PAGE>

made by the Committee shall be binding and conclusive on all Participants in the
Plan and on their legal representatives and beneficiaries.

4.   TYPES OF AWARDS.
     ---------------

     Awards under the Plan may be granted in any one or a combination of:
     (a)  Incentive Stock Options; and
     (b)  Non-statutory Stock Options.

as defined below in paragraphs 7-8 of the Plan.

5.   STOCK SUBJECT TO THE PLAN.
     -------------------------

     Subject to adjustment as provided in Section 13, the number of shares
reserved for issuance under the Plan is twenty-five thousand, three hundred
seventy-five (25,375'" shares of Common Stock of the Company, par value $.01 per
share. These shares of Common Stock may be either authorized but unissued shares
or shares previously issued and reacquired by the Company. To the extent that
options or rights granted under the Plan are exercised, the shares covered will
be unavailable for future grants under the Plan; to the extent that options
expire or are cancelled without having been exercised, the shares subject to
such options shall return to the pool of shares reserved for issuance under the
Plan.

6.   ELIGIBILITY.
     -----------

     Officers and other employees of the Company or its affiliates who are
employed on a full time basis shall be eligible to receive Incentive Stock
Options or Non-statutory Stock Options under the Plan. Directors who are not
employees or officers of the Company or its affiliates shall not be eligible to
receive Awards under the Plan.

7.   NON-STATUTORY STOCK OPTIONS.
     ---------------------------

7.1  Grant of Non-statutory Stock Options.
     ------------------------------------

     The Committee may, from time to time, grant Non-statutory Stock Options to
eligible employees and, upon such terms and conditions as the Committee may
determine, grant Non-statutory options in exchange for and upon surrender of
previously granted Awards under this Plan. Non-statutory Stock Options granted
under this Plan are subject to the following terms and conditions:

     (a)  Price. The purchase price per share of Common Stock deliverable upon
          -----
the exercise of each Non-statutory Stock Option shall be 100% of the Fair Market
Value of the Company's Common Stock on the date the option is granted. Shares
may be purchased only upon full payment of the purchase price. Payment of the
purchase price may be made, in whole or in part, through the surrender of shares
of the Common Stock of the Company at the Fair Market Value of such shares
determined in the manner described in Section 2(h).

                                      A-3
<PAGE>

     (b)  Terms of Options. The term during which each Non-statutory Stock
          ----------------
Option may be exercised shall be determined by the Committee, but in no event
shall a Non-statutory Stock Option be exercisable in whole or in part more than
10 years and one day from the Date of Grant. The Committee shall determine the
date on which each Non-statutory Stock Option shall become exercisable and may
provide that a Non-statutory Stock Option shall be exercisable in installments.
The shares comprising each installment may be purchased in whole or in part at
any time after such installment becomes purchasable. The Committee may, in its
sole discretion, accelerate the time at which any Non-statutory Stock Option may
be exercised in whole or in part. Notwithstanding the above, in the event of a
Change in Control of the Company, all Non-statutory Stock Options shall become
immediately exercisable. No Incentive Stock Option granted under this Plan is
transferable except by will or the laws of descent and distribution and is
exercisable in his lifetime only by the employee to whom it is granted.

     (c)  Termination of Employment. Upon the termination of an employee's full
          -------------------------
time service for any reason other than Disability, Normal Retirement, a change
in control as defined in Section 2(1), death or Termination for Cause, his
Non-statutory Stock Options shall be exercisable only as to those shares which
were immediately purchasable by him at the date of termination and only for a
period of three months following termination. In the event of Termination for
Cause, all rights under his Non-statutory Stock Options shall expire upon
termination. In the event of the death, Disability or Normal Retirement of any
employee or a change in control as defined in Section 2(1), all Non-statutory
Stock Options held by the employee, whether or not exercisable at such time,
shall be exercisable by the employee or his legal representatives or
beneficiaries for one year following the date of his death, disability, normal
retirement or the date of any termination (except for cause) following a change
in control provided that in no event shall the period extend beyond the
expiration of the Non-statutory Stock Option term. The Committee may extend the
time period to exercise any Non-statutory Stock Option.

8.   INCENTIVE STOCK OPTIONS.
     -----------------------

8.1  Grant of Incentive Stock Options.
     --------------------------------

     The Committee may, from time to time, grant Incentive Stock Options to
eligible employees. Incentive Stock Options granted pursuant to the Plan shall
be subject to the following terms and conditions:

     (a)  Price. The purchase price per share of Common Stock deliverable upon
          -----
the exercise of each Incentive Stock Option shall be not less than 100% of the
Fair Market Value of the Company's Common Stock on the date the Incentive Stock
Option is granted. However, if an employee owns stock possessing more than 10%
of the total combined voting power of all classes of Common Stock of the
Company, the purchase price per share of Common Stock deliverable upon the
exercise of each Incentive Stock Option shall not be less than 110% of the Fair
Market Value of the Company's Common Stock on the date the Incentive Stock
Option is granted. Shares may be purchased only upon payment of the full
purchase price. Payment of the purchase price may be made, in whole or in part,
through the surrender of shares of the

                                      A-4



<PAGE>

Common Stock of the Company at the Fair Market Value of such shares determined
in the manner described in Section 2(h).

     (b) Amounts of Options. Incentive Stock Options may be granted to any
         -------------------
eligible employee in such amounts as determined by the Committee: provided that
the amount granted is consistent with the terms of Section 422A of the Code. In
the case of an option intended to qualify as an Incentive Stock Option, the
aggregate Fair Market Value (determined as of the time the option is granted) of
the Common Stock with respect to which Incentive Stock Options granted are
exercisable for the first time by the Participant during any calendar year
(under all plans of the Participant's employer corporation and its parent and
subsidiary corporations) shall not exceed $100,000. The provisions of this
Section 8.1(b) shall be construed and applied in accordance with Section 422A(d)
of the Code and the regulations, if any, promulgated thereunder.

     (c)  Terms of Options. The term during which each Incentive Stock Option
          ----------------
may be exercised shall be determined by the Committee, but in no event shall an
Incentive Stock Option be exercisable in whole or in part more than 10 years
from the Date of Grant. If any employee, at the time an Incentive Stock Option
is granted to him, owns Common Stock representing more than 10% of the total
combined voting power of the Company (or, under Section 425(d) of the Code, is
deemed to own Common Stock representing more than 10% of the total combined
voting power of all such classes of Common Stock, by reason of the ownership of
such classes of Common Stock, directly or indirectly, by or for any brother,
sister, spouse, ancestor or lineal descendent of such employee, or by or for any
corporation, partnership, estate or trust of which such employee is a
shareholder, partner or beneficiary), the Incentive Stock Option granted to him
shall not be exercisable after the expiration of five years from the Date of
Grant. No Incentive Stock Option granted under this Plan is transferable except
by will or the laws of descent and distribution and is exercisable in his
lifetime only by the employee to whom it is granted.

     The Committee shall determine the date on which each Incentive Stock Option
shall become exercisable and may provide that an Incentive Stock Option shall
become exercisable in installments. The shares comprising each installment may
be purchased in whole or in part at any time after such installment becomes
purchasable, provided that the amount able to be first exercised in a given year
is consistent with the terms of Section 422A of the Code. The Committee may, in
its sole discretion, accelerate the time at which any Incentive Stock Option
may be exercised in whole or in part, provided that it is consistent with the
terms of Section 422A of the Code. Notwithstanding the above, in the event of a
Change in Control of the Company, all Incentive Stock Options shall become
immediately exercisable.

     (d)   Termination of Employment. Upon the termination of an employee's full
           -------------------------
time service for any reason other than Disability, Normal Retirement, Change in
Control, death or Termination for Cause, his Incentive Stock Options shall be
exercisable only as to those shares which were immediately purchasable by him at
the date of termination and only for a period of three months following
termination. In the event of Termination for Cause all rights under his
Incentive Stock Options shall expire upon termination.

                                      A-5

<PAGE>

     In the event of death or Disability of any employee, all Incentive Stock
Options held by such employee, whether or not exercisable at such time, shall be
exercisable by the Participant or his legal representatives or beneficiaries for
one year following the date of his death or cessation of employment due to
Disability. Upon termination of an employee's service due to Normal Retirement,
or a Change in Control, all Incentive Stock Options held by such employee,
whether or not exercisable at such time, shall be exercisable for a period of
one year following the date of his cessation of employment, provided however,
that such option shall not be eligible for treatment as an Incentive Stock
Option in the event such option is exercised more than three months following
the date of his cessation of employment. In no event shall the exercise period
extend beyond the expiration of the Incentive Stock Option term. The Committee
may extend the time period to exercise an Incentive Stock Option.

9.   SURRENDER AND CANCELLATION OF OPTIONS.
     -------------------------------------

     With the written consent of the Company and an Optionee, an option
previously granted may be cancelled, and new options may be granted to the
Optionee or others in connection with the cancellation or at any time thereafter
during the term of the Plan.

10.  RIGHTS OF A SHAREHOLDER: NONTRANSFERABILITY.
     -------------------------------------------

     An optionee shall have no rights as a shareholder with respect to any
shares covered by a Non-statutory and/or Incentive Stock Option until the date
of issuance of a stock certificate for such shares. Nothing in this Plan or in
any Award granted confers on any person any right to continue in the employ of
the Company or its affiliates or to continue to perform services for the Company
or its affiliates or interferes in any way with the right of the Company or its
affiliates to terminate his services as an officer or other employee at any
time.

     No Award under the Plan shall be transferable by the optionee other than by
will or the laws of descent and distribution and may only be exercised during
his lifetime by the optionee, or by a guardian or legal representative.

11.  AGREEMENT WITH GRANTEES.
     -----------------------

     Each Award of Options will be evidenced by a written agreement, executed by
the Participant and the Company or its affiliates which describes the conditions
for receiving the Awards including the date of Award, the purchase price if any,
applicable periods, and any other terms and conditions as may be required by the
Board of Directors or applicable securities law.

12.  DESIGNATION OF BENEFICIARY.
     --------------------------

     A Participant may, with the consent of the Committee, designate a person or
persons to receive, in the event of death, any stock option Award to which he
would then be entitled. Such designation will be made upon forms supplied by and
delivered to the Company and may be revoked in writing. If a Participant fails
effectively to designate a beneficiary, then his estate will be deemed to be the
beneficiary.

                                      A-6
<PAGE>

13.  DILUTION AND OTHER ADJUSTMENTS.
     ------------------------------

     In the event of any change in the outstanding shares of Common Stock of the
Company by reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares, or
other similar corporate change, or other increase or decrease in such shares
without receipt or payment of consideration by the Company, the number of shares
subject to this Plan shall be proportionately adjusted and the Committee will
make such adjustments to previously granted Awards, to prevent dilution or
enlargement of the rights of the Participant, including any or all of the
following:

     (a)  adjustments in the aggregate number or kind of shares of Common Stock
          covered by Awards already made under the Plan; and

     (b)  adjustments in the purchase price of outstanding Incentive and/or
          Non-statutory Stock Options.

     No such adjustments may, however, materially change the value of benefits
available to a Participant under a previously granted Award.

14.  WITHHOLDING.
     -----------

     There may be deducted from each distribution of cash and/or Common Stock
under the Plan the amount of tax required by any governmental authority to be
withheld.

15.  AMENDMENT OF THE PLAN.
     ---------------------

     The Board of Directors may at any time, and from time to time, modify or
amend the Plan in any respect; provided however, that if desired to continue to
qualify the Plan under the Securities and Exchange Commission Rule 16b-3,
shareholder approval shall be required for any such modification or amendment
which:

     (a)  materially increases the maximum number of shares for which options
          may be granted under the Plan (subject, however, to the provisions of
          Section 13 hereof);

     (b)  materially increase the benefits accruing to participants under the
          Plan; or

     (d)  materially modifies the requirements as to eligibility for
          participation in the Plan.

     Failure to ratify or approve amendments or modifications to subsections (a)
through (d) of this Section by shareholders shall be effective only as to the
specific amendment or modification requiring such ratification. Other
provisions, sections, and subsections of this Plan will remain in full force and
effect.

     No such termination, modification or amendment may affect the rights of a
Participant under an outstanding Award.

                                      A-7
<PAGE>

16.  EFFECTIVE DATE OF PLAN.
     ----------------------

     The Plan shall become effective upon adoption by the Board of Directors of
the Company, subject to shareholder approval. The Plan shall be presented to
shareholders for approval for purposes of; (i) obtaining favorable treatment
under Section 16(b) of the Securities Exchange Act of 1934; (ii) obtaining
preferential tax treatment for Incentive Stock Options; and (iii) maintaining
listing on the Nasdaq National Market. If such approval is not obtained, any
option granted prior hereto shall be null and void and the Plan shall terminate.

17.  TERMINATION OF THE PLAN.
     -----------------------

     The right to grant Awards under the Plan will terminate upon the earlier of
ten (10) years after the Effective Date of the Plan or the issuance of Common
Stock or the exercise of options or related rights equaling the maximum number
of shares reserved under the Plan as set forth in Section 5. The Board of
Directors has the right to suspend or terminate the Plan at any time, provided
that no such action will, without the consent of a Participant, adversely affect
his rights under a previously granted Award.

18.  APPLICABLE LAW.
     --------------

     The Plan will be administered in accordance with the laws of the State of
Delaware.

                                      A-8

<PAGE>

                                AMENDMENT NO.  1
                                       TO
                                KSB BANCORP INC.
                        1993 INCENTIVE STOCK OPTION PLAN


     WHEREAS, the Board of Directors ("Board") of KSB Bancorp Inc.  (the
"Company") desires to amend the KSB Bancorp Inc. 1993 Incentive Stock Option
Plan (the "Plan") to conform to the new rules adopted by the Securities and
Exchange Commission (SEC) as they relate to Section 16 of the Securities
Exchange Act of 1934;

     WHEREAS, Section 15 of the Plan permits the Plan to be amended from time to
time subject to Securities and Exchange Commission Rule 16b-3;

     WHEREAS, Rule 16b-3 no longer requires shareholder approval as a
prerequisite to any modification or amendment that affects the grant, award or
other acquisition from an issuer;

     NOW, THEREFORE, BE IT RESOLVED, that the Plan shall be, and hereby is,
amended effective as of December 30, 1997, in accordance with the following:


1.   Section 2, DEFINITIONS is amended as follows:
                -----------

          Subsection 2(d), the definition of COMMITTEE, shall be amended by
     deleting the paragraph thereof and adding the following paragraph in lieu
     thereof:

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

     A new definition of "Non-Employee Director" is added and reads as follows:

               "NON-EMPLOYEE DIRECTOR" mans, for purposes of the Plan, a
          Director who (a) is not employed by the Company; (b) does not receive
          compensation directly or indirectly as a consultant (or in any other
          capacity than as a Director) greater than $60,000; (c) does not have
          an interest in a transaction requiring disclosure under Item 404(a) of
          Regulation S-K; or (d) is not engaged in a business relationship for
          which disclosure would be required pursuant to Item 404(b) of
          Regulation S-K.

2.   Section 3, ADMINISTRATION, is amended by adding to the end thereof the
                --------------
     following:

          All transactions involving a grant, award or other acquisition from
          the Company shall:

          (a)   be approved by the Company's full Board or by the Committee;
<PAGE>

          (b)  be approved, or ratified, in compliance with Section 14 of the
               Exchange Act, by either: the affirmative vote of the holders of a
               majority of the securities present, or represented and entitled
               to vote at a meeting duly held in accordance with the laws of the
               state in which the Company is incorporated; or the written
               consent of the holders of a majority of the securities of the
               issuer entitled to vote provided that such ratification occurs no
               later than the date of the next annual meeting of shareholders;
               or

          (c)  be held by the Participant for a period of six months following
               the date of such acquisition.

3.   Subsection 7.1(b), TERMS OF OPTIONS, is hereby amended by deleting the
                        ----------------
     first sentence thereof and adding the following sentence in lieu thereof:

          The term during which each Non-statutory Stock Option may be exercised
     shall be determined by the Committee.

4.   Section 7, NON-STATUTORY STOCK OPTIONS, is hereby amended by adding (d) to
                ---------------------------
     the end thereof, which shall state as follows:

          (d)  TRANSFERABILITY. In the discretion of the Board, all or any Non-
               ---------------
               Statutory Stock Options granted hereunder may be transferable by
               the Participant, provided, however, that the Board may limit the
               transferability of such Option or Options to a designated class
               or classes of persons.

5.   Section 8, INCENTIVE STOCK OPTIONS, is hereby amended by replacing all
                -----------------------
     references to Section 422A of the Code with Section 422 of the Code.

6.   Subsection 8.1(c), TERMS OF OPTIONS, is hereby amended by replacing all
                        ----------------
     references to Section 425(d) of the Code with Section 424(d) of the Code.

7.   Subsection 8.1(c), TERMS OF OPTIONS, is further amended by deleting the
                        ----------------
     second paragraph thereof and adding the following paragraph in lieu
     thereof:

          The Committee shall determine the date on which each Incentive Stock
     Option shall become exercisable and may provide that an Incentive Stock
     Option shall become exercisable in installments.  The shares comprising
     each installment may be purchased in whole or in part at any time during
     the term of such option after such installment becomes exercisable,
     provided that the amount able to be first exercised in a given year is
     consistent with the term of Section 422 of the Code.  To the extent
     required by Section 422 of the Code, the aggregate Fair Market Value
     (determined at the time the option is granted) of the Common Stock for
     which Incentive Stock Options are exercisable for the first time by a
     Participant during any calendar year (under all plans of the Holding
     Company and its

                                       2
<PAGE>

     Affiliates) shall not exceed $100,000. The Committee may, in its sole
     discretion, accelerate the time at which any Incentive Stock Option may be
     exercised in whole or in part, provided that it is consistent with the
     terms of Section 422 of the Code. Notwithstanding the above, in the event
     of a Change in Control of the Company, all Incentive Stock Options shall
     become immediately exercisable, unless the Fair Market Value of the amount
     exercisable as a result of a Change in Control shall exceed $100,000
     (determined as of the Date of Grant). In such event, the first $100,000 of
     Incentive Stock Options (determined as of the Date of Grant) shall be
     exercisable as Incentive Stock Options and any excess shall be exercisable
     as Non-Statutory Stock Options.

8.   Subsection 8.1(d), TERMINATION OF EMPLOYMENT, is amended by deleting the
                        -------------------------
     last sentence thereof and adding the following sentence in lieu thereof:

               The Committee may extend the time period to exercise an Incentive
          Stock Option; however, such an extension shall cause the option,
          pursuant to Subsection 424(h) of the Code, to be treated as newly
          granted.

9.   A new Subsection 8.1(e) COMPLIANCE WITH CODE is added and reads as follows:
                             --------------------

          The options granted under this Section 8 of the Plan are intended to
     qualify as incentive stock options within the meaning of Section 422 of the
     Code, but the Company makes no warranty as to the qualification of any
     option as an incentive stock option within the meaning of Section 422 of
     the Code.  If an Option granted hereunder fails for whatever reason to
     comply with the provisions of Section 422 of the Code, and such failure is
     not or cannot be cured, such Option shall be a Non-Statutory Stock Option.

10.  Section 10, RIGHTS OF A SHAREHOLDER: NONTRANSFERABILITY, is amended by the
                 -------------------------------------------
     removal of the second paragraph and is retitled RIGHTS OF A SHAREHOLDER.
                                                     -----------------------
11.  Section 13, DILUTION AND OTHER ADJUSTMENTS, is amended by the addition to
                 ------------------------------
     the end of the last paragraph the following:

          With respect to Incentive Stock Options, no such adjustment shall be
     made if it would be deemed a "modification" of the Award under Section 424
     of the Code.

12.  Section 15, AMENDMENT OF THE PLAN, is amended and reads in its entirety as
                 ---------------------
     follows:

          The Board may, at any time, and from time to time, modify or amend the
     Plan in any respect, or modify or amend an Award received by a Participant;
     provided, however, that no such termination, modification or amendment may
     affect the rights of a Participant, without his consent, under an
     outstanding Award.  Any amendment or modification of the Plan or an
     outstanding Award under the Plan shall be approved by the Committee or the
     full Board of the Company.

                                       3
<PAGE>

13.  A new Section 19 is added to the Plan as follows:


          19.  ACCELERATED OWNERSHIP STOCK OPTION RIGHTS.  The Committee may
     grant the right to receive an Accelerated Ownership Option simultaneously
     with, or subsequent to, the grant of any stock option, with respect to all
     or some of the shares covered by such stock option.  In the event an
     Accelerated Ownership Option Right has been granted, upon the exercise of
     the related Stock Option, the participant will be granted an Accelerated
     Ownership Stock Option (which may be an Incentive or Non-Incentive Stock
     Option) to purchase a number of shares of Common Stock equal to the sum of
     the number of whole shares of Common Stock used by the participant in
     payment of the purchase price of the Stock Option.  The exercise price of
     the Accelerated Ownership Option shall be the Fair Market Value of the
     Common Stock on the date of grant of the Accelerated Ownership Option.  The
     term during which the Accelerated Ownership Option may be exercised (and
     the other terms and conditions) shall be determined by the Committee, but
     in no event shall an Accelerated Ownership Option be exercisable in whole
     or in part before the expiration of six months from the date of the grant
     of the Accelerated Ownership Option.  Any shares that are used for the full
     or partial payment of the exercise price of any option in connection with
     an Accelerated Ownership Option Right will not be counted as issued under
     the Plan and will be available for future grants under the Plan.



                                       4
<PAGE>

     IN WITNESS WHEREOF, this Amendment No. 1 has been executed by the duly
authorized officers of the Company as of the 30th day of December, 1997.


ATTEST:                       KSB BANCORP, INC.



____________________                By: __________________________________
                                    President and Chief Executive Officer

                                       5


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