COMMUNITY BANKS, INC. LONG-TERM INCENTIVE PLAN STOCK OPTION AGREEMENT
Exhibit
10
COMMUNITY
BANKS, INC.
LONG-TERM
INCENTIVE PLAN
TO:
Xxxxxx
Xxxxxxx
SSN:
xxx-xx-xxxx
DATE:
July 25, 2005
You
are
hereby granted an option, effective as of the date hereof, to purchase
3688
shares
of Common Stock of Community Banks, Inc. ("CBI"), hereby designated as
Incentive
Stock Options (sometimes referred to as “ISO’s”)
at a
price of $
27.11
per
share, and 6312
shares
of
CBI Common Stock, hereby designated as Non-qualified
Stock Options (sometimes referred to as “NQSO’s”)
at a
price of $27.11
per
share, pursuant to the Community Banks, Inc. Long-Term Incentive Plan (the
"Plan") adopted by the shareholders of CBI on May 26, 1998 and effective May
31,
1998.
VESTING
OF ISO’s GRANTED JULY 25, 2005
Your
ISO(s) may first be exercised on or after six months from the date of grant,
but
not before that time. On
and after six months from the date of grant, your ISO(s) may be exercised for
up
to 100% of the total number of shares.
The
ISO(s) shall terminate and shall not be exercisable after expiration of ten
years from the date of grant.
VESTING
OF NQSO’s
Your
NQSO(s) may first be exercised on and after six months from the date of grant,
but not before that time. On
and after six months from the date of grant,
your
NQSO(s) may be exercised for up to 100%
of
the
total number of shares then subject to the NQSO(s).
CHANGE
OF CONTROL
In
the
event of a "change of control" (as hereafter defined) of CBI, your option may,
from and after the date of the change in control, be exercised for up to 100%
of
the total number of shares then subject to the option (computed without regard
to the exercise restrictions set forth in the preceding paragraph) minus the
number of shares previously purchased upon exercise of the option (as adjusted
for stock dividends, stock splits, combinations of shares and what the
Compensation Committee deems in its sole discretion to be similar
circumstances). A "change of control" shall be deemed to have occurred upon
the
happening of any of the following events:
1
(1)
|
a
change within a twelve month period in a majority of the members
of the
Board of Directors of CBI;
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(2)
|
a
change within a twelve month period in the holders of more than 50%
of the
outstanding voting stock of CBI; or
|
(3)
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any
other event deemed to constitute a "change of control" by the Compensation
Committee.
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LIMITATION
UPON GRANT OF ISOs
ISOs
will
not be granted if the effect of the grant would be to allow you to exercise
for
the first time, in any calendar year, ISOs to purchase stock having a fair
market value of more than $100,000 (determined at the date of
grant).
METHOD
OF EXERCISE
You
may
exercise your option by giving written notice to the Secretary of CBI on forms
supplied by CBI at its then principal executive office, accompanied by payment
of the option price for the total number of shares you specify that you wish
to
purchase. The payment may be in any of the following forms: (i) cash, which
may
be evidenced by a check (provided, that any optionee whose employment has
terminated and the estate of any deceased optionee must make payment by
certified or cashier’s check); (ii) certificates representing shares of CBI
Common Stock which will be valued by the Secretary of CBI at the fair market
value on the date of exercise, accompanied by an assignment of the stock to
CBI;
or (iii) any combination thereof. Any assignment of stock shall be in a form
and
substance satisfactory to the Secretary of CBI, including guarantees of
signature(s) where he/she deems such guarantees necessary or
desirable.
TERMINATION
Your
option will, to the extent not previously exercised by you, terminate three
years after the date on which your employment by CBI or a CBI subsidiary is
terminated other than by reason of disability (as defined in Section 105 (d)
(4)
of the Internal Revenue Code of 1954, as amended (the "Code")) or death (but
in
no event later than ten years from the date this option is granted). If you
are
employed by a CBI subsidiary corporation, your employment shall be deemed to
have terminated on the date your employer ceases to be CBI subsidiary
corporation, unless you are on that date transferred to CBI or another CBI
subsidiary corporation. Your employment shall not be deemed to have terminated
if you are transferred from CBI to a CBI affiliate or subsidiary, or vice versa,
or from one of CBI subsidiary corporations to another CBI subsidiary
corporation.
If
you
die while employed by CBI or a CBI subsidiary corporation, your executor or
administrator may, at any time within one year after the date of your death
(but
in no event later than ten years from the date this option is granted), exercise
the option for up to 100% of the total
number of shares then subject to the option (computed without regard to the
exercise restrictions set forth in the second paragraph hereof) minus the number
of shares previously purchased upon exercise of the option (as adjusted for
stock dividends, stock splits, combinations of shares and what the Compensation
Committee deems in its sole discretion to be similar
circumstances).
2
If
your
employment by CBI or a CBI subsidiary corporation is terminated by reason of
your becoming disabled (within the meaning of Section 105 (d) (4) of the Code),
you or your legal guardian or custodian may at anytime within one year after
the
date of such termination (but in no event later than ten years from the date
this option is granted), exercise the option for up to 100% of the total number
of shares then subject to the option (computed without regard to the exercise
restrictions set forth in the second paragraph hereof) minus the number of
shares previously purchased upon exercise of the option (as adjusted for stock
dividends, stock splits, combinations of shares and what the Compensation
Committee deems in its sole discretion to be similar circumstances). Your
executor, administrator, guardian, or custodian must present proof of his/her
authority satisfactory to CBI prior to being allowed to exercise this
option.
Except
with respect to your death or disability as described above, any options
exercised later than three (3) months after the date your employment by CBI
or a
CBI subsidiary is terminated cannot receive ISO treatment and will be deemed
NQSOs. Further, you acknowledge and agree that CBI has encouraged you to seek
advice from a tax professional with respect to any exercise of an option or
the
sale of any shares acquired through an exercise.
ADJUSTMENT
In
the
event of any change in the outstanding shares of CBI Common Stock by reason
of a
stock dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion, or what the
Compensation Committee deems in its sole discretion to be similar circumstances,
the number and kind of shares subject to this option and the option price for
such shares shall be appropriately adjusted in a manner to be determined in
the
sole discretion of the Compensation Committee.
TRANSFERABILITY
/ RIGHTS PRIOR TO EXERCISE
This
option is not transferable, except in the event of disability or death as
provided above. During your lifetime, this option is exercisable only by you.
Until the option price has been paid in full pursuant to due exercise of this
option and the purchased shares are delivered to you, you do not have any rights
as a stockholder of CBI. CBI reserves the right not to deliver to you the shares
purchased by virtue of the exercise of this option during any period of time
in
which CBI deems, in its sole discretion, that such delivery may not be
consummated without violating a federal, state, local, or securities exchange
rule, regulation, or law.
3
OTHER
RESTRICTIONS
Notwithstanding
anything to the contrary contained herein, this option is not exercisable until
all the following events occur and during the following periods of
time:
(1)
|
Until
the Plan pursuant to which this option is granted is approved by
the
stockholders of CBI;
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(2)
|
Until
this option and the optioned shares are approved and/or registered
with
such federal, state, and local regulatory bodies or agencies and
securities exchanges as CBI may deem necessary or
desirable;
|
(3)
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During
any period of time in which CBI deems that the exercisability of
this
option, the offer to sell the shares optioned hereunder, or the sale
thereof, may violate a federal, state, local, or securities exchange
rule,
regulation or law, or may cause CBI to be legally obligated to issue
or
sell more shares than CBI is legally entitled to issue or
sell.
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The
following two paragraphs shall be applicable if, on the date of exercise of
this
option, the Common Stock to be purchased pursuant to such exercise has not
been
registered under the Securities Act of 1933 and under applicable state
securities laws, and shall continue to be applicable for so long as such
registration has not occurred:
A.
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The
optionee hereby agrees, warrants, and represents that he/she will
acquire
the Common Stock of CBI to be issued hereunder for his/her own respective
account for investment purposes only, and not with a view to, or
in
connection with, any resale or other distribution of any of such
shares,
except as hereafter permitted. The optionee further agrees that he/she
will not at any time make any offer, sale, transfer, pledge, or other
disposition of such Common Stock to be issued hereunder without an
effective registration statement under the Securities Act of 1933
(as
amended) and under any applicable state securities laws or an opinion
of
counsel for CBI to the effect that the proposed transaction will
be exempt
from such registration. The optionee agrees that, as a condition
precedent
to CBI obligation to permit the exercise of this option, the optionee
shall execute such instruments, representations, acknowledgments,
and
agreements as CBI may, in its sole discretion, deem advisable to
avoid any
violation of federal, state, local, or securities exchange rule,
regulation, or law.
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B.
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The
certificates for Common Stock to be issued to the optionee hereunder
shall
bear the following legend:
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"The
shares represented by this certificate have not been registered under the
Securities Act of 1933 (as amended) or under applicable state securities laws.
The shares have been acquired for investment and may not be offered, sold,
transferred, pledged, or otherwise disposed of without an effective registration
statement under the Securities Act of 1933 (as amended) and under any applicable
state securities laws or an opinion of counsel for the Corporation that the
proposed transaction will be exempt from such registration."
4
The
foregoing legend shall be removed upon registration of the legended shares
under
the Securities Act of 1933 (as amended) and under any applicable state laws
or
upon receipt of any opinion of counsel for CBI that said registration is no
longer required.
The
sole
purpose of the agreements, warranties, representations, and legend set forth
in
the two preceding paragraphs is to prevent violations of the Securities Act
of
1933 (as amended) and any applicable state securities laws.
CONFLICTING
TERMS
This
option shall be subject to the terms of the Plan in effect on the date this
option is granted and to the terms of a certain Employment and Consulting
Agreement between CBI and you dated December 31, 2004 (“Employment Agreement”),
which terms are hereby incorporated herein by reference and made a part hereof.
In the event of any conflict between the terms of this option and the terms
of
the Plan in effect on the date of this option, the terms of the Plan shall
govern. In the event of any conflict between the terms of this option and the
terms of the Employment Agreement, the terms of this option shall govern. This
option constitutes the entire understanding between CBI and you with respect
to
the subject matter hereof and no amendment, supplement, or waiver of this
option, in whole or in part, shall be binding upon CBI unless in writing and
signed by the President and Chief Executive Officer of CBI This option and
the
performances of the parties hereunder shall be construed in accordance with
and
governed by the laws of the Commonwealth of Pennsylvania applicable to contracts
made and to be performed solely in the Commonwealth of Pennsylvania.
NO
RIGHT TO CONTINUED EMPLOYMENT
Nothing
in this Agreement shall confer upon the optionee any right to continue in the
employ of CBI or any of its subsidiaries, or limit in any respect the right
of
CBI or any such subsidiary to terminate optionee’s employment at any
time.
ATTEST:
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COMMUNITY
BANKS, INC.
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/s/ Xxxxxxxx X. Xxxx
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By:
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/s/
Xxxxx X. Xxxxxxxxxxxx
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||
Xxxxx
X. Xxxxxxxxxxxx, President
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