<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
SOUTH STREET FINANCIAL CORP.
(Exact name of Registrant as specified in its charter)
North Carolina 56-1973261
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
155 West South Street
Albemarle, North Carolina 28001
(Address of Principal Executive Offices)
SOUTH STREET FINANCIAL CORP. STOCK OPTION PLAN
(Full title of the Plans)
--------------------
CARL M. HILL, President
South Street Financial Corp.
155 West South Street
Albemarle, North Carolina 28001
(704) 982-9184
(Name and address, including zip code, and telephone number, including area
code, of agent for service)
Copies to:
EDWARD C. WINSLOW III
JEAN C. BROOKS
Brooks, Pierce, McLendon,
Humphrey & Leonard, L.L.P.
2000 Renaissance Plaza
Post Office Box 26000
Greensboro, North Carolina 27420
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================
Title of Securities Amount to be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered/1/ Offering Price Aggregate Offering Registration
Per Unit Price/4/ Fee
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par 449,650/2/ $12.00/3/ $5,395,800.00 $1,591.76
value
================================================================================================
</TABLE>
(Footnotes on Next Page)
This Registration Statement shall become effective upon filing in
accordance with Section 8(a) of the Securities Act of 1933, as amended, and 17
C.F.R. (S)230.462.
<PAGE>
/1/Together with an indeterminate number of additional shares which may
be necessary to adjust the number of shares reserved for issuance pursuant to
the South Street Financial Corp. Stock Option Plan ("Stock Option Plan") as a
result of a reclassification, reorganization, recapitalization, stock split,
stock dividend or similar occurrence which makes an adjustment of shares just
and appropriate.
/2/Represents the total number of shares which may be issued pursuant to
options granted under the Stock Option Plan.
/3/Assumes a value per share underlying options granted under the Stock
Option Plan equal to $12.00, which was the price per share paid on January 16,
1998, which was the closing market price of South Street Financial Corp. common
stock on the Nasdaq National Market System on January 16, 1998.
/4/Estimated total for the purposes of calculating the registration fee
in accordance with Rule 457(c) and (h).
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<PAGE>
Part I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Item I. Plan Information.
This Registration Statement on Form S-8 relates to the registration of up
to 449,650 shares of common stock, no par value, of South Street Financial Corp.
(the "Registrant") which are reserved for issuance pursuant to options which
have been granted under the South Street Financial Corp. Stock Option Plan
("Stock Option Plan"). This Registration Statement also relates to an
indeterminent number of additional shares which may be necessary to adjust the
number of shares reserved for issuance pursuant to the Stock Option Plan as a
result of a reclassification, reorganization, recapitalization, stock split,
stock dividend or similar occurrence which makes an adjustment of shares just
and appropriate. Documents containing the information specified in Part I of
Form S-8 will be sent or given to the participants in the Stock Option Plan as
specified by Rule 428(b)(1). 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 pursuant to Rule 424 in
reliance on Rule 428.
Item 2. Registration Information and Employee Plan Annual Information.
The required statement is contained in the prospectus to be delivered
pursuant to Part I of this Registration Statement as specified by Rule
428(b)(1).
Part II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents filed with the Commission are incorporated herein
by reference:
(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
September 30, 1997.
(b) All reports filed by the Registrant pursuant to Sections 13(c) or
15(d) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") since the end of the fiscal year covered by the
Registrant's Annual Report on Form 10-K referred to in clause (a)
above.
(c) The description of the Registrant's Common Stock contained in the
Registrant's S-1 Registration Statement, Registration
<PAGE>
No. 333-04509, incorporated by reference in the Registration Statement
on Form 8-A filed with the Commission under Section 12(b) of the
Exchange Act on July 25, 1996 (File No. 0-21083), including any
amendment or report filed for the purpose of updating such description.
All documents subsequently filed by the Registrant and the Stock Option
Plan 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
registered hereby have been sold or which deregisters all securities then
remaining unsold, shall be deemed incorporated by reference herein and to be a
part hereof from the date of the filing of such documents. Any statement
contained in this Registration Statement, or in a document incorporated or
deemed to be incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of this Registration Statement to the extent that a
statement contained herein, or in any other subsequently filed document which is
also 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.
Not applicable.
Item 6. Indemnification of Directors and Officers.
The Registrant's Articles of Incorporation provide that to the fullest
extent permitted by the North Carolina Business Corporation Act (the "NCBCA"),
no person who serves as a director shall be personally liable to the Registrant
or any of its stockholders or otherwise for monetary damages for breach of any
duty as director. The Registrant's Bylaws state that any person who at any time
serves or has served as a director or officer of the Registrant, or who, while
serving as a director or officer of the Registrant, serves or has served at the
request of the Registrant as a director, officer, partner, trustee, employer or
agent of another corporation, partnership, joint venture, trust or other
enterprise, or as a trustee or administrator under an employee benefit plan,
shall have a right to be indemnified by the Registrant to the fullest extent
permitted by law against liability and litigation expense arising out of such
status or activities in such capacity. "Liability and litigation expense" is
defined in the Bylaws as including costs and expenses of
<PAGE>
litigation (including reasonable attorneys' fees), judgments, fines and amounts
paid in settlement which are actually and reasonably incurred in connection with
or as a consequence of any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, including
appeals.
Litigation expense, as described above, may be paid by the Registrant in
advance of the final disposition or termination of the litigation matter, if the
Registrant receives an undertaking, dated, in writing and signed by the person
to be indemnified, to repay all such sums unless such person is ultimately
determined to be entitled to be indemnified by the Registrant as provided in the
Registrant's Bylaws.
Sections 55-8-50 through 55-8-58 of the NCBCA contain provisions
prescribing the extent to which directors and officers shall or may be
indemnified. Section 55-8-51 of the NCBCA permits a corporation, with certain
exceptions, to indemnify a present or former director against liability if (i)
the director conducted himself in good faith, (ii) the director reasonably
believed (x) that the director's conduct in the director's official capacity
with the corporation was in its best interests and (y) in all other cases the
director's conduct was at least not opposed to the corporation's best interests,
and (iii) in the case of any criminal proceeding, the director had no reasonable
cause to believe the director's conduct was unlawful. A corporation may not
indemnify a director in connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation or in
connection with a proceeding charging improper personal benefit to the director.
The above standard of conduct is determined by the board of directors, or a
committee or special legal counsel or the shareholders as prescribed in Section
55-8-55.
Sections 55-8-52 and 55-8-56 of the NCBCA require a corporation to
indemnify a director or officer in the defense of any proceeding to which the
director or officer was a party against reasonable expenses when the director or
officer is wholly successful in the director's or officer's defense, unless the
articles of incorporation provide otherwise. Upon application, the court may
order indemnification of the director or officer if the director or officer is
adjudged fairly and reasonably so entitled under Section 55-8-54.
In addition, Section 55-8-57 permits a corporation to provide for
indemnification of directors, officers, employees or agents, in its articles of
incorporation or bylaws or by contract or resolution, against liability in
various proceedings and to purchase and maintain insurance policies on behalf of
these individuals.
3
<PAGE>
The foregoing is only a general summary of certain aspects of North
Carolina law dealing with indemnification of directors and officers and does not
purport to be complete. It is qualified in its entirety by reference to the
relevant statutes, which contain detailed specific provisions regarding the
circumstances under which and the person for whose benefit indemnifications
shall or may be made.
Item 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits
The following exhibits are filed with or incorporated by reference into
this Registration Statement on Form S-8 (numbering corresponds to Exhibit Table
in Item 601 of Regulation S-K):
Exhibit No. Description of Document
----------- -----------------------
(3)(i) The Registrant's Articles of Incorporation
(incorporated by reference to Exhibit (3)(i) of the
Registrant's S-1 Registration Statement,
Registration No. 333-04509, dated May 24, 1996
and amended on July 25, 1996)
(3)(ii) The Registrant's Bylaws (incorporated by
reference to Exhibit (3)(ii) of the Registrant's S-1
Registration Statement, Registration No.
333-04509, dated May 24, 1996 and amended on July
25, 1996)
(4) Specimen Stock Certificate for the Registrant
(incorporated by reference to Exhibit 4 of the
Registrant's S-1 Registration Statement,
Registration No. 333-04509, dated May 24, 1996
and amended on July 25, 1996)
(5) Opinion of Brooks, Pierce, McLendon, Humphrey
& Leonard, L.L.P. as to legality of securities
being registered
4
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(10) South Street Financial Corp. Stock Option Plan
(23)(i) Consent of Brooks, Pierce, McLendon, Humphrey
& Leonard, L.L.P. (included in Exhibit 5)
(23)(ii) Consent of McGladrey & Pullen, LLP
Item 9. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to the Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(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. Notwith standing 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 a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) above 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 with or furnished to the Commission by the
Registrant pursuant to Section 13
5
<PAGE>
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, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered that remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes, that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) 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.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions discussed in Item 6 thereof, or otherwise,
the Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities 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 hereby, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
6
<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act of
1933, 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 Albemarle, State of North Carolina, on the 10th
day of February, 1998.
SOUTH STREET FINANCIAL CORP.
Registrant
By: /s/ Carl M. Hill
-------------------------------------
Carl M. Hill, President
Each person whose individual signature appears below hereby makes,
constitutes and appoints Carl M. Hill to sign for such person and in such
person's name and capacity indicated below, any and all amendments to this
Registration Statement, including any and all post-effective amendments.
<PAGE>
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.
Date: February 10, 1998 By: /s/ Carl M. Hill
-----------------------------------
Carl M. Hill, President, Chief
Executive Officer and Director
(Principal Executive Officer)
Date: February 10, 1998 By: /s/ Christopher F. Cranford
-----------------------------------
Christopher F. Cranford, Controller
and Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
Date: February 10, 1998 By: /s/ R. Ronald Swanner
-----------------------------------
R. Ronald Swanner, Executive Vice
President, Secretary and Director
Date: February 10, 1998 By: /s/ Caldwell A. Holbrook, Jr.
-----------------------------------
Caldwell A. Holbrook, Jr., Director
Date: February 10, 1998 By: /s/ Joel A. Huneycutt
-----------------------------------
Joel A. Huneycutt, Director
Date: February 10, 1998 By: /s/ Douglas Dwight Stokes
-----------------------------------
Douglas Dwight Stokes, Director
Date: February 10, 1998 By: /s/ Greg E. Underwood
-----------------------------------
Greg E. Underwood, Director
<PAGE>
EXHIBIT INDEX
Method of
Exhibit No. Description Filing
- ----------- ----------- ---------------
(3)(i) The Registrant's Articles of Incorporated by
Incorporation Reference
(3)(ii) The Registrant's Bylaws Incorporated by
Reference
(4) Specimen Stock Certificate for the Incorporated by
Registrant Reference
(5) Opinion of Brooks, Pierce, Filed Herewith
McLendon, Humphrey & Leonard,
L.L.P. as to legality of
securities being registered
(10) South Street Financial Corp. Stock Filed Herewith
Option Plan
(23)(i) Consent of Brooks, Pierce, Filed Herewith
McLendon, Humphrey & Leonard,
L.L.P. (included in Exhibit 5)
(23)(ii) Consent of McGladrey & Pullen, LLP Filed Herewith
2
<PAGE>
February 10, 1998
(910) 271-3112
Board of Directors
South Street Financial Corp.
155 West South Street
Albemarle, North Carolina 28001
Re: South Street Financial Corp. Stock Option Plan -- Registration
Statement on Form S-8 with Respect to the Offering of up to 449,650
Shares of Common Stock
Gentlemen:
We have acted as special counsel to South Street Financial Corp. (the
"Holding Company"), in connection with the Holding Company's registration under
the Securities Act of 1933 on Form S-8 (the "Registration Statement") of its
offering of up to 449,650 shares of Common Stock, no par value (the "Shares"),
under the South Street Financial Corp. Stock Option Plan (the "Stock Option
Plan") in connection with the exercise of stock options (the "Option Rights").
As such counsel, we have made such legal and factual examinations and inquiries
as we deemed advisable for the purpose of rendering our opinions.
For purposes of rendering our opinion, we have assumed that (i) the Shares
issuable pursuant to the exercise of Option Rights granted under the terms of
the Stock Option Plan will continue to be duly and validly authorized on the
dates the Shares are issued pursuant to the Option Rights; (ii) on the dates the
Option Rights are exercised, the Option Rights granted under the terms of the
Stock Option Plan will constitute valid, legal and binding obligations of the
Holding Company and will (subject to applicable bankruptcy, moratorium,
insolvency, reorganization and other laws and legal principles affecting the
enforceability of creditors' rights generally) be enforceable against the
Holding Company in accordance with their terms; (iii) no change occurs after the
date hereof in applicable law or the pertinent facts; and (iv) the provisions of
applicable "blue sky" and other state securities laws have been complied with to
the extent required.
<PAGE>
Board of Directors
South Street Financial Corp.
February 10, 1998
Page 2
Based on the foregoing, and subject to the assumptions set forth herein, it
is our opinion as of the date hereof that the Shares which have been or are to
be issued pursuant to the Stock Option Plan have been duly and validly
authorized and, upon the issuance or sale of the Shares in accordance with the
Stock Option Plan, and upon receipt of any consideration required thereby, will
be legally issued, fully paid and nonassessable.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement.
Sincerely yours,
BROOKS, PIERCE, MCLENDON, HUMPHREY &
LEONARD, L.L.P.
By: /s/ Edward C. Winslow III
---------------------------------
Edward C. Winslow III
<PAGE>
SOUTH STREET FINANCIAL CORP.
STOCK OPTION PLAN
THIS IS THE STOCK OPTION PLAN ("Plan") of South Street Financial Corp. (the
"Corporation"), a North Carolina corporation, with its principal office in
Albemarle, Stanly County, North Carolina, adopted by the Board of Directors of
the Corporation and effective upon the approval of the Plan by the shareholders
of the Corporation, under which options may be granted from time to time to
eligible directors and employees of the Corporation, Home Savings Bank of
Albemarle, Inc., SSB (the "Bank") and of any corporation or other entity of
which either the Corporation or the Bank owns, directly or indirectly, not less
than fifty percent (50%) of any class of equity securities (a "Subsidiary"), to
purchase shares of common stock of the Corporation ("Common Stock"), subject to
the provisions set forth below:
1. PURPOSE OF THE PLAN. The purpose of the Plan is to aid the
-------------------
Corporation, the Bank and any Subsidiary in attracting and retaining capable
directors and employees and to provide a long range incentive for directors,
employees and others to remain in the management and service of the Corporation,
the Bank or any Subsidiary, to perform at increasing levels of effectiveness and
to acquire a permanent stake in the Corporation with the interest and outlook of
an owner. These objectives will be promoted through the granting of options to
acquire shares of Common Stock pursuant to the terms of this Plan.
2. ADMINISTRATION. The Plan shall be administered by a committee (the
--------------
"Committee"), which shall consist of not less than two members of the Board of
Directors of the Corporation (the "Board") who are "Non-Employee Directors" as
defined in Rule 16b-3(b)(3) of the Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Members of the Committee
shall serve at the pleasure of the Board. In the absence at any time of a duly
appointed Committee, this Plan shall be administered by the Board. The Committee
may designate any officers or employees of the Corporation, the Bank or any
Subsidiary to assist in the administration of the Plan and to execute documents
on behalf of the Committee and perform such other ministerial duties as may be
delegated to them by the Committee.
<PAGE>
Subject to the provisions of the Plan, the determinations or the
interpretation and construction of any provision of the Plan by the Committee
shall be final and conclusive upon all persons affected thereby. By way of
illustration and not of limitation, the Committee shall have the discretion (a)
to construe and interpret the Plan and all options granted hereunder and to
determine the terms and provisions (and amendments thereof) of the options
granted under the Plan (which need not be identical); (b) to define the terms
used in the Plan and in the options granted hereunder; (c) to prescribe, amend
and rescind the rules and regulations relating to the Plan; (d) to determine the
individuals to whom and the time or times at which such options shall be
granted, the number of shares to be subject to each option, the option price,
and the determination of leaves of absence which may be granted to participants
without constituting a termination of their employment for the purposes of the
Plan; and (e) to make all other determinations necessary or advisable for the
administration of the Plan.
It shall be in the discretion of the Committee to grant options which
qualify as "incentive stock options," as that term is defined in Section 422 of
the Internal Revenue Code of 1986, as amended ("Incentive Stock Options") or
which do not qualify as Incentive Stock Options ("Nonqualified Stock Options")
(herein referred to collectively as "Options;" however, whenever reference is
specifically made only to "Incentive Stock Options" or "Nonqualified Stock
Options," such reference shall be deemed to be made to the exclusion of the
other). Any options granted which fail to satisfy the requirements for
Incentive Stock Options shall become Nonqualified Stock Options.
3. STOCK AVAILABLE FOR OPTIONS. In the discretion of the Committee, the
---------------------------
stock to be subject to Options under the Plan shall be authorized but unissued
shares of Common Stock which are issued directly to optionees upon exercise of
options and/or shares of Common Stock which are acquired by the Plan or the
Corporation in the open market. The total number of shares of Common Stock for
which Options may be granted under the Plan is 449,650 shares, which is ten
percent (10%) of the total number of shares of Common Stock issued by the
Corporation in connection with the conversion of the Bank from a North Carolina
mutual savings bank to a North Carolina stock savings bank on October 2, 1996
(the "Conversion"). Such number of shares is subject to any capital adjustments
as provided in Section 16. In the event that an Option granted under the Plan
is forfeited, released, expires or is terminated unexercised as to any shares
covered thereby, such shares thereafter shall be available for the granting of
Options under the Plan; however, if the forfeiture, expiration,
<PAGE>
release or termination date of an Option is beyond the term of existence of the
Plan as described in Section 21, then any shares covered by forfeited,
unexercised, released or terminated options shall not reactivate the existence
of the Plan and therefore may not be available for additional grants under the
Plan. The Corporation, during the term of the Plan, will reserve and keep
available a number of shares of Common Stock sufficient to satisfy the
requirements of the Plan. In the discretion of the Committee, the shares of
Common Stock necessary to be delivered to satisfy exercised options may be from
authorized and unissued shares of Common Stock or may be purchased in the open
market.
4. ELIGIBILITY. Options shall be granted only to individuals who meet
-----------
all of the following eligibility requirements:
(a) Such individual must be an employee or a member of the Board
of Directors of the Corporation, the Bank or a Subsidiary. For this
purpose, an individual shall be considered to be an "employee" only if
there exists between the Corporation, the Bank or a Subsidiary and the
individual the legal and bona fide relationship of employer and
employee. In determining whether such relationship exists, the
regulations of the United States Treasury Department relating to the
determination of such relationship for the purpose of collection of
income tax at the source on wages shall be applied.
(b) Such individual must have such knowledge and experience in
financial and business matters that he or she is capable of evaluating
the merits and risks of the investment involved in the exercise of the
Options.
(c) Such individual, being otherwise eligible under this Section
4, shall have been selected by the Committee as a person to whom an
Option shall be granted under the Plan.
In determining the directors and employees to whom Options shall be granted
and the number of shares to be covered by each Option, the Committee shall take
into account the nature of the services rendered by respective directors and
employees, their present and potential contributions to the success of the
Corporation, the Bank and any Subsidiary and such other factors as the Committee
shall deem relevant. A director or employee who has been granted an Option
under the Plan may be granted an additional Option or Options under the Plan if
the Committee shall so determine.
<PAGE>
If, pursuant to the terms of the Plan, it is necessary that the percentage
of stock ownership of any individual be determined, stock ownership in the
Corporation or of a related corporation which is owned (directly or indirectly)
by or for such individual's brothers and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal descendants or by or for any corporation,
partnership, estate or trust of which such employee is a shareholder, partner or
beneficiary shall be considered as owned by such director or employee.
5. OPTION AGREEMENT Subject to the provisions of this Plan, Options
----------------
shall be awarded to the directors and employees in such amounts as are
determined by the Committee. The proper officers on behalf of the Corporation
and each Optionee shall execute a Stock Option Grant and Agreement (the "Option
Agreement") which shall set forth the total number of shares of Common Stock to
which it pertains, the exercise price, whether it is a Nonqualified Stock Option
or an Incentive Stock Option, and such other terms, conditions, restrictions and
privileges as the Committee in each instance shall deem appropriate, provided
they are not inconsistent with the terms, conditions and provisions of this
Plan. Each Optionee shall receive a copy of his executed Option Agreement. Any
Option granted with the intention that it will be an Incentive Stock Option but
which fails to satisfy a requirement for Incentive Stock Options shall continue
to be valid and shall be treated as a Nonqualified Stock Option.
6. OPTION PRICE.
------------
(a) The option price of each Option granted under the Plan shall be
not less than one hundred percent (100%) of the market value of the stock
on the date of grant of the Option. In the case of incentive stock options
granted to a shareholder who owns stock possessing more than 10 percent
(10%) of the total combined voting power of all classes of stock of the
Corporation, the Bank or a Subsidiary (a "ten percent shareholder"), the
option price of each Option granted under the Plan shall not be less than
one hundred and ten percent (110%) of the market value of the stock on the
date of grant of the Option. If the Common Stock is listed on a national
securities exchange (including for this purpose the Nasdaq Stock Market,
Inc. National Market) on the date in question, then the market value per
share shall be not less than 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 market price per share shall be equal to the average between
the bid and asked price on such date. If the Common Stock is traded
otherwise
<PAGE>
than on a national securities exchange (including for this purpose the
Nasdaq Stock Market, Inc. National Market) on the date in question, then
the market price per share shall be equal to the average 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. The Committee shall
maintain a written record of its method of determining such value.
(b) The option price shall be payable to the Corporation either
(i) in cash or by check, bank draft or money order payable to the
order of the Corporation, or (ii) at the discretion of the Committee,
through the delivery of shares of the common stock of the Corporation
owned by the optionee with a market value (determined in a manner
consistent with (i) above) equal to the option price, or (iii) at the
discretion of the Committee by a combination of (i) and (ii) above. No
shares shall be delivered until full payment has been made.
7. EXPIRATION OF OPTIONS. The Committee shall determine the expiration
---------------------
date or dates of each Option, but such expiration date shall be not later than
ten (10) years after the date such Option is granted. In the event an Incentive
Stock Option is granted to a ten percent shareholder, the expiration date or
dates of each Option shall be not later than five (5) years after the date such
Option is granted. The Committee, in its discretion, may extend the expiration
date or dates of an Option after such date was originally set; however, such
expiration date may not exceed the maximum expiration date described in this
Section 7.
8. TERMS AND CONDITIONS OF OPTIONS.
-------------------------------
(a) All Options must be granted within ten (10) years of the
Effective Date of this Plan as defined in Section 20.
(b) The Committee may grant Options which are intended to be
Incentive Stock Options and Nonqualified Stock Options, either
separately or jointly, to an eligible employee.
(c) The grant of Options shall be evidenced by
<PAGE>
a written instrument (an Option Agreement) containing terms and
conditions established by the Committee consistent with the provisions
of this Plan.
(d) Not less than 100 shares may be purchased at any one time
unless the number purchased is the total number at that time
purchasable under the Plan.
(e) The recipient of an Option shall have no rights as a
shareholder with respect to any shares covered by his Option until
payment in full by him for the shares being purchased. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock is fully
paid for, except as provided in Section 16.
(f) The aggregate fair market value of the stock (determined as of the
time the Option is granted) with respect to which Incentive Stock Options
are exercisable for the first time by any participant during any calendar
year (under all benefit plans of the Corporation, the Bank or any
Subsidiary, if applicable) shall not exceed $100,000; provided, however,
that such $100,000 limit of this subsection (f) shall not apply to the
grant of Nonqualified Stock Options. The Committee may grant Options which
are exercisable in excess of the foregoing limitations, in which case
Options granted which are exercisable in excess of such limitation shall be
Nonqualified Stock Options.
(g) All stock obtained pursuant to an option which qualifies as
an Incentive Stock Option shall be held in escrow for a period which
ends on the later of (i) two (2) years from the date of the granting
of the Option or (ii) one (1) year after the transfer of the stock
pursuant to the exercise of the Option. The stock shall be held by the
Corporation or its designee. The employee who has exercised the Option
shall during such holding period have all rights of a shareholder,
including but not limited to the rights to vote, receive dividends and
sell the stock. The sole purpose of the escrow is to inform the
Corporation of a disqualifying disposition of the stock within the
meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, and it shall be administered solely for that purpose.
<PAGE>
9. EXERCISE OF OPTIONS.
-------------------
(a) Unless otherwise set forth in the Option Agreement, all Options
granted to an optionee by virtue of his position as a nonemployee director
of the Corporation or the Bank (as stated in the Option Agreement) shall be
fully vested, exercisable and nonforfeitable immediately at the time of the
grant.
(b) Options granted to an optionee by virtue of his position as an
employee (as stated in the Option Agreement) shall become vested and
exercisable at the times, at the rate and subject to such limitations as
may be set forth in the Option Agreement executed in connection therewith;
provided, however, that all outstanding and nonforfeited options shall be
exercisable, if not sooner, on the day prior to the expiration date
thereof.
(c) Notwithstanding the foregoing, Options shall become exercisable
with respect to all of the shares subject thereto upon the optionee's
death, retirement or disability within the meaning of Section 22(e)(3) of
the Internal Revenue Code of 1986, as amended, and in the event of a change
in control as set forth in Section 13 of this Plan.
(d) Any right to exercise Options in annual installments shall be
cumulative and any vested installments may be exercised, in whole or in
part, at the election of the optionee. The exercise of any Option must be
evidenced by written notice to the Corporation that the optionee intends to
exercise his Option.
(e) In no event shall an Option be deemed granted by the Corporation
or exercisable by a recipient prior to the mutual execution by the
Corporation and the recipient of an Option Agreement which comports with
the requirements of Section 5 and Section 8(c).
(f) The inability of the Corporation or Bank to obtain approval from any
regulatory body or authority deemed by counsel to be necessary to the lawful
issuance and sale of any shares of Common Stock hereunder shall relieve the
Corporation and the Bank of any liability in respect of the non-issuance or sale
of such shares. As a condition to the
<PAGE>
exercise of an option, the Corporation may require the person exercising
the Option 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 laws.
(g) The Committee shall have the discretionary authority to impose
in the Option Agreements such restrictions on shares of Common Stock
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.
(h) Notwithstanding anything to the contrary herein, an optionee
receiving the grant of an Option by virtue of his or her position as a
director or as an employee of the Corporation, the Bank or a
Subsidiary (as stated in the Option Agreement), shall be required to
exercise his or her Options within the periods set forth in Sections
10, 11 and 12 below.
10. TERMINATION OF EMPLOYMENT - EXCEPT BY DISABILITY, RETIREMENT OR DEATH.
---------------------------------------------------------------------
If any optionee receiving the grant of an Option by virtue of his position as a
director (as stated in the Option Agreement) ceases to be a director of at least
one of the Corporation, the Bank or any Subsidiary for any reason other than
death, retirement (as defined in Section 11) or disability (as defined in
Section 11) or if any optionee receiving the grant of an Option by virtue of his
position as an employee (as stated in the Option Agreement) ceases to be an
employee of at least one of the Corporation, the Bank and any Subsidiary for any
reason other than death, retirement (as defined in Section 11) or disability (as
defined in Section 11), he may, (i) at any time within three (3) months after
his date of termination, but not later than the date of expiration of the
Option, exercise any Option designated in the Option Agreement as an Incentive
Stock Option and (ii) at any time prior to the date of expiration of the Option,
exercise any option designated in the Option Agreement as a Nonqualified Stock
Option. However, in either such event the optionee may exercise any Option only
to the extent it was vested and he or she was entitled to exercise the Option on
the date of termination. Any Options or portions of Options of terminated
optionees not so exercised shall terminate and be forfeited.
11. TERMINATION OF EMPLOYMENT - DISABILITY OR RETIREMENT. If any optionee
----------------------------------------------------
receiving the grant of an Option by virtue of his position as a director (as
stated in the Option Agreement)
<PAGE>
ceases to be a director of at least one of the Corporation, the Bank or any
Subsidiary due to his becoming disabled within the meaning of Section 22(e)(3)
of the Internal Revenue Code of 1986, as amended, or if any employee receiving
the grant of an Option by virtue of his position as an employee (as stated in
the Option Agreement) ceases to be employed by at least one of the Corporation,
the Bank and any Subsidiary due to his becoming disabled within the meaning of
Section 22(e)(3) of the Internal Revenue Code of 1986, as amended, all unvested
and forfeitable Options of such optionee shall immediately become vested and
nonforfeitable and he may, (i) at any time within 12 months after his date of
termination, but not later than the date of expiration of the Option, exercise
any option designated in the Option Agreement as an Incentive Stock Option with
respect to all shares subject thereto and (ii) at any time prior to the date of
expiration of the Option, exercise any Option designated in the Option Agreement
as a Nonqualified Stock Option with respect to all shares subject thereto. Any
portions of Options of optionees who are terminated because they become disabled
which are not so exercised shall terminate.
If any optionee receiving the grant of an Option by virtue of his position
as a director (as stated in the Option Agreement) ceases to be a director of at
least one of the Corporation, the Bank or any Subsidiary due to his retirement,
or if any employee receiving the grant of an Option by virtue of his position as
an employee (as stated in the Option Agreement) ceases to be employed by at
least one of the Corporation, the Bank and any Subsidiary due to his retirement,
all unvested and forfeitable Options of such optionee shall immediately become
vested and nonforfeitable and he may, at any time prior to the date of
expiration of the Option, exercise such Option; provided, however, that if the
Option is exercised more than three months after such retirement, the Option may
be treated as a Nonqualified Stock Option. Any portions of Options of retired
directors or employees not so exercised shall terminate. For purposes of this
Plan, the term "retirement," as it relates to any optionee receiving a grant of
an Option as a result of his or her position as an employee of the Corporation,
the Bank or any Subsidiary, shall mean (i) the termination of the optionee's
employment under conditions which would constitute retirement under any tax
qualified retirement plan maintained by the Corporation, the Bank or a
Subsidiary, or (ii) termination of employment after attaining age 65. The term
"retirement," as it relates to any optionee receiving a grant of an Option as a
result of his or her position as a director shall mean the cessation of
membership on such board of directors (i) with the approval of such board of
directors, at any time after such
<PAGE>
optionee reaches age 65, or (ii) at the election of the optionee at any time
after not less than 25 years of service as a member of the such board of
directors, as applicable.
12. TERMINATION OF EMPLOYMENT - DEATH. If an optionee receiving the grant
---------------------------------
of an option by virtue of his position as a director (as stated in the Option
Agreement) dies while a director of the Corporation, the Bank or any Subsidiary
or if any employee receiving the grant of an option by virtue of his position as
an employee (as stated in the Option Agreement) dies while in the employment of
the Corporation, the Bank or a Subsidiary, all unvested and forfeitable Options
of such optionee shall immediately become vested and nonforfeitable and the
person or persons to whom the Option is transferred by will or by the laws of
descent and distribution may exercise the Option at any time until the term of
the Option has expired, with respect to all shares subject thereto, to the same
extent and upon the same terms and conditions the optionee would have been
entitled to do so had he lived. Any Options or portions of options of deceased
directors or employees not so exercised shall terminate.
13. CHANGE IN CONTROL. In the event that an optionee ceases to be an
-----------------
employee, a director of the Corporation, the Bank or a Subsidiary (which
position resulted in his or her receipt of an option pursuant to this Plan) for
any reason after the occurrence of a "change in control" and prior to the time
that all shares allocated to him or her would be 100% vested, nonforfeitable and
exercisable in accordance with Sections 9 and 10 above, then, notwithstanding
Sections 9 and 10 above, all Options granted to such optionee shall immediately
become fully vested and nonforfeitable. For purposes of this Plan, a "change in
control" shall mean (i) a change in control of a nature that would be required
to be reported by the Corporation in response to Item 1 of the Current Report on
Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of
the Exchange Act; (ii) such time as any "person" (as such 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 Corporation or Bank representing 25 percent or
more of the combined voting power of the outstanding Common Stock of the
Corporation or outstanding common stock of the Bank, as applicable; or (iii)
individuals who constitute the Board or the board of directors of the Bank on
the date hereof (the "Incumbent Board" and "Incumbent Bank Board," respectively)
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
<PAGE>
Incumbent Board or Incumbent Bank Board, as applicable, or whose nomination for
election by the Corporation's or Bank's shareholders was approved by the
Corporation's or Bank's Board of Directors or Nominating Committee, shall be
considered as though he or she were a member of the Incumbent Board or Incumbent
Bank Board, as applicable; or (iv) either the Corporation or the Bank
consolidates or merges with or into another corporation, association or entity
or is otherwise reorganized, where neither the Corporation nor the Bank,
respectively, is the surviving corporation in such transaction; or (v) all or
substantially all of the assets of either the Corporation or the Bank are sold
or otherwise transferred to or are acquired by any other entity or group.
As set forth in Section 10, in the event of such a termination after a
change in control, the Optionee must exercise any Incentive Stock Options within
three (3) months after his date of termination and may exercise any Nonqualified
Stock Options at any time prior to the date of expiration of the Option.
14. STOCK APPRECIATION RIGHTS.
-------------------------
(a) General Terms and Conditions. The Committee may, but shall
not be obligated to, grant rights to optionees to surrender an
exercisable Option, or any portion thereof, in consideration for the
payment by the Corporation of an amount equal to the excess of the
market value (determined as set forth in Section 6 above) of the
shares of Common Stock subject to the Option, or portion thereof,
surrendered over the exercise price of the Option with respect to such
shares (any such authorized surrender and payment being hereinafter
referred to as a "Stock Appreciation Right"). Such payment, at the
discretion of the Committee, may be made in shares of Common Stock
valued at the then market value thereof (determined as set forth in
Section 6 above), or in cash, or partly in cash and partly in shares
of Common Stock.
The terms and conditions set with respect to a Stock Appreciation
Right may include (without limitation), subject to other provisions of this
Section 14 and this Plan, the period during which, date by which or event
upon which the Stock Appreciation Right may be exercised (which shall be on
the same terms as the Option to which is related); the method for valuing
shares of Common Stock for purposes of
<PAGE>
this Section 14; a ceiling on the amount of consideration which the
Corporation may pay in connection with exercise of the Stock Appreciation
Right; and arrangements for income tax withholding. The Committee shall
have complete discretion to determine whether, when and to whom Stock
Appreciation Rights may be granted.
(b) Time Limitations. A Stock Appreciation Right may be
exercised only within the period, if any, within which the Option to
which it relates may be exercised. Notwithstanding the foregoing, any
election by an optionee to exercise Stock Appreciation Rights shall be
made during the period beginning on the third business day following
the release for publication of quarterly or annual financial
information required to be prepared and disseminated by the
Corporation pursuant to the requirements of the Exchange Act and
ending on the twelfth business day following such date. The required
release of information shall be deemed to have been satisfied when the
specified financial data appears on or in a wire service, financial
news service or newspaper of general circulation or is otherwise first
made publicly available.
(c) Effects of Exercise of Stock Appreciation Rights or Options.
Upon the exercise of a Stock Appreciation Right, the number of shares
of Common Stock available under the Option to which it relates shall
decrease by a number equal to the number of shares for which the Stock
Appreciation Right was exercised. Upon the exercise of an Option, any
related Stock Appreciation Right shall terminate as to any number of
shares of Common Stock subject to the Stock Appreciation Right that
exceeds the total number of shares for which the Option remains
unexercised.
(d) Time of Grant. A Stock Appreciation Right granted in
connection with an Incentive Stock Option must be granted concurrently
with the Option to which is relates, while a Stock Appreciation Right
granted in connection with a Nonqualified Stock Option may be granted
concurrently with the Option to which it relates or at any time
thereafter prior to the exercise or expiration of such Option. No
optionee shall have any Stock Appreciation Rights unless (i) in the
case of Incentive Stock Options and Nonqualified Stock Options, the
Stock Option Agreement shall so
<PAGE>
state or (ii) in the case of Nonqualified Stock Options, the Committee
shall have executed an amendment to the Stock Option Agreement so
stating.
(e) Non-Transferable. A Stock Appreciation Right may not be
transferred or assigned except in connection with a transfer of the
Option to which it relates.
15. RESTRICTIONS ON TRANSFER. An Option granted under this Plan may not
------------------------
be transferred except by will or the laws of descent and distribution and,
during the lifetime of the optionee to whom it was granted, may be exercised
only by such optionee.
16. CAPITAL ADJUSTMENTS AFFECTING COMMON STOCK.
------------------------------------------
(a) If the outstanding shares of Common Stock of the Corporation are
increased, decreased, changed into or exchanged for a different number or
kind of shares or other securities of the Corporation or another entity as
a result of a recapitalization, reclassification, stock dividend, stock
split, amendment to the Corporation's Certificate of Incorporation, reverse
stock split, merger or consolidation, an appropriate adjustment shall be
made in the number and/or kind of securities allocated to the Options and
Stock Appreciation Rights previously and subsequently granted under the
Plan, without change in the aggregate purchase price applicable to the
unexercised portion of the outstanding Options but with a corresponding
adjustment in the price for each share or other unit of any security
covered by the Options.
(b) In the event that the Corporation shall declare and pay any
dividend with respect to the Common Stock (other than a dividend payable in
shares of the Corporation's Common Stock or a regular quarterly cash
dividend), including a dividend which results in a nontaxable return of
capital to the holders of shares of Common Stock for federal income tax
purposes, or otherwise than by dividend makes distribution of property to
the holders of its shares of Common Stock, the Committee, in its discretion
applied uniformly to all outstanding Options, may adjust the exercise price
per share of outstanding Options in such a manner as the Committee may
determine to be necessary to reflect the effect of the dividend or other
distribution on the fair market value of a share of Common Stock.
(c) To the extent that the foregoing adjustments
<PAGE>
described in Sections 16(a) and (b) above relate to particular Options or
to particular stock or securities of the Corporation subject to Option
under this Plan, such adjustments shall be made by the Committee, whose
determination in that respect shall be final and conclusive.
(d) The grant of an Option or Stock Appreciation Right pursuant to
this Plan shall not affect in any way the right or power of the Corporation
to make adjustments, reclassifications, reorganizations or changes of its
capital or business structure or to merge or to consolidate or to dissolve,
liquidate or sell, or transfer all or any part of its business or assets.
(e) No fractional shares of stock shall be issued under the Plan for
any such adjustment.
(f) Any adjustment made pursuant to this Section 16, shall be made,
to the extent practicable, in such manner as not to constitute a
modification of any outstanding Incentive Stock Options within the meaning
of Section 424(h) of the Internal Revenue Code of 1986, as amended.
17. INVESTMENT PURPOSE. At the discretion of the Committee, any Option
------------------
Agreement may provide that the optionee shall, by accepting the Option,
represent and agree, for himself and his transferees by will or the laws of
descent and distribution, that all shares of stock purchased upon the exercise
of the Option will be acquired for investment and not for resale or
distribution, and that upon each exercise of any portion of an Option, the
person entitled to exercise the same shall furnish evidence of such facts which
is satisfactory to the Corporation. Certificates for shares of stock acquired
under the Plan may be issued bearing such restrictive legends as the Corporation
and its counsel may deem necessary to ensure that the optionee is not an
"underwriter" within the meaning of the regulations of the Securities Exchange
Commission.
18. APPLICATION OF FUNDS. The proceeds received by the Corporation from
--------------------
the sale of Common Stock pursuant to Options will be used for general corporate
purposes.
19. NO OBLIGATION TO EXERCISE. The granting of an Option or Stock
-------------------------
Appreciation Right shall impose no obligation upon the optionee to exercise such
Option or Stock Appreciation Right.
20. EFFECTIVE DATE OF PLAN. The Plan will become effective upon the
----------------------
approval of the Plan by the shareholders of
<PAGE>
the Corporation and receipt of any necessary regulatory approvals.
21. TERM OF PLAN. Options and Stock Appreciation Rights may be granted
------------
pursuant to this Plan from time to time within ten (10) years from the effective
date of the Plan.
22. TIME OF GRANTING OF OPTIONS. Nothing contained in the Plan or in any
---------------------------
resolution adopted or to be adopted by the Committee or the shareholders of the
Corporation and no action taken by the Committee shall constitute the granting
of any Option or Stock Appreciation Right hereunder. The granting of an Option
and Stock Appreciation Right pursuant to the Plan shall take place only when an
Option Agreement shall have been duly executed and delivered by and on behalf of
the Corporation at the direction of the Committee.
23. CASH PAYMENTS. At the time of the payment of any dividend or other
-------------
distribution with respect to the Common Stock, in the absolute discretion of,
and upon direction of the Board, the Corporation shall cause to be paid to
existing directors and employees of the Corporation, the Bank or any Subsidiary
who hold nonforfeited, unexercised Options under this Plan, regardless of
whether or not such Options are vested and nonforfeitable, a cash amount equal
to the number of shares of Common Stock subject to nonforfeited, unexercised
options held by such optionee multiplied by the amount of any dividends or other
distributions paid per share of Common Stock outstanding. The Board shall have
the discretion to approve cash payments at the time of some dividends or
distributions but not others. Notwithstanding the foregoing, no amounts shall
be paid to optionees pursuant to this Section 23 with respect to any dividend or
distribution if at the time of such dividend or distribution, the exercise price
of the Options shall have been reduced pursuant to Section 16(b) above.
If any director or employee of the Corporation, the Board or any Subsidiary
shall receive any cash payment from the Company, the Board or any Subsidiary
pursuant to this Section 23 with respect to an Option which is not vested and
exercisable, and if such Option shall be forfeited, then within 30 days after
the effective date of such forfeiture, the optionee shall pay to the
Corporation, the Bank or the Subsidiary (as applicable) an amount equal to the
cash payment received by such optionee with respect to such forfeited Option.
In the alternative, at the option of the Corporation, the Bank or the Subsidiary
(as applicable) the amount to be repaid may be withheld from the final
compensation payable to the optionee.
<PAGE>
24. WITHHOLDING TAXES. Whenever the Corporation proposes or is required
-----------------
to cause to be issued or transferred shares of stock, cash or other assets
pursuant to this Plan, the Corporation shall have the right to require the
optionee to remit to the Corporation an amount sufficient to satisfy any
federal, state and/or local withholding tax requirements prior to the issuance
of any certificate or certificates for such shares or delivery of such cash or
other assets. Alternatively, the Corporation may issue or transfer such shares
of stock or make other distributions of cash or other assets net of the number
of shares or other amounts sufficient to satisfy the withholding tax
requirements. For withholding tax purposes, the shares of stock, cash and other
assets to be distributed shall be valued on the date the withholding obligation
is incurred.
25. TERMINATION AND AMENDMENT. The Board may at any time alter, suspend,
-------------------------
terminate or discontinue the Plan, subject to any applicable regulatory
requirements and any required stockholder approval or any stockholder approval
which the Board may deem advisable for any reason, such as for the purpose of
obtaining or retaining any statutory or regulatory benefits under tax,
securities or other laws or satisfying applicable stock exchange or quotation
system listing requirements. The Board may not, without the consent of the
holder of an Option or Stock Appreciation Right previously granted, make any
alteration which would deprive the optionee of his rights with respect thereto.
26. CAPTIONS AND HEADINGS; GENDER AND NUMBER. Captions and paragraph
----------------------------------------
headings used herein are for convenience only, do not modify or affect the
meaning of any provision herein, are not a part, and shall not serve as a basis
for interpretation or construction of, this Plan. As used herein, the masculine
gender shall include the feminine and neuter, and the singular number shall
include the plural, and vice versa, whenever such meanings are appropriate.
27. COST OF PLAN; EXCULPATION AND INDEMNIFICATION. All costs and expenses
---------------------------------------------
incurred in the operation and administration of the Plan shall be borne by the
Corporation, the Bank and the Subsidiaries. In connection with this Plan, no
member of the Board, no member of the Board of Directors of the Bank, and no
member of the Board of Directors of any Subsidiary, and no member of the
Committee shall be personally liable for any act or omission to act, nor for any
mistake in judgment made in good faith, unless arising out of, or resulting
from, such person's own bad faith, willful misconduct or criminal acts. To the
extent permitted by applicable law and regulation, the
<PAGE>
Corporation shall indemnify, defend and hold harmless the members of the Board,
the members of the Board of Directors of the Bank and the members of the Board
of Directors of any Subsidiary, and members of the Committee, and each other
officer or employee of the Bank, the Corporation or of any Subsidiary to whom
any power or duty relating to the administration or interpretation of this Plan
may be assigned or delegated, from and against any and all liabilities
(including any amount paid in settlement of a claim with the approval of the
Board), and any costs or expenses (including counsel fees) incurred by such
persons arising out of or as a result of, any act or omission to act, in
connection with the performance of such person's duties, responsibilities and
obligations under this Plan, other than such liabilities, costs, and expenses as
may arise out of, or result from the bad faith, willful misconduct or criminal
acts of such persons.
28. GOVERNING LAW. Without regard to the principles of conflicts of laws,
-------------
the laws of the State of North Carolina shall govern and control the validity,
interpretation, performance, and enforcement of this Plan.
29. INSPECTION OF PLAN. A copy of this Plan, and any amendments thereto,
------------------
shall be maintained by the Secretary of the Corporation and shall be shown to
any proper person making inquiry about it.
30. OTHER PROVISIONS. The Option Agreements authorized under this
----------------
Plan shall contain such other provisions not inconsistent with the foregoing,
including, without limitation, increased restrictions upon the exercise of
options, as the Committee may deem advisable.
<PAGE>
EXHIBIT A
---------
STOCK OPTION GRANT AND AGREEMENT
THIS STOCK OPTION GRANT AND AGREEMENT ("Agreement"), being made according
to and subject to the terms and conditions of the STOCK OPTION PLAN of South
Street Financial Corp. ("Plan"), a copy of which is attached hereto as Annex A
and is hereby incorporated by reference and made a part of this Agreement, is
herein executed and effective the _______ day of _______________, _____, between
South Street Financial Corp. (the "Corporation") and ____________________
("Optionee"):
1. Grant. As of the above date, the Corporation hereby grants to the
-----
Optionee (applicable provisions are marked):
[_] an Incentive Stock Option [as that term is defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code")] to purchase
________ shares of Common Stock of the Corporation at the price stated
in this Agreement;
[_] a Nonqualified Stock Option to purchase __________ shares of Common
Stock of the Corporation at the price stated in this Agreement.
The Optionee [_] shall [_] shall not have Stock Appreciation Rights in
connection with the Options granted hereby, in accordance with Section
14 of the Plan.
The Option(s) and any Stock Appreciation Rights granted under this
section and as described in this Agreement is (are) in all respects
subject to and conditioned by the terms, definitions, and provisions of
this Agreement and of the Plan. Capitalized terms in this Agreement
which are not otherwise defined but which are defined in the Plan shall
have the same meaning given to those terms in the Plan.
The Optionee has been granted Options under the Plan as a result of the
Optionee's
<PAGE>
position as a [ ] director [ ] employee of the Corporation, the Bank or
a Subsidiary.
2. Price. The Option price is $_____________ for each share.
-----
3. Exercise of Option. The Option(s) granted under this Agreement shall be
------------------
exercisable pursuant to the terms and conditions of the Plan and as set
forth below:
(a) Right to Exercise: In addition to the terms and conditions
-----------------
imposed on the Optionee's right to exercise his Options and any Stock
Appreciation Rights imposed in the Plan, the following terms and
conditions are applicable:
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
(b) [_] (Marked if applicable) Annual Installments: Subject to the
-------------------
terms and conditions of the Plan, the Incentive Stock Options can be
exercised in annual installments as follows:
__________________ shares beginning on __________, 19__
__________________ shares beginning on __________, 19__
__________________ shares beginning on __________, 19__
__________________ shares beginning on __________, 19__
__________________ shares beginning on __________, 19__
Subject to the terms and conditions of the Plan, the Nonqualified
Options can be exercised in annual installments as follows:
__________________ shares beginning on __________, 19__
__________________ shares beginning on __________, 19__
__________________ shares beginning on __________, 19__
<PAGE>
__________________ shares beginning on __________, 19__
__________________ shares beginning on __________, 19__
The right to exercise the Option(s) in annual installments shall be
cumulative. In addition, the option(s) shall be exercisable upon
disability, death, retirement and a change in control as set forth in
the Plan.
(c) [_] (Marked if applicable) Immediate Vesting: Subject to the
-----------------
terms and conditions of the Plan, all of the Options are vested,
nonforfeitable and exercisable.
(d) Method of Exercise: The Options and any Stock Appreciation
------------------
Rights granted under this Agreement shall be exercisable by a
written notice to the Secretary of the Corporation which shall:
(1) State the election to exercise the Option or the election
to surrender an exercisable Option and exercise Stock
Appreciation Rights, the number of shares in respect of which
the Option or Stock Appreciation Right is being exercised, the
person in whose name any stock certificate or certificates for
such shares of Common Stock is to be registered or to whom any
cash is to be paid, his or her address, and social security
number;
(2) Contain any such representation and agreements as to
Optionee's investment intent with respect to shares of Common
Stock as may be required by the Committee;
(3) Be signed by the person 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 the Corporation,
of the right of such person or
<PAGE>
persons to exercise the Option or Stock Appreciation
Rights in accordance with the Plan; and
(4) Be accompanied by payment of the purchase price of any
shares with respect to which the Option is being exercised which
payment shall be in form acceptable to the Committee pursuant to
Section 6(b) of the Plan.
(e) Representations and Warranties: In order to exercise an Option or
------------------------------
Stock Appreciation Right, the person exercising the Option or Stock
Appreciation Right must make the representations and warranties to the
Corporation as may be required by any applicable law or regulation, or
as may otherwise be required pursuant to the Plan.
(f) Approvals. In order for an Option or Stock Appreciation Right to
---------
be exercised, all filings and approvals required by applicable law and
regulations or pursuant to the Plan must have been made and obtained.
4. Non-transferability. Neither any Option nor any Stock Appreciation
-------------------
Rights may be transferred in any manner otherwise than by will or the laws of
descent and distribution and such Option and any Stock Appreciation Rights may
be exercised during the life of the Optionee only by him or her.
5. Investment Purpose. This Option and any Stock Appreciation Rights
------------------
may not be exercised if the issuance of shares or payment of cash upon such
exercise would constitute a violation of any applicable federal or state
securities law or other law or valid regulation.
6. Expiration. This Option and any corresponding Stock Appreciation
----------
Rights shall expire on _____________, _________.
7. Escrow. All stock purchased pursuant to an Incentive Stock Option
------
shall be held in escrow for a period which ends on the later of (i) two (2)
years from the date of the granting of the option or (ii) one (1) year after the
transfer of the stock pursuant to the exercise of the Option. The stock shall
be held by the Corporation or its designee. The Optionee who has exercised the
Option shall have all rights of a stockholder, including, but not limited to,
the rights to vote, receive
<PAGE>
dividends and sell the stock. The sole purpose of the escrow is to inform the
Corporation of a disqualifying disposition of the stock within the meaning of
Section 422 of the Code, and it shall be administered solely for this purpose.
8. Repayment of Cash Payments. If the Optionee hereunder forfeits any
--------------------------
Options pursuant to the Plan, the Optionee shall, within 30 days after the
effective date of such forfeiture, pay the Corporation, the Bank or a Subsidiary
(as applicable) an amount equal to the cash payments received by the Optionee
from the Corporation, the Bank or any Subsidiary with respect to such forfeited
Options pursuant to Section 23 of the Plan. In the alternative, at the option
of the Corporation, the Bank or a Subsidiary, the amount to be repaid may be
withheld by the Corporation, the Bank or a Subsidiary from the final
compensation or fees payable to the Optionee. Each acceptance by an Optionee
of cash payments pursuant to such Section 23 with respect to Options still
subject to forfeiture shall constitute a reaffirmation of the agreements set
forth in this paragraph 8.
9. Tax Withholding. All stock, cash and other assets distributed
---------------
pursuant to this Agreement shall be subject to applicable federal, state and
local withholding for taxes. The Optionee expressly acknowledges and agrees to
such withholding. The Optionee acknowledges and agrees to the tax withholding
provisions which are set forth in the Plan.
10. Resolution of Disputes. Any dispute or disagreement which should
----------------------
arise under, or as a result of, or in any way relate to, the interpretation,
construction, or application of this Agreement or the Plan will be determined by
the Committee designated in Section 2 of the Plan. Any determination made by
such Committee shall be final, binding, and conclusive for all purposes.
11. Construction Controlled by Plan. The Options and any corresponding
-------------------------------
Stock Appreciation Rights evidenced hereby shall be subject to all of the
requirements, conditions and provisions of the Plan. This Agreement shall be
construed so as to be consistent with the Plan; and the provisions of the Plan
shall be deemed to be controlling in the event that any provision should appear
to be inconsistent therewith.
12. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such a manner as to be valid and enforceable under
applicable law, but if any provision of this Agreement is determined to be
unenforceable, invalid or illegal, the validity of any other provision or part
thereof
<PAGE>
shall not be affected thereby and this Agreement shall continue to be binding on
the parties hereto as if such unenforceable, invalid or illegal provision or
part thereof had not been included herein.
13. Modification of Agreement; Waiver. This Agreement may be modified,
---------------------------------
amended, suspended or terminated, and any terms, representations or conditions
may be waived, but only by a written instrument signed by each of the parties
hereto and only subject to the limitations set forth in the Plan. No waiver
hereunder shall constitute a waiver with respect to any subsequent occurrence or
other transaction hereunder or of any other provision.
14. Captions and Headings; Gender and Number. Captions and paragraph
----------------------------------------
headings used herein are for convenience only, do not modify or affect the
meaning of any provision herein, are not a part, and shall not serve as a basis
for interpretation or construction, of this Agreement. As used herein, the
masculine gender shall include the feminine and neuter, and the singular number
shall include the plural, and vice versa, whenever such meanings are
appropriate.
15. Governing Law; Venue and Jurisdiction. Without regard to the
-------------------------------------
principles of conflicts of laws, the laws of the State of North Carolina shall
govern and control the validity, interpretation, performance, and enforcement of
this Agreement.
16. Binding Effect. This Agreement shall be binding upon and shall inure
--------------
to the benefit of the Corporation, and its successors and assigns, and shall be
binding upon and inure to the benefit of the Optionee, and his or her heirs,
legatees, personal representative, executor, administrator and permitted
assigns.
17. Entire Agreement. This Agreement and the Plan constitute and embody
----------------
the entire understanding and agreement of the parties hereto and, except as
otherwise provided hereunder, there are no other agreements or understandings,
written or oral, in effect between the parties hereto relating to the matters
addressed herein.
18. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have set their hands and
<PAGE>
seals the day and year first above written.
ATTEST: SOUTH STREET FINANCIAL CORP.
- --------------------------------------------------------------------------------
By:
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(Corporate Seal)
President
- ---------------
OPTIONEE:
---------------------------------------
---------------------------------------
(SEAL)
----------------
<PAGE>
(Letterhead of McGladrey & Pullen, LLP)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference into this Registration
Statement on Form S-8 of South Street Financial Corp. of our report dated
November 6, 1997, relating to the consolidated statements of financial condition
of South Street Financial Corp. and subsidiary as of September 30, 1997 and
1996, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the years in the three year period ended September
30, 1997, which report was incorporated by reference in the September 30, 1997
Form 10-K of South Street Financial Corp.
McGLADREY & PULLEN, LLP
Charlotte, North Carolina
February 10, 1998
