SCHEDULE 14A INFORMATION
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section
240.14a-11(c) or Section 240.14a-12
SOUTHERN COMMUNITY BANCSHARES, INC.
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule O-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule O-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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SOUTHERN COMMUNITY BANCSHARES, INC.
325 2nd Street, S.E.
Cullman, Alabama 35505
(205) 734-4863
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of
Shareholders of Southern Community Bancshares, Inc. (the "Holding
Company") will be held at the office of the Holding Company at 325 2nd
Street, S.E., Cullman, Alabama 35055 on January 19, 1998, at 2:00
p.m., Central Time (the "Annual Meeting"), for the following purposes,
all of which are more completely set forth in the accompanying Proxy
Statement:
1. To elect two director(s) of the Holding Company for
term(s) expiring in December 2001;
2. To approve the Southern Community Bancshares, Inc.
Stock Option and Incentive Plan and Trust, a copy of which
is attached hereto as Exhibit A;
3. To approve the Southern Community Bancshares, Inc.
Management Recognition Plan and Trust, a copy of which is
attached hereto as Exhibit B;
4. To ratify the selection of Arthur Andersen LLP as the
auditors of the Holding Company for the current fiscal year;
and
5. To transact such other business as may properly come
before the Annual Meeting or any adjournments thereof.
Only the Holding Company shareholders of record at the close
of business on December 11, 1997, will be entitled to receive notice
of and to vote at the Annual Meeting and at any adjournments thereof.
Whether or not you expect to attend the Annual Meeting, we urge you to
consider the accompanying Proxy Statement carefully and to SIGN, DATE
AND PROMPTLY RETURN THE ENCLOSED PROXY SO THAT YOUR SHARES MAY BE
VOTED IN ACCORDANCE WITH YOUR WISHES AND THE PRESENCE OF A QUORUM MAY
BE ASSURED AT THE ANNUAL MEETING. The giving of a proxy does not
affect your right to vote in person in the event you attend the Annual
Meeting.
By Order of the Board of Directors
William R. Faulk, President
Cullman, Alabama
December 18, 1997
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SOUTHERN COMMUNITY BANCSHARES, INC.
325 2nd Street, S.E.
Cullman, Alabama 35055
(205) 734-4863
PROXY STATEMENT
PROXIES
The enclosed Proxy is being solicited by the Board of
Directors of Southern Community Bancshares, Inc. (the "Holding
Company"), for use at the 1997 Annual Meeting of Shareholders of the
Holding Company to be held at the office of Southern Community
Bancshares, on January 19, 1998, at 2:00 p.m., Central Time, and at
any adjournments thereof (the "Annual Meeting"). Without affecting
any vote previously taken, the Proxy may be revoked by a shareholder
by execution of a later dated proxy which is received by the Holding
Company before the Proxy is exercised or by giving notice of
revocation to the Holding Company in writing or in open meeting before
the Proxy is exercised. Attendance at the Annual Meeting will not, of
itself, revoke a proxy.
Each properly executed Proxy received prior to the Annual
Meeting and not revoked will be voted as specified thereon or, in the
absence of specific instructions to the contrary, will be voted:
FOR the election of Ronald P. Martin and Phillip W. Freeman
as director(s) of the Holding Company for term(s) expiring in December
31, 2001;
FOR the approval of the Southern Community Bancshares, Inc.
Stock Option and Incentive Plan and Trust (the "Stock Option Plan"),
a copy of which is attached hereto as Exhibit A;
FOR the approval of the Southern Community Bancshares, Inc.
Management Recognition Plan and Trust (the "MRP"), a copy of which is
attached hereto as Exhibit B; and
FOR the ratification of the selection of Arthur Andersen LLP
("Arthur Andersen") as the auditors of the Holding Company for the
current fiscal year.
Proxies may be solicited by the directors, officers and
other employees of the Holding Company in person or by telephone,
telegraph or mail only for use at the Annual Meeting. Such proxies
will not be used for any other meeting. The cost of soliciting
proxies will be borne by the Holding Company.
Only shareholders of record as of the close of business on
December 11, 1997 (the "Voting Record Date"), are entitled to vote at
the Annual Meeting. Each such shareholder will be entitled to cast
one vote for each share owned. The Holding Company's records disclose
that, as of the Voting Record Date, there were 1,137,350 votes
entitled to be cast at the Annual Meeting.
This Proxy Statement is first being mailed to shareholders
of the Holding Company on or about the 18th day of December, 1997.
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VOTE REQUIRED
Election of Directors
Under Delaware corporate law and the Holding Company's
Certificate of Incorporation (the "Certificate of Incorporation"), the
two nominees receiving the greatest number of votes will be elected as
directors. Shares to which the authority to vote is withheld are not
counted toward the election of directors or toward the election of the
individual nominees specified in the enclosed Proxy. If the enclosed
Proxy is signed and dated by the shareholder, but no vote is specified
thereon, the shares held by such shareholder will be voted FOR the
re-election of the two nominees.
Approval of the Stock Option Plan
The affirmative vote of the holders of at least a majority
of the outstanding shares of the Holding Company is necessary to
approve the Stock Option Plan. Generally, shares which are held by a
nominee for a beneficial owner and which are represented in person or
by proxy at the Annual Meeting, but not voted with respect to such
proposals ("Non-votes"), will have the same effect as a vote against
the approval of the Stock Option Plan. If, however, shares are
represented at the Annual Meeting by a shareholder who signed and
dated a proxy in the form of the enclosed Proxy, but who did not vote
on the approval of the Stock Option Plan by marking the appropriate
block on the Proxy, such shares will be voted FOR the adoption of the
Stock Option Plan and will not be considered Non-votes.
Approval of the MRP
The affirmative vote of the holders of at least a majority
of the outstanding shares of the Holding Company is necessary to
approve the MRP. Generally, shares which are held by a nominee for a
beneficial owner and which are represented in person or by proxy at
the Annual Meeting, but not voted with respect to such proposals
("Non-votes"), will have the same effect as a vote against the
approval of the MRP. If, however, shares are represented at the
Annual Meeting by a shareholder who signed and dated a proxy in the
form of the enclosed Proxy, but who did not vote on the approval of
the MRP by marking the appropriate block on the Proxy, such shares
will be voted FOR the adoption of the MRP and will not be considered
Non-votes.
Ratification of Selection of Auditors
The affirmative vote of the holders of a majority of the
shares of the Holding Company represented in person or by proxy at
the Annual Meeting is necessary to ratify the selection of Arthur
Andersen as the auditors of the Holding Company for the current fiscal
year. Non-votes will have the same effect as a vote against the
approval of such ratification, as will abstentions. If, however,
shares are represented at the Annual Meeting by a shareholder who
signed and dated a proxy in the form of the enclosed Proxy, but who
did not vote on the ratification of the selection of Arthur Andersen
by marking the appropriate block on the Proxy, such shares will be
voted FOR the ratification of the selection of and will not be
considered Non-votes.
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VOTING SECURITIES AND OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with
respect to the only person(s) known to the Holding Company to own
beneficially more than five percent of the outstanding common shares
of the Holding Company, as of December 11, 1997:
Name and Address of Amount and Nature of Percent of Shares
Beneficial Owner Beneficial Ownership Outstanding
First Bankers Trust, N.A. 90,988 8.0%
1201 Broadway
Quincy, Illinois 62301
(1) Consists of shares held by First Bankers Trust, N.A., as the
trustee for the Southern Community Bancshares, Inc. Employee Stock
Ownership Plan.
PROPOSAL ONE - ELECTION OF DIRECTORS
Election of Directors
The Certificate of Incorporation provides for a Board of
Directors consisting of up to nine (9) persons divided into three
classes. In accordance with the Certificate of Incorporation,
nominees for election as directors may be proposed only by the
directors or by a shareholder entitled to vote for directors if such
shareholder has submitted a written nomination to the Secretary of the
Holding Company not less than thirty days nor more than sixty days
prior to the date of the annual meeting of shareholders. Each such
written nomination must state the name, age, business or residence
address of the nominee, the principal occupation or employment of the
nominee, and the number of common shares of the Holding Company owned
either beneficially or of record by each such nominee.
The Board of Directors proposes the reelection of the
following persons to serve until the Annual Meeting of Shareholders
in 1998 and until their successors are duly elected and qualified or
until their earlier resignation, removal from office or death:
Name Age (1) Positions Held Since (2)
Ronald P. Martin 52 Director 1996
Phillip W. Freeman 46 Director 1996
(1) As of September 30, 1997.
(2) Ronald P. Martin and Phillip W. Freeman became director(s)
of the Holding Company in connection with the conversion of First
Federal Savings & Loan Association of Cullman (the "Association")
from mutual to stock form (the "Conversion") and the formation of
the Holding Company as the Holding Company for the Association.
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If any nominee is unable to stand for election, any proxies
granting authority to vote for such nominee will be voted for such
substitute as the Board of Directors recommends.
The following directors will continue to serve as directors
of the Holding Company after the Annual Meeting for the terms
indicated:
Name Age(1) Position(s) Held Since(2) Term Expires
Finis E. St. John, IV 40 Director, Chairman 1996 1999
William R. Faulk 36 Director, President 1996 2000
Maxie T. Hudson 64 Director 1996 1999
Eston E. Jones 78 Director 1996 1999
W. Daniel Keel 62 Director 1996 1999
Joseph S. Franey 57 Director 1996 2000
(1) As of September 30, 1997.
(2) Each director became a director in connection with the Conversion.
Finis E. St. John, IV. Mr. St. John is a partner in St. John & St.
John, L.L.P., a law firm located in Cullman. Mr. St. John is also an
executive officer of Cullman Environmental, Inc., a waste service
concern serving Cullman, Alabama.
Mr. William R. Faulk. Mr. Faulk has a BS in economics and an MBA in
finance, both from the University of Alabama at Birmingham. He is a
graduate of the Stonier School of Banking. He joined First Federal in
1986 and served in a variety of positions before becoming President
and Chief Executive Officer in 1994.
Joseph S. Franey. Mr. Franey is a retired trucking company executive.
Phillip W. Freeman. Dr. Phillip Freeman is a physician practicing
with Cullman Internal Medicine Incorporated. Dr. Freeman is a member
of the Cullman Area Chamber of Commerce.
Maxie T. Hudson. Mr. Hudson is the immediate past President of the
Association. Prior to joining the Association, Mr. Hudson was
employed as an accountant.
Eston E. Jones. Mr. Jones was the President of the Association prior
to Mr. Hudson. Mr. Jones currently serves on the Loan Committee of
the Board of Directors.
Ronald P. Martin. Mr. Martin is a Certified Public Accountant in
private practice. Mr. Martin has worked in both public and private
accounting during his career. Prior to entering private practice,
Mr. Martin was Chief Financial Officer of a regional construction
company.
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Meetings of Directors
The Holding Company was incorporated in July 1996. The
Board of Directors of the Holding Company met six (6) times for
regularly scheduled and special meetings during the fiscal year ended
September 30, 1997. Each director attended at least 75% of the
aggregate of such meetings.
Each director of the Holding Company is also a director of
the Association. The Board of Directors of the Association met 12
times for regularly scheduled and special meetings during the fiscal
year ended September 30, 1997. Each director attended at least 75% of
the aggregate of such meetings and all meetings of committees of the
Board of Directors of which such director was a member.
Committees of Directors
The Board of Directors of the Holding Company has a Stock
Option Plan Committee and an MRP Committee. The Board of Directors of
the Holding Company also has an Audit Committee, a Loan Committee and
an Asset Liability Management Committee, but no separate nominating or
compensation committees.
The members of the Stock Option Plan Committee are Messrs.
St. John, Keel and Martin. The Stock Option Plan Committee
administers the Stock Option Plan and determines the number of shares
to be covered by options granted to the officers and employees of the
Holding Company pursuant to the Stock Option Plan.
The members of the MRP Committee are Messrs. St. John, Keel
and Martin. The MRP Committee administers the MRP and determines the
number of shares to be awarded to officers and employees of the
Holding Company pursuant to the Stock Option Plan.
The members of the Audit Committee are Messrs. Martin,
Franey and Faulk. The Audit Committee is responsible for selecting an
auditor, having an audit conducted and reviewing and reporting to the
full Board of Directors on the independent audits of the Holding
Company.
The members of the Loan Committee are Messrs. Jones and
Keel. The Loan Committee reviews and approves all real estate loans
made by the Association. The Loan Committee reviews and approves all
loans not secured by real estate made by the Association in an amount
greater than $20,000. All loans made by the Association in amounts in
excess of $250,000 are reviewed and approved by the full Board of
Directors.
The Asset Liability Management Committee is comprised of
Messrs. Martin and Faulk and Ms. Knight. The function of the Asset
Liability Management Committee is to review the interest rate risk of
the Association and to report and recommend action to the full Board
of Directors with regard thereto. The Asset Liability Management
Committee met four (4) times during the fiscal year ended September
30, 1997.
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EXECUTIVE OFFICERS
In addition to Mr. William R. Faulk, the President of the
Holding Company and the following persons are executive officers of
the Holding Company and hold the designated positions:
Name Age (1) Position(s) Held
Beth B. Knight 35 Secretary/Treasurer/Vice
President-Finance and Chief
Financial Officer
Beth B. Knight. Ms. Knight has a BS in accounting from the University
of Alabama and she is a Certified Public Account. She joined the
Association in 1992 and has served in her current capacity since
joining the Association.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information with
respect to the number of common shares of the Holding Company
beneficially owned by each director of the Holding Company and by all
directors and executive officers of the Holding Company as a group, as
of December 11, 1997:
Name and Address of Amount and Nature of
Beneficial Owner (1) Beneficial Percent of Shares
Ownership(2) Outstanding
William R. Faulk 29,150 2.56%
Joseph S. Franey 30,000 2.64
Phillip W. Freeman 20,000 1.76
Maxie T. Hudson 12,000 1.06
Eston E. Jones 15,000 1.32
W. Daniel Keel 30,000 2.64
Ronald P. Martin 30,000 2.64
Finis E. St. John, IV 30,000 2.64
All directors and 355,265 32.57
executive officers
as a group (10
persons)(3)
(1) Each of the persons listed in this table may be contacted at
the address of the Holding Company.
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(2) The beneficial owner has sole voting and investment power
unless otherwise indicated. The beneficial ownership shown for
individuals above includes shares owned by spouses as follows:
Mr. Faulk, 14,575; Mr. Franey, 15,000; Dr. Freeman, 10,000; Mr.
Keel, 15,000; Mr. Martin, 15,000; and Mr. St. John, 15,000.
(3) Includes shares held in grantor trusts for contribution to
the Stock Option Plan and the MRP, if adopted. Directors of the
Holding Company act as trustees of such trusts and have voting
and investment power with respect to such shares.
Section 16(a) Beneficial Ownership Reporting Compliance
Under the federal securities laws, each director and
executive officer of the Holding Company is required to file a Form 3
to report their beneficial ownership of common shares of the Holding
Company to the Securities and Exchange Commission within ten days (10)
after the date on which they become a director or executive officer.
The Holding Company must disclose in its Proxy Statements any failure
to file a Form 3 timely. At the time of appointment to the Board of
Directors of the Holding Company in December 1996 all directors and
executive officers timely filed Form 3. See "PROPOSAL ONE - ELECTION
OF DIRECTORS."
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Executive Compensation
No executive officer of the Holding Company received
compensation in excess of $100,000 in fiscal 1997. The following
table sets forth the compensation paid to Mr. William Faulk, the
President of the Holding Company, for the fiscal year(s) ended
September 30, 1997:
SUMMARY COMPENSATION TABLE
Name and Principal Salary ($) Bonus ($) Other
William R. Faulk, President $82,435 $3,776 $3,776
Director Compensation
The Holding Company pays no director's fees. Each director
of the Association currently receives a fee of $750 for each meeting
of the Board of Directors attended. In addition, each member of the
Loan Committee receives $450 per month. Each member of the Audit
Committee receives a fee of $500 for each meeting of the Audit
Committee attended.
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Employment Agreements
The Association has entered into employment agreements with
William R. Faulk, President of the Association and Ms. Beth B. Knight,
Vice-President-Finance and Chief Financial Officer of the Association
(the "Employment Agreements"). The Employment Agreements were
effective upon the completion of the Conversion and each provide for a
term of three years, renewing at the end of each year at the option of
the Association, with salary in any year to be not less that the first
year of the term and with performance and salary review to be
undertaken by the Board of Directors not less often than annually.
The initial salary of Mr. Faulk and Ms. Knight under the Employment
Agreements was $78,750 and $49,875, respectively. The Employment
Agreements also provide for the inclusion of Mr. Faulk and Ms. Knight
in any formally established employee benefit, bonus, pension and
profit-sharing plans for which senior management personnel are
eligible.
Each Employment Agreement is terminable by the Association
at any time. In the event of termination by the Association for "just
cause," as defined in the Employment Agreement, Mr. Faulk and/or Ms.
Knight will have no right to receive any compensation or other
benefits for any period after such termination. In the event of
termination by the Association other than for just cause, Mr. Faulk
and/or Ms. Knight will be entitled to a continuation of salary
payments for a period of time equal to the term of the Employment
Agreement and a continuation of benefits substantially equal to those
being provided at the date of termination of employment until the
earliest to occur of the end of the end of the term of the Employment
Agreement or the date on which Mr. Faulk and/or Ms. Knight becomes
employed full-time by another employer.
Each Employment Agreement also contains provisions with
respect to the occurrence within one year of a "change of control" of
(1) the termination of employment of the employee for any reason other
than just cause, retirement or termination at the end of the term of
the agreement, or (2) a constructive termination resulting from change
in the capacity or circumstances in which the employee is employed or
a material reduction in his responsibilities, authority, compensation
or other benefits provided under the Employment Agreement without the
employee's written consent. In the event of any such occurrence, the
employee would be entitled to payment of an amount equal to (a) the
amount of compensation to which he would be entitled for the remainder
of the term of the Employment Agreement, plus (b) the difference
between (i) three times the employee's average annual compensation for
the three taxable years immediately preceding the termination of
employment less (ii) the amount paid to the employee as compensation
for the remainder of the employment term. In addition, the employee
would be entitled to continued coverage under all benefit plans until
the earliest of the end of the term of the Employment Agreement or the
date on which he is included in another employer's benefit plans as a
full-time employee. The maximum which the employee may receive,
however, is limited to an amount which will not result in the
imposition of a penalty tax pursuant to Section 280G(b)(3) of the
Code. "Change of Control," as defined in the Employment Agreement,
generally refers to the acquisition by any person or entity of the
ownership or power to vote 10% or more of the voting stock of the
Association or the Holding Company, the control of the election of a
majority of the directors of the Association or the Holding Company or
the exercise of a controlling influence over the management or
policies of the Association or the Holding Company.
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Certain Transactions
In accordance with the OTS regulations, the Association
makes loans to executive officers and directors of the Association in
the ordinary course of business and on the same terms and conditions,
including interest rates and collateral, as those of comparable loans
to other persons. All outstanding loans to executive officers and
directors comply with such policy, do not involve more than the normal
risk of collectibility or present other unfavorable features and are
current in their payments. Loans to all directors and executive
officers of the Association and their related interests totaled
$510,000 at September 30, 1997. Any future transactions between the
Holding Company and the Association or any other affiliate of the
Holding Company will be on terms no less favorable than could be
approved by a majority of the directors of the Holding Company
including the majority of disinterested directors.
Finis E. St. John, IV, Chairman of the Association and of
the Holding Company, serves as general counsel to the Association.
The Association expects to continue to engage Mr. St. John in such
capacity in the future.
PROPOSAL TWO - APPROVAL OF
THE SOUTHERN COMMUNITY BANCSHARES, INC.
STOCK OPTION AND INCENTIVE PLAN AND TRUST
General
On November 17,1997, the Board of Directors of the Holding
Company adopted the Stock Option Plan. In accordance with the terms
of the Stock Option Plan and regulations of the Office of Thrift
Supervision (the "OTS"), the Stock Option Plan must also be approved
by the holders of a majority of the outstanding shares of the Holding
Company. The provisions of the Stock Option Plan comply with OTS
regulations The OTS in no way endorses or approves the Stock Option
Plan. The Board of Directors of the Holding Company recommends that
the shareholders of the Holding Company approve the Stock Option Plan.
The following is a summary of the terms of the Stock Option
Plan and is qualified in its entirety by reference to the full text
of the Stock Option Plan, a copy of which is attached hereto as
Exhibit A.
Purpose, Administration and Eligibility
The purposes of the Stock Option Plan include retaining and
providing incentives to the directors, officers and employees of the
Holding Company and its subsidiaries by facilitating their purchase of
a stock interest in the Holding Company. Pursuant to the Stock Option
Plan, 113,375 common shares of the Holding Company shall be subject to
purchase through the exercise of options to be granted to certain
directors, officers and employees of the Holding Company from time to
time under the Stock Option Plan.
The Stock Option Plan will be administered by a committee of
directors composed of at least three directors of the Holding Company
who are not employees of the Holding Company (the "Stock Option
Committee"). The Stock Option Committee may grant options under the
Stock Option Plan at such times as they deem most beneficial to the
Holding Company on the basis of the individual participant's
responsibility, tenure and future potential to the Holding Company.
Grants must be made in accordance with OTS regulations which provide
that no individual may receive options to purchase more than 25% of
the shares which are subject to the Stock Option Plan.
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The Board of Directors of the Holding Company has created a
"grantor trust" to acquire the common shares to be awarded under the
Stock Option Plan. For corporate law purposes, such shares are deemed
to be issued and outstanding when acquired by the trust. Common
shares held by the trust will be voted by the trustees of the Stock
Option Plan who will be directors of the Association. Dividends or
distributions payable with respect to shares held by the trust shall
be allocated to the participants' accounts under the Stock Option
Plan. When a participant in the Stock Option Plan acquires shares
pursuant to the exercise of options, such shares and amounts equal to
accrued dividends and distributions thereon, shall be released from
the trust to the participant and the exercise price paid by the
participant with respect to the options shall be remitted to the
Holding Company.
Without further approval of the shareholders, the Board of
Directors may at any time terminate the Stock Option Plan or may amend
it from time to time in such respects as the Board of Directors may
deem advisable, except that the Board of Directors may not, without
the approval of the shareholders, make any amendment which would: (a)
increase the aggregate number of common shares which may be issued
under the Stock Option Plan (except for adjustments to reflect
certain changes in the capitalization of the Holding Company); (b)
materially modify the requirements as to eligibility for participation
in the Stock Option Plan; or (c) materially increase the benefits
accruing to participants under the Stock Option Plan. Notwithstanding
the foregoing, the Board of Directors may amend the Stock Option Plan
to take into account changes in applicable securities, federal income
tax and other applicable laws.
Option Terms
Options granted under the Stock Option Plan may be
"incentive stock options" within the meaning of Section 422 of the
Code ("ISOs") or may not be ISOs ("Non-qualified Options"). The
option exercise price for ISOs and Non-qualified Options will be
determined by the Stock Option Committee at the time of grant, but
must not be less than 100% of the fair market value of the shares on
the date of the grant. No stock option will be exercisable after the
expiration of ten years from the date of grant. In the case of an ISO
granted to an employee who owns more than 10% of the Holding Company's
outstanding common shares at the time an ISO is granted under the
Stock Option Plan, however, the exercise price of the ISO may not be
less than 110% of the fair market value of the shares on the date of
the grant and the ISO may not be exercisable after the expiration of
five years from the date of grant.
An option recipient will not be permitted to transfer or
assign an option other than by will, in accordance with the laws of
descent and distribution or pursuant to a domestic relations order
issued by a court of competent jurisdiction. "Termination for cause,"
as defined in the Stock Option Plan, will result in the annulment of
any outstanding options.
The Holding Company will receive no monetary consideration
for the granting of options under the Stock Option Plan. Upon the
exercise of options, the Holding Company will receive payment of cash,
common shares of the Holding Company or a combination of cash and
common shares from option recipients in exchange for shares issued.
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Tax Treatment of Incentive Stock Options
An optionee who is granted an ISO will not recognize taxable
income either on the date of grant or on the date of exercise,
although the alternative minimum tax may apply. Upon disposition of
shares acquired from the exercise of an ISO, long-term capital gain or
loss is generally recognized in an amount equal to the difference
between the amount realized on the sale or disposition and the
exercise price. If the optionee disposes of the shares within two
years of the date of grant or within one year from the date of the
transfer of the shares to the optionee (a "Disqualifying
Disposition"), however, then the optionee will recognize ordinary
income, as opposed to capital gain, at the time of disposition in an
amount generally equal to the lesser of (i) the amount of gain
realized on the disposition, or (ii) the difference between the fair
market value of the shares received on the date of exercise and the
exercise price. Any remaining gain or loss is treated as a short-term
or long-term capital gain or loss, depending upon the period of time
the shares have been held.
The Holding Company is not entitled to a tax deduction upon
either the exercise of an ISO or the disposition of shares acquired
pursuant to such exercise, except to the extent that the optionee
recognizes ordinary income in a Disqualifying Disposition. Ordinary
income from a Disqualifying Disposition will constitute compensation
but will not be subject to tax withholding, nor will it be considered
wages for payroll tax purposes.
If the holder of an ISO pays the exercise price, in whole or
in part, with previously acquired shares of the Holding Company, the
exchange should not affect the ISO tax treatment of the exercise. Upon
such exchange, and except as otherwise described herein, no gain or
loss is recognized by the optionee upon delivering previously acquired
shares to the Holding Company, and shares received by the optionee
equal in number to previously acquired common shares exchanged
therefor will have the same basis and holding period for long-term
capital gain purposes as the previously acquired shares. (The
optionee, however, will not be able to utilize the prior holding
period for the purpose of satisfying the ISO statutory holding period
requirements for avoidance of a Disqualifying Disposition.) Shares
received by the optionee in excess of the number of shares previously
acquired will have a basis for federal income tax purposes of zero and
a holding period which commences as of the date the shares are
transferred to the optionee upon exercise of the ISO. If the
exercise of an ISO is effected using shares previously acquired
through the exercise of an ISO, the exchange of such previously
acquired shares will be considered a disposition of such shares for
the purpose of determining whether a Disqualifying Disposition has
occurred.
Tax Treatment of Non-qualified Options
An optionee receiving a Non-qualified Option does not
recognize taxable income on the date of grant of the option, provided
that the option does not have a readily ascertainable fair market
value at the time it is granted. The optionee must recognize ordinary
income generally at the time of exercise of a Non-qualified Option in
the amount of the difference between the fair market value of the
shares on the date of exercise and the option price. The ordinary
income received will constitute compensation for which tax withholding
by the Holding Company generally will be required. The amount of
ordinary income recognized by an optionee will be deductible by the
Holding Company in the year that the optionee recognizes the income if
the Holding Company complies with the applicable withholding
requirement.
11
<PAGE>
If, at the time of exercise, the sale of the shares could
subject the optionee to short-swing profit liability under Section
16(b) of the Securities Exchange Act of 1934, such person generally
will not recognize ordinary income until the date that the optionee is
no longer subject to such Section 16(b) liability. Upon such date,
the optionee will recognize ordinary income in an amount equal to the
fair market value of the shares on such date less the option exercise
price. Nevertheless, the optionee may elect under Section 83(b) of the
Code within 30 days of the date of exercise to recognize ordinary
income as of the date of exercise, without regard to the restriction
of Section 16(b).
Shares acquired upon the exercise of a Non-qualified Option
will have a tax basis equal to their fair market value on the exercise
date or other relevant date on which ordinary income is recognized,
and the holding period for the shares generally will begin on the date
of exercise or such other relevant date. Upon subsequent disposition
of the shares, the optionee will recognize long-term capital gain or
loss if the optionee has held the shares for more than one year prior
to disposition, or short-term capital gain or loss if the optionee has
held the shares for one year or less.
If a holder of a Non-qualified Option pays the exercise
price, in whole or in part, with previously acquired shares of the
Holding Company, the optionee will recognize ordinary income in the
amount by which the fair market value of the shares received exceeds
the exercise price. The optionee will not recognize gain or loss with
respect to the previously acquired shares upon delivering such
previously acquired shares to the Holding Company unless such delivery
constitutes a Disqualifying Disposition of shares acquired through the
exercise of an ISO. Shares received by an optionee equal in number to
the previously acquired shares exchanged therefor will have the same
basis and holding period as such previously acquired shares. Shares
received by an optionee in excess of the number of such previously
acquired shares will have a basis equal to the fair market value of
such additional shares as of the date ordinary income is recognized.
The holding period for such additional shares will commence as of the
date of exercise or such other relevant date.
Proposed Awards
The Board of Directors of the Holding Company adopted the
Stock Option Plan on November 17, 1997. If the shareholders approve
the Stock Option Plan, options to purchase up to 5,687 common shares
of the Holding Company will be granted in accordance with the terms of
the Stock Option Plan to each non-employee director on the fifth
business day following the effective date of the Stock Option Plan.
Common shares of the Holding Company may also be awarded under the
Stock Option Plan to each non-employee director who was not a director
on the effective date of the Stock Option Plan, but who is
subsequently elected or appointed to the Board of Directors of the
Holding Company, or a subsidiary of the Holding Company on the date of
such election or appointment.
12
<PAGE>
In addition, if the shareholders approve the Stock Option
Plan at the Annual Meeting, the Stock Option Committee intends to
grant the following options under the Stock Option Plan to the
corresponding executive officers:
Name of Recipient Shares Subject to Options
William R. Faulk 28,434
Beth Knight 10,000
Raymond Williams 10,000
The Stock Option Committee also intends to grant options to
purchase 25,492 common shares to the employees of the Holding Company
who are not executive officers. No determination has been made yet
with respect to the extent to which the options granted to employees
will be ISOs.
If shares are available under the Stock Option Plan, the
Stock Option Committee may grant options under the Stock Option Plan
to the directors, officers and employees of the Holding Company in
the future at such times as they deem most beneficial to the Holding
Company on the basis of the individual participant's responsibility,
tenure and future potential. Options awarded under the Stock Option
Plan will become exercisable at the rate of one-fifth per year
commencing on the date that is one year after the date of grant of the
award.
The Board of Directors of the Holding Company recommends
that the shareholders of the Holding Company approve the Stock Option
Plan. Accordingly, the shareholders of the Holding Company will be
asked to approve the following resolution at the Annual Meeting:
RESOLVED, that the Southern Community Bancshares, Inc. Stock
Option and Incentive Plan and Trust be, and it hereby is, approved.
PROPOSAL THREE - APPROVAL OF
THE SOUTHERN COMMUNITY BANCSHARES, INC.
MANAGEMENT RECOGNITION PLAN AND TRUST
General
On November 17, 1997, the Board of Directors of the Holding
Company adopted the MRP. In accordance with the terms of the MRP and
regulations of the OTS, the MRP must also be approved by the holders
of a majority of the outstanding shares of the Holding Company. The
provisions of the MRP comply with OTS regulations. The OTS in no way
endorses or approves the MRP. The Board of Directors of the Holding
Company recommends that the shareholders of the Holding Company
approve the MRP.
The following is a summary of the terms of the MRP and is
qualified in its entirety by reference to the full text of the MRP, a
copy of which is attached hereto as Exhibit B.
13
<PAGE>
Purpose, Administration and Eligibility
The purpose of the MRP is to provide directors, officers and
certain key employees of the Holding Company with an ownership
interest in the Holding Company in a manner designed to compensate
such directors, officers and key employees for services to the
Holding Company. If the shareholders approve the MRP at the Annual
Meeting, up to 45,494 common shares of the Holding Company shall be
made available for award under the MRP.
The MRP will be administered by a committee of directors
composed of at least three directors of the Holding Company who are
not employees of the Holding Company (the "MRP Committee"). The MRP
Committee will determine the number of shares to be awarded to
eligible participants other than non-employee directors. The MRP
Committee may make awards under the MRP to the officers and employees
of the Holding Company at such times as they deem most beneficial to
the Holding Company on the basis of the individual participant's
responsibility, tenure and future potential. Grants must be made in
accordance with OTS regulations, which provide that no individual may
be awarded more than 25% of the shares under the MRP.
The Board of Directors of the Holding Company has created a
"grantor trust" to acquire the common shares to be awarded under the
MRP. For corporate law purposes, such shares are deemed to be issued
and outstanding when acquired by the trust. Common shares held by the
trust will be voted by the trustees of the MRP who will be directors
of the Association. Dividends or distributions payable with respect
to shares held by the trust shall be allocated to the participants'
accounts under the MRP. When a participant in the MRP earns shares
pursuant to his or her vesting schedule, such shares and amounts equal
to accrued dividends and distributions thereon, shall be released from
the trust to the participant.
Terms
Unless the MRP Committee specifies a longer period of time,
one-fifth of the number of shares awarded to an individual will
become earned and non-forfeitable on each of the first five
anniversaries of the date of such award. Compensation expense in the
amount of the fair market value of the MRP shares will be recognized
as the shares are earned. Until shares awarded are earned by the
participant, such shares will be forfeited in the event that the
participant ceases to be either a director or an employee of the
Holding Company, except that in the event of the death or disability
of a participant, the participant's shares will be deemed to be earned
and non-forfeitable.
The shares, together with any cash dividends or
distributions paid thereon, will be distributed as soon as practicable
after they are earned. A participant may direct the voting of all
shares awarded to him or her which have been earned, but have not yet
been distributed to him or her. Shares that have been awarded, but
not earned, will be voted in the discretion of the MRP Trustee to be
appointed by the MRP Committee. Shares that have been awarded, but
not earned, may not be transferred.
14
<PAGE>
Without further approval of the shareholders, the Board of
Directors may at any time terminate the MRP or may amend it from time
to time in such respects as the Board of Directors may deem advisable,
except that the Board of Directors may not, without the approval of
the shareholders, make any amendment which would: (a) increase the
aggregate number of common shares which may be issued under the MRP
(except for adjustments to reflect certain changes in the
capitalization of the Holding Company); (b) materially modify the
requirements as to eligibility for participation in the MRP; or (c)
materially increase the benefits accruing to participants under the
MRP. Notwithstanding the foregoing, the Board of Directors may amend
the MRP to take into account changes in applicable securities, federal
income tax and other applicable laws.
Tax Treatment of Shares Awarded Under the MRP
Persons receiving shares under the MRP generally will not
recognize income upon the award of such shares, but will recognize
ordinary income when and to the extent such shares become earned and
non-forfeitable, in an amount equal to the fair market value of the
shares at the time such shares become earned and non-forfeitable plus
the amount of any earnings distributed to the participant with
respect to such shares. If applicable withholding requirements are
satisfied, the Holding Company will be entitled to a deduction each
year in an amount equal to the income, if any, recognized by
participants for such year.
Under Section 83(b) of the Code, a participant may elect,
within 30 days after the shares are awarded, to recognize ordinary
income on the date the shares are awarded based on the fair market
value of the shares on such date. If the election is made, the
Holding Company would be entitled to a deduction for an equivalent
amount. A participant making such an election will have a tax basis
in the shares equal to the amount of ordinary income recognized, and
the participant's holding period for capital gains purposes for such
shares will commence on the date the shares are awarded. If a
Section 83(b) election is made, however, and the shares are
subsequently forfeited, the participant will not be entitled to
either a deduction of the amount previously recognized as income with
respect to such shares or a refund of any tax paid thereon. If an
election under Section 83(b) is not made with respect to an award, the
Holding Company will recognize the compensation expense arising from
such award ratably over the five year vesting period, based on the
fair market value of the shares at the time of vesting.
Proposed Awards
The Board of Directors of the Holding Company adopted the
MRP on November 17, 1997. If the shareholders approve the MRP, up to
2,275 common shares of the Holding Company will be awarded in
accordance with the terms of the MRP to each non-employee director on
the fifth business day following the effective date of the MRP.
Common shares of the Holding Company may also be awarded under the MRP
to each non-employee director who was not a director on the effective
date of the MRP, but who is subsequently elected or appointed to the
Board of Directors of the Holding Company, or a subsidiary of the
Holding Company on the date of such election or appointment.
In addition, if the shareholders approve the MRP at the
Annual Meeting, the MRP Committee intends to make the following awards
under the MRP to the corresponding executive officers:
Name of Recipient Shares to be Awarded
William R. Faulk 11,373
Beth Knight 3,000
Raymond Williams 3,000
15
<PAGE>
The MRP Committee also intends to award 12,196 common shares
to the employees of the Holding Company who are not executive
officers. The MRP Committee may award shares under the MRP to the
directors, officers and key employees of the Holding Company in the
future at such times as they deem most beneficial to the Holding
Company and Citizens on the basis of the individual participant's
responsibility, tenure and future potential.
The Board of Directors of the Holding Company recommends
that the shareholders of the Holding Company approve the MRP.
Accordingly, the shareholders of the Holding Company will be asked to
approve the following resolution at the Annual Meeting:
RESOLVED, that The Southern Community Bancshares, Inc.
Management Recognition Plan and Trust be, and it hereby is, approved.
NEW PLAN BENEFITS
The following table sets forth certain information with
respect to the options expected to be granted pursuant to the Stock
Option Plan and the awards expected to be made pursuant to the MRP:
Stock Option Plan
Shares Subject MRP
Name and Position to Options Dollar Value($)(2) Shares #
William R. Faulk, 28,434 $207,557 11,373
President
All executive 48,434 317,057 17,373
officers, as
a group (3
persons)
All directors 39,807 290,631 15,925
who are not
officers, as
a group (7
persons)
All employees 25,494 222,557 12,196
who are not
executive
officers, as
a group
(13 persons)
(1) The dollar value of the shares subject to options under the
Stock Option Plan is not determinable.
(2) Based upon the number of shares awarded multiplied by the
$18.25 per share closing bid price quoted by Nasdaq on December
1, 1997.
16
<PAGE>
PROPOSAL FOUR - SELECTION OF AUDITORS
The Board of Directors has selected Arthur Andersen, LLP as
the auditors of the Holding Company for the current fiscal year and
recommends that the shareholders ratify such selection. Management
expects that a representative of Arthur Andersen, LLP will be present
at the Annual Meeting, will have the opportunity to make a statement
if he or she so desires and will be available to respond to
appropriate questions.
PROPOSALS OF SHAREHOLDERS AND OTHER MATTERS
Any proposals of shareholders intended to be included in the
Proxy statement for the Annual Meeting of Shareholders of the Holding
Company to be held in January, 1999 should be sent to the Holding
Company by certified mail and must be received by the Holding Company
not later than August 14, 1998.
Management knows of no other business which may be brought
before the Annual Meeting. It is the intention of the persons named
in the enclosed Proxy to vote such Proxy in accordance with their
best judgment on any other matters which may be brought before the
Annual Meeting.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE
URGED TO FILL IN, SIGN AND RETURN THE PROXY IN THE ENCLOSED
SELF-ADDRESSED ENVELOPE.
By Order of the Board of Directors
William R. Faulk, President
Cullman, Alabama
December 18, 1997
17
<PAGE>
REVOCABLE PROXY
SOUTHERN COMMUNITY BANCSHARES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF
Southern Community Bancshares, Inc.
The undersigned shareholder of Southern Community
Bancshares, Inc. (the "Holding Company") hereby constitutes and
appoints William R. Faulk and Finis E. St. John, IV or either one of
them, the Proxy or Proxies of the undersigned with full power of
substitution and resubstitution, to vote at the Annual Meeting of
Shareholders of the Holding Company to be held at the office of the
Holding Company located at 323 2nd Street, S.E., Cullman, Alabama
35055 on January 19, 1998 at 2:00 p.m., Central Time (the "Annual
Meeting"), all of the shares of the Holding Company which the
undersigned is entitled to vote at the Annual Meeting, or at any
adjournment thereof, on each of the following proposals, all of which
are described in the accompanying Proxy Statement:
1. The election as directors of all nominees listed below:
Ronald P. Martin
Phillip W. Freeman
FOR WITHHOLD FOR ALL EXCEPT
(INSTRUCTION: To withhold authority to vote for any
individual nominee, mark "For All Except" and write that
nominee's name in the space provided below:
2. The approval of The Southern Community Bancshares, Inc.
Stock Option and Incentive Plan and Trust.
FOR AGAINST ABSTAIN
3. The approval of The Southern Community Bancshares, Inc.
Management Recognition Plan and Trust.
FOR AGAINST ABSTAIN
Important: Please sign and date this proxy on the reverse side.
4. The ratification of the selection of Arthur Andersen,
LLP as the auditors of Southern Community Bancshares, Inc.
for the current fiscal year.
FOR AGAINST ABSTAIN
5. In their discretion, upon such other business as may
properly come before the Annual Meeting or any adjournments
thereof.
<PAGE>
This Revocable Proxy will be voted as directed by the
undersigned member. If no direction is given, this Revocable Proxy
will be voted FOR proposals 1, 2, 3 and 4.
All Proxies previously given by the undersigned are hereby
revoked. Receipt of the Notice of Annual Meeting of Shareholders of
the Holding Company and of the accompanying Proxy Statement is hereby
acknowledged.
NOTE: Please sign your name exactly as it appears on this Proxy.
Joint accounts require only one signature. If you are signing this
Proxy as an attorney, administrator, agent, corporation, officer,
executor, trustee or guardian, etc., please add your full title to
your signature.
_________________________ ________________________________
Signature Signature
_________________________ ________________________________
Print or Type Name Print or Type Name
_________________________ ________________________________
Date Date
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
SOUTHERN COMMUNITY BANCSHARES, INC. PLEASE DATE, SIGN AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR MAILING
IN THE U.S.A.
IMPORTANT: IF YOU RECEIVE MORE THAN ONE CARD, PLEASE SIGN AND RETURN
ALL CARDS IN THE ACCOMPANYING ENVELOPE.
EXHIBIT A
SOUTHERN COMMUNITY BANCSHARES, INC.
STOCK OPTION AND INCENTIVE PLAN
AND TRUST AGREEMENT
1. Purpose. The purpose of the Southern Community Bancshares,
Inc. Stock Option and Incentive Plan and Trust Agreement is to promote
and advance the interests of Southern Community Bancshares, Inc. (the
"Holding Company"), and its shareholders by enabling the Holding
Company to attract, retain and reward directors, managerial and other
key employees of the Holding Company and any Subsidiary (hereinafter
defined), and to strengthen the mutuality of interests between such
directors and employees and the Holding Company's shareholders by
providing such persons with a proprietary interest in pursuing the
long-term growth, profitability and financial success of the Holding
Company.
2. Definitions. For purposes of this Plan, the following terms
shall have the meanings set forth below:
(a) "Agreement" means the Southern Community Bancshares, Inc.
Stock Option and Incentive Plan and Trust Agreement.
(b) "Board" means the Board of Directors of the Holding Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended,
or any successor thereto, together with rules, regulations and
interpretations promulgated thereunder.
(d) "Committee" means the Committee of the Board constituted as
provided in Section 4 of this Plan.
(e) "Common Shares" means the common shares, $.01 par value, of
the Holding Company or any security of the Holding Company issued in
substitution, in exchange or in lieu thereof.
(f) "Employment" means regular employment with the Holding
Company or a Subsidiary and does not include service as a director
only.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute.
(h) "Fair Market Value" shall be determined as follows:
(i) If the Common Shares are traded on a national securities
exchange at the time of grant of the Stock Option, then the Fair
Market Value shall be the average of the highest and the lowest
selling price on such exchange on the date such Stock Option is
granted or, if there were no sales on such date, then on the next
prior business day on which there was a sale.
(ii) If the Common Shares are quoted on The NASDAQ Stock
Market at the time of the grant of the Stock Option, then the
Fair Market Value shall be the mean between the closing high bid
and low asked quotation with respect to a Common Share on such
date on The NASDAQ Stock Market.
A-1
<PAGE>
(iii) If the Common Shares are listed on the National Daily
Quotation Service "pink sheets" published by the National
Quotation Bureau, Inc., then the Fair Market Value shall be the
mean between the closing high bid and low asked quotation with
respect to a Common Share on such date on the National Daily
Quotation Service "pink sheets."
(iv) If the Common Shares are not traded on a national
securities exchange or quoted on The NASDAQ Stock Market or
listed on the National Daily Quotation Service "pink sheets,"
then the Fair Market Value shall be as determined by the
Committee.
(i) "Holding Company" means Southern Community Bancshares, Inc.,
a Delaware corporation, or any successor corporation.
(j) "Incentive Stock Option" means any Stock Option granted
pursuant to the provisions of Section 8 of this Plan that is intended
to be and is specifically designated as an "incentive stock option"
within the meaning of Section 422 of the Code.
(k) "Non-Qualified Stock Option" means any Stock Option granted
pursuant to the provisions of Section 8 of this Plan that is not an
Incentive Stock Option.
(l) "OTS" means the Office of Thrift Supervision, Department of
the Treasury.
(m) "Participant" means an employee or director of the Holding
Company or a Subsidiary who is granted Stock Options under this Plan.
Notwithstanding the foregoing, for the purposes of the granting of any
Incentive Stock Option under this Plan, the term "Participant" shall
include only employees of the Holding Company or a Subsidiary.
(n) "Plan" means the Southern Community Bancshares, Inc. Stock
Option and Incentive Plan and Trust Agreement, as set forth herein and
as it may be hereafter amended from time to time.
(o) "Plan Shares" means the Common Shares held pursuant to the
Plan for which Stock Options have been, or may in the future be,
granted to a Participant pursuant to the Plan.
(p) "Plan Share Reserve" means the Common Shares held by the
Trustee pursuant to Section 7 of this Agreement.
(q) "Stock Option" means an award to purchase Common Shares
granted pursuant to the provisions of Section 8 of this Plan.
(r) "Subsidiary" means any corporation or entity in which the
Holding Company directly or indirectly controls 50% or more of the
total voting power of all classes of its stock having voting power and
includes, without limitation, First Federal Savings and Loan
Association of Cullman.
(s) "Terminated for Cause" means any removal of a director or
discharge of an employee for the personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful
violation of a material provision of any law, rule or regulation
(other than traffic violations or similar offenses), a material
violation of a final cease-and-desist order or any other action of a
director or employee which results in a substantial financial loss to
the Holding Company or a Subsidiary.
A-2
<PAGE>
(t) "Trust" means the trust established by this Agreement.
(u) "Trustee(s)" means the person(s) or entity approved by the
Board pursuant to Section 4(a) and 4(b) to hold legal title to the
Plan assets for the purposes set forth herein.
3. Establishment of the Plan and Trust. The Holding Company
hereby establishes a Stock Option and Incentive Plan and Trust
Agreement upon the terms and subject to the conditions set forth in
this Agreement. The Trustee hereby accepts the Trust and agrees to
hold the Trust assets existing on the date of this Agreement and all
additions and accretions thereto upon the terms and conditions of this
Agreement.
4. Administration.
(a) Committee; Trustee. This Plan shall be administered by the
Board or by a Committee, if one is designated by the Board, to be
comprised of not less than three of the members of the Board who are
not employees of the Holding Company. The members of the Committee,
if any, and the Trustee shall be appointed from time to time by the
Board. Members of the Committee, if any, and the Trustee shall serve
at the pleasure of the Board, and the Board may from time to time
remove members from, or add members to, the Committee or the Trustee.
A majority of the members of the Committee shall constitute a quorum
for the transaction of business. An action approved in writing by a
majority of the members of the Committee then serving shall be fully
as effective as if the action had been taken by unanimous vote at a
meeting duly called and held.
(b) Interpretation. The Board, or the Committee if one is
designated, is authorized to construe and interpret this Plan and to
make all other determinations necessary or advisable for the
administration of this Plan. The Board or the Committee, if any, may
designate persons other than members of Board or the Committee to
carry out its responsibilities under such conditions and limitations
as it may prescribe. Any determination, decision or action of the
Board or the Committee in connection with the construction,
interpretation, administration, or application of this Plan shall be
final, conclusive and binding upon all persons participating in this
Plan and any person validly claiming under or through persons
participating in this Plan. The Holding Company shall effect the
granting of Stock Options under this Plan in accordance with the
determinations made by the Board or the Committee, by execution of
instruments in writing in such form as approved by the Board or the
Committee.
5. Duration of, and Common Shares Subject to, this Plan.
(a) Term. This Plan shall terminate on the date which is ten
(10) years from the date on which this Plan is adopted by the Board,
except with respect to Stock Options then outstanding.
Notwithstanding the foregoing, no Incentive Stock Option may be
granted under this Plan after the date which is ten (10) years from
the date on which this Plan is adopted by the Board or the date on
which this Plan is approved by the shareholders of the Holding
Company, whichever is earlier.
(b) Common Shares Subject to Plan. The maximum number of Common
Shares in respect of which Stock Options may be granted under this
Plan, subject to adjustment as provided in Section 13 of this Plan,
shall be ten percent of the total Common Shares sold in connection
with the conversion of First Federal Savings and Loan Association of
Cullman from mutual to stock form.
A-3
<PAGE>
For the purpose of computing the total number of Common Shares
available for Stock Options under this Plan, there shall be counted
against the foregoing limitations the number of Common Shares subject
to issuance upon exercise or settlement of Stock Options as of the
dates on which such Stock Options are granted. If any Stock Options
are forfeited, terminated or exchanged for other Stock Options, or
expire unexercised, the Common Shares which were theretofore subject
to such Stock Options shall again be available for Stock Options under
this Plan to the extent of such forfeiture, termination or expiration
of such Stock Options.
Common Shares which may be issued under this Plan may be either
authorized and unissued shares or issued shares which have been
reacquired by the Holding Company or issued shares which have been
acquired by the Trust. No fractional shares shall be issued under
this Plan.
6. Eligibility and Grants. Persons eligible for Stock Options
under this Plan shall consist of directors and managerial and other
key employees of the Holding Company or a Subsidiary who hold
positions with significant responsibilities or whose performance or
potential contribution, in the judgment of the Committee, will benefit
the future success of the Holding Company or a Subsidiary. In
selecting the directors and employees to whom Stock Options will be
awarded and the number of shares subject to such Stock Options, the
Committee shall consider the position, duties and responsibilities of
the eligible directors and employees, the value of their services to
the Holding Company and the Subsidiaries and any other factors the
Committee may deem relevant.
7. Contributions or Purchases; Plan Share Reserve.
(a) Amount and Timing of Contributions or Purchases. The Board
shall determine the amounts of cash or Common Shares to be contributed
by the Holding Company to the Trust or the amounts of Common Shares to
be purchased by the Trust. Such amounts shall be paid to the Trustee
at the time of contribution. In connection with any purchase of
Common Shares by the Trust, the Trust may execute a promissory note
payable to the Holding Company in the amount up to the aggregate
purchase price, containing such terms and conditions as may be agreed
by the Holding Company and the Trust. No contributions to the Trust
by Directors or Employees shall be permitted.
(b) Investment of Trust Assets. Except as otherwise permitted
by Section 12(b) of this Agreement, the Trustee shall invest all of
the Trust's assets, after providing for any required withholding as
needed for tax purposes, exclusively in Common Shares. After such
investment, the Common Shares shall be held by the Trustee in the Plan
Share Reserve until such Common Shares are acquired pursuant to the
exercise of a Stock Option granted hereunder. Any funds held by the
Trust before purchasing Common Shares shall be invested by the Trustee
in such interest-bearing account or accounts at the Association as the
Trustee shall determine to be appropriate.
(c) Maintenance and Reduction of Plan Share Reserves. Upon the
exercise of Stock Options pursuant to this Agreement, or the decision
of the Committee to return Plan Shares to the Holding Company, the
Plan Share Reserve shall be reduced by the number of Plan Shares so
exercised or returned. Any Plan Shares subject to Stock Options which
have not been exercised shall be retained in the Plan Share Reserve.
8. Stock Options. Stock Options granted under this Plan may be
in the form of Incentive Stock Options or Non-Qualified Stock Options,
and such Stock Options shall be subject to the following terms and
conditions as the Committee shall deem desirable:
A-4
<PAGE>
(a) Grant. Stock Options may be granted under this Plan on
terms and conditions not inconsistent with the provisions of this Plan
and in such form as the Committee may from time to time approve and
shall contain such additional terms and conditions, not inconsistent
with the express provisions of this Plan; provided, however, that no
more than 25% of the shares subject to Stock Options may be awarded to
any individual who is an employee of the Holding Company or a
Subsidiary, no more than 5% of such shares may be awarded to any
director who is not an employee of the Holding Company or a
Subsidiary.
(b) Stock Option Price. The option exercise price per Common
Share purchasable under a Stock Option shall be determined by the
Committee at the time of grant; provided, however, that in no event
shall the exercise price of a Stock Option be less than 100% of the
Fair Market Value of the Common Shares on the date of the grant of
such Stock Option. Notwithstanding the foregoing, in the case of a
Participant who owns Common Shares representing more than 10% of the
outstanding Common Shares at the time the Incentive Stock Option is
granted, the option exercise price shall in no event be less than 110%
of the Fair Market Value of the Common Shares at the time the
Incentive Stock Option is granted.
(c) Stock Option Terms. Subject to the right of the Holding
Company to provide for earlier termination in the event of any merger,
acquisition or consolidation involving the Holding Company, the term
of each Stock Option shall be fixed by the Committee; except that the
term of Incentive Stock Options will not exceed ten years after the
date the Incentive Stock Option is granted; provided, however, that in
the case of a Participant who owns a number of Common Shares
representing more than 10% of the Common Shares outstanding at the
time the Incentive Stock Option is granted, the term of the Incentive
Stock Option shall not exceed five years.
(d) Exercisability. Except as set forth in Section 8(f) and
Section 9 of this Plan, Stock Options awarded under this Plan shall
become exercisable at the rate of one-fifth per year commencing on the
date that is one year after the date of the grant of the Stock Option
and shall be subject to such other terms and conditions as shall be
determined by the Committee at the date of grant.
(e) Method of Exercise. A Stock Option may be exercised, in
whole or in part, by giving written notice of exercise to the Trustee
and the Holding Company specifying the number of Common Shares to be
purchased. Such notice shall be accompanied by payment to the Trustee
of the full amount of the purchase price in cash or, if acceptable to
the Committee in its sole discretion, in Common Shares already owned
by the Participant, or by surrendering outstanding Stock Options. The
Board or the Committee, if any, may also permit Participants, either
on a selective or aggregate basis, to simultaneously exercise Options
and sell Common Shares thereby acquired, pursuant to a brokerage or
similar arrangement, approved in advance by the Board or the
Committee, and use the proceeds from such sale as payment of the
purchase price of such shares. Any amounts received by the Trustee in
respect of the exercise of Stock Options shall be remitted to the
Holding Company.
(f) Special Rule for Incentive Stock Options. With respect to
Incentive Stock Options granted under this Plan, to the extent the
aggregate Fair Market Value (determined as of the date the Incentive
Stock Option is granted) of the number of shares with respect to which
Incentive Stock Options are exercisable under all plans of the Holding
Company or a Subsidiary for the first time by a Participant during any
calendar year exceeds $100,000, or such other limit as may be required
by the Code, such Stock Options shall be Non-Qualified Stock Options
to the extent of such excess.
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9. Termination of Employment or Directorship.
(a) Except in the event of the death or disability of a
Participant, upon the resignation, removal or retirement from the
board of directors of any Participant who is a director of the Holding
Company or a Subsidiary, or upon the termination of Employment of a
Participant who is not a director of the Holding Company or a
Subsidiary, any Stock Option which has not yet become exercisable
shall there upon terminate and be of no further force or effect, and,
subject to extension by the Committee, any Stock Option which has
become exercisable shall terminate if it is not exercised within 12
months of such resignation, removal or retirement; provided, however,
in the case of any Incentive Stock Option such period shall be 3
months after such resignation, removal or retirement.
(b) Unless the Committee shall specifically state otherwise at
the time a Stock Option is granted, all Stock Options granted under
this Plan shall become exercisable in full on the date of termination
of a Participant's employment or directorship with the Holding Company
or a Subsidiary because of his death or disability, and, subject to
extension by the Committee, all Stock Options shall terminate if not
exercised within 12 months of the Participant's death or disability.
(c) In the event the Employment or the directorship of a
Participant is Terminated for Cause (hereinafter defined), any Stock
Option which has not been exercised shall terminate as of the date of
such termination for cause.
10. Non-transferability of Stock Options. No Stock Option
under this Plan, and no right or interests therein, shall be
assignable or transferable by a Participant except by will or the laws
of descent and distribution. During the lifetime of a Participant,
Stock Options are exercisable only by, and payments in settlement of
Stock Options will be payable only to, the Participant or his or her
legal representative.
11. Voting of Plan Shares. All Common Shares held by the
Trustee in the Plan Share Reserve, including Common Shares subject to
Stock Options which have not been exercised, shall be voted by the
Trustee.
12. Trust.
(a) The Trustee. The Trustee shall receive, hold, administer,
invest and make distributions and disbursements from the Trust in
accordance with the provisions of the Plan and the Trust and the
applicable directions, rules, regulations, procedures and policies
established by the Committee pursuant to this Agreement.
(b) Management of Trust. The Trustee shall have complete
authority and discretion with respect to the management, control and
investment of the Trust, and the Trustee shall invest all assets of
the Trust, except those attributable to cash dividends paid with
respect to Plan Shares not held in the Plan Share Reserve, in Common
Shares to the fullest extent practicable, and except to the extent
that the Trustee determines that the holding of monies in cash or cash
equivalents is necessary to meet the obligations of the Trust. The
Trustee shall have the power to do all things and execute such
instruments as may be deemed necessary or proper, including the
following powers:
(i) To invest up to 100% of all Trust assets in Common
Shares without regard to any law now or hereafter in force
limiting investments for Trustees or other fiduciaries. The
investment authorized herein may constitute the only investment
of the Trust, and, in making such investment, the Trustee is
authorized to purchase Common Shares from the Holding Company or
from any other source. Such Common Shares so purchased may be
outstanding, newly issued or treasury shares;
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(ii) To invest any Trust assets not otherwise invested in
accordance with clause (i) above, in such deposit accounts and
certificates of deposit (including those issued by the
Association), obligations of the United States government or its
agencies or such other investments as shall be considered the
equivalent of cash;
(iii) To sell, exchange or otherwise dispose of any property
at any time held or acquired by the Trust;
(iv) To cause stocks, bonds or other securities to be
registered in the name of a nominee, without the addition of
words indicating that such security is an asset of the Trust (but
accurate records shall be maintained showing that such security
is an asset of the Trust);
(v) To hold cash without interest in such amounts as may be
reasonable, in the opinion of the Trustee, for the proper
operation of the Plan and the Trust;
(vi) To employ brokers, agents, custodians, consultants and
accountants;
(vii) To hire counsel to render advice with respect to the
Trustee's rights, duties and obligations hereunder, and such
other legal services or representation as the Trustee may deem
desirable; and
(viii) To hold funds and securities representing the amounts
to be distributed to a Recipient or his Beneficiary as a
consequence of a dispute as to the disposition thereof, whether
in a segregated account or held in common with other assets of
the Trust.
Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement
or report to any court, or to secure any order of court for the
exercise of any power herein contained, or to give bond.
(c) Records and Accounts. The Trustee shall maintain accurate
and detailed records and accounts of all transactions of the Trust,
which shall be available at all reasonable times for inspection by any
legally entitled person or entity to the extent required by applicable
law, or any other person determined by the Committee.
(d) Earnings. All earnings, gains and losses with respect to
Trust assets shall be allocated, in accordance with a reasonable
procedure adopted by the Committee, to bookkeeping accounts for
Recipients or to the general account of the Trust, depending on the
nature and allocation of the assets generating such earnings, gains
and losses. Without limiting the generality of the foregoing, any
earnings on cash dividends or returned capital received with respect
to Common Shares shall be allocated (a) to accounts for Participants,
if such shares are the subject of outstanding grants, and shall be
distributed as specified in Article VII of this Agreement, or (b)
otherwise to the Plan Share Reserve if such Plan Shares are not the
subject of outstanding grants.
(e) Expenses. All costs and expenses incurred in the operation
and administration of the Plan shall be paid by the Holding Company.
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13. Adjustments Upon Changes in Capitalization.
(a) The existence of this Plan and the Stock Options granted
hereunder shall not affect or restrict in any way the right or power
of the Board or the shareholders of the Holding Company to make or
authorize the following: any adjustment, recapitalization,
reorganization or other change in the Holding Company's capital
structure or its business; any merger, acquisition or consolidation of
the Holding Company; any issuance of bonds, debentures, preferred or
prior preference stocks ahead of or affecting the Holding Company's
capital stock or the rights thereof; the dissolution or liquidation of
the Holding Company or any sale or transfer of all or any part of its
assets or business; or any other corporate act or proceeding,
including any merger or acquisition which would result in the exchange
of cash, stock of another company or options to purchase the stock of
another company for any Stock Option outstanding at the time of such
corporate transaction or which would involve the termination of all
Stock Options outstanding at the time of such corporate transaction.
(b) In the event of any change in capitalization affecting
the Common Shares of the Holding Company, such as a stock dividend,
stock split, recapitalization, merger, consolidation, split-up,
combination or exchange of shares or other form of reorganization, or
any other change affecting the Common Shares, such proportionate
adjustments, if any, as the Board in its discretion may deem
appropriate to reflect such change shall be made with respect to the
aggregate number of Common Shares for which Stock Options in respect
thereof may be granted under this Plan, the maximum number of Common
Shares which may be sold or awarded to any Participant, the number of
Common Shares covered by each outstanding Stock Option, and the
exercise price per share in respect of outstanding Stock Options.
(c) The Committee may also make such adjustments in the number
of shares covered by, and the exercise price or other value of, any
outstanding Stock Options in the event of a spin-off or other
distribution (other than normal cash dividends) of Holding Company
assets to shareholders. In the event that another corporation or
business entity is being acquired by the Holding Company, and the
Holding Company agrees to assume outstanding employee stock options
and/or the obligation to make future grants of options or rights to
employees of the acquired entity, the aggregate number of Common
Shares available for Stock Options under Section 5 of this Plan may be
increased accordingly.
14. Amendment and Termination of this Plan. Without further
approval of the shareholders, the Board may at any time terminate this
Plan, or may amend it from time to time in such respects as the Board
may deem advisable, except that the Board may not, without approval of
the shareholders, make any amendment which would (a) increase the
aggregate number of Common Shares which may be issued under this Plan
(except for adjustments pursuant to Section 13 of this Plan), (b)
materially modify the requirements as to eligibility for participation
in this Plan, or (c) materially increase the benefits accruing to
Participants under this Plan. The above notwithstanding, the Board
may amend this Plan to take into account changes in applicable
securities, federal income tax and other applicable laws.
15. Modification of Options. The Board may authorize the
Committee to direct the execution of an instrument providing for the
modification of any outstanding Stock Option which the Board believes
to be in the best interests of the Holding Company; provided, however,
that no such modification, extension or renewal shall reduce the
exercise price or confer on the holder of such Stock Option any right
or benefit which could not be conferred on him by the grant of a new
Stock Option at such time and shall not materially decrease the
Participant's benefits under the Stock Option without the consent of
the holder of the Stock Option, except as otherwise permitted under
this Plan.
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16. Miscellaneous.
(a) Tax Withholding. The Holding Company shall have the right
to deduct from any settlement, including the delivery or vesting of
Common Shares, made under this Plan any federal, state or local taxes
of any kind required by law to be withheld with respect to such
payments or to take such other action as may be necessary in the
opinion of the Holding Company to satisfy all obligation for the
payment of such taxes. If Common Shares are used to satisfy tax
withholding, such shares shall be valued based on the Fair Market
Value when the tax withholding is required to be made.
(b) No Right to Employment. Neither the adoption of this Plan
nor the granting of any Stock Option shall confer upon any employee of
the Holding Company or a Subsidiary any right to continued Employment
with the Holding Company or a Subsidiary as the case may be, nor shall
it interfere in any way with the right of the Holding Company or a
Subsidiary to terminate the Employment of any of its employees at any
time, with or without cause.
(c) Annulment of Stock Options. The grant of any Stock Option
under this Plan payable in cash is provisional until cash is paid in
settlement thereof. The grant of any Stock Option payable in Common
Shares is provisional until the Participant becomes entitled to the
certificate in settlement thereof. In the event the Employment or the
directorship of a Participant is Terminated for Cause, any Stock
Option which is provisional shall be annulled as of the date of such
termination.
(d) Other Holding Company Benefit and Compensation Programs.
Payments and other benefits received by a Participant under a Stock
Option made pursuant to this Plan shall not be deemed a part of a
Participant's regular, recurring compensation for purposes of the
termination indemnity or severance pay law of any country and shall
not be included in, nor have any effect on, the determination of
benefits under any other employee benefit plan or similar arrangement
provided by the Holding Company or a Subsidiary unless expressly so
provided by such other plan or arrangement, or except where the
Committee expressly determines that a Stock Option or portion of a
Stock Option should be included to accurately reflect competitive
compensation practices or to recognize that a Stock Option has been
made in lieu of a portion of competitive annual cash compensation,
Stock Options under this Plan may be made in combination with or in
tandem with, or as alternatives to, grants, stock options or payments
under any other plans of the Holding Company or a Subsidiary. This
Plan notwithstanding, the Holding Company or any Subsidiary may adopt
such other compensation programs and additional compensation
arrangements as it deems necessary to attract, retain and reward
directors and employees for their service with the Holding Company and
its Subsidiaries.
(e) Securities Law Restrictions. No Common Shares shall be
issued under this Plan unless counsel for the Holding Company shall be
satisfied that such issuance will be in compliance with applicable
federal and state securities laws. Certificates for Common Shares
delivered under this Plan may be subject to such stock-transfer orders
and other restrictions as the Committee may deem advisable under the
rules, regulations, and other requirements of the Securities and
Exchange Committee, any stock exchange upon which the Common Shares
are then listed, and any applicable federal or state securities law.
The Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(f) Stock Option Agreement. Each Participant receiving a
Stock Option under this Plan shall enter into an agreement with the
Holding Company in a form specified by the Committee agreeing to the
terms and conditions of the Stock Option and such related matters as
the Committee shall, in its sole discretion, determine.
(g) Cost of Plan. The costs and expenses of administering
this Plan shall be borne by the Holding Company.
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(h) Governing Law. This Plan and all actions taken hereunder
shall be governed by and construed in accordance with the laws of the
State of Delaware, except to the extent that federal law shall be
deemed applicable.
(i) Voting and Dividend Rights. No Participant shall have any
voting or dividend rights (except as specifically provided in Section
12) or other rights of a shareholder in respect of any Common Shares
covered by a grant, prior to the time such Common Shares are owned by
such Participant.
(j) Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware, except to the
extent that federal laws shall be deemed applicable.
(k) Effective Date. This Plan shall be effective immediately
after adoption by the Board and the approval by the Holding Company's
shareholders. This Plan shall be submitted to the shareholders of the
Holding Company for approval at an annual or special meeting of
shareholders to be held no sooner than six months after the effective
date of the Conversion.
(l) Tax Status of Trust. It is intended that the trust
established hereby be treated as a grantor trust of the Association
under the provisions of Section 671, et seq., of the Internal Revenue
Code of 1986, as amended (26 U.S.C. Sect. 671 et seq.)
IN WITNESS WHEREOF, the following Trustees execute this
Agreement, accepting and binding themselves to undertake and perform
the obligations and duties of the Trustee hereunder and consenting to
the foregoing Agreement effective the ___ day of January, 1998.
B y : ____________________________ (Trustee)
B y : ____________________________ (Trustee)
B y : ______________________________ (Trustee)
A-10
EXHIBIT B
SOUTHERN COMMUNITY BANCSHARES, INC.
MANAGEMENT RECOGNITION PLAN
AND TRUST AGREEMENT
ARTICLE I
DEFINITIONS
The following words and phrases when used in this Agreement with
an initial capital letter shall have the meanings set forth below,
unless the context clearly indicates otherwise. Wherever appropriate,
the masculine pronoun shall include the feminine pronoun and the
singular shall include the plural:
1.01 "Agreement" means the Southern Community Bancshares, Inc.
Management Recognition Plan and Trust Agreement.
1.02 "Association" means First Federal Savings & Loan
Association of Cullman, a federally chartered savings and loan
association.
1.03 "Award" means a right granted to a Director or an Employee
under this Plan to receive Plan Shares.
1.04 "Beneficiary" means the person or persons designated by a
Recipient to receive any benefits payable under this Plan in the event
of such Recipient's death. Such person or persons shall be designated
in writing on forms provided for this purpose by the Committee and may
be changed from time to time by similar written notice to the
Committee. In the absence of a written designation, the Beneficiary
shall be the Recipient's estate.
1.05 "Board" means the Board of Directors of the Holding
Company.
1.06 "Committee" means the Management Recognition Plan
Committee appointed by the Board pursuant to Article IV hereof.
1.07 "Common Shares" means common shares of the Holding Company.
1.08 "Conversion" means the conversion of the Association from
mutual to stock form.
1.09 "Director" means any person who is a member of the Board
of Directors of the Holding Company, the Association or a Subsidiary.
1.10 "Employee" means any person who is employed by the Holding
Company, the Association or a Subsidy.
1.11 "Holding Company" means Southern Community Bancshares,
Inc., a Delaware corporation incorporated for the purpose of holding
all of the common shares of the Association issued in connection with
the Conversion.
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1.12 "Person" means an individual, corporation, partnership,
trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of
entity not specifically listed herein.
1.13 "Plan" means the Management Recognition Plan established
by this Agreement.
1.14 "Plan Shares" means the Common Shares held pursuant to the
Trust and which are awarded or issuable to a Recipient pursuant to the
Plan.
1.15 "Plan Share Reserve" means the Common Shares held by the
Trustee pursuant to Sections 5.02 and 5.03 of this Agreement.
1.16 "Recipient" means any Director or Employee who receives an
Award under the Plan.
1.17 "Subsidiaries" means subsidiaries of the Holding Company
or the Association which, with the consent of the Board, agree to
participate in the Plan.
1.18 "Trust" means the trust established by this Agreement.
1.19 "Trustee(s)" means the person(s) or entity approved by the
Board pursuant to Sections 4.01 and 4.02 to hold legal title to the
Plan assets for the purposes set forth herein.
ARTICLE II
ESTABLISHMENT OF THE PLAN AND TRUST
2.01 The Holding Company hereby establishes a Management
Recognition Plan and Trust upon the terms and subject to the
conditions set forth in this Agreement. The Trustee hereby accepts
the Trust and agrees to hold the Trust assets existing on the date of
this Agreement and all additions and accretions thereto upon the terms
and conditions of this Agreement.
ARTICLE III
PURPOSE OF THE PLAN
3.01 The purpose of the Plan is to reward and retain the
Directors and Employees of the Holding Company, the Association and
the Subsidiaries who are in key positions of responsibility by
providing such Directors and Employees with an equity interest in the
Holding Company as reasonable compensation for their contributions to
the Holding Company, the Association and the Subsidiaries.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Role of the Committee. The Plan shall be administered and
interpreted by the Committee, which shall consist of not less than
three members of the Board who are not employees of the Holding
Company or the Association. The Committee shall have all of the
powers set forth in this Plan. The interpretation and construction by
the Committee of any provisions of this Agreement or of any Award
granted hereunder shall be final, conclusive and binding. The
Committee shall act by the vote, or the written consent, of a majority
of its members. The Committee shall report actions and decisions with
respect to the Plan to the Board upon request by the Board.
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<PAGE>
4.02 Role of the Board. The members of the Committee and the
Trustee(s) shall be appointed or approved by and will serve at the
pleasure of the Board. The Board may in its discretion from time to
time remove members from or add members to the Committee and may
remove, replace or add Trustee(s). The Board, in its absolute
discretion, may take any action under or with respect to the Plan
which the Committee is authorized to take and may reverse or override
any action taken or decision made by the Committee under or with
respect to the Plan or take any other action reserved to the Board
under this Agreement; provided, however, that the Board may not revoke
any Award already granted under this Agreement. All decisions,
determinations and interpretations of the Board shall be final,
conclusive and binding upon all parties having an interest in the
Plan.
4.03 Limitation on Liability. No member of the Board or the
Committee, nor any Trustee, shall be liable for any determination made
in good faith with respect to the Plan or any Plan Shares or Awards
granted under the Plan. If a member of the Board or of the Committee
or any Trustee is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of
anything done or not done by such member in such capacity under or
with respect to this Plan, the Holding Company shall indemnify such
member against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by
such member in connection with such action, suit or proceeding if such
member acted in good faith and in a manner such member reasonably
believed to be in or not opposed to the best interests of the Holding
Company, the Association and the Subsidiaries and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such
member's conduct was unlawful.
ARTICLE V
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 Amount and Timing of Contributions. The Board shall
determine the amounts (or the method of computing the amounts) to be
contributed by the Holding Company to the Trust. Such amounts shall
be paid to the Trustee at the time of contribution. No contributions
to the Trust by Directors or Employees shall be permitted.
5.02 Investment of Trust Assets. Except as otherwise permitted
by Section 8.02 of this Agreement, the Trustee shall invest all of the
Trust's assets, after providing for any required withholding as needed
for tax purposes, exclusively in Common Shares; provided, however,
that the Trust shall not purchase a number of Common Shares equal to
more than 3% of the number of Common Shares issued in connection with
the Conversion, except that if the Association's tangible capital
exceeds 10%, the Trust may purchase a number of Common Shares equal to
up to 4% of the Common Shares issued in connection with the
Conversion. After such investment, the Common Shares shall be held by
the Trustee in the Plan Share Reserve until such Common Shares are
subject to one or more Awards. Any funds held by the Trust before
purchasing Common Shares shall be invested by the Trustee in such
interest-bearing account or accounts at the Association as the Trustee
shall determine to be appropriate.
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<PAGE>
5.03 Effect of Allocations, Returns and Forfeitures Upon Plan
Share Reserves. Upon the allocation of Awards under Section 6.02 of
this Agreement, or the decision of the Committee to return Plan Shares
to the Holding Company, the Plan Share Reserve shall be reduced by the
number of Plan Shares so allocated or returned. Any Plan Shares
subject to an Award which is subject to forfeiture by the Recipient
pursuant to Section 7.01 of this Agreement shall be retained in the
Plan Share Reserve.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 Eligibility. Directors and Employees are eligible to
receive Awards within the sole discretion of the Committee, subject to
review and approval or rejection by the Board.
6.02 Allocations. The Committee will determine which of the
Directors and Employees will be granted Awards and the number of Plan
Shares covered by each Award; provided, however, that: (a) the
aggregate number of Plan Shares covered by Awards to any Employee
shall not exceed 25% of the total number of Plan Shares, (b) no more
than 5% of the Shares shall be awarded to any Director who is not an
Employee, and (c) no more than 30% of the Plan Shares shall be awarded
in the aggregate to Directors who are not Employees. In the event
Plan Shares are forfeited for any reason or additional Plan Shares are
purchased by the Trustee, the Committee may, from time to time,
determine which of the Employees will be granted additional Awards to
be awarded from forfeited or additional Plan Shares.
In selecting the Directors and Employees to whom Awards will be
granted and the number of shares covered by such awards, the Committee
shall consider the position, duties and responsibilities of the
eligible Directors and Employees, the value of their services to the
Holding Company, the Association and the Subsidiaries and any other
factors the Committee may deem relevant. All allocations by the
Committee shall be subject to review and approval or rejection by the
Board.
6.03 Form of Allocation. As promptly as practicable after a
determination is made pursuant to Section 6.02 of this Agreement that
an Award is to be made, the Committee shall notify the recipient in
writing of the grant of the Award, the number of Plan Shares covered
by the Award and the terms upon which the Plan Shares subject to the
Award may be earned. The date on which the Committee determines that
an Award is to be made or a later date designated by the Committee
shall be considered the date of grant of the Awards. The Committee
shall maintain records as to all grants of Awards under the Plan.
6.04 Allocations Not Required. None of the Directors or
Employees, either individually or as a group, shall have any right or
entitlement to receive an Award under the Plan. The Committee may,
with the approval of the Board, and shall, if so directed by the
Board, return all Common Shares and other assets in the Plan Share
Reserve to the Holding Company at any time and thereafter cease
issuing Awards.
6.05 Shareholder Approval. This Agreement shall be submitted
to the shareholders of the Holding Company at an annual or special
meeting to be held no sooner than six months after the effective date
of the Conversion. Notwithstanding anything to the contrary in this
Agreement, no Awards shall be granted hereunder until the shareholders
of the Holding Company approve this Agreement.
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ARTICLE VII
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earning Plan Shares; Forfeitures.
(a) General Rules. Unless the Committee shall specifically
state a longer period of time over which Awards shall be earned and
non-forfeitable at the time an Award is granted, Plan Shares shall be
earned and non-forfeitable by a Recipient over a period of five years
at the rate of one-fifth per year commencing on the date which is one
year after the date of the grant of such Award. As Plan Shares become
earned and non-forfeitable, any cash dividend, returned capital and
earnings thereon shall also be earned and non-forfeitable.
(b) Revocation. Unless otherwise permitted by applicable law
and regulations, any Plan Shares and any cash dividends, returned
capital and earnings thereon that have not been earned and are not
non-forfeitable in accordance with Section 7.01(a) of this Agreement
shall be forfeited in the event that (i) a Recipient who is a Director
ceases to serve on the Board of Directors of both the Holding Company
and the Association or (ii) a Recipient who is not a Director of the
Holding Company or the Association ceases to be an Employee of the
Holding Company or the Association, except as otherwise provided in
subsection (c) of this Section 7.01.
(c) Exception for Terminations Due to Death or Disability.
All Plan Shares and cash dividends, returned capital and earnings
thereon subject to an Award held by a Recipient whose service as a
Director or Employee of the Holding Company, the Association or a
Subsidiary terminates due to (i) death or (ii) disability (as
determined by the Committee) shall be deemed fully earned and non-
forfeitable as of the later of the Recipients last day of service as a
Director or as an Employee and shall be distributed as soon as
practicable thereafter.
7.02 Distribution of Plan Shares.
(a) Timing of Distributions; General Rule. Except as
otherwise provided in this Agreement, Plan Shares shall be distributed
to the Recipient or his Beneficiary, as the case may be, as soon as
practicable after they have been earned, together with any cash
dividends, returned capital and earnings thereon with respect to Plan
Shares that have been earned.
(b) Form of Distribution. All distributions of Plan Shares,
together with any shares representing stock dividends, shall be
distributed in the form of Common Shares. No fractional shares shall
be distributed. Payments representing cash dividends, returned
capital and earnings thereon shall be made in cash.
(c) Withholding. The Trustee may withhold from any cash
payment made under this Plan sufficient amounts to cover any
applicable withholding and employment taxes and, if the amount of such
cash payment is not sufficient, the Trustee may require the Recipient
or Beneficiary to pay to the Trustee the amount required to be
withheld as a condition of delivering the Plan Shares. The Trustee
shall pay over to the Holding Company, the Association or the
Subsidiary which employs or employed such Recipient or which the
Recipient serves or served as a Director, any such amount withheld
from or paid by the Recipient or Beneficiary.
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(d) Regulatory Exceptions. Notwithstanding anything to the
contrary in this Agreement, no Plan Shares, upon becoming fully earned
and non-forfeitable, shall be distributed unless and until all of the
requirements of all applicable laws and regulations shall have been
met.
7.03 Voting of Plan Shares. All Common Shares held by the
Trustee in the Plan Share Reserve which have not yet been earned by a
Recipient pursuant to Section 7.01 of this Agreement shall be voted by
the Trustee. A Recipient shall be entitled to direct the voting of
Plan Shares which have been earned pursuant to Section 7.01 of this
Agreement but have not yet been distributed to him.
ARTICLE VIII
TRUST
8.01 Trust. The Trustee shall receive, hold, administer,
invest and make distributions and disbursements from the Trust in
accordance with the provisions of the Plan and the Trust and the
applicable directions, rules, regulations, procedures and policies
established by the Committee pursuant to this Agreement.
8.02 Management of Trust. The Trustee shall have complete
authority and discretion with respect to the management, control and
investment of the Trust, and the Trustee shall invest all assets of
the Trust, except those attributable to cash dividends paid with
respect to Plan Shares not held in the Plan Share Reserve, in Common
Shares to the fullest extent practicable, and except to the extent
that the Trustee determines that the holding of monies in cash or cash
equivalents is necessary to meet the obligations of the Trust. The
Trustee shall have the power to do all things and execute such
instruments as may be deemed necessary or proper, including the
following powers:
(a) To invest up to 100% of all Trust assets in Common Shares
without regard to any law now or hereafter in force limiting
investments for Trustees or other fiduciaries. The investment
authorized herein may constitute the only investment of the Trust,
and, in making such investment, the Trustee is authorized to purchase
Common Shares from the Holding Company or from any other source. Such
Common Shares so purchased may be outstanding, newly issued or
treasury shares;
(b) To invest any Trust assets not otherwise invested in
accordance with Section 8.02(a) of this Agreement in such deposit
accounts and certificates of deposit (including those issued by the
Association), obligations of the United States government or its
agencies or such other investments as shall be considered the
equivalent of cash;
(c) To sell, exchange or otherwise dispose of any property at
any time held or acquired by the Trust;
(d) To cause stocks, bonds or other securities to be
registered in the name of a nominee, without the addition of words
indicating that such security is an asset of the Trust (but accurate
records shall be maintained showing that such security is an asset of
the Trust);
(e) To hold cash without interest in such amounts as may be
reasonable, in the opinion of the Trustee, for the proper operation of
the Plan and the Trust;
(f) To employ brokers, agents, custodians, consultants and
accountants;
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(g) To hire counsel to render advice with respect to the
Trustee's rights, duties and obligations hereunder, and such other
legal services or representation as the Trustee may deem desirable;
and
(h) To hold funds and securities representing the amounts to
be distributed to a Recipient or his Beneficiary as a consequence of a
dispute as to the disposition thereof, whether in a segregated account
or held in common with other assets of the Trust.
Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement
or report to any court, or to secure any order of court for the
exercise of any power herein contained, or to give bond.
8.03 Records and Accounts. The Trustee shall maintain accurate
and detailed records and accounts of all transactions of the Trust,
which shall be available at all reasonable times for inspection by any
legally entitled person or entity to the extent required by applicable
law, or any other person determined by the Committee.
8.04 Earnings. All earnings, gains and losses with respect to
Trust assets shall be allocated, in accordance with a reasonable
procedure adopted by the Committee, to bookkeeping accounts for
Recipients or to the general account of the Trust, depending on the
nature and allocation of the assets generating such earnings, gains
and losses. Without limiting the generality of the foregoing, any
earnings on cash dividends or returned capital received with respect
to Common Shares shall be allocated (a) to accounts for Recipients, if
such shares are the subject of outstanding Awards, and shall become
deemed earned and be distributed as specified in Article VII of this
Agreement, or (b) or otherwise to the Plan Share Reserve if such Plan
Shares are not the subject of outstanding awards.
8.05 Expenses. All costs and expenses incurred in the operation
and administration of the Plan shall be paid by the Holding Company.
ARTICLE IX
MISCELLANEOUS
9.01 Adjustments for Capital Changes. The aggregate number of
Plan Shares available for issuance pursuant to the Awards and the
number of Plan Shares to which any Award relates shall be
proportionately adjusted for any increase or decrease in the total
number of outstanding Common Shares issued subsequent to the effective
date of the Plan if such increase or decrease resulted from any split,
subdivision or consolidation of shares or other capital adjustment, or
other increase or decrease in such shares effected without receipt or
payment or consideration by the Holding Company.
9.02 Amendment and Termination of Plan. The Board may, by
resolution, at any time amend or terminate the Plan. The power to
amend or terminate the Plan shall include the power to direct the
Trustee to return to the Holding Company or the Association all or any
part of the assets of the Trust, including Common Shares held in the
Plan Share Reserve, as well as Common Shares and other assets subject
to Awards which are not yet earned by the Directors or Employees to
whom they are allocated provided, however, that the termination of the
Trust shall not affect a Recipient's right to earn Awards and to the
distribution of Shares relating thereto, including earnings thereon,
in accordance with the terms of this Agreement and the grant by the
Committee or the Board.
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9.03 Nontransferable. Awards shall not be transferable by a
Recipient. During the lifetime of the Recipient, an Award may only be
earned by and paid to the Recipient who was notified in writing of the
Award by the Committee pursuant to Section 6.03 of this Agreement. No
Recipient or Beneficiary shall have any right in or claim to any
assets of the Plan or the Trust, nor shall the Holding Company, the
Association or any Subsidiary be subject to any claim for benefits
hereunder.
9.04 Directorship Rights. Neither this Agreement nor any grant
of an Award hereunder nor any action taken by the Trustee, the
Committee or the Board in connection with the Plan shall create any
right, either express or implied, on the part of any Director to
continue to serve as a Director of the Association or a Subsidiary.
9.05 Employment Rights. Neither this Agreement nor any grant
of an Award hereunder nor any action taken by the Trustee, the
Committee or the Board in connection with the Plan shall create any
right, either express or implied, on the part of any Employee to
continue in the employ of the Holding Company, the Association or a
Subsidiary.
9.06 Voting and Dividend Rights. No Recipient shall have any
voting or dividend rights or other rights of a shareholder in respect
of any Plan Shares covered by an Award, except as expressly provided
in Sections 7.01, 7.02 and 7.03 of this Agreement, prior to the time
such Plan Shares are actually distributed to such Recipient.
9.07 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware, except to the
extent that federal laws shall be deemed applicable.
9.08 Effective Date. This Agreement shall be effective as of
the 19th day of January, 1998.
9.09 Term of Plan. The Plan shall remain in effect until the
earlier of (a) the termination of the Plan by the Board or (b) the
distribution of all assets from the Trust. The termination of the
Plan shall not affect any Awards previously granted and such Awards
shall remain valid and in effect until they have been earned and paid
or by their terms expire or are forfeited.
9.10 Tax Status of Trust. It is intended that the trust
established hereby be treated as a grantor trust of the Association
under the provisions of Section 671, et seq., of the Internal Revenue
Code of 1986, as amended (26 U.S.C. Sect. 671 et seq.)
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IN WITNESS WHEREOF, the following Trustees execute this
Agreement, accepting and binding themselves to undertake and perform
the obligations and duties of the Trustee hereunder and consenting to
the foregoing Agreement effective the 19th day of January, 1998.
By: ________________________ (Trustee)
By: ________________________ (Trustee)
By: _______________________ (Trustee)
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