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FIRST SOUTH BANCORP, INC.
1997 STOCK OPTION PLAN, AS AMENDED
1. PURPOSE OF THE PLAN.
The purpose of this Plan is to advance the interests of the
Company through providing select key Employees and Directors of
the Bank, the Company, and their Affiliates with the opportunity
to acquire Shares. By encouraging such stock ownership, the
Company seeks to attract, retain and motivate the best available
personnel for positions of substantial responsibility and to
provide additional incentives to Directors and key Employees of
the Company or any Affiliate to promote the success of the
business.
2. DEFINITIONS.
As used herein, the following definitions shall apply.
(a) "Affiliate" shall mean any "parent corporation" or
"subsidiary corporation" of the Company, as such terms are
defined in Section 424(e) and (f), respectively, of the Code.
(b) "Agreement" shall mean a written agreement entered
into in accordance with Paragraph 5(c).
(c) "Bank" shall mean First South Bank.
(d) "Board" shall mean the Board of Directors of the
Company.
(e) "Change in Control" shall mean any one of the
following events: (1) the acquisition of ownership, holding or
power to vote more than 25% of the Bank's or the Company's
voting stock, (2) the acquisition of the ability to control the
election of a majority of the Bank's or the Company's directors,
(3) the acquisition of a controlling influence over the
management or policies of the Bank or the Company by any person
or by persons acting as a "group" (within the meaning of Section
13(d) of the Securities Exchange Act of 1934), (4) the
acquisition of control of the Bank or the Company within the
meaning of Section 53-42.1 of the General Statutes of North
Carolina or 12 U.S.C. Section 1817(7)(j)(8)(B) or the
regulations promulgated by any North Carolina or Federal
regulatory agency having regulatory authority over the Company
or the Bank applying such statutes, or (5) during any period of
two consecutive years, individuals (the "Continuing Directors")
who at the beginning of such period constitute the Board of
Directors of the Company or the Bank (the "Existing Board")
cease for any reason to constitute at least two-thirds thereof,
provided that any individual whose election or nomination for
election as a member of the Existing Board was approved by a
vote of at least two-thirds of the Continuing Directors then in
office shall be considered a Continuing Director. For purposes
of this subparagraph only, the term "person" refers to an
individual or a corporation, partnership, trust, association,
joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not
specifically listed herein. The decision of the Committee as to
whether a change in control has occurred shall be conclusive and
binding.
(f) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(g) "Committee" shall mean the Stock Option Committee
appointed by the Board in accordance with Paragraph 5(a) hereof.
(h) "Common Stock" shall mean the common stock of the
Company.
(i) "Company" shall mean First South Bancorp, Inc.
(j) "Continuous Service" shall mean the absence of any
interruption or termination of service as an Employee or
Director of the Company or an Affiliate. Continuous Service
shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence approved by the
Company, in the case of transfers
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between payroll locations of the Company or between the Company,
an Affiliate or a successor,
or in the case of a Director's performance of services in an
emeritus or advisory capacity.
(k) "Director" shall mean any member of the Board, and any
member of the board of directors of any Affiliate that the Board
has by resolution designated as being eligible for participation
in this Plan.
(l) "Disability" shall mean a physical or mental
condition, which in the sole and absolute discretion of the
Committee, is reasonably expected to be of indefinite duration
and to substantially prevent a Participant from fulfilling his
or her duties or responsibilities to the Company or an
Affiliate.
(m) "Effective Date" shall mean the date specified in
Paragraph 13 hereof.
(n) "Employee" shall mean any person employed by the
Company, the Bank, or an Affiliate.
(o) "Exercise Price" shall mean the price per Optioned
Share at which an Option may be exercised.
(p) "ISO" means an option to purchase Common Stock which
meets the requirements set forth in the Plan, and which is
intended to be and is identified as an "incentive stock option"
within the meaning of Section 422 of the Code.
(q) "Market Value" shall mean the fair market value of
the Common Stock, as determined under Paragraph 7(b) hereof.
(r) "Non-Employee Director" shall have the meaning
provided in Rule 16b-3.
(s) "Non-ISO" means an option to purchase Common Stock
which meets the requirements set forth in the Plan but which is
not intended to be and is not identified as an ISO.
(t) "Option" means an ISO and/or a Non-ISO.
(u) "Optioned Shares" shall mean Shares subject to an
Option granted pursuant to this Plan.
(v) "Participant" shall mean any person who receives an
Option pursuant to the Plan.
(w) "Plan" shall mean this First South Bancorp, Inc. 1997
Stock Option Plan, as amended.
(x) "Rule 16b-3" shall mean Rule 16b-3 of the General
Rules and Regulations under the Securities Exchange Act of 1934,
as amended.
(y) "Share" shall mean one share of Common Stock.
(z) "Year of Service" shall mean a full twelve-month
period, measured from the date of an Option and each annual
anniversary of that date, during which a Participant has not
terminated Continuous Service for any reason.
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3. TERM OF THE PLAN AND OPTIONS.
(a) Term of the Plan. The Plan shall continue in effect
for a term of ten years from the Effective Date, unless sooner
terminated pursuant to Paragraph 15 hereof. No Option shall be
granted under the Plan after ten years from the Effective Date.
(b) Term of Options. The term of each Option granted
under the Plan shall be established by the Committee, but shall
not exceed 10 years; provided, however, that in the case of an
Employee who owns Shares representing more than 10% of the
outstanding Common Stock at the time an ISO is granted, the term
of such ISO shall not exceed five years.
4. SHARES SUBJECT TO THE PLAN.
Except as otherwise required under Paragraph 10, the
aggregate number of Shares deliverable pursuant to Options shall
not exceed 787,348 Shares, which equals 10% of the Shares issued
by the Company in connection with the Bank's conversion from
mutual to stock form. Such Shares may either be authorized but
unissued Shares, Shares held in treasury, or Shares held in a
grantor trust created by the Company. If any Options should
expire, become unexercisable, or be forfeited for any reason
without having been exercised, the Optioned Shares shall, unless
the Plan shall have been terminated, be available for the grant
of additional Options under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) Composition of the Committee. The Plan shall be
administered by the Committee, which shall consist of at least
two Directors appointed by the Board. Members of the Committee
shall serve at the pleasure of the Board. In the absence at any
time of a duly appointed Committee, the Plan shall be
administered by those members of the Board who are Non-Employee
Directors.
(b) Powers of the Committee. Except as limited by the
express provisions of the Plan or by resolutions adopted by the
Board, the Committee shall have sole and complete authority and
discretion (i) to select Participants and grant Options, (ii) to
determine the form and content of Options to be issued in the
form of Agreements under the Plan, (iii) to interpret the Plan,
(iv) to prescribe, amend and rescind rules and regulations
relating to the Plan, and (v) to make other determinations
necessary or advisable for the administration of the Plan. The
Committee shall have and may exercise such other power and
authority as may be delegated to it by the Board from time to
time. A majority of the entire Committee shall constitute a
quorum and the action of a majority of the members present at
any meeting at which a quorum is present, or acts approved in
writing by a majority of the Committee without a meeting, shall
be deemed the action of the Committee.
(c) Agreement. Each Option shall be evidenced by a
written agreement containing such provisions as may be approved
by the Committee. Each such Agreement shall constitute a
binding contract between the Company and the Participant, and
every Participant, upon acceptance of such Agreement, shall be
bound by the terms and restrictions of the Plan and of such
Agreement. The terms of each such Agreement shall be in
accordance with the Plan, but each Agreement may include such
additional provisions and restrictions determined by the
Committee, in its discretion, provided that such additional
provisions and restrictions are not inconsistent with the terms
of the Plan. In particular, the Committee shall set forth in
each Agreement (i) the Exercise Price of an Option, (ii) the
number of Shares subject to, and the expiration date of, the
Option, (iii) the manner, time and rate (cumulative or
otherwise) of exercise or vesting of such Option, and (iv) the
restrictions, if any, to be placed upon such Option, or upon
Shares which may be issued upon exercise of such Option.
The Chairman of the Committee and such other Directors and
officers as shall be designated by the Committee are hereby
authorized to execute Agreements on behalf of the Company and to
cause them to be delivered to the recipients of Options.
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(d) Effect of the Committee's Decisions. All decisions,
determinations and interpretations of the Committee shall be
final and conclusive on all persons affected thereby.
(e) Indemnification. In addition to such other rights
of indemnification as they may have, the members of the
Committee shall be indemnified by the Company in connection with
any claim, action, suit or proceeding relating to any action
taken or failure to act under or in connection with the Plan or
any Option, granted hereunder to the full extent provided for
under the Company's governing instruments with respect to the
indemnification of Directors.
6. GRANT OF OPTIONS.
(a) General Rule. The Committee shall have the discretion
to make discretionary grants of Options to Employees and
Directors (including members of the Committee). In addition,
the Committee shall automatically make the awards specified in
Paragraphs 6(b) and 9 hereof.
(b) Automatic Grants to Employees. On the Effective Date,
each of the following Employees shall receive an Option to
purchase the number of Shares listed below, at an Exercise Price
per Share equal to the Market Value of a Share on the Effective
Date; provided that such grant shall not be made to an Employee
whose Continuous Service terminates on or before the Effective
Date:
Participant Number of Shares
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Thomas A. Vann 72,735
With respect to each of the above-named Participants, the
Option granted to the Participant hereunder (i) shall vest in
accordance with the general rule set forth in Paragraph 8(a) of
the Plan, (ii) shall have a term of ten years from the Effective
Date, and (iii) shall be subject to the general rule set forth
in Paragraph 8(c) with respect to the effect of a Participant's
termination of Continuous Service on the Participant's right to
exercise his Options.
(c) Special Rules for ISOs. The aggregate Market Value,
as of the date the Option is granted, of the Shares with respect
to which ISOs are exercisable for the first time by an Employee
during any calendar year (under all incentive stock option
plans, as defined in Section 422 of the Code, of the Company or
any present or future Affiliate of the Company) shall not exceed
$100,000. Notwithstanding the foregoing, the Committee may
grant Options in excess of the foregoing limitations, in which
case such Options granted in excess of such limitation shall be
Options which are Non-ISOs.
7. EXERCISE PRICE FOR OPTIONS.
(a) Limits on Committee Discretion. The Exercise Price
as to any particular Option shall not be less than 100% of the
Market Value of the Optioned Shares on the date of grant. In
the case of an Employee who owns Shares representing more than
10% of the Company's outstanding Shares of Common Stock at the
time an ISO is granted, the Exercise Price shall not be less
than 110% of the Market Value of the Optioned Shares at the time
the ISO is granted.
(b) Standards for Determining Exercise Price. If the
Common Stock is listed on a national securities exchange
(including the NASDAQ National Market System) on the date in
question, then the Market Value per Share shall be the average
of the highest and lowest selling price on such exchange on such
date, or if there were no sales on such date, then the Exercise
Price shall be the mean between the bid and asked price on such
date. If the Common Stock is traded otherwise than on a
national securities exchange on the date in question, then the
Market Value per Share shall be the mean between the bid and
asked price on such date, or, if there is no bid and asked price
on such
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date, then on the next prior business day on which there was a
bid and asked price. If no such bid and asked price is
available, then the Market Value per Share shall be its fair
market value as determined by the Committee, in its sole and
absolute discretion.
8. EXERCISE OF OPTIONS.
(a) Generally. Unless the Committee specifically
imposes a vesting schedule in an Agreement granting an Option,
each Option shall be fully vested and exercisable at all times,
subject to Paragraph 13 hereof. An Option may not be exercised
for a fractional Share.
(b) Procedure for Exercise. A Participant may exercise
Options, subject to provisions relative to its termination and
limitations on its exercise, only by (1) written notice of
intent to exercise the Option with respect to a specified number
of Shares, and (2) payment to the Company (contemporaneously
with delivery of such notice) in cash, in Common Stock owned for
more than six months, or a combination of cash and Common Stock
owned for more than six months, of the amount of the Exercise
Price for the number of Shares with respect to which the Option
is then being exercised. Each such notice (and payment where
required) shall be delivered, or mailed by prepaid registered or
certified mail, addressed to the Treasurer of the Company at its
executive offices. Common Stock owned for more than six months
utilized in full or partial payment of the Exercise Price for
Options shall be valued at its Market Value at the date of
exercise. Upon a Participant's exercise of an Option, the
Company may, in the discretion of the Committee, pay to the
Participant a cash amount up to but not exceeding the amount of
dividends, if any, declared on the underlying Shares between the
date of grant and the date of exercise of the Option.
(c) Period of Exercisability. Except to the extent
otherwise provided in the terms of an Agreement, an Option may
be exercised by a Participant only while he is an Employee and
has maintained Continuous Service from the date of the grant of
the Option, or within one year after termination of such
Continuous Service (but not later than the date on which the
Option would otherwise expire), except if the Employee's
Continuous Service terminates by reason of -
(1) "Just Cause" which for purposes hereof shall
have the meaning set forth in any unexpired employment or
severance agreement between the Participant and the Bank
and/or the Company (and, in the absence of any such
agreement, shall mean termination because of the
Employee's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties,
willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or final
cease-and-desist order, then the Participant's rights to
exercise such Option shall expire on the date of such
termination;
(2) death, then to the extent that the Participant
would have been entitled to exercise the Option
immediately prior to his death, such Option of the
deceased Participant may be exercised within two years
from the date of his death (but not later than the date on
which the Option would otherwise expire) by the personal
representatives of his estate or person or persons to whom
his rights under such Option shall have passed by will or
by laws of descent and distribution.
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(d) Effect of the Committee's Decisions. The
Committee's determination whether a Participant's Continuous
Service has ceased, and the effective date thereof, shall be
final and conclusive on all persons affected thereby.
(e) Mandatory Six-Month Holding Period. Notwithstanding
any other provision of this Plan to the contrary, Common Stock
that is purchased upon exercise of an Option may not be sold
within the six-month period following the grant date of that
Option, except in the event of the Participant's death or
disability, or such other event as the Board may specifically
deem appropriate.
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9. AUTOMATIC GRANTS TO NON-EMPLOYEE DIRECTORS.
(a) Automatic Grants. Notwithstanding any other
provisions of this Plan, each Director who is not an Employee
but is a Director on the Effective Date shall receive, on said
date, Non-ISOs to purchase 18,300 Shares. Such Non-ISOs shall
have an Exercise Price per Share equal to the Market Value of a
Share on the date of grant, and be subject to the terms of
Paragraph 9(b) hereof.
(b) Terms of Exercise. Options received under the
provisions of Paragraph 9(a) shall be fully exercisable at all
times subject to Paragraph 13 hereof and shall be exercisable in
accordance with the terms of Paragraph 8(b) hereof.
Options granted under this Paragraph shall have a term of
ten years; provided that Options granted under this Paragraph
shall expire one year after the date on which a Director
terminates Continuous Service on the Board for a reason other
than death, but in no event later than the date on which such
Options would otherwise expire. In the event of such Director's
death during the term of his directorship, Options granted under
this Paragraph shall become immediately exercisable, and may be
exercised within two years from the date of his death by the
personal representatives of his estate or person or persons to
whom his rights under such Option shall have passed by will or
by laws of descent and distribution, but in no event later than
the date on which such Options would otherwise expire. In the
event of such Director's Disability during his or her
directorship, the Director's Option shall become immediately
exercisable, and such Option may be exercised within two years
of the termination of directorship due to Disability, but not
later than the date that the Option would otherwise expire.
Unless otherwise inapplicable or inconsistent with the
provisions of this Paragraph, the Options to be granted to
Directors hereunder shall be subject to all other provisions of
this Plan.
10. CHANGE IN CONTROL; EFFECT OF CHANGES IN COMMON STOCK
SUBJECT TO THE PLAN.
(a) Change in Control. Upon a Change in Control, all
Options shall become fully exercisable, notwithstanding any
other provision of the Plan or any Agreement.
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(b) Recapitalizations; Stock Splits, Etc. The number
and kind of shares reserved for issuance under the Plan, and the
number and kind of shares subject to outstanding Options, and
the Exercise Price thereof, shall be proportionately adjusted
for any increase, decrease, change or exchange of Shares for a
different number or kind of shares or other securities of the
Company which results from a merger, consolidation,
recapitalization, reorganization, reclassification, stock
dividend, split-up, combination of shares, or similar event in
which the number or kind of shares is changed without the
receipt or payment of consideration by the Company.
(c) Transactions in which the Company is Not the
Surviving Entity. In the event of (i) the liquidation or
dissolution of the Company, (ii) a merger or consolidation in
which the Company is not the surviving entity, or (iii) the sale
or disposition of all or substantially all of the Company's
assets (any of the foregoing to be referred to
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herein as a "Transaction"), all outstanding Options, together
with the Exercise Prices thereof, shall be equitably adjusted
for any change or exchange of Shares for a different number or
kind of shares or other securities which results from the
Transaction.
(d) Special Rule for ISOs. Any adjustment made pursuant
to subparagraphs (a) or (b)(1) hereof shall be made in such a
manner as not to constitute a modification, within the meaning
of Section 424(h) of the Code, of outstanding ISOs.
(e) Conditions and Restrictions on New, Additional, or
Different Shares or Securities. If, by reason of any adjustment
made pursuant to this Paragraph, a Participant becomes entitled
to new, additional, or different shares of stock or securities,
such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and
restrictions which were applicable to the Shares pursuant to the
Option before the adjustment was made.
(f) Other Issuances. Except as expressly provided in
this Paragraph, the issuance by the Company or an Affiliate of
shares of stock of any class, or of securities convertible into
Shares or stock of another class, for cash or property or for
labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, shall not affect,
and no adjustment shall be made with respect to, the number,
class, or Exercise Price of Shares then subject to Options or
reserved for issuance under the Plan.
(g) Certain Special Dividends. The Exercise Price of
shares subject to outstanding Options shall be proportionately
adjusted upon the payment of a special large and nonrecurring
dividend that has the effect of a return of capital to the
stockholders, except that this subparagraph (g) shall not apply
to any dividend which is paid to the Participant pursuant to
Paragraph 8(b) or 9(b) hereof.
11. NON-TRANSFERABILITY OF OPTIONS.
Options may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or
by the laws of descent and distribution. Notwithstanding the
foregoing, or any other provision of this Plan, a Participant
who holds Options may transfer such Options (but not ISOs) to
his or her spouse, lineal ascendants, lineal descendants, or to
a duly established trust for the benefit of one or more of these
individuals. Options so transferred may thereafter be
transferred only to the Participant who originally received the
grant or to an individual or trust to whom the Participant could
have initially transferred the Options pursuant to this
Paragraph 11. Options which are transferred pursuant to this
Paragraph 11 shall be exercisable by the transferee according to
the same terms and conditions as applied to the Participant.
12. TIME OF GRANTING OPTIONS.
The date of grant of an Option shall, for all purposes, be
the later of the date on which the Committee makes the
determination of granting such Option, and the Effective Date.
Notice of the determination shall be given to each Participant
to whom an Option is so granted within a reasonable time after
the date of such grant.
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13. EFFECTIVE DATE.
The Plan shall become effective immediately upon its
approval by a favorable vote of stockholders owning at least a
majority of the total votes cast at a duly called meeting of the
Company's stockholders held in accordance with applicable laws.
No Options may be granted within one year of the closing date of
the Bank's mutual-to-stock conversion, or become exercisable
prior to approval of the Plan by the stockholders of the
Company.
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14. MODIFICATION OF OPTIONS.
At any time, and from time to time, the Board may authorize
the Committee to direct execution of an instrument providing for
the modification of any outstanding Option, provided no such
modification shall confer on the holder of said Option any right
or benefit which could not be conferred on him by the grant of a
new Option at such time, or impair the Option without the
consent of the holder of the Option.
15. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend the terms of the
Plan and, with respect to any Shares at the time not subject to
Options, suspend or terminate the Plan. No amendment,
suspension or termination of the Plan shall, without the consent
of any affected holders of an Option, alter or impair any rights
or obligations under any Option theretofore granted.
16. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Compliance with Securities Laws. Shares of Common
Stock shall not be issued with respect to any Option unless the
issuance and delivery of such Shares shall comply with all
relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law, and
the requirements of any stock exchange upon which the Shares may
then be listed.
(b) Special Circumstances. The inability of the Company
to obtain approval from any regulatory body or authority deemed
by the Company's counsel to be necessary to the lawful issuance
and sale of any Shares hereunder shall relieve the Company of
any liability in respect of the non-issuance or sale of such
Shares. As a condition to the exercise of an Option, the
Company may require the person exercising the Option to make
such representations and warranties as may be necessary to
assure the availability of an exemption from the registration
requirements of federal or state securities law.
(c) Committee Discretion. The Committee shall have the
discretionary authority to impose in Agreements such
restrictions on Shares as it may deem appropriate or desirable,
including but not limited to the authority to impose a right of
first refusal, or to establish repurchase rights, or to pay an
Optionee the in-the-money value of his Option in consideration
for its cancellation, or all of these restrictions.
17. RESERVATION OF SHARES.
The Company, during the term of the Plan, will reserve and
keep available a number of Shares sufficient to satisfy the
requirements of the Plan.
18. WITHHOLDING TAX.
The Company's obligation to deliver Shares upon exercise
of Options shall be subject to the Participant's satisfaction of
all applicable federal, state and local income and employment
tax withholding obligations. The Committee, in its discretion,
may permit the Participant to satisfy the obligation, in whole
or in part, by irrevocably electing to have the Company withhold
Shares, or to deliver to the Company Shares that he already
owns, having a value equal to the amount required to be
withheld. The value of the Shares to be withheld, or delivered
to the Company, shall be based on the Market Value of the Shares
on the date the amount of tax to be withheld is to be
determined. The amount of the withholding requirement shall be
applicable statutory minimum federal, state or local income tax
with respect to the award on the date that the amount of tax is
to be withheld. As an alternative, the Company may retain, or
sell without notice, a number of such Shares sufficient to cover
the amount required to be withheld.
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19. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall an Employee's or Director's eligibility
to participate or participation in the Plan create or be deemed
to create any legal or equitable right of the Employee,
Director, or any other party to continue service with the
Company, the Bank, or any Affiliate of such corporations.
Except to the extent provided in Paragraphs 6(b) and 9(a), no
Employee or Director shall have a right to be granted an Option
or, having received an Option, the right to again be granted an
Option. However, an Employee or Director who has been granted
an Option may, if otherwise eligible, be granted an additional
Option or Options.
20. Governing Law.
The Plan shall be governed by and construed in accordance
with the laws of the State of North Carolina, except to the
extent that federal law shall be deemed to apply.
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