<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. N/A )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box: / / Confidential, for Use of
/ / Preliminary proxy statement the Commission Only (as
/X/ Definitive proxy statement permitted by Rule 14a-6(e)(2)
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FIRST STATE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than 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)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (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 0-11(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:
- --------------------------------------------------------------------------------
<PAGE>
March 19, 1997
To the Shareholders of FIRST STATE CORPORATION:
You are cordially invited to attend the Annual Meeting of Shareholders of
First State Corporation (the "Company") to be held at Radium Springs Casino,
2501 Radium Springs Road, Albany, Georgia, on Monday, April 28, 1997, at 1:30
p.m. The official notice of the Annual Meeting, the Proxy Statement of
management of the Company and the Company's Annual Report accompany this letter.
The principal business of the meeting will be (a) to elect directors of the
Company and (b) approve the Company's 1997 Stock Incentive Plan. We will also
review the operations of the Company for the past year.
Whether or not you plan to attend the Annual Meeting, please mark, date and
sign the enclosed form of proxy and return it to the Company in the envelope
provided as soon as possible so that your shares can be voted at the Annual
Meeting.
Very truly yours,
Morgan G. Murphy
Chairman and Chief Executive Officer
Douglas E. Wren
President and Chief Operating Officer
<PAGE>
FIRST STATE CORPORATION
333 WEST BROAD AVENUE
ALBANY, GEORGIA 31701
(912) 432-8000
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 28, 1997
To the Shareholders of FIRST STATE CORPORATION:
Notice is hereby given that the Annual Meeting of Shareholders of First
State Corporation (the "Company" or "First State") will be held on April 28,
1997, at 1:30 p.m., at Radium Springs Casino, 2501 Radium Springs Road, Albany,
Georgia, for the following purposes:
(1) To elect five directors for three-year terms;
(2) To approve the First State Corporation 1997 Stock Incentive Plan; and
(3) To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on March 12, 1997,
as the record date for the determination of shareholders entitled to notice of
and to vote at the meeting.
All shareholders are requested to mark, date, sign, and return the enclosed
form of proxy as soon as possible. If you attend the meeting and wish to vote
your shares in person, you may do so at any time before the proxy is exercised.
By Order of the Board of Directors,
Robert E. Lee
Secretary
March 19, 1997
<PAGE>
FIRST STATE CORPORATION
333 WEST BROAD AVENUE
ALBANY, GEORGIA 31701
(912) 432-8000
PROXY STATEMENT
----------------------------------------------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of the Company for use at the Annual
Shareholders' Meeting and at any adjournments thereof. The Shareholders'
Meeting will be held on Monday, April 28, 1997, at 1:30 p.m., at Radium Springs
Casino, 2501 Radium Springs Road, Albany, Georgia.
The Proxy Statement and Form of Proxy are first being mailed to
shareholders on or about March 19, 1997. If the enclosed Proxy is properly
executed, returned and not revoked, it will be voted in accordance with the
specifications made by the shareholder. If the Form of Proxy is signed and
returned and specifications are not made, the Proxy will be voted FOR the
election of the directors and approval of the other items listed thereon.
Shareholders who sign proxies have the right to revoke them at any time
before they are voted by delivering to Robert E. Lee, Secretary of the Company,
at the principal office of the Company either an instrument revoking the Proxy
or a duly executed Proxy bearing a later date or by attending the Annual Meeting
and voting in person.
PROPOSALS TO BE CONSIDERED AT THE ANNUAL MEETING
Shareholders will be asked to consider two proposals at the Annual Meeting.
PROPOSAL 1. To elect five directors to serve a three-year term expiring
in 2000. (See page 2 for a discussion of this proposal.)
PROPOSAL 2. To approve the First State Corporation 1997 Stock Incentive
Plan. (See page 24 for a discussion of this proposal.)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF EACH OF THE PROPOSALS.
<PAGE>
VOTING AT THE ANNUAL MEETING
The close of business on March 12, 1997 has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
Annual Meeting. As of the close of business on March 12, 1997, the authorized
common stock of the Company consisted of 20,000,000 shares, $1.00 par value per
share (the "Common Stock"), of which 4,549,588 shares were issued and
outstanding and held of record by 567 shareholders. Each outstanding share is
entitled to one vote on the matters to be presented at the Annual Meeting.
Directors are elected by a plurality of the shares present in person or by
proxy at the meeting and entitled to vote. Only those votes actually cast will
be counted for the purpose of determining whether a particular nominee received
sufficient votes to be elected. Accordingly, abstentions will not be included
in vote totals and will not be considered in determining the outcome of the
vote.
Approval of the First State Corporation 1997 Stock Incentive Plan and all
other matters that may properly come before the Annual Meeting requires the
affirmative vote of a majority of the shares of Common Stock entitled to vote on
such matter. Broker non-votes will not be counted for or against approval of
any matter properly brought before the Annual Meeting.
PROPOSAL 1 -- ELECTION OF DIRECTORS
NOMINEES AND CONTINUING DIRECTORS
Pursuant to the Company's Articles of Incorporation, its Board of Directors
is divided into three classes: those with terms expiring in 1997, those with
terms expiring in 1998, and those with terms expiring in 1999.
The Board of Directors proposes that the nominees listed below be
re-elected as directors of the Company to serve an additional three years and
until their successors are duly elected and qualified. If any of these nominees
should become unavailable to serve as a director (which is not now anticipated),
then the persons named as proxies reserve full discretion to vote for any other
person or persons as may be nominated.
The table below sets forth for each director nominee and continuing
director of the Company (a) the person's name, (b) his or her age at
December 31, 1996, (c) the year he or she was first elected as a director of the
Company, and (d) his or her business experience for the past five years.
2
<PAGE>
Director Nominees
To Serve a Term of Three Years Until 2000
-----------------------------------------
Year
First
Name Age Elected Occupation
- ---- --- ------- ----------
Temp S. Davis, III 59 1981 Economic Development Manager
(former District Manager) of
Georgia Power Company (electric
utility) (retired in 1994)
G. William Hughey, III 49 1992 President of Hughey & Neuman,
Inc. (real estate management and
sales)
A. Collins Knight, III 47 1993 President, Engineering &
Equipment Co., Inc. (wholesale
distributor of industrial
supplies)
Earle P. Spurlock 48 1990 Owner and President of Logos
Plus, Inc. (specialty
advertising)
Vernon H. Warren 48 1993 Personal Investments; Partner of
Estate Farms (farming)
Continuing Directors
Current Term Expires in 1998
----------------------------
Year
First
Name Age Elected Occupation
- ---- --- ------- ----------
James D. Deal, Jr. 47 1990 President of Albany
Communications, Inc. (Motorola
sales and service dealership)
Morgan G. Murphy 67 1981 Chairman of the Board and Chief
Executive Officer of the Company;
Chairman of the Board of First
State Bank & Trust Company,
Albany
3
<PAGE>
Year
First
Name Age Elected Occupation
- ---- --- ------- ----------
John Temple Phillips, III 49 1991 President of Applied Cable
Technology, Inc. (telephone
engineering and construction);
Owner of Applied Fiber
Telecommunications, Inc. (fiber
optic components)
Joseph B. Powell, Jr. 67 1981 Executive Vice President and
Director of First State Bank &
Trust Company, Albany
Michael J. Wetherbee 46 1981 Manager of Wetherbee Rental (real
estate and farming)
Continuing Directors
Current Term Expires in 1999
----------------------------
Year
First
Name Age Elected Occupation
- ---- --- ------- ----------
Henry M. Goodyear, Jr. 68 1981 Partner of Goodyear & Goodyear
(farm management and real estate
sales and appraisals); Former
President and Chairman of the
Board of Plantation Services
(farm management and real estate
sales and appraisals)
James Griffin, Jr. 62 1990 Owner and General Manager of
Poteat Funeral Home
William L. Walden 46 1988 President and Chief Executive
Officer of Walden & Kirkland,
Inc. (real estate sales and
management)
Douglas E. Wren 49 1986 President and Chief Operating
Officer of the Company; President
and Chief Executive Officer of
First State Bank & Trust Company,
Albany
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR APPROVAL OF PROPOSAL 1
4
<PAGE>
EXECUTIVE OFFICERS
The table set forth below shows for each executive officer of the Company
and certain executive officers of First State Bank & Trust Company, Albany,
Georgia ("FSB Albany") and First State Bank & Trust Company, Cordele, Georgia
("FSB Cordele") (collectively, the "Subsidiary Banks"), (a) the person's name,
(b) his age at December 31, 1996, (c) the year he was first elected as an
officer of the Company or the Subsidiary Banks, as applicable, and (d) his
present positions with the Company and the Subsidiary Banks, as applicable. All
of the officers listed below have been employed by the Company or one of its
Subsidiary Banks for at least five years.
Year
First
Name Age Elected Positions
- ---- --- ------- ---------
Morgan G. Murphy 67 1981 Chairman of the Board and Chief
Executive Officer of the Company;
Chairman of the Board of FSB
Albany
Douglas E. Wren 49 1986 President and Chief Operating
Officer of the Company; President
and Chief Executive Officer of
FSB Albany
James L. Flatt 43 1989 Senior Vice President and Senior
Lending Executive of the Company;
Executive Vice President, Senior
Lending Executive, and Chief
Operating Officer of FSB Albany
Robert E. Lee 44 1985 Senior Vice President and Chief
Financial Officer of the Company;
Executive Vice President and
Chief Financial Officer of FSB
Albany
Joseph B. Powell, Jr. 67 1981 Executive Vice President, Trust
Division, of FSB Albany
Jeffrey W. Johnson 47 1987 President and Chief Executive
Officer of FSB Cordele
5
<PAGE>
INDEBTEDNESS OF DIRECTORS AND OFFICERS
The Company's directors and officers and certain business organizations and
individuals associated with them have been customers of and have had banking
transactions with the Subsidiary Banks and are expected to continue such
relationships in the future. Pursuant to such transactions, the Company's
directors and officers from time to time have borrowed funds from the Subsidiary
Banks for various business and personal reasons. The extensions of credit made
by the Subsidiary Banks to their directors and officers (a) were made in the
ordinary course of business, (b) were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and (c) did not involve more than a
normal risk of collectibility or present other unfavorable features.
MEETINGS AND COMMITTEES
During the year ended December 31, 1996, the Board of Directors of the
Company held 12 meetings. No director attended fewer than 75 percent of the
meetings of the Board of Directors of the Company during 1996.
The Audit Committee of the Board of Directors of the Company is comprised
of six outside directors. During 1996, the members of the Committee were
James D. Deal, Jr., G. William Hughey, III, John Temple Phillips, III, Earle P.
Spurlock, William L. Walden and Michael J. Wetherbee. The Audit Committee
reviews reports prepared by the Company's internal and external auditors to
verify that the recommendations contained in such reports are implemented by
management.
The Executive Committee of the Company's Board of Directors also serves as
its Nominating Committee. During 1996, the members of this Committee were
G. William Hughey, III, Morgan G. Murphy, John Temple Phillips, III, William L.
Walden, Michael J. Wetherbee and Douglas E. Wren. No formal procedure for
individual shareholders to submit recommendations of persons to be considered as
directors of the Company has been adopted. The Board, however, would consider
any such recommendation if delivered in writing to: Robert E. Lee, First State
Corporation, 333 West Broad Avenue, Albany, Georgia 31701.
BOARD COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee and the Stock Option Awards Committee
(collectively, the "Committee") of the Board of Directors of the Company is
comprised of the same five non-employee directors, Michael J. Wetherbee,
James D. Deal, Jr., G. William Hughey, III (appointed to the Committee in April
1996), John Temple Phillips, III and William L. Walden. The Committee generally
is responsible for the compensation and benefit plans for all employees and is
directly accountable for reviewing and monitoring compensation and benefit
plans, and payments and awards under those plans, for the Company's senior
executives, including the
6
<PAGE>
Chief Executive Officer and the other named executive officers. In carrying out
these responsibilities, the Committee reviews the design of all compensation and
benefit plans applicable to executive officers, determines base salaries,
reviews incentive plan performance measures, establishes incentive targets,
approves cash incentive awards based on performance, grants stock options and
other long-term incentives, and monitors the administration of the various
plans. In all these matters, the Committee's decisions are reviewed and
approved by the Board of Directors. To assist it in accomplishing these
responsibilities, the Committee has retained an independent compensation
consultant to advise it with respect to executive compensation.
BASE SALARIES
The Company, with the approval of the Committee, establishes and maintains
base salary ranges for all employees, including the named executive officers.
The midpoints of the ranges are intended to reflect the median amounts paid to
executives in similar positions in comparable financial institutions. The
salary ranges are reviewed annually with the assistance of an independent
consultant and adjusted as needed to maintain competitiveness. This review
includes data from a variety of industry surveys, as well as pay data reported
in proxies. All comparisons are based on banking companies having approximately
the same asset base as the Company. Within this framework, executive salaries
are determined based on individual performance and experience. The salaries of
the Chief Executive Officer and the President are evaluated solely by the
Committee. Salaries for the other named executive officers generally are
recommended by the Chief Executive Officer and the President and reviewed by the
Committee. Each of the named executive officers received a salary increase in
January 1996 and their salaries are listed in the Summary Compensation Table.
The Committee has established a policy to manage executive base salaries to the
market median. Executive salaries which are above or below the median will be
adjusted over time to rates which are closer to the median salaries reported by
similar banks.
ANNUAL INCENTIVES
One of the Committee's objectives in managing executive compensation is to
directly link a significant portion of executive pay to Company performance.
The Senior Management Incentive Plan ("Incentive Plan") accomplishes this
objective by providing an annual incentive based on the Company's Return on
Equity ("ROE"). Under the Incentive Plan, an incentive pool is created which is
equal to a specified percentage of Net Income. The funding percentage varies
based on ROE, with a higher funding percentage applying to higher levels of ROE.
No incentives are funded if ROE is less than 10%. The incentive pool is
allocated among the participants based on pre-specified percentages, subject to
modest adjustments based on a subjective evaluation of individual performance.
Incentives earned by the named executive officers in 1996, 1995 and 1994
are listed in the Summary Compensation Table.
Through participation in the Incentive Plan, executives may earn total cash
compensation (salaries plus incentives) which equals or exceeds median amounts
reported by similar banks,
7
<PAGE>
depending upon Company performance. To ensure that the Incentive Plan continues
to provide a meaningful incentive opportunity and pay reasonable incentives, the
Committee has authorized an annual review of the funding formula and the
incentive opportunities for the named executive officers. The Committee's
intention is for executive incentives to approximately equal the market median
if Company performance approximates peer group results and for executive
incentives to exceed the market median if Company performance also exceeds peer
group performance.
LONG-TERM INCENTIVES
Another major objective of the Committee in managing executive compensation
is to reward executives for increasing the value of the Company to its
stockholders. The First State Corporation 1993 Stock Incentive Plan ("Stock
Plan") accomplishes this objective by providing executives opportunities to earn
and acquire a meaningful ownership interest in the Company. Under the Stock
Plan, which was approved by the Board of Directors in 1993 and by the
shareholders at the Annual Meeting in 1995, the Committee is authorized to make
awards of stock options, restricted stock and other stock-based incentives. The
Committee has the sole authority to select the officers and other key employees
to whom awards may be made under the Stock Plan.
Because the value of stock options and other stock awards is determined by
the price of the Common Stock, the Committee believes these awards benefit
stockholders by linking a potentially significant portion of executive pay to
the performance of the Common Stock. In addition, the Stock Plan assists the
Company in attracting and retaining key employees and providing a competitive
compensation opportunity.
Awards made under the Stock Plan in 1996 are disclosed in the Summary
Compensation Table.
BENEFITS
In general, the benefit plans provided to key executives, such as profit
sharing, life insurance and healthcare, are intended to provide an adequate
retirement income as well as financial protection against illness, disability or
death. Benefits offered to the named executive officers and other executives
are substantially the same as those provided to all employees, with some
variation, primarily to promote tax efficiency and replacement of benefits lost
due to regulatory limits.
CHIEF EXECUTIVE OFFICER COMPENSATION
In determining the compensation of the Chief Executive Officer, the
Committee is guided by the Company's compensation philosophy, Company
performance and competitive practices. In January 1996, the Chief Executive
Officer's salary was increased by 2.1%, from $210,500 to $215,000. In
authorizing the salary increase, the Committee noted the Company's favorable
performance in 1995, which included substantially higher (25% higher) returns on
assets and equity than the total returns of banks and all U.S. companies traded
on Nasdaq. Although the
8
<PAGE>
performance of the Company and of the Chief Executive Officer would have
supported a larger increase under the Company's existing salary increase
guidelines, the Committee approved a modest increase because of its desire to
manage salaries toward the market median. This also was consistent with the
Committee's decision to place less emphasis on base salary increases and more
emphasis on annual incentives and stock options as a means of rewarding
executives. In keeping with the Incentive Plan, the Chief Executive Officer
earned an incentive in 1996 based on the Company's ROE. The Committee approved
an incentive equal to his pre-set share of the incentive pool. During 1996, the
Chief Executive Officer also received an option to purchase 18,000 shares of
Common Stock under the Stock Plan.
SUMMARY
The Company's executive compensation program encourages executives to
manage the Company profitably and to increase the value of the business to the
shareholders. The increasing emphasis on annual and long-term incentives is
consistent with the Committee's policy of linking pay to performance and
increasing shareholder value. The Committee believes this approach provides
competitive compensation and is in the best interest of the stockholders. The
Committee will continue to monitor the effectiveness of the executive
compensation program and will initiate changes as it deems appropriate.
Submitted by the Compensation Committee of the First State Corporation
Board of Directors:
Michael J. Wetherbee (Chairman) John Temple Phillips, III
James D. Deal, Jr. William L. Walden
G. William Hughey, III
[Remainder of page intentionally left blank]
9
<PAGE>
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total return on its
Common Stock with that of companies listed on the Nasdaq Stock Market (U.S.
companies) and that of bank stocks listed on the Nasdaq Stock Market (SIC
6020-6029, 6710-6719, U.S. and foreign) for the period commencing May 3, 1994
(the first month the Common Stock was publicly traded) through December 31,
1996. The graph assumes an initial investment of $100.00.
Comparison of Five Year-Cumulative Total Returns
Performance Graph for
FIRST STATE CORPORATION
PREPARED BY THE CENTER FOR RESEARCH INSECURITY PRICES
Produced on 01/29/97 including data to 12/31/96
[GRAPH]
<TABLE>
<CAPTION>
Symbol CRSP Total Returns Index for: 12/31/91 12/31/92 12/31/93 12/30/94 12/29/95 12/31/96
- ------ ----------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
FIRST STATE CORPORATION 104.6 181.5 326.9
Nasdaq Stock Market (US Companies) 78.6 91.4 105.0 102.6 145.1 178.5
Nasdaq Bank Stocks 58.9 85.7 97.8 97.4 145.1 191.7
SIC 6020-6029,6710-6719 US & Foreign
</TABLE>
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on
the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a
trading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 05/03/94.
10
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE COMPENSATION
------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------
LONG TERM COMPENSATION
----------------------------
ANNUAL COMPENSATION AWARDS
----------------------------------------- ----------------------------
OTHER SECURITIES
NAME AND ANNUAL RESTRICTED UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS COMPENSATION
------------------ ---- ------ ----- ------------ ------------ ---------- ------------
($) (#)
<S> <C> <C> <C> <C> <C> <C> <C>
Morgan G. Murphy, Chairman of 1996 $215,000 $126,044 -- 18,000 $22,430.36 2/
the Board and CEO; Chairman of
the Board of FSB Albany 1995 210,500 147,350 1/ -- 22,000 27,311.00 3/
1994 206,335 131,832 -- -- 33,682.82 4/
Douglas E. Wren, President and 1996 137,500 69,094 -- 12,000 24,836.82 5/
Chief Operating Officer;
President and Chief Executive 1995 132,200 79,500 1/ -- 16,600 27,194.20 6/
Officer of FSB Albany
1994 127,090 69,385 -- -- 27,607.56 7/
James L. Flatt, Senior Vice 1996 104,000 43,550 -- 6,000 11,235.38 8/
President and Senior Lending
Executive; Executive Vice 1995 100,000 50,000 1/ -- 8,250 11,659.38 9/
President, Senior Lending
Executive and Chief Operating 1994 95,000 41,631 -- -- 11,607.31 10/
Officer of FSB Albany
Robert E. Lee, Senior Vice 1996 89,500 37,478 -- 6,000 9,554.56 11/
President and Chief Financial
Officer; Executive Vice President 1995 86,000 43,000 1/ -- 8,250 10,256.94 12/
and Chief Financial Officer of
FSB Albany 1994 80,000 38,162 -- -- 9,811.77 13/
</TABLE>
11
<PAGE>
FOOTNOTES TO SUMMARY COMPENSATION TABLE
1/ The aggregate amount of any other compensation paid or distributed during
the indicated year to the individuals named in the Summary Compensation Table
did not exceed the lesser of $50,000 or 10% of the total annual salary and bonus
for each individual.
2/ Consists of (a) $6,500 directors' fees from the Company and various
subsidiaries, (b) $4,434.36 401(k) contribution, (c) $6,750 profit sharing, and
(d) $4,746 money purchase pension plan.
3/ Consists of (a) $11,300 directors' fees from the Company and various
subsidiaries, (b) $4,473 401(k) contribution, (c) $6,750 profit sharing, and
(d) $4,788 money purchase pension plan.
4/ Consists of (a) $11,600 directors' fees from the Company and various
subsidiaries, (b) $5,373.33 401(k) contribution, (c) $7,970 profit sharing, and
(d) $8,739.49 money purchase pension plan.
5/ Consists of (a) $9,400 directors' fees from the Company and various
subsidiaries, (b) $878.20 life insurance premium, (c) $4,125.12 401(k)
contribution, (d) $6,187.50 profit sharing, and (e) $4,246 money purchase
pension plan.
6/ Consists of (a) $12,300 directors' fees from the Company and various
subsidiaries, (b) $878.20 life insurance premium, (c) $3,952 401(k)
contribution, (d) $6,000 profit sharing, and (e) $4,064 money purchase pension
plan.
7/ Consists of (a) $12,550 directors' fees from the Company and various
subsidiaries, (b) $776.91 life insurance premium, (c) $3,812.65 401(k)
contribution, (d) $5,850 profit sharing, and (e) $4,618 money purchase pension
plan.
8/ Consists of (a) $150 directors' fees from Southeastern Mortgage,
(b) $379.38 life insurance premium, (c) $3,120 401(k) contribution, (d) $4,680
profit sharing, and (e) $2,906 money purchase pension plan.
9/ Consists of (a) $900 directors' fees from Southeastern Mortgage, (b) 379.38
life insurance premium, (c) $3,000 401(k) contribution, (d) $4,600 profit
sharing, and (e) $2,780 money purchase pension plan.
10/ Consists of (a) $1,050 directors' fees from Southeastern Mortgage,
(b) $337.40 life insurance premium, (c) $2,850 401(k) contribution, (d) $4,300
profit sharing, and (e) $3,069.91 money purchase pension plan.
11/ Consists of (a) $150 directors' fees from Southeastern Mortgage,
(b) $365.94 life insurance premium, (c) $2,685.12 401(k) contribution,
(d) $4,027.50 profit sharing, and (e) $2,326 money purchase pension plan.
12/ Consists of (a) $900 directors' fees from Southeastern Mortgage,
(b) $365.94 life insurance premium, (c) $2,775 401(k) contribution, (d) $4,000
profit sharing, and (e) $2,216 money purchase pension plan.
13/ Consists of (a) $1,050 directors' fees from Southeastern Mortgage,
(b) $340.18 life insurance premium, (c) $2,400 401(k) contribution, (d) $3,800
profit sharing, and (e) $2,221.59 money purchase pension plan.
12
<PAGE>
STOCK OPTIONS
OPTION GRANTS
The following table contains information regarding the grant of stock
options during 1996 to the named executive officers under the Company's 1993
Stock Incentive Plan.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
- ------------------------------------------------------------------------------------------
Number of Percent of
Securities Total Options
Underlying Granted to
Options Employees in Exercise Expiration Grant Date
Name Granted (#) Fiscal Year Price ($/Sh) Date Value1/
---- ----------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Morgan G. Murphy 18,000 33.3% $16.67 1/30/06 $100,440
Douglas E. Wren 12,000 22.2% $16.67 1/30/06 $ 66,960
James L. Flatt 6,000 11.1% $16.67 1/30/06 $ 34,480
Robert E. Lee 6,000 11.1% $16.67 1/30/06 $ 34,480
</TABLE>
1/ The fair value of the options granted in 1996 of $5.58 per option share was
based upon the discounted value of future cash flows of the options using
the Black-Scholes option pricing model and the following assumptions:
Expected life of the options 7 years
Weighted average stock price at grant date $16.67
Risk-free interest rate 6.30%
Expected dividend yield (as a percent of the fair
value of the stock) 2.50%
Expected volatility 29%
Annual forfeiture rate 0%
The EXPECTED LIFE OF THE OPTIONS is an estimate of when, on average, the
options are expected to be exercised. The WEIGHTED AVERAGE STOCK PRICE AT
GRANT DATE is the closing sales price of the Common Stock on date of grant.
The RISK-FREE INTEREST RATE is the rate on zero-coupon U.S. government
issues with a remaining term equal to the expected life of the options.
The EXPECTED DIVIDEND YIELD is based on the Company's recent dividend yield
EXPECTED VOLATILITY is a measure of the variability in the Company's stock
price. ANNUAL FORFEITURE RATE is the percentage of options expected to be
forfeited prior to vesting.
OPTION EXERCISES AND HOLDINGS
The following table contains information concerning the number of stock
options held by the named executive officers at December 31, 1996. No stock
options were exercised by the named executive officers during 1996.
13
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Number of Value of Unexercised
Securities Underlying In-the-Money
Unexercised Options Options held
at 12/31/96 (#): at 12/31/96 ($):
Name Exercisable Unexercisable Exercisable Unexercisable 1/
---- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C>
Morgan G. Murphy 102,480 0 $ 2,083,880 $ 0
Douglas E. Wren 37,950 25,200 828,950 451,200
James L. Flatt 16,500 12,600 360,250 225,600
Robert E. Lee 16,500 12,600 360,250 225,600
</TABLE>
1/ Market value of underlying securities at year-end (closing price
of $31 per share) minus the exercise price.
COMPENSATION OF DIRECTORS
The directors of the Company receive $150 per meeting attended for their
service as directors and between $100 and $150 per meeting attended for their
service on committees. Effective as of the annual meeting of shareholders, each
non-management director also received an option to purchase 330 shares of Common
Stock at a price of $18.67 per share (adjusted for the 50% stock dividend issued
in July 1996) pursuant to the First State Corporation Outside Directors Stock
Option Plan.
EMPLOYEE BENEFIT PLANS
The Company maintains several tax-qualified and non-qualified employee
benefit plans for employees of the Company and its subsidiaries, including those
benefit plans described below.
PENSION PLAN
The Company maintains the First State Bank & Trust Company Pension Plan
(the "Pension Plan"), a tax-qualified, defined benefit pension plan, which
benefits substantially all employees of the Company who have completed one year
of service.
Eligible employees with five or more years of service are entitled to a
monthly benefit beginning upon termination of employment after age 65. The
pension benefit formula provides for a monthly benefit equal to an eligible
employee's accrued benefit as of December 31, 1988 under the Pension Plan's
pre-1989 benefit formula plus benefit accruals for post-1988 years of service
equal to the greater of (a) or (b) below:
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<PAGE>
(a) 1/2 of 1% of the employee's highest average monthly compensation
determined over a consecutive five-year period multiplied by that
employee's years of service credited after December 31, 1988; or
(b) 2.5% of 1988 compensation multiplied by that employee's years of
service credited after December 31, 1988 (but, as to certain highly
compensated employees, only to the extent of years of service credited
prior to January 1, 1994), proportionately reduced if all years of service
at age 65 are less than 30.
While the monthly pension benefit is normally payable at age 65, an adjusted
benefit is available earlier or later than age 65 in certain circumstances, such
as a participant's disability, eligibility for early retirement or continued
employment following age 65.
The normal form of monthly benefit payment is a single life annuity if the
participant is unmarried, although a minimum of 60 monthly payments will be made
even if the participant dies before the end of the 60-month period, or an
actuarial equivalent joint and 50% survivor annuity if the participant is
married.
The estimated annual benefits payable at normal retirement age to persons
in specified remuneration and years of service classifications are shown in the
following table. All amounts are shown for a single life annuity (with 60
months certain) and assume that active participation continues until age 65.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
ESTIMATED ANNUAL BENEFITS FOR REPRESENTATIVE YEARS OF SERVICE
Years of Service
-------------------------------------------------------------------
Compensation* 10 15 20 25 30 35 40
- ------------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 75,000 3,965 8,058 12,150 16,243 20,336 19,718 21,391
100,000 4,465 9,528 14,590 19,653 24,715 23,813 26,256
125,000 5,681 12,260 18,838 25,416 31,994 30,808 34,019
150,000 6,898 14,991 23,085 31,179 39,273 37,803 41,783
175,000 7,989 17,598 27,208 36,818 46,427 44,673 49,422
200,000 9,080 20,205 31,331 42,456 53,581 51,543 57,061
225,000 10,171 22,812 35,453 48,094 60,735 58,412 64,700
250,000 11,263 25,419 39,576 53,732 67,888 65,282 72,339
275,000 12,354 28,026 43,698 59,371 75,043 72,152 79,978
300,000 13,445 30,633 47,821 65,009 82,196 79,022 87,617
325,000 14,536 33,240 51,943 70,647 89,350 85,892 95,255
350,000 15,473 35,615 55,757 75,899 96,041 92,298 102,431
</TABLE>
*Compensation amounts used to calculate benefit accruals after December 31,
1988 in this table have been capped as required by applicable provisions of
the Internal Revenue Code.
15
<PAGE>
Years of credited service, to the nearest year, and current compensation
covered by the Pension Plan (total salary, bonus and any other incentive
compensation paid) for the named executives are as follows: Mr. Murphy, 46
years, $160,000 (capped by applicable Internal Revenue Code provisions); Mr.
Wren, 11 years, $160,000 (capped by applicable Internal Revenue Code
provisions); Mr. Flatt, 10 years, $153,989; and Mr. Lee, 16 years, $132,500.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Company maintains the First State Bank and Trust Company Supplemental
Executive Retirement Plan (the "Retirement Plan"), an unfunded, non-qualified
defined benefit retirement plan for a select group of management personnel. A
participant's potential benefit under the Retirement Plan is equal to a monthly
benefit payable for 180 months, generally commencing at age 65, equal to 75% of
the participant's average compensation (as defined in the Retirement Plan),
reduced by amounts then payable to the participant under the Pension Plan, under
the First State Bank and Trust Company Employee Savings and Thrift Plan (the
"Thrift Plan"), by Social Security and pursuant to any disability insurance plan
maintained by the Company. In determining the amount of the benefit reduction
under the Retirement Plan's offset provisions, the benefits payable under the
Pension Plan and the Thrift Plan are calculated as if they would be paid over
the same 180-month period as the Retirement Plan benefit. A participant becomes
vested in his or her Retirement Plan benefit only upon the completion of 25
years of employment with the Company. If the participant dies or becomes
disabled after becoming vested in his or her Retirement Plan benefit, the
eligible spouse (as defined in the Retirement Plan) or the participant, as
applicable, will be entitled to the participant's Retirement Plan benefit
commencing on the first day of the month on or after the participant terminates
employment due to death or disability.
The estimated annual benefits payable upon retirement at age 65 for the
named executives are as follows: Mr. Murphy, $764. Mr. Wren, Mr. Flatt and
Mr. Lee do not participate in the Retirement Plan.
SALARY CONTINUATION AGREEMENTS
FSB Albany has entered into separate agreements with Mr. Wren, Mr. Flatt
and Mr. Lee, each of which obligates FSB Albany and its affiliates to provide
limited salary continuation to his surviving spouse or dependents in the event
of the death of the executive while employed with FSB Albany or its affiliates,
but prior to his eligibility for early retirement under the Pension Plan.
In the event of such a death, monthly benefits are paid to the surviving
spouse, if the executive and surviving spouse had been married for at least 12
months, or, if there is no eligible surviving spouse, to those dependents of the
executive generally under age 19 (but also including unmarried, under age 22
dependents who are still full-time students) as follows:
(a) 100% of monthly base salary for the first 12 months after death;
(b) 50% of monthly base salary for the next succeeding 12 months;
16
<PAGE>
(c) 25% of monthly base salary for the next succeeding 12 months; and
(d) 12 and 1/2% of monthly base salary for the next succeeding 24
months.
If an eligible surviving spouse dies or remarries prior to the end of the salary
continuation period, the remaining payments will be apportioned among then
eligible dependents for the remainder of the salary continuation period even if
during that period one or more of those dependents ceases to be an eligible
dependent.
Each of the salary continuation agreements terminates without any benefits
becoming payable if the executive's employment with FSB Albany and its
affiliates is terminated for any reason other than death.
EMPLOYMENT AGREEMENTS
DOUGLAS E. WREN
As of May 8, 1996, First State and FSB Albany amended and restated the
then-existing employment agreement with Douglas E. Wren with regard to
Mr. Wren's continued service as a senior officer of both First State and FSB
Albany. The agreement has a five-year term which is automatically extended for
successive one-year periods at the end of each calendar year unless 90 days'
prior notice is given by either party. During the term of the agreement, First
State and FSB Albany have agreed to provide Mr. Wren with (a) an annual base
salary of $100,000, increased annually based on the size and performance of
First State and FSB Albany; (b) an annual bonus payable under the Incentive Plan
the amount of which may vary depending upon the extent to which annual
performance goals are met; (c) participation in employee benefit programs
maintained for employees generally or those limited to senior executives; (d)
reimbursement of the dues and costs of club memberships; and (e) the use of an
automobile and reimbursement of expenses incurred in operating the automobile.
Also during the term of the agreement, First State and FSB Albany have agreed to
make no changes adversely affecting the rights of Mr. Wren under any stock
option or restricted stock awards granted to him. If Mr. Wren's employment
agreement is terminated prior to the end of the five-year term, First State and
FSB Albany may be required to provide Mr. Wren with a lump sum separation
payment and any unpaid bonus earned under the Incentive Plan and, in certain
circumstances, to continued health and accident and life insurance coverages.
The amount of any separation payment varies depending upon the circumstances of
the termination of employment and may be limited if deemed to constitute a
"parachute payment" within the meaning of Section 280G of the Internal Revenue
Code. If the termination is effected (a) by First State or FSB Albany within
three (3) years of certain changes of control effected or contemplated as
described in the agreement, other than for good cause (as defined in the
agreement) or (b) by Mr. Wren within one (1) year of a change in control, the
lump sum amount is equal to 2.99 times Mr. Wren's average annual compensation
(as defined in the agreement). If the termination of employment is otherwise
effected by First State or FSB Albany other than for good cause, the lump sum
amount is equal to 2 times Mr. Wren's average annual compensation. If
Mr. Wren's termination of employment is effected for any other reason, the lump
sum amount is limited to salary earned but unpaid through the date of
termination. If the termination of employment is related to a change of
17
<PAGE>
control or otherwise effected by First State or FSB Albany other than for good
cause, First State and FSB Albany are obligated to provide health and accident
and life insurance coverages for up to 36 months following termination of
employment. If Mr. Wren's employment is terminated prior to expiration of the
contract term for any reason, he is subject to a confidentiality covenant for a
period of 12 months and if he voluntarily terminates employment after a change
in control, he is subject to a non-competition covenant for a period of one (1)
year.
JAMES L. FLATT
As of May 8, 1996, First State and FSB Albany amended and restated the
then-existing employment agreement with James L. Flatt with regard to Mr.
Flatt's continued service as a senior officer of both First State and FSB
Albany. The agreement has a five-year term which is automatically extended for
successive one-year periods at the end of each calendar year unless 90 days'
prior notice is given by either party. During the term of the agreement, First
State and FSB Albany have agreed to provide Mr. Flatt with (a) an annual base
salary of $89,400, increased annually based on the size and performance of First
State and FSB Albany; (b) an annual bonus payable as a percentage of his base
salary under the Incentive Plan the amount of which may vary depending upon the
extent to which annual performance goals are met; (c) participation in employee
benefit programs maintained for employees generally or those limited to senior
executives; (d) reimbursement of the dues and costs of club memberships; and (e)
the use of an automobile and reimbursement of expenses incurred in operating the
automobile. During the term of the agreement, First State and FSB Albany have
agreed to make no changes adversely affecting the rights of Mr. Flatt under any
stock option or restricted stock awards granted to him. If First State or FSB
Albany terminates the employment agreement prior to the end of the five-year
term, they are required to provide Mr. Flatt with a lump sum separation payment
and any unpaid bonus earned under the Incentive Plan. The amount of any
separation payment varies depending upon the circumstances of the termination of
employment. If the termination is effected by First State or FSB Albany within
three (3) years of certain changes of control effected or contemplated as
described in the agreement, other than for good cause (as defined in the
agreement), the lump sum amount is equal to 2.99 times Mr. Flatt's average
annual compensation (as defined in the agreement). If the termination of
employment is otherwise effected by First State or FSB Albany or by Mr. Flatt,
the lump sum amount is limited to salary earned but unpaid through the date of
termination. If the termination of employment is related to a change of control
as described above, First State and FSB Albany are obligated to provide health
and accident and life insurance coverages for up to 36 months following
termination of employment. If Mr. Flatt's employment is terminated prior to
expiration of the contract term for any reason, he is subject to a
confidentiality covenant for a period of 12 months.
ROBERT E. LEE
As of May 8, 1996, First State and FSB Albany amended and restated the
then-existing employment agreement with Robert E. Lee with regard to Mr. Lee's
continued service as a senior officer of both First State and FSB Albany. The
agreement has a five-year term which is automatically extended for successive
one-year periods at the end of each calendar year unless 90 days' prior notice
is given by either party. During the term of the agreement, First State and FSB
Albany have agreed to provide Mr. Lee with (a) an annual base salary of $73,750,
increased annually based on the size and performance of First State and FSB
Albany; (b) an annual bonus
18
<PAGE>
payable as a percentage of his base salary under the Incentive Plan the amount
of which may vary depending upon the extent to which annual performance goals
are met; (c) participation in employee benefit programs maintained for employees
generally or those limited to senior executives; (d) reimbursement of the dues
and costs of club memberships; and (e) the use of an automobile and
reimbursement of expenses incurred in operating the automobile. During the term
of the agreement, First State and FSB Albany have agreed to make no changes
adversely affecting the rights of Mr. Lee under any stock option or restricted
stock awards granted to him. If First State or FSB Albany terminates the
employment agreement prior to the end of the five-year term, they are required
to provide Mr. Lee with a lump sum separation payment and any unpaid bonus
earned under the Incentive Plan. The amount of any separation payment varies
depending upon the circumstances of the termination of employment. If the
termination is effected by First State or FSB Albany within three (3) years of
certain changes of control effected or contemplated as described in the
agreement, other than for good cause (as defined in the agreement), the lump sum
amount is equal to 2.99 times Mr. Lee's average annual compensation (as defined
in the agreement). If the termination of employment is otherwise effected by
First State or FSB Albany or by Mr. Lee, the lump sum amount is limited to
salary earned but unpaid through the date of termination. If the termination of
employment is related to a change of control as described above, First State and
FSB Albany are obligated to provide health and accident and life insurance
coverages for up to 36 months following termination of employment. If Mr. Lee's
employment is terminated prior to expiration of the contract term for any
reason, he is subject to a confidentiality covenant for a period of 12 months.
First State and FSB Albany are obligated to pay all legal fees and expenses
incurred by Mr. Wren, Mr. Flatt or Mr. Lee should First State or FSB Albany
challenge any provision of the their respective employment agreements,
regardless of the outcome of the contest.
BENEFICIAL OWNERSHIP OF COMMON STOCK
PRINCIPAL HOLDERS OF STOCK
The following table sets forth the persons who beneficially owned, at
December 31, 1996, more than 5% of the outstanding Common Stock of the Company.
Unless otherwise indicated, each person is the record owner of and has sole
voting and investment powers over his or her shares.
Number of Shares
Name and Address of of Common Stock
Beneficial Owner Beneficially Owned(1) Percentage
------------------- --------------------- ----------
J. Reeves Haley 291,642 2/ 6.41%
209 Dixie Drive
Moultrie, Georgia 31768
Vernon H. Warren 583,440 3/5/ 12.82%
108 Glenwood Road
Americus, Georgia 31709
19
<PAGE>
Number of Shares
Name and Address of of Common Stock
Beneficial Owner Beneficially Owned(1) Percentage
------------------- --------------------- ----------
FSB Albany, Trustee 1,570,799 4/5/ 3 4.53%
333 West Broad Avenue
Albany, Georgia 31703
- --------------------
1/ The information shown above is based upon information furnished by the named
persons. Information relating to beneficial ownership is based upon "beneficial
ownership" concepts set forth in rules promulgated under the Securities Act of
1934, as amended. Under such rules a person is deemed to be a "beneficial
owner" of a security if that person has or shares "voting power," which includes
the power to dispose or to direct the voting of such security, or "investment
power," which includes the power to dispose or to direct the disposition of such
security. A person is also deemed to be a beneficial owner of any security of
which that person has the right to acquire beneficial ownership within sixty
(60) days. Under the rules, more than one person may be deemed to be a
beneficial owner of the same securities, and a person may be deemed to be a
beneficial owner of securities as to which he or she has no beneficial interest.
The shares of Company stock issuable upon exercise of outstanding options held
by a person are assumed to be outstanding for the purpose of determining the
percentage of shares beneficially owned by that person.
2/ According to the Schedule 13G filed with the Securities and Exchange
Commission by Mr. Haley in February, 1997, consists of (a) 291,312 shares owned
of record by Mr. Haley and (b) an option to purchase an additional 330 shares.
3/ Consists of (a) 198,670 shares owned of record by FSB Albany under a
revocable agreement with Ms. Warren, (b) 183,150 shares owned of record by FSB
Albany as trustee under the Will of Marie H. Warren, as to which Vernon H.
Warren has sole voting power but no investment power, (c) 195,661 shares owned
of record by FSB Albany under a revocable agreement with Kathryn Warren Powell,
as to which Vernon H. Warren has sole voting power but no investment power,
(d) 4,969 shares owned of record by Ms. Warren as co-executor and co-trustee
under the Will of Thomas D. Warren, as to which Ms. Warren shares voting and
investment powers and (e) an option to purchase an additional 990 shares.
4/ Consists of an aggregate of 1,570,799 shares owned of record by FSB Albany,
Trustee, for various trust accounts, (a) 7,703 shares, as to which the Trustee
has shared voting and investment power, (b) 399,615 shares, as to which the
Trustee has sole voting power, and (c) 1,563,097 shares, as to which the Trustee
has sole investment power.
5/ 577,482 shares are included in both the number of shares beneficially owned
by Vernon H. Warren and the number of shares beneficially owned by FSB Albany,
Trustee.
20
<PAGE>
OWNERSHIP BY MANAGEMENT
The following table sets forth the number and percentage ownership of
shares of Common Stock beneficially owned by each director of the Company and by
all directors and executive officers as a group, at December 31, 1996. Unless
otherwise indicated, each person is the record owner of and has sole voting and
investment powers over his or her shares.
Number of Shares
of Common Stock
Name Beneficially Owned 1/ Percentage
---- --------------------- ----------
Morgan G. Murphy 138,300 2/ 2.97%
Temp S. Davis, III 1,327 3/ *
James D. Deal, Jr. 5,908 4/ *
Henry M. Goodyear, Jr. 7,464 5/ *
James Griffin, Jr. 1,320 6/ *
G. William Hughey, III 28,017 7/ *
A. Collins Knight, III 1,321 8/ *
John Temple Phillips, III 25,410 9/ *
Joseph B. Powell, Jr. 43,454 10/ *
Earle P. Spurlock 30,393 11/ *
William L. Walden 60,316 12/ 1.32%
Vernon H. Warren 583,440 13/ 12.82%
Michael J. Wetherbee 17,687 14/ *
Douglas E. Wren 49,533 15/ 1.08%
All directors and executive
officers as a group (16 persons) 1,039,563 16/ 21.79%
- --------------------
* Less than 1%.
1/ See note 1 to preceding table.
21
<PAGE>
2/ Consists of (a) 35,462 shares owned of record by Mr. Murphy, (b) 149 shares
owned of record by FSB Albany, as custodian for Morgan G. Murphy IRA,
(c) 209 shares owned of record by the FSB Albany 401(k) Stock Purchase
Plan, and (d) options to purchase an additional 102,480 shares.
3/ Consists of (a) 337 shares owned of record by Mr. Davis and (b) options to
purchase an additional 990 shares.
4/ Consists of (a) 4,918 shares owned of record by Mr. Deal and (b) options to
purchase an additional 990 shares.
5/ Consists of (a) 6,474 shares owned of record by Merrill Lynch Pierce Fenner
& Smith, Inc., for the benefit of Mr. Goodyear and (b) options to purchase
an additional 990 shares.
6/ Consists of (a) 330 shares owned of record by Mr. Griffin and (b) options
to purchase an additional 990 shares.
7/ Consists of (a) 6,171 shares owned of record by Mr. Hughey, (b) 20,196
shares owned of record by Hughey-Neuman, Inc., (c) 330 shares owned of
record by Mr. Hughey's spouse, as to which voting and investment powers are
shared, (d) 330 shares owned of record by FSB Albany, as custodian for
Sharon R. Hughey IRA, as to which voting and investment powers are shared,
and (e) options to purchase an additional 990 shares.
8/ Consists of (a) 331 shares owned of record by Mr. Knight and (b) options to
purchase an additional 990 shares.
9/ Consists of (a) 11,265 shares owned of record by Interstate/Johnson Lane,
for the benefit of Mr. Phillips, (b) 2,970 shares owned of record by
Merrill Lynch Pierce Fenner & Smith, Inc., for the benefit of Mr. Phillips
and his spouse, (c) 1,881 shares owned of record by Merrill Lynch Pierce
Fenner & Smith, Inc., for the benefit of John Temple Phillips III IRA,
(d) 1,881 shares owned of record by Merrill Lynch Pierce Fenner & Smith,
Inc., for the benefit of Sarah H. Phillips IRA, (c) 5,148 shares owned of
record by Shearson/Lehman Brothers, Inc. for the benefit of Mr. Phillips'
minor children, and (d) options to purchase an additional 990 shares.
10/ Consists of (a) 12,457 shares owned of record by Mr. Powell, (b) 1,897
shares owned of record by Mr. Powell's spouse, as to which voting and
investment powers are shared, (c) options to purchase an additional 25,140
shares, and (d) 3,960 shares allotted to Mr. Powell pursuant to a
restricted stock award.
11/ Consists of (a) 25,443 shares owned of record by Mr. Spurlock, (b) 330
shares owned of record by E. Spurlock IRA, (c) 330 shares owned of record
by L. Spurlock IRA, as to which voting and investment powers are shared,
(d) 1,650 shares owned of record by Linda F. Spurlock, Trustee, for the
benefit of Marlin P. Spurlock, as to which Mr. Spurlock shares voting power
and investment, (3) 1,650 shares owned of record by Linda F. Spurlock,
Trustee, for the benefit of Martha F. Spurlock, as to which Mr. Spurlock
shares voting and investment powers and (f) options to purchase an
additional 990 shares.
22
<PAGE>
12/ Consists of (a) 13,135 shares owned of record by Merrill Lynch Pierce
Fenner & Smith, Inc., for the benefit of Mr. Walden, (b) 2,751 shares owned
of record by Merrill Lynch Pierce Fenner & Smith, Inc., for the benefit of
Mr. Walden's spouse, as to which voting and investment powers are shared,
(c) 43,440 shares owned of record by Mr. Walden, as Trustee under
Cornelia H. Walden Trust under Agreement for the benefit of Clayton D.
Chapman, Lawson Chapman, Spencer T. Walden, Susan H. Martin, Kathy W.
LeHeup, and Lindsey LeHeup, and (d) options to purchase an additional 990
shares.
13/ Consists of (a) 198,670 shares owned of record by FSB Albany under a
revocable agreement with Ms. Warren, (b) 183,150 shares owned of record by
FSB Albany as trustee under the Will of Marie H. Warren, as to which
Vernon H. Warren has sole voting power but no investment power, (c) 195,661
shares owned of record by FSB Albany under a revocable agreement with
Kathryn Warren Powell, as to which Vernon H. Warren has sole voting power
but no investment power, (d) 4,969 shares owned of record by Ms. Warren as
co-executor and co-trustee under the Will of Thomas D. Warren, as to which
Ms. Warren shares voting and investment powers and (e) an option to
purchase an additional 990 shares.
14/ Consists of (a) 7,808 shares owned of record by Mr. Wetherbee, (b) 8,889
shares owned of record by Mr. Wetherbee as trustee for John W. Brooks,
Anne R. Wetherbee, Harriett H. Wetherbee, and Edward J. Wetherbee, and (c)
options to purchase an additional 990 shares.
15/ Consists of (a) 2,168 shares owned of record by Mr. Wren, (b) 2,144 shares
owned of record by FSB Albany, as custodian for Douglas E. Wren, IRA,
(c) 599 shares owned of record by Interstate/Johnson Lane, Inc., for the
benefit of Mr. Wren, (d) 75 shares owned of record by the First State
Employee Stock Purchase Plan for Mr. Wren's account, (e) 897 shares owned
of record by the First State 401-k Stock Purchase Plan for Mr. Wren's
account, and (f) options to purchase an additional 63,150 shares (of which
43,650 were exercisable at March 1, 1997).
16/ Includes (a) an aggregate of 6,973 shares owned of record by James L. Flatt
and Robert E. Lee and (b) options held by Messrs. Flatt and Lee to purchase
an aggregate of 58,200 additional shares (of which 38,700 were exercisable
at March 1, 1997).
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
To the Company's knowledge, based solely on a review of copies of Reports
of Beneficial Ownership and Changes in Beneficial Ownership furnished to it and
representations that no other reports were required, its directors, executive
officers and greater than ten percent shareholders complied during 1996 with all
applicable Section 16(a) filing requirements.
23
<PAGE>
PROPOSAL 2 -- FIRST STATE CORPORATION 1997 STOCK INCENTIVE PLAN
INTRODUCTION
On January 27, 1997, the Board of Directors approved the First State
Corporation 1997 Stock Incentive Plan (the "Stock Plan"), the full text of which
is set forth in Appendix A to this Proxy Statement.
The Stock Plan provides the Company with increased flexibility to grant
equity-based compensation to key employees, officers, directors and consultants
of the Company or an affiliate for the purpose of giving them a proprietary
interest in the Company and providing the Company with a mechanism to attract
and retain key personnel. The Board of Directors has reserved 230,000 shares of
common stock, $1.00 par value per share (the "Common Stock") for issuance
pursuant to awards that may be made under the Stock Plan, subject to adjustment
as provided therein.
Applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code") restrict the Company's ability in the absence of stockholder approval to
grant incentive stock options under Code Section 421 and to claim deductions
which may otherwise be associated with the grant of nonqualified options and
stock appreciation rights under Code Section 162(m).
The following description of the Stock Plan is qualified in its entirety by
reference to the applicable provisions of the plan document.
TERMS OF THE STOCK PLAN
ADMINISTRATION
Awards under the Stock Plan will be determined by the Stock Option Awards
Committee of the Board of Directors (the "Committee"), the members of which are
selected by the Board of Directors. The Board of Directors will consider the
advisability of complying with the disinterested standards contained in both
Section 162(m) of the Code, and Rule 16(b)(3) (promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) when appointing members
to the Committee. The Committee has at least two members. At the present time,
the members of the Stock Option Awards Committee are the same as the members of
the Compensation Committee.
AWARDS
The Stock Plan permits the Committee to make awards of shares of Common
Stock, awards of derivative securities related to the value of the Common Stock
and certain cash awards to eligible persons. These discretionary awards may be
made on an individual basis or pursuant to a program approved by the Committee
for the benefit of a group of eligible persons. The Stock Plan permits the
Committee to make awards of a variety of equity-based incentives, including (but
not limited to) stock awards, options to purchase shares of Common Stock and to
sell shares of Common Stock back to the Company, stock appreciation rights,
so-called "cashout" or
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"limited stock appreciation rights" (which the Committee may make exercisable in
the event of a certain changes in control of the Company or other events),
phantom shares, performance incentive rights, dividend equivalent rights and
similar rights (collectively, "Stock Incentives").
The number of shares of Common Stock as to which a Stock Incentive is
granted and to whom any Stock Incentive is granted shall be determined by the
Committee, subject to the provisions of the Stock Plan. Stock Incentives
issuable may be made exercisable or settled at such prices and may be made
forfeitable or terminable under such terms as are established by the Committee,
to the extent not otherwise inconsistent with the terms of the Stock Plan. No
participant who is a "covered employee", within the meaning of Section 162(m) of
the Code, however, may be granted during any single fiscal year of the Company
rights to shares of Common Stock under options and stock appreciation rights
which, in the aggregate, exceed 100,000 shares of Common Stock.
Stock Incentives generally are not transferable or assignable during a
holder's lifetime.
OPTIONS
The Stock Plan provides for incentive stock options and non-qualified stock
options. The Committee will determine whether an option is an incentive stock
option or a non-qualified stock option at the time the option is granted, and
the option will be evidenced by a Stock Incentive Agreement. Options may be
made exercisable pursuant to such terms as are established by the Committee, to
the extent not otherwise inconsistent with the terms of the Stock Plan.
The exercise price of an option shall be set forth in the applicable Stock
Incentive Agreement. The exercise price of an incentive stock option may not be
less than the fair market value of the Common Stock on the date of the grant (or
less than 110% of the fair market value if the participant owns more than 10% of
the Company's outstanding Common Stock). At the time the incentive stock option
is exercised, the Company will be entitled to place a legend on the certificates
representing the shares of Common Stock purchased pursuant to the option to
identify them as shares of Common Stock purchased upon the exercise of an
incentive stock option. Non-qualified stock options may be made exercisable at
a price equal to, less than or more than the fair market value of the Common
Stock on the date that the option is awarded, based upon an average fair market
value of the Common Stock at the time the option is awarded, or based upon any
other reasonable measure of fair market value. The Committee may permit an
option exercise price to be paid in cash or by the delivery of previously-owned
shares of Common Stock, or to be satisfied through a cashless exercise executed
through a broker or by having a number of shares of Common Stock otherwise
issuable at the time of exercise withheld.
The term of an option shall be specified in the applicable Stock Incentive
Agreement. The term of an incentive stock option may not exceed ten years from
the date of grant; however, any incentive stock option granted to a participant
who owns more than 10% of the Common Stock shall not be exercisable after the
expiration of five (5) years after the date the option is granted. Subject to
any further limitations in a Stock Incentive Agreement, in the event of a
participant's termination of employment, the term of an incentive stock option
shall expire, terminate and become unexercisable no later than three months
after the date of such termination of
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employment; provided, however, that if such termination of employment is due to
death or disability, one year shall be substituted for the three-month period.
STOCK APPRECIATION RIGHTS
Stock appreciation rights may be granted separately or in connection with
another Stock Incentive, and the Committee may provide that they are exercisable
at the discretion of the holder or that they will be paid at a time or times
certain or upon the occurrence or non-occurrence of certain events. Stock
appreciation rights may be settled in shares of Common Stock or in cash,
according to terms established by the Committee with respect to any particular
award.
STOCK AWARDS
The Committee may grant shares of Common Stock to a participant, subject to
such restrictions and conditions, if any, as the Committee shall determine.
OTHER STOCK INCENTIVES
Dividend equivalent rights, performance units and phantom shares may be
granted in such numbers or units and may be subject to such conditions or
restrictions as the Committee shall determine and shall be payable in cash or
shares of Common Stock, as the Committee may determine.
CERTAIN CASH AWARDS
The Committee may make cash awards designed to cover tax obligations of
employees that result from the receipt or exercise of a Stock Incentive.
The terms of particular Stock Incentives may provide that they terminate,
among other reasons, upon the holder's termination of employment or other status
with respect to the Company or any affiliate of the Company, upon a specified
date, upon the holder's death or disability, or upon the occurrence of a change
in control of the Company; Stock Incentives may include exercise, conversion or
settlement rights to a holder's estate or personal representative in the event
of the holder's death or disability. At the Committee's discretion, Stock
Incentives that are subject to termination may be cancelled, accelerated, paid
or continued, subject to the terms of the applicable Stock Incentive agreement
and to the provisions of the Stock Plan.
CERTAIN REORGANIZATIONS
The number of shares of Common Stock reserved for issuance in connection
with the grant or settlement of Stock Incentives or to which a Stock Incentive
is subject, as the case may be, and the exercise price of each nonqualified
option are subject to adjustment in the event of any recapitalization of the
Company effected without the receipt of consideration.
In the event of certain corporate reorganizations, Stock Incentives may be
substituted, cancelled, accelerated, cashed-out or otherwise adjusted by the
Committee, provided such
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adjustment is not inconsistent with the terms of the Stock Plan or any agreement
reflecting the terms of a Stock Incentive.
AMENDMENTS OR TERMINATION
Although the Stock Plan may be amended by the Board of Directors without
stockholder approval, the Board of Directors also may condition any such
amendment upon stockholder approval if stockholder approval is deemed necessary
or appropriate in consideration of tax, securities or other laws. No such
action by the Board of Directors may adversely affect the rights of a holder of
a Stock Incentive without the holder's consent.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion outlines generally the federal income tax
consequences of participation in the Stock Plan. Individual circumstances may
vary and each participant should rely on his or her own tax counsel for advice
regarding federal income tax treatment under the Stock Plan.
INCENTIVE STOCK OPTIONS
A participant who exercises an incentive stock option will not be taxed at
the time he or she exercises his or her option or a portion thereof. Instead,
the participant will be taxed at the time he or she sells the shares of Common
Stock purchased pursuant to the incentive stock option. The participant will be
taxed on the difference between the price he or she paid for the Common Stock
and the amount for which he or she sells the Common Stock. If the participant
does not sell the shares of Common Stock prior to two years from the date of
grant of the incentive stock option and one year from the date the Common Stock
is transferred to him or her, the gain will be capital gain and the Company will
not get a corresponding deduction. If the participant sells the shares of
Common Stock at a gain prior to that time, the difference between the amount the
participant paid for the Common Stock and the lesser of fair market value on the
date of exercise or the amount for which the stock is sold will be taxed as a
capital gain. If the participant sells the shares of Common Stock for less than
the amount he or she paid for the stock prior to the one- or two-year period
indicated, no amount will be taxed as ordinary income and the loss will be taxed
as a capital loss. Exercise of an incentive stock option may subject a
participant to, or increase a participant's liability for, the alternative
minimum tax.
NONQUALIFIED OPTIONS
A participant will not recognize income upon the grant of an option or at
any time prior to the exercise of the option or a portion thereof. At the time
the participant exercises a nonqualified option or portion thereof, he or she
will recognize compensation taxable as ordinary income in an amount equal to the
excess of the fair market value of the Common Stock on the date the option is
exercised over the price paid for the Common Stock, and the Company will then be
entitled to a corresponding deduction.
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Depending upon the period shares of Common Stock are held after exercise,
the sale or other taxable disposition of shares acquired through the exercise of
a nonqualified option generally will result in a short- or long-term capital
gain or loss equal to the difference between the amount realized on such
disposition and the fair market value of such shares when the nonqualified
option was exercised.
Special rules apply to a participant who exercises a nonqualified option by
paying the exercise price, in whole or in part, by the transfer of shares of
Common Stock to the Company.
OTHER STOCK INCENTIVES
A participant will not recognize income upon the grant of a stock
appreciation right, dividend equivalent right, performance unit award or phantom
share (the "Equity Incentives"). Generally, at the time a participant receives
payment under any Equity Incentive, he or she will recognize compensation
taxable as ordinary income in an amount equal to the cash or the fair market
value of the Common Stock received, and the Company will then be entitled to a
corresponding deduction.
A participant will not be taxed upon the grant of a stock award if such
award is not transferable by the participant or is subject to a "substantial
risk of forfeiture," as defined in the Code. However, when the shares of Common
Stock that are subject to the stock award are transferable by the participant
and are no longer subject to a substantial risk of forfeiture, the participant
will recognize compensation taxable as ordinary income in an amount equal to the
fair market value of the stock subject to the stock award, less any amount paid
for such stock, and the Company will then be entitled to a corresponding
deduction. However, if a participant so elects at the time of receipt of a
stock award, he or she may include the fair market value of the stock subject to
the stock award, less any amount paid for such stock, in income at that time and
the Company also will be entitled to a corresponding deduction at that time.
STOCKHOLDER APPROVAL
The Board of Directors seeks stockholder approval because such approval is
required under the Code as a condition to incentive stock option treatment and
will maximize the potential for deductions associated with any nonqualified
options and stock appreciation rights granted under the Stock Plan. Stockholder
approval also will allow the Company greater flexibility to issue equity-based
awards that qualify for exemptions available under the short-swing profit
recovery provisions of Section 16 of the Exchange Act.
Approval of the Stock Plan requires the affirmative vote of the holders of
at least a majority of the outstanding shares of Common Stock of the Company
present, or represented and entitled to vote, at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF
THE FIRST STATE CORPORATION 1997 STOCK INCENTIVE PLAN
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ACCOUNTING MATTERS
Mauldin & Jenkins, certified public accountants, audited the financial
statements of the Company and provided various other services to the Company for
the year ended December 31, 1996. A representative of Mauldin & Jenkins is
expected to be present at the meeting to respond to any appropriate questions
and to make a statement if the representative desires to do so.
SHAREHOLDER PROPOSALS
Any shareholder of the Company wishing to submit a proposal for action at
the next annual meeting of shareholders of the Company, and desiring inclusion
of the same in management's proxy materials, must provide a written copy of the
proposal to management no later than November 19, 1997. Any such proposal must
comply in all respects with the rules and regulations of the Securities and
Exchange Commission.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters to be
brought before the Annual Meeting. If, however, any matter other than the
election of directors or approval of the Stock Plan or matters incident thereto
should properly come before the Annual Meeting, votes will be cast pursuant to
the proxies in accordance with the best judgment of the proxyholders.
EXPENSES AND SOLICITATION OF PROXIES
All expenses of the proxy solicitation will be paid by the Company. In
addition to solicitation by mail, certain directors, officers and regular
employees of the Company and the Subsidiary Banks may solicit proxies by
telephone, facsimile, telegram or personal interview, for which they will
receive no compensation in addition to their regular salaries. The Company may
request brokerage houses, custodians, nominees and fiduciaries to forward
soliciting material to the beneficial owners of Common Stock held of record by
such persons and, if requested, will reimburse them for their reasonable
out-of-pocket expenses in connection therewith.
AVAILABLE INFORMATION
SHAREHOLDERS MAY OBTAIN, WITHOUT CHARGE, A COPY OF THE 1996 ANNUAL REPORT
ON FORM 10-K OF THE COMPANY. WRITTEN REQUESTS SHOULD BE ADDRESSED TO:
ROBERT E. LEE, FIRST STATE CORPORATION, 333 WEST BROAD AVENUE, ALBANY, GEORGIA
31701.
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APPENDIX A
FIRST STATE CORPORATION
1997 STOCK INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1 DEFINITIONS...................................................... 1
1.1 Definitions........................................................ 1
SECTION 2 THE STOCK INCENTIVE PLAN......................................... 5
2.1 Purpose of the Plan................................................ 5
2.2 Stock Subject to the Plan.......................................... 5
2.3 Administration of the Plan......................................... 5
2.4 Eligibility and Limits............................................. 6
SECTION 3 TERMS OF STOCK INCENTIVES........................................ 6
3.1 Terms and Conditions of All Stock Incentives....................... 6
3.2 Terms and Conditions of Options.................................... 7
(a) Option Price.................................................. 8
(b) Option Term................................................... 8
(c) Payment....................................................... 8
(d) Conditions to the Exercise of an Option....................... 8
(e) Termination of Incentive Stock Option......................... 9
(f) Special Provisions for Certain Substitute Options............. 9
3.3 Terms and Conditions of Stock Appreciation Rights.................. 9
(a) Settlement..................................................... 9
(b) Conditions to Exercise......................................... 9
3.4 Terms and Conditions of Stock Awards............................... 10
3.5 Terms and Conditions of Dividend Equivalent Rights................. 10
(a) Payment....................................................... 10
(b) Conditions to Payment......................................... 10
3.6 Terms and Conditions of Performance Unit Awards.................... 10
(a) Payment....................................................... 10
(b) Conditions to Payment......................................... 11
3.7 Terms and Conditions of Phantom Shares............................. 11
(a) Payment....................................................... 11
(b) Conditions to Payment......................................... 11
3.8 Treatment of Awards Upon Termination of Service.................... 11
SECTION 4 RESTRICTIONS ON STOCK............................................ 11
4.1 Escrow of Shares................................................... 11
4.2 Forfeiture of Shares............................................... 12
4.3 Restrictions on Transfer........................................... 12
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SECTION 5 GENERAL PROVISIONS............................................... 12
5.1 Withholding........................................................ 12
5.2 Changes in Capitalization; Merger; Liquidation..................... 13
5.3 Cash Awards........................................................ 13
5.4 Compliance with Code............................................... 14
5.5 Right to Terminate Service......................................... 14
5.6 Restrictions on Delivery and Sale of Shares; Legends............... 14
5.7 Non-alienation of Benefits......................................... 14
5.8 Termination and Amendment of the Plan.............................. 14
5.9 Stockholder Approval............................................... 14
5.10 Choice of Law...................................................... 15
5.11 Effective Date of Plan............................................. 15
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FIRST STATE CORPORATION
1997 STOCK INCENTIVE PLAN
SECTION 1 DEFINITIONS
1.1 DEFINITIONS. Whenever used herein, the masculine pronoun shall be
deemed to include the feminine, and the singular to include the plural, unless
the context clearly indicates otherwise, and the following capitalized words and
phrases are used herein with the meaning thereafter ascribed:
(a) "BOARD OF DIRECTORS" means the board of directors of the Company.
(b) "CAUSE" has the same meaning as provided in the employment
agreement between the Participant and the Company or, if applicable, any
affiliate of the Company on the date of Termination of Service, or if no such
definition or employment agreement exists, "Cause" means conduct amounting to
(1) fraud or dishonesty against the Company or its affiliates, (2) Participant's
willful misconduct, repeated refusal to follow the reasonable directions of the
board of directors of the Company or its affiliates, or knowing violation of law
in the course of performance of the duties of Participant's service with the
Company or its affiliates, (3) repeated absences from work without a reasonable
excuse, (4) repeated intoxication with alcohol or drugs while on the Company or
affiliates' premises during regular business hours, (5) a conviction or plea of
guilty or NOLO CONTENDERE to a felony or a crime involving dishonesty, or (6) a
breach or violation of the terms of any agreement to which Participant and the
Company or its affiliates are party.
(c) "CHANGE IN CONTROL" means any one of the following events which
may occur without the approval of the Board of Directors:
(1) the acquisition by any person, entity or "group," within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act
of 1934 (excluding, for this purpose, any employee benefit plan maintained by
the Company or any affiliate), which acquires beneficial ownership of voting
securities of the Company (or of such other Company affiliates as may be
identified in the Stock Incentive Agreement or otherwise designated by the
Committee) of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Securities Exchange Act of 1934) of more than fifty percent (50%) of
either the then outstanding shares of Stock or the combined voting power of the
Company's (or of such other Company affiliates') (as may be identified in the
Stock Incentive Agreement or otherwise designated by the Committee) then
outstanding voting securities entitled to vote generally in the election of
directors;
(2) the acquisition by any person, entity or "group," within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act
of 1934 (excluding, for this purpose, any employee benefit plan maintained by
the Company or any affiliate), which acquires beneficial ownership of voting
securities of the Company (or of such other Company affiliates as may be
identified in the Stock Incentive Agreement or otherwise designated by the
Committee) of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Securities Exchange Act of 1934) of more than thirty percent (30%) or
more of either the then outstanding shares of Stock or the combined voting power
of the Company's (or of such other Company affiliates') (as
<PAGE>
may be identified in the Stock Incentive Agreement or otherwise designated by
the Committee) then outstanding voting securities entitled to vote generally in
the election of directors and the failure for any reason of individuals who
constitute the Incumbent Board to continue to constitute at least two-thirds of
the Board of Directors within any thirteen (13) month period. For purposes of
this Section 1.1(c)(2), the term "Incumbent Board" shall mean the members of the
Board of Directors as of the date this Plan is adopted by the Board of Directors
and any person becoming a member of the Board of Directors after that date whose
election, or whose nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then comprising the
Incumbent Board (other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of directors of the Company, as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities
Exchange Act of 1934); or
(3) the approval by the stockholders of the Company (or of such
other Company affiliates as may be identified in the Stock Incentive Agreement
or otherwise designated by the Committee) of a reorganization, merger or
consolidation, with respect to which persons who were the stockholders of the
Company (or of such other Company affiliates as may be identified in the Stock
Incentive Agreement or otherwise designated by the Committee) immediately prior
to such reorganization, merger or consolidation do not, immediately thereafter,
own more than fifty percent (50%) of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged or
consolidated company's then outstanding voting securities, or a liquidation or
dissolution of the Company (or of such other Company affiliates as may be
identified in the Stock Incentive Agreement or otherwise designated by the
Committee) or the sale of all or substantially all of the assets of the Company
(or of such other Company affiliates as may be identified in the Stock Incentive
Agreement or otherwise designated by the Committee).
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means the committee appointed by the Board of
Directors to administer the Plan pursuant to Plan Section 2.3.
(f) "COMPANY" means First State Corporation, a Georgia corporation.
(g) "DISABILITY" has the same meaning as provided in the long-term
disability plan or policy maintained or, if applicable, most recently
maintained, by the Company or, if applicable, any affiliate of the Company for
the Participant. If no long-term disability plan or policy was ever maintained
on behalf of the Participant or, if the determination of Disability relates to
an Incentive Stock Option, Disability shall mean that condition described in
Code Section 22(e)(3), as amended from time to time. In the event of a dispute,
the determination of Disability shall be made by the Board of Directors and
shall be supported by advice of a physician competent in the area to which such
Disability relates.
(h) "DISPOSITION" means any conveyance, sale, transfer, assignment,
pledge or hypothecation, whether outright or as security, inter vivos or
testamentary, with or without consideration, voluntary or involuntary.
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(i) "DIVIDEND EQUIVALENT RIGHTS" means certain rights to receive cash
payments as described in Plan Section 3.5.
(j) "FAIR MARKET VALUE" refers to the determination of value of a
share of Stock. If the Stock is actively traded on any national securities
exchange or any Nasdaq quotation or market system, Fair Market Value shall mean
the closing price at which sales of Stock shall have been sold on the most
recent trading date immediately prior to the date of determination, as reported
by any such exchange or system selected by the Committee on which the shares of
Stock are then traded. If the shares of Stock are not actively traded on any
such exchange or system, Fair Market Value shall mean the arithmetic mean of the
bid and asked prices for the shares of Stock on the most recent trading date
within a reasonable period prior to the determination date as reported by such
exchange or system. If there are no bid and asked prices within a reasonable
period or if the shares of Stock are not traded on any exchange or system as of
the determination date, Fair Market Value shall mean the fair market value of a
share of Stock as determined by the Committee taking into account such facts and
circumstances deemed to be material by the Committee to the value of the Stock
in the hands of the Participant; provided that, for purposes of granting awards
other than Incentive Stock Options, Fair Market Value of a share of Stock may be
determined by the Committee by reference to the average market value determined
over a period certain or as of specified dates, to a tender offer price for the
shares of Stock (if settlement of an award is triggered by such an event) or to
any other reasonable measure of fair market value and provided further that, for
purposes of granting Incentive Stock Options, Fair Market Value of a share of
Stock shall be determined in accordance with the valuation principles described
in the regulations promulgated under Code Section 422.
(k) "INCENTIVE STOCK OPTION" means an incentive stock option, as
defined in Code Section 422, described in Plan Section 3.2.
(l) "NON-QUALIFIED STOCK OPTION" means a stock option, other than an
option qualifying as an Incentive Stock Option, described in Plan Section 3.2.
(m) "OPTION" means a Non-Qualified Stock Option or an Incentive Stock
Option.
(n) "OVER 10% OWNER" means an individual who at the time an Incentive
Stock Option is granted owns Stock possessing more than 10% of the total
combined voting power of the Company or one of its Parents or Subsidiaries,
determined by applying the attribution rules of Code Section 424(d).
(o) "PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, with respect to
Incentive Stock Options, at the time of granting of the Option, each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain.
(p) "PARTICIPANT" means an individual who receives a Stock Incentive
hereunder.
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(q) "PERFORMANCE UNIT AWARD" refers to a performance unit award
described in Plan Section 3.6.
(r) "PHANTOM SHARES" refers to the rights described in Plan Section
3.7.
(s) "PLAN" means the First State Corporation 1997 Stock Incentive
Plan.
(t) "STOCK" means the Company's common stock, $1.00 par value.
(u) "STOCK APPRECIATION RIGHT" means a stock appreciation right
described in Plan Section 3.3.
(v) "STOCK AWARD" means a stock award described in Plan Section 3.4.
(w) "STOCK INCENTIVE AGREEMENT" means an agreement between the
Company and a Participant or other documentation evidencing an award of a Stock
Incentive.
(x) "STOCK INCENTIVE PROGRAM" means a written program established by
the Committee pursuant to which Stock Incentives, other than Options or Stock
Appreciation Rights, are awarded under the Plan under uniform terms, conditions
and restrictions set forth in such written program and distributed among
eligible officers, employees and directors.
(y) "STOCK INCENTIVES" means, collectively, Dividend Equivalent
Rights, Incentive Stock Options, Non-Qualified Stock Options, Performance Unit
Awards, Phantom Shares, Stock Appreciation Rights and Stock Awards.
(z) "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, with respect to
Incentive Stock Options, at the time of the granting of the Option, each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
(aa) "TERMINATION OF SERVICE" means the termination of the service
relationship, whether employment or otherwise, between a Participant and the
Company and its affiliates, regardless of the fact that severance or similar
payments are made to the Participant for any reason, including, but not by way
of limitation, a termination by resignation, discharge, death, Disability or
retirement. The Committee shall, in its absolute discretion, determine the
effect of all matters and questions relating to Termination of Service,
including, but not by way of limitation, the question of whether a leave of
absence constitutes a Termination of Service, or whether a Termination of
Service is for Cause.
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SECTION 2 THE STOCK INCENTIVE PLAN
2.1 PURPOSE OF THE PLAN. The Plan is intended to (a) provide incentive to
officers, employees, directors and consultants of the Company and its affiliates
to stimulate their efforts toward the continued success of the Company and to
operate and manage the business in a manner that will provide for the long-term
growth and profitability of the Company; (b) encourage stock ownership by
officers, employees, directors and consultants by providing them with a means to
acquire a proprietary interest in the Company by acquiring shares of Stock or to
receive compensation which is based upon appreciation in the value of Stock; and
(c) provide a means of obtaining and rewarding key personnel.
2.2 STOCK SUBJECT TO THE PLAN. Subject to adjustment in accordance with
Section 5.2, 230,000 shares of Stock (the "Maximum Plan Shares") are hereby
reserved exclusively for issuance pursuant to Stock Incentives. At no time
shall the Company have outstanding Stock Incetnives and shares of Stock
issued in respect of Stock Incentives in excess of the Maximum Plan Shares.
The shares of Stock attributable to the nonvested, unpaid, unexercised,
unconverted or otherwise unsettled portion of any Stock Incentive that is
forfeited or cancelled or expires or terminates for any reason without
becoming vested, paid, exercised, converted or otherwise settled in full
shall again be available for purposes of the Plan.
2.3 ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Committee. The Committee shall have full authority in its discretion to
determine the officers, employees, directors and consultants of the Company or
its affiliates to whom Stock Incentives shall be granted and the terms and
provisions of Stock Incentives, subject to the Plan. Subject to the provisions
of the Plan, the Committee shall have full and conclusive authority to interpret
the Plan; to prescribe, amend and rescind rules and regulations relating to the
Plan; to determine the terms and provisions of the respective Stock Incentive
Agreements or Stock Incentive Programs and to make all other determinations
necessary or advisable for the proper administration of the Plan. The
Committee's determinations under the Plan need not be uniform and may be made by
it selectively among persons who receive, or are eligible to receive, awards
under the Plan (whether or not such persons are similarly situated). The
Committee's decisions shall be final and binding on all Participants.
As to any matter involving a Participant who is not a "reporting person"
for purposes of Section 16 of the Securities Exchange Act of 1934, the Committee
may delegate to any member of the Board of Directors or officer of the Company
the administrative authority to (a) interpret the provisions of the
Participant's Stock Incentive Agreement and (b) determine the treatment of Stock
Incentives upon a Termination of Service, as contemplated by Plan Section 3.8.
The Committee shall consist of at least two members of the Board of
Directors. The Board of Directors shall consider the advisability of complying
with the disinterested standards contained in both Code Section 162(m) and Rule
16b-3(b)(3) (promulgated under the Securities Exchange Act of 1934) when
appointing members to, or otherwise considering the composition of, the
Committee. The Board of Directors may from time to time remove members from or
add members to the Committee. Vacancies on the Committee shall be filled by the
Board of Directors.
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2.4 ELIGIBILITY AND LIMITS. Stock Incentives may be granted only to
officers, employees, directors and consultants of the Company or an affiliate;
provided, however, that an Incentive Stock Option may only be granted to an
employee of the Company or any Parent or Subsidiary. In the case of Incentive
Stock Options, the aggregate Fair Market Value (determined as at the date an
Incentive Stock Option is granted) of stock with respect to which stock options
intended to meet the requirements of Code Section 422 become exercisable for the
first time by an individual during any calendar year under all plans of the
Company and its Parents and Subsidiaries shall not exceed $100,000; provided
further, that if the limitation is exceeded, the Incentive Stock Option(s) which
cause the limitation to be exceeded shall be treated as Non-Qualified Stock
Option(s); except as the terms of the Stock Incentive Agreement may expressly
provide otherwise. To the extent required under Code Section 162(m) and
regulations thereunder for compensation to be treated as qualified
performance-based compensation, the maximum number of shares Stock with respect
to which Options or Stock Appreciation Rights may be granted during any single
fiscal year of the Company to any Participant who is a "covered employee,"
within the meaning of Code Section 162(m) and the regulations promulgated
thereunder (a "Covered Employee"), shall not exceed 100,000.
SECTION 3 TERMS OF STOCK INCENTIVES
3.1 TERMS AND CONDITIONS OF ALL STOCK INCENTIVES.
(a) The number of shares of Stock as to which a Stock Incentive shall
be granted shall be determined by the Committee in its sole discretion, subject
to the provisions of Section 2.2 as to the total number of shares available for
grants under the Plan. If a Stock Incentive Agreement so provides, a
Participant may be granted a new Option to purchase a number of shares of Stock
equal to the number of previously owned shares of Stock tendered in payment of
the Exercise Price (as defined below) for each share of Stock purchased pursuant
to the terms of the Stock Incentive Agreement.
(b) Each Stock Incentive shall be evidenced either by a Stock
Incentive Agreement in such form and containing such terms, conditions and
restrictions as the Committee may determine is appropriate or be made subject to
the terms of a Stock Incentive Program, containing such terms, conditions and
restrictions as the Committee may determine is appropriate. Each Stock
Incentive Agreement or Stock Incentive Program shall be subject to the terms of
the Plan and any provision in a Stock Incentive Agreement or Stock Incentive
Program that is inconsistent with the Plan shall be null and void.
(c) The date a Stock Incentive is granted shall be the date on which
the Committee has approved the terms and conditions of the Stock Incentive
Agreement or Stock Incentive Program and has determined the recipient of the
Stock Incentive and the number of shares covered by the Stock Incentive and has
taken all such other action necessary to complete the grant of the Stock
Incentive.
(d) The Committee may provide in any Stock Incentive Agreement or
pursuant to any Stock Incentive Program (or subsequent to the award of a Stock
Incentive but prior to its expiration or cancellation, as the case may be) that,
in the event of a Change in Control, the Stock
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Incentive shall or may be cashed out on the basis of any price not greater than
the highest price paid for a share of Stock in any transaction reported by any
market or system selected by the Committee on which the shares of Stock are then
actively traded during a specified period immediately preceding or including the
date of the Change in Control or offered for a share of Stock in any tender
offer occurring during a specified period immediately preceding or including the
date the tender offer commences; provided that, in no case shall any such
specified period exceed one (1) year (the "Change in Control Price"). For
purposes of this Subsection, the cash-out of a Stock Incentive shall be
determined as follows:
(1) Options shall be cashed out on the basis of the excess, if
any, of the Change in Control Price (but not more than the Fair Market Value of
the Stock on the date of the cash-out in the case of Incentive Stock Options)
over the Exercise Price with or without regard to whether the Option may
otherwise be exercisable only in part;
(2) Stock Awards and Phantom Shares shall be cashed out in an
amount equal to the Change in Control Price with or without regard to any
conditions or restrictions otherwise applicable to any such Stock Incentive; and
(3) Stock Appreciation Rights, Dividend Equivalent Rights and
Performance Unit Awards shall be cashed out with or without regard to any
conditions or restrictions otherwise applicable to any such Stock Incentive and
the amount of the cash out shall be determined by reference to the number of
shares of Stock that would be required to pay the Participant in kind for the
value of the Stock Incentive as of the date of the Change in Control multiplied
by the Change in Control Price.
(e) Any Stock Incentive may be granted in connection with all or any
portion of a previously or contemporaneously granted Stock Incentive. Exercise
or vesting of a Stock Incentive granted in connection with another Stock
Incentive may result in a pro rata surrender or cancellation of any related
Stock Incentive, as specified in the applicable Stock Incentive Agreement or
Stock Incentive Program.
(f) Stock Incentives shall not be transferable or assignable except
by will or by the laws of descent and distribution and shall be exercisable,
during the Participant's lifetime, only by the Participant; in the event of the
Disability of the Participant, by the legal representative of the Participant;
or in the event of the death of the participant, by the personal representative
of the Participant's estate or if no personal representative has been appointed,
by the successor in interest determined under the Participant's will.
3.2 TERMS AND CONDITIONS OF OPTIONS. Each Option granted under the Plan
shall be evidenced by a Stock Incentive Agreement. At the time any Option is
granted, the Committee shall determine whether the Option is to be an Incentive
Stock Option or a Non-Qualified Stock Option, and the Option shall be clearly
identified as to its status as an Incentive Stock Option or a Non-Qualified
Stock Option. At the time any Incentive Stock Option is exercised, the Company
shall be entitled to place a legend on the certificates representing the shares
of Stock purchased pursuant to the Option to clearly identify them as shares of
Stock purchased upon exercise of an Incentive
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Stock Option. An Incentive Stock Option may only be granted within ten (10)
years from the earlier of the date the Plan is adopted by the Board of Directors
or approved by the Company's stockholders.
(a) OPTION PRICE. Subject to adjustment in accordance with
Section 5.2 and the other provisions of this Section 3.2, the exercise price
(the "Exercise Price") per share of Stock purchasable under any Option shall be
as set forth in the applicable Stock Incentive Agreement. With respect to each
grant of an Incentive Stock Option to a Participant who is not an Over 10% Owner
or to each grant of any Option to a Participant who is then a Covered Employee,
the Exercise Price per share shall not be less than the Fair Market Value on the
date the Option is granted. With respect to each grant of an Incentive Stock
Option to a Participant who is an Over 10% Owner, the Exercise Price shall not
be less than 110% of the Fair Market Value on the date the Option is granted.
(b) OPTION TERM. The term of an Option shall be as specified in the
applicable Stock Incentive Agreement; provided, however that any Incentive Stock
Option granted to a Participant who is not an Over 10% Owner shall not be
exercisable after the expiration of ten (10) years after the date the Option is
granted and any Incentive Stock Option granted to an Over 10% Owner shall not be
exercisable after the expiration of five (5) years after the date the Option is
granted.
(c) PAYMENT. Payment for all shares of Stock purchased pursuant to
exercise of an Option shall be made in any form or manner authorized by the
Committee in the Stock Incentive Agreement or by amendment thereto, including,
but not limited to, cash or, if the Stock Incentive Agreement provides, (1) by
delivery to the Company of a number of shares of Stock which have been owned by
the holder for at least six (6) months prior to the date of exercise having an
aggregate Fair Market Value of not less than the product of the Exercise Price
multiplied by the number of shares the Participant intends to purchase upon
exercise of the Option on the date of delivery; (2) in a cashless exercise
through a broker; or (3) by having a number of shares of Stock withheld, the
Fair Market Value of which as of the date of exercise is sufficient to satisfy
the Exercise Price. In its discretion, the Committee also may authorize (at
the time an Option is granted or thereafter) Company financing to assist the
Participant as to payment of the Exercise Price on such terms as may be offered
by the Committee in its discretion. Payment shall be made at the time that the
Option or any part thereof is exercised, and no shares shall be issued or
delivered upon exercise of an option until full payment has been made by the
Participant. The holder of an Option, as such, shall have none of the rights of
a stockholder.
(d) CONDITIONS TO THE EXERCISE OF AN OPTION. Each Option granted
under the Plan shall be exercisable by whom, at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Committee shall
specify in the Stock Incentive Agreement; provided, however, that subsequent to
the grant of an Option, the Committee, at any time before complete termination
of such Option, may accelerate the time or times at which such Option may be
exercised in whole or in part, including, without limitation, upon a Change in
Control and may permit the Participant or any other designated person to
exercise the Option, or any portion thereof, for all or
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part of the remaining Option term notwithstanding any provision of the Stock
Incentive Agreement to the contrary.
(e) TERMINATION OF INCENTIVE STOCK OPTION. With respect to an
Incentive Stock Option, in the event of the Termination of Service of a
Participant, the Option or portion thereof held by the Participant which is
unexercised shall expire, terminate, and become unexercisable no later than the
expiration of three (3) months after the date of Termination of Service;
provided, however, that in the case of a holder whose Termination of Service is
due to death or Disability, one (1) year shall be substituted for such three (3)
month period. For purposes of this Subsection (e), Termination of Service of
the Participant shall not be deemed to have occurred if the Participant is
employed by another corporation (or a parent or subsidiary corporation of such
other corporation) which has assumed the Incentive Stock Option of the
Participant in a transaction to which Code Section 424(a) is applicable.
(f) SPECIAL PROVISIONS FOR CERTAIN SUBSTITUTE OPTIONS.
Notwithstanding anything to the contrary in this Section 3.2, any Option issued
in substitution for an option previously issued by another entity, which
substitution occurs in connection with a transaction to which Code
Section 424(a) is applicable, may provide for an exercise price computed in
accordance with such Code Section and the regulations thereunder and may contain
such other terms and conditions as the Committee may prescribe to cause such
substitute Option to contain as nearly as possible the same terms and conditions
(including the applicable vesting and termination provisions) as those contained
in the previously issued option being replaced thereby.
3.3 TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS. Each Stock
Appreciation Right granted under the Plan shall be evidenced by a Stock
Incentive Agreement. A Stock Appreciation Right may be granted in connection
with all or any portion of a previously or contemporaneously granted Stock
Incentive or not in connection with a Stock Incentive. A Stock Appreciation
Right shall entitle the Participant to receive the excess of (a) the Fair Market
Value of a specified or determinable number of shares of the Stock at the time
of payment or exercise over (b) a specified price (1) which, in the case of a
Stock Appreciation Right granted in connection with an Option, shall be not less
than the Exercise Price for that number of shares and (2) which, in the case of
a Stock Appreciation Right that is granted to a Participant who is then a
Covered Employee, shall not be less than the Fair Market Value of the Stock at
the time of the award. A Stock Appreciation Right granted in connection with a
Stock Incentive may only be exercised to the extent that the related Stock
Incentive has not been exercised, paid or otherwise settled. The exercise of a
Stock Appreciation Right granted in connection with a Stock Incentive shall
result in a pro rata surrender or cancellation of any related Stock Incentive to
the extent the Stock Appreciation Right has been exercised.
(a) SETTLEMENT. Upon settlement of a Stock Appreciation Right, the
Company shall pay to the Participant the appreciation in cash or shares of Stock
(valued at the aggregate Fair Market Value on the date of payment or exercise)
as provided in the Stock Incentive Agreement or, in the absence of such
provision, as the Committee may determine.
(b) CONDITIONS TO EXERCISE. Each Stock Appreciation Right granted
under the Plan shall be exercisable or payable at such time or times, or upon
the occurrence of such event or events, and in such amounts, as the Committee
shall specify in the Stock Incentive Agreement; provided,
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however, that subsequent to the grant of a Stock Appreciation Right, the
Committee, at any time before complete termination of such Stock Appreciation
Right, may accelerate the time or times at which such Stock Appreciation Right
may be exercised or paid in whole or in part.
3.4 TERMS AND CONDITIONS OF STOCK AWARDS. The number of shares of Stock
subject to a Stock Award and restrictions or conditions on such shares, if any,
shall be as the Committee determines, and the certificate for such shares shall
bear evidence of any restrictions or conditions. Subsequent to the date of the
grant of the Stock Award, the Committee shall have the power to permit, in its
discretion, an acceleration of the expiration of an applicable restriction
period with respect to any part or all of the shares awarded to a Participant.
The Committee may require a cash payment from the Participant in an amount no
greater than the aggregate Fair Market Value of the shares of Stock awarded
determined at the date of grant in exchange for the grant of a Stock Award or
may grant a Stock Award without the requirement of a cash payment.
3.5 TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS. A Dividend
Equivalent Right shall entitle the Participant to receive payments from the
Company in an amount determined by reference to any cash dividends paid on a
specified number of shares of Stock to Company stockholders of record during the
period such rights are effective. The Committee may impose such restrictions
and conditions on any Dividend Equivalent Right as the Committee in its
discretion shall determine, including the date any such right shall terminate
and may reserve the right to terminate, amend or suspend any such right at any
time.
(a) PAYMENT. Payment in respect of a Dividend Equivalent Right may
be made by the Company in cash or shares of Stock (valued at Fair Market Value
on the date of payment) as provided in the Stock Incentive Agreement or, in the
absence of such provision, as the Committee may determine.
(b) CONDITIONS TO PAYMENT. Each Dividend Equivalent Right granted
under the Plan shall be payable at such time or times, or upon the occurrence of
such event or events, and in such amounts, as the Committee shall specify in the
Stock Incentive Agreement or Stock Incentive Program; provided, however, that
subsequent to the grant of a Dividend Equivalent Right, the Committee, at any
time before complete termination of such Dividend Equivalent Right, may
accelerate the time or times at which such Dividend Equivalent Right may be paid
in whole or in part.
3.6 TERMS AND CONDITIONS OF PERFORMANCE UNIT AWARDS. A Performance Unit
Award shall entitle the Participant to receive, at a future date, payment of an
amount equal to all or a portion of the value of a number of units (stated in
terms of a designated dollar amount per unit) granted by the Committee, all as
the Committee shall specify in the Stock Incentive Agreement or Stock Incentive
Program. At the time of the grant, the Committee must determine the base value
of each unit, the number of units subject to a Performance Unit Award, the
performance factors applicable to the determination of the ultimate payment
value of the Performance Unit Award and the period over which Company
performance shall be measured. The Committee may provide for an alternate base
value for each unit under certain specified conditions.
(a) PAYMENT. Payment in respect of Performance Unit Awards may be
made by the Company in cash or shares of Stock (valued at Fair Market Value on
the date of payment) as
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provided in the Stock Incentive Agreement or Stock Incentive Program or, in the
absence of such provision, as the Committee may determine.
(b) CONDITIONS TO PAYMENT. Each Performance Unit Award granted under
the Plan shall be payable at such time or times, or upon the occurrence of such
event or events, and in such amounts, as the Committee shall specify in the
Stock Incentive Agreement or Stock Incentive Program; provided, however, that
subsequent to the grant of a Performance Unit Award, the Committee, at any time
before complete termination of such Performance Unit Award, may accelerate the
time or times at which such Performance Unit Award may be paid in whole or in
part.
3.7 TERMS AND CONDITIONS OF PHANTOM SHARES. Phantom Shares shall entitle
the Participant to receive, at a future date, payment of an amount equal to all
or a portion of the Fair Market Value of a number of shares of Stock at the end
of a certain period, all as the Committee shall specify in the Stock Incentive
Agreement or Stock Incentive Program. At the time of the grant, the Committee
shall determine the factors which will govern the portion of the rights so
payable, including, at the discretion of the Committee, any performance criteria
that must be satisfied as a condition to payment.
(a) PAYMENT. Payment in respect of Phantom Shares may be made by the
Company in cash or shares of Stock (valued at Fair Market Value on the date of
payment) as provided in the Stock Incentive Agreement or Stock Incentive Program
or, in the absence of such provision, as the Committee may determine.
(b) CONDITIONS TO PAYMENT. Each Phantom Share granted under the Plan
shall be payable at such time or times, or upon the occurrence of such event or
events, and in such amounts, as the Committee shall specify in the Stock
Incentive Agreement or Stock Incentive Program; provided, however, that
subsequent to the grant of a Phantom Share, the Committee, at any time before
complete termination of such Phantom Share, may accelerate the time or times at
which such Phantom Share may be paid in whole or in part.
3.8 TREATMENT OF AWARDS UPON TERMINATION OF SERVICE. Except as otherwise
provided by Plan Section 3.2(e), any award under this Plan to a Participant who
suffers a Termination of Service may be cancelled, accelerated, paid or
continued, as provided in the Stock Incentive Agreement or Stock Incentive
Program or, in the absence of such provision, as the Committee may determine.
The portion of any award exercisable in the event of continuation or the amount
of any payment due under a continued award may be adjusted by the Committee to
reflect the Participant's period of service from the date of grant through the
date of the Participant's Termination of Service or such other factors as the
Committee determines are relevant to its decision to continue the award.
SECTION 4 RESTRICTIONS ON STOCK
4.1 ESCROW OF SHARES. Any certificates representing the shares of Stock
issued under the Plan shall be issued in the Participant's name, but, if the
Stock Incentive Agreement or Stock Incentive Program so provides, the shares of
Stock shall be held by a custodian designated by the Committee (the
"Custodian"). Each applicable Stock Incentive Agreement or Stock Incentive
Program providing for transfer of shares of Stock to the Custodian shall appoint
the Custodian as the attorney-in-fact for the Participant for the term specified
in the applicable Stock Incentive
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Agreement or Stock Incentive Program, with full power and authority in the
Participant's name, place and stead to transfer, assign and convey to the
Company any shares of Stock held by the Custodian for such Participant, if the
Participant forfeits the shares under the terms of the applicable Stock
Incentive Agreement or Stock Incentive Program. During the period that the
Custodian holds the shares subject to this Section, the Participant shall be
entitled to all rights, except as provided in the applicable Stock Incentive
Agreement or Stock Incentive Program, applicable to shares of Stock not so held.
Any dividends declared on shares of Stock held by the Custodian shall, as the
Committee may provide in the applicable Stock Incentive Agreement or Stock
Incentive Program, be paid directly to the Participant or, in the alternative,
be retained by the Custodian until the expiration of the term specified in the
applicable Stock Incentive Agreement or Stock Incentive Program and shall then
be delivered, together with any proceeds, with the shares of Stock to the
Participant or to the Company, as applicable.
4.2 FORFEITURE OF SHARES. Notwithstanding any vesting schedule set forth
in any Stock Incentive Agreement or Stock Incentive Program, in the event that
the Participant violates a noncompetition agreement as set forth in the Stock
Incentive Agreement or Stock Incentive Program, all Stock Incentives and shares
of Stock issued to the holder pursuant to the Plan shall be forfeited; provided,
however, that the Company shall return to the holder the lesser of any
consideration paid by the Participant in exchange for Stock issued to the
Participant pursuant to the Plan or the then Fair Market Value of the Stock
forfeited hereunder.
4.3 RESTRICTIONS ON TRANSFER. The Participant shall not have the right to
make or permit to exist any Disposition of the shares of Stock issued pursuant
to the Plan except as provided in the Plan or the applicable Stock Incentive
Agreement or Stock Incentive Program. Any Disposition of the shares of Stock
issued under the Plan by the Participant not made in accordance with the Plan or
the applicable Stock Incentive Agreement or Stock Incentive Program shall be
void. The Company shall not recognize, or have the duty to recognize, any
Disposition not made in accordance with the Plan and the applicable Stock
Incentive Agreement or Stock Incentive Program, and the shares so transferred
shall continue to be bound by the Plan and the applicable Stock Incentive
Agreement or Stock Incentive Program.
SECTION 5 GENERAL PROVISIONS
5.1 WITHHOLDING. The Company shall deduct from all cash distributions
under the Plan any taxes required to be withheld by federal, state or local
government. Whenever the Company proposes or is required to issue or transfer
shares of Stock under the Plan or upon the vesting of any Stock Award, the
Company shall have the right to require the recipient to remit to the Company an
amount sufficient to satisfy any federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for such
shares or the vesting of such Stock Award. A Participant may pay the
withholding tax in cash, or, if the applicable Stock Incentive Agreement or
Stock Incentive Program provides, a Participant may elect to have the number of
shares of Stock he is to receive reduced by, or with respect to a Stock Award,
tender back to the Company, the smallest number of whole shares of Stock which,
when multiplied by the Fair Market Value of the shares of Stock determined as of
the Tax Date (defined below), is sufficient to satisfy federal, state and local,
if any, withholding taxes arising from exercise or payment of a Stock Incentive
(a "Withholding Election"). A Participant may make a Withholding Election only
if both of the following conditions are met:
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(a) The Withholding Election must be made on or prior to the date on
which the amount of tax required to be withheld is determined (the "Tax Date")
by executing and delivering to the Company a properly completed notice of
Withholding Election as prescribed by the Committee; and
(b) Any Withholding Election made will be irrevocable; however, the
Committee may in its sole discretion disapprove and give no effect to the
Withholding Election.
5.2 CHANGES IN CAPITALIZATION; MERGER; LIQUIDATION.
(a) The number of shares of Stock reserved for the grant of Options,
Dividend Equivalent Rights, Performance Unit Awards, Phantom Shares, Stock
Appreciation Rights and Stock Awards; the number of shares of Stock reserved for
issuance upon the exercise or payment, as applicable, of each outstanding
Option, Dividend Equivalent Right, Performance Unit Award, Phantom Share and
Stock Appreciation Right and upon vesting or grant, as applicable, of each Stock
Award; the Exercise Price of each outstanding Option and the specified number of
shares of Stock to which each outstanding Dividend Equivalent Right, Phantom
Share and Stock Appreciation Right pertains shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Stock resulting
from a subdivision or combination of shares or the payment of an ordinary stock
dividend in shares of Stock to holders of outstanding shares of Stock or any
other increase or decrease in the number of shares of Stock outstanding effected
without receipt of consideration by the Company.
(b) In the event of any merger, consolidation, extraordinary dividend
(including a spin-off), reorganization or other change in the corporate
structure of the Company or its Stock or tender offer for shares of Stock, the
Committee, in its sole discretion, may make such adjustments with respect to
awards and take such other action as it deems necessary or appropriate to
reflect or in anticipation of such merger, consolidation, extraordinary
dividend, reorganization, other change in corporate structure or tender offer,
including, without limitation, the substitution of new awards, the termination
or adjustment of outstanding awards, the acceleration of awards or the removal
of restrictions on outstanding awards. Any adjustment pursuant to this
Section 5.2 may provide, in the Committee's discretion, for the elimination
without payment therefor of any fractional shares that might otherwise become
subject to any Stock Incentive.
(c) The existence of the Plan and the Stock Incentives granted
pursuant to the Plan shall not affect in any way the right or power of the
Company to make or authorize any adjustment, reclassification, reorganization or
other change in its capital or business structure, any merger or consolidation
of the Company, any issue of debt or equity securities having preferences or
priorities as to the Stock or the rights thereof, the dissolution or liquidation
of the Company, any sale or transfer of all or any part of its business or
assets, or any other corporate act or proceeding.
5.3 CASH AWARDS. The Committee may, at any time and in its discretion,
grant to any holder of a Stock Incentive the right to receive, at such times and
in such amounts as determined by the Committee in its discretion, a cash amount
which is intended to reimburse such person for all or a portion of the federal,
state and local income taxes imposed upon such person as a consequence of the
receipt of the Stock Incentive or the exercise of rights thereunder.
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5.4 COMPLIANCE WITH CODE. All Incentive Stock Options to be granted
hereunder are intended to comply with Code Section 422, and all provisions of
the Plan and all Incentive Stock Options granted hereunder shall be construed in
such manner as to effectuate that intent.
5.5 RIGHT TO TERMINATE SERVICE. Nothing in the Plan or in any Stock
Incentive Agreement or Stock Incentive Program shall confer upon any Participant
the right to continue as an employee, officer, director or consultant of the
Company or any of its affiliates or affect the right of the Company or any of
its affiliates to terminate the Participant's service at any time.
5.6 RESTRICTIONS ON DELIVERY AND SALE OF SHARES; LEGENDS. Each Stock
Incentive is subject to the condition that if at any time the Committee, in its
discretion, shall determine that the listing, registration or qualification of
the shares covered by such Stock Incentive upon any securities exchange or under
any state or federal law is necessary or desirable as a condition of or in
connection with the granting of such Stock Incentive or the purchase or delivery
of shares thereunder, the delivery of any or all shares pursuant to such Stock
Incentive may be withheld unless and until such listing, registration or
qualification shall have been effected. If a registration statement is not in
effect under the Securities Act of 1933 or any applicable state securities laws
with respect to the shares of Stock purchasable or otherwise deliverable under
Stock Incentives then outstanding, the Committee may require, as a condition of
exercise of any Option or as a condition to any other delivery of Stock pursuant
to a Stock Incentive, that the Participant or other recipient of a Stock
Incentive represent, in writing, that the shares received pursuant to the Stock
Incentive are being acquired for investment and not with a view to distribution
and agree that the shares will not be disposed of except pursuant to an
effective registration statement, unless the Company shall have received an
opinion of counsel that such disposition is exempt from such requirement under
the Securities Act of 1933 and any applicable state securities laws. The
Company may include on certificates representing shares delivered pursuant to a
Stock Incentive such legends referring to the foregoing representations or
restrictions or any other applicable restrictions on resale as the Company, in
its discretion, shall deem appropriate.
5.7 NON-ALIENATION OF BENEFITS. Other than as specifically provided with
regard to the death of a Participant, no benefit under the Plan shall be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge; and any attempt to do so shall be void. No such benefit
shall, prior to receipt by the Participant, be in any manner liable for or
subject to the debts, contracts, liabilities, engagements or torts of the
Participant.
5.8 TERMINATION AND AMENDMENT OF THE PLAN. The Board of Directors at any
time may amend or terminate the Plan without stockholder approval; provided,
however, that the Board of Directors may condition any amendment on the approval
of stockholders of the Company if such approval is necessary or advisable with
respect to tax, securities or other applicable laws. No such termination or
amendment without the consent of the holder of a Stock Incentive shall adversely
affect the rights of the Participant under such Stock Incentive.
5.9 STOCKHOLDER APPROVAL. The Plan shall be submitted to the stockholders
of the Company for their approval within twelve (12) months before or after its
adoption by the Board of Directors. If such approval is not obtained, any Stock
Incentive granted under the Plan shall be void.
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5.10 CHOICE OF LAW. The laws of the State of Georgia shall govern the
Plan, to the extent not preempted by federal law.
5.11 EFFECTIVE DATE OF PLAN. The Plan shall become effective upon the date
the Plan is approved by the Board of Directors.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed this
27TH day of JANUARY , 1997.
FIRST STATE CORPORATION
By: /s/ Douglas E. Wren
---------------------------------------------
Title: President
------------------------------------------
Attest:
/s/ Robert E. Lee
- ----------------------
Secretary
[CORPORATE SEAL]
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FIRST STATE CORPORATION
PROXY
SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 28, 1997
The undersigned shareholder of First State Corporation (the "Company") hereby
appoints Robert E. Lee and Sheri C. Cox as proxies with full power of
substitution to vote all shares of common stock of the Company which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Shareholders (the "Meeting") to be held at Radium Springs Casino,
2501 Radium Springs Road, Albany, Georgia, on Monday, April 28, 1997, at
1:30 p.m., and at any adjournments thereof, upon the proposals described in the
accompanying Notice of Annual Meeting, receipt of which is hereby acknowledged.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSALS
PROPOSAL ONE: To elect the five (5) nominees listed below to serve as directors
of the Company for a term of three years until 2000.
Temp S. Davis
G. William Hughey, III
A. Collins Knight, III
Earle P. Spurlock
Vernon H. Warren
/ / FOR all nominees listed above / / WITHHOLD AUTHORITY
(except as indicated to the contrary below). to vote for all nominees
listed above
INSTRUCTION: To withhold authority for any individual nominee, mark "FOR"
above, and write that nominee's name in this space:
PROPOSAL TWO: To approve the First State Corporation 1997 Stock Incentive Plan.
FOR / / AGAINST / / ABSTAIN / /
(Signature Required on Other Side)
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF DIRECTION TO THE CONTRARY IS NOT
INDICATED, IT WILL BE VOTED FOR THE PROPOSALS. DISCRETIONARY AUTHORITY IS
HEREBY CONFERRED AS TO ALL OTHER MATTERS WHICH MAY COME BEFORE THIS MEETING.
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(Signature)
[LABEL] ---------------------------------------
(Additional Signature, if jointly held)
, 1997
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(Date)
If stock is held in the name of more than one person, all holders should sign.
Signatures should correspond exactly with the name or names appearing on the
stock certificate(s). When signing as attorney, executor, administrator,
trustee, guardian or custodian, please indicate the capacity in which you are
acting.
Please mark, date and sign this Proxy, and return it in the enclosed,
return-addressed envelope. No postage is necessary.
Shareholder will will not attend the Meeting.
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PLEASE RETURN THIS PROXY AS SOON AS POSSIBLE
